Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify NASDAQ Options Market Rules Chapter VII, Various Sections, Dealing With Market Maker Obligations, 6646-6648 [2011-2616]

Download as PDF 6646 Federal Register / Vol. 76, No. 25 / Monday, February 7, 2011 / Notices 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 5 in general, and furthers the objectives of Section 6(b)(5) of the Act 6 in particular, in that it is designed to promote just and equitable principles of trade, 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. In particular, the proposed rule change seeks to reduce investor confusion and address issues that have arisen in the operation of the $1 Strike Program by providing a consistent application of strike price intervals for issues in the $1 Strike Program. 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 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 Because the foregoing proposed rule change does not significantly affect the protection of investors or the public interest, does not impose any significant burden on competition, and, by its terms, does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 7 and Rule 19b–4(f)(6) thereunder.8 The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because the proposal is substantially 5 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 7 15 U.S.C. 78s(b)(3)(A). 8 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission has waived the five-day prefiling requirement in this case. emcdonald on DSK2BSOYB1PROD with NOTICES 6 15 VerDate Mar<15>2010 17:16 Feb 04, 2011 Jkt 223001 similar to that of another exchange that has been approved by the Commission.9 Therefore, the Commission designates the proposal operative upon filing.10 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend 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: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2011–14 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–Phlx–2011–14. 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 (http://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 website viewing and printing in the Commission’s Public 9 See Securities Exchange Act Release No. 63773 (January 25, 2011) (SR–NYSEAmex–2010–109). See also Securities Exchange Act Release No.63770 (January 25, 2011) (SR–NYSEArca–2010–106). 10 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 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–Phlx– 2011–14 and should be submitted on or before February 28, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Elizabeth M. Murpthy, Secretary. [FR Doc. 2011–2569 Filed 2–4–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63815; File No. SR– NASDAQ–2011–012] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify NASDAQ Options Market Rules Chapter VII, Various Sections, Dealing With Market Maker Obligations February 1, 2011. 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 January 19, 2011, 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. 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 amend Chapter VII, Section 3, Continuing Market Maker Registration, Section 5, Obligations of Market Makers, and Section 6, Market Maker Quotations, of the NASDAQ rulebook for the NASDAQ Options Market (‘‘NOM’’) to: (a) Permit Market Maker assignment by option rather than by series; (b) adopt a $5 quotation 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\07FEN1.SGM 07FEN1 Federal Register / Vol. 76, No. 25 / Monday, February 7, 2011 / Notices spread parameter; and (c) amend the quoting requirement for Market Makers as explained further below. These changes are scheduled to be implemented on NOM on or about May 1, 2011; the Exchange will announce the implementation schedule by Options Trader Alert, once the rollout schedule, which will be based in part on NOM participants’ readiness, is finalized. The text of the proposed rule change is available at http:// nasdaq.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 and discussed any comments it received on 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. emcdonald on DSK2BSOYB1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to strengthen Market Maker obligations. The NASDAQ Options Market (‘‘NOM’’), the options trading facility of The NASDAQ Stock Market LLC, has been fully operational for over two years. During this time, NASDAQ has carefully considered the role of Market Makers in the NOM marketplace and their concomitant obligations. An Options Market Maker is a Participant 3 registered with NASDAQ as a Market Maker.4 Market Makers on NOM have certain obligations such as maintaining two-sided markets and participating in transactions that are ‘‘reasonably calculated to contribute to the maintenance of a fair and orderly market.’’ 