Self-Regulatory Organizations; the NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Modifying Fees for Members Using the NASDAQ Options Market, 37067-37069 [E9-17819]

Download as PDF Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Notices SECURITIES AND EXCHANGE COMMISSION Proposed Extension of Existing Collection; Comment Request Upon written request, copies available from: U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549–0213. jlentini on DSKJ8SOYB1PROD with NOTICES Extension: Rule 17Ad–4(b) and (c); OMB Control No. 3235–0341;SEC File No. 270–264. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in the following rule: Rule 17Ad–4(b) and (c) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (‘‘Exchange Act’’). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Rule 17Ad–4(b) and (c) (17 CFR 240.17Ad–4) is used to document when transfer agents are exempt, or no longer exempt, from the minimum performance standards and certain recordkeeping provisions of the Commission’s transfer agent rules. Rule 17Ad–4(c) sets forth the conditions under which a registered transfer agent loses its exempt status. Once the conditions for exemption no longer exist, the transfer agent, to keep the appropriate regulatory authority (‘‘ARA’’) apprised of its current status, must prepare, and file if the ARA for the transfer agent is the Board of Governors of the Federal Reserve System (‘‘BGFRS’’) or the Federal Deposit Insurance Corporation (‘‘FDIC’’), a notice of loss of exempt status under paragraph (c). The transfer agent then cannot claim exempt status under Rule 17Ad–4(b) again until it remains subject to the minimum performance standards for non-exempt transfer agents for six consecutive months. The ARAs use the information contained in the notice to determine whether a registered transfer agent qualifies for the exemption, to determine when a registered transfer agent no longer qualifies for the exemption, and to determine the extent to which that transfer agent is subject to regulation. The BGFRS receives approximately two notices of exempt status and two notices of loss of exempt status annually. The FDIC also receives approximately two notices of exempt status and two notices of loss of exempt status annually. The Commission and VerDate Nov<24>2008 19:02 Jul 24, 2009 Jkt 217001 the Office of the Comptroller of the Currency (‘‘OCC’’) do not require transfer agents to file a notice of exempt status or loss of exempt status. Instead, transfer agents whose ARA is the Commission or OCC need only to prepare and maintain these notices. The Commission estimates that approximately ten notices of exempt status and ten notices of loss of exempt status are prepared annually by transfer agents whose ARA is the Commission. We estimate that the transfer agents for whom the OCC is their ARA prepare and maintain approximately five notices of exempt status and five notices of loss of exempt status annually. Thus, a total of approximately thirty-eight notices of exempt status and loss of exempt status are prepared and maintained by transfer agents annually. Of these thirty-eight notices, approximately eight are filed with an ARA. Any additional costs associated with filing such notices would be limited primarily to postage, which would be minimal. Since the Commission estimates that no more than one-half hour is required to prepare each notice, the total annual burden to transfer agents is approximately nineteen hours. The average cost per hour is approximately $30. Therefore, the total cost of compliance to the transfer agent industry is about $570. Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Comments should be directed to Charles Boucher, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312 or send an e-mail to: PRA_Mailbox@sec.gov. Dated: July 21, 2009. Florence E. Harmon, Deputy Secretary. [FR Doc. E9–17768 Filed 7–24–09; 8:45 am] BILLING CODE 8010–01–P PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 37067 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60352; File No. SR– NASDAQ–2009–059] Self-Regulatory Organizations; the NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Modifying Fees for Members Using the NASDAQ Options Market July 21, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1, and Rule 19b–4 thereunder,2 notice is hereby given that on July 1, 2009, The NASDAQ Stock Market LLC (‘‘NASDAQ’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by NASDAQ. Pursuant to Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 a proposed rule change to modify pricing for NASDAQ members using the NASDAQ Options Market (‘‘NOM’’), Nasdaq’s facility for the trading of standardized equity and index options [sic]. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NASDAQ proposes to modify pricing for NASDAQ members using the Nasdaq Market Center. This proposed rule change, which is effective upon filing, will become operative on July 1, 2009. The text of the proposed rule change is available at https:// nasdaqomx.cchwallstreet.com/, at NASDAQ’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASDAQ included statements concerning the purpose of and basis for the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NASDAQ has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 2 17 E:\FR\FM\27JYN1.SGM 27JYN1 37068 Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq is modifying NASDQ Rule 7050, the fee schedule for NOM, in several ways. First, Nasdaq is making changes that apply to orders with an account type of ‘‘Customer.’’ Specifically, Nasdaq is ending its pricing program to eliminate the fee for the execution of options orders with an account type of ‘‘Customer’’ that take liquidity 5 in certain Penny Pilot options. In April, Nasdaq expanded the application of that rule to all options that are included in the Options Penny Pilot Program. Nasdaq continued to monitor the trading of options on these equities to ensure that the proposal is operating in a fashion that promotes the interests of investors. Nasdaq has concluded that the reduction of fees is no longer attracting new order flow to NOM and, therefore, Nasdaq is establishing a fee of $0.20 per executed contract for Customer orders in Penny Pilot options. Second, Nasdaq is also changing the fee structure for ‘‘Customer’’ orders in options not included in the Options Penny Pilot Program. Currently, Nasdaq charges no execution fees for members providing liquidity through the NASDAQ Options Market with an account type ‘‘Customer.’’ Nasdaq also offers a credit of $0.20 per executed contract to members entering orders in options with an account type ‘‘Customer’’ that execute and remove liquidity entered by another member in options that are not included in the Options Penny Pilot Program. Nasdaq is proposing to eliminate the payment of this credit when an order with an account type of Customer executes against another order with an account type of Customer. Nasdaq determined that the previous rule resulted in disproportionate payment for Customer orders relative to order volume growth. Third, Nasdaq is modifying NASDAQ Rule 7050 to lower from $0.45 to $0.20 the fees applicable to orders from Firms that remove liquidity in non-Penny Pilot stocks. Nasdaq believes that lowering this fee will attract more order flow to NOM and improve its overall competitiveness. Nasdaq believes that the proposed fees are competitive, fair and reasonable, and non-discriminatory in that they apply equally to all similarly 5 An order that ‘‘takes’’ or ‘‘removes’’ liquidity is one that is entered into NOM and that executes against an order resting on the NOM book. VerDate Nov<24>2008 19:02 Jul 24, 2009 Jkt 217001 situated members and customers. As with all fees, Nasdaq may adjust these proposed fees in response to competitive conditions by filing a new proposed rule change. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,6 in general, and with Section 6(b)(5) of the Act,7 in particular, in that the proposal is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. NASDAQ also believes that the proposed rule change is consistent with Section 6(b)(4) of the Act,8 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which NASDAQ operates or controls. The proposed change identifies a class of person subject to transaction execution fees based on the role of that class in bringing order flow to NASDAQ. With respect to options markets, the Commission has found comparable pricing distinctions to be consistent with the Act. For example, in SR–ISE– 2006–26,9 the Commission approved a fee schedule under which orders of professional customers were charged higher fees than orders of nonprofessional customers. A Firm rate that is lower than other participant rates is not uncommon. In fact, ISE charges the same differential rate that NASDAQ is proposing: $0.20 per contract for Proprietary Firm executions and $0.45 per contract for non-ISE–Market Makers.10 NASDAQ also believes it is equitable to rebate customer executions in nonpenny pilot options when the customer removes liquidity, unless the customer removes liquidity from a resting customer order. In that case, neither side of the trade is charged a fee or U.S.C. 78f. U.S.C. 78f(b)(5). 8 15 U.S.C. 78f(b)(4). 9 Securities Exchange Act Release No. 59287 (January 23, 2009), 74 FR 5694 (January 30, 2009) (SR–ISE–2006–26). 10 See https://www.ise.com/assets//documents// optionsExchange//legal/fee/fee_schedule. PO 00000 6 15 7 15 Frm 00072 Fmt 4703 Sfmt 4703 given a rebate. In other words, customer-to-customer transactions will be free to both sides of the trade (as is the case on most options markets) and therefore in NASDAQ’s view it is not justifiable to pay an additional rebate. NASDAQ understands that on exchanges that engage in payment-fororder-flow and that have less transparent fee schedules, customer orders that interact with other customer orders do not receive payment whereas customer orders that interact with a market maker do receive payment for order flow. The impact of the changes upon the net fees paid by a particular market participant will depend upon a number of variables, including its monthly volume, the order types it uses, and the prices of its quotes and orders (i.e., its propensity to add or remove liquidity and to set the best bid and offer), and the extent to which it acts as an agent for retail customers. NASDAQ notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. NASDAQ is modifying fees to remain competitive with those charged by other venues and therefore strongly believes that its fees are reasonable and equitably allocated to those members that opt to direct orders to NASDAQ rather than competing venues. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 11 and subparagraph (f)(2) of Rule 19b–4 thereunder.12 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public 11 15 12 17 E:\FR\FM\27JYN1.SGM U.S.C. 78s(b)(3)(a)(ii). CFR 240.19b–4(f)(2). 