Self-Regulatory Organizations; the NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to NASDAQ Options Market Fees and Rebates, 9024-9028 [2014-03250]
Download as PDF
<![CDATA[
9024
Federal Register / Vol. 79, No. 31 / Friday, February 14, 2014 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–03186 Filed 2–13–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71516; File No. SR–
NASDAQ–2014–013]
Self-Regulatory Organizations; the
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
NASDAQ Options Market Fees and
Rebates
February 10, 2014.
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 January
29, 2014, 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: (i)
Amend the Customer Non-Penny Pilot
Options 3 Rebate to Add Liquidity; (ii)
amend the Customer and Professional
Rebates to Add Liquidity in Penny Pilot
Options; 4 and (iii) amend the Penny
Pilot Options Customer Fee for
Removing Liquidity.
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on February 3, 2014.
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.
to add liquidity by earning a higher
Non-Penny Pilot Customer Rebate to
Add Liquidity. The Exchange also
proposes to amend the Tier 8 Rebate to
Add Liquidity to lower the Professional
rebate paid for that tier. While the
Exchange is lowering the Professional
Rebate to Add Liquidity in Penny Pilot
Options, the Exchange believes that the
rebate will continue to encourage
Participants to add volume to earn the
rebate. The Exchange proposes to
increase the Customer Penny Pilot
Options Fee for Removing Liquidity
from $0.45 to $0.47 per contract. Despite
the increase, the Exchange believes this
fee remains competitive.
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.
The Exchange currently pays a
Customer Non-Penny Pilot Rebate to
Add Liquidity of $0.84 per contract.
Non-Customer Participants do not
receive a Non-Penny Pilot Rebate to
Add Liquidity. The Exchange proposes
to pay an additional $0.01 per contract
Non-Penny Pilot Options Customer
Rebate to Add Liquidity (for a total
rebate of $0.85 per contract) to a
Participant that qualifies for a Tier 7 or
8 Customer or Professional Penny Pilot
Options Rebate to Add Liquidity in a
given month. Participants would receive
the additional $0.01 per contract rebate
for each transaction which adds
liquidity in Non-Penny Pilot Options in
that month.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ proposes to amend certain
fees in Chapter XV, Section 2. The
Exchange proposes to amend the NonPenny Pilot Options Customer Rebate to
Add Liquidity to encourage Participants
Non-Penny Pilot Customer Rebate To
Add Liquidity
Penny Pilot Options Customer and
Professional Rebate To Add Liquidity
The Exchange currently pays
Customer and Professional Rebates to
Add Liquidity based on an eight tier
rebate structure as follows:
Rebate to
add liquidity
Monthly volume
Tier 1 Participant adds Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 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 Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above
0.20% to 0.30% of total industry customer equity and ETF option ADV contracts per day in a month ............................................
Tier 3 Participant adds Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above
0.30% to 0.40% of total industry customer equity and ETF option ADV contracts per day in a month ............................................
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Non-Penny Pilot Options pricing includes
options overlying the Nasdaq 100 Index traded
under the symbol NDX.
4 The Penny Pilot was established in March 2008
and in October 2009 was expanded and extended
through June 30, 2014. 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)
mstockstill on DSK4VPTVN1PROD with NOTICES
1 15
VerDate Mar<15>2010
17:47 Feb 13, 2014
Jkt 232001
(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
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
$0.25
0.42
0.43
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); 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); 69787 (June 18, 2013), 78 FR 37858 (June 24,
2013) (SR–NASDAQ–2013–082) and 71105
(December 17, 2013), 78 FR 77530 (December 23,
2013) (SR–NASDAQ–2013–154). See also NOM
Rules, Chapter VI, Section 5.
E:\FR\FM\14FEN1.SGM
14FEN1
Federal Register / Vol. 79, No. 31 / Friday, February 14, 2014 / Notices
Rebate to
add liquidity
Monthly volume
Tier 4 Participant adds Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above
0.40% or more of total industry customer equity and ETF option ADV contracts per day in a month ..............................................
Tier 5 Participant adds (1) Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 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 ..................................................................
Tier 6 Participant has Total Volume of 100,000 or more contracts per day in a month, of which 25,000 or more contracts per day
in a month must be Customer and/or Professional liquidity in Penny Pilot Options ..........................................................................
Tier 7 Participant has Total Volume of 150,000 or more contracts per day in a month, of which 50,000 or more contracts per day
in a month must be Customer and/or Professional liquidity in Penny Pilot Options ..........................................................................
Tier 8 Participant adds Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 0.75%
or more of national customer volume in multiply-listed equity and ETF options classes in a month. ................................................
For purposes of qualifying for a
Customer and Professional Rebate to
Add Liquidity tier, the Exchange
determines the applicable percentage of
total industry customer equity and ETF
option average daily volume by
including the Participant’s Penny Pilot
and Non-Penny Pilot Customer and/or
Professional volume that adds liquidity.