5 To register as a Market Maker, a Participant must file a written application with Nasdaq Regulation, which will consider an applicant’s market making ability and other factors 3 The term ‘‘Options Participant’’ or ‘‘Participant’’ means a firm or organization that is registered with the Exchange pursuant to Chapter II of the NOM Rules for purposes of participating in options trading on NOM as a ‘‘Nasdaq Options Order Entry Firm’’ or ‘‘Nasdaq Options Market Maker.’’ 4 See NOM Rules, Chapter VII, Section 2. 5 See NOM Rules, Chapter VII, Section 5(a). VerDate Mar<15>2010 17:16 Feb 04, 2011 Jkt 223001 it deems appropriate in determining whether to approve an applicant’s registration.6 All Market Makers are designated as specialists on NOM for all purposes under the Act or rules thereunder.7 The NOM Rules place no limit on the number of qualifying entities that may become Market Makers.8 The good standing of a Market Maker may be suspended, terminated, or withdrawn if the conditions for approval cease to be maintained or the Market Maker violates any of its agreements with NASDAQ or any provisions of the NOM Rules.9 Currently, a Participant that has qualified as a Market Maker may register to make markets in individual series of options.10 Instead, NASDAQ proposes to require that Market Makers register by option. Thus, once so registered, a NOM Market Maker is subject to the market making obligations in all series of that option, except Quarterly Options Series, adjusted option series and any options series until the time to expiration for such series is less than nine months.11 In order to effect this change, NASDAQ proposes to amend various provisions in Sections 3, 5 and 6 of Chapter VII that currently refer to ‘‘series.’’ NASDAQ believes that registration by option rather than series should spread the benefits of Market Maker quoting across all series of an option, which should, in turn, result in higher quality markets. NASDAQ also proposes to adopt quotation spread parameters, also known as bid/ask differentials, which establish the maximum permissible width between a Market Maker’s bid and an offer in a particular series. Specifically, NASDAQ proposes to adopt a $5 wide quote spread parameter for all options.12 Currently, NOM Market Makers are not subject to quote spread parameters, such that the requirement for a two-sided market can be met with a quotation that is very wide. NASDAQ believes that a $5 quote spread parameter for NOM Market Makers should result in narrower markets, and thereby, improve the quality of NOM’s markets. Lastly, NASDAQ proposes to amend its quotation requirement for Market Makers. Today, NOM Market Makers are required to make markets on a continuous basis in at least 75% of the options series in which the Market 6 See NOM Rules, Chapter VII, Section 2(a). NOM Rules, Chapter VII, Section 2. 8 See NOM Rules, Chapter VII, Rule 2(c). 9 See NOM Rules, Chapter VII, Section 4(b). 10 See NOM Rules, Chapter VII, Section 3(a). 11 See proposed NOM Rules, Chapter VII, Section 6(d)(i)(2). 12 See proposed NOM Rules, Chapter VII, Section 6(d)(ii). 7 See PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 6647 Maker is registered. NASDAQ proposes to change this requirement to 60% of the series; in those series, to satisfy this requirement with respect to quoting a series, a Market Maker must quote such series 90% of the trading day (as a percentage of the total number of minutes in such trading day) 13 or such higher percentage as the Exchange may announce in advance.14 Nasdaq Regulation may consider exceptions to the requirement to quote 90% (or higher) of the trading day based on demonstrated legal or regulatory requirements or other mitigating circumstances. Although the proposed 60% requirement is lower than the current 75%, the Exchange is also proposing herein to adopt, for the first time, a quote spread requirement and a requirement to register by option rather than by series, which are considerable changes for Market Makers. NASDAQ believes that this new 60% quoting requirement is needed to balance the proposed, new quotation spread parameters. Under this proposal, NASDAQ recognizes that certain options series present special challenges for Market Makers, due to nontraditional terms. Accordingly, NASDAQ proposes that Quarterly Option Series, adjusted option series, and any option series until the time to expiration for such series is less than nine months be treated differently. Specifically, under this proposal, Market Makers shall not be subject to the continuous quoting obligation in Section 6(d)(1) [sic] of NOM rules in any Quarterly Option Series, any adjusted option series,15 and any option series until the time to expiration for such series is less than nine months. Accordingly, the requirement to make two-sided markets set forth in 5(a)(i) of NOM Rules shall not apply to Market Makers respecting Quarterly Option Series, adjusted option series, and series 13 For example, on a normal trading day, which lasts 390 minutes (from 9:30 a.m. to 4 p.m.), quoting in a series would need to be maintained for the total of at least 351 minutes in order to meet the 90%of-the-trading-day threshold. In a shortened trading session, the total number of minutes the quote must be maintained would be lowered proportionately (and the same percentage threshold would apply). 