Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees, 6386-6389 [2013-01984]
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6386
Federal Register / Vol. 78, No. 20 / Wednesday, January 30, 2013 / Notices
SECURITIES AND EXCHANGE
COMMISSION
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
[Release No. 34–68718; File No. SR–
NASDAQ–2013–010]
NASDAQ proposes to modify Chapter
XV, Section 2, entitled ‘‘NASDAQ
Options Market—Fees and Rebates,’’
which governs pricing for NASDAQ
members using the NASDAQ Options
Market (‘‘NOM’’), NASDAQ’s facility for
executing and routing standardized
equity and index options, to amend
Routing Fees.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on February 1, 2013.
The text of the proposed rule change
is provided in Exhibit 5. The text of the
proposed rule change is also 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.
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Routing Fees
January 24, 2013.
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 January
18, 2013, 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.
Exchange
Customer
mstockstill on DSK4VPTVN1PROD with
BATS Penny Pilot ............................................................................................
BATS Non-Penny Pilot ....................................................................................
BOX .................................................................................................................
BX Options Penny Pilot ...................................................................................
BX Options Non-Penny Pilot ...........................................................................
CBOE ...............................................................................................................
CBOE orders greater than 99 contracts in NDX, MNX ETFs and ETNs ........
C2 ....................................................................................................................
ISE (Standard) .................................................................................................
ISE Select Symbols * .......................................................................................
MIAX ................................................................................................................
NYSE Arca Penny Pilot ...................................................................................
NYSE Arca Non-Penny Pilot ...........................................................................
NYSE AMEX ....................................................................................................
PHLX (for all options other than PHLX Select Symbols) ................................
PHLX Select Symbols ** ...................................................................................
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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20:43 Jan 29, 2013
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to amend
the Routing Fees in Section 2(4) of
Chapter XV in order to recoup costs the
Exchange incurs for routing and
executing certain orders in equity
options to away markets.
Currently, the fees for routing
Customer, Firm, Market Maker and
Professional orders are as follows:
Firm
$0.55
0.86
0.11
0.11
0.11
0.11
0.29
0.55
0.11
0.35
0.11
0.55
0.90
0.11
0.11
0.11
$0.55
0.94
0.55
0.54
0.94
0.55
0.55
0.55
0.55
0.55
0.55
0.55
0.94
0.55
0.55
0.55
MM
Professional
$0.55
0.94
0.55
0.54
0.94
0.55
0.55
0.55
0.55
0.55
0.55
0.55
0.94
0.55
0.55
0.55
$0.55
0.94
0.31
0.54
0.94
0.41
N/A
0.55
0.31
0.44
0.36
0.55
0.90
0.31
0.31
0.55
Jkt 229001
the current Routing Fees located in
Section 2(4) of Chapter XV and instead
assess NOM Participants a fixed fee plus
the away market transaction fee as noted
below.
Today, the Exchange calculates
Routing Fees by assessing a fixed
Routing Fee of $0.11 per contract, which
is comprised of certain Exchange costs
related to routing orders to away
markets plus the away market’s
transaction fee. With respect to the fixed
costs, the Exchange incurs a fee when it
utilizes Nasdaq Options Services LLC
(‘‘NOS’’), a member of the Exchange and
the Exchange’s exclusive order router.3
Each time NOS routes an order to an
away market, NOS is charged a clearing
fee 4 and, in the case of certain
exchanges, a transaction fee is also
charged in certain symbols, which fees
are passed through to the Exchange. The
Exchange currently recoups clearing
and transaction charges incurred by the
Exchange as well as certain other costs
incurred by the Exchange when routing
to away markets, such as administrative
and technical costs associated with
operating NOS, membership fees at
away markets, Options Regulatory Fees
(‘‘ORFs’’) and technical costs associated
with routing options. With respect to
3 See NASDAQ Rules at Chapter VI, Section 11(e)
(Order Routing).
The Exchange proposes to adopt new
Routing Fees when routing and
executing orders in equity options to
BATS Exchange, Inc. (‘‘BATS’’), BOX
Options Exchange LLC (‘‘BOX’’), the
Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’), C2 Options
Exchange, Incorporated (‘‘C2’’),
International Securities Exchange, LLC
(‘‘ISE’’), the Miami International
Securities Exchange, LLC (‘‘MIAX’’),
NASDAQ Options Market (‘‘NOM’’),
NYSE Arca, Inc. (‘‘NYSE Arca’’), NYSE
MKT LLC (‘‘NYSE Amex’’) and
NASDAQ OMX PHLX LLC (‘‘Phlx’’).
The Exchange is proposing to eliminate
1 15
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
4 The Options Clearing Corporation (‘‘OCC’’)
assesses $0.01 per contract side.
