Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend NASDAQ's Fees for Order Execution, 75232-75234 [2012-30546]
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Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68421; File No. SR–
NASDAQ–2012–135]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
NASDAQ’s Fees for Order Execution
December 13, 2012.
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 November
30, 2012, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III, below, which Items
have been prepared by 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 the Substance
of the Proposed Rule Change
The NASDAQ Stock Market LLC
proposes changes to NASDAQ’s fees for
order execution. While changes
pursuant to this proposal are effective
upon filing, the Exchange will
implement the proposed rule on
December 3, 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
sroberts on DSK5SPTVN1PROD with
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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Jkt 229001
Second, NASDAQ is proposing a
discounted execution fee of $0.0028 per
share executed for the following
securities (‘‘Designated Securities’’):
1. Purpose
NASDAQ currently charges $0.0030
per share executed with respect to all
orders for securities priced at $1 or more
per share that execute in the NASDAQ
Market Center. In this proposed rule
change, NASDAQ is proposing two
specific discounts from this fee.3 First,
if a member enters Market-on-Close
(‘‘MOC’’) and/or Limit-on-Close
(‘‘LOC’’) orders that execute in the
NASDAQ Closing Cross, and such
orders represent more than 0.06% of the
total consolidated volume reported to
all consolidated transaction reporting
plans by all exchanges and trade
reporting facilities (‘‘Consolidated
Volume’’) during the month, the
member would pay a fee of $0.0029 per
share executed with respect to its orders
that execute in the NASDAQ Market
Center during the month.4 NASDAQ is
introducing the discount because it
believes that members that participate
in the NASDAQ Closing Cross to a
significant extent through the use of
MOC and/or LOC orders are frequently
acting on behalf of institutional investor
customers. At present, such members
may be giving NASDAQ lower relative
priority in their order routing decisions
due to its relatively high fees for
accessing liquidity, as compared with
lower-cost exchanges. As a result,
liquidity providers on NASDAQ may
receive larger orders that have already
attempted to access liquidity elsewhere,
such that the order is more likely to
have an impact on the price of the stock.
By lowering fees for these members,
NASDAQ hopes to encourage them to
give greater priority to NASDAQ in their
routing decisions, thereby lowering
their cost and improving the execution
experience of liquidity providers.
NASDAQ also hopes to encourage
greater use of its Closing Cross through
this pricing incentive. NASDAQ further
notes that the New York Stock Exchange
(‘‘NYSE’’) currently offers general
pricing incentives to members that make
use of its closing process to a specified
extent.5
BAC Bank of America Corporation
DIA SPDR Dow Jones Industrial Average
ETF
EEM iShares MSCI Emerging Markets Index
ETF
F Ford Motor Co.
GE General Electric Company
GEN GenOn Energy, Inc.
HPQ Hewlett-Packard Company
INTC Intel Corporation
IWM iShares Russell 2000 Index ETF
MSFT Microsoft Corporation
NOK Nokia Corporation
QQQ Powershares QQQ ETF
S Sprint Nextel Corp.
SPY SPDR S&P 500 ETF
TZA Direxion Daily Small Cap Bear 3X
Shares ETF
VXX iPath S&P 500 VIX ST Futures ETN
XLF Financial Select Sector SPDR ETF
YHOO Yahoo! Inc.
3 NASDAQ is also making conforming changes to
relocate the placement of the definitions of ‘‘MPID’’
and ‘‘Consolidated Volume’’ in Rule 7018.
4 Unless a lower rate applies. For example, an
order subject to the discount for Designated
Securities described below would pay the lower
rate.
5 Securities Exchange Act Release No. 68150
(November 5, 2012), 77 FR 67431 (November 9,
2012) (SR–NYSE–2012–56); Securities Exchange
Act Release No. 68021 (October 9, 2012), 77 FR
63406 (October 16, 2012) (SR–NYSE–2012–50).
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
The discounted fee would apply to all
orders in Designated Securities entered
through a market participant identifier
(‘‘MPID’’) through which a member
accesses, provides, or routes shares of
liquidity that represent more than
0.25% of Consolidated Volume during
the month, including a daily average
volume of at least 2 million shares of
liquidity provided. The Designated
Securities were selected based on
analysis of the extent to which (i)
NASDAQ generally has a strong quote
in the security, in terms of size and time
at the national best bid or offer
(‘‘NBBO’’), but (ii) NASDAQ’s share of
executions in the security has declined.
