Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees, 75657-75659 [2013-29607]
Download as PDF
Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / 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–NYSEArca–2013–136 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.
maindgalligan on DSK5TPTVN1PROD with NOTICES
All submissions should refer to File
Number SR–NYSEArca–2013–136. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at 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–
NYSEArca–2013–136, and should be
submitted on or before January 2, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–29615 Filed 12–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71008; File No. SR–
NASDAQ–2013–146]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Routing Fees
December 6, 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 November
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, Section 2, entitled ‘‘NASDAQ
Options Market—Fees and Rebates,’’
which governs pricing for NASDAQ
members using the NASDAQ Options
Market (‘‘NOM’’), NASDAQ’s facility for
executing and routing standardized
equity and index options, to amend
Routing Fees.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on December 2, 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.
1 15
15 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
16:45 Dec 11, 2013
2 17
Jkt 232001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00115
Fmt 4703
Sfmt 4703
75657
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to amend
the Routing Fees in Section 2(3) of
Chapter XV in order to recoup costs the
Exchange incurs for routing and
executing certain orders in equity
options to away markets. Today, the
Exchange assesses a Non-Customer a
$0.95 per contract Routing Fee to any
options exchange. The Customer
Routing Fee for option orders routed to
NASDAQ OMX PHLX LLC (‘‘PHLX’’) is
a $0.05 per contract Fixed Fee in
addition to the actual transaction fee
assessed. The Customer Routing Fee for
option orders routed to NASDAQ OMX
BX, Inc. (‘‘BX Options’’) is $0.00 per
contract. The Customer Routing Fee for
option orders routed to all other options
exchanges 3 (excluding PHLX and BX
Options) is a fixed fee of $0.15 per
contract (‘‘Fixed Fee’’) in addition to the
actual transaction fee assessed. If the
away market pays a rebate, the Routing
Fee is $0.00 per contract.4
The Exchange proposes to increase
the Customer Routing Fixed Fee of
$0.15 per contract when an option order
is routed to all other exchanges to $0.20
per contract. With respect to the fixed
costs, the Exchange incurs a fee when it
utilizes Nasdaq Options Services LLC
(‘‘NOS’’), a member of the Exchange and
the Exchange’s exclusive order router.5
Each time NOS routes an order to an
away market, NOS is charged a clearing
fee 6 and, in the case of certain
exchanges, a transaction fee is also
charged in certain symbols, which fees
are passed through to the Exchange. The
Exchange currently recoups clearing
and transaction charges incurred by the
Exchange as well as certain other costs
incurred by the Exchange when routing
to away markets, such as administrative
and technical costs associated with
operating NOS, membership fees at
3 Including BATS Exchange, Inc. (‘‘BATS’’), BOX
Options Exchange LLC (‘‘BOX’’), the Chicago Board
Options Exchange, Incorporated (‘‘CBOE’’), C2
Options Exchange, Incorporated (‘‘C2’’),
International Securities Exchange, LLC (‘‘ISE’’), the
Miami International Securities Exchange, LLC
(‘‘MIAX’’), NYSE Arca, Inc. (‘‘NYSE Arca’’), NYSE
MKT LLC (‘‘NYSE Amex’’) and Topaz Exchange,
LLC (‘‘Gemini’’).
4 For all Routing Fees, the transaction fee will
continue to be based on the away market’s actual
transaction fee or rebate for particular market
participants and in the case that there is no
transaction fee or rebate assessed by the away
market, the fixed fee.
5 See NASDAQ Rules at Chapter VI, Section 11(e)
(Order Routing).
6 The Options Clearing Corporation (‘‘OCC’’)
assesses $0.01 per contract side.
E:\FR\FM\12DEN1.SGM
12DEN1
75658
Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
2. Statutory Basis
NASDAQ believes that its proposal to
amend its Pricing Schedule is consistent
with Section 6(b) of the Act 8 in general,
and furthers the objectives of Section
6(b)(4) and (b)(5) of the Act 9 in
particular, in that it provides for the
equitable allocation of reasonable dues,
fees and other charges among members
and issuers and other persons using any
facility or system which NASDAQ
operates or controls, and is not designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes that the
proposed Routing Fees are reasonable
because they seek to recoup costs that
are incurred by the Exchange when
routing Customer, Firm, Market Maker
and Professional orders to away markets
on behalf of members. Each destination
market’s transaction charge varies and
there is a cost incurred by the Exchange
when routing orders to away markets.
