Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Penny Pilot Option Rebates To Add Liquidity, 41455-41460 [2013-16530]
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Federal Register / Vol. 78, No. 132 / Wednesday, July 10, 2013 / Notices
2013–040 and should be submitted on
or before July 31, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–16532 Filed 7–9–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69929; File No. SR–
NASDAQ–2013–091]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Penny Pilot Option Rebates To Add
Liquidity
July 3, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1, and Rule 19b–4 thereunder,2
notice is hereby given that on June 27,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to modify Chapter
XV, entitled ‘‘Options Pricing,’’ at
Section 2 governing pricing for
NASDAQ members using the NASDAQ
Options Market (‘‘NOM’’), NASDAQ’s
facility for executing and routing
standardized equity and index options.
Specifically, NOM proposes to amend
certain Customer,3 Professional 4 and
NOM Market Maker 5 Rebates to Add
Liquidity in Penny Pilot Options.6
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on July 1, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
www.nasdaq.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change. The text of
these statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ proposes to modify Chapter
XV, entitled ‘‘Options Pricing,’’ at
Section 2(1) governing the rebates and
fees assessed for option orders entered
into NOM. The Exchange proposes to
amend the Customer, Professional and
NOM Market Maker Penny Pilot
Options Rebates to Add Liquidity and
make other technical amendments to the
Section 2(1) as described more fully
below.
Today, the Exchange offers an eighttiered Rebate to Add Liquidity in Penny
Pilot Options to Customers and
Professionals as follows:
Rebate to add
liquidity
Monthly volume
Tier 1 .........................................................
Tier 2 .........................................................
Tier 3 .........................................................
Tier 4 .........................................................
Tier 5 .........................................................
17 17
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Participant adds Customer and Professional liquidity of up to 0.20% of total industry
customer equity and ETF option average daily volume (‘‘ADV’’) contracts per day
in a month.
Participant adds Customer and Professional liquidity of 0.21% to 0.30% of total industry customer equity and ETF option ADV contracts per day in a month.
Participant adds Customer and Professional liquidity of 0.31% to 0.49% of total industry customer equity and ETF option ADV contracts per day in a month.
Participant adds Customer and Professional liquidity of 0.5% or more of total industry customer equity and ETF option ADV contracts per day in a month.
Participant adds (1) Customer and Professional liquidity of 25,000 or more contracts per day in a month, (2) the Participant has certified for the Investor Support Program set forth in Rule 7014, and (3) the Participant executed at least one
order on NASDAQ’s equity market.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The term ‘‘Customer’’ applies to any transaction
that is identified by a Participant for clearing in the
Customer range at The Options Clearing
Corporation (‘‘OCC’’) which is not for the account
of broker or dealer or for the account of a
‘‘Professional’’ (as that term is defined in Chapter
I, Section 1(a)(48)).
4 The term ‘‘Professional’’ means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s) pursuant to
Chapter I, Section 1(a)(48). All Professional orders
shall be appropriately marked by Participants.
5 The term ‘‘NOM Market Maker’’ is a Participant
that has registered as a Market Maker on NOM
pursuant to Chapter VII, Section 2, and must also
1 15
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17:42 Jul 09, 2013
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remain in good standing pursuant to Chapter VII,
Section 4. In order to receive NOM Market Maker
pricing in all securities, the Participant must be
registered as a NOM Market Maker in at least one
security.
6 The Penny Pilot was established in March 2008
and in October 2009 was expanded and extended
through June 30, 2013. See Securities Exchange Act
Release Nos. 57579 (March 28, 2008), 73 FR 18587
(April 4, 2008) (SR–NASDAQ–2008–026) (notice of
filing and immediate effectiveness establishing
Penny Pilot); 60874 (October 23, 2009), 74 FR 56682
(November 2, 2009) (SR–NASDAQ–2009–091)
(notice of filing and immediate effectiveness
expanding and extending Penny Pilot); 60965
(November 9, 2009), 74 FR 59292 (November 17,
2009) (SR–NASDAQ–2009–097) (notice of filing
and immediate effectiveness adding seventy-five
classes to Penny Pilot); 61455 (February 1, 2010),
75 FR 6239 (February 8, 2010) (SR–NASDAQ–
2010–013) (notice of filing and immediate
PO 00000
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41455
$0.25
0.40
0.43
0.45
0.42
effectiveness adding seventy-five classes to Penny
Pilot); 62029 (May 4, 2010), 75 FR 25895 (May 10,
2010) (SR–NASDAQ–2010–053) (notice of filing
and immediate effectiveness adding seventy-five
classes to Penny Pilot); 65969 (December 15, 2011),
76 FR 79268 (December 21, 2011) (SR–NASDAQ–
2011–169) (notice of filing and immediate
effectiveness extension and replacement of Penny
Pilot); 67325 (June 29, 2012), 77 FR 40127 (July 6,
2012) (SR–NASDAQ–2012–075) (notice of filing
and immediate effectiveness and extension and
replacement of Penny Pilot through December 31,
2012); and 68519 (December 21, 2012), 78 FR 136
(January 2, 2013) (SR–NASDAQ–2012–143) (notice
of filing and immediate effectiveness and extension
and replacement of Penny Pilot through June 30,
2013). See also NOM Rules, Chapter VI, Section 5.
The Exchange recently filed a proposed rule change
to extend the pilot through December 31, 2013. See
SR–Phlx–2013–64, which is not yet published.
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Federal Register / Vol. 78, No. 132 / Wednesday, July 10, 2013 / Notices
Rebate to add
liquidity
Monthly volume
Tier 6 .........................................................
Tier 7 .........................................................
Tier 8 .........................................................
Participant has Total Volume of 130,000 or more contracts per day in a month, of
which 25,000 or more contracts per day in a month must be Customer or Professional liquidity.
Participant has Total Volume of 175,000 or more contracts per day in a month, of
which 50,000 or more contracts per day in a month must be Customer or Professional liquidity.
Participant (1) has Total Volume of 325,000 or more contracts per day in a month,
or (2) adds Customer or Professional liquidity of 1.00% or more of national customer volume in multiply-listed equity and ETF options classes in a month or (3)
adds Customer or Professional liquidity of 60,000 or more contracts per day in a
month and NOM Market Maker liquidity of 40,000 or more contracts per day per
month.
The Exchange is proposing to amend
Tier 8 which currently pays a rebate of
$0.48 per contract to a Participant that:
(i) Has Total Volume 7 of 325,000 or
more contracts per day in a month; (ii)
adds Customer or Professional liquidity
of 1.00% or more of national customer
volume in multiply-listed equity and
ETF options classes in a month; or (iii)
adds Customer or Professional liquidity
of 60,000 or more contracts per day in
a month and NOM Market Maker
liquidity of 40,000 or more contracts per
day in a month. The Exchange is
proposing to continue to pay a $0.48 per
contract rebate for Tier 8 and amend the
criteria to qualify for this rebate tier.
The Exchange proposes to pay the Tier
8 rebate to a Participant that: (i) has
Total Volume of 325,000 or more
contracts per day in a month (as is the
case today); or (ii) has Total Volume of
200,000 or more contracts per day in a
month of which 70,000 or more
contracts per day in a month must be
Customer and/or Professional liquidity;
or (iii) adds Customer or Professional
liquidity of 1.00% or more of national
customer volume in multiply-listed
equity and ETF options classes in a
month (as is the case today). The
Exchange would eliminate the criteria
whereby a Participant can achieve the
Tier 8 rebate by adding Customer or
Professional liquidity of 60,000 or more
contracts per day in a month and NOM
Market Maker liquidity of 40,000 or
more contracts per day per month. The
Exchange believes that Participants will
be incentivized to achieve a Tier 8
rebate as they are today and additional
Participants may be able to qualify with
the new criteria, which focuses on
Customer and/or Professional liquidity.
The Exchange is also proposing to
make a technical amendment to the
Penny Pilot Options Customer and
Professional Rebates to Add Liquidity to
clarify the text of these rebates. The
Exchange today permits Participants to
add Customer or Professional liquidity
for Tiers 1 through 7. Participants may
add either Customer or Professional
liquidity to qualify for these rebate tiers.
The Exchange proposes to add the
words ‘‘/or’’ to clarify that Customer
and/or Professional liquidity may be
added to Tiers 1 through 5. The
Exchange also proposes to amend Tiers
6 and 7 in similar fashion to add‘‘and/
’’ to specify Customer or Professional
liquidity may be added. Similarly the
Exchange proposes to add the word
‘‘and/’’ in note 2 of Section (2)(1) of
Chapter XV which provides that ‘‘[a]
Participant that adds Firm, Non-NOM
Market Maker or Broker-Dealer liquidity
in Penny Pilot Options or Non-Penny
Pilot Options of 15,000 contracts per
.
