Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by The NASDAQ Stock Market LLC Relating to Fees for Execution of Contracts on the NASDAQ Options Market, 44037-44040 [2010-18404]
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44037
Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–18301 Filed 7–26–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62543; File No. SR–
NASDAQ–2010–075]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by The
NASDAQ Stock Market LLC Relating to
Fees for Execution of Contracts on the
NASDAQ Options Market
July 21, 2010.
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 June 30, 2010, The
NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the Exchange.
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
The Exchange proposes to modify
Exchange Rule 7050 governing pricing
for NASDAQ members using the
NASDAQ Options Market (‘‘NOM’’),
NASDAQ’s facility for executing and
routing standardized equity and index
options. Specifically, NOM proposes to:
(i) Modify pricing for both Penny Pilot3
Options and All Other Options with
respect to the fees for adding 4 and
removing liquidity 5 as well as the
rebates for adding and removing
liquidity; (ii) eliminate the rebates for
adding and fees for removing liquidity
in options overlying Standard and
Poor’s Depositary Receipts/SPDRs
(‘‘SPY’’),6 PowerShares QQQ Trust
(‘‘QQQQ’’)® and Ishares Russell 2000
(‘‘IWM’’); (iii) eliminate the fee for an
order that executes against another
order entered by the same firm; and (iv)
allow a rebate for Customer orders
which execute against other customer
orders.
While changes pursuant to this
proposal are effective upon filing, the
Exchange has designated these changes
to be operative for transactions on July
1, 2010.
The text of the proposed rule change
is set forth below. Proposed new text is
in italic and deleted text is in [brackets].
7050. NASDAQ Options Market
The following charges shall apply to the
use of the order execution and routing
services of the NASDAQ Options
Market for all securities.
(1) Fees for Execution of Contracts on
the NASDAQ Options Market
FEES AND REBATES
(per executed contract)
Customer
Penny Pilot Options:
Rebate to Add Liquidity ............................................................................
Fee for Removing Liquidity .......................................................................
[IWM, QQQQ, SPY]
[Rebate to Add Liquidity] ..........................................................................
[Fee for Removing Liquidity] .....................................................................
NDX and MNX
Rebate to Add Liquidity ............................................................................
Fee for Removing Liquidity .......................................................................
All Other Options:
Fee for Adding Liquidity ...........................................................................
Fee for Removing Liquidity .......................................................................
Rebate [for] to [Removing] Add Liquidity[*] ..............................................
[Transactions in which the same
participant is the buyer and the seller
shall be charged a net fee of $0.10 per
executed contract.]
[*No rebate will be paid when a
customer order executes against another
customer order.]
*
*
*
*
*
The text of the proposed rule change
is available on the Exchange’s Web site
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1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Penny Pilot was established in March 2008
and in October 2009 was expanded and extended
through December 31, 2010. See Securities
Exchange Act Release Nos. 57579 (March 28, 2008),
73 FR 18587 (April 4, 2008) (SR–NASDAQ–2008–
026) (notice of filing and immediate effectiveness
establishing Penny Pilot); 60874 (October 23, 2009),
74 FR 56682 (November 2, 2009) (SR–NASDAQ–
2009–091) (notice of filing and immediate
2 17
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Firm
Non-NOM
market maker
NOM market
maker
$0.[25]32
$0.[35]40
$0.[25]10
$0.45
$0.25
$0.45
$0.[25]30
$0.45
[$0.30]
[$0.35]
[$0.30]
[$0.45]
[$0.30]
[$0.45]
[$0.30]
[$0.45]
$0.10
$0.50
$0.10
$0.50
$0.10
$0.50
$0.20
$0.40
[Free]$0.00
[¥]$0.40
$0.20
$0.[30]45
$0.4[0]5
[¥]$0.00
$0.[30]45
$0.45
[¥]$0.00
$0.30
$0.45
$0.00[¥]
at https://
www.nasdaqomx.cchwallstreet.com, at
the principal office of the Exchange, 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
effectiveness expanding and extending Penny
Pilot); 60965 (November 9, 2009), 74 FR 59292
(November 17, 2009) (SR–NASDAQ–2009–097)
(notice of filing and immediate effectiveness adding
seventy-five classes to Penny Pilot); 61455
(February 1, 2010), 75 FR 6239 (February 8, 2010)
(SR–NASDAQ–2010–013) (notice of filing and
immediate effectiveness adding seventy-five classes
to Penny Pilot); and 62029 (May 4, 2010), 75 FR
25895 (May 10, 2010) (SR–NASDAQ–2010–053)
(notice of filing and immediate effectiveness adding
seventy-five classes to Penny Pilot). See also
Exchange Rule Chapter VI, Section 5.
4 An order that adds liquidity is one that is
entered into NOM and rests on the NOM book.
5 An order that removes liquidity is one that is
entered into NOM and that executes against an
order resting on the NOM book.
