Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees, 31153-31156 [2014-12518]

Download as PDF Federal Register / Vol. 79, No. 104 / Friday, May 30, 2014 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) 7 of the Act and subparagraph (f)(6) of Rule 19b–4 thereunder.8 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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–2014–056 on the subject line. mstockstill on DSK4VPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2014–056. 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 NASDAQ. 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–2014–056 and should be submitted on or before June 20, 2014. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Kevin M. O’Neill, Deputy Secretary. 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. [FR Doc. 2014–12524 Filed 5–29–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72238; File No. SR– NASDAQ–2014–055] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees May 23, 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 May 15, 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. 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 7 15 U.S.C. 78s(b)(3)(A). 8 17 CFR 240.19b–4(f)(6). VerDate Mar<15>2010 18:23 May 29, 2014 1 15 Jkt 232001 31153 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 NASDAQ proposes to modify Chapter XV, entitled ‘‘Options Pricing,’’ at Section 2 governing pricing for NASDAQ members using the NASDAQ Options Market (‘‘NOM’’), NASDAQ’s facility for executing and routing standardized equity and index options. Specifically, NOM proposes to amend its Routing Fees. While the changes proposed herein are effective upon filing, the Exchange has designated that the amendments be operative on June 2, 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 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 Chapter XV, Section 2(3) to recoup costs incurred by the Exchange to route orders to away markets. Today, the Exchange assesses a NonCustomer a $0.95 per contract Routing Fee to any options exchange. The Customer 3 Routing Fee for option orders routed to NASDAQ OMX PHLX LLC (‘‘PHLX’’) is a $0.10 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 $0.10 per contract. The Customer Routing Fee for option orders routed to 3 The term ‘‘Customer’’ or (‘‘C’’) applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Chapter I, Section 1(a)(48)). E:\FR\FM\30MYN1.SGM 30MYN1 31154 Federal Register / Vol. 79, No. 104 / Friday, May 30, 2014 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES all other options exchanges 4 (excluding PHLX and BX Options) is a fixed fee of $0.20 per contract (‘‘Fixed Fee’’) in addition to the actual transaction fee assessed. If the away market pays a rebate, the Routing Fee is $0.10 per contract. With respect to the fixed costs, the Exchange incurs a fee when it utilizes Nasdaq Execution Services LLC (‘‘NES’’),5 a member of the Exchange and the Exchange’s exclusive order router. Each time NES routes an order to an away market, NES 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 NES, membership fees at away markets, Options Regulatory Fees (‘‘ORFs’’), staffing 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 System. This transaction fee is calculated on an order-by-order basis since different away markets charge different amounts. The Exchange is proposing to increase Routing Fees to account for increased OCC fees and other increased costs associated with clearing, ORF and other operational costs. The Exchange proposes to increase Routing Fees for Non-Customer orders from $0.95 to $0.97 per contract. The Exchange also proposes to increase Customer Routing Fees as described herein. The Exchange proposes to increase Customer Routing Fees to PHLX from a Fixed Fee of $0.10 to $0.12 per contract, in addition to the actual transaction fee assessed. The Exchange proposes to increase Customer Routing Fees to BX Options from $0.10 to $0.12 per contract. The Exchange also proposes to amend Routing Fees to all 4 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 ISE Gemini, LLC (‘‘Gemini’’). 5 The Exchange filed a proposed rule change to utilize Nasdaq Execution Services, LLC (‘‘NES’’) for outbound order routing. See Securities Exchange Act Release No. 71419 (January 28, 2014), 79 FR 6247 (February 3, 2014) (SR–NASDAQ–2014–007). 6 OCC assessed a $0.01 per contract side. The fee has recently been increased from $0.01 to $0.02 per contract side. See Securities Exchange Act Release No. 71769 (March 21, 2014), 79 FR 17214 (March 21, 2014) (SR–OCC–2014–05). VerDate Mar<15>2010 18:23 May 29, 2014 Jkt 232001 other exchanges (except PHLX and BX Options) from $0.20 to $0.22 per contract, in addition to the actual transaction fee assessed, provided the away market does not pay a rebate. If the away market pays a rebate, the Routing Fee assessed would be $0.12 per contract, an increase from the current $0.10 per contract. The Exchange proposes these increases to recoup an additional portion of the costs incurred by the Exchange for routing these orders. The Exchange is proposing to increase Non-Customer and Customer Routing