Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Customer Fees and Rebates in Penny Pilot Options, 22015-22019 [2012-8838]
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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices
Exchange’s existing technology platform
for Non-FLEX trading, which should
make the FLEX System more efficient
and effective and easier for users to
understand. The Exchange believes that
the further refinements being proposed
in this instant rule change filing should
also serve to further those objectives by
more clearly and accurately describing
the operation of the enhanced System
and deleting superfluous and
unnecessary provisions in the FLEX
rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is 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
The Exchange neither solicited or
received comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 24 and Rule
19b–4(f)(6) thereunder.25 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.26
A proposed rule change filed under
Rule 19b–4(f)(6) 27 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),28 the Commission
may designate a shorter time if such
24 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
26 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 Exchange
has satisfied this requirement.
27 17 CFR 240.19b–4(f)(6).
28 17 CFR 240.19b–4(f)(6)(iii).
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action is consistent with the protection
of investors and the public interest.
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 such waiver will allow CBOE to
codify the revisions to its rules to more
clearly and accurately describe the
operation of its new system for FLEX
Options prior to implementation.
Therefore, the Commission designates
the proposal operative upon filing.29
At any time within 60 days of the
filing of such 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:
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–CBOE–2012–033 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–CBOE–2012–033. This file
number should be included on the
subject line if email 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
29 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).
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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–CBOE–
2012–033 and should be submitted on
or before May 3, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–8839 Filed 4–11–12; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66768; File No. SR–
NASDAQ–2012–048]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Customer Fees and Rebates in Penny
Pilot Options
April 6, 2012.
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 April 2,
2012, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or ‘‘Exchange’’) 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.
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to modify Chapter
XV, entitled ‘‘Option Pricing,’’ at
Section 2 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 amend
the Penny Pilot 3 Options (‘‘Penny
Options’’) Customer Rebates to Add
Liquidity and Penny Options Customer
Fee for Removing Liquidity. The
Exchange also proposes to make other
minor amendments to the Section 2.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nasdaq.cchwall
street.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. 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 proposes to modify Chapter
XV, entitled ‘‘Option Pricing,’’ at
Section 2 governing the rebates and fees
assessed for option orders entered into
NOM. Specifically, the Exchange is
proposing to modify the five tier
structure for paying Customer Rebates to
Add Liquidity in Penny Options. The
Exchange proposes to amend various
rebate tiers to further incentivize NOM
Participants to route Customer orders in
Penny Options to the Exchange by
paying additional rebates for certain
orders after the NOM Participant has
met a volume criteria and also removing
certain criteria to qualify for a rebate.
The Exchange believes that
incentivizing NOM Participants to send
additional Customer orders in Penny
Options to the Exchange will benefit all
market participants by adding liquidity
to the market.
Specifically, the Exchange currently
pays a Customer Rebate to Add
Liquidity in Penny Options based on the
following tier structure:
* * * The Customer Rebate to Add
Liquidity in Penny Pilot Options will be
paid as noted below. Each Customer
order of 5,000 or more, displayed or
non-displayed contracts, which adds
liquidity in Penny Pilot Options, will
qualify for an additional rebate of $0.01
per contract provided the NOM
Participant has qualified for a rebate in
Tier 2, 3, 4 or 5 for that month.
Rebate to add
liquidity
Monthly volume
Tier 1 Participant adds Customer liquidity of up to 14,999 contracts per day in a month ...............................................................
Tier 2 Participant adds Customer liquidity of 15,000 to 49,999 contracts per day in a month ........................................................
Tier 3 Participant adds Customer liquidity of 50,000 or more contracts per day in a month ..........................................................
Tier 4 a Participant adds (1) Customer liquidity of 100,000 or more contracts per day in a month, and (2) NOM Market Maker
liquidity of 40,000 or more contracts per day in a month ................................................................................................................
Tier 5 b Participant adds (1) Customer liquidity of 25,000 or more contracts per day in a month, (2) the Participant has certified
for the Investor Support Program set forth in Rule 7014; and (3) the Participant executed at least one order on NASDAQ’s
equity market ....................................................................................................................................................................................
$0.26
0.38
0.42
0.43
0.41
a
For purposes of Tier 4, the Exchange will aggregate the trading activity of separate NOM Participants when computing average daily volumes where 75 percent common ownership or control exists between NOM Participants.
b For purposes of Tier 5, the Exchange will allow a NOM Participant to qualify for the rebate if a NASDAQ member under common ownership
with the NOM Participant has certified for the Investor Support Program and executed at least one order on NASDAQ’s equity market. Common
ownership is defined as 75 percent common ownership or control.
The Exchange proposes to amend the
tier structure for Customer Rebates to
Add Liquidity in Penny Options as
follows:
* * * The Customer Rebate to Add
Liquidity in Penny Pilot Options will be
paid as noted below. Each Customer
order of 5,000 or more, displayed or
non-displayed contracts, which adds
liquidity in Penny Pilot Options, will
qualify for an additional rebate of $0.01
per contract provided the NOM
Participant has qualified for a rebate in
Tier 2, 3, 4 or 5 for that month.