6 SPY options are based on the SPDR exchangetraded fund (‘‘ETF’’), which is designed to track the
performance of the S&P 500 Index.
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In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
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Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Notices
1. Purpose
NASDAQ is proposing to modify Rule
7050 governing the fees assessed for
options orders entered into NOM.
Specifically, NASDAQ is proposing to
modify pricing for both Penny Pilot
Options and All Other Options with
respect to the fees for adding and
removing liquidity as well as the rebates
for adding liquidity. These amendments
to the fees are part of the Exchange’s
continued effort to attract and enhance
participation in NOM. By amending its
fees, NASDAQ seeks to encourage
industry market makers to participate as
registered market makers on NOM in
order to attract additional liquidity.
Currently, NASDAQ distinguishes
between options that are included in the
Penny Pilot and those that are not.
Penny Options—Adding Liquidity:
The Exchange currently pays a rebate of
$0.25 per executed contract to members
providing liquidity through NOM in
options included in the Penny Pilot and
in the capacity of ‘‘Customer’’, ‘‘firm’’,
‘‘NOM Market Maker’’ 7 or ‘‘Non-NOM
Market Maker’’ 8. The Exchange
proposes to amend these fees as follows:
Customers would be rebated $0.32 per
contract instead of $0.25 per contract; a
firm would be rebated $0.10 per
contract instead of $0.25 per contract;
and a NOM Market Maker would be
rebated $0.30 per contract instead of
$0.25 per contract.9
Penny Options—Removing Liquidity:
The Exchange assesses a fee to members
removing liquidity through NOM in
options included in the Penny Pilot and
charges a fee of $0.35 per executed
contract to Customers for removing such
liquidity and a fee of $0.45 per executed
contract to members in the capacity of
firm, NOM Market Maker and NonNOM Market Maker for removing
liquidity. The Exchange proposes to
amend these fees as follows: Customers
would be assessed $0.40 per contract
instead of $0.35 per contract.10
Non-Penny Options—Adding
Liquidity: The Exchange assesses a fee of
$0.30 per executed contract to members
providing liquidity through NOM in
options not included in the Penny Pilot
(under the category of All Other
Options) in the capacity of firm, NOM
Market Maker and Non-NOM Market
Maker. The Exchange currently assesses
no execution fees for members adding
liquidity through NOM, in All Other
Options, with an account type
Customer, and will continue to assess
no fee. The Exchange proposes to
amend these fees for adding liquidity as
follows: a firm would be assessed $0.45
per contract instead of $0.30 per
contract; and a Non-NOM Market Maker
would be assessed a fee of $0.45 per
contract instead of $0.30 per contract.11
Non-Penny Options—Removing
Liquidity: The Exchange assesses fees to
members removing liquidity through
NOM in All Other Options and charges
a fee of $0.40 per executed contract to
members removing liquidity in the
capacity of firm and a fee of $0.45 per
executed contract to members removing
liquidity in the capacity of NOM Market
Maker and Non-NOM Market Maker.
The Exchange currently assesses no
execution fees for members removing
liquidity through NOM, in All Other
Options, with an account type
Customer. The Exchange proposes to
amend these fees for removing liquidity
as follows: a Customer would be
assessed $0.40 per contract instead of
$0.00 and a firm would be assessed a fee
of $0.45 per contract instead of $0.40.12
Non-Penny Options—Rebates: The
Exchange currently provides a rebate for
removing liquidity through NOM in
Non-Penny Options (All Other Options)
of $0.20 per executed contract to
members acting in the capacity of
Customer. The Exchange proposes to
pay a rebate to add liquidity through
NOM in All Other Options of $0.20 per
executed contract to members acting in
the capacity of Customer and eliminate
the rebate for removing liquidity.13
Elimination of IWM, QQQQ and SPY:
The Exchange currently pays a rebate of
$0.30 per executed contract to all
members for adding liquidity in options
overlying IWM, QQQQ and SPY. The
Exchange also currently assesses a fee of
$0.35 per executed contract to members
removing liquidity through NOM in
options overlying IWM, QQQQ and SPY
in the capacity of Customer and a fee of
$0.45 per executed contract to all
members removing liquidity in the
capacity of firm, NOM Market Maker
and Non-NOM Market Maker.
The Exchange proposes to eliminate
the rebate for adding liquidity and the
fee for removing liquidity in options
overlying IWM, QQQQ and SPY.
Members would be assessed the rates
currently applicable to Penny Pilot
Options going forward. The Exchange
no longer believes that these rebates and
fees are necessary incentives to promote
order flow in these symbols.
Elimination of Fees: The Exchange
currently assesses a net fee of $0.10 per
executed contract when a member order
executes against an order entered by the
same firm. In other words, a transaction
in which the same participant is both
the buyer and the seller is currently
assessed a net fee of $0.10 per contract.
The Exchange is proposing to eliminate
this fee as the Exchange believes that
this fee is no longer necessary. The fee
was initially enacted to change the
distinction between orders that interact
with other members’ orders and those
that interact with orders from the same
firm. At this time, the Exchange believes
that this distinction is no longer
necessary to compete for order flow.
