Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Customer Rebates in Penny Pilot Options, 52369-52371 [2011-21319]
Download as PDF
<![CDATA[
52369
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Notices
The law judge found that, in sales of
variable annuities to elderly customers,
Respondents violated Section 17(a) of
the Securities Act of 1933, Section 10(b)
of the Securities Exchange Act of 1934,
and Exchange Act Rule 10b–5, and
Exchange Act Section 17(a) and
Exchange Act Rule 17a–3. The law
judge also found that Collins failed to
reasonably supervise Brown within the
meaning of Exchange Act Sections
15(b)(4)(E) and 15(b)(6). For these
violations, the law judge issued ceaseand-desist orders against Respondents,
ordered Respondents to disgorge
commissions earned from selling certain
variable annuities, barred Respondents
from associating with a broker, dealer,
or investment adviser, and imposed a
third-tier civil monetary penalty of
$130,000 against each Respondent.
Issues likely to be considered at oral
argument include whether Respondents
violated the above provisions and, if so,
the extent to which, under the
circumstances, sanctions are warranted.
For further information, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: August 17, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–21463 Filed 8–18–11; 11:15 am]
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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65138; File No. SR–
NASDAQ–2011–112]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Customer Rebates in Penny Pilot
Options
August 15, 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 August 5,
2011, 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 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
modify pricing for the Penny Pilot 3
Options (‘‘Penny Options’’) with respect
to the Customer Rebate to Add
Liquidity.
The text of the proposed rule change
is set forth below. Proposed new text is
in italics 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]
Professional
Customer
Penny Pilot Options:
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 to Add Liquidity .......................................................
Non-NOM
market maker
Firm
NOM market
maker
◊ [$0.36 ]
$0.45
$0.29
$0.45
$0.10
$0.45
$0.25
$0.45
$0.30
$0.45
$0.10
$0.50
$0.10
$0.50
$0.10
$0.50
$0.10
$0.50
$0.20
$0.40
$0.00
$0.45
$0.20
$0.20
$0.45
$0.00
$0.45
$0.45
$0.00
$0.45
$0.45
$0.00
$0.30
$0.45
$0.00
◊ The Customer Rebate to Add Liquidity in
Penny Pilot Options will be paid as follows:
Monthly volume
jlentini on DSK4TPTVN1PROD with NOTICES
Tier
Tier
Tier
Tier
1
2
3
4
............................................................................................................................................................
............................................................................................................................................................
............................................................................................................................................................
............................................................................................................................................................
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
2 17
VerDate Mar<15>2010
17:16 Aug 19, 2011
Jkt 223001
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
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
0–499,999
500,000–799,999
800,000–1,199,999
1,200,000 and up
Rebate to add
liquidity
$0.26
$0.32
$0.36
$0.38
(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.
E:\FR\FM\22AUN1.SGM
22AUN1
52370
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Notices
(2)–(4) No Change
* These fees are applicable to orders routed
to ISE that are subject to Rebates and Fees for
Adding and Removing Liquidity in Select
Symbols. See ISE’s Schedule of Fees for the
complete list of symbols that are subject to
these fees.
** These fees are applicable to orders
routed to PHLX that are subject to Rebates
and Fees for Adding and Removing Liquidity
in Select Symbols. See PHLX’s Fee Schedule
for the complete list of symbols that are
subject to these fees.
*
*
*
*
*
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
www.nasdaq.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
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 rebates and fees
assessed for option orders entered into
NOM. Specifically, NASDAQ is
proposing to modify pricing for the
Customer Rebate to Add Liquidity in
Penny Options to create monthly
volume tiers. The Exchange believes the
monthly volume thresholds will
incentivize firms that route Customer
orders to the Exchange to increase
Customer order flow to the Exchange.
The Exchange currently pays a
Customer Rebate to Add Liquidity of
$0.36 per executed contract to members
providing liquidity through NOM in
Penny Options. The Exchange proposes
to amend this rebate so that Customers
will receive a Rebate to Add Liquidity
based on their total number of Customer
contracts that add liquidity in Penny
Options in a given month. The
Exchange proposes to pay a Customer
Rebate to Add Liquidity in Penny
Options based on four volume tiers as
follows:
Monthly volume
Tier
Tier
Tier
Tier
1
2
3
4
............................................................................................................................................................