Tier 2 ...............................................
TKELLEY on DSK3SPTVN1PROD with NOTICES
.
Tier 3 ...............................................
.
Tier 4 ...............................................
17:42 Jul 09, 2013
0.48
Rebate to add liquidity
Participant adds NOM Market Maker liquidity in Penny Pilot Options
of up to 39,999 contracts per day in a month.
$0.25
Participant adds NOM Market Maker liquidity in Penny Pilot Options
of 40,000 to 109,999 contracts per day in a month.
0.30
Participant and its affiliate under Common Ownership qualify for Tier
8 of the Customer and Professional Rebate to Add Liquidity in
Penny Pilot Options.
0.37
Participant adds NOM Market Maker liquidity in Penny Pilot Options
of 110,000 or more contracts per day in a month.
0.28 or $0.38 in the following symbols BAC, GLD, IWM, QQQ and
VXX or $0.40 in SPY.
7 Total Volume is defined as Customer,
Professional, Firm, Broker-Dealer, Non-NOM
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0.47
day or more in a given month will
receive a Rebate to Add Liquidity in
Penny Pilot Options of $0.20 per
contract and will pay a Fee for Adding
Liquidity in Non-Penny Pilot Options of
$0.36 per contract.’’ This would make
clear that a Participant may add Penny
and/or Non-Penny Pilot Options to
qualify for the rebate. Finally, the
Exchange proposes a similar
amendment to note b in Section 2(1)
Chapter XV which provides that ‘‘[f]or
purposes of Tiers 6, 7 and 8, ‘‘Total
Volume’’ shall be defined as Customer,
Professional, Firm, Broker-Dealer, NonNOM Market Maker and NOM Market
Maker volume in Penny Pilot Options
and Non-Penny Pilot Options which
either adds or removes liquidity on
NOM.’’ The Exchange would add the
words ‘‘/or’’ to make clear that Total
Volume can consist of Penny Pilot
Options or Non-Penny Pilot Options.
The Exchange believes that these
amendments will provide greater clarity
to the pricing. The Exchange otherwise
does not propose to amend Tiers 1
through 7 of the Customer and
Professional Rebates to Add Liquidity in
Penny Pilot Options.
Today, the Exchange offers a fourtiered Rebate to Add Liquidity in Penny
Pilot Options to NOM Market Makers as
follows:
Monthly volume
Tier 1 ...............................................
0.45
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Market Maker and NOM Market Maker volume in
Penny Pilot Options or Non-Penny Pilot Options
PO 00000
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which either adds or removes liquidity on NOM.
See Chapter XV, Section 2(1) of the NOM Rules.
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Federal Register / Vol. 78, No. 132 / Wednesday, July 10, 2013 / Notices
TKELLEY on DSK3SPTVN1PROD with NOTICES
The Exchange proposes to amend the
Tier 2 NOM Market Maker Rebate to
Add Liquidity in Penny Pilot Options
which currently pays a $0.30 per
contract rebate to a Participant that adds
NOM Market Maker liquidity in Penny
Pilot Options of 40,000 to 109,999
contracts per day in a month to 40,000
to 69,999 contracts per day in a month
to achieve the same rebate.
The Exchange also proposes to amend
the Tier 3 NOM Market Maker Rebate to
Add Liquidity in Penny Pilot Options
which currently pays a $0.37 per
contract rebate to reduce that rebate to
$0.32 per contract and amend the
criteria to qualify for a Tier 3 rebate.
Currently, a Participant and its affiliate
under Common Ownership 8 that
qualify for Tier 8 of the Customer and
Professional Rebate to Add Liquidity in
Penny Pilot Options qualify for a Tier 3
NOM Market Maker Rebate to Add
Liquidity in Penny Pilot Options. The
Exchange is proposing to eliminate the
current Tier 3 criteria and instead pay
the new $0.32 per contract NOM Market
Maker Rebate to Add Liquidity in Penny
Pilot Options to Participants that add
NOM Market Maker liquidity in Penny
Pilot Options of 70,000 to 99,999
contracts per day in a month.
The Exchange also proposes to amend
the Tier 4 NOM Market Maker Rebate to
Add Liquidity in Penny Pilot Options
which currently pays rebate of $0.28 9 or
$0.38 per contract in the following
symbols, Bank of America Corporation
(‘‘BAC’’), SPDR Gold Shares (‘‘GLD’’),
iShares Russell 2000 Index (‘‘IWM’’),
PowerShares QQQ (‘‘QQQ’’), iPath S&P
500 VIX ST Futures ETN (‘‘VXX’’), or
$0.40 per contract in SPDR S&P 500
(‘‘SPY’’) if Participants add NOM
Market Maker liquidity in Penny Pilot
Options of 110,000 or more contracts
per day in a month. The Exchange is
proposing to increase the Tier 4 rebate
of $0.28 per contract, which is paid on
all qualifying Penny Pilot Options,
excluding BAC, GLD, IWM, QQQ, VXX
and SPY, to $0.32 per contract.10 In
addition, the Exchange proposes to
decrease the requisite number of
contracts that a Participant must add in
NOM Market Maker liquidity in Penny
Pilot Options to achieve a Tier 4 rebate
8 The term ‘‘Common Ownership’’ is defined in
Chapter XV of the NOM Rules as Participants under
75% common ownership or control.
9 The $0.28 per contract Tier 4 NOM Market
Maker rebate would be paid on all qualifying Penny
Pilot Options, excluding BAC, GLD, IWM, QQQ,
VXX and SPY.
10 The Exchange is not proposing to amend the
$0.38 per contract rebate in BAC, GLD, IWM, QQQ
or VXX or the $0.40 per contract rebate in SPY.
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17:42 Jul 09, 2013
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from 110,000 to 100,000 or more
contracts per day in a month.
The Exchange is not proposing to
amend the Tier 1 NOM Market Maker
Rebate to Add Liquidity in Penny Pilot
Options. The Exchange would also
eliminate the text referencing Tiers 3
and 4 of the NOM Market Maker Rebate
to Add Liquidity in Penny Pilot Options
which provides that ‘‘[i]n the instance
that a Participant qualifies for both a
Tier 3 and a Tier 4 NOM Market Maker
Penny Pilot Option rebate, the Exchange
would pay the Participant the Tier 3
rebate unless the Participant is eligible
for an increased rebate in one of the
following symbols: BAC, GLD, IWM,
QQQ, VXX and SPY, in which case the
Tier 4 rebate would be applied.’’ This
language is no longer necessary because
a Participant would not be able to
qualify for both a Tier 3 and a Tier 4
rebate with the proposed changes.
The Exchange believes that the
amendment to the NOM Market Maker
Rebate to Add Liquidity will continue to
incentivize NOM Market Makers to post
liquidity on the Exchange.
2. Statutory Basis
NASDAQ believes that the proposed
rule changes are consistent with the
provisions of Section 6 of the Act,11 in
general, and with Section 6(b)(4) of the
Act,12 in particular, in that they provide
for the equitable allocation of reasonable
dues, fees and other charges among
Participants and issuers and other
persons using any facility or system
which NASDAQ operates or controls as
described in detail below.
The Exchange’s proposal to amend
the Customer, Professional and NOM
Market Maker Penny Pilot Options
Rebates to Add Liquidity are reasonable
because the Exchange will continue to
offer competitive Customer, Professional
and NOM Market Maker rebates in order
to attract liquidity to the market to the
benefit of all market participants. The
Exchange believes that offering
Customers and Professionals and NOM
Market Makers the opportunity to earn
higher rebates is reasonable because by
incentivizing Participants to select the
Exchange as a venue to post Customer
and Professional liquidity will attract
additional order flow to the benefit of
all market participants and
incentivizing NOM Market Makers to
post liquidity will also benefit
participants through increased order
interaction.