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away market transaction fees, the
Exchange does not assess actual
transaction fees in all cases today, but
rather has limited fees in certain
circumstances. In those cases the
Exchange does not recover all of its
costs for routing to the away market.5
Today, the Exchange amends its
Routing Fees to reflect amendments to
away market transaction fees by filing
proposed rule changes. The Exchange
proposes to eliminate the current
Routing Fees and instead assess the
actual away market fee assessed by the
away exchange at the time that the order
was entered into the Exchange’s trading
system. This transaction fee would be
calculated on an order-by-order basis
since different away markets charge
different amounts.6 The Exchange
analyzed its clearing costs,7
administrative and technical costs
associated with operating NOS,
membership fees at away markets and
regulatory costs in determining the fixed
fee for routing. With respect to BATS,
BOX, C2, CBOE, ISE, MIAX, NYSE
Amex and NYSE Arca the Exchange
proposes to continue to assess $0.11 per
contract in addition to the away
market’s transaction fee.8 While this
proposal does not change the fixed cost
assessed to away markets other than
Phlx and BX Options, the Exchange
would assess the actual transaction fees
that are in place at the various away
markets and will no longer limit those
transaction fees as it does today in
certain circumstances.9 While clearing
costs have recently decreased,10 the
Exchange would continue to assess
$0.11 per contract because of other
increased costs. Specifically, several
exchanges have increased ORFs or
adopted ORFs and the Exchange
5 In some cases the Exchange filed a rule change
which noted that the Exchange would not assess the
actual transaction charge, but a lower amount
where the transaction fees at an away market were
higher than other markets.
6 This is similar to the methodology utilized by
ISE in assessing Routing Fees. See ISE’s Fee
Schedule.
7 OCC recently amended its clearing fee from
$0.03 per contract side to $0.01 per contract side.
See Securities Exchange Act Release No. 68025
(October 10, 2012), 77 FR 63398 (October 16, 2012)
(SR–OCC–2012–18).
8 The $0.11 per contract fixed fee would apply to
all options exchanges other than Phlx and BX. The
Exchange anticipates that if other options
exchanges are approved by the Commission after
the filing of this proposal, those exchanges would
be assessed the $0.11 per contract fee applicable to
‘‘all other options exchanges.’’ The Exchange
currently assesses $0.11 per contract for costs
incurred by the Exchange.
9 Today, the Exchange caps certain Routing Fees
at certain levels. For example, the Exchange caps
BATS, NYSE Arca and BX Options Routing Fees at
$0.94 per contract.
10 See note 7.
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proposes to assess the same fixed cost
Routing Fee for non-NASDAQ OMX
exchanges despite the lower clearing
fee.11
The Exchange also analyzed costs
related to routing to Phlx and BX
Options and determined to assess a
lower fee of $0.05 per contract as
compared to other away markets
because NOS is utilized by all three
exchanges to route orders.12 Phlx, BX
Options and NOM all utilize NOS
which lowers the cost of routing to
those markets as compared to other
away markets. In addition the fixed
costs are reduced because NOS is
owned and operated by NASDAQ OMX
and the three exchanges and NOS share
common technology and related
operational functions. The Exchange
proposes to assess a $0.05 per contract
fixed fee in addition to the away
market’s transaction fee to route to Phlx
and BX Options. This proposal would
reduce the fixed fees assessed today on
average to route to Phlx and BX Options
from $0.11 to $0.05 per contract.
For all Routing Fees, the transaction
fee is based on the away market’s
transaction fee or rebate for particular
market participants and in the case that
there is no transaction fee or rebate
assessed by the away market, the only
fee assessed would be the $0.05 or $0.11
per contract fixed fee assessed by the
Exchange to recoup its costs. The
Exchange proposes to pass along any
rebate paid by the away market where
there is such a rebate. Today, the
Exchange does not pass along rebates.
Any rebate available would be netted
against a fee assessed by the Exchange.
For example, if a Customer order is
routed to BOX, and BOX offers a
customer rebate of $0.20 per contract,
the Exchange would assess a $0.11 per
contract fixed fee which would net
against the rebate ($0.20 per contract in
this example). The market participant
for whom the Customer contract was
11 CBOE recently increased its ORF from $.0065
to $.0085 per contract. See Securities Exchange Act
Release No. 68480 (December 19, 2012), 77 FR
76119 (December 26, 2012) (SR–CBOE–2012–118).
C2 recently increased its ORF from $.0015 to $.002
per contract. See Securities Exchange Act Release
No. 68479 (December 19, 2012), 77 FR 76131
(December 26, 2012) (SR–C2–2012–040). NYSE
MKT LLC (‘‘NYSE Amex’’) recently increased its
ORF from $0.004 to $0.005 per contract. See
Securities Exchange Act Release No. 68183
(November 8, 2012), 77 FR 68186 (November 15,
2012) (SR–NYSEMKT–2012–54). NYSE Arca
recently increased its ORF from $0.004 to $0.005
per contract. See Securities Exchange Act Release
No. 68174 (November 7, 2012), 77 FR 67845
(November 14, 2012) (SR–NYSEArca–2012–118).