Fees by $0.02 per contract to cover the increased costs of offering its members the opportunity to route to other options exchanges. With the recent increase by OCC 7 as well as increases in ORFs and NOM’s operational expenses, the Exchange sees to further recoup a portion of increased costs with the increase to its Routing Fees. Today the Exchange does not assess the actual transaction fee assessed by BX Options, rather the Exchange only assesses the Fixed Fee, because the Exchange would continue to retain the rebate to offset the cost to route orders to BX Options. This is the not the case for all orders routed to BX Options because not all Customer orders receive a rebate.8 This will remain the same. Similarly, the Exchange is proposing to amend the Customer Routing Fee assessed when routing to all other options exchanges, if the away market pays a rebate, from a $0.10 to a $0.12 per contract Fixed Fee, in order to recoup an additional portion of the costs incurred by the Exchange for routing these orders. The Exchange does not assess the actual transaction fee assessed by the away market, rather the Exchange only assesses the Fixed Fee, because the Exchange would continue to retain the rebate to offset the cost to route orders to these away markets. This will remain the same. 2. Statutory Basis NASDAQ believes that its proposal to amend its Pricing Schedule is consistent with Section 6(b) of the Act 9 in general, and furthers the objectives of Section 6(b)(4) and (b)(5) of the Act 10 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members 7 Id. 8 BX Options pays a Customer Rebate to Remove Liquidity as follows: Customers are paid $0.32 per contract in All Other Penny Pilot Options (excluding BAC, IWM, QQQ, SPY and VXX) and $0.70 per contract in Non-Penny Pilot Options. See BX Options Rules at Chapter XV, Section 2(1). 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4), (5). PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 and issuers and other persons using any facility or system which it operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that amending the Non-Customer and Customer Routing Fees by $0.02 per contracts is reasonable because the Exchange desires to recoup an additional portion of the cost it incurs when routing NonCustomer and Customer orders. Specifically, the Exchange’s proposal to increase Non-Customer fees from $0.95 to $0.97 per contract is reasonable because the additional $0.02 per contract fee will recoup increased costs borne by NOM. The Exchange believes that amending the Customer Routing Fees for orders routed to PHLX from a Fixed Fee of $0.10 to $0.12 per contract is reasonable because the Exchange desires to recoup an additional portion of the cost it incurs when routing Customer orders to PHLX. The Exchange will continue to also assess actual transaction fees assessed by PHLX for Customer orders. The Exchange believes that amending the Customer Routing Fee for orders routed to BX Options from a Fixed Fee of $0.10 to $0.12 per contract is reasonable because the Exchange desires to recoup an additional portion of the cost it incurs when routing Customer orders to BX Options, similar to the amount of Fixed Fee it proposes to assess for orders routed to PHLX. While the Exchange would continue to retain any rebate paid by BX Options, the Exchange does not assess the actual transaction fee that is charged by BX Options for Customer orders. The Exchange believes that continuing to assess lower Fixed Fees to route Customer orders to PHLX and BX Options, as compared to other options exchanges, is reasonable as the Exchange is able to leverage certain infrastructure to offer those markets lower fees as explained further below. The Exchange believes that increasing the fee for routing to all other options exchanges (other than PHLX and BX Options) from $0.20 to $0.22 per contact is reasonable because the increased fee would recoup costs associated with routing Customer orders, in addition to the actual transaction fee when no rebate is paid. Similarly, the Exchange believes that amending the Customer Routing Fee to other away markets, other than PHLX and BX Options, in the instance the away market pays a rebate from $0.10 to $0.12 per contract is reasonable because the Exchange desires to recoup an additional portion of the cost it incurs when routing orders to these away markets. While the Exchange E:\FR\FM\30MYN1.SGM 30MYN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 79, No. 104 / Friday, May 30, 2014 / Notices would continue to retain any rebate paid by these away markets, the Exchange does not assess the actual transaction fee that is charged by the away market for Customer orders. The Fixed Fee for Customer orders is an approximation of the costs the Exchange will be charged for routing orders to away markets. As a general matter, the Exchange believes that the proposed fees for Customer orders routed to markets which pay a rebate, such as BX Options and other away markets, would allow it to recoup and cover a portion of the costs of providing optional routing services for Customer orders because it better approximates the