The Exchange is proposing to make
certain amendments to the tiers as noted
below.
The Exchange proposes to amend the
Tier 8 Professional Penny Pilot Options
Rebate to Add Liquidity to reduce the
rebate paid from $0.48 to $0.47 per
contract. Today, the Exchange pays a
$0.48 per contract Customer and
Professional Penny Pilot Options Tier 8
Rebate to Add Liquidity to Participants
that add Customer and/or Professional
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options of 0.75% or
more of national customer volume in
multiply-listed equity and ETF options
classes in a month. The Exchange would
continue to pay a Penny Pilot Options
Rebate to Add Liquidity of $0.48 per
contract to Participants that add
Customer liquidity and qualify for
Tier 8.
mstockstill on DSK4VPTVN1PROD with NOTICES
Customer Penny Pilot Options Fee for
Removing Liquidity
The Exchange proposes to increase
the Penny Pilot Options Customer Fee
for Removing Liquidity from $0.45 to
$0.47 per contract. The Exchange will
continue to assess a NOM Market Maker
a $0.48 per contract Penny Pilot Options
Fee for Removing Liquidity. A
Professional, Firm, Non-NOM Market
Maker and Broker-Dealer will continue
to be assessed $0.49 per contract.
2. Statutory Basis
NASDAQ believes that its proposal to
amend its Pricing Schedule is consistent
with Section 6(b) of the Act 5 in general,
and furthers the objectives of Section
6(b)(4) and (b)(5) of the Act 6 in
5 15
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4), (5).
VerDate Mar<15>2010
17:47 Feb 13, 2014
Jkt 232001
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.
Non-Penny Pilot Customer Rebate To
Add Liquidity
The Exchange’s proposal to pay an
additional $0.01 per contract NonPenny Pilot Options Customer Rebate to
Add Liquidity to a Participant that
qualifies for a Tier 7 or 8 Customer or
Professional Penny Pilot Options Rebate
to Add Liquidity in a given month is
reasonable because the rebate
encourages Participants to qualify for
higher Customer or Professional Penny
Pilot Options rebate tiers in order to also
qualify for an additional Non-Penny
Pilot Options Customer rebate. To
qualify for a Tier 7 rebate, Participants
require Total Volume of 150,000 or
more contracts per day in a month, of
which 50,000 or more contracts per day
in a month must be Customer and/or
Professional liquidity in Penny Pilot
Options. Total Volume is defined as
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. To qualify for a Tier
8 rebate, Participants must add
Customer and/or Professional liquidity
in Penny Pilot Options and/or NonPenny Pilot Options of 0.75% or more
of national customer volume in
multiply-listed equity and ETF options
classes in a month. The Exchange
believes that by encouraging
Participants to qualify for Tier 7 or 8
there will be an incentive to add a
certain amount of Penny and/or NonPenny Pilot Options volume and/or
Customer and/or Professional liquidity,
thereby attracting additional order flow
to the benefit of all market participants.
Today, the Exchange also incentivizes
PO 00000
Frm 00089
Fmt 4703
9025
Sfmt 4703
0.45
0.45
0.45
0.47
0.48
NOM Market Makers to post liquidity,
by offering NOM Market Makers rebates,
which also benefit market participants
through increased order interaction.
Firms, Non-NOM Market Makers and
Broker-Dealers are also offered rebates
under the current pricing structure.
The Exchange’s proposal to pay an
additional $0.01 per contract NonPenny Pilot Options Customer Rebate to
Add Liquidity to a Participant that
qualifies for a Tier 7 or 8 Customer or
Professional Penny Pilot Options Rebate
to Add Liquidity in a given month is
equitable and not unfairly
discriminatory because the Exchange
will pay the additional $0.01 per
contract rebate in addition to the NonPenny Pilot Options Rebate to Add
Liquidity to all Participants that qualify
for a Tier 7 or 8 Customer or
Professional Penny Pilot Options Rebate
to Add Liquidity in a uniform manner.
Today, no other market participant is
entitled to a Non-Penny Pilot Options
Rebate to Add Liquidity other than a
Customer. The Exchange believes that it
is reasonable, equitable and not unfairly
discriminatory to only pay Customers a
rebate in Non-Penny Pilot Options
because Customer order flow is unique
and benefits all market participants
through the increased liquidity that
such order flow brings to the market.
The opportunity to increase the NonPenny Pilot Options rebate will further
encourage the addition of Penny Pilot
and Non-Penny Pilot Options liquidity
as well as Customer and Professional
liquidity.
Customer and Professional Penny Pilot
Option Rebate To Add Liquidity
The Exchange’s proposal to lower the
Tier 8 Professional Penny Pilot Options
Rebate to Add Liquidity from $0.48 to
$0.47 per contract is reasonable because
the Exchange believes that the $0.47 per
contract rebate should continue to
incentivize Participants to qualify for a
Tier 8 Penny Pilot Options Rebate to
Add Liquidity to earn the rebate.