14 Any such higher percentage would involve an appropriate advance announcement, which would then be available on the Exchange’s Web site. In the illustration above, if the Exchange set the threshold, for example, at 99% (rather than 90%), then on a normal trading day, quoting would need to be maintained for 386 (rather than 351) minutes out of the total of 390 minutes. 15 For these purposes, an adjusted option series is an option series wherein one option contract in the series represents the delivery of other than 100 shares of underlying stock or Exchange-Traded Fund Shares. E:\FR\FM\07FEN1.SGM 07FEN1 6648 Federal Register / Vol. 76, No. 25 / Monday, February 7, 2011 / Notices with an expiration of nine months or greater. In addition, if a technical failure or limitation of a system of the Exchange prevents a Market Maker from maintaining, or prevents a Market Maker from communicating to NOM, timely and accurate quotes, the duration of such failure or limitation shall not be included in any of the calculations under this subparagraph (i) with respect to the affected quotes. As a whole, the proposed amendments are intended to improve the quality of NOM markets, while carefully considering the important role of Market Makers in the NOM marketplace. Adopting quotation spread parameters and requiring registration across the series of an option are intended to encourage market making in more series; at the same time, NASDAQ recognizes the need to balance these new, more burdensome obligations with a lower series quoting percentage requirement. This balance of obligations should help to make the market better for all participants. NASDAQ believes that it has crafted a reasonable balance in this proposal. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 16 in general, and furthers the objectives of Section 6(b)(5) of the Act 17 in particular, in that it 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 facilitating transactions in securities, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that the proposal is appropriate and reasonable for Market Makers, similar to the rules of other options exchanges (as specified below) and should, at the same time, enhance the quality of the Exchange’s options markets. emcdonald on DSK2BSOYB1PROD with NOTICES 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. 16 15 17 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Mar<15>2010 17:16 Feb 04, 2011 Jkt 223001 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 Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be disapproved. 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 Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASDAQ–2011–012 on the subject line. 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–2011–012 and should be submitted on or before February 28, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–2616 Filed 2–4–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63811; File No. SR–OCC– 2011–02] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change To Accommodate the Clearance of Relative Performance Options February 1, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 • Send paper comments in triplicate notice is hereby given that on January to Elizabeth M. Murphy, Secretary, 19, 2011, The Options Clearing Securities and Exchange Commission, Corporation (‘‘OCC’’) filed with the 100 F Street, NE., Washington, DC Securities and Exchange Commission 20549–1090. (‘‘Commission’’) the proposed rule All submissions should refer to File change as described in Items I and II Number SR–NASDAQ–2011–012. This below, which Items have been prepared file number should be included on the primarily by OCC. The Commission is subject line if e-mail is used. To help the publishing this notice to solicit Commission process and review your comments on the proposed rule change comments more efficiently, please use from interested persons. only one method. The Commission will post all comments on the Commission’s I. Self-Regulatory Organization’s Statement of the Terms of Substance of Internet Web site (http://www.sec.gov/ the Proposed Rule Change rules/sro.shtml). Copies of the submission, all subsequent The proposed rule change would amendments, all written statements accommodate the clearance of options with respect to the proposed rule on certain indexes measuring the change that are filed with the relative performance of one reference Commission, and all written communications relating to the 18 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). proposed rule change between the 2 17 CFR 240.19b–4. Commission and any person, other than Paper Comments PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 E:\FR\FM\07FEN1.SGM 07FEN1