............................................................................................................................................................
............................................................................................................................................................
............................................................................................................................................................
jlentini on DSK4TPTVN1PROD with NOTICES
By way of example, the Exchange
would pay a Rebate to Add Liquidity of
$0.36 per contract to a NOM Participant
that executed 900,000 Customer
contracts that added liquidity in Penny
Options in a given month. If the NOM
Participant executed 1,500,000
Customer contracts that added liquidity
in Penny Options in a given month, the
Exchange would pay a Rebate to Add
Liquidity of $0.38 per contract.
2. Statutory Basis
NASDAQ believes that the proposed
rule changes are consistent with the
provisions of Section 6 of the Act,4 in
general, and with Section 6(b)(4) of the
Act,5 in particular, in that it provides for
the equitable allocation of reasonable
dues, fees and other charges among
members and issuers and other persons
using any facility or system which
NASDAQ operates or controls.
The Exchange believes that the
proposed monthly tier structure for
Customer Rebates to Add Liquidity in
Penny Options is equitable, reasonable
and not unfairly discriminatory because
by incentivizing broker-dealers acting as
agent for Customer orders to select the
Exchange as a venue to post Customer
orders will attract Customer order flow
4 15
5 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
VerDate Mar<15>2010
17:16 Aug 19, 2011
Jkt 223001
and benefit all market participants.
While the Exchange is lowering the
current Rebate to Add Liquidity for
Customers in tiers 1 and 2, the Exchange
believes that broker-dealers acting as
agent for Customer orders will in fact be
incentivized to bring additional order
flow to the Exchange and obtain higher
rebates.
Furthermore, the Exchange believes
that the proposed Customer monthly
volume tier Rebates to Add Liquidity
are equitable and not unfairly
discriminatory because the Rebates to
Add Liquidity are higher in tier levels
2, 3 and 4 for Customers as compared
to all other market participants. With
respect to tier level 1, the Exchange is
proposing to pay a Customer a lower
Rebate to Add Liquidity as compared to
a Professional and NOM Market Maker.
The Exchange believes that this
proposal is equitable because the
Customer has the opportunity to earn
higher rebates with the tier structure as
compared to a Professional, who will
only receive a $0.29 per contract Rebate
to Add Liquidity, and a NOM Market
Maker, who will only receive a $0.30
per contract Rebate to Add Liquidity.
Additionally, with respect to NOM
Market Makers, the proposed fee
structure is equitable because market
makers have obligations to the market
PO 00000
Frm 00068
Fmt 4703
Sfmt 4703
0–499,999
500,000–799,999
800,000–1,199,999
1,200,000 and up
Rebate to add
liquidity
$0.26
$0.32
$0.36
$0.38
and regulatory requirements,6 which
normally do not apply to other market
participants. Customers receive a higher
Rebate to Add Liquidity for all tiers as
compared to a Firm and Non-NOM
Market Maker.7
The Exchange believes the proposed
monthly tier structure for Customer
Rebates to Add Liquidity in Penny
Options is also reasonable because the
amount of the rebate is similar to a
tiered rebate offered by NYSE Arca, Inc.
(‘‘NYSE Arca’’). NYSE Arca pays a per
contract rate on all posted liquidity in
Customer Penny Pilot Issues by
aggregating total contracts executed that
added liquidity in Penny Pilot Issues in
a given month.8
6 Pursuant to Chapter VII (Market Participants),
Section 5 (Obligations of Market Makers), in
registering as a market maker, an Options
Participant commits himself to various obligations.
Transactions of a Market Maker in its market
making capacity must constitute a course of
dealings reasonably calculated to contribute to the
maintenance of a fair and orderly market, and
Market Makers should not make bids or offers or
enter into transactions that are inconsistent with
such course of dealings. Further, all Market Makers
are designated as specialists on NOM for all
purposes under the Act or rules thereunder. See
Chapter VII, Section 5.