costs incurred by the Exchange for routing such orders. While each destination market’s transaction charge varies and there is a cost incurred by the Exchange when routing orders to away markets, including, OCC clearing costs, administrative and technical costs associated with operating NES, membership fees at away markets, ORFs and technical costs associated with routing options, the Exchange believes that the proposed Routing Fees will enable it to recover the increased costs it incurs to route Customer orders to away markets. The Exchange believes that amending the Non-Customer Routing Fees from $0.95 to $0.97 per contract is equitable and not unfairly discriminatory because the Exchange would assess the same Non-Customer Routing Fee to all NonCustomer orders routed away. The Exchange believes that amending the Customer Routing Fee for orders routed to PHLX from a Fixed Fee of $0.10 to $0.12 per contract, in addition to the actual transaction fee, is equitable and not unfairly discriminatory because the Exchange would assess the same Fixed Fee to all orders routed to PHLX in addition to the transaction fee assessed by that market. With respect to BX Options, the Exchange believes that amending the Customer Routing Fee for orders routed to BX Options from a Fixed Fee of $0.10 to $0.12 per contract is equitable and not unfairly discriminatory because the Exchange would assess the same Fixed Fee to all Customer orders routed to BX Options. With respect routing Customer orders to all other away markets (except PHLX and BX Options) the Exchange believes that amending the Customer Routing Fee from $0.20 to $0.22 per contract, in addition to the actual transaction fee assessed) is equitable and not unfairly discriminatory because the Exchange would assess the same fee to all Customer orders routed to away markets, provided the away market does VerDate Mar<15>2010 18:23 May 29, 2014 Jkt 232001 not pay a rebate. The Exchange believes that increasing the Routing Fee to away markets (other than PHLX and BX Options), when the away market pays a rebate, from $0.10 to $0.12 per contract is equitable and not unfairly discriminatory because all Customer orders routed to away markets (other than PHLX and BX Options) would be assessed the same fee, provided the away market paid a rebate. The Exchange would uniformly assess a $0.12 per contract Fixed Fee to orders routed to NASDAQ OMX exchanges because the Exchange is passing along the saving realized by leveraging NASDAQ OMX’s infrastructure and scale to market participants when those orders are routed to PHLX or BX Options and is providing those savings to all market participants. Furthermore, it is important to note that when orders are routed to an away market they are routed based on price first.11 The Exchange believes that it is equitable and not unfairly discriminatory to assess a fixed cost of $0.12 per contract to route orders to PHLX and BX Options because the cost, in terms of actual cash outlays, to the Exchange to route to those markets is lower. For example, costs related to routing to PHLX and BX Options are lower as compared to other away markets because NES is utilized by all three exchanges to route orders.12 NES and the three NASDAQ OMX options markets have a common data center and staff that are responsible for the day-to-day operations of NES. 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 lower than the costs to route to a non-NASDAQ OMX exchange. When routing orders to nonNASDAQ OMX exchanges, the Exchange incurs costly connectivity charges related to telecommunication lines, membership and access fees, and other related costs when routing orders. Market participants may submit orders to the Exchange as ineligible for routing or ‘‘DNR’’ to avoid Routing Fees.13 Also, orders are routed to an away market based on price first.14 11 See NASDAQ Rules at Chapter VI, Section 11(e) (Order Routing). 12 See Chapter VI, Section 11 of the BX Options and NOM Rules. 13 See note 12. 14 Id. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 31155 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 does not believe that the proposal creates a burden on intra-market competition because the Exchange is applying the same Routing Fee increase of $0.02 per contract to all market participants. The Exchange will continue to assess separate Customer Routing Fees. Customers will continue to receive the lowest fees as compared to NonCustomers when routing orders, as is the case today. Other options exchanges also assess lower Routing Fees for customer orders as compared to NonCustomer orders.15 The Exchange’s proposal would allow the Exchange to continue to recoup its costs when routing both Non-Customer and Customer orders. The Exchange continues to pass along savings realized by leveraging NASDAQ OMX’s infrastructure and scale to market participants when Customer orders are routed to PHLX and BX Options and is providing those savings to all market participants. Today, other options exchanges also assess fixed routing fees to recoup costs incurred by the exchange to route orders to away markets.16 Market participants may submit orders to the Exchange as ineligible for routing or ‘‘DNR’’ to avoid Routing Fees.17 Also, orders are routed to an away market based on price first.18 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.19 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 15 BATS assesses lower customer routing fees as compared to non-customer routing fees per the away market. For example BATS assesses Phlx customer routing fees of $0.45 per contract and an ISE non-customer routing fee of $0.65 per contract. See BATS BZX Exchange Fee Schedule. 