Agencies

[Federal Register Volume 76, Number 25 (Monday, February 7, 2011)]
[Notices]
[Pages 6646-6648]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2616]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63815; File No. SR-NASDAQ-2011-012]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Modify NASDAQ Options 
Market Rules Chapter VII, Various Sections, Dealing With Market Maker 
Obligations

February 1, 2011.
    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 January 19, 2011, 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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to amend Chapter VII, Section 3, Continuing Market 
Maker Registration, Section 5, Obligations of Market Makers, and 
Section 6, Market Maker Quotations, of the NASDAQ rulebook for the 
NASDAQ Options Market (``NOM'') to: (a) Permit Market Maker assignment 
by option rather than by series; (b) adopt a $5 quotation

[[Page 6647]]

spread parameter; and (c) amend the quoting requirement for Market 
Makers as explained further below. These changes are scheduled to be 
implemented on NOM on or about May 1, 2011; the Exchange will announce 
the implementation schedule by Options Trader Alert, once the rollout 
schedule, which will be based in part on NOM participants' readiness, 
is finalized.
    The text of the proposed rule change is available at http://nasdaq.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 and 
discussed any comments it received on 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.

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

1. Purpose
    The purpose of the proposed rule change is to strengthen Market 
Maker obligations. The NASDAQ Options Market (``NOM''), the options 
trading facility of The NASDAQ Stock Market LLC, has been fully 
operational for over two years. During this time, NASDAQ has carefully 
considered the role of Market Makers in the NOM marketplace and their 
concomitant obligations.
    An Options Market Maker is a Participant \3\ registered with NASDAQ 
as a Market Maker.\4\ Market Makers on NOM have certain obligations 
such as maintaining two-sided markets and participating in transactions 
that are ``reasonably calculated to contribute to the maintenance of a 
fair and orderly market.'' \5\ To register as a Market Maker, a 
Participant must file a written application with Nasdaq Regulation, 
which will consider an applicant's market making ability and other 
factors it deems appropriate in determining whether to approve an 
applicant's registration.\6\ All Market Makers are designated as 
specialists on NOM for all purposes under the Act or rules 
thereunder.\7\ The NOM Rules place no limit on the number of qualifying 
entities that may become Market Makers.\8\ The good standing of a 
Market Maker may be suspended, terminated, or withdrawn if the 
conditions for approval cease to be maintained or the Market Maker 
violates any of its agreements with NASDAQ or any provisions of the NOM 
Rules.\9\
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    \3\ The term ``Options Participant'' or ``Participant'' means a 
firm or organization that is registered with the Exchange pursuant 
to Chapter II of the NOM Rules for purposes of participating in 
options trading on NOM as a ``Nasdaq Options Order Entry Firm'' or 
``Nasdaq Options Market Maker.''
    \4\ See NOM Rules, Chapter VII, Section 2.
    \5\ See NOM Rules, Chapter VII, Section 5(a).
    \6\ See NOM Rules, Chapter VII, Section 2(a).
    \7\ See NOM Rules, Chapter VII, Section 2.
    \8\ See NOM Rules, Chapter VII, Rule 2(c).
    \9\ See NOM Rules, Chapter VII, Section 4(b).
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    Currently, a Participant that has qualified as a Market Maker may 
register to make markets in individual series of options.\10\ Instead, 
NASDAQ proposes to require that Market Makers register by option. Thus, 
once so registered, a NOM Market Maker is subject to the market making 
obligations in all series of that option, except Quarterly Options 
Series, adjusted option series and any options series until the time to 
expiration for such series is less than nine months.\11\ In order to 
effect this change, NASDAQ proposes to amend various provisions in 
Sections 3, 5 and 6 of Chapter VII that currently refer to ``series.'' 
NASDAQ believes that registration by option rather than series should 
spread the benefits of Market Maker quoting across all series of an 
option, which should, in turn, result in higher quality markets.
---------------------------------------------------------------------------

    \10\ See NOM Rules, Chapter VII, Section 3(a).
    \11\ See proposed NOM Rules, Chapter VII, Section 6(d)(i)(2).
---------------------------------------------------------------------------

    NASDAQ also proposes to adopt quotation spread parameters, also 
known as bid/ask differentials, which establish the maximum permissible 
width between a Market Maker's bid and an offer in a particular series. 
Specifically, NASDAQ proposes to adopt a $5 wide quote spread parameter 
for all options.\12\ Currently, NOM Market Makers are not subject to 
quote spread parameters, such that the requirement for a two-sided 
market can be met with a quotation that is very wide. NASDAQ believes 
that a $5 quote spread parameter for NOM Market Makers should result in 
narrower markets, and thereby, improve the quality of NOM's markets.
---------------------------------------------------------------------------

    \12\ See proposed NOM Rules, Chapter VII, Section 6(d)(ii).
---------------------------------------------------------------------------