MIAX recently adopted an ORF of $0.0040 per
contract side. See SR–MIAX–2012–06 (not yet
published).
12 See Chapter VI, Section 11 of the NASDAQ and
BX Options Rules and Phlx Rule 1080(m)(iii)(A).
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6387
routed would receive a $0.09 per
contract rebate. Today the market
participant does not receive a rebate and
only pays the current Routing Fees.
As with all fees, the Exchange may
adjust these Routing Fees in response to
competitive conditions by filing a new
proposed rule change.
2. Statutory Basis
NASDAQ believes that the proposed
rule changes are consistent with the
provisions of Section 6 of the Act,13 in
general, and with Section 6(b)(4) of the
Act,14 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 NOM
operates or controls.
The Exchange believes that the
proposed Routing Fees are reasonable
because they seek to recoup costs that
are incurred by the Exchange when
routing Customer, Firm, Market Maker
and Professional orders to away markets
on behalf of members. Each destination
market’s transaction charge varies and
there is a cost incurred by the Exchange
when routing orders to away markets.
The costs to the Exchange include
clearing costs, administrative and
technical costs associated with
operating NOS, membership fees at
away markets, ORFs and technical costs
associated with routing options. The
Exchange believes that the proposed
Routing Fees would enable the
Exchange to recover the costs it incurs
to route orders to away markets in
addition to transaction fees assessed to
market participants for the execution of
Customer, Firm, Market Maker and
Professional orders by the away market.
Specifically, other options exchanges
have increased ORFs that are assessed
per transaction.15 The Exchange
believes that it is reasonable to recoup
these costs borne by the Exchange on
each transaction.
13 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
15 CBOE recently increased its ORF from $.0065
to $.0085 per contract. See Securities Exchange Act
Release No. 68480 (December 19, 2012), 77 FR
76119 (December 26, 2012) (SR–CBOE–2012–118).
C2 recently increased its ORF from $.0015 to $.002
per contract. See Securities Exchange Act Release
No. 68479 (December 19, 2012), 77 FR 76131
(December 26, 2012) (SR–C2–2012–040). NYSE
Amex recently increased its ORF from $0.004 to
$0.005 per contract. See Securities Exchange Act
Release No. 68183 (November 8, 2012), 77 FR 68186
(November 15, 2012) (SR–NYSEMKT–2012–54).
NYSE Arca recently increased its ORF from $0.004
to $0.005 per contract. See Securities Exchange Act
Release No. 68174 (November 7, 2012), 77 FR 67845
(November 14, 2012) (SR–NYSEArca–2012–118).
MIAX recently adopted an ORF of $0.0040 per
contract side. See SR–MIAX–2012–06 (not yet
published).
14 15
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Federal Register / Vol. 78, No. 20 / Wednesday, January 30, 2013 / Notices
In addition, the Exchange notes that it
would assess a fixed fee of $0.11 per
contract, as it does today, for costs
incurred by the Exchange with respect
to non-NASDAQ OMX exchanges. The
Exchange believes that the proposed fee
is reasonable because while the clearing
fee itself was lowered by OCC (from
$0.03 to $0.01 per contract side), other
fees, such as ORFs, have increased in
recent months. The Exchange, in
analyzing its actual costs, has
determined to continue to assess a $0.11
per contract fee to represent the overall
cost to the Exchange for technical,
administrative, clearing, regulatory,
compliance and other costs, in addition
to the transaction fee assessed by the
away market. Also, the Exchange will
assess the actual transaction fees that
are in place at the various away markets
and will no longer limit those
transaction fees as it does today in
certain circumstances. The Exchange
believes that it is reasonable for it to
recoup its actual costs associated with
routing orders to away markets. NOM
Participants would be entitled to receive
rebates offered by away markets with
this proposal, which rebates would net
against fees assessed by the Exchange
for routing orders. The Exchange
believes that the opportunity to collect
a rebate will reduce Routing Fees.
In addition, the Exchange believes
that it is equitable and not unfairly
discriminatory to assess a fixed cost of
$0.11 per contract, which is mostly
comprised of technology, infrastructure
and away market non-transaction fee
costs, to route orders to non-NASDAQ
OMX away markets because the
Exchange would be assessing an overall
lower fixed fee. While the clearing cost
was reduced, other fees have increased
and therefore the Exchange believes that
a $0.11 per contract fee continues to be
reasonable because it represents the cost
to route to non-NASDAQ OMX away
markets. The proposed $0.11 per
contract fixed fee would be assessed
uniformly on all market participants in
addition to the actual transaction fees
on all orders routed to non-NASDAQ
OMX markets.