The Exchange believes that the
amendments to the Penny Pilot Options
Rebates to Add Liquidity are equitable
PO 00000
11 15
12 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
Frm 00106
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41457
and not unfairly discriminatory for
various reasons. The Exchange believes
that continuing to pay Customers and
Professionals tiered Rebates to Add
Liquidity in Penny Pilot Options, as
proposed herein, is equitable and not
unfairly discriminatory as compared to
other market participants. Pursuant to
this proposal, the Exchange would pay
the highest Tier 1 Rebates to Add
Liquidity in Penny Pilot Options of
$0.25 per contract to Customers,
Professionals and NOM Market Makers
for transacting one qualifying contract
as compared to other market
participants.13 The Exchange believes
that Customers are entitled to higher
rebates because Customer order flow
brings unique benefits to the market
through increased liquidity which
benefits all market participants. The
Exchange believes that continuing to
offer Professionals the same Penny Pilot
Options Rebates to Add Liquidity as
Customers is equitable and not unfairly
discriminatory for the reasons which
follow. The Exchange believes that
offering Professionals the opportunity to
earn the same rebates as Customers, as
is the case today, and higher rebates as
compared to Firms, Broker-Dealers and
Non-NOM Market Makers, and in some
cases NOM Market Makers, is equitable
and not unfairly discriminatory because
the Exchange does not believe that the
amount of the rebate offered by the
Exchange has a material impact on a
Participant’s ability to execute orders in
Penny Pilot Options. By offering
Professionals, as well as Customers,
higher rebates, the Exchange hopes to
simply remain competitive with other
venues so that it remains a choice for
market participants when posting orders
and the result may be additional
Professional order flow for the
Exchange, in addition to increased
Customer order flow. A Participant may
not be able to gauge the exact rebate tier
it would qualify for until the end of the
month because Professional volume
would be commingled with Customer
volume in calculating tier volume.14 A
Professional could only otherwise
presume the Tier 1 rebate would be
achieved in a month when determining
13 Firms, Non-NOM Market Makers and BrokerDealers receive a $0.10 per contract Penny Pilot
Option Rebate to Add Liquidity. In addition,
Participant that adds Firm, Non-NOM Market
Maker or Broker-Dealer liquidity in Penny Pilot
Options and/or Non-Penny Pilot Options of 15,000
contracts per day or more in a given month will
receive a Rebate to Add Liquidity in Penny Pilot
Options of $0.20 per contract.
14 Customer and Professional volume is
aggregated for purposes of determining which
rebate tier a Participant qualifies for with respect to
the Professional Rebate to Add Liquidity in Penny
Pilot Options.
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TKELLEY on DSK3SPTVN1PROD with NOTICES
price.15 Further, the Exchange initially
established Professional pricing in order
to ‘‘. . . bring additional revenue to the
Exchange.’’ 16 The Exchange noted in
the Professional Filing that it believes
‘‘. . . that the increased revenue from
the proposal would assist the Exchange
to recoup fixed costs.’’ 17 The Exchange
also noted in that filing that it believes
that establishing separate pricing for a
Professional, which ranges between that
of a customer and market maker,
accomplishes this objective.18 The
Exchange does not believe that
providing Professionals with the
opportunity to obtain higher rebates
equivalent to that of a Customer creates
a competitive environment where
Professionals would be necessarily
advantaged on NOM as compared to
NOM Market Makers, Firms, BrokerDealers or Non-NOM Market Makers.
Also, a Professional is assessed the same
fees as other market participants, except
Customers and NOM Market Makers, as
discussed herein.19 For these reasons,
the Exchange believes that continuing to
offer Professionals the same rebates as
Customers is equitable and not unfairly
discriminatory. Finally, the Exchange
believes that NOM Market Makers
should be offered the opportunity to
earn higher rebates as compared to NonNOM Market Makers, Firms and Broker
Dealers 20 because NOM Market Makers
15 A Professional would be unable to determine
the exact rebate that would be paid on a transaction
by transaction basis with certainty until the end of
a given month when all Customer and Professional
volume is aggregated for purposes of determining
which tier the Participant qualified for in a given
month.
16 See Securities Exchange Act Release No. 64494
(May 13, 2011), 76 FR 29014 (May 19, 2011) (SR–
NASDAQ–2011–066) (‘‘Professional Filing’’). In this
filing, the Exchange addressed the perceived
favorable pricing of Professionals who were
assessed fees and paid rebates like a Customer prior
to the filing. The Exchange noted in that filing that
a Professional, unlike a retail Customer, has access
to sophisticated trading systems that contain
functionality not available to retail Customers.
17 See Securities Exchange Act Release No. 64494
(May 13, 2011), 76 FR 29014 (May 19, 2011) (SR–
NASDAQ–2011–066).
18 See Securities Exchange Act Release No. 64494
(May 13, 2011), 76 FR 29014 (May 19, 2011) (SR–
NASDAQ–2011–066). The Exchange noted in this
filing that it believes the role of the retail customer
in the marketplace is distinct from that of the
professional and the Exchange’s fee proposal at that
time accounted for this distinction by pricing each
market participant according to their roles and
obligations.
19 The Fee for Removing Liquidity in Penny Pilot
Options is $0.48 per contract for all market
participants, except Customers and NOM Market
Makers. Customers are assessed $0.45 per contract
and NOM Market Makers would continue to be
assessed $0.47 per contract.
20 Firms, Non-NOM Market Makers and BrokerDealers are paid a $0.10 per contract Rebate to Add
Liquidity in Penny Pilot Options and have the
opportunity to earn a higher Penny Pilot Options
Rebate to Add Liquidity of $0.20 per contact if they
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17:42 Jul 09, 2013
Jkt 229001
add value through continuous quoting 21
and the commitment of capital.
The Exchange’s proposal to amend
the Customer and Professional Rebates
to Add Liquidity in Penny Pilot Options
is reasonable because the Exchange is
offering Participants meaningful
incentives to increase their participation
on NOM in terms of higher Penny Pilot
Options Rebates to Add Liquidity. The
Exchange’s proposal to amend Tier 8 to
eliminate the criteria which qualifies a
Participant that adds Customer or
Professional liquidity of 60,000 or more
contracts per day in a month and NOM
Marker Maker liquidity of 40,000 or
more contracts per day in a month to a
$0.48 per contract rebate and replace
that criteria with new criteria that pays
the same rebate if the Participant has
Total Volume of 200,000 or more
contracts per day in a month, of which
70,000 or more contracts per day in a
month must be Customer and/or
Professional liquidity is reasonable
because it should continue to
incentivize Participants to add liquidity
on NOM. The new criteria focuses on
Total Volume which consists of
Customer, Professional, Firm, BrokerDealer, Non-NOM Market Maker and
NOM Market Maker volume in Penny
Pilot Options and/or Non-Penny Pilot
Options which either adds or removes
liquidity on NOM. The Exchange
believes that offering Participants an
option to transact a lower amount of
Total Volume (200,000 contracts) as
compared to the 325,000 contracts of
Total Volume, which would also qualify
a Participant for a Tier 8 rebate, and also
requiring that 70,000 of that Total
Volume be comprised of Customer and/
or Professional liquidity further
incentivizes Participants to add
Customer and Professional liquidity to
NOM. The criteria that is being
eliminated required 60,000 or more
contracts per day of Customer and/or
Professional liquidity and 40,000 or
more contracts of NOM Market Maker
liquidity. The Exchange believes that it
is reasonable to incentivize Participants
to add a greater amount of Customer
transact 15,000 contracts per day or more in a given
month of Penny Pilot Options or Non-Penny Pilot
Options liquidity.
21 Pursuant to Chapter VII (Market Participants),
Section 5 (Obligations of Market Makers), in
registering as a market maker, an Options
Participant commits himself to various obligations.
Transactions of a Market Maker in its market
making capacity must constitute a course of
dealings reasonably calculated to contribute to the
maintenance of a fair and orderly market, and
Market Makers should not make bids or offers or
enter into transactions that are inconsistent with
such course of dealings. Further, all Market Makers
are designated as specialists on NOM for all
purposes under the Act or rules thereunder. See
Chapter VII, Section 5.
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and/or Professional liquidity combined
with other volume as a means to qualify
for the Tier 8 rebate. This proposal only
impacts one of the ways in which a
Participant may qualify for the Tier 8
rebate. Participants that today do not
qualify for the Tier 8 rebate may be able
to qualify with the new criteria. In
addition, other exchanges employ
similar incentive programs.22
The Exchange’s proposal to amend
Tier 8 to eliminate the criteria which
qualifies a Participant that adds
Customer or Professional liquidity of
60,000 or more contracts per day in a
month and NOM Marker Maker
liquidity of 40,000 or more contracts per
day in a month to a $0.48 per contract
rebate and replace that criteria with new
criteria that pays the same rebate if the
Participant has Total Volume of 200,000
or more contracts per day in a month,
of which 70,000 or more contracts per
day in a month must be Customer and/
or Professional liquidity is equitable and
not unfairly discriminatory because this
amendment will be applied to all
market participants in a uniform matter.
