Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Fees and Rebates for Mini Options, 19549-19552 [2013-07475]
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Federal Register / Vol. 78, No. 62 / Monday, April 1, 2013 / Notices
annually, to determine whether the
purchases were influenced by the
investment by the Investing Fund in the
Fund. The Board will consider, among
other things: (a) Whether the purchases
were consistent with the investment
objectives and policies of the Fund; (b)
how the performance of securities
purchased in an Affiliated Underwriting
compares to the performance of
comparable securities purchased during
a comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index; and (c)
whether the amount of securities
purchased by the Fund in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board will take any appropriate actions
based on its review, including, if
appropriate, the institution of
procedures designed to assure that
purchases of securities in Affiliated
Underwritings are in the best interest of
shareholders of the Fund.
8. Each Fund will maintain and
preserve permanently in an easily
accessible place a written copy of the
procedures described in the preceding
condition, and any modifications to
such procedures, and will maintain and
preserve for a period of not less than six
years from the end of the fiscal year in
which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in Affiliated Underwritings
once an investment by an Investing
Fund in the securities of the Fund
exceeds the limit of section
12(d)(1)(A)(i) of the Act, setting forth
from whom the securities were
acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the Board’s determinations were made.
9. Before investing in a Fund in
excess of the limit in section
12(d)(1)(A), an Investing Fund will
execute a Participation Agreement with
the Fund stating, without limitation,
that their respective boards of directors
or trustees and their investment
advisers, or Trustee and Sponsor, as
applicable, understand the terms and
conditions of the order, and agree to
fulfill their responsibilities under the
order. At the time of its investment in
Shares of a Fund in excess of the limit
in section 12(d)(1)(A)(i), an Investing
Fund will notify the Fund of the
investment. At such time, the Investing
Fund will also transmit to the Fund a
list of the names of each Investing Fund
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Affiliate and Underwriting Affiliate. The
Investing Fund will notify the Fund of
any changes to the list as soon as
reasonably practicable after a change
occurs. The Fund and the Investing
Fund will maintain and preserve a copy
of the order, the Participation
Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
10. Before approving any advisory
contract under section 15 of the Act, the
board of directors or trustees of each
Investing Management Company,
including a majority of the disinterested
directors or trustees, will find that the
advisory fees charged under such
contract are based on services provided
that will be in addition to, rather than
duplicative of, the services provided
under the advisory contract(s) of any
Fund in which the Investing
Management Company may invest.
These findings and their basis will be
recorded fully in the minute books of
the appropriate Investing Management
Company.
11. Any sales charges and/or service
fees charged with respect to shares of an
Investing Fund will not exceed the
limits applicable to a fund of funds as
set forth in NASD Conduct Rule 2830.
12. No Fund relying on the section
12(d)(1) Relief will acquire securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent permitted by exemptive
relief from the Commission permitting
the Fund to purchase shares of other
investment companies for short-term
cash management purposes.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–07415 Filed 3–29–13; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, April 4, 2013 at 3:45 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
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staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Paredes, as duty
officer, voted to consider the items
listed for the Closed Meeting in a closed
session.
The subject matter of the Closed
Meeting will be:
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings;
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: March 28, 2013.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–07637 Filed 3–28–13; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69236; File No. SR–
NASDAQ–2013–049]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Fees and Rebates for Mini Options
March 26, 2013.
BILLING CODE 8011–01–P
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19549
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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 March
15, 2013, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 78, No. 62 / Monday, April 1, 2013 / Notices
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 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 establish fees and rebates for the
option contracts overlying 10 shares of
a security (‘‘Mini Options’’) applicable
to NASDAQ members using NOM.3
The text of the proposed rule change
is available at https://
nasdaq.cchwallstreet.com/, at the
Exchange’s principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposal is to
modify Chapter XV, Section 2, entitled
‘‘NASDAQ Options Market—Fees and
Rebates,’’ to establish fees and rebates
for Mini Options applicable to NASDAQ
members using NOM.