The Exchange’s proposal to lower the
Tier 8 Professional Penny Pilot Options
E:\FR\FM\14FEN1.SGM
14FEN1
9026
Federal Register / Vol. 79, No. 31 / Friday, February 14, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
Rebate to Add Liquidity from $0.48 to
$0.47 per contract is equitable and not
unfairly discriminatory for the reasons
which follow. 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 offering
Professionals the opportunity to earn
the same rebates as Customers, as is the
case today, or slightly lower rebates, as
proposed for Tier 8, 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 as
compared to other market participants,
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.7 A
Professional could only otherwise
presume the Tier 1 rebate would be
achieved in a month when determining
price.8 Further, the Exchange initially
established Professional pricing in order
to ‘‘. . . bring additional revenue to the
Exchange.’’ 9 The Exchange noted in the
Professional Filing that it believes ‘‘. . .
that the increased revenue from the
proposal would assist the Exchange to
7 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.
8 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.
9 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.
VerDate Mar<15>2010
17:47 Feb 13, 2014
Jkt 232001
recoup fixed costs.’’ 10 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.11 The
Exchange does not believe that
providing Professionals with the
opportunity to obtain higher rebates,
which may be 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.12 For
these reasons, the Exchange believes
that continuing to offer Professionals the
same rebates or slightly lower rebates as
Customers is equitable and not unfairly
discriminatory. NOM Market Makers
also receive higher rebates as compared
to Firms, Non-NOM Market Makers and
Broker-Dealers because NOM Market
Makers are valuable market participants
that provide liquidity in the
marketplace and incur costs unlike
other market participants. 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 because NOM Market Makers
add value through continuous quoting 13
and the commitment of capital. The
Exchange believes that encouraging
NOM Market Makers to be more
aggressive when posting liquidity, by
offering such higher rebates, benefits all
market participants through increased
10 See Securities Exchange Act Release No. 64494
(May 13, 2011), 76 FR 29014 (May 19, 2011) (SR–
NASDAQ–2011–066).
11 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.
12 The Fee for Removing Liquidity in Penny Pilot
Options is $0.49 per contract for all market
participants, except Customers who are assessed
$0.45 per contract and NOM Market Makers who
are assessed $0.48 per contract.
13 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.
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
liquidity. NOM Market Makers will
continue to earn the same or lower
rebates as compared to Customers and
Professionals.14
Customer Penny Pilot Options Fee for
Removing Liquidity
The Exchange’s proposal to increase
the Penny Pilot Options Customer Fee
for Removing Liquidity from $0.45 per
contract to $0.47 per contract is
reasonable because the Exchange will
continue to assess Customers the lowest
Fee for Removing Liquidity as compared
to other market participants. In
addition, Participants may qualify for
certain rebates by transacting Customer
orders. The rebates for Customers are
the highest rebates offered by the
Exchange.
The Exchange’s proposal to increase
the Penny Pilot Options Customer Fee
for Removing Liquidity from $0.45 per
contract to $0.47 per contract is
equitable and not unfairly
discriminatory. The Exchange will
assess the lowest Penny Pilot Options
Fee for Removing Liquidity to
Customers as is the case today. NOM
Market Makers will also continue to
receive a lower fee as compared to a
Professional, Firm, Non-NOM Market
Maker and Broker-Dealer because of the
obligations borne by NOM Market
Makers.15
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 offering to pay an
additional $0.01 per contract Customer
Non-Penny Pilot Options Rebate to Add
Liquidity to Participants that qualify for
a Tier 7 or 8 Customer or Professional
Rebate to Add Liquidity does not
impose an undue burden on
competition, rather it encourages
Participants to add liquidity to NOM to
obtain the Customer rebate and in turn
14 The Tier 1 NOM Market Maker Rebate to Add
Liquidity in Penny Pilot Options is the same rebate
as the Tier 1 Customer and Professional rebate in
Penny Pilot Options. The Exchange pays 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. Firms, Non-NOM Market
Makers and Broker-Dealers receive a $0.10 per
contract Penny Pilot Option Rebate to Add
Liquidity. In addition, Participants 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.
15 See note 13.
E:\FR\FM\14FEN1.SGM
14FEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 31 / Friday, February 14, 2014 / Notices
promotes competition. The Exchange
does not believe that offering
Participants that qualify for Tier 7 or 8
of the Customer and Professional Penny
Pilot Options Rebate to Add Liquidity
an additional Non-Penny Pilot Options
Customer rebate would result in any
burden on competition as between
market participants because the
remaining market participants, NOM
Market Makers, Firms, Non-NOM
Market Makers and Broker-Dealers,
would continue to have an opportunity
to earn Penny Pilot Options rebates.