Rebate to add
liquidity
Monthly volume
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Tier
Tier
Tier
Tier
1
2
3
4
Participant
Participant
Participant
Participant
adds
adds
adds
adds
Customer
Customer
Customer
Customer
liquidity
liquidity
liquidity
liquidity
of
of
of
of
up to 14,999 contracts per day in a month ...............................................................
15,000 to 49,999 contracts per day in a month ........................................................
50,000 to 74,999 contracts per day in a month ........................................................
75,000 or more contracts per day in a month ..........................................................
3 The Penny Pilot was established in March 2008
and in October 2009 was expanded and extended
through June 30, 2012. 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
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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); 62029 (May 4, 2010), 75 FR 25895 (May 10,
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$0.26
0.38
0.43
0.44
2010) (SR–NASDAQ–2010–053) (notice of filing
and immediate effectiveness adding seventy-five
classes to Penny Pilot); 65969 (December 15, 2011,
76 FR 79268 (December 21, 2011) (SR–NASDAQ–
2011–169) (notice of filing and immediate
effectiveness extension and replacement of Penny
Pilot). See also Exchange Rule Chapter VI, Section
5.
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22017
Rebate to add
liquidity
Monthly volume
Tier 5 a Participant adds (1) Customer liquidity of 25,000 or more contracts per day in a month, (2) the Participant has certified
for the Investor Support Program set forth in Rule 7014; and (3) the Participant executed at least one order on NASDAQ’s
equity market ....................................................................................................................................................................................
0.42
a For
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purposes of Tier 5, the Exchange will allow a NOM Participant to qualify for the rebate if a NASDAQ member under common ownership
with the NOM Participant has certified for the Investor Support Program and executed at least one order on NASDAQ’s equity market. Common
ownership is defined as 75 percent common ownership or control.
Currently, Tier 3 firms that add
50,000 or more contracts per day in a
month of Customer liquidity, in Penny
Options, receive a rebate of $0.42 per
contract. The Exchange is proposing to
increase the Tier 3 Customer rebate from
$0.42 per contract to $0.43 per contract.
The Exchange also proposes to amend
the number of contracts required to
qualify for Tier 3 from 50,000 or more
contracts per day in a month to require
NOM Participants to add between
50,000 to 74,999 contracts per day in a
month of Customer liquidity in Penny
Options to qualify for the increased
$0.43 Customer rebate.
Currently, Tier 4 firms that (1) add
Customer liquidity of 100,000 or more
contracts per day in a month of
Customer order liquidity in Penny
Options, and (2) provide 40,000 or more
contracts per day of NOM Market Maker
liquidity per day in a month receive a
rebate of $0.43 per contract if both
criteria are met. For purposes of
determining qualification for this tier,
the Exchange currently aggregates 4 the
trading activity of separate NOM
Participants in calculating the average
daily volume if there is at least 75%
common ownership or control between
the NOM Participants. The Exchange
proposes to amend the criteria to qualify
for Tier 4 from 100,000 or more
contracts per day in a month to 75,000
or more contracts per day in a month of
Customer liquidity in Penny Options
and also remove the second criteria to
qualify for Tier 4. The Exchange would
therefore remove the requirement that a
NOM Market Maker add liquidity of
40,000 or more contracts per day in a
month. In addition the Exchange
proposes to increase the current Tier 4
Customer rebate of $0.43 per contract to
$0.44 per contract. The Exchange would
also remove note ‘‘(a)’’, which was
associated with the second criteria of
Tier 4, which is no longer necessary as
the NOM Marker Maker requirement
would no longer be a condition to
receive the Tier 4 Customer rebate.
Currently, Tier 5 firms that (1)
provide 25,000 or more contracts per
4 Aggregation is necessary and appropriate
because certain NOM participants conduct
Customer and NOM Market Maker trading activity
through separate but related broker-dealers.
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day in a month of Customer order
liquidity in Penny Options, (2) where
the Participant has certified for the
Investor Support Program (‘‘ISP’’) as set
forth in Rule 7014 5; and (3) where the
Participant executed at least one order
on NASDAQ’s equity market receive a
$0.41 per contract Customer rebate. The
Exchange proposes to amend Tier 5 to
increase the Customer rebate in Penny
Options from $0.41 per contract to $0.42
per contract. The Exchange would also
renumber the current note ‘‘(b)’’ as note
‘‘(a).’’ The Exchange is not proposing
any changes to current Tiers 1 and 2.6
The Exchange also proposes to
subsidize the proposed increased
Customer Rebates to Add Liquidity in
Penny Options by increasing the
Customer Fee for Removing Liquidity in
Penny Options from $0.44 per contract
to $0.45 per contract. The Exchange
believes that this increase will allow the
Exchange to compete more effectively
by subsidizing rebates offered on
Customer orders.