16 See CBOE’s Fees Schedule and ISE’s Fee Schedule. 17 See note 12. 18 Id. 19 15 U.S.C. 78s(b)(3)(A)(ii). E:\FR\FM\30MYN1.SGM 30MYN1 31156 Federal Register / Vol. 79, No. 104 / Friday, May 30, 2014 / Notices All submissions should refer to File Number SR–NASDAQ–2014–055 and should be submitted on or before June 20, 2014. 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. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Kevin M. O’Neill, Deputy Secretary. IV. Solicitation of Comments [FR Doc. 2014–12518 Filed 5–29–14; 8:45 am] 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: BILLING CODE 8011–01–P 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–2014–055 on the subject line. mstockstill on DSK4VPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2014–055. 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. VerDate Mar<15>2010 18:23 May 29, 2014 Jkt 232001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72241; File No. SR– NASDAQ–2014–027] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of the PowerShares MultiStrategy Alternative Portfolio of PowerShares Actively Managed Exchange-Traded Fund Trust May 23, 2014. I. Introduction On March 24, 2014, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade the shares (‘‘Shares’’) of the PowerShares MultiStrategy Alternative Portfolio (‘‘Fund’’) under Nasdaq Rule 5735. The proposed rule change was published for comment in the Federal Register on April 11, 2014.3 The Commission received no comments on the proposal. On May 21, Nasdaq filed Amendment No. 1 to the proposal.4 The Commission is publishing this notice to solicit comments on Amendment No. 1 from interested persons and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 71892 (Apr. 7, 2014), 79 FR 20262 (‘‘Notice’’). 4 In Amendment No. 1, Nasdaq amended the proposed rule change to: (i) Narrow the scope of the Fund’s investments to exclude non-U.S. exchange traded index options; and (ii) specify where quotation and last sale information could be found for underlying exchange traded equities, options, and futures. 1 15 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 II. Description of the Proposed Rule Change The Exchange proposes to list and trade Shares of the Fund under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares. The Shares will be offered by PowerShares Actively Managed Exchange-Traded Fund Trust (‘‘Trust’’). The Trust is registered with the Commission as an investment company as defined by the Investment Company Act of 1940 (‘‘Investment Company Act’’).5 The Fund is a series of the Trust. Invesco PowerShares Capital Management LLC will be the investment adviser (‘‘Adviser’’) to the Fund. The Fund may use one or more subadvisers.6 Invesco Distributors, Inc. (‘‘Distributor’’) will be the principal underwriter and distributor of the Shares. The Bank of New York Mellon will act as the administrator, accounting agent, custodian, and transfer agent for the Fund. The Exchange represents that the Adviser is not a broker-dealer although it is affiliated with the Distributor, which is a broker-dealer.7 The Adviser has implemented a fire wall with respect to its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio. The Exchange also represents that the Shares will be subject to Nasdaq Rule 5735, which sets forth the initial and continued listing criteria applicable to Managed Fund Shares 8 and that for initial and continued listing, the Fund must be in compliance with Rule 10A–3 under the Act.9 5 The Trust has filed a registration statement on Form N–1A (‘‘Registration Statement’’) with the Commission. See Registration Statement filed on November 27, 2013 (File Nos. 333–147622 and 811– 22148). The descriptions of the Fund and the Shares contained herein are based, in part, on information in the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the1940 Act. See Investment Company Act Release No. 28171 (February 27, 2008) (File No. 812– 13386). 6 The Exchange states that no sub-adviser had been selected as of the date of filing of the Notice. See Notice supra note 3, 79 FR at 20263, n.6. 7 See id. at 20263. The Exchange states in the event (a) the Adviser becomes newly affiliated with a broker-dealer (or becomes a registered brokerdealer), or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel and/or such brokerdealer affiliate, if applicable, regarding access to information concerning the composition and/or changes to the portfolio and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. See id. at 20263. 8 See id. at 20267. 9 See 17 CFR 240.10A–3. See also Notice, supra note 3 at 20267. E:\FR\FM\30MYN1.SGM 30MYN1

