Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to NDX Pricing, 35732-35735 [2012-14573]
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Federal Register / Vol. 77, No. 115 / Thursday, June 14, 2012 / Notices
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–CBOE–2012–054 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–2012–054. 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
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
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
offices 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–
2012–054, and should be submitted on
or before July 5, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–14574 Filed 6–13–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67171; File No. SR–
NASDAQ–2012–068]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
NDX Pricing
June 8, 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 May 30,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NASDAQ Stock Market LLC
proposes to modify pricing for NASDAQ
members using the NASDAQ Options
Customer
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NDX and MNX:
Rebate to Add Liquidity ................................................
Fee for Removing Liquidity ...........................................
The Exchange proposes to assess the
following Rebate to Remove Liquidity,
Rebates to Add Liquidity,3 Fees to Add
8 17
1 15
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
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14:34 Jun 13, 2012
Professional
$0.10
0.50
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 amend Chapter
XV, Section 2 to adopt rebates and fees
relating to NDX options. NASDAQ
currently assesses the same rebates and
fees for NDX and options on the onetenth value of the Nasdaq 100 Index
traded under the symbol MNX (‘‘MNX’’)
as follows:
Non-NOM
market maker
Firm
$0.10
0.50
$0.10
0.50
$0.10
0.50
NOM market
maker
$0.20
0.40
Liquidity and Fees for Removing
Liquidity 4 for transactions in NDX:
2 17
CFR 240.19b–4.
order that adds liquidity is one that is
entered into NOM and rests on the NOM book.
3 An
Jkt 226001
Market (‘‘NOM’’), NASDAQ’s facility for
executing and routing standardized
equity and index options. Specifically,
NASDAQ proposes to amend Chapter
XV, Section 2 entitled ‘‘NASDAQ
Options Market—Fees and Rebates’’ to
adopt rebates and fees relating to
options on the Nasdaq 100 Index traded
under the symbol NDX (‘‘NDX’’).
While the changes proposed herein
are effective upon filing, the Exchange
has designated these changes to be
operative on June 1, 2012.
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.
PO 00000
Frm 00076
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4 An order that removes liquidity is one that is
entered into NOM and that executes against an
order resting on the NOM book.
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Federal Register / Vol. 77, No. 115 / Thursday, June 14, 2012 / Notices
Customer
NDX:
Rebate to Remove Liquidity .........................................
Rebate to Add Liquidity ................................................
Fee to Add Liquidity ......................................................
Fee for Removing Liquidity ...........................................
Professional
$0.40
1
1
0.00
Non-NOM
market maker
Firm
$0.00
0.00
0.70
0.70
$0.00
0.00
0.70
0.70
$0.00
0.00
0.70
0.70
NOM market
maker
$0.00
1
1
0.70
1 A Customer and NOM Market Maker will either receive a Rebate to Add Liquidity of $0.20 per contract when trading against a Professional,
Firm, NOM Market Maker or Non-NOM Market Maker or will pay a Fee to Add Liquidity of $0.65 per contract when trading against a Customer.
A Customer or a NOM Market Maker 5
would therefore be entitled to receive a
Rebate to Add Liquidity or would pay
a Fee to Add Liquidity depending on
the contra-party to the transaction. The
Exchange also proposes to amend
Chapter XV, Section 2 to remove the
term ‘‘NDX and’’ in NDX and MNX title
of the rebates and fees currently in the
Rule.
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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,6 in
general, and with Section 6(b)(4) of the
Act,7 in particular, in that they provide
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 its
proposal to adopt separate fees and
rebates for transactions in NDX is
reasonable because the Exchange has
previously distinguished other index
products.8 The Exchange is proposing to
assess certain participants higher Fees
to Add and Remove Liquidity for NDX
and pay a higher Customer Rebate to
Remove Liquidity ($0.40 per contract).
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. Additionally, these proposed
fees and rebates for NDX are also similar
to complex order fees currently in place
at the International Securities Exchange,
LLC (‘‘ISE’’).9
5 NOM Market Makers must be registered as such
pursuant to Chapter VII, Section 2 of the Nasdaq
Options Rules, and must also remain in good
standing pursuant to Chapter VII, Section 4.
6 15 U.S.C. 78f.
7 15 U.S.C. 78f(b)(4).