The Exchange also proposes to make
minor amendments to Section 2
including amending the title of Section
2 from ‘‘NASDAQ Options Market
–Fees’’ to ‘‘NASDAQ Options Market
–Fees and Rebates.’’ to more specifically
describe the Rule. The Exchange also
proposes to correct a cross-reference to
the NASDAQ OMX PHLX LLC (‘‘Phlx’’)
‘‘Fee Schedule.’’ The Exchange proposes
to update the title of the ‘‘Fee Schedule’’
to the ‘‘Pricing Schedule’’ in accordance
with a recent amendment filed by Phlx.7
5 For a detailed description of the ISP, see
Securities Exchange Act Release No. 63270
(November 8, 2010), 75 FR 69489 (November 12,
2010) (NASDAQ–2010–141) (notice of filing and
immediate effectiveness) (the ‘‘ISP Filing’’). See also
Securities Exchange Act Release Nos. 63414
(December 2, 2010), 75 FR 76505 (December 8,
2010) (NASDAQ–2010–153) (notice of filing and
immediate effectiveness); and 63628 (January 3,
2011), 76 FR 1201 (January 7, 2011) (NASDAQ–
2010–154) (notice of filing and immediate
effectiveness).
6 The Exchange currently pays an additional
rebate of $0.01 per contract for each Customer order
of 5,000 or more, displayed or non-displayed
contracts, which adds liquidity in Penny Options as
long as the NOM Participant qualified for a rebate
in Tier 2, 3, 4 or 5 for that month. This is not being
amended in this proposal.
7 See SR–Phlx–2012–35.
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2. Statutory Basis
NASDAQ believes that the proposed
rule changes are consistent with the
provisions of Section 6 of the Act,8 in
general, and with Section 6(b)(4) of the
Act,9 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 new pricing tiers are
reasonable, equitable and not unfairly
discriminatory because they continue an
existing program 10 to encourage brokerdealers acting as agent for Customer
orders to select the Exchange as a venue
to post Customer orders. The Exchange
believes that its success at attracting
Customer order flow benefits all market
participants by improving the quality of
order interaction and executions at the
Exchange. The Exchange believes the
existing monthly volume thresholds
have incentivized firms that route
Customer orders to the Exchange to
increase Customer order flow to the
Exchange. The Exchange desires to
continue to encourage firms that route
Customer orders to increase Customer
order flow to the Exchange by offering
greater Customer rebates for greater
liquidity added to the Exchange.
Specifically, the Exchange believes
that the increased Customer rebates in
Penny Options would further
incentivize firms to continue to send
more Customer volume to the Exchange.
By increasing the Customer rebates in
Tiers 3, 4 and 5 by $0.01 per contract
each, the Exchange would further
encourage NOM Participants to transact
a greater number of Customer rebates in
Penny Options. With respect to Tier 3,
NOM Participants that qualify for these
Customer rebates today should qualify
8 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
10 The Exchange adopted these monthly volume
achievement tiers in September 2011. See Securities
Exchange Act Release Nos. 65317 (September 12,
2011), 76 FR 57778 (September 16, 2011) (SR–
NASDAQ–2011–124), 65317 (September 12, 2011),
76 FR 61129 (October 3, 2011) (SR–NASDAQ–
2011–127), 66126 (January 10, 2012), 77 FR 2335
(January 17, 2012) (SR–NASDAQ–2012–003) and
66360 (February 8, 2012), 77 FR 8312 (February 14,
2012) (SR–NASDAQ–2012–022).
9 15
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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices
for the increased rebate which continues
to require at least 50,000 contracts per
day in a month of Customer liquidity,
but also amends the criteria to between
50,000 and 74,999 contracts of Customer
liquidity in Penny Options to qualify for
the increased rebate of $0.43 per
contract. NOM Participants who
currently transact greater than 74,999
contracts per day in a month today
would be entitled to an even greater
rebate because they would qualify for
the increased Tier 4 rebate of $0.44 per
contract. The Exchange is amending
Tier 4 to lower the first criteria from
100,000 or more contracts of Customer
liquidity to 75,000 or more contracts of
Customer liquidity in Penny Options
and remove the second criteria to
qualify for the Customer rebate.11
Therefore NOM Participants would only
be required to add 75,000 or more
contracts per day in a month of
Customer liquidity in Penny Options to
receive the increased Customer rebate of
$0.44 per contract. The lower criteria in
Tier 4 would allow NOM Participants
that currently qualify for Tier 3, because
they add greater than 75,000 contracts
per day in a month of Customer
liquidity in Penny Options, to qualify
for the $0.44 per contract rebate and
also encourage other NOM Participants
to add more Customer liquidity to
qualify for an even greater rebate than
that offered for Tier 3.