Agencies

[Federal Register Volume 79, Number 104 (Friday, May 30, 2014)]
[Notices]
[Pages 31153-31156]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-12518]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72238; File No. SR-NASDAQ-2014-055]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Routing Fees

May 23, 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 May 15, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,'' 
at Section 2 governing pricing for NASDAQ members using the NASDAQ 
Options Market (``NOM''), NASDAQ's facility for executing and routing 
standardized equity and index options. Specifically, NOM proposes to 
amend its Routing Fees. While the changes proposed herein are effective 
upon filing, the Exchange has designated that the amendments be 
operative on June 2, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend the Routing Fees in Chapter 
XV, Section 2(3) to recoup costs incurred by the Exchange to route 
orders to away markets.
    Today, the Exchange assesses a Non-Customer a $0.95 per contract 
Routing Fee to any options exchange. The Customer \3\ Routing Fee for 
option orders routed to NASDAQ OMX PHLX LLC (``PHLX'') is a $0.10 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 $0.10 per contract. The Customer Routing Fee 
for option orders routed to

[[Page 31154]]

all other options exchanges \4\ (excluding PHLX and BX Options) is a 
fixed fee of $0.20 per contract (``Fixed Fee'') in addition to the 
actual transaction fee assessed. If the away market pays a rebate, the 
Routing Fee is $0.10 per contract.
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    \3\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Chapter I, Section 
1(a)(48)).
    \4\ 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 ISE Gemini, LLC 
(``Gemini'').
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    With respect to the fixed costs, the Exchange incurs a fee when it 
utilizes Nasdaq Execution Services LLC (``NES''),\5\ a member of the 
Exchange and the Exchange's exclusive order router. Each time NES 
routes an order to an away market, NES 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 NES, 
membership fees at away markets, Options Regulatory Fees (``ORFs''), 
staffing 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 System. This transaction fee is 
calculated on an order-by-order basis since different away markets 
charge different amounts.
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    \5\ The Exchange filed a proposed rule change to utilize Nasdaq 
Execution Services, LLC (``NES'') for outbound order routing. See 
Securities Exchange Act Release No. 71419 (January 28, 2014), 79 FR 
6247 (February 3, 2014) (SR-NASDAQ-2014-007).
    \6\ OCC assessed a $0.01 per contract side. The fee has recently 
been increased from $0.01 to $0.02 per contract side. See Securities 
Exchange Act Release No. 71769 (March 21, 2014), 79 FR 17214 (March 
21, 2014) (SR-OCC-2014-05).
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    The Exchange is proposing to increase Routing Fees to account for 
increased OCC fees and other increased costs associated with clearing, 
ORF and other operational costs. The Exchange proposes to increase 
Routing Fees for Non-Customer orders from $0.95 to $0.97 per contract. 
The Exchange also proposes to increase Customer Routing Fees as 
described herein. The Exchange proposes to increase Customer Routing 
Fees to PHLX from a Fixed Fee of $0.10 to $0.12 per contract, in 
addition to the actual transaction fee assessed. The Exchange proposes 
to increase Customer Routing Fees to BX Options from $0.10 to $0.12 per 
contract. The Exchange also proposes to amend Routing Fees to all other 
exchanges (except PHLX and BX Options) from $0.20 to $0.22 per 
contract, in addition to the actual transaction fee assessed, provided 
the away market does not pay a rebate. If the away market pays a 
rebate, the Routing Fee assessed would be $0.12 per contract, an 
increase from the current $0.10 per contract. The Exchange proposes 
these increases to recoup an additional portion of the costs incurred 
by the Exchange for routing these orders.
    The Exchange is proposing to increase Non-Customer and Customer 
Routing Fees by $0.02 per contract to cover the increased costs of 
offering its members the opportunity to route to other options 
exchanges. With the recent increase by OCC \7\ as well as increases in 
ORFs and NOM's operational expenses, the Exchange sees to further 
recoup a portion of increased costs with the increase to its Routing 
Fees.
---------------------------------------------------------------------------

    \7\ Id.
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    Today the Exchange does not assess the actual transaction fee 
assessed by BX Options, rather the Exchange only assesses the Fixed 
Fee, because the Exchange would continue to retain the rebate to offset 
the cost to route orders to BX Options. This is the not the case for 
all orders routed to BX Options because not all Customer orders receive 
a rebate.\8\ This will remain the same. Similarly, the Exchange is 
proposing to amend the Customer Routing Fee assessed when routing to 
all other options exchanges, if the away market pays a rebate, from a 
$0.10 to a $0.12 per contract Fixed Fee, in order to recoup an 
additional portion of the costs incurred by the Exchange for routing 
these orders. The Exchange does not assess the actual transaction fee 
assessed by the away market, rather the Exchange only assesses the 
Fixed Fee, because the Exchange would continue to retain the rebate to 
offset the cost to route orders to these away markets. This will remain 
the same.
---------------------------------------------------------------------------

    \8\ BX Options pays a Customer Rebate to Remove Liquidity as 
follows: Customers are paid $0.32 per contract in All Other Penny 
Pilot Options (excluding BAC, IWM, QQQ, SPY and VXX) and $0.70 per 
contract in Non-Penny Pilot Options. See BX Options Rules at Chapter 
XV, Section 2(1).
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2. Statutory Basis
    NASDAQ believes that its proposal to amend its Pricing Schedule is 
consistent with Section 6(b) of the Act \9\ in general, and furthers 
the objectives of Section 6(b)(4) and (b)(5) of the Act \10\ 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 it operates or 
controls, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------

