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, 34814-34817 [2014-14199]
Download as PDF
<![CDATA[
34814
Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices
that the proposed fee changes reflect
this competitive environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 16 and
subparagraph (f)(2) of Rule 19b–4
thereunder,17 because it establishes a
due, fee, or other charge imposed by
ISE.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
emcdonald on DSK67QTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2014–30 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–ISE–2014–30. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–ISE–
2014–30, and should be submitted on or
before July 9, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14200 Filed 6–17–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72378; File No. SR–
NASDAQ–2014–062]
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
June 12, 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 June 2,
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
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
16 15
U.S.C. 78s(b)(3)(A)(ii).
17 17 CFR 240.19b–4(f)(2).
VerDate Mar<15>2010
16:35 Jun 17, 2014
1 15
Jkt 232001
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
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 amending
the NOM Market Maker 3 Rebates to
Add Liquidity in Penny Pilot 4 Options.
While the Exchange has designated
the proposal as effective upon filing, the
Exchange has designated that the
change is operative on June 2, 2014.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and
3 The term ‘‘NOM Market Maker’’ means a
Participant that has registered as a Market Maker on
NOM pursuant to Chapter VII, Section 2, and must
also remain in good standing pursuant to Chapter
VII, Section 4. In order to receive NOM Market
Maker pricing in all securities, the Participant must
be registered as a NOM Market Maker in at least one
security. See Chapter XV. ‘‘Participant’’ means a
firm, or organization that is registered with the
Exchange pursuant to Chapter II of these Rules for
purposes of participating in options trading on
NOM as a ‘‘Nasdaq Options Order Entry Firm’’ or
‘‘Nasdaq Options Market Maker’’. See Chapter I,
Section (a)(40).
4 The Penny Pilot was established in March 2008
and was extended through December 31, 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 72244 (May
23, 2014), 79 FR 31151 (May 30, 2014) (SR–
NASDAQ–2014–056) (notice of filing and
immediate effectiveness). See also NOM Rules,
Chapter VI, Section 5.
E:\FR\FM\18JNN1.SGM
18JNN1
Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices
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 Chapter
XV, Section 2 regarding the Tier 6 NOM
Market Maker Rebates to Add Liquidity
in Penny Pilot Options, to add another
methodology by which a Participant can
earn the rebate. NASDAQ proposes the
amendment in order to continue to
incentivize Participants to select NOM
as a venue when directing order flow.
Rebates for Adding NOM Market Maker
Liquidity
The Exchange currently pays NOM
Market Maker Rebates to Add Liquidity
based on a six tier rebate structure,
which is found in Chapter XV, Section
2(1), as follows:
Monthly volume
Tier 1 .........................
Tier 2 .........................
Tier 3 .........................
Tier 4 .........................
Tier 5 .........................
emcdonald on DSK67QTVN1PROD with NOTICES
Tier 6 .........................
Rebate to add liquidity
Participant adds NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options of up to 0.10% of total industry customer equity and ETF option average daily volume (‘‘ADV’’) contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options above 0.10% to 0.30% of total industry customer equity and ETF option
ADV contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options above 0.30% to 0.60% of total industry customer equity and ETF option
ADV contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options of above 0.60% of total industry customer equity and ETF option ADV
contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options of above 0.30% of total industry customer equity and ETF option ADV
contracts per day in a month and qualifies for the Tier 7 or Tier 8 Customer and/or
Professional Rebate to Add Liquidity in Penny Pilot Options.
Participant adds NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options above 0.80% of total industry customer equity and ETF option ADV
contracts per day in a month and qualifies for the Tier 7 or Tier 8 Customer and/or
Professional Rebate to Add Liquidity in Penny Pilot Options.
For purposes of qualifying for a NOM
Market Maker Penny Pilot Options
Rebate to Add Liquidity tier, the
Exchange today uses a metric that is a
percentage of total industry customer
equity and exchange traded fund
(‘‘ETF’’) option average daily volume
(‘‘ADV’’) contracts per day in a month.5
This percentage metric is graduated
from Tier 1 (lowest percentage) through
Tier 6 (highest percentage). For
example, currently a Participant can
earn the $0.20 Tier 1 rebate if he adds
NOM Market Maker liquidity in Penny
Pilot Options and/or Non-Penny Pilot
Options of up to 0.10% of total industry
customer equity and ETF option ADV
contracts per day in a month; and can
earn the $0.42 Tier 6 rebate if he adds
NOM Market Maker liquidity in Penny
Pilot Options and/or Non-Penny Pilot
Options above 0.80% of total industry
customer equity and ETF option ADV
contracts per day in a month and
qualifies for the Tier 7 or Tier 8
5 See Securities Exchange Act Release No. 71703
(March 12, 2014), 79 FR 15172 (March 18, 2014)
(SR–NASDAQ–2014–023) (order approving
proposal to establish, among other things, the
percentage metric).