By lowering the fee for accessing
liquidity in these securities, NASDAQ
hopes to encourage members to give
greater priority to NASDAQ in their
routing decisions, thereby lowering
their cost and improving the execution
experience of liquidity providers in
Designated Securities. In order to
qualify for the discount, members must
demonstrate a commitment to regular
participation in the NASDAQ Market
Center by reaching relatively modest
usage levels (shares accessed, provided
or routed representing 0.25% of
Consolidated Volume), including an
average daily volume of 2 million or
more shares of liquidity provided.
Through this requirement, NASDAQ
will minimize the likelihood of offering
the discount to members that engage
solely in opportunistic trading without
providing liquidity. NASDAQ believes
that this will, in turn, increase the
likelihood that offering the pricing
incentive will increase NASDAQ’s
market quality in Designated Securities.
NASDAQ further notes that NYSE and
NYSEArca currently offer pricing
E:\FR\FM\19DEN1.SGM
19DEN1
Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
incentives that are limited to certain
designated securities.6
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2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,7 in
general, and with Sections 6(b)(4) and
6(b)(5) of the Act,8 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.
Specifically, NASDAQ believes that
the proposal to introduce a pricing
incentive for members that achieve
certain participation levels in the
NASDAQ Closing Cross is reasonable
because it will result in a reduction of
fees below the levels currently in effect,
which in turn are consistent with the
requirements of Rule 610 under
Regulation NMS 9 applicable to access
fees. The proposal is consistent with an
equitable allocation of fees and not
unfairly discriminatory because it will
reduce fees to members that NASDAQ
believes are generally acting on behalf of
institutional investors, and NASDAQ
believes that drawing the orders of such
members to NASDAQ will be beneficial
to other market participants.
Specifically, by encouraging such
members to route orders to NASDAQ
sooner, the pricing change is intended
to benefit liquidity providers by
allowing them to achieve more frequent
executions under conditions where the
execution of their posted liquidity is
less likely to have a negative impact on
the price of the security being traded. In
addition, the change is intended to
increase the proportion of orders in
NASDAQ that reflect long-term trading
interest, rather than opportunistic
trading strategies. Accordingly, although
the fee reduction applies only to
members with certain characteristics, it
is equitable and not unfairly
discriminatory because it is intended to
encourage trading behavior that is
beneficial to the market as a whole. The
discount is also not unfairly
discriminatory because an appreciable
number of members are expected to
qualify for it based on current trading
volumes, and more may qualify by
6 Securities Exchange Act Release No. 68021
(October 9, 2012), 77 FR 63406 (October 16, 2012)
(SR–NYSE–2012–50); Securities Exchange Act
Release No. 67986 (October 4, 2012), 77 FR 61803
(October 11, 2012) (SR–NYSEArca–2012–104).
7 15 U.S.C. 78f.
8 15 U.S.C. 78f(b)(4) and (5).
9 17 CFR 242.610.
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increasing their participation in
NASDAQ.
Similarly, NASDAQ believes that the
proposal to introduce a pricing
incentive for Designated Securities is
reasonable because it will result in a
reduction of fees below the levels
currently in effect, which in turn are
consistent with the requirements of Rule
610 under Regulation NMS 10 applicable
to access fees. The proposal is
consistent with an equitable allocation
of fees and not unfairly discriminatory
because it will reduce fees for members
that have demonstrated a commitment
to regular participation in the NASDAQ
Market Center through reaching
specified levels of overall usage and
liquidity provision. Incentives focused
on the members that provide liquidity
are prevalent in securities markets
because higher levels of liquidity
provision aid price discovery and
dampen volatility. In addition, the focus
of the incentive on Designated
Securities is equitable and not
unreasonably discriminatory because,
despite strong quotes in terms of size
and time at the inside, NASDAQ’s share
of executions in these securities has
declined, thereby risking the
willingness of members to continue to
offer liquidity at current levels. By
providing an incentive for members to
access NASDAQ’s quote in these
securities, the price change will benefit
liquidity providers as well as liquidity
accessors. The discount is also not
unfairly discriminatory because an
appreciable number of members are
expected to qualify for it based on
current trading volumes, and more may
qualify by increasing their participation
in NASDAQ.