    The Exchange believes that amending the Non-Customer and Customer 
Routing Fees by $0.02 per contracts is reasonable because the Exchange 
desires to recoup an additional portion of the cost it incurs when 
routing Non-Customer and Customer orders. Specifically, the Exchange's 
proposal to increase Non-Customer fees from $0.95 to $0.97 per contract 
is reasonable because the additional $0.02 per contract fee will recoup 
increased costs borne by NOM.
    The Exchange believes that amending the Customer Routing Fees for 
orders routed to PHLX from a Fixed Fee of $0.10 to $0.12 per contract 
is reasonable because the Exchange desires to recoup an additional 
portion of the cost it incurs when routing Customer orders to PHLX. The 
Exchange will continue to also assess actual transaction fees assessed 
by PHLX for Customer orders.
    The Exchange believes that amending the Customer Routing Fee for 
orders routed to BX Options from a Fixed Fee of $0.10 to $0.12 per 
contract is reasonable because the Exchange desires to recoup an 
additional portion of the cost it incurs when routing Customer orders 
to BX Options, similar to the amount of Fixed Fee it proposes to assess 
for orders routed to PHLX. While the Exchange would continue to retain 
any rebate paid by BX Options, the Exchange does not assess the actual 
transaction fee that is charged by BX Options for Customer orders.
    The Exchange believes that continuing to assess lower Fixed Fees to 
route Customer orders to PHLX and BX Options, as compared to other 
options exchanges, is reasonable as the Exchange is able to leverage 
certain infrastructure to offer those markets lower fees as explained 
further below.
    The Exchange believes that increasing the fee for routing to all 
other options exchanges (other than PHLX and BX Options) from $0.20 to 
$0.22 per contact is reasonable because the increased fee would recoup 
costs associated with routing Customer orders, in addition to the 
actual transaction fee when no rebate is paid. Similarly, the Exchange 
believes that amending the Customer Routing Fee to other away markets, 
other than PHLX and BX Options, in the instance the away market pays a 
rebate from $0.10 to $0.12 per contract is reasonable because the 
Exchange desires to recoup an additional portion of the cost it incurs 
when routing orders to these away markets. While the Exchange

[[Page 31155]]