8 See Chapter XV, Section 2(1) fees. The Exchange
currently assesses different fees and rebates for
other indexes such as HGX, SOX and OSX. Also,
the Exchange assesses different fees for Penny Pilot
transactions and non-Penny Pilot transactions. In
addition, some market participants, such as market
makers, have obligations pursuant to Exchange
rules which the Exchange recognizes in its pricing.
9 See ISE’s Fee Schedule. ISE recently adopted
fees for complex orders in two of the most activelytraded index option products, the NASDAQ 100
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The Exchange believes that its
proposal to adopt separate fees and
rebates for transactions in NDX is
equitable and not unfairly
discriminatory because Customers will
receive a $0.40 per contract Rebate to
Remove Liquidity, which in turn will
attract Customer order flow to the
Exchange to the benefit of all market
participants through increased liquidity.
Further, the Exchange also believes it is
reasonable, equitable and not unfairly
discriminatory to only offer rebates for
removing liquidity to Customers and not
other market participants as an
incentive to attract Customer order flow
in NDX to the Exchange. It is an
important Exchange function to provide
an opportunity to all market
participants to trade against Customer
orders.
The Exchange’s proposal to pay a
$0.20 per contract Rebate to Add
Liquidity to Customers and NOM
Market Makers when trading against a
Professional, Firm, NOM Market Maker
or Non-NOM Market Maker,10 and
assess a Fee to Add Liquidity of $0.65
per contract when trading against a
Customer is reasonable because the
Exchange believes that providing
Customers and Market Makers with the
opportunity to either earn a rebate or
pay a lower fee should incentivize these
critical market participants to post
Index option (‘‘NDX’’) and the Russell 2000 Index
option (‘‘RUT’’). Specifically, ISE charges ISE
market maker orders, firm proprietary orders and
Customer (Professional Orders) $0.25 per contract
for providing liquidity on the complex order book
in NDX and RUT and $0.70 per contract for taking
liquidity from the complex order book in NDX and
RUT. Non-ISE Market Makers are charged $0.25 per
contract for providing liquidity and $0.75 per
contract for taking liquidity from the complex order
book in NDX and RUT. Priority Customer orders are
not charged a fee for trading in the complex order
book in NDX and RUT and receive a rebate of $0.50
per contract when those orders trade with nonPriority Customer orders in the complex order book
in NDX and RUT. In comparison, NOM has
proposed to adopt a similar fee structure, although
not related to complex orders as is the case at ISE,
with respect to paying a rebate and assessing a fee
depending on the contra-party to the transaction
and whether the participant is adding or removing
liquidity. In addition, the proposed NOM Fees for
Removing Liquidity are similar to those adopted by
ISE.
10 Non-NOM Market Makers are registered market
makers on another options market that append the
market maker designation to orders routed to NOM.
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
liquidity on NOM. While the Customer
and NOM Market Maker are unaware at
the time they enter a transaction
whether they would earn a rebate or pay
a lower fee, the Exchange believes that
the possibility of earning a $0.20 per
contract Rebate to Add Liquidity when
trading against a non-Customer
(Professional, Firm, NOM Market Maker
or Non-NOM Market Maker) or the
opportunity to pay a lower fee, as
compared to other market
participants,11 when trading against a
Customer should incentivize both
Customers and Market Makers to add
liquidity. Increased liquidity benefits all
market participants.
The Exchange’s proposal to pay a
$0.20 per contract Rebate to Add
Liquidity to Customers and NOM
Market Makers when trading against a
Professional, Firm, NOM Market Maker
or Non-NOM Market Maker, and assess
a Fee to Add Liquidity of $0.65 per
contract when trading against a
Customer is equitable and not unfairly
discriminatory because Customers and
NOM Market Makers differ from other
market participants. Customer order
flow benefits all market participants by
improving liquidity, the quality of order
interaction and executions at the
Exchange. NOM Market Makers have
obligations to the market and regulatory
requirements,12 which normally do not
apply to other market participants. A
NOM Market Maker has the obligation
to make continuous markets, engage in
course of dealings reasonably calculated
to contribute to the maintenance of a
fair and orderly market, and not make
bids or offers or enter into transactions
11 Professionals, Firms and Non-NOM Market
Makers are assessed a $0.70 per contract Fee to Add
Liquidity.