Specifically, the Exchange is
proposing to assess market participants
on a per trade basis the following fees
and rebates on Mini Options:
Customer
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Rebate to Add Liquidity ...............................................................................................................
Fee to Remove Liquidity ..............................................................................................................
The Exchange believes that the $0.030
and $0.015 rebate per trade for
Customers and NOM Market Makers,
respectively, should encourage these
market participants to trade Mini
Options on NOM and serves as a means
to incentivize order flow and to promote
this new infant product for trading on
NOM. The Exchange is not offering at
this time any rebate per trade to
Professionals, Firms, Broker/Dealers, or
Non-NOM Market Makers.
The Fee to Remove Liquidity for all
market participants will be $0.049 on a
per trade basis. The Exchange believes
that this is an equitable allocation of
reasonable fees since the Exchange is
assessing all market participants the
same rate to transact trades in Mini
Options.
On a per trade basis, the Rebate to
Add Liquidity or Fee to Remove
Liquidity will be rounded to the nearest
$0.01 using standard rounding rules.
For example, a NOM Market Maker
adding liquidity is contra to a Customer
removing liquidity for seven contracts.
The NOM Market Maker’s total Rebate
to Add Liquidity for this transaction
will be $0.105 rounded to $0.11 and the
Customer will be assessed $0.343
rounded to $0.34.
Additionally, Mini Options volume
will not count toward the Penny Pilot
and Non-Penny pilot tiers, where
applicable.
3 See Securities Exchange Act Release No. 68720
(Jan. 24, 2013), 78 FR 6382 (Jan. 30, 2013).
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While the changes to the NOM rules
pursuant to this proposal are effective
upon filing, the Exchange has
designated these changes to be operative
on March 18, 2013.
2. Statutory Basis
The Exchange believes that its
proposal to amend its rules is consistent
with Section 6(b) of the Act 4 in general,
and furthers the objectives of Sections
6(b)(4) of the Act 5 in particular, in that
it is an equitable allocation of
reasonable fees and other charges among
Exchange members and other persons
using its facilities.
Even though the Exchange is
proposing lower per trade fees as
compared to standard option contracts,
as it believes is necessary for the
product to trade on NOM due to its
smaller exercise and assignment value
of a Mini Option, the Exchange
recognizes the costs to the Exchange to
process quotes and orders in Mini
Options, perform regulatory
surveillance and retain quotes and
orders for archival purposes will be
comparable to the same as a for a
standard contract. The Exchange
believes, therefore, that adopting the
proposed fees for Mini Options is
appropriate, not unreasonable, not
unfairly discriminatory and not
burdensome on competition between
participants or between the Exchange
4 15
PO 00000
U.S.C. 78f(b).
Frm 00107
Fmt 4703
$0.030
$0.049
$0.000
$0.049
NOM market
maker
$0.015
$0.049
and other exchanges in the listed
options market place.
Specifically, the proposed Fee to
Remove Liquidity is equitable and not
unfairly discriminatory because all
market participants will be charged the
same fee of $0.049 per contract. The
Exchange believes that treating all
market participants equally, in turn,
will increase order flow and will
provide increased liquidity to the
market and benefit all participants. The
Exchange also believes that the
proposed $0.049 per contract Fee to
Remove Liquidity is equitable and not
unfairly discriminatory because in the
current U.S. options market many of the
standard contracts are quoted in
pennies. Under this pricing structure,
the minimum penny tick increment
equates to a $1.00 economic value
difference per contract, given that a
single standardized U.S. options
contract covers 100 shares of the
underlying stock. Where contracts are
quoted in $0.05 increments (nonpennies), the economic value per tick is
$5.00 in proceeds to the investor
transacting in these contracts. Since the
Exchange is planning to file to permit
Mini Options to have the same
minimum tick as permitted for standard
options, including penny increments,
the minimum penny tick increment
equates to a $0.10 economic value in
comparison to fee structures on
5 15
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Professional,
firm, broker/
dealer, nonNOM market
maker
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U.S.C. 78f(b)(4).
