Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Its Excess Order Fee, 39773-39774 [2012-16372]

Download as PDF Federal Register / Vol. 77, No. 129 / Thursday, July 5, 2012 / Notices affiliated SRO’s oversight of NOS,23 combined with a non-affiliated SRO’s monitoring of NOS’s compliance with the Exchange’s rules and quarterly reporting to the Exchange, will help to protect the independence of the Exchange’s regulatory responsibilities with respect to NOS. The Commission also believes that the Exchange’s proposed amendments to PHLX Rule 985(b) are designed to ensure that NOS cannot use any information advantage it may have because of its affiliation with the Exchange. Furthermore, the Commission believes that the Exchange’s proposal to allow NOS to route options orders inbound to the Exchange from BX, on a pilot basis, will provide the Exchange and the Commission an opportunity to assess the impact of any conflicts of interest of allowing an affiliated member of the Exchange to route orders inbound to the Exchange and whether such affiliation provides an unfair competitive advantage. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,24 that the proposed rule change, as modified by Amendment No. 1 (SR–PHLX–2012–68), be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Kevin M. O’Neill, Deputy Secretary. Commission (‘‘Commission’’) a proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change NASDAQ proposes to institute an excess order fee. [sic] NASDAQ will implement the proposed change on July 2, 2012. The text of the proposed rule change is available at https:// nasdaq.cchwallstreet.com, at NASDAQ’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. BILLING CODE 8011–01–P A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 1. Purpose [FR Doc. 2012–16373 Filed 7–3–12; 8:45 am] [Release No. 34–67292; File No. SR– NASDAQ–2012–073] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Its Excess Order Fee June 28, 2012. TKELLEY on DSK3SPTVN1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 25, 2012, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) filed with the Securities and Exchange 23 This oversight will be accomplished through the 17d–2 Agreement between FINRA and the Exchange and the Regulatory Contract. See Notice, supra note 3, at 31054 n.12 and accompanying text. 24 15 U.S.C. 78s(b)(2). 25 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Mar<15>2010 16:48 Jul 03, 2012 Jkt 226001 NASDAQ recently submitted a proposed rule change to introduce an Excess Order Fee,3 aimed at reducing inefficient order entry practices of certain market participants that place excessive burdens on the systems of NASDAQ and its members and that may negatively impact the usefulness and life cycle cost of market data. The fee is scheduled to be implemented on July 2, 2012. In general, the determination of whether to impose the fee on a particular market participant identifier (‘‘MPID’’) is made by calculating the ratio between (i) entered orders, weighted by the distance of the order from the national best bid or offer (‘‘NBBO’’), and (ii) orders that execute in whole or in part. The fee is imposed on MPIDs that have an ‘‘Order Entry Ratio’’ of more than 100. 3 Securities Exchange Act Release No. 66951 (May 9, 2012), 77 FR 28647 (May 15, 2012) (SR– NASDAQ–2012–055). PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 39773 Through this proposed rule change, the Exchange is modifying the parameters of the fee slightly to provide that all calculations under the rule establishing the fee will be based on orders received by NASDAQ during regular market hours (generally, 9:30 a.m. to 4:00 p.m.) 4 and will exclude orders received at other times, even if they execute during regular market hours. NASDAQ is making the change because the concerns about inefficient order entry practices that have prompted the fee are generally not present with regard to trading activity outside of regular market hours, when volumes are light. NASDAQ is also concerned that lower execution rates outside of regular market hours may skew calculations under the rule, such that an MPID that is considered acceptably efficient during regular market hours would be required to pay a fee under the rule due to its activity outside of regular market hours. 2. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,5 in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,6 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, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. As originally proposed and as modified by this proposed rule change, NASDAQ believes that the Order Entry Fee is reasonable because it is designed to achieve improvements in the quality of displayed liquidity and market data that will benefit all market participants. In addition, although the level of the fee may theoretically be very high, the fee is reasonable because market participants may readily avoid the fee by making improvements in their order entry practices that reduce the number of orders they enter, bring the prices of their orders closer to the NBBO, and/or increase the percentage of their orders that execute. The proposed change to the fee is reasonable because it will reduce the likelihood of the fee being imposed on an MPID that is considered acceptably efficient during regular market hours, when the impact of 4 Regular market hours may be different in some circumstances, such as on the day after Thanksgiving, when regular market hours on all exchanges traditionally end at 1:00 p.m. 5 15 U.S.C. 78f. 6 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\05JYN1.SGM 05JYN1 39774 Federal Register / Vol. 77, No. 129 / Thursday, July 5, 2012 / Notices inefficient trading on NASDAQ and other market participants is highest. For similar reasons, the fee is consistent with an equitable allocation of fees, because although the fee may apply to only a small number of market participants, the fee would be applied to them in order to encourage better order entry practices that will benefit all market participants. Ideally, the fee will be applied to no one, because market participants will adjust their behavior in order to avoid the fee. The proposed change will increase the likelihood that the fee will not be imposed in unwarranted circumstances. Finally, NASDAQ believes that the fee is not unfairly discriminatory. Although the fee may apply to only a small number of market participants, it will be imposed because of the negative externalities that such market participants impose on others through inefficient order entry practices. The proposed modification to the fee is not unfairly discriminatory because although it will lessen the potential impact of the fee on MPIDs that are active outside of regular market hours, this change is rationally related to the fee’s purpose of promoting efficient trading practices in conditions where inefficiency may negatively impact NASDAQ and other market participants. B. Self-Regulatory Organization’s Statement on Burden on Competition TKELLEY on DSK3SPTVN1PROD with NOTICES 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. Specifically, NASDAQ believes that the fee will constrain market participants from pursuing certain inefficient and potentially abusive trading strategies. To the extent that this change may be construed as a burden on competition, NASDAQ believes that it is appropriate in order to further the purposes of Section 6(b)(5) of the Act.7 The proposed change will lessen any burden on competition by removing from consideration orders entered outside of regular market hours, when concerns about the impact of inefficient trading on NASDAQ and other market participants are diminished. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.8 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 printing in the Commission’s Public Reference Room 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 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–NASDAQ–2012–073, and should be submitted on or before July 26, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–16372 Filed 7–3–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67301; File No. SR– NASDAQ–2012–077] • 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–2012–073 on the subject line. Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Correcting Various NASDAQ Options Market Rules Paper Comments Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 2 thereunder, notice is hereby given that on June 26, 2012, The NASDAQ Stock Market LLC (‘‘NASDAQ’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II and III, below, which Items have been prepared by NASDAQ. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. • 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–2012–073. 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 June 28, 2012. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NASDAQ is filing with the Commission a proposal for the NASDAQ Options Market (‘‘NOM’’) to amend the following provisions: Chapter I, Section 3 to add additional exchanges to the list of those rules incorporated by reference; Chapter V, Section 3 to provide that market maker interest is cancelled during a halt; 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 7 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 16:48 Jul 03, 2012 8 15 Jkt 226001 PO 00000 U.S.C. 78s(b)(3)(a)(ii). [sic] Frm 00100 Fmt 4703 Sfmt 4703 E:\FR\FM\05JYN1.SGM 05JYN1