7 A Firm receives a $0.10 per contract Rebate to
Add Liquidity and a Non-NOM Market maker
receives a $0.25 per contract Rebate to Add
Liquidity.
8 See NYSE Arca’s Fee Schedule.
E:\FR\FM\22AUN1.SGM
22AUN1
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Notices
The Exchange believes that the
proposed monthly tier structure for
Customer Rebates to Add Liquidity in
Penny Options is equitable and not
unfairly discriminatory because the
Exchange would uniformly pay a Rebate
to Add Liquidity to Customers
executing Penny Options based on the
monthly tiers proposed herein.
The Exchange operates in a highly
competitive market comprised of nine
U.S. options exchanges in which
sophisticated and knowledgeable
market participants can readily send
order flow to competing exchanges if
they deem fee levels at a particular
exchange to be excessive. The Exchange
believes that the proposed rebate
structure and tiers are competitive and
similar to other rebates and tiers in
place on other exchanges. The Exchange
believes that this competitive
marketplace impacts the rebates present
on the Exchange today and substantially
influences the proposals set forth above.
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.
jlentini on DSK4TPTVN1PROD with NOTICES
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 9 and paragraph
(f)(2) of Rule 19b-4 10 thereunder. 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:
9 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
17:16 Aug 19, 2011
• 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–2011–112 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.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65142; File No. SR–Phlx–
2011–112]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NASDAQ
OMX PHLX LLC Relating to Clarifying
Amendments to the Rule Book
August 16, 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 August
All submissions should refer to File
8, 2011, NASDAQ OMX PHLX LLC
Number SR–NASDAQ–2011–112. This
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
file number should be included on the
Securities and Exchange Commission
subject line if e-mail is used. To help the (‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
Commission process and review your
and III below, which Items have been
comments more efficiently, please use
only one method. The Commission will prepared by the Exchange. The
post all comments on the Commission’s Commission is publishing this notice to
solicit comments on the proposed rule
Internet Web site (https://www.sec.gov/
change from interested persons.
rules/sro/shtml). Copies of the
submission, all subsequent
I. Self-Regulatory Organization’s
amendments, all written statements
Statement of the Terms of Substance of
with respect to the proposed rule
the Proposed Rule Change
change that are filed with the
The Exchange proposes to amend
Commission, and all written
Exchange Rules 625, 3228 and Options
communications relating to the
Procedure Floor Advice (‘‘OFPA’’) F–10
proposed rule change between the
Commission and any person, other than to eliminate unnecessary text and
correct cross-references in Rule text.
those that may be withheld from the
The Exchange also proposes to
public in accordance with the
eliminate an unnecessary title in the
provisions of 5 U.S.C. 552, will be
Rule Book.
available for Web site viewing and
The text of the proposed rule change
printing in the Commission’s Public
is available on the Exchange’s Web site
Reference Room, 100 F Street, NE.,
at https://nasdaqtrader.com/
Washington, DC 20549, on official
micro.aspx?id=PHLXfilings, at the
business days between the hours of 10
principal office of the Exchange, at the
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and Commission’s Public Reference Room,
and on the Commission’s Web site at
copying at the principal office of the
https://www.sec.gov.
Exchange. All comments received will
be posted without change; the
II. Self-Regulatory Organization’s
Commission does not edit personal
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
identifying information from
Change
submissions. You should submit only
information that you wish to make
In its filing with the Commission, the
available publicly. All submissions
Exchange included statements
should refer to File No. SR–NASDAQ–
concerning the purpose of and basis for
2011–112 and should be submitted on
the proposed rule change and discussed
or before September 12, 2011.
any comments it received on the
For the Commission, by the Division of
proposed rule change. The text of these
Trading and Markets, pursuant to delegated
statements may be examined at the
authority.11
places specified in Item IV below. The
Exchange has prepared summaries, set
Elizabeth M. Murphy,
forth in sections A, B, and C below, of
Secretary.
the most significant aspects of such
[FR Doc. 2011–21319 Filed 8–19–11; 8:45 am]
statements.