VerDate Mar<15>2010
34815
16:35 Jun 17, 2014
Jkt 232001
Customer,6 and/or Professional 7 Rebate
to Add Liquidity in Penny Pilot
Options.
The Exchange proposes to amend the
Tier 6 rebate to add an alternative to the
current metric. Specifically, in addition
to the current metric of above 0.80% of
total industry customer equity and ETF
option ADV where the NOM Market
Maker also qualifies for the Tier 7 or
Tier 8 Customer and/or Professional
Rebate to Add Liquidity in Penny Pilot
Options,8 the Exchange proposes to add
6 The term ‘‘Customer’’ means 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)). See Chapter XV.
7 The term ‘‘Professional’’ means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s) pursuant to
Chapter I, Section 1(a)(48). All Professional orders
shall be appropriately marked by Participants. See
Chapter XV.
8 The Tier 7 rebate requires that a 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. The
Tier 8 rebate requires that the Participant adds
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
$0.20
$0.25
$0.30
$0.32 or $0.38 in the following
symbols BAC, GLD, IWM,
QQQ and VXX or $0.40 in
SPY
$0.40
$0.42
the alternate metric that a Participant
may earn a Tier 6 rebate if he adds NOM
Market Maker liquidity in Penny Pilot
Options and/or Non-Penny Pilot
Options above 0.90% of total industry
customer equity and ETF option ADV
contracts per day in a month.
With the proposed amendment, the
Exchange would pay a Tier 6 $0.42 per
contract rebate where a Participant adds
NOM Market Maker liquidity in Penny
Pilot Options and/or Non-Penny Pilot
Options above 0.80% of total industry
customer equity and ETF option ADV
contracts per day in a month and
qualifies for the Tier 7 or Tier 8
Customer and/or Professional Rebate to
Add Liquidity in Penny Pilot Options,
or Participant adds NOM Market Maker
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options above 0.90%
of total industry customer equity and
ETF option ADV contracts per day in a
month. The Exchange is not amending
the current qualification for the Tier 6
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. See Chapter XV, Section 2(1).
E:\FR\FM\18JNN1.SGM
18JNN1
34816
Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices
NOM Market Maker rebate, but is
simply adding an alternate method to
qualify to earn a rebate.
In addition, the Exchange is
proposing to delete an extraneous
period in Tier 5, and thereby conform
the punctuation in Tiers 1 through 6 of
the NOM Market Maker Rebates to Add
Liquidity in Penny Pilot Options.
The Exchange would continue to
incentivize Participants, with NOM
Market Maker rebate Tiers 1 through 6
as amended, to provide liquidity by
paying specified rebates to those
Participants that add NOM Market
Maker liquidity in Penny Pilot Options
and/or Non-Penny Pilot Options
according to percentage metrics keyed
to industry customer equity and ETF
option average ADV contracts per day in
a month.9
emcdonald on DSK67QTVN1PROD with NOTICES
2. Statutory Basis
NASDAQ believes that its proposal to
amend its Pricing Schedule is consistent
with Section 6(b) of the Act 10 in
general, and furthers the objectives of
Section 6(b)(4) and (b)(5) of the Act 11 in
particular, in that it provides for the
equitable allocation of reasonable dues,
fees and other charges among members
and issuers and other persons using any
facility or system which NASDAQ
operates or controls, and is not designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange’s goal is to modify
percentage eligibility thresholds where a
Participant adds NOM Market Maker
liquidity in order to continue to
encourage market participants to direct
a greater amount of NOM Market Maker
liquidity to the Exchange. The
Exchange’s proposal does not eliminate
rebates or the ability for market
participants to earn rebates, but rather
incorporates an additional way to earn
rebates as noted herein.
The Exchange’s proposal to amend
Tier 6 of the NOM Market Maker Rebate
to Add Liquidity in Penny Pilot Options
is reasonable, equitable and not unfairly
discriminatory for the reasons noted
below.