27JYN1 Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. In addition, the Commission seeks comment generally on whether the proposed assessment of transaction fees is consistent with the Act, in particular whether the proposal provides for an equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities under Section 6(b)(4) of the Act or whether the proposal permits unfair discrimination between customers, issuers, brokers, or dealers under Section 6(b)(5) of the Act. Specifically: 1. The Exchange has determined that the previous $0.20 rebate for a Customer account for removing liquidity resulted in disproportionate payment for Customer orders relative to order volume growth. Do commenters believe that eliminating the rebate to Customers removing liquidity in non-Penny Pilot options when that Customer trades against a Customer order, while retaining the rebate to Customers that trade against a Firm or Market Maker order is consistent with the Act, including whether it is an equitable allocation of fees under Section 6(b)(4) and not unfairly discriminatory under Section 6(b)(5)? Why or why not? 2. The Commission notes that the fee schedules of some options exchanges provide for different levels of transaction fees for different categories of market participants. Generally, if there is a distinction between transaction fees for market makers and other non-customers (e.g. brokerdealers, firms), the market maker transaction fee is less than the noncustomer fee. However, the Exchange notes that one exchange charges away market makers more than non-customer orders.13 The Exchange proposes to charge Market Makers $0.45 per contract to remove orders in non-Penny Pilot options and to charge Firms $0.20 per contract to remove such orders. Is this fee differential consistent with the Act, including whether it is an equitable allocation of fees under Section 6(b)(4) and not unfairly discriminatory under Section 6(b)(5)? Why or why not? 3. In non-Penny Pilot options, the Exchange proposes to lower the fees charged to firms that remove liquidity 13 See supra note 10 and accompanying text. VerDate Nov<24>2008 19:02 Jul 24, 2009 Jkt 217001 from $0.45 to $0.20. The Exchange, however, maintains the fee of $0.45 for sending orders via the Options Intermarket Linkage that execute on NOM. Is creating a differential in this manner consistent with the Act, including whether it is an equitable allocation of fees under Section 6(b)(4) and not unfairly discriminatory under Section 6(b)(5)? Why or why not? Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASDAQ–2009–059 on the subject line. 37069 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–17819 Filed 7–24–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60320; File No. SR–CTA– 2009–01] Consolidated Tape Association; Notice of Filing and Immediate Effectiveness of the Twelfth Charges Amendment to the Second Restatement of the Consolidated Tape Association Plan July 16, 2009. Pursuant to Section 11A of the Securities Exchange Act of 1934 Paper Comments (‘‘Act’’),1 and Rule 608 thereunder,2 notice is hereby given that on July 13, • Send paper comments in triplicate 2009, the Consolidated Tape to Elizabeth M. Murphy, Secretary, Association (‘‘CTA’’) Plan Participants Securities and Exchange Commission, (‘‘Participants’’) 3 filed with the 100 F Street, NE., Washington DC Securities and Exchange Commission 20549–1090. (‘‘Commission’’) a proposal to amend the Second Restatement of the CTA Plan All submissions should refer to File (the ‘‘CTA Plan’’). The proposal Number SR–NASDAQ–2009–059. This represents the twelfth charges file number should be included on the subject line if e-mail is used. To help the amendment to the Plan (‘‘Twelfth Charges Amendment’’) and reflects Commission process and review your changes unanimously adopted by the comments more efficiently, please use only one method. The Commission will Participants. The Twelfth Charges post all comments on the Commission’s Amendment would delete the ticker display charge from Schedule A–1 of Internet Web site (https://www.sec.gov/ Exhibit E of the CTA Plan. rules/sro.shtml). Copies of the Pursuant to Rule 608(b)(3)(ii) under submission, all subsequent the Act,4 the Participants designated the amendments, all written statements Amendment as concerned solely with with respect to the proposed rule the administration of the Plan. As a change that are filed with the result, the Amendment has become Commission, and all written effective upon filing with the communications relating to the Commission. At any time within 60 proposed rule change between the Commission and any person, other than days of the filing of the Amendment, the Commission may summarily abrogate those that may be withheld from the the Amendment and require that the public in accordance with the Amendment be refiled in accordance provisions of 5 U.S.C. 552, will be with paragraph (a)(1) of Rule 608 and available for inspection and copying in reviewed in accordance with paragraph the Commission’s Public Reference (b)(2) of Rule 608, if it appears to the Room, 100 F Street, NE., Washington, DC 20549, on official business days 14 17 CFR 200.30–3(a)(12). between the hours of 10 a.m. and 3 p.m. 1 15 U.S.C. 78k–1. Copies of such filing also will be 2 17 CFR 242.608. available for inspection and copying at 3 Each Participant executed the proposed the principal office of the Exchange. All amendment. The Participants are the American comments received will be posted Stock Exchange LLC (n/k/a NYSE Amex LLC); Boston Stock Exchange, Inc. (n/k/a NASDAQ OMX without change; the Commission does BX, Inc.); Chicago Board Options Exchange, not edit personal identifying Incorporated; Chicago Stock Exchange, Inc.; information from submissions. You Financial Industry Regulatory Authority, Inc., should submit only information that International Securities Exchange, LLC; The you wish to make available publicly. All NASDAQ Stock Market LLC; National Stock Exchange, Inc.; New York Stock Exchange LLC; submissions should refer to File No. NYSE Arca, Inc.; and Philadelphia Stock Exchange, SR–NASDAQ–2009–059 and should be Inc. (n/k/a NASDAQ OMX PHLX, Inc.). submitted on or before August 17, 2009. 4 17 CFR 242.608(b)(3)(ii). PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 E:\FR\FM\27JYN1.SGM 27JYN1