Similarly, the Exchange proposes to
eliminate the text which states that ‘‘No
rebate will be paid when a customer
order executes against another customer
order.’’ The Exchange believes that this
distinction is no longer necessary and
that the elimination of this language
will afford Customers additional rebates
and create additional incentives to
enhance participation in NOM.
While changes pursuant to this
proposal are effective upon filing, the
Exchange has designated these changes
to be operative for transactions on July
1, 2010.
7 A NOM Market Maker must be registered as
such pursuant to Chapter VII, Section 2 of Exchange
rules, and must remain in good standing pursuant
to Chapter VII, Section 2. In order to receive NOM
Market Maker pricing in all securities, the firm
must be registered as a NOM Market Maker in at
least one security.
8 A Non-NOM Market Maker is a registered
market maker on another options market that
appends the market maker designation to orders
executed on NOM.
9 A Non-NOM Market Maker would continue to
be rebated $0.25 per contract.
10 A firm, NOM Market Maker and Non-NOM
Market Maker would continue to be assessed $0.45
per contract.
11 The fees currently assessed on NOM Market
Makers for adding liquidity in Non-Penny Options
(All Other Options) will remain the same.
12 The fees currently assessed on NOM Market
Makers and Non-NOM Market Makers for removing
liquidity in Non-Penny Options (All Other Options)
will remain the same.
13 The Exchange currently does not provide firms,
NOM Market Makers and Non-NOM Market Makers
rebates in Non-Penny options (All Other Options)
2. Statutory Basis
NASDAQ believes that the proposed
rule changes are consistent with the
provisions of Section 6 of the Act,14 in
general, and with Section 6(b)(4) of the
Act,15 in particular, in that it provides
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
sroberts on DSKD5P82C1PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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and is not proposing any changes at this time for
these members.
14 15 U.S.C. 78f.
15 15 U.S.C. 78f(b)(4).
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Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Notices
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
Exchange believes the proposed
amendments to the fees and rebates for
adding and removing liquidity are
equitable and reasonable because they
are within the range of fees assessed by
other exchanges employing similar
pricing schemes and that the proposed
fees apply fairly to all similarly situated
participants on NOM for reasons
discussed in greater detail below.
With respect to the proposed rebates
for adding liquidity in Penny Options,
the Exchange believes that its proposal
to increase the current rebate of $0.25
per contract to $0.32 per contract for
customers is both reasonable and
equitable because the rebate is
consistent with other rebates being paid
in certain symbols at NYSE Arca, Inc.
(‘‘NYSE Arca’’).16 Moreover, the
Exchange is seeking to provide the
appropriate incentives to broker-dealers
acting as agent for customer orders to
select the Exchange as a venue to post
customer limit orders. The Exchange
also proposes to increase the current
rebate of $0.25 per contract to $0.30 per
contract for NOM Market Makers. The
Exchange believes that this increase is
equitable and reasonable because the
proposed increase is within the range of
similar fees assessed by other
exchanges, such as the price differential
for market makers and other brokerdealer on other exchanges. Specifically,
the rate differential between NOM
Market Makers and Non-NOM Market
Makers is currently similar to pricing
distinctions employed at, the
International Securities Exchange, Inc.
(‘‘ISE’’),17 which assesses a Non-ISE
Market Maker 18 $0.45 per contract for
trading in equity options, while an ISE
Market Maker at the lowest tier (highest
rate) is assessed $0.18 per contract.19
Finally, the Exchange has decreased the
rebate from $0.25 per contract to $0.10
per contract for Firms. As with the other
proposed changes, the Exchange
believes that this proposal is reasonable
because it is within the range of fees
assessed at other exchanges and the
proposed price differential is similar to
other price differentials on other
exchanges. For example, a Firm
Proprietary order at ISE is assessed a
maker fee of $0.10 per contract while a
16 See
NYSE Arca’s Fee Schedule.
ISE’s Schedule of Fees.
18 A Non-ISE Market Maker means a market
maker as defined in Section 3(a)(38) of the Act
registered in the same options class on another
options exchange. See ISE’s Schedule of Fees.
19 See ISE’s Schedule of Fees.
17 See
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Market Maker Plus receives a $0.10 per
contract rebate in ISE’s select symbols.20
In addition to the fair price differential,
the Exchange believes its proposed fee
changes are just and equitable because
market makers have obligations to the
market place and regulatory burdens
placed on them that other broker-dealers
trading for their own account do not
currently endure.
The Exchange has also amended its
fees for removing liquidity in Penny
Options. The Exchange increased the fee
for removing liquidity that is assessed to
broker-dealers for customer orders from
$0.35 per contract to $0.40 per contract.