The Exchange’s proposal to adopt a
new Tier 6 metric for Participants that
add the highest level of NOM Market
Maker liquidity in Penny Pilot Options
and/or Non-Penny Pilot Options above
9 The dynamic rebate structure, consisting of a
percentage of total industry customer equity and
ETF option ADV, is similar for Customer and/or
Professional Penny Pilot Options as well as for
NOM Market Makers for similar products (e.g.,
Penny Pilot Options and Non-Penny Pilot Options).
The Exchange notes that if a Participant qualifies
for two tiers, the higher rebate will be paid in a
given month.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(4), (5).
VerDate Mar<15>2010
16:35 Jun 17, 2014
Jkt 232001
0.90% of total industry customer equity
and ETF option ADV contracts per day
in a month is equitable and not unfairly
discriminatory because all eligible
Participants that qualify for the
additional Tier 6 NOM Market Maker
Rebate to Add Liquidity metric will be
uniformly paid the rebate.12
The Exchange would continue to
incentivize Participants, with Tiers 1
through 6 NOM Market Maker Penny
Pilot Options Rebates to Add Liquidity,
as amended, to provide liquidity by
paying specified rebates to those
Participants that add NOM Market
Maker liquidity in Penny Pilot Options
and/or Non-Penny Pilot Options
according to percentage metrics keyed
to industry customer equity and ETF
option average ADV contracts per day in
a month. The proposed percentage
metrics are dynamic in nature in that
they reference total industry options
contracts per day (rather than a static
number of contracts per day),13 and
thereby make the Rebate structure
similar for Customers and/or
Professionals as well as for NOM Market
Makers for similar products (e.g., Penny
Pilot Options and Non-Penny Pilot
Options).14
In addition, the Exchange believes it
is reasonable to continue to use
percentage metrics keyed to industry
customer equity and ETF option average
ADV contracts per day in a month
because that is a benchmark that
Participants are comfortable with in
respect to Customer and Professional
liquidity. Moreover, the Exchange
believes that industry customer volume
is a fair metric because it does not have
the periodic spikes that may occur due
to floor trading. Because NOM is an
electronic market place with no trading
floor, the Exchange believes that an
industry volume metric is fair and
reasonable.
12 The NOM Market Maker obligations and
regulatory requirements remain unchanged.
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.
13 See supra note 5.
14 The Exchange notes that if a Participant
qualifies for two tiers, the higher rebate will be
paid.
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.
The Exchange believes that adding an
additional percentage eligibility metric
in Tier 6 for Participants that bring the
largest amount of liquidity should
encourage Participants to direct
additional NOM Market Maker order
flow to the Exchange, and will dovetail
with the existing metric in Tier 6.
Added liquidity benefits all market
participants by providing more trading
opportunities, which attracts market
participants to the Exchange. 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 encouraging
Participants to add NOM Market Maker
liquidity creates competition among
options exchanges because the
Exchange believes that the rebates may
cause market participants to select NOM
as a venue to send order flow. The
Exchange is continuing to offer rebates
at specified percentage metrics for NOM
Market Maker order flow being executed
at the Exchange, which additional order
flow should benefit other 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 belief that
the rebate structure and tiers as
amended 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
E:\FR\FM\18JNN1.SGM
18JNN1
Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices
19(b)(3)(A)(ii) of the Act.15 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.
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–2014–062, and should be
submitted on or before July 9, 2014.
15.1(a) and (c). Changes to the fee
schedule pursuant to this proposal are
effective upon filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2014–14199 Filed 6–17–14; 8:45 am]
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–2014–062 on the subject line.
emcdonald on DSK67QTVN1PROD with NOTICES
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:
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Related to Fees for Use
of BATS Exchange, Inc.
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–2014–062. 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
15 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Mar<15>2010
16:35 Jun 17, 2014
Jkt 232001
34817
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72376; File No. SR–BATS–
2014–021]
June 12, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 30,
2014, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Exchange has
designated the proposed rule change as
one establishing or changing a member
due, fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
of the Act 3 and Rule 19b–4(f)(2)
thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend the fee schedule applicable to
Members 5 and non-members of the
Exchange pursuant to BATS Rules
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 A Member is defined as ‘‘any registered broker
or dealer that has been admitted to membership in
the Exchange.’’ See Exchange Rule 1.5(n).