Finally, NASDAQ notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive. In such an environment,
NASDAQ must continually adjust its
fees to remain competitive with other
exchanges and with alternative trading
systems that have been exempted from
compliance with the statutory standards
applicable to exchanges. NASDAQ
believes that the proposed rule change
reflects this competitive environment
because it lowers fees for members
whose trading activity is likely to
reinforce incentives for other members
to provide liquidity at NASDAQ.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule change will result in any
10 Id.
PO 00000
Frm 00129
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
Because the market for order execution
is extremely competitive, members may
readily opt to disfavor NASDAQ’s
execution services if they believe that
alternatives offer them better value. By
reducing fees, the proposal is a
manifestation of the continued intense
level of competition in the market for
order execution.
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.11 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–2012–135 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–2012–135. This
file number should be included on the
11 15
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E:\FR\FM\19DEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
19DEN1
75234
Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
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
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–2012–135, and should be
submitted on or before January 9, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–30546 Filed 12–18–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68425; File No. SR–BOX–
2012–021]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Extend
the Penny Pilot Program
sroberts on DSK5SPTVN1PROD with
December 13, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b-4 thereunder,2
notice is hereby given that on November
30, 2012, BOX Options Exchange LLC
(the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
12 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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16:35 Dec 18, 2012
Jkt 229001
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6)(iii)
thereunder,4 which renders the proposal
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
BOX Options Exchange LLC (the
‘‘Exchange’’) proposes to amend Rule
7260 (Penny Pilot Program) to extend,
through June 30, 2013, the pilot program
that permits certain classes to be quoted
in penny increments (‘‘Penny Pilot
Program’’). The text of the proposed rule
change is available from the principal
office of the Exchange, on the
Exchange’s Internet Web site at https://
boxexchange.com, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to extend the
effective time period of the Penny Pilot
Program that is currently scheduled to
expire on December 31, 2012, for an
additional six months, through June 30,
2013.5 The Penny Pilot Program permits
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii).
5 The Penny Pilot Program has been in effect on
the Exchange since its inception in May 2012. See
Securities Exchange Act Release No. 66871 (April
27, 2012) 77 FR 26323 (May 3, 2012) (File No. 10–
206, In the Matter of the Application of BOX
Options Exchange LLC for Registration as a
National Securities Exchange Findings, Opinion,
and Order of the Commission) and 67328 (June 29,
2012) 77 FR 40123 (July 6, 2012) (SR–BOX–2012–
4 17
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
certain classes to be quoted in penny
increments. The minimum price
variation for all classes included in the
Penny Pilot Program, except for the
QQQQs, SPY and IWM, will continue to
be $0.01 for all quotations in option
series that are quoted at less than $3 per
contract and $0.05 for all quotations in
option series that are quoted at $3 per
contract or greater. The QQQQs, SPY
and IWM, will continue to be quoted in
$0.01 increments for all options series.
The Exchange may replace any Pilot
Program classes that have been delisted
on the second trading day following
January 1, 2013. The replacement
classes will be selected based on trading
activity for the six month period
beginning June 1, 2012, and ending
November 30, 2012. The Exchange will
employ the same parameters to
prospective replacement classes as
approved and applicable under the Pilot
Program, including the exclusion of
high-priced underlying securities. The
Exchange will distribute a Regulatory
Circular notifying Participants which
replacement classes shall be included in
the Penny Pilot Program.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the Act,6
in general, and Section 6(b)(5) of the
Act,7 in particular, in that it is designed
to foster cooperation and coordination
with persons engaged in regulating,
clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism for a free and open market
and a national market system and, in
general, to protect investors and the
public interest. In particular, the
proposed extension will allow the
Penny Pilot Program to remain in effect
without interruption.
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 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
No written comments were either
solicited or received.
007). The extension of the effective date is the only
change to the Penny Pilot Program being proposed
at this time.
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
E:\FR\FM\19DEN1.SGM
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]]>Agencies
[Federal Register Volume 77, Number 244 (Wednesday, December 19, 2012)]
[Notices]
[Pages 75232-75234]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30546]
[[Page 75232]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68421; File No. SR-NASDAQ-2012-135]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend NASDAQ's Fees for Order Execution
December 13, 2012.