The Exchange believes that this
amendment is reasonable and equitable
because it is still less than the fee of
$0.45 per contract that is currently
assessed on Firms, NOM Market Makers
and Non-NOM Market Makers and $0.05
less than the fees for removing liquidity
at NYSEArca in Penny Options.21
The Exchange has also proposed to
amend its fees in non-Penny Options
(All Other Options). Specifically, the
Exchange has increased its fees for
adding liquidity for both Firms and
Non-NOM Market Makers from $0.30
per contract to $0.45 per contract. The
Exchange believes that these fees are
reasonable because they are within the
range of fees assessed in the industry.
Further, the Exchange believes that it is
equitable because the price differential
exists currently on ISE. At ISE, a NonISE Market Maker (FARMM) is assessed
a $0.20 per contract make fee in the
select symbols, while a Market Maker is
assessed $0.10 per contract.22 As
mentioned previously, there are also
existing price differentials on ISE as
between an ISE Market Maker and a
Non-ISE Market Maker. As discussed,
market makers have certain obligations
to the market and regulatory
requirements, which normally do not
apply to Firms and Broker Dealers.23
Additionally, the Exchange is
proposing to assess to a customer a
$0.40 per contract fee for removing
liquidity. Currently, customer orders do
not pay for removing liquidity. The
Exchange believes that this fee proposal
is reasonable because it is within the
range of rates being assessed to other
market participants and to brokerdealers for executing customer order in
Penny Options at other exchanges. The
Exchange also believes that this fee
proposal is equitable because it is $0.05
20 See
ISE’s Schedule of Fees.
NYSE Arca’s Fee Schedule.
22 See ISE’s Schedule of Fees.
23 See Exchange Rules Section VII, Market
Participants, Sections 5, Obligations of Market
Makers, and Section 6, Market Maker Quotations.
21 See
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44039
per contract less the fees being assessed
on Firms, NOM Market Makers and
Non-NOM Market Makers. The
Exchange also proposes to increase the
fee for removing liquidity that is being
assessed on Firms from $0.40 per
contract to $0.45 per contract. The
Exchange believes that this proposal is
both reasonable and equitable because it
is the exact fee currently being assessed
on NOM Market Makers and Non-NOM
Market Makers. Keeping rates
reasonable for customer orders is
necessary to provide incentives for
customer order flow in a mature, highly
competitive market place. Finally, the
Exchange is amending All Other
Options to convert its rebate for
removing liquidity to a rebate for adding
liquidity. The Exchange proposes to pay
a rebate to customer orders for adding
liquidity of $.20. The Exchange was
previously paying customer orders that
removed liquidity $.20. The Exchange
believes that this proposal is reasonable
because customers are still receiving a
rebate, but for adding versus removing
liquidity. Also, the Exchange believes
that the proposal is equitable because
broker-dealers acting as agent for
customer orders will be eligible to
receive rebates similar to rebates found
on other exchange for certain symbols.
Also, the rebate serves to incentivize
increased customer order flow to be sent
to the Exchange for the benefit of all
market participants.
The Exchange also believes that its
proposal to eliminate the rebate to add
liquidity and fee for removing liquidity
for options overlying IWM, QQQQ and
SPY is both reasonable and equitable
because the Exchange is proposing to
remove these fees for all participants.
The same applies to the Exchange
proposal to eliminate the $0.10 net fee
for executed contracts which applies to
transactions in which the same
participant is the buyer and the seller as
it was rarely assessed.
NASDAQ is one of eight options
market in the national market system for
standardized options. It is a mature,
robust market that is highly competitive.
Joining NASDAQ and electing to trade
options is entirely voluntary. Under
these circumstances, NASDAQ’s fees
must be competitive, fair and just in
order for NASDAQ to attract order flow,
execute orders, and grow as a market.
NASDAQ thus believes that its fees are
equitable, fair and reasonable and
consistent with the Exchange Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
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Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Notices
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or 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 24 and
paragraph (f)(2) of Rule 19b–4 25
thereunder. 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
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.
Comments may be submitted by any of
the following methods:
sroberts on DSKD5P82C1PROD with NOTICES
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–2010–075 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–2010–075. 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 Web site viewing and
printing 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 the 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 Number SR–
NASDAQ–2010–075 and should be
submitted on or before August 17, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–18404 Filed 7–26–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62540; File No. SR–
NYSEAmex–2010–70]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NYSE
Amex LLC Extending the Operative
Date of NYSE Amex Equities Rule
92(c)(3) From July 31, 2010 to
December 31, 2010
July 21, 2010.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on July 9,
2010, NYSE Amex LLC (the ‘‘Exchange’’
or ‘‘NYSE Amex’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
26 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
24 15
25 17
U.S.C. 78s(b)(3)(A)(ii).