1 15
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to modify the
‘‘Options Pricing’’ section of its fee
schedule effective immediately, in order
to amend a rebate and add two new tiers
for Customer 6 orders that add liquidity
to the Exchange’s options platform
(‘‘BATS Options’’) in options classes
subject to the penny pilot program
(‘‘Penny Pilot Securities’’).7 More
specifically, the Exchange is proposing
to amend the fee schedule as follows: (i)
Lower the standard rebate for Customer
orders that add liquidity in Penny Pilot
Securities; (ii) introduce a new tier for
Customer orders that add liquidity in
Penny Pilot Securities; and (iii)
introduce a new cross-asset tier for
Customer orders that add liquidity in
Penny Pilot Securities.
The Exchange currently provides
rebates for Customer orders that add
liquidity to the BATS Options order
book in Penny Pilot Securities pursuant
to a tiered pricing structure, as
described below, including a cross-asset
tier, which provides enhanced rebates to
6 As defined on the Exchange’s fee schedule, a
‘‘Customer’’ order is any transaction identified by
a Member for clearing in the Customer range at the
Options Clearing Corporation (‘‘OCC’’), except for
those designated as ‘‘Professional’’.
7 The Exchange currently charges different fees
and provides different rebates depending on
whether an options class is an options class that
qualifies as a Penny Pilot Security pursuant to
Exchange Rule 21.5, Interpretation and Policy .01
or is a non-penny options class.
E:\FR\FM\18JNN1.SGM
18JNN1
]]>Agencies
[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34814-34817]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14199]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72378; File No. SR-NASDAQ-2014-062]
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
June 12, 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 June 2, 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
amending the NOM Market Maker \3\ Rebates to Add Liquidity in Penny
Pilot \4\ Options.
---------------------------------------------------------------------------
\3\ The term ``NOM Market Maker'' means a Participant that has
registered as a Market Maker on NOM pursuant to Chapter VII, Section
2, and must also remain in good standing pursuant to Chapter VII,
Section 4. In order to receive NOM Market Maker pricing in all
securities, the Participant must be registered as a NOM Market Maker
in at least one security. See Chapter XV. ``Participant'' means a
firm, or organization that is registered with the Exchange pursuant
to Chapter II of these Rules for purposes of participating in
options trading on NOM as a ``Nasdaq Options Order Entry Firm'' or
``Nasdaq Options Market Maker''. See Chapter I, Section (a)(40).
\4\ The Penny Pilot was established in March 2008 and was
extended through December 31, 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 72244
(May 23, 2014), 79 FR 31151 (May 30, 2014) (SR-NASDAQ-2014-056)
(notice of filing and immediate effectiveness). See also NOM Rules,
Chapter VI, Section 5.
---------------------------------------------------------------------------
While the Exchange has designated the proposal as effective upon
filing, the Exchange has designated that the change is operative on
June 2, 2014.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, and
[[Page 34815]]
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 Chapter XV, Section 2 regarding the Tier 6
NOM Market Maker Rebates to Add Liquidity in Penny Pilot Options, to
add another methodology by which a Participant can earn the rebate.
NASDAQ proposes the amendment in order to continue to incentivize
Participants to select NOM as a venue when directing order flow.
Rebates for Adding NOM Market Maker Liquidity
The Exchange currently pays NOM Market Maker Rebates to Add
Liquidity based on a six tier rebate structure, which is found in
Chapter XV, Section 2(1), as follows:
----------------------------------------------------------------------------------------------------------------
Monthly volume Rebate to add liquidity
----------------------------------------------------------------------------------------------------------------
Tier 1.............................. Participant adds NOM Market $0.20
Maker liquidity in Penny
Pilot Options and/or Non-
Penny Pilot Options of up
to 0.10% of total industry
customer equity and ETF
option average daily volume
(``ADV'') contracts per day
in a month.
Tier 2.............................. Participant adds NOM Market $0.25
Maker liquidity in Penny
Pilot Options and/or Non-
Penny Pilot Options above
0.10% to 0.30% of total
industry customer equity
and ETF option ADV
contracts per day in a
month.
Tier 3.............................. Participant adds NOM Market $0.30
Maker liquidity in Penny
Pilot Options and/or Non-
Penny Pilot Options above
0.30% to 0.60% of total
industry customer equity
and ETF option ADV
contracts per day in a
month.
Tier 4.............................. Participant adds NOM Market $0.32 or $0.38 in the following symbols BAC,
Maker liquidity in Penny GLD, IWM, QQQ and VXX or $0.40 in SPY
Pilot Options and/or Non-
Penny Pilot Options of
above 0.60% of total
industry customer equity
and ETF option ADV
contracts per day in a
month.