Agencies

[Federal Register Volume 74, Number 142 (Monday, July 27, 2009)]
[Notices]
[Pages 37067-37069]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17819]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60352; File No. SR-NASDAQ-2009-059]


Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Modifying Fees for Members Using the NASDAQ Options Market

July 21, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 1, 2009, The NASDAQ Stock Market LLC (``NASDAQ'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by NASDAQ. Pursuant to Section 19(b)(3)(A)(ii) 
of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ a proposed rule 
change to modify pricing for NASDAQ members using the NASDAQ Options 
Market (``NOM''), Nasdaq's facility for the trading of standardized 
equity and index options [sic]. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to modify pricing for NASDAQ members using the 
Nasdaq Market Center. This proposed rule change, which is effective 
upon filing, will become operative on July 1, 2009. The text of the 
proposed rule change is available at https://nasdaqomx.cchwallstreet.com/, at NASDAQ's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASDAQ has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

[[Page 37068]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq is modifying NASDQ Rule 7050, the fee schedule for NOM, in 
several ways. First, Nasdaq is making changes that apply to orders with 
an account type of ``Customer.'' Specifically, Nasdaq is ending its 
pricing program to eliminate the fee for the execution of options 
orders with an account type of ``Customer'' that take liquidity \5\ in 
certain Penny Pilot options. In April, Nasdaq expanded the application 
of that rule to all options that are included in the Options Penny 
Pilot Program. Nasdaq continued to monitor the trading of options on 
these equities to ensure that the proposal is operating in a fashion 
that promotes the interests of investors. Nasdaq has concluded that the 
reduction of fees is no longer attracting new order flow to NOM and, 
therefore, Nasdaq is establishing a fee of $0.20 per executed contract 
for Customer orders in Penny Pilot options.
---------------------------------------------------------------------------

    \5\ An order that ``takes'' or ``removes'' liquidity is one that 
is entered into NOM and that executes against an order resting on 
the NOM book.
---------------------------------------------------------------------------

    Second, Nasdaq is also changing the fee structure for ``Customer'' 
orders in options not included in the Options Penny Pilot Program. 
Currently, Nasdaq charges no execution fees for members providing 
liquidity through the NASDAQ Options Market with an account type 
``Customer.'' Nasdaq also offers a credit of $0.20 per executed 
contract to members entering orders in options with an account type 
``Customer'' that execute and remove liquidity entered by another 
member in options that are not included in the Options Penny Pilot 
Program. Nasdaq is proposing to eliminate the payment of this credit 
when an order with an account type of Customer executes against another 
order with an account type of Customer. Nasdaq determined that the 
previous rule resulted in disproportionate payment for Customer orders 
relative to order volume growth.
    Third, Nasdaq is modifying NASDAQ Rule 7050 to lower from $0.45 to 
$0.20 the fees applicable to orders from Firms that remove liquidity in 
non-Penny Pilot stocks. Nasdaq believes that lowering this fee will 
attract more order flow to NOM and improve its overall competitiveness.
    Nasdaq believes that the proposed fees are competitive, fair and 
reasonable, and non-discriminatory in that they apply equally to all 
similarly situated members and customers. As with all fees, Nasdaq may 
adjust these proposed fees in response to competitive conditions by 
filing a new proposed rule change.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\6\ in general, and with Section 
6(b)(5) of the Act,\7\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    NASDAQ also believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\8\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which NASDAQ operates or controls. The proposed change 
identifies a class of person subject to transaction execution fees 
based on the role of that class in bringing order flow to NASDAQ. With 
respect to options markets, the Commission has found comparable pricing 
distinctions to be consistent with the Act. For example, in SR-ISE-
2006-26,\9\ the Commission approved a fee schedule under which orders 
of professional customers were charged higher fees than orders of non-
professional customers. A Firm rate that is lower than other 
participant rates is not uncommon. In fact, ISE charges the same 
differential rate that NASDAQ is proposing: $0.20 per contract for 
Proprietary Firm executions and $0.45 per contract for non-ISE-Market 
Makers.\10\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b)(4).
    \9\ Securities Exchange Act Release No. 59287 (January 23, 
2009), 74 FR 5694 (January 30, 2009) (SR-ISE-2006-26).
    \10\ See https://www.ise.com/assets//documents//optionsExchange//legal/fee/fee_schedule.
---------------------------------------------------------------------------