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standard options on the make-take
exchanges, including NOM, where
securities quoted in penny increments
are commonly in the $0.30 to $0.45 per
contract range. A $0.30 per contract
rebate in a penny quoted security is a
rebate equivalent to 30% of the value of
the minimum tick. A $0.45 per contract
fee in a penny quoted security is a
charge equivalent to 45% of the value of
the minimum tick. For Mini Options the
proposed Fee to Remove Liquidity is
$0.049 or 49% of the proposed value of
that minimum tick, but still less than
50% of the proposed value of that
minimum tick as in the case with
standard options trading in penny
increments today.
The Exchange believes that the
proposed Rebate to Add Liquidity for
Mini Options is equitable and not
unfairly discriminatory because
Customers and NOM Market Makers,
receiving rebates of $0.030 and $0.015
per trade respectively, would be the
only market participants to receive a
rebate. The Exchange believes that it is
reasonable to assess Customers and
NOM Market Makers lower fees as
compared to other market participants
because these market participants
contribute to the market in terms of
liquidity and trading environment as
compared to other market participants.
For NOM Market Makers this includes
its specific Market Maker quoting
obligations and certain other obligations
to the market that do not apply to other
market participants.6 The Exchange
believes that the differentiation between
the rebates offered to Customers as
compared with all other market
participants, including NOM Market
Makers, is justified and not unfairly
discriminatory because it is in
recognition of the important
contribution that Customers provide to
the market place. Increased Customer
liquidity benefits all market participants
seeking to provide liquidity to
Customers.
Finally, the Exchange believes that
the proposed fees and rebates are
reasonable and not unfairly
discriminatory because the fees are
consistent with price differentiation that
exists today on all option exchanges.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
6 See Exchange Rules Section VII, Market
Participants, Sections 5, Obligations of Market
Makers, and Section 6, Market Maker Quotations.
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Exchange believes that by offering Mini
Options it will encourage order flow to
be directed to the Exchange, which will
benefit all market participants by
increasing liquidity on the Exchange.
The Exchange will assess a Fee to
Remove Liquidity of $0.049 per contract
on all market participants, essentially
treating market participants equally and
ignoring their varying contributions to
the market. Additionally, Customers
and NOM Market Makers are eligible for
a Rebate to Add Liquidity. The
Exchange believes these pricing
amendments do not impose a burden on
competition but rather that the proposed
rule change will continue to promote
competition on the Exchange and
position the Exchange as an attractive
alternative when compared to other
options exchanges.
The Exchange believes that the
adoption of the proposed fees and
rebates for Mini Options, which will be
listed for trading on one or more
exchange, will not impose any
unnecessary burden on intramarket
competition. The Exchange operates in
a highly competitive market, comprised
of eleven exchanges, where market
participants are highly knowledgeable
and can easily and without any material
impediments, direct Mini Options
orders to the options exchange that they
believe is the most attractive for their
business.
Accordingly, the fees that are assessed
and the rebates paid by the Exchange
described in the above proposal are
influenced by these robust market forces
and therefore must remain competitive
with fees charged and rebates paid by
other venues on other products and
therefore must continue to be reasonable
and equitably allocated.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.7 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
7 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00108
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19551
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–2013–049 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–2013–049. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2013–049 and should be
submitted on or before April 22, 2013.
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Federal Register / Vol. 78, No. 62 / Monday, April 1, 2013 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–07475 Filed 3–29–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69235; File No. SR–CBOE–
2013–036]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Order Type
and Auction Rules in Advance of MiniOption Launch
March 25, 2013.
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 March 20,
2013, the Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) 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 Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
pmangrum on DSK3VPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to amend Rules 6.53
(Certain Types of Orders Defined), 6.74
(Crossing Orders), 6.74A (Automated
Improvement Mechanism (‘‘AIM’’)) and
6.74B (Solicitation Auction
Mechanism). Each of these rules sets
forth minimum order quantities
predicated on an option contract
delivering 100 shares. The proposal
would amend these rules to maintain
the same minimum order quantities in
amounts proportional to mini-options
delivering 10 shares (i.e., the same
number of underlying securities). The
Exchange is not proposing to change the
substantive content of these rules. The
text of the proposed rule change is
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
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available on the Exchange’s Web site
(https://www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item 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
CBOE recently amended its rules to
allow for the listing of mini-options that
deliver 10 physical shares on SPDR S&P
500 (‘‘SPY’’), Apple, Inc. (‘‘AAPL’’),
SPDR Gold Trust (‘‘GLD’’), Google Inc.