BILLING CODE 8011–01–P
1 15
10 17
VerDate Mar<15>2010
Electronic Comments
11 17
Jkt 223001
52371
PO 00000
CFR 200.30–3(a)(12).
Frm 00069
Fmt 4703
Sfmt 4703
2 17
E:\FR\FM\22AUN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
22AUN1
]]>Agencies
[Federal Register Volume 76, Number 162 (Monday, August 22, 2011)]
[Notices]
[Pages 52369-52371]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-21319]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65138; File No. SR-NASDAQ-2011-112]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Customer Rebates in Penny Pilot Options
August 15, 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 August 5, 2011, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 modify pricing for the
Penny Pilot \3\ Options (``Penny Options'') with respect to the
Customer Rebate to Add Liquidity.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
The text of the proposed rule change is set forth below. Proposed
new text is in italics 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 Profes- sional Firm maker maker
----------------------------------------------------------------------------------------------------------------
Penny Pilot Options:
Rebate to Add Liquidity..... [diam] [$0.36 $0.29 $0.10 $0.25 $0.30
]
Fee for Removing Liquidity.. $0.45 $0.45 $0.45 $0.45 $0.45
NDX and MNX:
Rebate to Add Liquidity..... $0.10 $0.10 $0.10 $0.10 $0.20
Fee for Removing Liquidity.. $0.50 $0.50 $0.50 $0.50 $0.40
All Other Options:
Fee for Adding Liquidity.... $0.00 $0.20 $0.45 $0.45 $0.30
Fee for Removing Liquidity.. $0.45 $0.45 $0.45 $0.45 $0.45
Rebate to Add Liquidity......... $0.20 $0.00 $0.00 $0.00 $0.00
----------------------------------------------------------------------------------------------------------------
[diam] The Customer Rebate to Add Liquidity in Penny Pilot
Options will be paid as follows:
------------------------------------------------------------------------
Rebate to add
Monthly volume liquidity
------------------------------------------------------------------------
Tier 1............................ 0-499,999 $0.26
Tier 2............................ 500,000-799,999 $0.32
Tier 3............................ 800,000-1,199,999 $0.36
Tier 4............................ 1,200,000 and up $0.38
------------------------------------------------------------------------
[[Page 52370]]
(2)-(4) No Change
* These fees are applicable to orders routed to ISE that are
subject to Rebates and Fees for Adding and Removing Liquidity in
Select Symbols. See ISE's Schedule of Fees for the complete list of
symbols that are subject to these fees.
** These fees are applicable to orders routed to PHLX that are
subject to Rebates and Fees for Adding and Removing Liquidity in
Select Symbols. See PHLX's Fee Schedule for the complete list of
symbols that are subject to these fees.
* * * * *
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nasdaq.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 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 rebates and
fees assessed for option orders entered into NOM. Specifically, NASDAQ
is proposing to modify pricing for the Customer Rebate to Add Liquidity
in Penny Options to create monthly volume tiers. The Exchange believes
the monthly volume thresholds will incentivize firms that route
Customer orders to the Exchange to increase Customer order flow to the
Exchange.
The Exchange currently pays a Customer Rebate to Add Liquidity of
$0.36 per executed contract to members providing liquidity through NOM
in Penny Options. The Exchange proposes to amend this rebate so that
Customers will receive a Rebate to Add Liquidity based on their total
number of Customer contracts that add liquidity in Penny Options in a
given month. The Exchange proposes to pay a Customer Rebate to Add
Liquidity in Penny Options based on four volume tiers as follows:
------------------------------------------------------------------------
Rebate to add
Monthly volume liquidity
------------------------------------------------------------------------
Tier 1............................ 0-499,999 $0.26
Tier 2............................ 500,000-799,999 $0.32
Tier 3............................ 800,000-1,199,999 $0.36
Tier 4............................ 1,200,000 and up $0.38
------------------------------------------------------------------------
By way of example, the Exchange would pay a Rebate to Add Liquidity
of $0.36 per contract to a NOM Participant that executed 900,000
Customer contracts that added liquidity in Penny Options in a given
month. If the NOM Participant executed 1,500,000 Customer contracts
that added liquidity in Penny Options in a given month, the Exchange
would pay a Rebate to Add Liquidity of $0.38 per contract.