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess a fixed cost of
$0.05 per contract to route orders to
NASDAQ OMX away markets (Phlx and
BX Options) because the cost, in terms
of actual cash outlays, to the Exchange
to route to those markets is lower. For
example, costs related to routing to Phlx
and BX Options are lower as compared
to other away markets because NOS is
utilized by all three exchanges to route
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Jkt 229001
orders.16 NOS and the three NASDAQ
OMX options markets have a common
data center and staff that are responsible
for the day-to-day operations of NOS.
Because the three exchanges are in a
common data center, Routing Fees are
reduced because costly expenses related
to, for example, telecommunication
lines to obtain connectivity are avoided
when routing orders in this instance.
The costs related to connectivity to
route orders to other NASDAQ OMX
exchanges are de minimis. When
routing orders to non-NASDAQ OMX
exchanges, the Exchange incurs costly
connectivity charges related to
telecommunication lines and other
related costs. The proposed fixed fee for
routing orders to non-NASDAQ OMX
exchanges is therefore increased as
compared to the fees for routing orders
to NASDAQ OMX exchanges (Phlx and
BX Options), $0.11 per contract versus
$0.05 per contract, respectively. The
proposed $0.05 per contract fixed fee
would be assessed uniformly on all
orders routed to NASDAQ OMX markets
in addition to the actual away market
transaction fee assessed by the
destination market. The Exchange also
believes that it is equitable and not
unfairly discriminatory for market
participants to receive rebates on orders
routed to away markets that pay rebates.
Today, the Exchange does not pay such
rebates when routing orders. The
Exchange would pay rebates offered by
away markets uniformly to market
participants when their orders are
routed to a destination market that
offers a rebate.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to pass along savings
realized by leveraging NASDAQ OMX’s
infrastructure and scale to market
participants when those orders are
routed to Phlx and BX Options.17 Orders
are routed to away markets in
accordance with Exchange rules based
on price.18 Market participants may
submit orders to the Exchange as
ineligible for routing or ‘‘DNR’’ to avoid
incurring the Routing Fees proposed
herein.19
16 See Chapter VI, Section 11 of the NASDAQ and
BX Options Rules and Phlx Rule 1080(m)(iii)(A).
17 Today, the Exchange assesses a $0.11 per
contract fixed fee for routing orders to Phlx and BX
Options. That fee is proposed to be reduced to a
$0.05 per contract fixed fee, which would be in
addition to the actual transaction fee assessed by
the away market.
18 See NASDAQ Rules at Chapter XII (Options
Order Protection and Locked and Crossed Market
Rules).
19 See NASDAQ Rules at Chapter VI, Section
11(e) (Order Routing).
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act. The Exchange
believes that the rule change would
allow the Exchange to recoup its costs
when routing orders designated as
available for routing by the market
participant. NOM Participants may
choose to mark the order as ineligible
for routing to avoid incurring these
fees.20 Today, other options exchanges
also assess similar fees to recoup costs
incurred when routing orders to away
markets. With respect to routing to Phlx
and BX Options at a lower cost as
compared to other away markets, the
Exchange does not believe that the
proposed amendments to increase those
fees, while maintaining the same fee
differential imposes a burden because
all market participants would be
assessed the same fees depending on the
away market. Also, the Exchange is
proposing to recoup costs incurred only
when members request the Exchange
route their orders to an away market.
The Exchange is passing along savings
realized by leveraging NASDAQ OMX’s
infrastructure and scale to market
participants when those orders are
routed to Phlx and BX Options and is
providing those saving to all market
participants. Finally, the Exchange
routes orders to away markets where the
Exchange’s disseminated bid or offer is
inferior to the national best bid (best
offer) price and based on price first.21
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.22 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,
20 See NASDAQ Rules at Chapter VI, Section
11(e) (Order Routing).
21 See NASDAQ Rules at Chapter XII (Options
Order Protection and Locked and Crossed Market
Rules).
22 15 U.S.C. 78s(b)(3)(A)(ii).
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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:
mstockstill on DSK4VPTVN1PROD with
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–2013–010 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–2013–010. 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 NASDAQ’s
principal office. 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–2013–010, and should be
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20:43 Jan 29, 2013
Jkt 229001
submitted on or before February 20,
2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–01984 Filed 1–29–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68724; File No. SR–NYSE–
2013–03]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending Rule
440B To Provide How the Trigger Price
Will Be Calculated if Trading Is
Interrupted Because of a Systems or
Technical Issue and Is Not Restored
During the Trading Day
January 24, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on January
10, 2013, New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. 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
Rule 440B to provide how the Trigger
Price will be calculated if trading is
interrupted because of a systems or
technical issue and is not restored
during the trading day. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.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
self-regulatory organization included
23 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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6389
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 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 440B to provide how the Trigger
Price 4 will be calculated if trading is
interrupted because of a systems or
technical issue and is not restored
during the trading day. Specifically, the
Exchange proposes to provide that if
trading in a covered security is
interrupted because of a systems or
technical issue and is not restored
during that trading day, the Exchange’s
determination of the Trigger Price shall
be based on the consolidated last sale
price for that security on the most recent
day on which the security traded.