(‘‘GOOG’’) and Amazon.com Inc.
(‘‘AMZN’’).5 Mini-options trading is
expected to commence on March 18,
2013.
Standard equity and exchange-traded
fund (‘‘ETF’’) option contracts have a
unit of trading of 100 shares deliverable
and mini-options will have a unit of
trading of 10 shares deliverable.6 Except
for the difference in the number of
deliverable shares, mini-options will
have the same terms and contract
characteristics as standard equity and
ETF options, including exercise style.
Accordingly, the Exchange represented
in its original mini-option filing that
Exchange rules that apply to the trading
of standard option contracts will apply
to mini-options as well.7
5 See Securities Exchange Act Release No. 68656
(January 15, 2013), 78 FR 4526 (January 22, 2013)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to List and Trade Option
Contracts Overlying 10 Shares of Certain Securities)
(SR–CBOE–2013–001). See also CBOE Rule 5.5.22.
6 Strike prices for mini-options will be set at the
same level as for standard options. See CBOE Rule
5.5.22(b). Bids and offers for mini-options will be
expressed in terms of dollars per 1/10th part of the
total value of the contract. See CBOE Rule 6.41(c).
No additional series of mini-options may be added
if the underlying security is trading at $90 or less.
The underlying security must trade above $90 for
five consecutive days prior to listing mini-option
contracts in an additional expiration month. See
CBOE Rule 5.5.22(c).
7 78 FR 4527.
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Prior to the commencement of trading
mini-options, the Exchange proposes to
amend Rules 6.53 (Certain Types of
Orders Define), 6.74 (Crossing Orders),
6.74A (AIM) and 6.74B (Solicitation
Auction Mechanism). Each of these
rules sets forth minimum order
quantities predicated on an option
contract delivering 100 shares. The
purpose of the proposed rule change is
to amend these rules to maintain the
same minimum order quantities in
amounts proportional to mini-options
delivering 10 shares (i.e., the same
number of underlying securities). The
Exchange is not proposing to change the
substantive content of these rules.
CBOE Rule 6.53(u): Certain Types of
Orders Defined—Qualified Contingent
Crosses (‘‘QCC’’)
CBOE Rule 6.53 sets forth different
order types that may be made available
on a class-by-class basis for trading on
the Exchange. Subparagraph (u) to
CBOE Rule 6.53 provides for the
availability of QCC orders, which are
orders to buy (sell) at least 1,000
standard options that are identified as
being a part of a qualified contingent
trade coupled with a contra-side order
to buy (sell) an equal number of
contracts.
A controversial feature of QCC orders
is that they ‘‘may execute without
exposure provided the execution (1) is
not at the same price as a public
customer order resting in the electronic
book and (2) is at or between the
[National Best Bid or Offer]’’.8 The
Commission approved the availability of
QCC orders in which the order has a
minimum size of 1,000 standard option
contracts (which is equivalent to 10,000
mini-option contracts). Because QCC
orders may be executed without
exposure, the Exchange believes that it
is imperative to maintain the minimum
QCC order size for mini-options that is
required for standard options in
proportion.
Accordingly, CBOE proposes to
amend CBOE Rule 6.53(u) to specify
that the minimum QCC order size for
standard options is 1,000 contracts and
the minimum order size for mini8 See CBOE Rule 6.53(u)(ii). CBOE commented
extensively when QCC orders were initially
proposed by the International Securities Exchange,
LLC (‘‘ISE’’) and a protracted regulatory review of
QCC orders culminated with the Commission
approving the introduction of QCC orders,
notwithstanding CBOE’s strong objections to the
order type. See Exchange Act Release No. 63955
(February 24, 2011), 76 FR 11533 (March 2, 2011)
(SR–ISE–2010–73). CBOE adopted rules to permit
QCC orders as a competitive response but continues
to remain critical of the order type. See Exchange
Act Release No. 64653 (June 13, 2011), 76 FR 35491
(June 17, 2011) (SR–CBOE–2011–041).