The Exchange’s proposal to increase
the rebates in Tiers 3, 4 and 5 and
amend the Tier 3 and 4 criteria as
described herein is reasonable because
it should further encourage NOM
Participants to qualify for Customer
rebates in Penny Options by transacting
a greater number of Customer contracts
in Penny Options and increase liquidity
on NOM. Increased liquidity benefits all
market participants on the Exchange. In
addition, the increased Tier 5 Customer
rebate should further encourage
increased activity in both the NASDAQ
Options Market and in the ISP of the
NASDAQ equity market. The
Exchange’s proposal to increase the
rebates in Tiers 3, 4 and 5 as well as
amend the criteria for Tiers 3 and 4 is
equitable and not unfairly
discriminatory because all NOM
Participants that transact Customer
orders in Penny Options are eligible for
the Customer rebates.12 In addition, the
proposals to amend the Tier 3 criteria to
11 As previously mentioned, the Exchange would
no longer require 40,000 or more contracts per day
in a month of NOM Market Maker liquidity.
12 Tier 1 pays a rebate for NOM Participants that
add Customer liquidity of up to 14,999 contracts
per day in a month of Penny Options. There is no
required minimum volume of Customer orders to
qualify for a Customer Rebate to Add Liquidity.
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between 50,000 and 74,999 contracts of
Customer liquidity in Penny Options
and lower the Tier 4 criteria to 75,000
or more contracts of Customer liquidity
in Penny Options and eliminate the
second criteria are equitable and not
unfairly discriminatory because they
should encourage NOM Participants
that currently qualify for Tier 3 today to
obtain the increased Tier 4 rebate and
encourage other NOM Participants to
transact additional Customer orders in
Penny Options to obtain the increased
rebates.
The Exchange’s proposal to increase
the Customer Fee for Removing
Liquidity in Penny Options is
reasonable because the Exchange is
seeking to recoup costs associated with
offering Customer rebates in Penny
Options to attract greater liquidity to the
Exchange. The increased liquidity
benefits all market participants. The
Exchange’s proposal to increase the
Customer Fee for Removing Liquidity in
Penny Options is equitable and not
unfairly discriminatory because all
market participants would uniformly be
assessed a $0.45 per contract Customer
Fee for Removing Liquidity in Penny
Options. Currently, Professionals,
Firms, Non-NOM Market Makers and
NOM Market Makers are assessed a
$0.45 per contract Fee for Removing
Liquidity in Penny Options. The
Exchange believes that increasing the
Customer Fee for Removing Liquidity by
$0.01 per contract ($0.44 per contract to
$0.45 per contract) allows the Exchange
to recoup costs and offer even greater
Customer rebates, thereby benefitting all
market participants by attracting
Customer order flow to NOM.
The Exchange’s proposals to amend
the title of Section 2 to reflect the
rebates offered and also update a crossreference to the Phlx fees are reasonable,
equitable and not unfairly
discriminatory because these
amendments provide greater clarity and
accuracy to the Rule text.
The Exchange operates in a highly
competitive market comprised of nine
U.S. options exchanges in which
sophisticated and knowledgeable
market participants can and do send
order flow to competing exchanges if
they deem fee levels at a particular
exchange to be excessive or rebate
opportunities to be inadequate. The
Exchange believes that the proposed fee
and rebate scheme are competitive and
similar to other fees, rebates and tier
opportunities in place on other
exchanges. The Exchange believes that
this competitive marketplace materially
impacts the fees and rebates present on
the Exchange today and substantially
influences the proposal set forth above.
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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.13 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. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or 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 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 email to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2012–048 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–2012–048. This
file number should be included on the
subject line if email 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
13 15
E:\FR\FM\12APN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
12APN1
Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices
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–2012–048 and should be
submitted on or before May 3, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–8838 Filed 4–11–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66766; File No. SR–ICC–
2012–05]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change to Membership
Qualifications
mstockstill on DSK4VPTVN1PROD with NOTICES
April 6, 2012.
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 April 3,
2012, ICE Clear Credit LLC (‘‘ICC’’) 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 primarily by ICC.
The Commission is publishing this
notice to solicit comments on the
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
16:27 Apr 11, 2012
Jkt 226001
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of Terms of Substance of the
Proposed Rule Change
The purpose of proposed rule change
is to conform the ICC membership
qualifications to be in compliance with
Commodity Futures Trading
Commission (‘‘CFTC’’) Regulations
39.12(a)(2)(ii) and 39.12(a)(2)(iii) no
later than the May 7, 2012 effective date
of CFTC Regulations 39.12(a)(2)(ii) and
39.12(a)(2)(iii). ICC believes these
changes are also consistent with
Commission Proposed Rule 17Ad–
22(b)(7).
As discussed in more detail in Item
II(A) below, the changes to Chapters 1
and 2 of the ICC Rules provide for
amendments to the membership
qualifications of ICC and related
definitions.
II. Self-Regulatory Organization’s
Statement of Purpose of, and Statutory
Basis for, the Proposed Rule Change
In its filing with the Commission, ICC
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. ICC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.
A. Self-Regulatory Organization’s
Statement of Purpose of, and Statutory
Basis for, the Proposed Rule Change
CFTC Regulation 39.12(a)(2)(ii)
provides that ‘‘the participant
requirements shall set forth capital
requirements that are based on
objective, transparent, and commonly
accepted standards that appropriately
match capital to risk. Capital
requirements shall be scalable to the
risks posed by clearing members.’’