The costs to the Exchange include
clearing costs, administrative and
technical costs associated with
operating NOS, membership fees at
away markets, ORFs and technical costs
associated with routing options. The
Exchange believes that the proposed
Routing Fees would enable the
Exchange to recover the costs it incurs
to route orders to away markets in
addition to transaction fees assessed to
market participants for the execution of
Customer, Firm, Market Maker and
Professional orders by the away market.
Specifically, new entrants have added
costs associated with routing.10 The
Exchange believes that it is reasonable
to recoup these costs borne by the
Exchange on each transaction. The
$0.20 per contract Customer Routing
Fixed Fee, which is assessed when an
option order is routed to all other
exchanges, represents the overall cost to
the Exchange for technical,
administrative, clearing, regulatory,
compliance and other costs, in addition
to the transaction fee assessed by the
away market.
In addition, the Exchange believes
that it is equitable and not unfairly
discriminatory to assess a $0.20 per
contract Customer Routing Fixed Fee
when an option order is routed to all
other exchanges because this fee would
be assessed uniformly on all market
participants in addition to the actual
transaction fees on all orders routed to
non-NASDAQ OMX markets.
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess a fixed cost of
$0.05 per contract to route orders to
PHLX and no cost to route to BX
Options because the cost, in terms of
actual cash outlays, to the Exchange to
route to those markets is lower. For
example, costs related to routing to
PHLX and BX Options are lower as
compared to other away markets
because NOS is utilized by all three
exchanges to route orders.11 NOS and
the three NASDAQ OMX options
(PHLX, BX Options and NOM) markets
have a common data center and staff
that are responsible for the day-to-day
operations of NOS. Because the three
exchanges are in a common data center,
Routing Fees are reduced because costly
expenses related to, for example,
telecommunication lines to obtain
connectivity are avoided when routing
orders in this instance. The costs related
to connectivity to route orders to other
NASDAQ OMX exchanges are de
minimis. When routing orders to nonNASDAQ OMX exchanges, the
Exchange incurs costly connectivity
charges related to telecommunication
lines and other related costs. The
Exchange believes it is reasonable,
equitable and not unfairly
discriminatory to pass along savings
realized by leveraging NASDAQ OMX’s
infrastructure and scale to market
participants when those orders are
routed to PHLX and BX Options. Orders
are routed to away markets in
accordance with Exchange rules based
on price.12 Market participants may
submit orders to the Exchange as
ineligible for routing or ‘‘DNR’’ to avoid
incurring the Routing Fees proposed
herein.13
7 Gemini adopted an ORF of $0.0010 per contract.
See Securities Exchange Act Release No. 70200
(August 14, 2013), 78 FR 51242 (August 20, 2013)
(SR–Topaz–2013–01).
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(4), (5).
10 See note 8 [sic].
11 See Chapter VI, Section 11 of the NASDAQ and
BX Options Rules and PHLX Rule 1080(m)(iii)(A).
12 See NASDAQ Rules at Chapter XII (Options
Order Protection and Locked and Crossed Market
Rules).
13 See NASDAQ Rules at Chapter VI, Section
11(e) (Order Routing).
maindgalligan on DSK5TPTVN1PROD with NOTICES
away markets, Options Regulatory Fees
(‘‘ORFs’’) and technical costs associated
with routing options. The Exchange
assesses the actual away market fee at
the time that the order was entered into
the Exchange’s trading system. This
transaction fee would be calculated on
an order-by-order basis since different
away markets charge different amounts.
A new market entrant recently
adopted an ORF.7 The Exchange
proposes to increase its Fixed Fee from
$0.15 to $0.20 per contract to recoup
costs associated with increased costs.
VerDate Mar<15>2010
16:45 Dec 11, 2013
Jkt 232001
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act. The Exchange
believes that the rule change would
allow the Exchange to recoup its costs
when routing orders designated as
available for routing by the market
participant. NOM Participants may
choose to mark the order as ineligible
for routing to avoid incurring these
fees.14 Today, other options exchanges
also assess similar fees to recoup costs
incurred when routing orders to away
markets.
With respect to continuing to route
orders to PHLX and BX Options at a
lower cost as compared to other away
markets, the Exchange does not believe
that the proposed amendments to
increase those fees, while maintaining
the same fee differential imposes a
burden because all market participants
would be assessed the same fees
depending on the away market. Also,
the Exchange is proposing to recoup
costs incurred only when members
request the Exchange route their orders
to an away market. The Exchange is
passing along savings realized by
leveraging NASDAQ OMX’s
infrastructure and scale to market
participants when those orders are
routed to Phlx and BX Options and is
providing those saving to all market
participants. Finally, the Exchange
routes orders to away markets where the
Exchange’s disseminated bid or offer is
inferior to the national best bid (best
offer) price and based on price first.15
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.16 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
14 See NASDAQ Rules at Chapter VI, Section
11(e) (Order Routing).