Any market participant is eligible to
receive the rebate provided they transact
a qualifying amount of Customer and
Professional volume in Penny Pilot
Options.
The Exchange’s proposal to amend
the NOM Market Maker Rebates to Add
Liquidity in Penny Pilot Options is
reasonable because it should incentivize
NOM Market Makers to post liquidity
on NOM. NOM Market Makers are
valuable market participants that
provide liquidity in the marketplace and
incur costs unlike other market
participants. The Exchange believes that
encouraging NOM Market Makers to be
more aggressive when posting liquidity
benefits all market participants through
increased liquidity. The Exchange
believes that the NOM Market Maker
rebate proposal is equitable and not
unfairly discriminatory because it does
not misalign the current rebate structure
because NOM Market Makers will
continue to earn higher rebates as
compared to Firms, Non-NOM Market
Makers and Broker-Dealers and will
earn the same or lower rebates as
22 See CBOE Fees Schedule. CBOE offers each
Trading Permit Holder (‘‘TPH’’) a credit for each
public customer order transmitted by the TPH
which is executed electronically in all multiplylisted option classes, excluding QCC trades and
executions related to contracts that are routed to
one or more exchanges in connection with the
Options Order Protection and Locked/Crossed
Market Plan, provided the TPH meets certain
percentage thresholds in a month as described in
the Volume Incentive Program. See also Phlx’s
Pricing Schedule at Section B which contains the
Customer Rebate Program.
E:\FR\FM\10JYN1.SGM
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TKELLEY on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 132 / Wednesday, July 10, 2013 / Notices
compared to Customers and
Professionals.23
The Exchange’s proposal to amend
the number of qualifying contracts in
Tier 2 of the NOM Market Maker Penny
Pilot Options Rebate to Add Liquidity
from 40,000 to 109,999 contracts to
40,000 to 69,999 contracts per day in a
month is reasonable because today
Participants that transact between
40,000 to 69,999 contracts of NOM
Market Maker Penny Pilot Options
would continue to qualify for Tier 2 and
Participants that qualify from 70,000 to
109,999 contracts would qualify for the
new proposed Tier 3 rebate of $0.32 per
contract.
The Exchange’s proposal to amend
the Tier 3 rebate, which currently
requires a Participant and its affiliate
under Common Ownership that qualify
for Tier 8 of the Customer and
Professional Rebate to Add Liquidity in
Penny Pilot Options to receive a Tier 3
rebate of $0.37 per contract, and replace
it with new criteria which requires that
a Participant add NOM Market Maker
liquidity in Penny Pilot Options of
70,000 to 99,999 contracts per day in a
month to qualify for a new Tier 3 rebate
rate of $0.32 per contract is reasonable
because it would increase the rebate
paid to certain Participants who
currently qualifying for a Tier 2 rebate.
Also, those Participants and its affiliate
under Common Ownership that qualify
for a Tier 8 rebate would continue to
receive the Customer and Professional
Rebates to Add Liquidity in Penny Pilot
Options rebate and may separately
qualify for another NOM Market Maker
Rebate to Add Liquidity in Penny Pilot
Options. The Exchange is offering a
different rebate incentive to remain
competitive while continuing to
encourage NOM Market Makers to
aggressively post liquidity on NOM.
The Exchange’s proposal to amend
Tier 4 to lower the number of NOM
Market Maker Penny Pilot Options
contract from 110,000 to 100,000 is
reasonable because additional
Participants may be able to qualify for
a Tier 4 NOM Market Maker Rebate to
Add Liquidity in Penny Pilot Options.
The Exchange also believes that the
proposal to pay an increased Tier 8
rebate of $0.32 per contract as compared
to $0.28 per contract for all symbols
excluding BAC, GLD, IWM, QQQ,
VXX 24 and SPY 25 is reasonable because
the increased rebate should encourage
other market participants to add NOM
23 The Tier 1 NOM Market Maker Rebate to Add
Liquidity in Penny Pilot Options is the same rebate
as the proposed Tier 1 Customer and Professional
rebate in Penny Pilot Options.
24 These symbols pay a $0.38 per contract rebate.
25 SPY pays a $0.40 per contract rebate.
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17:42 Jul 09, 2013
Jkt 229001
Marker Maker liquidity to obtain a
higher rebate in certain symbols.
The Exchange believes offering NOM
Market Makers the opportunity to
receive higher rebates as compared to
Firms, Non-NOM Market Makers and
Broker-Dealers is equitable and not
unfairly discriminatory because all
NOM Market Makers may qualify for the
NOM Market Maker rebate tiers and
every NOM Market Maker is entitled to
a rebate solely by adding one contract of
NOM Market Maker liquidity on NOM.
Also, as mentioned, the NOM Market
Maker would receive the same rebate in
Tier 1 as compared Customers and
Professionals and a higher rebate in all
other tiers as compared to a Firm, NonNOM Market Maker or Broker-Dealer
because of the obligations 26 borne by
NOM Market Makers as compared to
other market participants. Encouraging
NOM Market Makers to add greater
liquidity benefits all Participants in the
quality of order interaction.
The Exchange believes that it is
equitable and not unfairly
discriminatory to amend the Tier 2, 3
and 4 rebate criteria to qualify for those
rebates as well as the Tier 4 rebate rate
for certain symbols because those
amendments will apply uniformly to all
participants. The Exchange believes that
it is reasonable, equitable, and not
unfairly discriminatory to adopt specific
pricing for BAC, GLD, IWM, QQQ, VXX
and SPY because pricing by symbol is
a common practice on many U.S.
options exchanges as a means to
incentivize order flow to be sent to an
exchange for execution in the most
actively traded options classes, in this
case actively traded Penny Pilot
Options.27 The Exchange notes that
BAC, GLD, IWM, QQQ, VXX and SPY
are some of the most actively traded
options in the U.S.
The Exchange’s proposal to add
language throughout Section 2(1) of
Chapter XV to clarify the rule text with
respect to adding liquidity is reasonable,
equitable and not unfairly
discriminatory because the amendments
provide clarity to the rule text. The
Exchange’s proposal to eliminate text
related to qualifying for both Tier 3 and
Tier 4 NOM Market Maker rebates is
reasonable, equitable and not unfairly
discriminatory because the text is no
longer necessary because a Participant
could no longer achieve both rebates in
a given month.
note 21.
Phlx’s Pricing Schedule. See also the
International Securities Exchange LLC’s Fee
Schedule. Both of these markets segment pricing by
symbol.
PO 00000
26 See
27 See
Frm 00108
Fmt 4703
Sfmt 4703
41459
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule changes will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
Customers have traditionally been
paid the highest rebates offered by
options exchanges. While the
Exchange’s proposal results in a
Professional receiving the same or a
higher rebate as compared to a NOM
Market Maker, in certain circumstances,
the Exchange does not believe the
proposed rebate tiers would result in
any burden on competition as between
market participants. The Exchange
believes that offering Customers and
Professionals the proposed tiered
rebates creates competition among
options exchanges because the
Exchange believes that the rebates may
cause market participants to select NOM
as a venue to send Customer and
Professional order flow. The Exchange
believes that incentivizing NOM Market
Makers to post liquidity on NOM
benefits market participants through
increased order interaction. Also, NOM
Market Makers have obligations 28 to the
market which are not borne by other
market participants and therefore the
Exchange believes that NOM Market
Makers are entitled to a lower fee.
The proposed amendments does not
misalign the current rebate structure
because NOM Market Makers will
continue to earn higher rebates as
compared to Firms, Non-NOM Market
Makers and Broker-Dealers and will
earn the same or lower rebates as
compared to Customers and
Professionals.
The Exchange believes the differing
outcomes, rebates and fees created by
the Exchange’s proposed pricing
incentives contribute to the overall
health of the market place for the benefit
of all Participants that willing choose to
transact options on NOM. For the
reasons specified herein, the Exchange
does not believe this proposal creates an
undue burden on competition. The
Exchange operates in a highly
competitive market comprised of eleven
U.S. options exchanges in which many
sophisticated and knowledgeable
market participants can readily and do
send order flow to competing exchanges
if they deem fee levels or rebate
incentives at a particular exchange to be
excessive or inadequate. These market
forces support the Exchange belief that
the proposed rebate structure and tiers
proposed herein are competitive with
28 See
E:\FR\FM\10JYN1.SGM
note 21.
10JYN1
41460
Federal Register / Vol. 78, No. 132 / Wednesday, July 10, 2013 / Notices
rebates and tiers in place on other
exchanges. The Exchange believes that
this competitive marketplace continues
to impact the rebates present on the
Exchange today and substantially
influences the proposals set forth above.