Tier 5.............................. Participant adds NOM Market $0.40
Maker liquidity in Penny
Pilot Options and/or Non-
Penny Pilot Options of
above 0.30% of total
industry customer equity
and ETF option ADV
contracts per day in a
month and qualifies for the
Tier 7 or Tier 8 Customer
and/or Professional Rebate
to Add Liquidity in Penny
Pilot Options.
Tier 6.............................. Participant adds NOM Market $0.42
Maker liquidity in Penny
Pilot Options and/or Non-
Penny Pilot Options above
0.80% of total industry
customer equity and ETF
option ADV contracts per
day in a month and
qualifies for the Tier 7 or
Tier 8 Customer and/or
Professional Rebate to Add
Liquidity in Penny Pilot
Options.
----------------------------------------------------------------------------------------------------------------
For purposes of qualifying for a NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity tier, the Exchange today uses a metric
that is a percentage of total industry customer equity and exchange
traded fund (``ETF'') option average daily volume (``ADV'') contracts
per day in a month.\5\ This percentage metric is graduated from Tier 1
(lowest percentage) through Tier 6 (highest percentage). For example,
currently a Participant can earn the $0.20 Tier 1 rebate if he adds NOM
Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of up to 0.10% of total industry customer equity and ETF option
ADV contracts per day in a month; and can earn the $0.42 Tier 6 rebate
if he adds NOM Market Maker liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options above 0.80% of total industry customer equity
and ETF option ADV contracts per day in a month and qualifies for the
Tier 7 or Tier 8 Customer,\6\ and/or Professional \7\ Rebate to Add
Liquidity in Penny Pilot Options.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 71703 (March 12,
2014), 79 FR 15172 (March 18, 2014) (SR-NASDAQ-2014-023) (order
approving proposal to establish, among other things, the percentage
metric).
\6\ The term ``Customer'' means 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)). See
Chapter XV.
\7\ The term ``Professional'' means any person or entity that
(i) is not a broker or dealer in securities, and (ii) places more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s) pursuant to Chapter
I, Section 1(a)(48). All Professional orders shall be appropriately
marked by Participants. See Chapter XV.
---------------------------------------------------------------------------
The Exchange proposes to amend the Tier 6 rebate to add an
alternative to the current metric. Specifically, in addition to the
current metric of above 0.80% of total industry customer equity and ETF
option ADV where the NOM Market Maker also qualifies for the Tier 7 or
Tier 8 Customer and/or Professional Rebate to Add Liquidity in Penny
Pilot Options,\8\ the Exchange proposes to add the alternate metric
that a Participant may earn a Tier 6 rebate if he adds NOM Market Maker
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above
0.90% of total industry customer equity and ETF option ADV contracts
per day in a month.
---------------------------------------------------------------------------
\8\ The Tier 7 rebate requires that a 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. The Tier 8 rebate
requires that the 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. See Chapter XV, Section 2(1).
---------------------------------------------------------------------------
With the proposed amendment, the Exchange would pay a Tier 6 $0.42
per contract rebate where a Participant adds NOM Market Maker liquidity
in Penny Pilot Options and/or Non-Penny Pilot Options above 0.80% of
total industry customer equity and ETF option ADV contracts per day in
a month and qualifies for the Tier 7 or Tier 8 Customer and/or
Professional Rebate to Add Liquidity in Penny Pilot Options, or
Participant adds NOM Market Maker liquidity in Penny Pilot Options and/
or Non-Penny Pilot Options above 0.90% of total industry customer
equity and ETF option ADV contracts per day in a month. The Exchange is
not amending the current qualification for the Tier 6
[[Page 34816]]
NOM Market Maker rebate, but is simply adding an alternate method to
qualify to earn a rebate.
In addition, the Exchange is proposing to delete an extraneous
period in Tier 5, and thereby conform the punctuation in Tiers 1
through 6 of the NOM Market Maker Rebates to Add Liquidity in Penny
Pilot Options.
The Exchange would continue to incentivize Participants, with NOM
Market Maker rebate Tiers 1 through 6 as amended, to provide liquidity
by paying specified rebates to those Participants that add NOM Market
Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot Options
according to percentage metrics keyed to industry customer equity and
ETF option average ADV contracts per day in a month.\9\
---------------------------------------------------------------------------
\9\ The dynamic rebate structure, consisting of a percentage of
total industry customer equity and ETF option ADV, is similar for
Customer and/or Professional Penny Pilot Options as well as for NOM
Market Makers for similar products (e.g., Penny Pilot Options and
Non-Penny Pilot Options). The Exchange notes that if a Participant
qualifies for two tiers, the higher rebate will be paid in a given
month.