15 See NASDAQ Rules at Chapter XII (Options
Order Protection and Locked and Crossed Market
Rules).
16 15 U.S.C. 78s(b)(3)(A)(ii).
E:\FR\FM\12DEN1.SGM
12DEN1
Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
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:
maindgalligan on DSK5TPTVN1PROD with NOTICES
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–2013–146 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–2013–146. 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–
VerDate Mar<15>2010
16:45 Dec 11, 2013
Jkt 232001
NASDAQ–2013–146 and should be
submitted on or before January 2, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–29607 Filed 12–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71022; File No. SR–OCC–
2013–17]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving Proposed Rule Change
Concerning Charters for the Board of
Directors, the Membership/Risk
Committee, the Audit Committee and
the Performance Committee
December 6, 2013.
I. Introduction
On October 17, 2013, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–OCC–2013–17 pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The proposed rule
change was published for comment in
the Federal Register on October 30,
2013.3 The Commission received no
comments concerning the proposed rule
change. For the reasons set forth below,
the Commission is approving the
proposed rule change.
II. Description
The proposed rule change concerns
the charter of OCC’s Board of Directors
(‘‘Board’’), as well as the charters of the
Board’s Membership/Risk Committee
(‘‘MRC’’), Audit Committee (‘‘AC’’), and
Performance Committee (‘‘PC’’)
(collectively, ‘‘Committee Charters’’).4
Board of Directors Charter
The Board’s new charter (‘‘Board
Charter’’) does not impose any new
responsibilities on the Board, but rather
reflects the existing powers and duties
of the Board under OCC’s By-Laws and
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 70753
(October 24, 2013), 78 FR 65027 (October 30, 2013)
(SR–OCC–2013–17).
4 OCC’s Board adopted its charter on March 7,
2013. Although OCC has had charters for its MRC,
AC, and PC in place for a number of years, it has
not previously submitted those as proposed rule
changes pursuant to Section 19(b) of the Act.
1 15
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
75659
Rules, as well as the underlying
practices that have been developed to
aid the Board in meeting its obligations.
According to OCC, the Board adopted a
charter in an effort to provide outside
parties with greater transparency into
the Board’s oversight activities, to
promote accountability, and to align
OCC with current best practices in
corporate governance.
The Board Charter addresses the
organization, composition, authority,
functions, and responsibilities of the
Board. With respect to membership, the
Board Charter sets forth the size and
composition of the Board, the
qualifications for Board membership,
and the term, tenure, and age limits
applicable to each category of Board
member. The Board Charter also
addresses Board meetings, specifying
that the Board will meet at least five
times annually, that the Chairman of the
Board will establish the agenda for each
meeting in consultation with the
President and Secretary, and that
individual Directors must prepare for
and attend each Board meeting.
Additionally, the Board Charter
incorporates many provisions of OCC’s
existing By-Laws, including those
governing the election, resignation, and
disqualification of Directors,5 the
establishment of Board committees and
subcommittees, and the existence of a
quorum.
The Board Charter also defines the
scope of the Board’s authority,
providing, among other things, that the
Board may make any inquiries it deems
appropriate in executing its duties, and
that the Board may confer with OCC
management or employees as needed.6
The Board Charter reiterates the Board’s
authority under the By-Laws to elect
certain corporate officers annually, to
form such committees and
subcommittees as it deems appropriate,
and to delegate authority to committee
members.
The Board Charter describes the
Board’s cardinal duty as overseeing OCC
to ensure that it is managed and
operates in a manner that is consistent
with OCC’s regulatory responsibilities.
The Board is also tasked with
5 The Board Charter currently reflects that the
Board has one Management Director, who is both
the Chairman of the Board and Chief Executive
Officer of OCC. OCC intends to split the office of
the Chairman into two offices, Executive Chairman
and President, both of whom will be elected as
Management Directors. See Securities Exchange Act
Release No. 70076 (July 30, 2013), 78 FR 47449
(August 5, 2013) (SR–OCC–2013–09).
6 The Chairman is permitted to ask OCC
management or others to attend meetings and
provide pertinent information. The Board may also
hire specialists or rely on outside advisors or
specialists.