Today, the Exchange only pays
Customers Non-Penny Pilot Options
Rebates to Add Liquidity.16 Customer
order flow brings unique benefits to the
market through increased liquidity
which benefits all market participants.
The Exchange’s proposal to pay an
additional Non-Penny Pilot Options
Customer Rebate to Add Liquidity,
presuming the Participant qualifies for
Tier 7 or 8 of the Customer and
Professional Penny Pilot Options Rebate
to Add Liquidity, will incentivize
Participants to direct Penny and NonPenny Pilot Options order flow, as well
as Customer and Professional order
flow, to NOM to the benefit of all other
market participants. The Exchange
believes the proposed pricing incentives
contribute to the overall health of the
market and benefit all Participants
willing to 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 believes that lowering
the Tier 8 Professional Penny Pilot
Options Rebate to Add Liquidity does
not burden competition because
Professionals will continue to earn
higher rebates as compared to other
non-Customer market participants,
except NOM Market Makers, as is the
case today. The Tier 1 NOM Market
Maker Rebate to Add Liquidity in Penny
Pilot Options is the same rebate as the
Tier 1 Customer and Professional rebate
in Penny Pilot Options. The Exchange
pays 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. This will also remain the
same. The Customer will earn a higher
Tier 8 rebate as compared to a
Professional. Customer liquidity offers
unique benefits to the market which
benefits all market participants.
16 NASDAQ OMX BX, Inc. Options pays a Rebate
to Remove Liquidity in All Other Penny Pilot
Options of $0.32 per contract to Customers only.
VerDate Mar<15>2010
17:47 Feb 13, 2014
Jkt 232001
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attract Specialists
and Market Makers. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes that
continuing to encourage Participants to
add Professional liquidity, by offering
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 Professional order
flow. For these reasons, the Exchange
does not believe this proposal creates an
undue burden on competition.
The Exchange does not believe that
increasing the Customer Penny Pilot
Options Fee for Removing Liquidity will
create an undue burden on competition
because the Exchange continues to
assess the lowest fee to Customers. As
noted above, Customer liquidity offers
unique benefits to the market which
benefits all market participants.
The Exchange operates in a highly
competitive market comprised of twelve
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’s belief that
the proposed rebate structure and tiers
proposed herein are competitive with
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.17 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,
17 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00091
Fmt 4703
Sfmt 4703
9027
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2014–013 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–2014–013. 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–
E:\FR\FM\14FEN1.SGM
14FEN1
9028
Federal Register / Vol. 79, No. 31 / Friday, February 14, 2014 / Notices
NASDAQ–2014–013, and should be
submitted on or before March 7, 2014.
FOR FURTHER INFORMATION CONTACT:
FOR FURTHER INFORMATION CONTACT:
Order Extending Temporary
Exemptions Under the Securities
Exchange Act of 1934 in Connection
With the Revision of the Definition of
‘‘Security’’ To Encompass SecurityBased Swaps, and Request for
Comment
Justine Alston, Financial Analyst, 202–
205–7623, Justin.alston@sba.gov, or
Curtis B. Rich, Management Analyst,
202–205–7030, curtis.rich@sba.gov.
SUPPLEMENTARY INFORMATION: Small
Business Administration (SBA) has
established a loan program, the
immediate Disaster Assistance Program,
(IDAP) to assist small businesses
affected by a federally declared disaster
or economic disaster. The program will
provide guaranteed loan through 7(a)
lenders participating in IDAP to cover
the short time frame between the data of
the disaster damage and a small
business. This requested information,
which will be provided by the affected
small businesses and IDAP participating
lenders, will be used to determine
eligibility for an IDAP loan and
participation in the program.
Justin Alston, Financial Analyst, 202–
401–8234, Justin.alston@sba.gov, or
Curtis B. Rich, Management Analyst,
202–205–7030, curtis.rich@sba.gov.
SUPPLEMENTARY INFORMATION: The
purpose of this data collection is to
monitor loan payment information on
SBA loan portfolios arising from the
Immediate Disaster Assistance Program.
This exercise will involve monthly
updates on the payments received by
lenders from small businesses that have
received funding through this guaranty
program. The Agency looks to better
manage the program’s effectiveness by
having lenders provide this form of
periodic reporting to SBA.
February 5, 2014.
Summary of Information Collection
Correction
In notice document 2014–02834,
appearing on pages 7731–7735 in the
issue of Monday, February 10, 2014,
make the following correction:
On page 7731, in the second column,
the date, which was inadvertently
omitted from the document heading, is
added to read as set forth above.
Title: Immediate Disaster Assistance
Loan Program Application and
Eligibility.
Description of Respondents: IDAP
participating lenders.
Total Estimated Annual Responses:
984.
Total Estimated Annual Hour Burden:
543.
[FR Doc. C1–2014–02834 Filed 2–13–14; 8:45 am]
Curtis B. Rich,
Management Analyst.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–03250 Filed 2–13–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71485; File No. S7–27–11]
BILLING CODE 1505–01–D
BILLING CODE P
SMALL BUSINESS ADMINISTRATION
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments
60-day notice and request for
comments.