The Exchange recently filed an
interim proposed rule change for Rule
440B(b) to provide that on November
12, 2012, the closing price for 216
Exchange-listed securities that did not
have a closing transaction on the
Exchange was the consolidated last sale
price available as of the end of regular
trading hours on November 12, 2012,
and that such closing price shall be the
Trigger Price for purposes of
determining whether a Short Sale Price
Test has been triggered pursuant to Rule
440B(c) on November 13, 2012.5 The
interim rule is in effect until the
Exchange has an opportunity to amend
its rules on a permanent basis. The
Exchange now proposes to establish a
rule provision that provides for how the
Trigger Price is determined when a
systems or technical issue prevents the
closing of the security at the end of
regular trading hours.
Rule 440B sets forth how the
Exchange implements the provisions of
Rule 201 of Regulation SHO (‘‘Rule
201’’) 6 under the Act which, if
triggered, imposes a restriction on the
prices at which securities may be sold
short (‘‘Short Sale Price Test’’). Among
4 Trigger Price is defined in Rule 440B(b). See
Rule 440B(b). Determination of Trigger Price is set
forth in Rule 440(c). See Rule 440B(c).
5 See Securities Exchange Act Release No. 68220
(November 13, 2012), 77 FR 69528 (November 19,
2012) (SR–NYSE–2012–66).
6 17 CFR 242.201.
E:\FR\FM\30JAN1.SGM
30JAN1
]]>Agencies
[Federal Register Volume 78, Number 20 (Wednesday, January 30, 2013)]
[Notices]
[Pages 6386-6389]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01984]
[[Page 6386]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68718; File No. SR-NASDAQ-2013-010]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Routing Fees
January 24, 2013.
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 January 18, 2013, 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 Substance
of the Proposed Rule Change
NASDAQ proposes to modify Chapter XV, Section 2, entitled ``NASDAQ
Options Market--Fees and Rebates,'' which governs pricing for NASDAQ
members using the NASDAQ Options Market (``NOM''), NASDAQ's facility
for executing and routing standardized equity and index options, to
amend Routing Fees.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on February 1, 2013.
The text of the proposed rule change is provided in Exhibit 5. The
text of the proposed rule change is also 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Routing Fees in Section
2(4) of Chapter XV in order to recoup costs the Exchange incurs for
routing and executing certain orders in equity options to away markets.
Currently, the fees for routing Customer, Firm, Market Maker and
Professional orders are as follows:
----------------------------------------------------------------------------------------------------------------
Exchange Customer Firm MM Professional
----------------------------------------------------------------------------------------------------------------
BATS Penny Pilot................................ $0.55 $0.55 $0.55 $0.55
BATS Non-Penny Pilot............................ 0.86 0.94 0.94 0.94
BOX............................................. 0.11 0.55 0.55 0.31
BX Options Penny Pilot.......................... 0.11 0.54 0.54 0.54
BX Options Non-Penny Pilot...................... 0.11 0.94 0.94 0.94
CBOE............................................ 0.11 0.55 0.55 0.41
CBOE orders greater than 99 contracts in NDX, 0.29 0.55 0.55 N/A
MNX ETFs and ETNs..............................
C2.............................................. 0.55 0.55 0.55 0.55
ISE (Standard).................................. 0.11 0.55 0.55 0.31
ISE Select Symbols \*\.......................... 0.35 0.55 0.55 0.44
MIAX............................................ 0.11 0.55 0.55 0.36
NYSE Arca Penny Pilot........................... 0.55 0.55 0.55 0.55
NYSE Arca Non-Penny Pilot....................... 0.90 0.94 0.94 0.90
NYSE AMEX....................................... 0.11 0.55 0.55 0.31
PHLX (for all options other than PHLX Select 0.11 0.55 0.55 0.31
Symbols).......................................
PHLX Select Symbols \**\........................ 0.11 0.55 0.55 0.55
----------------------------------------------------------------------------------------------------------------
The Exchange proposes to adopt new Routing Fees when routing and
executing orders in equity options to BATS Exchange, Inc. (``BATS''),
BOX Options Exchange LLC (``BOX''), the Chicago Board Options Exchange,
Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''),
International Securities Exchange, LLC (``ISE''), the Miami
International Securities Exchange, LLC (``MIAX''), NASDAQ Options
Market (``NOM''), NYSE Arca, Inc. (``NYSE Arca''), NYSE MKT LLC (``NYSE
Amex'') and NASDAQ OMX PHLX LLC (``Phlx''). The Exchange is proposing
to eliminate the current Routing Fees located in Section 2(4) of
Chapter XV and instead assess NOM Participants a fixed fee plus the
away market transaction fee as noted below.