Accordingly, ICC revised Rule 209
(Risk-Based Capital Requirement) to
provide that if at any time and for so
long as a Clearing Participant has a
required contribution to the ICC General
Guaranty Fund that exceeds 25% of its
‘‘excess net capital,’’ ICC may (in
addition to imposing the trading activity
limitations provided for in ICC Rule
203(b)) require such Clearing Participant
to prepay and maintain with ICE Clear
Credit an amount up to the Clearing
Participant’s assessment obligation. ICC
Rule 102, the definitional section of the
Rules, has been amended to define
‘‘excess net capital’’ as the amount
reported on Form 1–FR–FCM or FOCUS
PO 00000
Frm 00059
Fmt 4703
Sfmt 4703
22019
Report or as otherwise reported to the
CFTC under CFTC Rule 1.12. For a
Participant that is not an FCM or a
Broker-Dealer, there is no standard
equivalent to ‘‘excess net capital’’ which
can be utilized across all types of
Clearing Participant entities. Therefore,
Rule 102 places the burden on the
Clearing Participant to demonstrate that
its capital exceeds the capital
requirement that would be applicable to
it if it were an FCM, as determined
pursuant to a methodology acceptable to
ICC.
CFTC Regulation 39.12(a)(2)(iii)
provides that ‘‘a derivatives clearing
organization shall not set a minimum
capital requirement of more than $50
million for any person that seeks to
become a clearing member in order to
clear swaps’’. [Emphasis added.]
Accordingly, ICC revised Rule
201(b)(ii) incorporates the CFTC
mandated $50,000,000 minimum
adjusted net capital requirement for all
ICC Clearing Participants. For a
Participant that is not an FCM or a
Broker-Dealer, there is no standard
equivalent to ‘‘adjusted net capital’’
which can be utilized across all types of
Clearing Participant entities. Therefore,
Rule 201(b)(ii)(C) places the burden on
the Clearing Participant to demonstrate
that its capital exceeds the capital
requirement that would be applicable to
it if it were an FCM, as determined
pursuant to a methodology acceptable to
ICC.
In addition, in order to promote
compliance with the capital adequacy
requirements, Rule 201(b)(i) has been
amended to provide that a Clearing
Participant must be regulated for capital
adequacy by a competent authority such
as the CFTC, SEC, Federal Reserve
Board, Office of the Comptroller of the
Currency, U.K. Financial Services
Authority or any other regulatory body
ICC designates from time to time for this
purpose, or is an affiliate of an entity
that satisfies the capital adequacy
regulatory requirement and is subject to
consolidated holding company group
supervision.
The Board of Managers approved the
above amendments on March 22, 2012
after receiving recommendations to
approve from the ICE Clear Credit Risk
Committee on March 21, 2012, and the
ICE Clear Credit Risk Management
Subcommittee on March 7, 2012.
However, the ICE Clear Credit Board,
Risk Committee and Risk Management
Subcommittee expressed concern with
respect the Amended Rules relating to
Commission Proposed Rule 17Ad–
22(b)(7) and CFTC Regulation
39.12(a)(2)(iii) and only recommended
approval or approved the same in order
E:\FR\FM\12APN1.SGM
12APN1
]]>Agencies
[Federal Register Volume 77, Number 71 (Thursday, April 12, 2012)]
[Notices]
[Pages 22015-22019]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8838]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66768; File No. SR-NASDAQ-2012-048]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Customer Fees and Rebates in Penny Pilot Options
April 6, 2012.
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 April 2, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') 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.
---------------------------------------------------------------------------
[[Page 22016]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ proposes to modify Chapter XV, entitled ``Option Pricing,''
at Section 2 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
amend the Penny Pilot \3\ Options (``Penny Options'') Customer Rebates
to Add Liquidity and Penny Options Customer Fee for Removing Liquidity.
The Exchange also proposes to make other minor amendments to the
Section 2.
---------------------------------------------------------------------------
\3\ The Penny Pilot was established in March 2008 and in October
2009 was expanded and extended through June 30, 2012. 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); 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); 65969 (December 15,
2011, 76 FR 79268 (December 21, 2011) (SR-NASDAQ-2011-169) (notice
of filing and immediate effectiveness extension and replacement of
Penny Pilot). See also Exchange Rule Chapter VI, Section 5.
---------------------------------------------------------------------------
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. 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 proposes to modify Chapter XV, entitled ``Option Pricing,''
at Section 2 governing the rebates and fees assessed for option orders
entered into NOM. Specifically, the Exchange is proposing to modify the
five tier structure for paying Customer Rebates to Add Liquidity in
Penny Options. The Exchange proposes to amend various rebate tiers to
further incentivize NOM Participants to route Customer orders in Penny
Options to the Exchange by paying additional rebates for certain orders
after the NOM Participant has met a volume criteria and also removing
certain criteria to qualify for a rebate. The Exchange believes that
incentivizing NOM Participants to send additional Customer orders in
Penny Options to the Exchange will benefit all market participants by
adding liquidity to the market.