Agencies

[Federal Register Volume 77, Number 129 (Thursday, July 5, 2012)]
[Notices]
[Pages 39773-39774]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16372]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67292; File No. SR-NASDAQ-2012-073]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Its Excess Order Fee

June 28, 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 June 25, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II and 
III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ proposes to institute an excess order fee. [sic] NASDAQ will 
implement the proposed change on July 2, 2012. The text of the proposed 
rule change is available at https://nasdaq.cchwallstreet.com, at 
NASDAQ's principal office, and at the Commission's Public Reference 
Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item III 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
    NASDAQ recently submitted a proposed rule change to introduce an 
Excess Order Fee,\3\ aimed at reducing inefficient order entry 
practices of certain market participants that place excessive burdens 
on the systems of NASDAQ and its members and that may negatively impact 
the usefulness and life cycle cost of market data. The fee is scheduled 
to be implemented on July 2, 2012. In general, the determination of 
whether to impose the fee on a particular market participant identifier 
(``MPID'') is made by calculating the ratio between (i) entered orders, 
weighted by the distance of the order from the national best bid or 
offer (``NBBO''), and (ii) orders that execute in whole or in part. The 
fee is imposed on MPIDs that have an ``Order Entry Ratio'' of more than 
100.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 66951 (May 9, 2012), 77 
FR 28647 (May 15, 2012) (SR-NASDAQ-2012-055).
---------------------------------------------------------------------------