Today, the Exchange calculates Routing Fees by assessing a fixed
Routing Fee of $0.11 per contract, which is comprised of certain
Exchange costs related to routing orders to away markets plus the away
market's transaction fee. With respect to the fixed costs, the Exchange
incurs a fee when it utilizes Nasdaq Options Services LLC (``NOS''), a
member of the Exchange and the Exchange's exclusive order router.\3\
Each time NOS routes an order to an away market, NOS is charged a
clearing fee \4\ and, in the case of certain exchanges, a transaction
fee is also charged in certain symbols, which fees are passed through
to the Exchange. The Exchange currently recoups clearing and
transaction charges incurred by the Exchange as well as certain other
costs incurred by the Exchange when routing to away markets, such as
administrative and technical costs associated with operating NOS,
membership fees at away markets, Options Regulatory Fees (``ORFs'') and
technical costs associated with routing options. With respect to
[[Page 6387]]
away market transaction fees, the Exchange does not assess actual
transaction fees in all cases today, but rather has limited fees in
certain circumstances. In those cases the Exchange does not recover all
of its costs for routing to the away market.\5\
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\3\ See NASDAQ Rules at Chapter VI, Section 11(e) (Order
Routing).
\4\ The Options Clearing Corporation (``OCC'') assesses $0.01
per contract side.
\5\ In some cases the Exchange filed a rule change which noted
that the Exchange would not assess the actual transaction charge,
but a lower amount where the transaction fees at an away market were
higher than other markets.
---------------------------------------------------------------------------
Today, the Exchange amends its Routing Fees to reflect amendments
to away market transaction fees by filing proposed rule changes. The
Exchange proposes to eliminate the current Routing Fees and instead
assess the actual away market fee assessed by the away exchange at the
time that the order was entered into the Exchange's trading system.
This transaction fee would be calculated on an order-by-order basis
since different away markets charge different amounts.\6\ The Exchange
analyzed its clearing costs,\7\ administrative and technical costs
associated with operating NOS, membership fees at away markets and
regulatory costs in determining the fixed fee for routing. With respect
to BATS, BOX, C2, CBOE, ISE, MIAX, NYSE Amex and NYSE Arca the Exchange
proposes to continue to assess $0.11 per contract in addition to the
away market's transaction fee.\8\ While this proposal does not change
the fixed cost assessed to away markets other than Phlx and BX Options,
the Exchange would assess the actual transaction fees that are in place
at the various away markets and will no longer limit those transaction
fees as it does today in certain circumstances.\9\ While clearing costs
have recently decreased,\10\ the Exchange would continue to assess
$0.11 per contract because of other increased costs. Specifically,
several exchanges have increased ORFs or adopted ORFs and the Exchange
proposes to assess the same fixed cost Routing Fee for non-NASDAQ OMX
exchanges despite the lower clearing fee.\11\
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\6\ This is similar to the methodology utilized by ISE in
assessing Routing Fees. See ISE's Fee Schedule.
\7\ OCC recently amended its clearing fee from $0.03 per
contract side to $0.01 per contract side. See Securities Exchange
Act Release No. 68025 (October 10, 2012), 77 FR 63398 (October 16,
2012) (SR-OCC-2012-18).
\8\ The $0.11 per contract fixed fee would apply to all options
exchanges other than Phlx and BX. The Exchange anticipates that if
other options exchanges are approved by the Commission after the
filing of this proposal, those exchanges would be assessed the $0.11
per contract fee applicable to ``all other options exchanges.'' The
Exchange currently assesses $0.11 per contract for costs incurred by
the Exchange.
\9\ Today, the Exchange caps certain Routing Fees at certain
levels. For example, the Exchange caps BATS, NYSE Arca and BX
Options Routing Fees at $0.94 per contract.
\10\ See note 7.
\11\ CBOE recently increased its ORF from $.0065 to $.0085 per
contract. See Securities Exchange Act Release No. 68480 (December
19, 2012), 77 FR 76119 (December 26, 2012) (SR-CBOE-2012-118). C2
recently increased its ORF from $.0015 to $.002 per contract. See
Securities Exchange Act Release No. 68479 (December 19, 2012), 77 FR
76131 (December 26, 2012) (SR-C2-2012-040). NYSE MKT LLC (``NYSE
Amex'') recently increased its ORF from $0.004 to $0.005 per
contract. See Securities Exchange Act Release No. 68183 (November 8,
2012), 77 FR 68186 (November 15, 2012) (SR-NYSEMKT-2012-54). NYSE
Arca recently increased its ORF from $0.004 to $0.005 per contract.
See Securities Exchange Act Release No. 68174 (November 7, 2012), 77
FR 67845 (November 14, 2012) (SR-NYSEArca-2012-118). MIAX recently
adopted an ORF of $0.0040 per contract side. See SR-MIAX-2012-06
(not yet published).