ACTION:
mstockstill on DSK4VPTVN1PROD with NOTICES
18 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:47 Feb 13, 2014
Jkt 232001
60-day notice and request for
comments.
ACTION:
The Small Business
Administration (SBA) intends to request
approval, from the Office of
Management and Budget (OMB) for the
collection of information described
below. The Paperwork Reduction Act
(PRA) of 1995, 44 U.S.C. Chapter 35
requires federal agencies to publish a
notice in the Federal Register
concerning each proposed collection of
information before submission to OMB,
and to allow 60 days for public
comment in response to the notice. This
notice complies with that requirement.
DATES: Submit comments on or before
April 15, 2014.
ADDRESSES: Send all comments to
Justine Alston, Financial Analyst, Office
of Financial Assistance, Small Business
Administration, 409 3rd Street, 8th
Floor, Washington, DC 20416.
SUMMARY:
The Small Business
Administration (SBA) intends to request
approval, from the Office of
Management and Budget (OMB) for the
collection of information described
below. The Paperwork Reduction Act
(PRA) of 1995, 44 U.S.C. Chapter 35
requires federal agencies to publish a
notice in the Federal Register
concerning each proposed collection of
information before submission to OMB,
and to allow 60 days for public
comment in response to the notice. This
notice complies with that requirement.
DATES: Submit comments on or before
April 15, 2014.
ADDRESSES: Send all comments to Justin
Alston, Financial Analyst, Office of
Financial Assistance, Small Business
Administration, 409 3rd Street, 8th
Floor, Washington, DC 20416.
SUMMARY:
PO 00000
Frm 00092
Fmt 4703
Title: Guaranteed Disaster Assistance
Program.
Description of Respondents: Lenders
who received funding through this
guaranty program.
Total Estimated Annual Responses:
5,604.
Total Estimated Annual Hour Burden:
467.
Curtis B. Rich,
Management Analyst.
[FR Doc. 2014–03321 Filed 2–13–14; 8:45 am]
BILLING CODE P
[FR Doc. 2014–03319 Filed 2–13–14; 8:45 am]
Data Collection Available for Public
Comments.
Summary of Information Collection
Sfmt 4703
SMALL BUSINESS ADMINISTRATION
Standard 7(a) Loan Guaranty
Processing Center (LGPC) Emergency
Catch-up Pilot
Small Business Administration.
Notice of Regulatory Waiver for
Standard 7(a) Loan Guaranty Processing
Center (LGPC) Emergency Catch-up
Pilot.
AGENCY:
ACTION:
During the first quarter of
Fiscal Year 2014, SBA waived an
Agency regulation applicable to the 7(a)
Business Loan Program for the Standard
7(a) Loan Guaranty Processing Center
(LGPC) Emergency Catch-up Pilot
(Pilot). Specifically, SBA waived the
regulation setting forth SBA’s criteria for
establishing borrower creditworthiness
and assuring repayment through the
consideration of nine elements. The
Pilot consisted of a streamlined review
process for qualified 7(a) loan
applications to address the backlog of
unprocessed applications at the LGPC
created by the government shutdown in
October 2013. This Notice explains the
actions SBA undertook and the reasons
for the Pilot.
DATES: The waiver was effective for
qualified applications submitted to the
SUMMARY:
E:\FR\FM\14FEN1.SGM
14FEN1
]]>Agencies
[Federal Register Volume 79, Number 31 (Friday, February 14, 2014)]
[Notices]
[Pages 9024-9028]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03250]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71516; File No. SR-NASDAQ-2014-013]
Self-Regulatory Organizations; the NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to NASDAQ Options Market Fees and Rebates
February 10, 2014.
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 January 29, 2014, 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:
(i) Amend the Customer Non-Penny Pilot Options \3\ Rebate to Add
Liquidity; (ii) amend the Customer and Professional Rebates to Add
Liquidity in Penny Pilot Options; \4\ and (iii) amend the Penny Pilot
Options Customer Fee for Removing Liquidity.
---------------------------------------------------------------------------
\3\ The Non-Penny Pilot Options pricing includes options
overlying the Nasdaq 100 Index traded under the symbol NDX.
\4\ The Penny Pilot was established in March 2008 and in October
2009 was expanded and extended through June 30, 2014. 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);
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);
69787 (June 18, 2013), 78 FR 37858 (June 24, 2013) (SR-NASDAQ-2013-
082) and 71105 (December 17, 2013), 78 FR 77530 (December 23, 2013)
(SR-NASDAQ-2013-154). See also NOM Rules, Chapter VI, Section 5.
---------------------------------------------------------------------------
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on February 3,
2014.