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
The Exchange proposes to extend the
operative date of NYSE Amex Equities
Rule 92(c)(3) from July 31, 2010 to
December 31, 2010. The text of the
proposed rule change is available at the
Exchange, the Commission’s Web site at
https://www.sec.gov, the Commission’s
Public Reference Room, and https://
www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to extend
the delayed operative date of Rule
92(c)(3) from July 31, 2010 to December
31, 2010. The Exchange believes that
this extension will provide the time
necessary for the Exchange, the New
York Stock Exchange LLC (‘‘NYSE’’), and
the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) to harmonize
their respective rules concerning
customer order protection to achieve a
standardized industry practice.4
Background:
On July 5, 2007, the Commission
approved amendments to NYSE Rule 92
to permit riskless principal trading at
the NYSE.5 These amendments were
filed in part to begin the harmonization
process between NYSE Rule 92 and
FINRA’s Manning Rule.6 In connection
with those amendments, the NYSE
implemented for an operative date of
January 16, 2008, NYSE Rule 92(c)(3),
which permits NYSE member
organizations to submit riskless
4 NYSE has filed a companion rule filing to
conform its Rules to the changes proposed in this
filing. See SR–NYSE–2010–52, formally submitted
July 9, 2010.
5 See Securities Exchange Act Release No. 56017
(Jul. 5, 2007), 72 FR 38110 (Jul. 12, 2007) (SR–
NYSE–2007–21).
6 See NASD Rule 2111 and IM–2110–2.
E:\FR\FM\27JYN1.SGM
27JYN1
]]>Agencies
[Federal Register Volume 75, Number 143 (Tuesday, July 27, 2010)]
[Notices]
[Pages 44037-44040]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-18404]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62543; File No. SR-NASDAQ-2010-075]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by The NASDAQ Stock Market LLC
Relating to Fees for Execution of Contracts on the NASDAQ Options
Market
July 21, 2010.
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 June 30, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify Exchange Rule 7050 governing
pricing for NASDAQ members using the NASDAQ Options Market (``NOM''),
NASDAQ's facility for executing and routing standardized equity and
index options. Specifically, NOM proposes to: (i) Modify pricing for
both Penny Pilot\3\ Options and All Other Options with respect to the
fees for adding \4\ and removing liquidity \5\ as well as the rebates
for adding and removing liquidity; (ii) eliminate the rebates for
adding and fees for removing liquidity in options overlying Standard
and Poor's Depositary Receipts/SPDRs (``SPY''),\6\ PowerShares QQQ
Trust (``QQQQ'')[supreg] and Ishares Russell 2000 (``IWM''); (iii)
eliminate the fee for an order that executes against another order
entered by the same firm; and (iv) allow a rebate for Customer orders
which execute against other customer orders.
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\3\ The Penny Pilot was established in March 2008 and in October
2009 was expanded and extended through December 31, 2010. See
Securities Exchange Act Release Nos. 57579 (March 28, 2008), 73 FR
18587 (April 4, 2008) (SR-NASDAQ-2008-026) (notice of filing and
immediate effectiveness establishing Penny Pilot); 60874 (October
23, 2009), 74 FR 56682 (November 2, 2009) (SR-NASDAQ-2009-091)
(notice of filing and immediate effectiveness expanding and
extending Penny Pilot); 60965 (November 9, 2009), 74 FR 59292
(November 17, 2009) (SR-NASDAQ-2009-097) (notice of filing and
immediate effectiveness adding seventy-five classes to Penny Pilot);
61455 (February 1, 2010), 75 FR 6239 (February 8, 2010) (SR-NASDAQ-
2010-013) (notice of filing and immediate effectiveness adding
seventy-five classes to Penny Pilot); and 62029 (May 4, 2010), 75 FR
25895 (May 10, 2010) (SR-NASDAQ-2010-053) (notice of filing and
immediate effectiveness adding seventy-five classes to Penny Pilot).
See also Exchange Rule Chapter VI, Section 5.
\4\ An order that adds liquidity is one that is entered into NOM
and rests on the NOM book.
\5\ An order that removes liquidity is one that is entered into
NOM and that executes against an order resting on the NOM book.
\6\ SPY options are based on the SPDR exchange-traded fund
(``ETF''), which is designed to track the performance of the S&P 500
Index.
---------------------------------------------------------------------------
While changes pursuant to this proposal are effective upon filing,
the Exchange has designated these changes to be operative for
transactions on July 1, 2010.
The text of the proposed rule change is set forth below. Proposed
new text is in italic and deleted text is in [brackets].
7050. NASDAQ Options Market
The following charges shall apply to the use of the order execution and
routing services of the NASDAQ Options Market for all securities.