---------------------------------------------------------------------------
The Exchange also analyzed costs related to routing to Phlx and BX
Options and determined to assess a lower fee of $0.05 per contract as
compared to other away markets because NOS is utilized by all three
exchanges to route orders.\12\ Phlx, BX Options and NOM all utilize NOS
which lowers the cost of routing to those markets as compared to other
away markets. In addition the fixed costs are reduced because NOS is
owned and operated by NASDAQ OMX and the three exchanges and NOS share
common technology and related operational functions. The Exchange
proposes to assess a $0.05 per contract fixed fee in addition to the
away market's transaction fee to route to Phlx and BX Options. This
proposal would reduce the fixed fees assessed today on average to route
to Phlx and BX Options from $0.11 to $0.05 per contract.
---------------------------------------------------------------------------
\12\ See Chapter VI, Section 11 of the NASDAQ and BX Options
Rules and Phlx Rule 1080(m)(iii)(A).
---------------------------------------------------------------------------
For all Routing Fees, the transaction fee is based on the away
market's transaction fee or rebate for particular market participants
and in the case that there is no transaction fee or rebate assessed by
the away market, the only fee assessed would be the $0.05 or $0.11 per
contract fixed fee assessed by the Exchange to recoup its costs. The
Exchange proposes to pass along any rebate paid by the away market
where there is such a rebate. Today, the Exchange does not pass along
rebates. Any rebate available would be netted against a fee assessed by
the Exchange. For example, if a Customer order is routed to BOX, and
BOX offers a customer rebate of $0.20 per contract, the Exchange would
assess a $0.11 per contract fixed fee which would net against the
rebate ($0.20 per contract in this example). The market participant for
whom the Customer contract was routed would receive a $0.09 per
contract rebate. Today the market participant does not receive a rebate
and only pays the current Routing Fees.
As with all fees, the Exchange may adjust these Routing Fees in
response to competitive conditions by filing a new proposed rule
change.
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\13\ in general, and with
Section 6(b)(4) of the Act,\14\ 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 NOM operates or controls.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed Routing Fees are reasonable
because they seek to recoup costs that are incurred by the Exchange
when routing Customer, Firm, Market Maker and Professional orders to
away markets on behalf of members. Each destination market's
transaction charge varies and there is a cost incurred by the Exchange
when routing orders to away markets. The costs to the Exchange include
clearing costs, administrative and technical costs associated with
operating NOS, membership fees at away markets, ORFs and technical
costs associated with routing options. The Exchange believes that the
proposed Routing Fees would enable the Exchange to recover the costs it
incurs to route orders to away markets in addition to transaction fees
assessed to market participants for the execution of Customer, Firm,
Market Maker and Professional orders by the away market. Specifically,
other options exchanges have increased ORFs that are assessed per
transaction.\15\ The Exchange believes that it is reasonable to recoup
these costs borne by the Exchange on each transaction.
---------------------------------------------------------------------------
\15\ CBOE recently increased its ORF from $.0065 to $.0085 per
contract. See Securities Exchange Act Release No. 68480 (December
19, 2012), 77 FR 76119 (December 26, 2012) (SR-CBOE-2012-118). C2
recently increased its ORF from $.0015 to $.002 per contract. See
Securities Exchange Act Release No. 68479 (December 19, 2012), 77 FR
76131 (December 26, 2012) (SR-C2-2012-040). NYSE Amex recently
increased its ORF from $0.004 to $0.005 per contract. See Securities
Exchange Act Release No. 68183 (November 8, 2012), 77 FR 68186
(November 15, 2012) (SR-NYSEMKT-2012-54). NYSE Arca recently
increased its ORF from $0.004 to $0.005 per contract. See Securities
Exchange Act Release No. 68174 (November 7, 2012), 77 FR 67845
(November 14, 2012) (SR-NYSEArca-2012-118). MIAX recently adopted an
ORF of $0.0040 per contract side. See SR-MIAX-2012-06 (not yet
published).
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[[Page 6388]]
In addition, the Exchange notes that it would assess a fixed fee of
$0.11 per contract, as it does today, for costs incurred by the
Exchange with respect to non-NASDAQ OMX exchanges. The Exchange
believes that the proposed fee is reasonable because while the clearing
fee itself was lowered by OCC (from $0.03 to $0.01 per contract side),
other fees, such as ORFs, have increased in recent months. The
Exchange, in analyzing its actual costs, has determined to continue to
assess a $0.11 per contract fee to represent the overall cost to the
Exchange for technical, administrative, clearing, regulatory,
compliance and other costs, in addition to the transaction fee assessed
by the away market. Also, the Exchange will assess the actual
transaction fees that are in place at the various away markets and will
no longer limit those transaction fees as it does today in certain
circumstances. The Exchange believes that it is reasonable for it to
recoup its actual costs associated with routing orders to away markets.
NOM Participants would be entitled to receive rebates offered by away
markets with this proposal, which rebates would net against fees
assessed by the Exchange for routing orders. The Exchange believes that
the opportunity to collect a rebate will reduce Routing Fees.