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 amend certain fees in Chapter XV, Section 2. The
Exchange proposes to amend the Non-Penny Pilot Options Customer Rebate
to Add Liquidity to encourage Participants to add liquidity by earning
a higher Non-Penny Pilot Customer Rebate to Add Liquidity. The Exchange
also proposes to amend the Tier 8 Rebate to Add Liquidity to lower the
Professional rebate paid for that tier. While the Exchange is lowering
the Professional Rebate to Add Liquidity in Penny Pilot Options, the
Exchange believes that the rebate will continue to encourage
Participants to add volume to earn the rebate. The Exchange proposes to
increase the Customer Penny Pilot Options Fee for Removing Liquidity
from $0.45 to $0.47 per contract. Despite the increase, the Exchange
believes this fee remains competitive.
Non-Penny Pilot Customer Rebate To Add Liquidity
The Exchange currently pays a Customer Non-Penny Pilot Rebate to
Add Liquidity of $0.84 per contract. Non-Customer Participants do not
receive a Non-Penny Pilot Rebate to Add Liquidity. The Exchange
proposes to pay an additional $0.01 per contract Non-Penny Pilot
Options Customer Rebate to Add Liquidity (for a total rebate of $0.85
per contract) to a Participant that qualifies for a Tier 7 or 8
Customer or Professional Penny Pilot Options Rebate to Add Liquidity in
a given month. Participants would receive the additional $0.01 per
contract rebate for each transaction which adds liquidity in Non-Penny
Pilot Options in that month.
Penny Pilot Options Customer and Professional Rebate To Add Liquidity
The Exchange currently pays Customer and Professional Rebates to
Add Liquidity based on an eight tier rebate structure as follows:
------------------------------------------------------------------------
Rebate to
Monthly volume add
liquidity
------------------------------------------------------------------------
Tier 1 Participant adds Customer and/or Professional $0.25
liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options 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 Customer and/or Professional 0.42
liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.20% to 0.30% of total industry customer
equity and ETF option ADV contracts per day in a month....
Tier 3 Participant adds Customer and/or Professional 0.43
liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.30% to 0.40% of total industry customer
equity and ETF option ADV contracts per day in a month....
[[Page 9025]]
Tier 4 Participant adds Customer and/or Professional 0.45
liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.40% or more of total industry customer
equity and ETF option ADV contracts per day in a month....
Tier 5 Participant adds (1) Customer and/or Professional 0.45
liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options 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.....
Tier 6 Participant has Total Volume of 100,000 or more 0.45
contracts per day in a month, of which 25,000 or more
contracts per day in a month must be Customer and/or
Professional liquidity in Penny Pilot Options.............
Tier 7 Participant has Total Volume of 150,000 or more 0.47
contracts per day in a month, of which 50,000 or more
contracts per day in a month must be Customer and/or
Professional liquidity in Penny Pilot Options.............
Tier 8 Participant adds Customer and/or Professional 0.48
liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 0.75% or more of national customer volume in
multiply-listed equity and ETF options classes in a month.
------------------------------------------------------------------------
For purposes of qualifying for a Customer and Professional Rebate
to Add Liquidity tier, the Exchange determines the applicable
percentage of total industry customer equity and ETF option average
daily volume by including the Participant's Penny Pilot and Non-Penny
Pilot Customer and/or Professional volume that adds liquidity. The
Exchange is proposing to make certain amendments to the tiers as noted
below.
The Exchange proposes to amend the Tier 8 Professional Penny Pilot
Options Rebate to Add Liquidity to reduce the rebate paid from $0.48 to
$0.47 per contract. Today, the Exchange pays a $0.48 per contract
Customer and Professional Penny Pilot Options Tier 8 Rebate to Add
Liquidity to Participants that add Customer and/or Professional
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of
0.75% or more of national customer volume in multiply-listed equity and
ETF options classes in a month. The Exchange would continue to pay a
Penny Pilot Options Rebate to Add Liquidity of $0.48 per contract to
Participants that add Customer liquidity and qualify for Tier 8.
Customer Penny Pilot Options Fee for Removing Liquidity
The Exchange proposes to increase the Penny Pilot Options Customer
Fee for Removing Liquidity from $0.45 to $0.47 per contract. The
Exchange will continue to assess a NOM Market Maker a $0.48 per
contract Penny Pilot Options Fee for Removing Liquidity. A
Professional, Firm, Non-NOM Market Maker and Broker-Dealer will
continue to be assessed $0.49 per contract.