(1) Fees for Execution of Contracts on the NASDAQ Options Market
Fees and Rebates
(per executed contract)
----------------------------------------------------------------------------------------------------------------
Non-NOM market NOM market
Customer Firm maker maker
----------------------------------------------------------------------------------------------------------------
Penny Pilot Options:
Rebate to Add Liquidity..................... $0.[25]32 $0.[25]10 $0.25 $0.[25]30
Fee for Removing Liquidity.................. $0.[35]40 $0.45 $0.45 $0.45
[IWM, QQQQ, SPY]
[Rebate to Add Liquidity]................... [$0.30] [$0.30] [$0.30] [$0.30]
[Fee for Removing Liquidity]................ [$0.35] [$0.45] [$0.45] [$0.45]
NDX and MNX
Rebate to Add Liquidity..................... $0.10 $0.10 $0.10 $0.20
Fee for Removing Liquidity.................. $0.50 $0.50 $0.50 $0.40
All Other Options:
Fee for Adding Liquidity.................... [Free]$0.00 $0.[30]45 $0.[30]45 $0.30
Fee for Removing Liquidity.................. [-]$0.40 $0.4[0]5 $0.45 $0.45
Rebate [for] to [Removing] Add Liquidity[*]. $0.20 [-]$0.00 [-]$0.00 $0.00[-]
----------------------------------------------------------------------------------------------------------------
[Transactions in which the same participant is the buyer and the seller
shall be charged a net fee of $0.10 per executed contract.]
[*No rebate will be paid when a customer order executes against another
customer order.]
* * * * *
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nasdaqomx.cchwallstreet.com, at the principal
office of the Exchange, 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, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these
[[Page 44038]]
statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in Sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ is proposing to modify Rule 7050 governing the fees assessed
for options orders entered into NOM. Specifically, NASDAQ is proposing
to modify pricing for both Penny Pilot Options and All Other Options
with respect to the fees for adding and removing liquidity as well as
the rebates for adding liquidity. These amendments to the fees are part
of the Exchange's continued effort to attract and enhance participation
in NOM. By amending its fees, NASDAQ seeks to encourage industry market
makers to participate as registered market makers on NOM in order to
attract additional liquidity.
Currently, NASDAQ distinguishes between options that are included
in the Penny Pilot and those that are not.
Penny Options--Adding Liquidity: The Exchange currently pays a
rebate of $0.25 per executed contract to members providing liquidity
through NOM in options included in the Penny Pilot and in the capacity
of ``Customer'', ``firm'', ``NOM Market Maker'' \7\ or ``Non-NOM Market
Maker'' \8\. The Exchange proposes to amend these fees as follows:
Customers would be rebated $0.32 per contract instead of $0.25 per
contract; a firm would be rebated $0.10 per contract instead of $0.25
per contract; and a NOM Market Maker would be rebated $0.30 per
contract instead of $0.25 per contract.\9\
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\7\ A NOM Market Maker must be registered as such pursuant to
Chapter VII, Section 2 of Exchange rules, and must remain in good
standing pursuant to Chapter VII, Section 2. In order to receive NOM
Market Maker pricing in all securities, the firm must be registered
as a NOM Market Maker in at least one security.
\8\ A Non-NOM Market Maker is a registered market maker on
another options market that appends the market maker designation to
orders executed on NOM.
\9\ A Non-NOM Market Maker would continue to be rebated $0.25
per contract.
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Penny Options--Removing Liquidity: The Exchange assesses a fee to
members removing liquidity through NOM in options included in the Penny
Pilot and charges a fee of $0.35 per executed contract to Customers for
removing such liquidity and a fee of $0.45 per executed contract to
members in the capacity of firm, NOM Market Maker and Non-NOM Market
Maker for removing liquidity. The Exchange proposes to amend these fees
as follows: Customers would be assessed $0.40 per contract instead of
$0.35 per contract.\10\
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\10\ A firm, NOM Market Maker and Non-NOM Market Maker would
continue to be assessed $0.45 per contract.
---------------------------------------------------------------------------
Non-Penny Options--Adding Liquidity: The Exchange assesses a fee of
$0.30 per executed contract to members providing liquidity through NOM
in options not included in the Penny Pilot (under the category of All
Other Options) in the capacity of firm, NOM Market Maker and Non-NOM
Market Maker. The Exchange currently assesses no execution fees for
members adding liquidity through NOM, in All Other Options, with an
account type Customer, and will continue to assess no fee. The Exchange
proposes to amend these fees for adding liquidity as follows: a firm
would be assessed $0.45 per contract instead of $0.30 per contract; and
a Non-NOM Market Maker would be assessed a fee of $0.45 per contract
instead of $0.30 per contract.\11\
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\11\ The fees currently assessed on NOM Market Makers for adding
liquidity in Non-Penny Options (All Other Options) will remain the
same.
---------------------------------------------------------------------------
Non-Penny Options--Removing Liquidity: The Exchange assesses fees
to members removing liquidity through NOM in All Other Options and
charges a fee of $0.40 per executed contract to members removing
liquidity in the capacity of firm and a fee of $0.45 per executed
contract to members removing liquidity in the capacity of NOM Market
Maker and Non-NOM Market Maker. The Exchange currently assesses no
execution fees for members removing liquidity through NOM, in All Other
Options, with an account type Customer. The Exchange proposes to amend
these fees for removing liquidity as follows: a Customer would be
assessed $0.40 per contract instead of $0.00 and a firm would be
assessed a fee of $0.45 per contract instead of $0.40.\12\
---------------------------------------------------------------------------
\12\ The fees currently assessed on NOM Market Makers and Non-
NOM Market Makers for removing liquidity in Non-Penny Options (All
Other Options) will remain the same.