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]]>Agencies
[Federal Register Volume 78, Number 62 (Monday, April 1, 2013)]
[Notices]
[Pages 19549-19552]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07475]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69236; File No. SR-NASDAQ-2013-049]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Fees and Rebates for Mini Options
March 26, 2013.
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 March 15, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
[[Page 19550]]
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange 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 establish fees and rebates for the option contracts
overlying 10 shares of a security (``Mini Options'') applicable to
NASDAQ members using NOM.\3\
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\3\ See Securities Exchange Act Release No. 68720 (Jan. 24,
2013), 78 FR 6382 (Jan. 30, 2013).
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The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com/, at the Exchange's principal office, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposal is to modify Chapter XV, Section 2,
entitled ``NASDAQ Options Market--Fees and Rebates,'' to establish fees
and rebates for Mini Options applicable to NASDAQ members using NOM.
Specifically, the Exchange is proposing to assess market
participants on a per trade basis the following fees and rebates on
Mini Options:
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Professional,
firm, broker/
Customer dealer, non- NOM market
NOM market maker
maker
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Rebate to Add Liquidity......................................... $0.030 $0.000 $0.015
Fee to Remove Liquidity......................................... $0.049 $0.049 $0.049
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The Exchange believes that the $0.030 and $0.015 rebate per trade
for Customers and NOM Market Makers, respectively, should encourage
these market participants to trade Mini Options on NOM and serves as a
means to incentivize order flow and to promote this new infant product
for trading on NOM. The Exchange is not offering at this time any
rebate per trade to Professionals, Firms, Broker/Dealers, or Non-NOM
Market Makers.
The Fee to Remove Liquidity for all market participants will be
$0.049 on a per trade basis. The Exchange believes that this is an
equitable allocation of reasonable fees since the Exchange is assessing
all market participants the same rate to transact trades in Mini
Options.
On a per trade basis, the Rebate to Add Liquidity or Fee to Remove
Liquidity will be rounded to the nearest $0.01 using standard rounding
rules. For example, a NOM Market Maker adding liquidity is contra to a
Customer removing liquidity for seven contracts. The NOM Market Maker's
total Rebate to Add Liquidity for this transaction will be $0.105
rounded to $0.11 and the Customer will be assessed $0.343 rounded to
$0.34.
Additionally, Mini Options volume will not count toward the Penny
Pilot and Non-Penny pilot tiers, where applicable.
While the changes to the NOM rules pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative on March 18, 2013.
2. Statutory Basis
The Exchange believes that its proposal to amend its rules is
consistent with Section 6(b) of the Act \4\ in general, and furthers
the objectives of Sections 6(b)(4) of the Act \5\ in particular, in
that it is an equitable allocation of reasonable fees and other charges
among Exchange members and other persons using its facilities.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
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Even though the Exchange is proposing lower per trade fees as
compared to standard option contracts, as it believes is necessary for
the product to trade on NOM due to its smaller exercise and assignment
value of a Mini Option, the Exchange recognizes the costs to the
Exchange to process quotes and orders in Mini Options, perform
regulatory surveillance and retain quotes and orders for archival
purposes will be comparable to the same as a for a standard contract.
The Exchange believes, therefore, that adopting the proposed fees for
Mini Options is appropriate, not unreasonable, not unfairly
discriminatory and not burdensome on competition between participants
or between the Exchange and other exchanges in the listed options
market place.