would continue to retain any rebate paid by these away markets, the 
Exchange does not assess the actual transaction fee that is charged by 
the away market for Customer orders. The Fixed Fee for Customer orders 
is an approximation of the costs the Exchange will be charged for 
routing orders to away markets. As a general matter, the Exchange 
believes that the proposed fees for Customer orders routed to markets 
which pay a rebate, such as BX Options and other away markets, would 
allow it to recoup and cover a portion of the costs of providing 
optional routing services for Customer orders because it better 
approximates the costs incurred by the Exchange for routing such 
orders. While each destination market's transaction charge varies and 
there is a cost incurred by the Exchange when routing orders to away 
markets, including, OCC clearing costs, administrative and technical 
costs associated with operating NES, membership fees at away markets, 
ORFs and technical costs associated with routing options, the Exchange 
believes that the proposed Routing Fees will enable it to recover the 
increased costs it incurs to route Customer orders to away markets.
    The Exchange believes that amending the Non-Customer Routing Fees 
from $0.95 to $0.97 per contract is equitable and not unfairly 
discriminatory because the Exchange would assess the same Non-Customer 
Routing Fee to all Non-Customer orders routed away. The Exchange 
believes that amending the Customer Routing Fee for orders routed to 
PHLX from a Fixed Fee of $0.10 to $0.12 per contract, in addition to 
the actual transaction fee, is equitable and not unfairly 
discriminatory because the Exchange would assess the same Fixed Fee to 
all orders routed to PHLX in addition to the transaction fee assessed 
by that market. With respect to BX Options, the Exchange believes that 
amending the Customer Routing Fee for orders routed to BX Options from 
a Fixed Fee of $0.10 to $0.12 per contract is equitable and not 
unfairly discriminatory because the Exchange would assess the same 
Fixed Fee to all Customer orders routed to BX Options. With respect 
routing Customer orders to all other away markets (except PHLX and BX 
Options) the Exchange believes that amending the Customer Routing Fee 
from $0.20 to $0.22 per contract, in addition to the actual transaction 
fee assessed) is equitable and not unfairly discriminatory because the 
Exchange would assess the same fee to all Customer orders routed to 
away markets, provided the away market does not pay a rebate. The 
Exchange believes that increasing the Routing Fee to away markets 
(other than PHLX and BX Options), when the away market pays a rebate, 
from $0.10 to $0.12 per contract is equitable and not unfairly 
discriminatory because all Customer orders routed to away markets 
(other than PHLX and BX Options) would be assessed the same fee, 
provided the away market paid a rebate.
    The Exchange would uniformly assess a $0.12 per contract Fixed Fee 
to orders routed to NASDAQ OMX exchanges because the Exchange is 
passing along the saving realized by leveraging NASDAQ OMX's 
infrastructure and scale to market participants when those orders are 
routed to PHLX or BX Options and is providing those savings to all 
market participants. Furthermore, it is important to note that when 
orders are routed to an away market they are routed based on price 
first.\11\ The Exchange believes that it is equitable and not unfairly 
discriminatory to assess a fixed cost of $0.12 per contract to route 
orders to PHLX and BX Options because the cost, in terms of actual cash 
outlays, to the Exchange to route to those markets is lower. For 