12 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.
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Federal Register / Vol. 77, No. 115 / Thursday, June 14, 2012 / Notices
that are inconsistent with course of
dealings. The proposed differentiation
as between Customers and NOM Market
Makers and other market participants
recognizes the differing contributions
made to the liquidity and trading
environment on the Exchange by
Customers and NOM Market Makers, as
well as the differing mix of orders
entered. Further, as noted herein, the
Customer and NOM Market Maker are
unaware at the time the order is entered
whether they would receive the $0.20
per contract Rebate to Add Liquidity or
pay the $0.65 per contract Fee to Add
Liquidity because they are aware of the
identity of the contra-party, which
would determine whether they receive a
rebate or pay a fee. The Exchange
believes that the Customer and NOM
Market Maker rebate or fee pricing
structure is equitable and not unfairly
discriminatory because the Rebate to
Add Liquidity, which is only being
offered to Customers and NOM Market
Makers, would reward these
participants for posting liquidity that
interacts with a non-Customer order
(Professionals, Firms, NOM Market
Makers and Non-NOM Market Makers).
Also, the Customer and NOM Market
Maker Fees to Add Liquidity ($0.65 per
contract), when trading with a
Customer, are equitable and not unfairly
discriminatory because the fees are
lower as compared to other market
participants.13 The $0.65 per contract
Customer and NOM Market Maker Fee
to Add Liquidity seeks to recoup the
$0.22 license fee 14 and fund the $0.40
Customer Rebate to Remove Liquidity,
which attracts liquidity to the Exchange
and benefits all participants. The
Exchange believes the combination of
fees and rebates for Customers and
NOM Market Makers to add liquidity
will incentivize these participants to
add liquidity in NDX and will also serve
to fund the $0.22 license fee.
The Exchange’s proposal to assess
Professionals, Firms, and Non-NOM
Market Makers a $0.70 per contract Fee
to Add Liquidity is reasonable because
the higher fees would enable the
Exchange to reward Customers that
remove liquidity with rebates. The
advantage of increased Customer order
flow benefits all market participants.
The Exchange’s proposal to assess
Professionals, Firms, and Non-NOM
Market Makers a $0.70 per contract Fee
to Add Liquidity is equitable and not
unfairly discriminatory because all
13 Professionals,
Firms and Non-NOM Market
Makers are assessed a $0.70 per Contract Fee to Add
Liquidity.
14 NOM is assessed a license fee of $0.22 per
contract to list NDX.
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14:34 Jun 13, 2012
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other market participants (Professionals,
Firms, and Non-NOM Market Makers),
other than Customers and NOM Market
Makers which are distinguished above,
would be assessed the same Fee to Add
Liquidity. Also, the Exchange believes it
is reasonable, equitable and not unfairly
discriminatory to not offer a Rebate to
Add Liquidity to Professionals, Firms
and Non-NOM Market Makers because
these participants do not bring the
unique benefits that Customer order
flow provides the market nor do these
participants have the obligations that
were described herein for NOM Market
Makers.
The Exchange’s proposal to assess all
market participants except Customers a
$0.70 per contract Fee for Removing
Liquidity is equitable and not unfairly
discriminatory because Professionals,
Firms, NOM Market Makers and NonNOM Market Makers would be assessed
the same Fee for Removing Liquidity.
Also, the Exchange believes the $0.70
per contract Fees for Removing
Liquidity are reasonable because the
Exchange currently pays a license fee 15
to list NDX on NOM and is seeking to
recoup that fee and to pay the proposed
$0.20 per contract Rebate to Add
Liquidity to Customers and NOM
Market Makers in NDX. In addition, the
Exchange believes that these remove
fees are within the range of fees for
removing liquidity assessed by other
exchanges.16
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. The Exchange
believes that the proposed fee and
rebate scheme is competitive and
similar to other fees and rebates in place
on other exchanges. The Exchange
believes that this competitive
marketplace materially impacts the fees
15 Id.
16 See BATS Exchange, Inc.’s Fee Schedule.
Professional, Firm and Market Maker orders are
assessed a fee of $0.80 per contract to remove
liquidity from the BATS Options order book.