In addition, the Exchange believes that it is equitable and not
unfairly discriminatory to assess a fixed cost of $0.11 per contract,
which is mostly comprised of technology, infrastructure and away market
non-transaction fee costs, to route orders to non-NASDAQ OMX away
markets because the Exchange would be assessing an overall lower fixed
fee. While the clearing cost was reduced, other fees have increased and
therefore the Exchange believes that a $0.11 per contract fee continues
to be reasonable because it represents the cost to route to non-NASDAQ
OMX away markets. The proposed $0.11 per contract fixed fee would be
assessed uniformly on all market participants in addition to the actual
transaction fees on all orders routed to non-NASDAQ OMX markets.
The Exchange believes that it is equitable and not unfairly
discriminatory to assess a fixed cost of $0.05 per contract to route
orders to NASDAQ OMX away markets (Phlx and BX Options) because the
cost, in terms of actual cash outlays, to the Exchange to route to
those markets is lower. For example, costs related to routing to Phlx
and BX Options are lower as compared to other away markets because NOS
is utilized by all three exchanges to route orders.\16\ NOS and the
three NASDAQ OMX options markets have a common data center and staff
that are responsible for the day-to-day operations of NOS. Because the
three exchanges are in a common data center, Routing Fees are reduced
because costly expenses related to, for example, telecommunication
lines to obtain connectivity are avoided when routing orders in this
instance. The costs related to connectivity to route orders to other
NASDAQ OMX exchanges are de minimis. When routing orders to non-NASDAQ
OMX exchanges, the Exchange incurs costly connectivity charges related
to telecommunication lines and other related costs. The proposed fixed
fee for routing orders to non-NASDAQ OMX exchanges is therefore
increased as compared to the fees for routing orders to NASDAQ OMX
exchanges (Phlx and BX Options), $0.11 per contract versus $0.05 per
contract, respectively. The proposed $0.05 per contract fixed fee would
be assessed uniformly on all orders routed to NASDAQ OMX markets in
addition to the actual away market transaction fee assessed by the
destination market. The Exchange also believes that it is equitable and
not unfairly discriminatory for market participants to receive rebates
on orders routed to away markets that pay rebates. Today, the Exchange
does not pay such rebates when routing orders. The Exchange would pay
rebates offered by away markets uniformly to market participants when
their orders are routed to a destination market that offers a rebate.
---------------------------------------------------------------------------
\16\ See Chapter VI, Section 11 of the NASDAQ and BX Options
Rules and Phlx Rule 1080(m)(iii)(A).
---------------------------------------------------------------------------
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to pass along savings realized by leveraging NASDAQ
OMX's infrastructure and scale to market participants when those orders
are routed to Phlx and BX Options.\17\ Orders are routed to away
markets in accordance with Exchange rules based on price.\18\ Market
participants may submit orders to the Exchange as ineligible for
routing or ``DNR'' to avoid incurring the Routing Fees proposed
herein.\19\
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\17\ Today, the Exchange assesses a $0.11 per contract fixed fee
for routing orders to Phlx and BX Options. That fee is proposed to
be reduced to a $0.05 per contract fixed fee, which would be in
addition to the actual transaction fee assessed by the away market.
\18\ See NASDAQ Rules at Chapter XII (Options Order Protection
and Locked and Crossed Market Rules).
\19\ See NASDAQ Rules at Chapter VI, Section 11(e) (Order
Routing).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act. The Exchange believes that the rule change
would allow the Exchange to recoup its costs when routing orders
designated as available for routing by the market participant. NOM
Participants may choose to mark the order as ineligible for routing to
avoid incurring these fees.\20\ Today, other options exchanges also
assess similar fees to recoup costs incurred when routing orders to
away markets. With respect to routing to Phlx and BX Options at a lower
cost as compared to other away markets, the Exchange does not believe
that the proposed amendments to increase those fees, while maintaining
the same fee differential imposes a burden because all market
participants would be assessed the same fees depending on the away
market. Also, the Exchange is proposing to recoup costs incurred only
when members request the Exchange route their orders to an away market.
The Exchange is passing along savings realized by leveraging NASDAQ
OMX's infrastructure and scale to market participants when those orders
are routed to Phlx and BX Options and is providing those saving to all
market participants. Finally, the Exchange routes orders to away
markets where the Exchange's disseminated bid or offer is inferior to
the national best bid (best offer) price and based on price first.\21\
---------------------------------------------------------------------------
\20\ See NASDAQ Rules at Chapter VI, Section 11(e) (Order
Routing).
\21\ See NASDAQ Rules at Chapter XII (Options Order Protection
and Locked and Crossed Market Rules).
---------------------------------------------------------------------------
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.\22\ 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,
[[Page 6389]]
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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2013-010 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-2013-010. 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 NASDAQ's principal office. 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-2013-010, and should
be submitted on or before February 20, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01984 Filed 1-29-13; 8:45 am]
BILLING CODE 8011-01-P