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.29 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
TKELLEY on DSK3SPTVN1PROD with NOTICES
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–2013–091 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–2013–091. 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–2013–091, and should be
submitted on or before July 31, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–16530 Filed 7–9–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69932; File No. SR–BYX–
2013–024]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Fees for Use
of BATS Y-Exchange, Inc.
July 3, 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 June 28,
2013, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange has designated the proposed
rule change as one establishing or
changing a member due, fee, or other
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
29 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Mar<15>2010
17:42 Jul 09, 2013
Jkt 229001
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
charge imposed by the Exchange under
Section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
fee schedule applicable to Members 5
and non-members of the Exchange
pursuant to BYX Rules 15.1(a) and (c).
While changes to the fee schedule
pursuant to this proposal will be
effective upon filing, the changes will
become operative on July 1, 2013.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to begin charging a monthly
fee for the Multicast PITCH Spin Server
Port and GRP Port, each of which are
logical ports 6 used to receive data from
3 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
5 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
6 A logical port is commonly referred to as a TCP/
IP port, and represents a port established by the
Exchange within the Exchange’s system for trading
and billing purposes. Each logical port established
is specific to a Member or non-member and grants
that Member or non-member the ability to operate
a specific application, such as FIX order entry or
Multicast PITCH data receipt. Logical port fees are
limited to logical ports in the Exchange’s primary
data center and no logical port fees are assessed for
redundant secondary data center ports.
4 17
E:\FR\FM\10JYN1.SGM
10JYN1
]]>Agencies
[Federal Register Volume 78, Number 132 (Wednesday, July 10, 2013)]
[Notices]
[Pages 41455-41460]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16530]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69929; File No. SR-NASDAQ-2013-091]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Penny Pilot Option Rebates To Add Liquidity
July 3, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 27, 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, entitled ``Options Pricing,''
at Section 2 governing pricing for NASDAQ members using the NASDAQ
Options Market (``NOM''), NASDAQ's facility for executing and routing
standardized equity and index options. Specifically, NOM proposes to
amend certain Customer,\3\ Professional \4\ and NOM Market Maker \5\
Rebates to Add Liquidity in Penny Pilot Options.\6\
---------------------------------------------------------------------------
\3\ The term ``Customer'' applies to any transaction that is
identified by a Participant for clearing in the Customer range at
The Options Clearing Corporation (``OCC'') which is not for the
account of broker or dealer or for the account of a ``Professional''
(as that term is defined in Chapter I, Section 1(a)(48)).
\4\ The term ``Professional'' means any person or entity that
(i) is not a broker or dealer in securities, and (ii) places more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s) pursuant to Chapter
I, Section 1(a)(48). All Professional orders shall be appropriately
marked by Participants.
\5\ The term ``NOM Market Maker'' is a Participant that has
registered as a Market Maker on NOM pursuant to Chapter VII, Section
2, and must also remain in good standing pursuant to Chapter VII,
Section 4. In order to receive NOM Market Maker pricing in all
securities, the Participant must be registered as a NOM Market Maker
in at least one security.
\6\ The Penny Pilot was established in March 2008 and in October
2009 was expanded and extended through June 30, 2013. See Securities
Exchange Act Release Nos. 57579 (March 28, 2008), 73 FR 18587 (April
4, 2008) (SR-NASDAQ-2008-026) (notice of filing and immediate
effectiveness establishing Penny Pilot); 60874 (October 23, 2009),
74 FR 56682 (November 2, 2009) (SR-NASDAQ-2009-091) (notice of
filing and immediate effectiveness expanding and extending Penny
Pilot); 60965 (November 9, 2009), 74 FR 59292 (November 17, 2009)
(SR-NASDAQ-2009-097) (notice of filing and immediate effectiveness
adding seventy-five classes to Penny Pilot); 61455 (February 1,
2010), 75 FR 6239 (February 8, 2010) (SR-NASDAQ-2010-013) (notice of
filing and immediate effectiveness adding seventy-five classes to
Penny Pilot); 62029 (May 4, 2010), 75 FR 25895 (May 10, 2010) (SR-
NASDAQ-2010-053) (notice of filing and immediate effectiveness
adding seventy-five classes to Penny Pilot); 65969 (December 15,
2011), 76 FR 79268 (December 21, 2011) (SR-NASDAQ-2011-169) (notice
of filing and immediate effectiveness extension and replacement of
Penny Pilot); 67325 (June 29, 2012), 77 FR 40127 (July 6, 2012) (SR-
NASDAQ-2012-075) (notice of filing and immediate effectiveness and
extension and replacement of Penny Pilot through December 31, 2012);
and 68519 (December 21, 2012), 78 FR 136 (January 2, 2013) (SR-
NASDAQ-2012-143) (notice of filing and immediate effectiveness and
extension and replacement of Penny Pilot through June 30, 2013). See
also NOM Rules, Chapter VI, Section 5. The Exchange recently filed a
proposed rule change to extend the pilot through December 31, 2013.
See SR-Phlx-2013-64, which is not yet published.
---------------------------------------------------------------------------
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on July 1,
2013.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nasdaq.cchwallstreet.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,''
at Section 2(1) governing the rebates and fees assessed for option
orders entered into NOM. The Exchange proposes to amend the Customer,
Professional and NOM Market Maker Penny Pilot Options Rebates to Add
Liquidity and make other technical amendments to the Section 2(1) as
described more fully below.
Today, the Exchange offers an eight-tiered Rebate to Add Liquidity
in Penny Pilot Options to Customers and Professionals as follows:
------------------------------------------------------------------------
Rebate to add
Monthly volume liquidity
------------------------------------------------------------------------
Tier 1......................... Participant adds $0.25
Customer and
Professional liquidity
of up to 0.20% of
total industry
customer equity and
ETF option average
daily volume (``ADV'')
contracts per day in a
month.
Tier 2......................... Participant adds 0.40
Customer and
Professional liquidity
of 0.21% to 0.30% of
total industry
customer equity and
ETF option ADV
contracts per day in a
month.
Tier 3......................... Participant adds 0.43
Customer and
Professional liquidity
of 0.31% to 0.49% of
total industry
customer equity and
ETF option ADV
contracts per day in a
month.
Tier 4......................... Participant adds 0.45
Customer and
Professional liquidity
of 0.5% or more of
total industry
customer equity and
ETF option ADV
contracts per day in a
month.
Tier 5......................... Participant adds (1) 0.42
Customer and
Professional liquidity
of 25,000 or more
contracts per day in a
month, (2) the
Participant has
certified for the
Investor Support
Program set forth in
Rule 7014, and (3) the
Participant executed
at least one order on
NASDAQ's equity market.
[[Page 41456]]
Tier 6......................... Participant has Total 0.45
Volume of 130,000 or
more contracts per day
in a month, of which
25,000 or more
contracts per day in a
month must be Customer
or Professional
liquidity.
Tier 7......................... Participant has Total 0.47
Volume of 175,000 or
more contracts per day
in a month, of which
50,000 or more
contracts per day in a
month must be Customer
or Professional
liquidity.
Tier 8......................... Participant (1) has 0.48
Total Volume of
325,000 or more
contracts per day in a
month, or (2) adds
Customer or
Professional liquidity
of 1.00% or more of
national customer
volume in multiply-
listed equity and ETF
options classes in a
month or (3) adds
Customer or
Professional liquidity
of 60,000 or more
contracts per day in a
month and NOM Market
Maker liquidity of
40,000 or more
contracts per day per
month.
------------------------------------------------------------------------
The Exchange is proposing to amend Tier 8 which currently pays a
rebate of $0.48 per contract to a Participant that: (i) Has Total
Volume \7\ of 325,000 or more contracts per day in a month; (ii) adds
Customer or Professional liquidity of 1.00% or more of national
customer volume in multiply-listed equity and ETF options classes in a
month; or (iii) adds Customer or Professional liquidity of 60,000 or
more contracts per day in a month and NOM Market Maker liquidity of
40,000 or more contracts per day in a month. The Exchange is proposing
to continue to pay a $0.48 per contract rebate for Tier 8 and amend the
criteria to qualify for this rebate tier. The Exchange proposes to pay
the Tier 8 rebate to a Participant that: (i) has Total Volume of
325,000 or more contracts per day in a month (as is the case today); or
(ii) has Total Volume of 200,000 or more contracts per day in a month
of which 70,000 or more contracts per day in a month must be Customer
and/or Professional liquidity; or (iii) adds Customer or Professional
liquidity of 1.00% or more of national customer volume in multiply-
listed equity and ETF options classes in a month (as is the case
today). The Exchange would eliminate the criteria whereby a Participant
can achieve the Tier 8 rebate by adding Customer or Professional
liquidity of 60,000 or more contracts per day in a month and NOM Market
Maker liquidity of 40,000 or more contracts per day per month. The
Exchange believes that Participants will be incentivized to achieve a
Tier 8 rebate as they are today and additional Participants may be able
to qualify with the new criteria, which focuses on Customer and/or
Professional liquidity.