example, costs related to routing to PHLX and BX Options are lower as 
compared to other away markets because NES is utilized by all three 
exchanges to route orders.\12\ NES and the three NASDAQ OMX options 
markets have a common data center and staff that are responsible for 
the day-to-day operations of NES. 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 lower 
than the costs to route to a non-NASDAQ OMX exchange. When routing 
orders to non-NASDAQ OMX exchanges, the Exchange incurs costly 
connectivity charges related to telecommunication lines, membership and 
access fees, and other related costs when routing orders. Market 
participants may submit orders to the Exchange as ineligible for 
routing or ``DNR'' to avoid Routing Fees.\13\ Also, orders are routed 
to an away market based on price first.\14\
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    \11\ See NASDAQ Rules at Chapter VI, Section 11(e) (Order 
Routing).
    \12\ See Chapter VI, Section 11 of the BX Options and NOM Rules.
    \13\ See note 12.
    \14\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange does not believe that the 
proposal creates a burden on intra-market competition because the 
Exchange is applying the same Routing Fee increase of $0.02 per 
contract to all market participants. The Exchange will continue to 
assess separate Customer Routing Fees. Customers will continue to 
receive the lowest fees as compared to Non-Customers when routing 
orders, as is the case today. Other options exchanges also assess lower 
Routing Fees for customer orders as compared to Non-Customer 
orders.\15\
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    \15\ BATS assesses lower customer routing fees as compared to 
non-customer routing fees per the away market. For example BATS 
assesses Phlx customer routing fees of $0.45 per contract and an ISE 
non-customer routing fee of $0.65 per contract. See BATS BZX 
Exchange Fee Schedule.
---------------------------------------------------------------------------

    The Exchange's proposal would allow the Exchange to continue to 
recoup its costs when routing both Non-Customer and Customer orders. 
The Exchange continues to pass along savings realized by leveraging 
NASDAQ OMX's infrastructure and scale to market participants when 
Customer orders are routed to PHLX and BX Options and is providing 
those savings to all market participants. Today, other options 
exchanges also assess fixed routing fees to recoup costs incurred by 
the exchange to route orders to away markets.\16\ Market participants 
may submit orders to the Exchange as ineligible for routing or ``DNR'' 
to avoid Routing Fees.\17\ Also, orders are routed to an away market 
based on price first.\18\
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    \16\ See CBOE's Fees Schedule and ISE's Fee Schedule.
    \17\ See note 12.
    \18\ Id.
---------------------------------------------------------------------------

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.\19\ 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

[[Page 31156]]

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.
---------------------------------------------------------------------------

    \19\ 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-2014-055 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-055. 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-2014-055 and 
should be submitted on or before June 20, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12518 Filed 5-29-14; 8:45 am]
BILLING CODE 8011-01-P
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