    NASDAQ also believes it is equitable to rebate customer executions 
in non-penny pilot options when the customer removes liquidity, unless 
the customer removes liquidity from a resting customer order. In that 
case, neither side of the trade is charged a fee or given a rebate. In 
other words, customer-to-customer transactions will be free to both 
sides of the trade (as is the case on most options markets) and 
therefore in NASDAQ's view it is not justifiable to pay an additional 
rebate. NASDAQ understands that on exchanges that engage in payment-
for-order-flow and that have less transparent fee schedules, customer 
orders that interact with other customer orders do not receive payment 
whereas customer orders that interact with a market maker do receive 
payment for order flow.
    The impact of the changes upon the net fees paid by a particular 
market participant will depend upon a number of variables, including 
its monthly volume, the order types it uses, and the prices of its 
quotes and orders (i.e., its propensity to add or remove liquidity and 
to set the best bid and offer), and the extent to which it acts as an 
agent for retail customers. NASDAQ notes that it operates in a highly 
competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive. NASDAQ is modifying fees to remain competitive 
with those charged by other venues and therefore strongly believes that 
its fees are reasonable and equitably allocated to those members that 
opt to direct orders to NASDAQ rather than competing venues.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\12\ At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public

[[Page 37069]]

interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. In addition, the Commission seeks 
comment generally on whether the proposed assessment of transaction 
fees is consistent with the Act, in particular whether the proposal 
provides for an equitable allocation of reasonable dues, fees, and 
other charges among its members and issuers and other persons using its 
facilities under Section 6(b)(4) of the Act or whether the proposal 
permits unfair discrimination between customers, issuers, brokers, or 
dealers under Section 6(b)(5) of the Act. Specifically:
    1. The Exchange has determined that the previous $0.20 rebate for a 
Customer account for removing liquidity resulted in disproportionate 
payment for Customer orders relative to order volume growth. Do 
commenters believe that eliminating the rebate to Customers removing 
liquidity in non-Penny Pilot options when that Customer trades against 
a Customer order, while retaining the rebate to Customers that trade 
against a Firm or Market Maker order is consistent with the Act, 
including whether it is an equitable allocation of fees under Section 
6(b)(4) and not unfairly discriminatory under Section 6(b)(5)? Why or 
why not?
    2. The Commission notes that the fee schedules of some options 
exchanges provide for different levels of transaction fees for 
different categories of market participants. Generally, if there is a 
distinction between transaction fees for market makers and other non-
customers (e.g. broker-dealers, firms), the market maker transaction 
fee is less than the non-customer fee. However, the Exchange notes that 
one exchange charges away market makers more than non-customer 
orders.\13\ The Exchange proposes to charge Market Makers $0.45 per 
contract to remove orders in non-Penny Pilot options and to charge 
Firms $0.20 per contract to remove such orders. Is this fee 
differential consistent with the Act, including whether it is an 
equitable allocation of fees under Section 6(b)(4) and not unfairly 
discriminatory under Section 6(b)(5)? Why or why not?
---------------------------------------------------------------------------

    \13\ See supra note 10 and accompanying text.
---------------------------------------------------------------------------

    3. In non-Penny Pilot options, the Exchange proposes to lower the 
fees charged to firms that remove liquidity from $0.45 to $0.20. The 
Exchange, however, maintains the fee of $0.45 for sending orders via 
the Options Intermarket Linkage that execute on NOM. Is creating a 
differential in this manner consistent with the Act, including whether 
it is an equitable allocation of fees under Section 6(b)(4) and not 
unfairly discriminatory under Section 6(b)(5)? Why or why not?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2009-059 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington DC 20549-1090.

    All submissions should refer to File Number SR-NASDAQ-2009-059. 
This file number should be included on the subject line if e-mail is 
used. To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-NASDAQ-2009-059 and should be 
submitted on or before August 17, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-17819 Filed 7-24-09; 8:45 am]
BILLING CODE 8010-01-P
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