---------------------------------------------------------------------------
\7\ Total Volume is defined as Customer, Professional, Firm,
Broker-Dealer, Non-NOM Market Maker and NOM Market Maker volume in
Penny Pilot Options or Non-Penny Pilot Options which either adds or
removes liquidity on NOM. See Chapter XV, Section 2(1) of the NOM
Rules.
---------------------------------------------------------------------------
The Exchange is also proposing to make a technical amendment to the
Penny Pilot Options Customer and Professional Rebates to Add Liquidity
to clarify the text of these rebates. The Exchange today permits
Participants to add Customer or Professional liquidity for Tiers 1
through 7. Participants may add either Customer or Professional
liquidity to qualify for these rebate tiers. The Exchange proposes to
add the words ``/or'' to clarify that Customer and/or Professional
liquidity may be added to Tiers 1 through 5. The Exchange also proposes
to amend Tiers 6 and 7 in similar fashion to add``and/'' to specify
Customer or Professional liquidity may be added. Similarly the Exchange
proposes to add the word ``and/'' in note 2 of Section (2)(1) of
Chapter XV which provides that ``[a] Participant that adds Firm, Non-
NOM Market Maker or Broker-Dealer liquidity in Penny Pilot Options or
Non-Penny Pilot Options of 15,000 contracts per day or more in a given
month will receive a Rebate to Add Liquidity in Penny Pilot Options of
$0.20 per contract and will pay a Fee for Adding Liquidity in Non-Penny
Pilot Options of $0.36 per contract.'' This would make clear that a
Participant may add Penny and/or Non-Penny Pilot Options to qualify for
the rebate. Finally, the Exchange proposes a similar amendment to note
b in Section 2(1) Chapter XV which provides that ``[f]or purposes of
Tiers 6, 7 and 8, ``Total Volume'' shall be defined as Customer,
Professional, Firm, Broker-Dealer, Non-NOM Market Maker and NOM Market
Maker volume in Penny Pilot Options and Non-Penny Pilot Options which
either adds or removes liquidity on NOM.'' The Exchange would add the
words ``/or'' to make clear that Total Volume can consist of Penny
Pilot Options or Non-Penny Pilot Options. The Exchange believes that
these amendments will provide greater clarity to the pricing. The
Exchange otherwise does not propose to amend Tiers 1 through 7 of the
Customer and Professional Rebates to Add Liquidity in Penny Pilot
Options.
Today, the Exchange offers a four-tiered Rebate to Add Liquidity in
Penny Pilot Options to NOM Market Makers as follows:
------------------------------------------------------------------------
Rebate to add
Monthly volume liquidity
------------------------------------------------------------------------
Tier 1........................ Participant adds NOM $0.25
Market Maker
liquidity in Penny
Pilot Options of up
to 39,999 contracts
per day in a month.
Tier 2........................ Participant adds NOM 0.30
Market Maker
liquidity in Penny
Pilot Options of
40,000 to 109,999
contracts per day in
a month.
Tier 3........................ Participant and its 0.37
affiliate under
Common Ownership
qualify for Tier 8 of
the Customer and
Professional Rebate
to Add Liquidity in
Penny Pilot Options.
Tier 4........................ Participant adds NOM 0.28 or $0.38 in
Market Maker the following
liquidity in Penny symbols BAC,
Pilot Options of GLD, IWM, QQQ
110,000 or more and VXX or
contracts per day in $0.40 in SPY.
a month.
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[[Page 41457]]
The Exchange proposes to amend the Tier 2 NOM Market Maker Rebate
to Add Liquidity in Penny Pilot Options which currently pays a $0.30
per contract rebate to a Participant that adds NOM Market Maker
liquidity in Penny Pilot Options of 40,000 to 109,999 contracts per day
in a month to 40,000 to 69,999 contracts per day in a month to achieve
the same rebate.
The Exchange also proposes to amend the Tier 3 NOM Market Maker
Rebate to Add Liquidity in Penny Pilot Options which currently pays a
$0.37 per contract rebate to reduce that rebate to $0.32 per contract
and amend the criteria to qualify for a Tier 3 rebate. Currently, a
Participant and its affiliate under Common Ownership \8\ that qualify
for Tier 8 of the Customer and Professional Rebate to Add Liquidity in
Penny Pilot Options qualify for a Tier 3 NOM Market Maker Rebate to Add
Liquidity in Penny Pilot Options. The Exchange is proposing to
eliminate the current Tier 3 criteria and instead pay the new $0.32 per
contract NOM Market Maker Rebate to Add Liquidity in Penny Pilot
Options to Participants that add NOM Market Maker liquidity in Penny
Pilot Options of 70,000 to 99,999 contracts per day in a month.
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\8\ The term ``Common Ownership'' is defined in Chapter XV of
the NOM Rules as Participants under 75% common ownership or control.
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The Exchange also proposes to amend the Tier 4 NOM Market Maker
Rebate to Add Liquidity in Penny Pilot Options which currently pays
rebate of $0.28 \9\ or $0.38 per contract in the following symbols,
Bank of America Corporation (``BAC''), SPDR Gold Shares (``GLD''),
iShares Russell 2000 Index (``IWM''), PowerShares QQQ (``QQQ''), iPath
S&P 500 VIX ST Futures ETN (``VXX''), or $0.40 per contract in SPDR S&P
500 (``SPY'') if Participants add NOM Market Maker liquidity in Penny
Pilot Options of 110,000 or more contracts per day in a month. The
Exchange is proposing to increase the Tier 4 rebate of $0.28 per
contract, which is paid on all qualifying Penny Pilot Options,
excluding BAC, GLD, IWM, QQQ, VXX and SPY, to $0.32 per contract.\10\
In addition, the Exchange proposes to decrease the requisite number of
contracts that a Participant must add in NOM Market Maker liquidity in
Penny Pilot Options to achieve a Tier 4 rebate from 110,000 to 100,000
or more contracts per day in a month.
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\9\ The $0.28 per contract Tier 4 NOM Market Maker rebate would
be paid on all qualifying Penny Pilot Options, excluding BAC, GLD,
IWM, QQQ, VXX and SPY.
\10\ The Exchange is not proposing to amend the $0.38 per
contract rebate in BAC, GLD, IWM, QQQ or VXX or the $0.40 per
contract rebate in SPY.
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The Exchange is not proposing to amend the Tier 1 NOM Market Maker
Rebate to Add Liquidity in Penny Pilot Options. The Exchange would also
eliminate the text referencing Tiers 3 and 4 of the NOM Market Maker
Rebate to Add Liquidity in Penny Pilot Options which provides that
``[i]n the instance that a Participant qualifies for both a Tier 3 and
a Tier 4 NOM Market Maker Penny Pilot Option rebate, the Exchange would
pay the Participant the Tier 3 rebate unless the Participant is
eligible for an increased rebate in one of the following symbols: BAC,
GLD, IWM, QQQ, VXX and SPY, in which case the Tier 4 rebate would be
applied.'' This language is no longer necessary because a Participant
would not be able to qualify for both a Tier 3 and a Tier 4 rebate with
the proposed changes.
The Exchange believes that the amendment to the NOM Market Maker
Rebate to Add Liquidity will continue to incentivize NOM Market Makers
to post liquidity on the Exchange.
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\11\ in general, and with
Section 6(b)(4) of the Act,\12\ in particular, in that they provide for
the equitable allocation of reasonable dues, fees and other charges
among Participants and issuers and other persons using any facility or
system which NASDAQ operates or controls as described in detail below.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange's proposal to amend the Customer, Professional and NOM
Market Maker Penny Pilot Options Rebates to Add Liquidity are
reasonable because the Exchange will continue to offer competitive
Customer, Professional and NOM Market Maker rebates in order to attract
liquidity to the market to the benefit of all market participants. The
Exchange believes that offering Customers and Professionals and NOM
Market Makers the opportunity to earn higher rebates is reasonable
because by incentivizing Participants to select the Exchange as a venue
to post Customer and Professional liquidity will attract additional
order flow to the benefit of all market participants and incentivizing
NOM Market Makers to post liquidity will also benefit participants
through increased order interaction.