Customer orders are assessed a fee of $0.75 per
contract to remove liquidity from the BATS Options
order book. BATS also offers liquidity rebates for
all other securities of $0.70 per contract for a
Professional, Firm or Market Maker order that adds
liquidity to the BATS Options order book and $0.75
per contract for a Customer order that adds liquidity
to the BATS Options order book. The Exchange is
proposing to assess Professional, Firms and NonNOM Market Makers $0.70 per contract fees to add
and remove liquidity, but no rebates and assess
Customers and NOM Market Makers $0.65 per
contact when trading against a Customer or a $0.20
per contract rebate when trading against a
Professional, Firm, NOM Market Maker or NonNOM Market Maker.
PO 00000
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Sfmt 4703
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
NASDAQ does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
To the contrary, NASDAQ has designed
its fees and rebates to compete
effectively for the execution and routing
of options contracts and to reduce the
overall cost to investors of options
trading. The Exchange believes that the
proposed fee/rebate pricing structure
would attract liquidity to and benefit
order interaction at the Exchange to the
benefit of all market participants.17
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.18 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2012–068 on the
subject line.
17 See June 7, 2012 Email from Jonathan Cayne,
Associate General Counsel, The Nasdaq OMX
Group, Inc. to Stephanie Mumford, Special
Counsel, Division of Trading and Markets,
Securities and Exchange Commission.
18 15 U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 77, No. 115 / Thursday, June 14, 2012 / Notices
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–2012–068. 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
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
10:00 a.m. and 3:00 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–2012–068 and should be
submitted on or before July 5, 2012.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–14573 Filed 6–13–12; 8:45 am]
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67172; File No. SR–BATS–
2012–020]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Fees for Use
of BATS Exchange, Inc.
June 8, 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 May 31,
2012, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) 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 the Exchange. The
Exchange has designated the proposed
rule change as one establishing or
changing a member due, fee, or other
charge imposed by the Exchange under
Section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
fee schedule applicable to Members 5
and non-members of the Exchange
pursuant to BATS Rules 15.1(a) and (c).
While changes to the fee schedule
pursuant to this proposal will be
effective upon filing, the changes will
become operative on June 1, 2012.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
2 17
19 17
CFR 200.30–3(a)(12).
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35735
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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to modify the
‘‘Options Pricing’’ section of its fee
schedule to: (i) modify the rebates
provided by the Exchange for
Customer 6 orders that add liquidity to
Exchange’s options platform (‘‘BATS
Options’’) in options classes subject to
the penny pilot program as described
below (‘‘Penny Pilot Securities’’),7 and
(ii) modify the BATS Options NBBO
Setter Program 8 by adopting enhanced
rebates for liquidity resulting from
orders with a significant level of
displayed size. The Exchange also
proposes minor structural changes to
the Options Pricing section of the
Exchange’s fee schedule, including
movement and re-numbering of certain
footnotes.
(i) Customer Rebates for Adding
Liquidity
The Exchange currently provides
rebates for Customer orders that add
liquidity to the BATS Options order
book in Penny Pilot Securities pursuant
to a tiered pricing structure, as
described below. The Exchange
proposes to modify this tiered pricing
structure, which will result in the
potential for Customer orders to receive
larger rebates per contract.
The Exchange currently provides a
rebate of $0.30 per contract for
Customer orders that add liquidity to
the BATS Options order book to the
extent a Member of BATS Options does
not qualify for a higher rebate based on
6 As defined on the Exchange’s fee schedule, a
‘‘Customer’’ order is any transaction identified by
a Member for clearing in the Customer range at the
Options Clearing Corporation (‘‘OCC’’), except for
those designated as ‘‘Professional’’.
7 The Exchange currently charges different fees
and provides different rebates depending on
whether an options class is an options class that
qualifies as a Penny Pilot Security pursuant to
Exchange Rule 21.5, Interpretation and Policy .01
or is a non-penny options class.
8 The NBBO Setter Program is a program that
provides additional rebates for executions resulting
from orders that add liquidity that set either the
national best bid (‘‘NBB’’) or national best offer
(‘‘NBO’’).
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]]>Agencies
[Federal Register Volume 77, Number 115 (Thursday, June 14, 2012)]
[Notices]
[Pages 35732-35735]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14573]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67171; File No. SR-NASDAQ-2012-068]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to NDX Pricing
June 8, 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 May 30, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASDAQ Stock Market LLC proposes to modify pricing for NASDAQ
members using the NASDAQ Options Market (``NOM''), NASDAQ's facility
for executing and routing standardized equity and index options.