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\4\ in general, and with Section
6(b)(4) of the Act,\5\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
members and issuers and other persons using any facility or system
which NASDAQ operates or controls.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed monthly tier structure for
Customer Rebates to Add Liquidity in Penny Options is equitable,
reasonable and not unfairly discriminatory because by incentivizing
broker-dealers acting as agent for Customer orders to select the
Exchange as a venue to post Customer orders will attract Customer order
flow and benefit all market participants. While the Exchange is
lowering the current Rebate to Add Liquidity for Customers in tiers 1
and 2, the Exchange believes that broker-dealers acting as agent for
Customer orders will in fact be incentivized to bring additional order
flow to the Exchange and obtain higher rebates.
Furthermore, the Exchange believes that the proposed Customer
monthly volume tier Rebates to Add Liquidity are equitable and not
unfairly discriminatory because the Rebates to Add Liquidity are higher
in tier levels 2, 3 and 4 for Customers as compared to all other market
participants. With respect to tier level 1, the Exchange is proposing
to pay a Customer a lower Rebate to Add Liquidity as compared to a
Professional and NOM Market Maker. The Exchange believes that this
proposal is equitable because the Customer has the opportunity to earn
higher rebates with the tier structure as compared to a Professional,
who will only receive a $0.29 per contract Rebate to Add Liquidity, and
a NOM Market Maker, who will only receive a $0.30 per contract Rebate
to Add Liquidity. Additionally, with respect to NOM Market Makers, the
proposed fee structure is equitable because market makers have
obligations to the market and regulatory requirements,\6\ which
normally do not apply to other market participants. Customers receive a
higher Rebate to Add Liquidity for all tiers as compared to a Firm and
Non-NOM Market Maker.\7\
---------------------------------------------------------------------------
\6\ Pursuant to Chapter VII (Market Participants), Section 5
(Obligations of Market Makers), in registering as a market maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Further, all Market
Makers are designated as specialists on NOM for all purposes under
the Act or rules thereunder. See Chapter VII, Section 5.
\7\ A Firm receives a $0.10 per contract Rebate to Add Liquidity
and a Non-NOM Market maker receives a $0.25 per contract Rebate to
Add Liquidity.
---------------------------------------------------------------------------
The Exchange believes the proposed monthly tier structure for
Customer Rebates to Add Liquidity in Penny Options is also reasonable
because the amount of the rebate is similar to a tiered rebate offered
by NYSE Arca, Inc. (``NYSE Arca''). NYSE Arca pays a per contract rate
on all posted liquidity in Customer Penny Pilot Issues by aggregating
total contracts executed that added liquidity in Penny Pilot Issues in
a given month.\8\
---------------------------------------------------------------------------
\8\ See NYSE Arca's Fee Schedule.
---------------------------------------------------------------------------
[[Page 52371]]
The Exchange believes that the proposed monthly tier structure for
Customer Rebates to Add Liquidity in Penny Options is equitable and not
unfairly discriminatory because the Exchange would uniformly pay a
Rebate to Add Liquidity to Customers executing Penny Options based on
the monthly tiers proposed herein.
The Exchange operates in a highly competitive market comprised of
nine U.S. options exchanges in which sophisticated and knowledgeable
market participants can readily send order flow to competing exchanges
if they deem fee levels at a particular exchange to be excessive. The
Exchange believes that the proposed rebate structure and tiers are
competitive and similar to other rebates and tiers in place on other
exchanges. The Exchange believes that this competitive marketplace
impacts the rebates present on the Exchange today and substantially
influences the proposals set forth above.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \9\ and paragraph (f)(2) of Rule 19b-4 \10\
thereunder. 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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-2011-112 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-2011-112. 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 such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File No. SR-NASDAQ-
2011-112 and should be submitted on or before September 12, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21319 Filed 8-19-11; 8:45 am]
BILLING CODE 8011-01-P