    Through this proposed rule change, the Exchange is modifying the 
parameters of the fee slightly to provide that all calculations under 
the rule establishing the fee will be based on orders received by 
NASDAQ during regular market hours (generally, 9:30 a.m. to 4:00 p.m.) 
\4\ and will exclude orders received at other times, even if they 
execute during regular market hours. NASDAQ is making the change 
because the concerns about inefficient order entry practices that have 
prompted the fee are generally not present with regard to trading 
activity outside of regular market hours, when volumes are light. 
NASDAQ is also concerned that lower execution rates outside of regular 
market hours may skew calculations under the rule, such that an MPID 
that is considered acceptably efficient during regular market hours 
would be required to pay a fee under the rule due to its activity 
outside of regular market hours.
---------------------------------------------------------------------------

    \4\ Regular market hours may be different in some circumstances, 
such as on the day after Thanksgiving, when regular market hours on 
all exchanges traditionally end at 1:00 p.m.
---------------------------------------------------------------------------

2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    As originally proposed and as modified by this proposed rule 
change, NASDAQ believes that the Order Entry Fee is reasonable because 
it is designed to achieve improvements in the quality of displayed 
liquidity and market data that will benefit all market participants. In 
addition, although the level of the fee may theoretically be very high, 
the fee is reasonable because market participants may readily avoid the 
fee by making improvements in their order entry practices that reduce 
the number of orders they enter, bring the prices of their orders 
closer to the NBBO, and/or increase the percentage of their orders that 
execute. The proposed change to the fee is reasonable because it will 
reduce the likelihood of the fee being imposed on an MPID that is 
considered acceptably efficient during regular market hours, when the 
impact of

[[Page 39774]]

inefficient trading on NASDAQ and other market participants is highest.
    For similar reasons, the fee is consistent with an equitable 
allocation of fees, because although the fee may apply to only a small 
number of market participants, the fee would be applied to them in 
order to encourage better order entry practices that will benefit all 
market participants. Ideally, the fee will be applied to no one, 
because market participants will adjust their behavior in order to 
avoid the fee. The proposed change will increase the likelihood that 
the fee will not be imposed in unwarranted circumstances. Finally, 
NASDAQ believes that the fee is not unfairly discriminatory. Although 
the fee may apply to only a small number of market participants, it 
will be imposed because of the negative externalities that such market 
participants impose on others through inefficient order entry 
practices. The proposed modification to the fee is not unfairly 
discriminatory because although it will lessen the potential impact of 
the fee on MPIDs that are active outside of regular market hours, this 
change is rationally related to the fee's purpose of promoting 
efficient trading practices in conditions where inefficiency may 
negatively impact NASDAQ and other market participants.

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. Specifically, 
NASDAQ believes that the fee will constrain market participants from 
pursuing certain inefficient and potentially abusive trading 
strategies. To the extent that this change may be construed as a burden 
on competition, NASDAQ believes that it is appropriate in order to 
further the purposes of Section 6(b)(5) of the Act.\7\ The proposed 
change will lessen any burden on competition by removing from 
consideration orders entered outside of regular market hours, when 
concerns about the impact of inefficient trading on NASDAQ and other 
market participants are diminished.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\8\ 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(a)(ii). [sic]
---------------------------------------------------------------------------

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-2012-073 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-2012-073. 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 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 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-NASDAQ-2012-073, and should be submitted on or before 
July 26, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16372 Filed 7-3-12; 8:45 am]
BILLING CODE 8011-01-P
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