Specifically, NASDAQ proposes to amend Chapter XV, Section 2 entitled
``NASDAQ Options Market--Fees and Rebates'' to adopt rebates and fees
relating to options on the Nasdaq 100 Index traded under the symbol NDX
(``NDX'').
While the changes proposed herein are effective upon filing, the
Exchange has designated these changes to be operative on June 1, 2012.
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 amend Chapter XV, Section 2 to adopt rebates and
fees relating to NDX options. NASDAQ currently assesses the same
rebates and fees for NDX and options on the one-tenth value of the
Nasdaq 100 Index traded under the symbol MNX (``MNX'') as follows:
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Non-NOM market NOM market
Customer Professional Firm maker maker
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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
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The Exchange proposes to assess the following Rebate to Remove
Liquidity, Rebates to Add Liquidity,\3\ Fees to Add Liquidity and Fees
for Removing Liquidity \4\ for transactions in NDX:
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\3\ An order that adds liquidity is one that is entered into NOM
and rests on the NOM book.
\4\ An order that removes liquidity is one that is entered into
NOM and that executes against an order resting on the NOM book.
[[Page 35733]]
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Non-NOM market NOM market
Customer Professional Firm maker maker
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NDX:
Rebate to Remove Liquidity.. $0.40 $0.00 $0.00 $0.00 $0.00
Rebate to Add Liquidity..... \1\ 0.00 0.00 0.00 \1\
Fee to Add Liquidity........ \1\ 0.70 0.70 0.70 \1\
Fee for Removing Liquidity.. 0.00 0.70 0.70 0.70 0.70
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\1\ A Customer and NOM Market Maker will either receive a Rebate to Add Liquidity of $0.20 per contract when
trading against a Professional, Firm, NOM Market Maker or Non-NOM Market Maker or will pay a Fee to Add
Liquidity of $0.65 per contract when trading against a Customer.
A Customer or a NOM Market Maker \5\ would therefore be entitled to
receive a Rebate to Add Liquidity or would pay a Fee to Add Liquidity
depending on the contra-party to the transaction. The Exchange also
proposes to amend Chapter XV, Section 2 to remove the term ``NDX and''
in NDX and MNX title of the rebates and fees currently in the Rule.
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\5\ NOM Market Makers must be registered as such pursuant to
Chapter VII, Section 2 of the Nasdaq Options Rules, and must also
remain in good standing pursuant to Chapter VII, Section 4.
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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,\6\ in general, and with Section
6(b)(4) of the Act,\7\ in particular, in that they provide 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.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposal to adopt separate fees and
rebates for transactions in NDX is reasonable because the Exchange has
previously distinguished other index products.\8\ The Exchange is
proposing to assess certain participants higher Fees to Add and Remove
Liquidity for NDX and pay a higher Customer Rebate to Remove Liquidity
($0.40 per contract). 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. Additionally, these proposed fees and rebates for NDX are
also similar to complex order fees currently in place at the
International Securities Exchange, LLC (``ISE'').\9\
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\8\ See Chapter XV, Section 2(1) fees. The Exchange currently
assesses different fees and rebates for other indexes such as HGX,
SOX and OSX. Also, the Exchange assesses different fees for Penny
Pilot transactions and non-Penny Pilot transactions. In addition,
some market participants, such as market makers, have obligations
pursuant to Exchange rules which the Exchange recognizes in its
pricing.
\9\ See ISE's Fee Schedule. ISE recently adopted fees for
complex orders in two of the most actively-traded index option
products, the NASDAQ 100 Index option (``NDX'') and the Russell 2000
Index option (``RUT''). Specifically, ISE charges ISE market maker
orders, firm proprietary orders and Customer (Professional Orders)
$0.25 per contract for providing liquidity on the complex order book
in NDX and RUT and $0.70 per contract for taking liquidity from the
complex order book in NDX and RUT. Non-ISE Market Makers are charged
$0.25 per contract for providing liquidity and $0.75 per contract
for taking liquidity from the complex order book in NDX and RUT.