    Lastly, NASDAQ proposes to amend its quotation requirement for 
Market Makers. Today, NOM Market Makers are required to make markets on 
a continuous basis in at least 75% of the options series in which the 
Market Maker is registered. NASDAQ proposes to change this requirement 
to 60% of the series; in those series, to satisfy this requirement with 
respect to quoting a series, a Market Maker must quote such series 90% 
of the trading day (as a percentage of the total number of minutes in 
such trading day) \13\ or such higher percentage as the Exchange may 
announce in advance.\14\ Nasdaq Regulation may consider exceptions to 
the requirement to quote 90% (or higher) of the trading day based on 
demonstrated legal or regulatory requirements or other mitigating 
circumstances. Although the proposed 60% requirement is lower than the 
current 75%, the Exchange is also proposing herein to adopt, for the 
first time, a quote spread requirement and a requirement to register by 
option rather than by series, which are considerable changes for Market 
Makers. NASDAQ believes that this new 60% quoting requirement is needed 
to balance the proposed, new quotation spread parameters.
---------------------------------------------------------------------------

    \13\ For example, on a normal trading day, which lasts 390 
minutes (from 9:30 a.m. to 4 p.m.), quoting in a series would need 
to be maintained for the total of at least 351 minutes in order to 
meet the 90%-of-the-trading-day threshold. In a shortened trading 
session, the total number of minutes the quote must be maintained 
would be lowered proportionately (and the same percentage threshold 
would apply).
    \14\ Any such higher percentage would involve an appropriate 
advance announcement, which would then be available on the 
Exchange's Web site. In the illustration above, if the Exchange set 
the threshold, for example, at 99% (rather than 90%), then on a 
normal trading day, quoting would need to be maintained for 386 
(rather than 351) minutes out of the total of 390 minutes.
---------------------------------------------------------------------------

    Under this proposal, NASDAQ recognizes that certain options series 
present special challenges for Market Makers, due to nontraditional 
terms. Accordingly, NASDAQ proposes that Quarterly Option Series, 
adjusted option series, and any option series until the time to 
expiration for such series is less than nine months be treated 
differently. Specifically, under this proposal, Market Makers shall not 
be subject to the continuous quoting obligation in Section 6(d)(1) 
[sic] of NOM rules in any Quarterly Option Series, any adjusted option 
series,\15\ and any option series until the time to expiration for such 
series is less than nine months. Accordingly, the requirement to make 
two-sided markets set forth in 5(a)(i) of NOM Rules shall not apply to 
Market Makers respecting Quarterly Option Series, adjusted option 
series, and series

[[Page 6648]]

with an expiration of nine months or greater.
---------------------------------------------------------------------------

    \15\ For these purposes, an adjusted option series is an option 
series wherein one option contract in the series represents the 
delivery of other than 100 shares of underlying stock or Exchange-
Traded Fund Shares.
---------------------------------------------------------------------------

    In addition, if a technical failure or limitation of a system of 
the Exchange prevents a Market Maker from maintaining, or prevents a 
Market Maker from communicating to NOM, timely and accurate quotes, the 
duration of such failure or limitation shall not be included in any of 
the calculations under this subparagraph (i) with respect to the 
affected quotes.
    As a whole, the proposed amendments are intended to improve the 
quality of NOM markets, while carefully considering the important role 
of Market Makers in the NOM marketplace. Adopting quotation spread 
parameters and requiring registration across the series of an option 
are intended to encourage market making in more series; at the same 
time, NASDAQ recognizes the need to balance these new, more burdensome 
obligations with a lower series quoting percentage requirement. This 
balance of obligations should help to make the market better for all 
participants. NASDAQ believes that it has crafted a reasonable balance 
in this proposal.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \17\ in particular, in that it 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 facilitating transactions in 
securities, and to remove impediments to and perfect the mechanisms of 
a free and open market and a national market system, and, in general, 
to protect investors and the public interest. The Exchange believes 
that the proposal is appropriate and reasonable for Market Makers, 
similar to the rules of other options exchanges (as specified below) 
and should, at the same time, enhance the quality of the Exchange's 
options markets.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 Exchange Act. Comments may be submitted 
by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2011-012 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-2011-012. 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 (http://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-2011-012 and should be submitted on or before February 28, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-2616 Filed 2-4-11; 8:45 am]
BILLING CODE 8011-01-P