The Exchange believes that the amendments to the Penny Pilot
Options Rebates to Add Liquidity are equitable and not unfairly
discriminatory for various reasons. The Exchange believes that
continuing to pay Customers and Professionals tiered Rebates to Add
Liquidity in Penny Pilot Options, as proposed herein, is equitable and
not unfairly discriminatory as compared to other market participants.
Pursuant to this proposal, the Exchange would pay the highest Tier 1
Rebates to Add Liquidity in Penny Pilot Options of $0.25 per contract
to Customers, Professionals and NOM Market Makers for transacting one
qualifying contract as compared to other market participants.\13\ The
Exchange believes that Customers are entitled to higher rebates because
Customer order flow brings unique benefits to the market through
increased liquidity which benefits all market participants. The
Exchange believes that continuing to offer Professionals the same Penny
Pilot Options Rebates to Add Liquidity as Customers is equitable and
not unfairly discriminatory for the reasons which follow. The Exchange
believes that offering Professionals the opportunity to earn the same
rebates as Customers, as is the case today, and higher rebates as
compared to Firms, Broker-Dealers and Non-NOM Market Makers, and in
some cases NOM Market Makers, is equitable and not unfairly
discriminatory because the Exchange does not believe that the amount of
the rebate offered by the Exchange has a material impact on a
Participant's ability to execute orders in Penny Pilot Options. By
offering Professionals, as well as Customers, higher rebates, the
Exchange hopes to simply remain competitive with other venues so that
it remains a choice for market participants when posting orders and the
result may be additional Professional order flow for the Exchange, in
addition to increased Customer order flow. A Participant may not be
able to gauge the exact rebate tier it would qualify for until the end
of the month because Professional volume would be commingled with
Customer volume in calculating tier volume.\14\ A Professional could
only otherwise presume the Tier 1 rebate would be achieved in a month
when determining
[[Page 41458]]
price.\15\ Further, the Exchange initially established Professional
pricing in order to ``. . . bring additional revenue to the Exchange.''
\16\ The Exchange noted in the Professional Filing that it believes ``.
. . that the increased revenue from the proposal would assist the
Exchange to recoup fixed costs.'' \17\ The Exchange also noted in that
filing that it believes that establishing separate pricing for a
Professional, which ranges between that of a customer and market maker,
accomplishes this objective.\18\ The Exchange does not believe that
providing Professionals with the opportunity to obtain higher rebates
equivalent to that of a Customer creates a competitive environment
where Professionals would be necessarily advantaged on NOM as compared
to NOM Market Makers, Firms, Broker-Dealers or Non-NOM Market Makers.
Also, a Professional is assessed the same fees as other market
participants, except Customers and NOM Market Makers, as discussed
herein.\19\ For these reasons, the Exchange believes that continuing to
offer Professionals the same rebates as Customers is equitable and not
unfairly discriminatory. Finally, the Exchange believes that NOM Market
Makers should be offered the opportunity to earn higher rebates as
compared to Non-NOM Market Makers, Firms and Broker Dealers \20\
because NOM Market Makers add value through continuous quoting \21\ and
the commitment of capital.
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\13\ Firms, Non-NOM Market Makers and Broker-Dealers receive a
$0.10 per contract Penny Pilot Option Rebate to Add Liquidity. In
addition, Participant that adds Firm, Non-NOM Market Maker or
Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options of 15,000 contracts per day or more in a given month
will receive a Rebate to Add Liquidity in Penny Pilot Options of
$0.20 per contract.
\14\ Customer and Professional volume is aggregated for purposes
of determining which rebate tier a Participant qualifies for with
respect to the Professional Rebate to Add Liquidity in Penny Pilot
Options.
\15\ A Professional would be unable to determine the exact
rebate that would be paid on a transaction by transaction basis with
certainty until the end of a given month when all Customer and
Professional volume is aggregated for purposes of determining which
tier the Participant qualified for in a given month.
\16\ See Securities Exchange Act Release No. 64494 (May 13,
2011), 76 FR 29014 (May 19, 2011) (SR-NASDAQ-2011-066)
(``Professional Filing''). In this filing, the Exchange addressed
the perceived favorable pricing of Professionals who were assessed
fees and paid rebates like a Customer prior to the filing. The
Exchange noted in that filing that a Professional, unlike a retail
Customer, has access to sophisticated trading systems that contain
functionality not available to retail Customers.
\17\ See Securities Exchange Act Release No. 64494 (May 13,
2011), 76 FR 29014 (May 19, 2011) (SR-NASDAQ-2011-066).
\18\ See Securities Exchange Act Release No. 64494 (May 13,
2011), 76 FR 29014 (May 19, 2011) (SR-NASDAQ-2011-066). The Exchange
noted in this filing that it believes the role of the retail
customer in the marketplace is distinct from that of the
professional and the Exchange's fee proposal at that time accounted
for this distinction by pricing each market participant according to
their roles and obligations.
\19\ The Fee for Removing Liquidity in Penny Pilot Options is
$0.48 per contract for all market participants, except Customers and
NOM Market Makers. Customers are assessed $0.45 per contract and NOM
Market Makers would continue to be assessed $0.47 per contract.
\20\ Firms, Non-NOM Market Makers and Broker-Dealers are paid a
$0.10 per contract Rebate to Add Liquidity in Penny Pilot Options
and have the opportunity to earn a higher Penny Pilot Options Rebate
to Add Liquidity of $0.20 per contact if they transact 15,000
contracts per day or more in a given month of Penny Pilot Options or
Non-Penny Pilot Options liquidity.
\21\ Pursuant to Chapter VII (Market Participants), Section 5
(Obligations of Market Makers), in registering as a market maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Further, all Market
Makers are designated as specialists on NOM for all purposes under
the Act or rules thereunder. See Chapter VII, Section 5.
---------------------------------------------------------------------------
The Exchange's proposal to amend the Customer and Professional
Rebates to Add Liquidity in Penny Pilot Options is reasonable because
the Exchange is offering Participants meaningful incentives to increase
their participation on NOM in terms of higher Penny Pilot Options
Rebates to Add Liquidity. The Exchange's proposal to amend Tier 8 to
eliminate the criteria which qualifies a Participant that adds Customer
or Professional liquidity of 60,000 or more contracts per day in a
month and NOM Marker Maker liquidity of 40,000 or more contracts per
day in a month to a $0.48 per contract rebate and replace that criteria
with new criteria that pays the same rebate if the Participant has
Total Volume of 200,000 or more contracts per day in a month, of which
70,000 or more contracts per day in a month must be Customer and/or
Professional liquidity is reasonable because it should continue to
incentivize Participants to add liquidity on NOM. The new criteria
focuses on Total Volume which consists of Customer, Professional, Firm,
Broker-Dealer, Non-NOM Market Maker and NOM Market Maker volume in
Penny Pilot Options and/or Non-Penny Pilot Options which either adds or
removes liquidity on NOM. The Exchange believes that offering
Participants an option to transact a lower amount of Total Volume
(200,000 contracts) as compared to the 325,000 contracts of Total
Volume, which would also qualify a Participant for a Tier 8 rebate, and
also requiring that 70,000 of that Total Volume be comprised of
Customer and/or Professional liquidity further incentivizes
Participants to add Customer and Professional liquidity to NOM. The
criteria that is being eliminated required 60,000 or more contracts per
day of Customer and/or Professional liquidity and 40,000 or more
contracts of NOM Market Maker liquidity. The Exchange believes that it
is reasonable to incentivize Participants to add a greater amount of
Customer and/or Professional liquidity combined with other volume as a
means to qualify for the Tier 8 rebate. This proposal only impacts one
of the ways in which a Participant may qualify for the Tier 8 rebate.
Participants that today do not qualify for the Tier 8 rebate may be
able to qualify with the new criteria. In addition, other exchanges
employ similar incentive programs.\22\
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\22\ See CBOE Fees Schedule. CBOE offers each Trading Permit
Holder (``TPH'') a credit for each public customer order transmitted
by the TPH which is executed electronically in all multiply-listed
option classes, excluding QCC trades and executions related to
contracts that are routed to one or more exchanges in connection
with the Options Order Protection and Locked/Crossed Market Plan,
provided the TPH meets certain percentage thresholds in a month as
described in the Volume Incentive Program. See also Phlx's Pricing
Schedule at Section B which contains the Customer Rebate Program.