Priority Customer orders are not charged a fee for trading in the
complex order book in NDX and RUT and receive a rebate of $0.50 per
contract when those orders trade with non-Priority Customer orders
in the complex order book in NDX and RUT. In comparison, NOM has
proposed to adopt a similar fee structure, although not related to
complex orders as is the case at ISE, with respect to paying a
rebate and assessing a fee depending on the contra-party to the
transaction and whether the participant is adding or removing
liquidity. In addition, the proposed NOM Fees for Removing Liquidity
are similar to those adopted by ISE.
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The Exchange believes that its proposal to adopt separate fees and
rebates for transactions in NDX is equitable and not unfairly
discriminatory because Customers will receive a $0.40 per contract
Rebate to Remove Liquidity, which in turn will attract Customer order
flow to the Exchange to the benefit of all market participants through
increased liquidity. Further, the Exchange also believes it is
reasonable, equitable and not unfairly discriminatory to only offer
rebates for removing liquidity to Customers and not other market
participants as an incentive to attract Customer order flow in NDX to
the Exchange. It is an important Exchange function to provide an
opportunity to all market participants to trade against Customer
orders.
The Exchange's proposal to pay a $0.20 per contract Rebate to Add
Liquidity to Customers and NOM Market Makers when trading against a
Professional, Firm, NOM Market Maker or Non-NOM Market Maker,\10\ and
assess a Fee to Add Liquidity of $0.65 per contract when trading
against a Customer is reasonable because the Exchange believes that
providing Customers and Market Makers with the opportunity to either
earn a rebate or pay a lower fee should incentivize these critical
market participants to post liquidity on NOM. While the Customer and
NOM Market Maker are unaware at the time they enter a transaction
whether they would earn a rebate or pay a lower fee, the Exchange
believes that the possibility of earning a $0.20 per contract Rebate to
Add Liquidity when trading against a non-Customer (Professional, Firm,
NOM Market Maker or Non-NOM Market Maker) or the opportunity to pay a
lower fee, as compared to other market participants,\11\ when trading
against a Customer should incentivize both Customers and Market Makers
to add liquidity. Increased liquidity benefits all market participants.
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\10\ Non-NOM Market Makers are registered market makers on
another options market that append the market maker designation to
orders routed to NOM.
\11\ Professionals, Firms and Non-NOM Market Makers are assessed
a $0.70 per contract Fee to Add Liquidity.
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The Exchange's proposal to pay a $0.20 per contract Rebate to Add
Liquidity to Customers and NOM Market Makers when trading against a
Professional, Firm, NOM Market Maker or Non-NOM Market Maker, and
assess a Fee to Add Liquidity of $0.65 per contract when trading
against a Customer is equitable and not unfairly discriminatory because
Customers and NOM Market Makers differ from other market participants.
Customer order flow benefits all market participants by improving
liquidity, the quality of order interaction and executions at the
Exchange. NOM Market Makers have obligations to the market and
regulatory requirements,\12\ which normally do not apply to other
market participants. A NOM Market Maker has the obligation to make
continuous markets, engage in course of dealings reasonably calculated
to contribute to the maintenance of a fair and orderly market, and not
make bids or offers or enter into transactions
[[Page 35734]]
that are inconsistent with course of dealings. The proposed
differentiation as between Customers and NOM Market Makers and other
market participants recognizes the differing contributions made to the
liquidity and trading environment on the Exchange by Customers and NOM
Market Makers, as well as the differing mix of orders entered. Further,
as noted herein, the Customer and NOM Market Maker are unaware at the
time the order is entered whether they would receive the $0.20 per
contract Rebate to Add Liquidity or pay the $0.65 per contract Fee to
Add Liquidity because they are aware of the identity of the contra-
party, which would determine whether they receive a rebate or pay a
fee. The Exchange believes that the Customer and NOM Market Maker
rebate or fee pricing structure is equitable and not unfairly
discriminatory because the Rebate to Add Liquidity, which is only being
offered to Customers and NOM Market Makers, would reward these
participants for posting liquidity that interacts with a non-Customer
order (Professionals, Firms, NOM Market Makers and Non-NOM Market
Makers). Also, the Customer and NOM Market Maker Fees to Add Liquidity
($0.65 per contract), when trading with a Customer, are equitable and
not unfairly discriminatory because the fees are lower as compared to
other market participants.\13\ The $0.65 per contract Customer and NOM
Market Maker Fee to Add Liquidity seeks to recoup the $0.22 license fee
\14\ and fund the $0.40 Customer Rebate to Remove Liquidity, which
attracts liquidity to the Exchange and benefits all participants. The
Exchange believes the combination of fees and rebates for Customers and
NOM Market Makers to add liquidity will incentivize these participants
to add liquidity in NDX and will also serve to fund the $0.22 license
fee.