Specifically, the Exchange currently pays a Customer Rebate to Add
Liquidity in Penny Options based on the following tier structure:
* * * The Customer Rebate to Add Liquidity in Penny Pilot Options
will be paid as noted below. Each Customer order of 5,000 or more,
displayed or non-displayed contracts, which adds liquidity in Penny
Pilot Options, will qualify for an additional rebate of $0.01 per
contract provided the NOM Participant has qualified for a rebate in
Tier 2, 3, 4 or 5 for that month.
------------------------------------------------------------------------
Rebate to add
Monthly volume liquidity
------------------------------------------------------------------------
Tier 1 Participant adds Customer liquidity of up to $0.26
14,999 contracts per day in a month....................
Tier 2 Participant adds Customer liquidity of 15,000 to 0.38
49,999 contracts per day in a month....................
Tier 3 Participant adds Customer liquidity of 50,000 or 0.42
more contracts per day in a month......................
Tier 4 \a\ Participant adds (1) Customer liquidity of 0.43
100,000 or more contracts per day in a month, and (2)
NOM Market Maker liquidity of 40,000 or more contracts
per day in a month.....................................
Tier 5 \b\ Participant adds (1) Customer liquidity of 0.41
25,000 or more contracts per day in a month, (2) the
Participant has certified for the Investor Support
Program set forth in Rule 7014; and (3) the Participant
executed at least one order on NASDAQ's equity market..
------------------------------------------------------------------------
\a\ For purposes of Tier 4, the Exchange will aggregate the trading
activity of separate NOM Participants when computing average daily
volumes where 75 percent common ownership or control exists between
NOM Participants.
\b\ For purposes of Tier 5, the Exchange will allow a NOM Participant to
qualify for the rebate if a NASDAQ member under common ownership with
the NOM Participant has certified for the Investor Support Program and
executed at least one order on NASDAQ's equity market. Common
ownership is defined as 75 percent common ownership or control.
The Exchange proposes to amend the tier structure for Customer
Rebates to Add Liquidity in Penny Options as follows:
* * * The Customer Rebate to Add Liquidity in Penny Pilot Options
will be paid as noted below. Each Customer order of 5,000 or more,
displayed or non-displayed contracts, which adds liquidity in Penny
Pilot Options, will qualify for an additional rebate of $0.01 per
contract provided the NOM Participant has qualified for a rebate in
Tier 2, 3, 4 or 5 for that month.
------------------------------------------------------------------------
Rebate to add
Monthly volume liquidity
------------------------------------------------------------------------
Tier 1 Participant adds Customer liquidity of up to $0.26
14,999 contracts per day in a month....................
Tier 2 Participant adds Customer liquidity of 15,000 to 0.38
49,999 contracts per day in a month....................
Tier 3 Participant adds Customer liquidity of 50,000 to 0.43
74,999 contracts per day in a month....................
Tier 4 Participant adds Customer liquidity of 75,000 or 0.44
more contracts per day in a month......................
[[Page 22017]]
Tier 5 \a\ Participant adds (1) Customer liquidity of 0.42
25,000 or more contracts per day in a month, (2) the
Participant has certified for the Investor Support
Program set forth in Rule 7014; and (3) the Participant
executed at least one order on NASDAQ's equity market..
------------------------------------------------------------------------
\a\ For purposes of Tier 5, the Exchange will allow a NOM Participant to
qualify for the rebate if a NASDAQ member under common ownership with
the NOM Participant has certified for the Investor Support Program and
executed at least one order on NASDAQ's equity market. Common
ownership is defined as 75 percent common ownership or control.
Currently, Tier 3 firms that add 50,000 or more contracts per day
in a month of Customer liquidity, in Penny Options, receive a rebate of
$0.42 per contract. The Exchange is proposing to increase the Tier 3
Customer rebate from $0.42 per contract to $0.43 per contract. The
Exchange also proposes to amend the number of contracts required to
qualify for Tier 3 from 50,000 or more contracts per day in a month to
require NOM Participants to add between 50,000 to 74,999 contracts per
day in a month of Customer liquidity in Penny Options to qualify for
the increased $0.43 Customer rebate.
Currently, Tier 4 firms that (1) add Customer liquidity of 100,000
or more contracts per day in a month of Customer order liquidity in
Penny Options, and (2) provide 40,000 or more contracts per day of NOM
Market Maker liquidity per day in a month receive a rebate of $0.43 per
contract if both criteria are met. For purposes of determining
qualification for this tier, the Exchange currently aggregates \4\ the
trading activity of separate NOM Participants in calculating the
average daily volume if there is at least 75% common ownership or
control between the NOM Participants. The Exchange proposes to amend
the criteria to qualify for Tier 4 from 100,000 or more contracts per
day in a month to 75,000 or more contracts per day in a month of
Customer liquidity in Penny Options and also remove the second criteria
to qualify for Tier 4. The Exchange would therefore remove the
requirement that a NOM Market Maker add liquidity of 40,000 or more
contracts per day in a month. In addition the Exchange proposes to
increase the current Tier 4 Customer rebate of $0.43 per contract to
$0.44 per contract. The Exchange would also remove note ``(a)'', which
was associated with the second criteria of Tier 4, which is no longer
necessary as the NOM Marker Maker requirement would no longer be a
condition to receive the Tier 4 Customer rebate.