---------------------------------------------------------------------------
2. Statutory Basis
NASDAQ believes that its proposal to amend its Pricing Schedule is
consistent with Section 6(b) of the Act \10\ in general, and furthers
the objectives of Section 6(b)(4) and (b)(5) of the Act \11\ 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------
The Exchange's goal is to modify percentage eligibility thresholds
where a Participant adds NOM Market Maker liquidity in order to
continue to encourage market participants to direct a greater amount of
NOM Market Maker liquidity to the Exchange. The Exchange's proposal
does not eliminate rebates or the ability for market participants to
earn rebates, but rather incorporates an additional way to earn rebates
as noted herein.
The Exchange's proposal to amend Tier 6 of the NOM Market Maker
Rebate to Add Liquidity in Penny Pilot Options is reasonable, equitable
and not unfairly discriminatory for the reasons noted below.
The Exchange's proposal to adopt a new Tier 6 metric for
Participants that add the highest level of NOM Market Maker liquidity
in Penny Pilot Options and/or Non-Penny Pilot Options above 0.90% of
total industry customer equity and ETF option ADV contracts per day in
a month is equitable and not unfairly discriminatory because all
eligible Participants that qualify for the additional Tier 6 NOM Market
Maker Rebate to Add Liquidity metric will be uniformly paid the
rebate.\12\
---------------------------------------------------------------------------
\12\ The NOM Market Maker obligations and regulatory
requirements remain unchanged. Pursuant to Chapter VII (Market
Participants), Section 5 (Obligations of Market Makers), in
registering as a market maker, an Options Participant commits
himself to various obligations. Transactions of a Market Maker in
its market making capacity must constitute a course of dealings
reasonably calculated to contribute to the maintenance of a fair and
orderly market, and Market Makers should not make bids or offers or
enter into transactions that are inconsistent with such course of
dealings. Further, all Market Makers are designated as specialists
on NOM for all purposes under the Act or rules thereunder. See
Chapter VII, Section 5.
---------------------------------------------------------------------------
The Exchange would continue to incentivize Participants, with Tiers
1 through 6 NOM Market Maker Penny Pilot Options Rebates to Add
Liquidity, as amended, to provide liquidity by paying specified rebates
to those Participants that add NOM Market Maker liquidity in Penny
Pilot Options and/or Non-Penny Pilot Options according to percentage
metrics keyed to industry customer equity and ETF option average ADV
contracts per day in a month. The proposed percentage metrics are
dynamic in nature in that they reference total industry options
contracts per day (rather than a static number of contracts per
day),\13\ and thereby make the Rebate structure similar for Customers
and/or Professionals as well as for NOM Market Makers for similar
products (e.g., Penny Pilot Options and Non-Penny Pilot Options).\14\
---------------------------------------------------------------------------
\13\ See supra note 5.
\14\ The Exchange notes that if a Participant qualifies for two
tiers, the higher rebate will be paid.
---------------------------------------------------------------------------
In addition, the Exchange believes it is reasonable to continue to
use percentage metrics keyed to industry customer equity and ETF option
average ADV contracts per day in a month because that is a benchmark
that Participants are comfortable with in respect to Customer and
Professional liquidity. Moreover, the Exchange believes that industry
customer volume is a fair metric because it does not have the periodic
spikes that may occur due to floor trading. Because NOM is an
electronic market place with no trading floor, the Exchange believes
that an industry volume metric is fair and reasonable.
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 adding an additional percentage
eligibility metric in Tier 6 for Participants that bring the largest
amount of liquidity should encourage Participants to direct additional
NOM Market Maker order flow to the Exchange, and will dovetail with the
existing metric in Tier 6.
Added liquidity benefits all market participants by providing more
trading opportunities, which attracts market participants to the
Exchange. 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 encouraging Participants to add NOM Market
Maker liquidity creates competition among options exchanges because the
Exchange believes that the rebates may cause market participants to
select NOM as a venue to send order flow. The Exchange is continuing to
offer rebates at specified percentage metrics for NOM Market Maker
order flow being executed at the Exchange, which additional order flow
should benefit other 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 belief that the rebate structure and tiers as
amended 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
[[Page 34817]]
19(b)(3)(A)(ii) of the Act.\15\ 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.
---------------------------------------------------------------------------
\15\ 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-2014-062 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-2014-062. 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-2014-062, and should
be submitted on or before July 9, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14199 Filed 6-17-14; 8:45 am]
BILLING CODE 8011-01-P