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\12\ 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.
\13\ Professionals, Firms and Non-NOM Market Makers are assessed
a $0.70 per Contract Fee to Add Liquidity.
\14\ NOM is assessed a license fee of $0.22 per contract to list
NDX.
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The Exchange's proposal to assess Professionals, Firms, and Non-NOM
Market Makers a $0.70 per contract Fee to Add Liquidity is reasonable
because the higher fees would enable the Exchange to reward Customers
that remove liquidity with rebates. The advantage of increased Customer
order flow benefits all market participants. The Exchange's proposal to
assess Professionals, Firms, and Non-NOM Market Makers a $0.70 per
contract Fee to Add Liquidity is equitable and not unfairly
discriminatory because all other market participants (Professionals,
Firms, and Non-NOM Market Makers), other than Customers and NOM Market
Makers which are distinguished above, would be assessed the same Fee to
Add Liquidity. Also, the Exchange believes it is reasonable, equitable
and not unfairly discriminatory to not offer a Rebate to Add Liquidity
to Professionals, Firms and Non-NOM Market Makers because these
participants do not bring the unique benefits that Customer order flow
provides the market nor do these participants have the obligations that
were described herein for NOM Market Makers.
The Exchange's proposal to assess all market participants except
Customers a $0.70 per contract Fee for Removing Liquidity is equitable
and not unfairly discriminatory because Professionals, Firms, NOM
Market Makers and Non-NOM Market Makers would be assessed the same Fee
for Removing Liquidity. Also, the Exchange believes the $0.70 per
contract Fees for Removing Liquidity are reasonable because the
Exchange currently pays a license fee \15\ to list NDX on NOM and is
seeking to recoup that fee and to pay the proposed $0.20 per contract
Rebate to Add Liquidity to Customers and NOM Market Makers in NDX. In
addition, the Exchange believes that these remove fees are within the
range of fees for removing liquidity assessed by other exchanges.\16\
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\15\ Id.
\16\ See BATS Exchange, Inc.'s Fee Schedule. Professional, Firm
and Market Maker orders are assessed a fee of $0.80 per contract to
remove liquidity from the BATS Options order book. Customer orders
are assessed a fee of $0.75 per contract to remove liquidity from
the BATS Options order book. BATS also offers liquidity rebates for
all other securities of $0.70 per contract for a Professional, Firm
or Market Maker order that adds liquidity to the BATS Options order
book and $0.75 per contract for a Customer order that adds liquidity
to the BATS Options order book. The Exchange is proposing to assess
Professional, Firms and Non-NOM Market Makers $0.70 per contract
fees to add and remove liquidity, but no rebates and assess
Customers and NOM Market Makers $0.65 per contact when trading
against a Customer or a $0.20 per contract rebate when trading
against a Professional, Firm, NOM Market Maker or Non-NOM Market
Maker.
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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. The
Exchange believes that the proposed fee and rebate scheme is
competitive and similar to other fees and rebates 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
NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. To the contrary,
NASDAQ has designed its fees and rebates to compete effectively for the
execution and routing of options contracts and to reduce the overall
cost to investors of options trading. The Exchange believes that the
proposed fee/rebate pricing structure would attract liquidity to and
benefit order interaction at the Exchange to the benefit of all market
participants.\17\
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\17\ See June 7, 2012 Email from Jonathan Cayne, Associate
General Counsel, The Nasdaq OMX Group, Inc. to Stephanie Mumford,
Special Counsel, Division of Trading and Markets, Securities and
Exchange Commission.
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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.\18\ 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.
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\18\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2012-068 on the subject line.
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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-2012-068. 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 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
10:00 a.m. and 3:00 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-2012-068 and should
be submitted on or before July 5, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14573 Filed 6-13-12; 8:45 am]
BILLING CODE 8011-01-P