---------------------------------------------------------------------------
\4\ Aggregation is necessary and appropriate because certain NOM
participants conduct Customer and NOM Market Maker trading activity
through separate but related broker-dealers.
---------------------------------------------------------------------------
Currently, Tier 5 firms that (1) provide 25,000 or more contracts
per day in a month of Customer order liquidity in Penny Options, (2)
where the Participant has certified for the Investor Support Program
(``ISP'') as set forth in Rule 7014 \5\; and (3) where the Participant
executed at least one order on NASDAQ's equity market receive a $0.41
per contract Customer rebate. The Exchange proposes to amend Tier 5 to
increase the Customer rebate in Penny Options from $0.41 per contract
to $0.42 per contract. The Exchange would also renumber the current
note ``(b)'' as note ``(a).'' The Exchange is not proposing any changes
to current Tiers 1 and 2.\6\
---------------------------------------------------------------------------
\5\ For a detailed description of the ISP, see Securities
Exchange Act Release No. 63270 (November 8, 2010), 75 FR 69489
(November 12, 2010) (NASDAQ-2010-141) (notice of filing and
immediate effectiveness) (the ``ISP Filing''). See also Securities
Exchange Act Release Nos. 63414 (December 2, 2010), 75 FR 76505
(December 8, 2010) (NASDAQ-2010-153) (notice of filing and immediate
effectiveness); and 63628 (January 3, 2011), 76 FR 1201 (January 7,
2011) (NASDAQ-2010-154) (notice of filing and immediate
effectiveness).
\6\ The Exchange currently pays an additional rebate of $0.01
per contract for each Customer order of 5,000 or more, displayed or
non-displayed contracts, which adds liquidity in Penny Options as
long as the NOM Participant qualified for a rebate in Tier 2, 3, 4
or 5 for that month. This is not being amended in this proposal.
---------------------------------------------------------------------------
The Exchange also proposes to subsidize the proposed increased
Customer Rebates to Add Liquidity in Penny Options by increasing the
Customer Fee for Removing Liquidity in Penny Options from $0.44 per
contract to $0.45 per contract. The Exchange believes that this
increase will allow the Exchange to compete more effectively by
subsidizing rebates offered on Customer orders.
The Exchange also proposes to make minor amendments to Section 2
including amending the title of Section 2 from ``NASDAQ Options Market
-Fees'' to ``NASDAQ Options Market -Fees and Rebates.'' to more
specifically describe the Rule. The Exchange also proposes to correct a
cross-reference to the NASDAQ OMX PHLX LLC (``Phlx'') ``Fee Schedule.''
The Exchange proposes to update the title of the ``Fee Schedule'' to
the ``Pricing Schedule'' in accordance with a recent amendment filed by
Phlx.\7\
---------------------------------------------------------------------------
\7\ See SR-Phlx-2012-35.
---------------------------------------------------------------------------
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\8\ in general, and with Section
6(b)(4) of the Act,\9\ 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed new pricing tiers are
reasonable, equitable and not unfairly discriminatory because they
continue an existing program \10\ to encourage broker-dealers acting as
agent for Customer orders to select the Exchange as a venue to post
Customer orders. The Exchange believes that its success at attracting
Customer order flow benefits all market participants by improving the
quality of order interaction and executions at the Exchange. The
Exchange believes the existing monthly volume thresholds have
incentivized firms that route Customer orders to the Exchange to
increase Customer order flow to the Exchange. The Exchange desires to
continue to encourage firms that route Customer orders to increase
Customer order flow to the Exchange by offering greater Customer
rebates for greater liquidity added to the Exchange.
---------------------------------------------------------------------------
\10\ The Exchange adopted these monthly volume achievement tiers
in September 2011. See Securities Exchange Act Release Nos. 65317
(September 12, 2011), 76 FR 57778 (September 16, 2011) (SR-NASDAQ-
2011-124), 65317 (September 12, 2011), 76 FR 61129 (October 3, 2011)
(SR-NASDAQ-2011-127), 66126 (January 10, 2012), 77 FR 2335 (January
17, 2012) (SR-NASDAQ-2012-003) and 66360 (February 8, 2012), 77 FR
8312 (February 14, 2012) (SR-NASDAQ-2012-022).