E:\FR\FM\12DEN1.SGM
12DEN1
Agencies
[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75657-75659]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29607]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71008; File No. SR-NASDAQ-2013-146]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Routing Fees
December 6, 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 November 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, Section 2, entitled ``NASDAQ
Options Market--Fees and Rebates,'' which governs pricing for NASDAQ
members using the NASDAQ Options Market (``NOM''), NASDAQ's facility
for executing and routing standardized equity and index options, to
amend Routing Fees.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on December 2, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Routing Fees in Section
2(3) of Chapter XV in order to recoup costs the Exchange incurs for
routing and executing certain orders in equity options to away markets.
Today, the Exchange assesses a Non-Customer a $0.95 per contract
Routing Fee to any options exchange. The Customer Routing Fee for
option orders routed to NASDAQ OMX PHLX LLC (``PHLX'') is a $0.05 per
contract Fixed Fee in addition to the actual transaction fee assessed.
The Customer Routing Fee for option orders routed to NASDAQ OMX BX,
Inc. (``BX Options'') is $0.00 per contract. The Customer Routing Fee
for option orders routed to all other options exchanges \3\ (excluding
PHLX and BX Options) is a fixed fee of $0.15 per contract (``Fixed
Fee'') in addition to the actual transaction fee assessed. If the away
market pays a rebate, the Routing Fee is $0.00 per contract.\4\
---------------------------------------------------------------------------
\3\ Including BATS Exchange, Inc. (``BATS''), BOX Options
Exchange LLC (``BOX''), the Chicago Board Options Exchange,
Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''),
International Securities Exchange, LLC (``ISE''), the Miami
International Securities Exchange, LLC (``MIAX''), NYSE Arca, Inc.
(``NYSE Arca''), NYSE MKT LLC (``NYSE Amex'') and Topaz Exchange,
LLC (``Gemini'').
\4\ For all Routing Fees, the transaction fee will continue to
be based on the away market's actual transaction fee or rebate for
particular market participants and in the case that there is no
transaction fee or rebate assessed by the away market, the fixed
fee.
---------------------------------------------------------------------------
The Exchange proposes to increase the Customer Routing Fixed Fee of
$0.15 per contract when an option order is routed to all other
exchanges to $0.20 per contract. With respect to the fixed costs, the
Exchange incurs a fee when it utilizes Nasdaq Options Services LLC
(``NOS''), a member of the Exchange and the Exchange's exclusive order
router.\5\ Each time NOS routes an order to an away market, NOS is
charged a clearing fee \6\ and, in the case of certain exchanges, a
transaction fee is also charged in certain symbols, which fees are
passed through to the Exchange. The Exchange currently recoups clearing
and transaction charges incurred by the Exchange as well as certain
other costs incurred by the Exchange when routing to away markets, such
as administrative and technical costs associated with operating NOS,
membership fees at
[[Page 75658]]
away markets, Options Regulatory Fees (``ORFs'') and technical costs
associated with routing options. The Exchange assesses the actual away
market fee at the time that the order was entered into the Exchange's
trading system. This transaction fee would be calculated on an order-
by-order basis since different away markets charge different amounts.
---------------------------------------------------------------------------
\5\ See NASDAQ Rules at Chapter VI, Section 11(e) (Order
Routing).
\6\ The Options Clearing Corporation (``OCC'') assesses $0.01
per contract side.
---------------------------------------------------------------------------
A new market entrant recently adopted an ORF.\7\ The Exchange
proposes to increase its Fixed Fee from $0.15 to $0.20 per contract to
recoup costs associated with increased costs.
---------------------------------------------------------------------------
\7\ Gemini adopted an ORF of $0.0010 per contract. See
Securities Exchange Act Release No. 70200 (August 14, 2013), 78 FR
51242 (August 20, 2013) (SR-Topaz-2013-01).