2. Statutory Basis
NASDAQ believes that its proposal to amend its Pricing Schedule is
consistent with Section 6(b) of the Act \5\ in general, and furthers
the objectives of Section 6(b)(4) and (b)(5) of the Act \6\ 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.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------
Non-Penny Pilot Customer Rebate To Add Liquidity
The Exchange's proposal to pay an additional $0.01 per contract
Non-Penny Pilot Options Customer Rebate to Add Liquidity to a
Participant that qualifies for a Tier 7 or 8 Customer or Professional
Penny Pilot Options Rebate to Add Liquidity in a given month is
reasonable because the rebate encourages Participants to qualify for
higher Customer or Professional Penny Pilot Options rebate tiers in
order to also qualify for an additional Non-Penny Pilot Options
Customer rebate. To qualify for a Tier 7 rebate, Participants require
Total Volume of 150,000 or more contracts per day in a month, of which
50,000 or more contracts per day in a month must be Customer and/or
Professional liquidity in Penny Pilot Options. Total Volume is defined
as 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. To qualify
for a Tier 8 rebate, Participants must add Customer and/or Professional
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of
0.75% or more of national customer volume in multiply-listed equity and
ETF options classes in a month. The Exchange believes that by
encouraging Participants to qualify for Tier 7 or 8 there will be an
incentive to add a certain amount of Penny and/or Non-Penny Pilot
Options volume and/or Customer and/or Professional liquidity, thereby
attracting additional order flow to the benefit of all market
participants. Today, the Exchange also incentivizes NOM Market Makers
to post liquidity, by offering NOM Market Makers rebates, which also
benefit market participants through increased order interaction. Firms,
Non-NOM Market Makers and Broker-Dealers are also offered rebates under
the current pricing structure.
The Exchange's proposal to pay an additional $0.01 per contract
Non-Penny Pilot Options Customer Rebate to Add Liquidity to a
Participant that qualifies for a Tier 7 or 8 Customer or Professional
Penny Pilot Options Rebate to Add Liquidity in a given month is
equitable and not unfairly discriminatory because the Exchange will pay
the additional $0.01 per contract rebate in addition to the Non-Penny
Pilot Options Rebate to Add Liquidity to all Participants that qualify
for a Tier 7 or 8 Customer or Professional Penny Pilot Options Rebate
to Add Liquidity in a uniform manner. Today, no other market
participant is entitled to a Non-Penny Pilot Options Rebate to Add
Liquidity other than a Customer. The Exchange believes that it is
reasonable, equitable and not unfairly discriminatory to only pay
Customers a rebate in Non-Penny Pilot Options because Customer order
flow is unique and benefits all market participants through the
increased liquidity that such order flow brings to the market. The
opportunity to increase the Non-Penny Pilot Options rebate will further
encourage the addition of Penny Pilot and Non-Penny Pilot Options
liquidity as well as Customer and Professional liquidity.
Customer and Professional Penny Pilot Option Rebate To Add Liquidity
The Exchange's proposal to lower the Tier 8 Professional Penny
Pilot Options Rebate to Add Liquidity from $0.48 to $0.47 per contract
is reasonable because the Exchange believes that the $0.47 per contract
rebate should continue to incentivize Participants to qualify for a
Tier 8 Penny Pilot Options Rebate to Add Liquidity to earn the rebate.
The Exchange's proposal to lower the Tier 8 Professional Penny
Pilot Options
[[Page 9026]]
Rebate to Add Liquidity from $0.48 to $0.47 per contract is equitable
and not unfairly discriminatory for the reasons which follow. 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 offering Professionals the opportunity to earn
the same rebates as Customers, as is the case today, or slightly lower
rebates, as proposed for Tier 8, 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 as compared to other market participants, 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.\7\ A Professional could
only otherwise presume the Tier 1 rebate would be achieved in a month
when determining price.\8\ Further, the Exchange initially established
Professional pricing in order to ``. . . bring additional revenue to
the Exchange.'' \9\ 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.'' \10\ 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.\11\ The Exchange does not
believe that providing Professionals with the opportunity to obtain
higher rebates, which may be 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.\12\ For these
reasons, the Exchange believes that continuing to offer Professionals
the same rebates or slightly lower rebates as Customers is equitable
and not unfairly discriminatory. NOM Market Makers also receive higher
rebates as compared to Firms, Non-NOM Market Makers and Broker-Dealers
because NOM Market Makers are valuable market participants that provide
liquidity in the marketplace and incur costs unlike other market
participants. 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 because NOM Market Makers add
value through continuous quoting \13\ and the commitment of capital.
The Exchange believes that encouraging NOM Market Makers to be more
aggressive when posting liquidity, by offering such higher rebates,
benefits all market participants through increased liquidity. NOM
Market Makers will continue to earn the same or lower rebates as
compared to Customers and Professionals.\14\
---------------------------------------------------------------------------
\7\ 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.
\8\ 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.
\9\ 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.
\10\ See Securities Exchange Act Release No. 64494 (May 13,
2011), 76 FR 29014 (May 19, 2011) (SR-NASDAQ-2011-066).
\11\ 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.
\12\ The Fee for Removing Liquidity in Penny Pilot Options is
$0.49 per contract for all market participants, except Customers who
are assessed $0.45 per contract and NOM Market Makers who are
assessed $0.48 per contract.