---------------------------------------------------------------------------
Specifically, the Exchange believes that the increased Customer
rebates in Penny Options would further incentivize firms to continue to
send more Customer volume to the Exchange. By increasing the Customer
rebates in Tiers 3, 4 and 5 by $0.01 per contract each, the Exchange
would further encourage NOM Participants to transact a greater number
of Customer rebates in Penny Options. With respect to Tier 3, NOM
Participants that qualify for these Customer rebates today should
qualify
[[Page 22018]]
for the increased rebate which continues to require at least 50,000
contracts per day in a month of Customer liquidity, but also amends the
criteria to between 50,000 and 74,999 contracts of Customer liquidity
in Penny Options to qualify for the increased rebate of $0.43 per
contract. NOM Participants who currently transact greater than 74,999
contracts per day in a month today would be entitled to an even greater
rebate because they would qualify for the increased Tier 4 rebate of
$0.44 per contract. The Exchange is amending Tier 4 to lower the first
criteria from 100,000 or more contracts of Customer liquidity to 75,000
or more contracts of Customer liquidity in Penny Options and remove the
second criteria to qualify for the Customer rebate.\11\ Therefore NOM
Participants would only be required to add 75,000 or more contracts per
day in a month of Customer liquidity in Penny Options to receive the
increased Customer rebate of $0.44 per contract. The lower criteria in
Tier 4 would allow NOM Participants that currently qualify for Tier 3,
because they add greater than 75,000 contracts per day in a month of
Customer liquidity in Penny Options, to qualify for the $0.44 per
contract rebate and also encourage other NOM Participants to add more
Customer liquidity to qualify for an even greater rebate than that
offered for Tier 3.
---------------------------------------------------------------------------
\11\ As previously mentioned, the Exchange would no longer
require 40,000 or more contracts per day in a month of NOM Market
Maker liquidity.
---------------------------------------------------------------------------
The Exchange's proposal to increase the rebates in Tiers 3, 4 and 5
and amend the Tier 3 and 4 criteria as described herein is reasonable
because it should further encourage NOM Participants to qualify for
Customer rebates in Penny Options by transacting a greater number of
Customer contracts in Penny Options and increase liquidity on NOM.
Increased liquidity benefits all market participants on the Exchange.
In addition, the increased Tier 5 Customer rebate should further
encourage increased activity in both the NASDAQ Options Market and in
the ISP of the NASDAQ equity market. The Exchange's proposal to
increase the rebates in Tiers 3, 4 and 5 as well as amend the criteria
for Tiers 3 and 4 is equitable and not unfairly discriminatory because
all NOM Participants that transact Customer orders in Penny Options are
eligible for the Customer rebates.\12\ In addition, the proposals to
amend the Tier 3 criteria to between 50,000 and 74,999 contracts of
Customer liquidity in Penny Options and lower the Tier 4 criteria to
75,000 or more contracts of Customer liquidity in Penny Options and
eliminate the second criteria are equitable and not unfairly
discriminatory because they should encourage NOM Participants that
currently qualify for Tier 3 today to obtain the increased Tier 4
rebate and encourage other NOM Participants to transact additional
Customer orders in Penny Options to obtain the increased rebates.
---------------------------------------------------------------------------
\12\ Tier 1 pays a rebate for NOM Participants that add Customer
liquidity of up to 14,999 contracts per day in a month of Penny
Options. There is no required minimum volume of Customer orders to
qualify for a Customer Rebate to Add Liquidity.
---------------------------------------------------------------------------
The Exchange's proposal to increase the Customer Fee for Removing
Liquidity in Penny Options is reasonable because the Exchange is
seeking to recoup costs associated with offering Customer rebates in
Penny Options to attract greater liquidity to the Exchange. The
increased liquidity benefits all market participants. The Exchange's
proposal to increase the Customer Fee for Removing Liquidity in Penny
Options is equitable and not unfairly discriminatory because all market
participants would uniformly be assessed a $0.45 per contract Customer
Fee for Removing Liquidity in Penny Options. Currently, Professionals,
Firms, Non-NOM Market Makers and NOM Market Makers are assessed a $0.45
per contract Fee for Removing Liquidity in Penny Options. The Exchange
believes that increasing the Customer Fee for Removing Liquidity by
$0.01 per contract ($0.44 per contract to $0.45 per contract) allows
the Exchange to recoup costs and offer even greater Customer rebates,
thereby benefitting all market participants by attracting Customer
order flow to NOM.
The Exchange's proposals to amend the title of Section 2 to reflect
the rebates offered and also update a cross-reference to the Phlx fees
are reasonable, equitable and not unfairly discriminatory because these
amendments provide greater clarity and accuracy to the Rule text.
The Exchange operates in a highly competitive market comprised of
nine U.S. options exchanges in which sophisticated and knowledgeable
market participants can and do send order flow to competing exchanges
if they deem fee levels at a particular exchange to be excessive or
rebate opportunities to be inadequate. The Exchange believes that the
proposed fee and rebate scheme are competitive and similar to other
fees, rebates and tier opportunities in place on other exchanges. The
Exchange believes that this competitive marketplace materially impacts
the fees and rebates present on the Exchange today and substantially
influences the proposal 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.\13\ 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. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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 email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2012-048 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-2012-048. This
file number should be included on the subject line if email 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
[[Page 22019]]
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-2012-048 and should be submitted
on or before May 3, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8838 Filed 4-11-12; 8:45 am]
BILLING CODE 8011-01-P