---------------------------------------------------------------------------
Non-Penny Options--Rebates: The Exchange currently provides a
rebate for removing liquidity through NOM in Non-Penny Options (All
Other Options) of $0.20 per executed contract to members acting in the
capacity of Customer. The Exchange proposes to pay a rebate to add
liquidity through NOM in All Other Options of $0.20 per executed
contract to members acting in the capacity of Customer and eliminate
the rebate for removing liquidity.\13\
---------------------------------------------------------------------------
\13\ The Exchange currently does not provide firms, NOM Market
Makers and Non-NOM Market Makers rebates in Non-Penny options (All
Other Options) and is not proposing any changes at this time for
these members.
---------------------------------------------------------------------------
Elimination of IWM, QQQQ and SPY: The Exchange currently pays a
rebate of $0.30 per executed contract to all members for adding
liquidity in options overlying IWM, QQQQ and SPY. The Exchange also
currently assesses a fee of $0.35 per executed contract to members
removing liquidity through NOM in options overlying IWM, QQQQ and SPY
in the capacity of Customer and a fee of $0.45 per executed contract to
all members removing liquidity in the capacity of firm, NOM Market
Maker and Non-NOM Market Maker.
The Exchange proposes to eliminate the rebate for adding liquidity
and the fee for removing liquidity in options overlying IWM, QQQQ and
SPY. Members would be assessed the rates currently applicable to Penny
Pilot Options going forward. The Exchange no longer believes that these
rebates and fees are necessary incentives to promote order flow in
these symbols.
Elimination of Fees: The Exchange currently assesses a net fee of
$0.10 per executed contract when a member order executes against an
order entered by the same firm. In other words, a transaction in which
the same participant is both the buyer and the seller is currently
assessed a net fee of $0.10 per contract. The Exchange is proposing to
eliminate this fee as the Exchange believes that this fee is no longer
necessary. The fee was initially enacted to change the distinction
between orders that interact with other members' orders and those that
interact with orders from the same firm. At this time, the Exchange
believes that this distinction is no longer necessary to compete for
order flow.
Similarly, the Exchange proposes to eliminate the text which states
that ``No rebate will be paid when a customer order executes against
another customer order.'' The Exchange believes that this distinction
is no longer necessary and that the elimination of this language will
afford Customers additional rebates and create additional incentives to
enhance participation in NOM.
While changes pursuant to this proposal are effective upon filing,
the Exchange has designated these changes to be operative for
transactions on July 1, 2010.
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\14\ in general, and with
Section 6(b)(4) of the Act,\15\ in particular, in that it provides
[[Page 44039]]
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 Exchange believes the
proposed amendments to the fees and rebates for adding and removing
liquidity are equitable and reasonable because they are within the
range of fees assessed by other exchanges employing similar pricing
schemes and that the proposed fees apply fairly to all similarly
situated participants on NOM for reasons discussed in greater detail
below.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
With respect to the proposed rebates for adding liquidity in Penny
Options, the Exchange believes that its proposal to increase the
current rebate of $0.25 per contract to $0.32 per contract for
customers is both reasonable and equitable because the rebate is
consistent with other rebates being paid in certain symbols at NYSE
Arca, Inc. (``NYSE Arca'').\16\ Moreover, the Exchange is seeking to
provide the appropriate incentives to broker-dealers acting as agent
for customer orders to select the Exchange as a venue to post customer
limit orders. The Exchange also proposes to increase the current rebate
of $0.25 per contract to $0.30 per contract for NOM Market Makers. The
Exchange believes that this increase is equitable and reasonable
because the proposed increase is within the range of similar fees
assessed by other exchanges, such as the price differential for market
makers and other broker-dealer on other exchanges. Specifically, the
rate differential between NOM Market Makers and Non-NOM Market Makers
is currently similar to pricing distinctions employed at, the
International Securities Exchange, Inc. (``ISE''),\17\ which assesses a
Non-ISE Market Maker \18\ $0.45 per contract for trading in equity
options, while an ISE Market Maker at the lowest tier (highest rate) is
assessed $0.18 per contract.\19\ Finally, the Exchange has decreased
the rebate from $0.25 per contract to $0.10 per contract for Firms. As
with the other proposed changes, the Exchange believes that this
proposal is reasonable because it is within the range of fees assessed
at other exchanges and the proposed price differential is similar to
other price differentials on other exchanges. For example, a Firm
Proprietary order at ISE is assessed a maker fee of $0.10 per contract
while a Market Maker Plus receives a $0.10 per contract rebate in ISE's
select symbols.\20\ In addition to the fair price differential, the
Exchange believes its proposed fee changes are just and equitable
because market makers have obligations to the market place and
regulatory burdens placed on them that other broker-dealers trading for
their own account do not currently endure.