\13\ 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.
\14\ The Tier 1 NOM Market Maker Rebate to Add Liquidity in
Penny Pilot Options is the same rebate as the Tier 1 Customer and
Professional rebate in Penny Pilot Options. The Exchange pays 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. Firms, Non-NOM Market Makers and Broker-Dealers
receive a $0.10 per contract Penny Pilot Option Rebate to Add
Liquidity. In addition, Participants 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.
---------------------------------------------------------------------------
Customer Penny Pilot Options Fee for Removing Liquidity
The Exchange's proposal to increase the Penny Pilot Options
Customer Fee for Removing Liquidity from $0.45 per contract to $0.47
per contract is reasonable because the Exchange will continue to assess
Customers the lowest Fee for Removing Liquidity as compared to other
market participants. In addition, Participants may qualify for certain
rebates by transacting Customer orders. The rebates for Customers are
the highest rebates offered by the Exchange.
The Exchange's proposal to increase the Penny Pilot Options
Customer Fee for Removing Liquidity from $0.45 per contract to $0.47
per contract is equitable and not unfairly discriminatory. The Exchange
will assess the lowest Penny Pilot Options Fee for Removing Liquidity
to Customers as is the case today. NOM Market Makers will also continue
to receive a lower fee as compared to a Professional, Firm, Non-NOM
Market Maker and Broker-Dealer because of the obligations borne by NOM
Market Makers.\15\
---------------------------------------------------------------------------
\15\ See note 13.
---------------------------------------------------------------------------
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 offering to pay
an additional $0.01 per contract Customer Non-Penny Pilot Options
Rebate to Add Liquidity to Participants that qualify for a Tier 7 or 8
Customer or Professional Rebate to Add Liquidity does not impose an
undue burden on competition, rather it encourages Participants to add
liquidity to NOM to obtain the Customer rebate and in turn
[[Page 9027]]
promotes competition. The Exchange does not believe that offering
Participants that qualify for Tier 7 or 8 of the Customer and
Professional Penny Pilot Options Rebate to Add Liquidity an additional
Non-Penny Pilot Options Customer rebate would result in any burden on
competition as between market participants because the remaining market
participants, NOM Market Makers, Firms, Non-NOM Market Makers and
Broker-Dealers, would continue to have an opportunity to earn Penny
Pilot Options rebates. Today, the Exchange only pays Customers Non-
Penny Pilot Options Rebates to Add Liquidity.\16\ Customer order flow
brings unique benefits to the market through increased liquidity which
benefits all market participants.
---------------------------------------------------------------------------
\16\ NASDAQ OMX BX, Inc. Options pays a Rebate to Remove
Liquidity in All Other Penny Pilot Options of $0.32 per contract to
Customers only.
---------------------------------------------------------------------------
The Exchange's proposal to pay an additional Non-Penny Pilot
Options Customer Rebate to Add Liquidity, presuming the Participant
qualifies for Tier 7 or 8 of the Customer and Professional Penny Pilot
Options Rebate to Add Liquidity, will incentivize Participants to
direct Penny and Non-Penny Pilot Options order flow, as well as
Customer and Professional order flow, to NOM to the benefit of all
other market participants. The Exchange believes the proposed pricing
incentives contribute to the overall health of the market and benefit
all Participants willing to 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 believes that lowering the Tier 8 Professional Penny
Pilot Options Rebate to Add Liquidity does not burden competition
because Professionals will continue to earn higher rebates as compared
to other non-Customer market participants, except NOM Market Makers, as
is the case today. The Tier 1 NOM Market Maker Rebate to Add Liquidity
in Penny Pilot Options is the same rebate as the Tier 1 Customer and
Professional rebate in Penny Pilot Options. The Exchange pays 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. This will also remain the same. The Customer will earn a
higher Tier 8 rebate as compared to a Professional. Customer liquidity
offers unique benefits to the market which benefits all market
participants. Customer liquidity benefits all market participants by
providing more trading opportunities, which attract Specialists and
Market Makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange believes that continuing to encourage Participants to add
Professional liquidity, by offering 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 Professional
order flow. For these reasons, the Exchange does not believe this
proposal creates an undue burden on competition.
The Exchange does not believe that increasing the Customer Penny
Pilot Options Fee for Removing Liquidity will create an undue burden on
competition because the Exchange continues to assess the lowest fee to
Customers. As noted above, Customer liquidity offers unique benefits to
the market which benefits all market participants.
The Exchange operates in a highly competitive market comprised of
twelve 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's belief that the proposed rebate structure and
tiers proposed herein are competitive with 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.\17\ 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.
---------------------------------------------------------------------------
\17\ 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-2014-013 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-2014-013. 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-
[[Page 9028]]
NASDAQ-2014-013, and should be submitted on or before March 7, 2014.
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03250 Filed 2-13-14; 8:45 am]
BILLING CODE 8011-01-P