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 November 30, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The NASDAQ Stock Market LLC proposes changes to NASDAQ's fees for
order execution. While changes pursuant to this proposal are effective
upon filing, the Exchange will implement the proposed rule on December
3, 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 currently charges $0.0030 per share executed with respect to
all orders for securities priced at $1 or more per share that execute
in the NASDAQ Market Center. In this proposed rule change, NASDAQ is
proposing two specific discounts from this fee.\3\ First, if a member
enters Market-on-Close (``MOC'') and/or Limit-on-Close (``LOC'') orders
that execute in the NASDAQ Closing Cross, and such orders represent
more than 0.06% of the total consolidated volume reported to all
consolidated transaction reporting plans by all exchanges and trade
reporting facilities (``Consolidated Volume'') during the month, the
member would pay a fee of $0.0029 per share executed with respect to
its orders that execute in the NASDAQ Market Center during the
month.\4\ NASDAQ is introducing the discount because it believes that
members that participate in the NASDAQ Closing Cross to a significant
extent through the use of MOC and/or LOC orders are frequently acting
on behalf of institutional investor customers. At present, such members
may be giving NASDAQ lower relative priority in their order routing
decisions due to its relatively high fees for accessing liquidity, as
compared with lower-cost exchanges. As a result, liquidity providers on
NASDAQ may receive larger orders that have already attempted to access
liquidity elsewhere, such that the order is more likely to have an
impact on the price of the stock. By lowering fees for these members,
NASDAQ hopes to encourage them to give greater priority to NASDAQ in
their routing decisions, thereby lowering their cost and improving the
execution experience of liquidity providers. NASDAQ also hopes to
encourage greater use of its Closing Cross through this pricing
incentive. NASDAQ further notes that the New York Stock Exchange
(``NYSE'') currently offers general pricing incentives to members that
make use of its closing process to a specified extent.\5\
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\3\ NASDAQ is also making conforming changes to relocate the
placement of the definitions of ``MPID'' and ``Consolidated Volume''
in Rule 7018.
\4\ Unless a lower rate applies. For example, an order subject
to the discount for Designated Securities described below would pay
the lower rate.
\5\ Securities Exchange Act Release No. 68150 (November 5,
2012), 77 FR 67431 (November 9, 2012) (SR-NYSE-2012-56); Securities
Exchange Act Release No. 68021 (October 9, 2012), 77 FR 63406
(October 16, 2012) (SR-NYSE-2012-50).
---------------------------------------------------------------------------
Second, NASDAQ is proposing a discounted execution fee of $0.0028
per share executed for the following securities (``Designated
Securities''):
BAC Bank of America Corporation
DIA SPDR Dow Jones Industrial Average ETF
EEM iShares MSCI Emerging Markets Index ETF
F Ford Motor Co.
GE General Electric Company
GEN GenOn Energy, Inc.
HPQ Hewlett-Packard Company
INTC Intel Corporation
IWM iShares Russell 2000 Index ETF
MSFT Microsoft Corporation
NOK Nokia Corporation
QQQ Powershares QQQ ETF
S Sprint Nextel Corp.
SPY SPDR S&P 500 ETF
TZA Direxion Daily Small Cap Bear 3X Shares ETF
VXX iPath S&P 500 VIX ST Futures ETN
XLF Financial Select Sector SPDR ETF
YHOO Yahoo! Inc.
The discounted fee would apply to all orders in Designated
Securities entered through a market participant identifier (``MPID'')
through which a member accesses, provides, or routes shares of
liquidity that represent more than 0.25% of Consolidated Volume during
the month, including a daily average volume of at least 2 million
shares of liquidity provided. The Designated Securities were selected
based on analysis of the extent to which (i) NASDAQ generally has a
strong quote in the security, in terms of size and time at the national
best bid or offer (``NBBO''), but (ii) NASDAQ's share of executions in
the security has declined. By lowering the fee for accessing liquidity
in these securities, NASDAQ hopes to encourage members to give greater
priority to NASDAQ in their routing decisions, thereby lowering their
cost and improving the execution experience of liquidity providers in
Designated Securities. In order to qualify for the discount, members
must demonstrate a commitment to regular participation in the NASDAQ
Market Center by reaching relatively modest usage levels (shares
accessed, provided or routed representing 0.25% of Consolidated
Volume), including an average daily volume of 2 million or more shares
of liquidity provided. Through this requirement, NASDAQ will minimize
the likelihood of offering the discount to members that engage solely
in opportunistic trading without providing liquidity. NASDAQ believes
that this will, in turn, increase the likelihood that offering the
pricing incentive will increase NASDAQ's market quality in Designated
Securities. NASDAQ further notes that NYSE and NYSEArca currently offer
pricing
[[Page 75233]]
incentives that are limited to certain designated securities.\6\
---------------------------------------------------------------------------
\6\ Securities Exchange Act Release No. 68021 (October 9, 2012),
77 FR 63406 (October 16, 2012) (SR-NYSE-2012-50); Securities
Exchange Act Release No. 67986 (October 4, 2012), 77 FR 61803
(October 11, 2012) (SR-NYSEArca-2012-104).