---------------------------------------------------------------------------
The Exchange's proposal to amend Tier 8 to eliminate the criteria
which qualifies a Participant that adds Customer or Professional
liquidity of 60,000 or more contracts per day in a month and NOM Marker
Maker liquidity of 40,000 or more contracts per day in a month to a
$0.48 per contract rebate and replace that criteria with new criteria
that pays the same rebate if the Participant has Total Volume of
200,000 or more contracts per day in a month, of which 70,000 or more
contracts per day in a month must be Customer and/or Professional
liquidity is equitable and not unfairly discriminatory because this
amendment will be applied to all market participants in a uniform
matter. Any market participant is eligible to receive the rebate
provided they transact a qualifying amount of Customer and Professional
volume in Penny Pilot Options.
The Exchange's proposal to amend the NOM Market Maker Rebates to
Add Liquidity in Penny Pilot Options is reasonable because it should
incentivize NOM Market Makers to post liquidity on NOM. NOM Market
Makers are valuable market participants that provide liquidity in the
marketplace and incur costs unlike other market participants. The
Exchange believes that encouraging NOM Market Makers to be more
aggressive when posting liquidity benefits all market participants
through increased liquidity. The Exchange believes that the NOM Market
Maker rebate proposal is equitable and not unfairly discriminatory
because it does not misalign the current rebate structure because NOM
Market Makers will continue to earn higher rebates as compared to
Firms, Non-NOM Market Makers and Broker-Dealers and will earn the same
or lower rebates as
[[Page 41459]]
compared to Customers and Professionals.\23\
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\23\ The Tier 1 NOM Market Maker Rebate to Add Liquidity in
Penny Pilot Options is the same rebate as the proposed Tier 1
Customer and Professional rebate in Penny Pilot Options.
---------------------------------------------------------------------------
The Exchange's proposal to amend the number of qualifying contracts
in Tier 2 of the NOM Market Maker Penny Pilot Options Rebate to Add
Liquidity from 40,000 to 109,999 contracts to 40,000 to 69,999
contracts per day in a month is reasonable because today Participants
that transact between 40,000 to 69,999 contracts of NOM Market Maker
Penny Pilot Options would continue to qualify for Tier 2 and
Participants that qualify from 70,000 to 109,999 contracts would
qualify for the new proposed Tier 3 rebate of $0.32 per contract.
The Exchange's proposal to amend the Tier 3 rebate, which currently
requires a Participant and its affiliate under Common Ownership that
qualify for Tier 8 of the Customer and Professional Rebate to Add
Liquidity in Penny Pilot Options to receive a Tier 3 rebate of $0.37
per contract, and replace it with new criteria which requires that a
Participant add NOM Market Maker liquidity in Penny Pilot Options of
70,000 to 99,999 contracts per day in a month to qualify for a new Tier
3 rebate rate of $0.32 per contract is reasonable because it would
increase the rebate paid to certain Participants who currently
qualifying for a Tier 2 rebate. Also, those Participants and its
affiliate under Common Ownership that qualify for a Tier 8 rebate would
continue to receive the Customer and Professional Rebates to Add
Liquidity in Penny Pilot Options rebate and may separately qualify for
another NOM Market Maker Rebate to Add Liquidity in Penny Pilot
Options. The Exchange is offering a different rebate incentive to
remain competitive while continuing to encourage NOM Market Makers to
aggressively post liquidity on NOM.
The Exchange's proposal to amend Tier 4 to lower the number of NOM
Market Maker Penny Pilot Options contract from 110,000 to 100,000 is
reasonable because additional Participants may be able to qualify for a
Tier 4 NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options.
The Exchange also believes that the proposal to pay an increased Tier 8
rebate of $0.32 per contract as compared to $0.28 per contract for all
symbols excluding BAC, GLD, IWM, QQQ, VXX \24\ and SPY \25\ is
reasonable because the increased rebate should encourage other market
participants to add NOM Marker Maker liquidity to obtain a higher
rebate in certain symbols.
---------------------------------------------------------------------------
\24\ These symbols pay a $0.38 per contract rebate.
\25\ SPY pays a $0.40 per contract rebate.
---------------------------------------------------------------------------
The Exchange believes offering NOM Market Makers the opportunity to
receive higher rebates as compared to Firms, Non-NOM Market Makers and
Broker-Dealers is equitable and not unfairly discriminatory because all
NOM Market Makers may qualify for the NOM Market Maker rebate tiers and
every NOM Market Maker is entitled to a rebate solely by adding one
contract of NOM Market Maker liquidity on NOM. Also, as mentioned, the
NOM Market Maker would receive the same rebate in Tier 1 as compared
Customers and Professionals and a higher rebate in all other tiers as
compared to a Firm, Non-NOM Market Maker or Broker-Dealer because of
the obligations \26\ borne by NOM Market Makers as compared to other
market participants. Encouraging NOM Market Makers to add greater
liquidity benefits all Participants in the quality of order
interaction.
---------------------------------------------------------------------------
\26\ See note 21.
---------------------------------------------------------------------------
The Exchange believes that it is equitable and not unfairly
discriminatory to amend the Tier 2, 3 and 4 rebate criteria to qualify
for those rebates as well as the Tier 4 rebate rate for certain symbols
because those amendments will apply uniformly to all participants. The
Exchange believes that it is reasonable, equitable, and not unfairly
discriminatory to adopt specific pricing for BAC, GLD, IWM, QQQ, VXX
and SPY because pricing by symbol is a common practice on many U.S.
options exchanges as a means to incentivize order flow to be sent to an
exchange for execution in the most actively traded options classes, in
this case actively traded Penny Pilot Options.\27\ The Exchange notes
that BAC, GLD, IWM, QQQ, VXX and SPY are some of the most actively
traded options in the U.S.
---------------------------------------------------------------------------
\27\ See Phlx's Pricing Schedule. See also the International
Securities Exchange LLC's Fee Schedule. Both of these markets
segment pricing by symbol.
---------------------------------------------------------------------------
The Exchange's proposal to add language throughout Section 2(1) of
Chapter XV to clarify the rule text with respect to adding liquidity is
reasonable, equitable and not unfairly discriminatory because the
amendments provide clarity to the rule text. The Exchange's proposal to
eliminate text related to qualifying for both Tier 3 and Tier 4 NOM
Market Maker rebates is reasonable, equitable and not unfairly
discriminatory because the text is no longer necessary because a
Participant could no longer achieve both rebates in a given month.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule changes will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
Customers have traditionally been paid the highest rebates offered
by options exchanges. While the Exchange's proposal results in a
Professional receiving the same or a higher rebate as compared to a NOM
Market Maker, in certain circumstances, the Exchange does not believe
the proposed rebate tiers would result in any burden on competition as
between market participants. The Exchange believes that offering
Customers and Professionals the proposed tiered rebates creates
competition among options exchanges because the Exchange believes that
the rebates may cause market participants to select NOM as a venue to
send Customer and Professional order flow. The Exchange believes that
incentivizing NOM Market Makers to post liquidity on NOM benefits
market participants through increased order interaction. Also, NOM
Market Makers have obligations \28\ to the market which are not borne
by other market participants and therefore the Exchange believes that
NOM Market Makers are entitled to a lower fee.
---------------------------------------------------------------------------
\28\ See note 21.
---------------------------------------------------------------------------
The proposed amendments does not misalign the current rebate
structure because NOM Market Makers will continue to earn higher
rebates as compared to Firms, Non-NOM Market Makers and Broker-Dealers
and will earn the same or lower rebates as compared to Customers and
Professionals.
The Exchange believes the differing outcomes, rebates and fees
created by the Exchange's proposed pricing incentives contribute to the
overall health of the market place for the benefit of all Participants
that willing choose to transact options on NOM. For the reasons
specified herein, the Exchange does not believe this proposal creates
an undue burden on competition. The Exchange operates in a highly
competitive market comprised of eleven U.S. options exchanges in which
many sophisticated and knowledgeable market participants can readily
and do send order flow to competing exchanges if they deem fee levels
or rebate incentives at a particular exchange to be excessive or
inadequate. These market forces support the Exchange belief that the
proposed rebate structure and tiers proposed herein are competitive
with
[[Page 41460]]
rebates and tiers in place on other exchanges. The Exchange believes
that this competitive marketplace continues to impact the rebates
present on the Exchange today and substantially influences the
proposals set forth above.
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.\29\ 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.
---------------------------------------------------------------------------
\29\ 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-2013-091 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-2013-091. 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-2013-091, and should
be submitted on or before July 31, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-16530 Filed 7-9-13; 8:45 am]
BILLING CODE 8011-01-P