Specifically, the proposed Fee to Remove Liquidity is equitable and
not unfairly discriminatory because all market participants will be
charged the same fee of $0.049 per contract. The Exchange believes that
treating all market participants equally, in turn, will increase order
flow and will provide increased liquidity to the market and benefit all
participants. The Exchange also believes that the proposed $0.049 per
contract Fee to Remove Liquidity is equitable and not unfairly
discriminatory because in the current U.S. options market many of the
standard contracts are quoted in pennies. Under this pricing structure,
the minimum penny tick increment equates to a $1.00 economic value
difference per contract, given that a single standardized U.S. options
contract covers 100 shares of the underlying stock. Where contracts are
quoted in $0.05 increments (non-pennies), the economic value per tick
is $5.00 in proceeds to the investor transacting in these contracts.
Since the Exchange is planning to file to permit Mini Options to have
the same minimum tick as permitted for standard options, including
penny increments, the minimum penny tick increment equates to a $0.10
economic value in comparison to fee structures on
[[Page 19551]]
standard options on the make-take exchanges, including NOM, where
securities quoted in penny increments are commonly in the $0.30 to
$0.45 per contract range. A $0.30 per contract rebate in a penny quoted
security is a rebate equivalent to 30% of the value of the minimum
tick. A $0.45 per contract fee in a penny quoted security is a charge
equivalent to 45% of the value of the minimum tick. For Mini Options
the proposed Fee to Remove Liquidity is $0.049 or 49% of the proposed
value of that minimum tick, but still less than 50% of the proposed
value of that minimum tick as in the case with standard options trading
in penny increments today.
The Exchange believes that the proposed Rebate to Add Liquidity for
Mini Options is equitable and not unfairly discriminatory because
Customers and NOM Market Makers, receiving rebates of $0.030 and $0.015
per trade respectively, would be the only market participants to
receive a rebate. The Exchange believes that it is reasonable to assess
Customers and NOM Market Makers lower fees as compared to other market
participants because these market participants contribute to the market
in terms of liquidity and trading environment as compared to other
market participants. For NOM Market Makers this includes its specific
Market Maker quoting obligations and certain other obligations to the
market that do not apply to other market participants.\6\ The Exchange
believes that the differentiation between the rebates offered to
Customers as compared with all other market participants, including NOM
Market Makers, is justified and not unfairly discriminatory because it
is in recognition of the important contribution that Customers provide
to the market place. Increased Customer liquidity benefits all market
participants seeking to provide liquidity to Customers.
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\6\ See Exchange Rules Section VII, Market Participants,
Sections 5, Obligations of Market Makers, and Section 6, Market
Maker Quotations.
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Finally, the Exchange believes that the proposed fees and rebates
are reasonable and not unfairly discriminatory because the fees are
consistent with price differentiation that exists today on all option
exchanges.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that by
offering Mini Options it will encourage order flow to be directed to
the Exchange, which will benefit all market participants by increasing
liquidity on the Exchange. The Exchange will assess a Fee to Remove
Liquidity of $0.049 per contract on all market participants,
essentially treating market participants equally and ignoring their
varying contributions to the market. Additionally, Customers and NOM
Market Makers are eligible for a Rebate to Add Liquidity. The Exchange
believes these pricing amendments do not impose a burden on competition
but rather that the proposed rule change will continue to promote
competition on the Exchange and position the Exchange as an attractive
alternative when compared to other options exchanges.
The Exchange believes that the adoption of the proposed fees and
rebates for Mini Options, which will be listed for trading on one or
more exchange, will not impose any unnecessary burden on intramarket
competition. The Exchange operates in a highly competitive market,
comprised of eleven exchanges, where market participants are highly
knowledgeable and can easily and without any material impediments,
direct Mini Options orders to the options exchange that they believe is
the most attractive for their business.
Accordingly, the fees that are assessed and the rebates paid by the
Exchange described in the above proposal are influenced by these robust
market forces and therefore must remain competitive with fees charged
and rebates paid by other venues on other products and therefore must
continue to be reasonable and equitably allocated.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\7\ 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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\7\ 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-2013-049 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-2013-049. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2013-049 and should
be submitted on or before April 22, 2013.
[[Page 19552]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-07475 Filed 3-29-13; 8:45 am]
BILLING CODE 8011-01-P