---------------------------------------------------------------------------
\16\ See NYSE Arca's Fee Schedule.
\17\ See ISE's Schedule of Fees.
\18\ A Non-ISE Market Maker means a market maker as defined in
Section 3(a)(38) of the Act registered in the same options class on
another options exchange. See ISE's Schedule of Fees.
\19\ See ISE's Schedule of Fees.
\20\ See ISE's Schedule of Fees.
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The Exchange has also amended its fees for removing liquidity in
Penny Options. The Exchange increased the fee for removing liquidity
that is assessed to broker-dealers for customer orders from $0.35 per
contract to $0.40 per contract. The Exchange believes that this
amendment is reasonable and equitable because it is still less than the
fee of $0.45 per contract that is currently assessed on Firms, NOM
Market Makers and Non-NOM Market Makers and $0.05 less than the fees
for removing liquidity at NYSEArca in Penny Options.\21\
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\21\ See NYSE Arca's Fee Schedule.
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The Exchange has also proposed to amend its fees in non-Penny
Options (All Other Options). Specifically, the Exchange has increased
its fees for adding liquidity for both Firms and Non-NOM Market Makers
from $0.30 per contract to $0.45 per contract. The Exchange believes
that these fees are reasonable because they are within the range of
fees assessed in the industry. Further, the Exchange believes that it
is equitable because the price differential exists currently on ISE. At
ISE, a Non-ISE Market Maker (FARMM) is assessed a $0.20 per contract
make fee in the select symbols, while a Market Maker is assessed $0.10
per contract.\22\ As mentioned previously, there are also existing
price differentials on ISE as between an ISE Market Maker and a Non-ISE
Market Maker. As discussed, market makers have certain obligations to
the market and regulatory requirements, which normally do not apply to
Firms and Broker Dealers.\23\
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\22\ See ISE's Schedule of Fees.
\23\ See Exchange Rules Section VII, Market Participants,
Sections 5, Obligations of Market Makers, and Section 6, Market
Maker Quotations.
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Additionally, the Exchange is proposing to assess to a customer a
$0.40 per contract fee for removing liquidity. Currently, customer
orders do not pay for removing liquidity. The Exchange believes that
this fee proposal is reasonable because it is within the range of rates
being assessed to other market participants and to broker-dealers for
executing customer order in Penny Options at other exchanges. The
Exchange also believes that this fee proposal is equitable because it
is $0.05 per contract less the fees being assessed on Firms, NOM Market
Makers and Non-NOM Market Makers. The Exchange also proposes to
increase the fee for removing liquidity that is being assessed on Firms
from $0.40 per contract to $0.45 per contract. The Exchange believes
that this proposal is both reasonable and equitable because it is the
exact fee currently being assessed on NOM Market Makers and Non-NOM
Market Makers. Keeping rates reasonable for customer orders is
necessary to provide incentives for customer order flow in a mature,
highly competitive market place. Finally, the Exchange is amending All
Other Options to convert its rebate for removing liquidity to a rebate
for adding liquidity. The Exchange proposes to pay a rebate to customer
orders for adding liquidity of $.20. The Exchange was previously paying
customer orders that removed liquidity $.20. The Exchange believes that
this proposal is reasonable because customers are still receiving a
rebate, but for adding versus removing liquidity. Also, the Exchange
believes that the proposal is equitable because broker-dealers acting
as agent for customer orders will be eligible to receive rebates
similar to rebates found on other exchange for certain symbols. Also,
the rebate serves to incentivize increased customer order flow to be
sent to the Exchange for the benefit of all market participants.
The Exchange also believes that its proposal to eliminate the
rebate to add liquidity and fee for removing liquidity for options
overlying IWM, QQQQ and SPY is both reasonable and equitable because
the Exchange is proposing to remove these fees for all participants.
The same applies to the Exchange proposal to eliminate the $0.10 net
fee for executed contracts which applies to transactions in which the
same participant is the buyer and the seller as it was rarely assessed.
NASDAQ is one of eight options market in the national market system
for standardized options. It is a mature, robust market that is highly
competitive. Joining NASDAQ and electing to trade options is entirely
voluntary. Under these circumstances, NASDAQ's fees must be
competitive, fair and just in order for NASDAQ to attract order flow,
execute orders, and grow as a market. NASDAQ thus believes that its
fees are equitable, fair and reasonable and consistent with the
Exchange Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not
[[Page 44040]]
necessary or appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or 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 \24\ and paragraph (f)(2) of Rule 19b-4 \25\
thereunder. 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 interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78s(b)(3)(A)(ii).
\25\ 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. 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-2010-075 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-2010-075. 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 Web site
viewing and printing 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 the 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 Number SR-
NASDAQ-2010-075 and should be submitted on or before August 17, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18404 Filed 7-26-10; 8:45 am]
BILLING CODE 8010-01-P