---------------------------------------------------------------------------
2. Statutory Basis
NASDAQ believes that its proposal to amend its Pricing Schedule is
consistent with Section 6(b) of the Act \8\ in general, and furthers
the objectives of Section 6(b)(4) and (b)(5) of the Act \9\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility or system which NASDAQ operates or
controls, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------
The Exchange believes that the proposed Routing Fees are reasonable
because they seek to recoup costs that are incurred by the Exchange
when routing Customer, Firm, Market Maker and Professional orders to
away markets on behalf of members. Each destination market's
transaction charge varies and there is a cost incurred by the Exchange
when routing orders to away markets. The costs to the Exchange include
clearing costs, administrative and technical costs associated with
operating NOS, membership fees at away markets, ORFs and technical
costs associated with routing options. The Exchange believes that the
proposed Routing Fees would enable the Exchange to recover the costs it
incurs to route orders to away markets in addition to transaction fees
assessed to market participants for the execution of Customer, Firm,
Market Maker and Professional orders by the away market. Specifically,
new entrants have added costs associated with routing.\10\ The Exchange
believes that it is reasonable to recoup these costs borne by the
Exchange on each transaction. The $0.20 per contract Customer Routing
Fixed Fee, which is assessed when an option order is routed to all
other exchanges, represents the overall cost to the Exchange for
technical, administrative, clearing, regulatory, compliance and other
costs, in addition to the transaction fee assessed by the away market.
---------------------------------------------------------------------------
\10\ See note 8 [sic].
---------------------------------------------------------------------------
In addition, the Exchange believes that it is equitable and not
unfairly discriminatory to assess a $0.20 per contract Customer Routing
Fixed Fee when an option order is routed to all other exchanges because
this fee would be assessed uniformly on all market participants in
addition to the actual transaction fees on all orders routed to non-
NASDAQ OMX markets.
The Exchange believes that it is equitable and not unfairly
discriminatory to assess a fixed cost of $0.05 per contract to route
orders to PHLX and no cost to route to BX Options because the cost, in
terms of actual cash outlays, to the Exchange to route to those markets
is lower. For example, costs related to routing to PHLX and BX Options
are lower as compared to other away markets because NOS is utilized by
all three exchanges to route orders.\11\ NOS and the three NASDAQ OMX
options (PHLX, BX Options and NOM) markets have a common data center
and staff that are responsible for the day-to-day operations of NOS.
Because the three exchanges are in a common data center, Routing Fees
are reduced because costly expenses related to, for example,
telecommunication lines to obtain connectivity are avoided when routing
orders in this instance. The costs related to connectivity to route
orders to other NASDAQ OMX exchanges are de minimis. When routing
orders to non-NASDAQ OMX exchanges, the Exchange incurs costly
connectivity charges related to telecommunication lines and other
related costs. The Exchange believes it is reasonable, equitable and
not unfairly discriminatory to pass along savings realized by
leveraging NASDAQ OMX's infrastructure and scale to market participants
when those orders are routed to PHLX and BX Options. Orders are routed
to away markets in accordance with Exchange rules based on price.\12\
Market participants may submit orders to the Exchange as ineligible for
routing or ``DNR'' to avoid incurring the Routing Fees proposed
herein.\13\
---------------------------------------------------------------------------
\11\ See Chapter VI, Section 11 of the NASDAQ and BX Options
Rules and PHLX Rule 1080(m)(iii)(A).
\12\ See NASDAQ Rules at Chapter XII (Options Order Protection
and Locked and Crossed Market Rules).
\13\ See NASDAQ Rules at Chapter VI, Section 11(e) (Order
Routing).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act. The Exchange believes that the rule change
would allow the Exchange to recoup its costs when routing orders
designated as available for routing by the market participant. NOM
Participants may choose to mark the order as ineligible for routing to
avoid incurring these fees.\14\ Today, other options exchanges also
assess similar fees to recoup costs incurred when routing orders to
away markets.
---------------------------------------------------------------------------
\14\ See NASDAQ Rules at Chapter VI, Section 11(e) (Order
Routing).
---------------------------------------------------------------------------
With respect to continuing to route orders to PHLX and BX Options
at a lower cost as compared to other away markets, the Exchange does
not believe that the proposed amendments to increase those fees, while
maintaining the same fee differential imposes a burden because all
market participants would be assessed the same fees depending on the
away market. Also, the Exchange is proposing to recoup costs incurred
only when members request the Exchange route their orders to an away
market. The Exchange is passing along savings realized by leveraging
NASDAQ OMX's infrastructure and scale to market participants when those
orders are routed to Phlx and BX Options and is providing those saving
to all market participants. Finally, the Exchange routes orders to away
markets where the Exchange's disseminated bid or offer is inferior to
the national best bid (best offer) price and based on price first.\15\
---------------------------------------------------------------------------
\15\ See NASDAQ Rules at Chapter XII (Options Order Protection
and Locked and Crossed Market Rules).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\16\ 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
[[Page 75659]]
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.
---------------------------------------------------------------------------
\16\ 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-2013-146 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-2013-146. 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-2013-146 and should
be submitted on or before January 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29607 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P