---------------------------------------------------------------------------
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\7\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4) and (5).
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Specifically, NASDAQ believes that the proposal to introduce a
pricing incentive for members that achieve certain participation levels
in the NASDAQ Closing Cross is reasonable because it will result in a
reduction of fees below the levels currently in effect, which in turn
are consistent with the requirements of Rule 610 under Regulation NMS
\9\ applicable to access fees. The proposal is consistent with an
equitable allocation of fees and not unfairly discriminatory because it
will reduce fees to members that NASDAQ believes are generally acting
on behalf of institutional investors, and NASDAQ believes that drawing
the orders of such members to NASDAQ will be beneficial to other market
participants. Specifically, by encouraging such members to route orders
to NASDAQ sooner, the pricing change is intended to benefit liquidity
providers by allowing them to achieve more frequent executions under
conditions where the execution of their posted liquidity is less likely
to have a negative impact on the price of the security being traded. In
addition, the change is intended to increase the proportion of orders
in NASDAQ that reflect long-term trading interest, rather than
opportunistic trading strategies. Accordingly, although the fee
reduction applies only to members with certain characteristics, it is
equitable and not unfairly discriminatory because it is intended to
encourage trading behavior that is beneficial to the market as a whole.
The discount is also not unfairly discriminatory because an appreciable
number of members are expected to qualify for it based on current
trading volumes, and more may qualify by increasing their participation
in NASDAQ.
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\9\ 17 CFR 242.610.
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Similarly, NASDAQ believes that the proposal to introduce a pricing
incentive for Designated Securities is reasonable because it will
result in a reduction of fees below the levels currently in effect,
which in turn are consistent with the requirements of Rule 610 under
Regulation NMS \10\ applicable to access fees. The proposal is
consistent with an equitable allocation of fees and not unfairly
discriminatory because it will reduce fees for members that have
demonstrated a commitment to regular participation in the NASDAQ Market
Center through reaching specified levels of overall usage and liquidity
provision. Incentives focused on the members that provide liquidity are
prevalent in securities markets because higher levels of liquidity
provision aid price discovery and dampen volatility. In addition, the
focus of the incentive on Designated Securities is equitable and not
unreasonably discriminatory because, despite strong quotes in terms of
size and time at the inside, NASDAQ's share of executions in these
securities has declined, thereby risking the willingness of members to
continue to offer liquidity at current levels. By providing an
incentive for members to access NASDAQ's quote in these securities, the
price change will benefit liquidity providers as well as liquidity
accessors. The discount is also not unfairly discriminatory because an
appreciable number of members are expected to qualify for it based on
current trading volumes, and more may qualify by increasing their
participation in NASDAQ.
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\10\ Id.
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Finally, NASDAQ notes that it operates in a highly competitive
market in which market participants can readily favor competing venues
if they deem fee levels at a particular venue to be excessive. In such
an environment, NASDAQ must continually adjust its fees to remain
competitive with other exchanges and with alternative trading systems
that have been exempted from compliance with the statutory standards
applicable to exchanges. NASDAQ believes that the proposed rule change
reflects this competitive environment because it lowers fees for
members whose trading activity is likely to reinforce incentives for
other members to provide liquidity at NASDAQ.
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. Because the market
for order execution is extremely competitive, members may readily opt
to disfavor NASDAQ's execution services if they believe that
alternatives offer them better value. By reducing fees, the proposal is
a manifestation of the continued intense level of competition in the
market for order execution.
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.\11\ 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.
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\11\ 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-2012-135 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-2012-135. This
file number should be included on the
[[Page 75234]]
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 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-2012-135, and should be submitted on or before
January 9, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30546 Filed 12-18-12; 8:45 am]
BILLING CODE 8011-01-P
