Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rebates in Penny Pilot Options, 71146-71150 [2014-28172]
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71146
Federal Register / Vol. 79, No. 230 / Monday, December 1, 2014 / Notices
hearing requests should state the nature
of the writer’s interest, any facts bearing
upon the desirability of a hearing on the
matter, the reason for the request, and
the issues contested. Persons who wish
to be notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: The Commission: Brent J.
Fields, Secretary, U.S. Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
FOR FURTHER INFORMATION CONTACT:
Diane L. Titus at (202) 551–6810, SEC,
Division of Investment Management,
Chief Counsel’s Office, 100 F Street NE.,
Washington, DC 20549–8010.
Cushing Funds Trust
[File No. 811–22428]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. Applicant
transferred its assets to corresponding
series of MainStay Funds Trust, and on
July 7, 2014, made distributions to its
shareholders based on net asset value.
Expenses of $822,606 incurred in
connection with the reorganization were
paid by Cushing Asset Management,
L.P., applicant’s investment adviser, and
New York Life Investment Management
LLC, the surviving fund’s investment
adviser.
Filing Date: The application was filed
on October 27, 2014.
Applicant’s Address: 8117 Preston
Rd., Suite 440, Dallas, TX 75225.
Lattice Strategies, LLC
[File No. 811–23001]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. Applicant states
the filings on Form N–8A and N–1A
made under applicant’s file number
were inadvertent and were intended
instead to be filed under the file number
of Lattice Strategies Trust.
Filing Date: The application was filed
on October 24, 2014.
Applicant’s Address: One
Embarcadero Center, 23rd Floor, San
Francisco, CA 94111.
Oceanstone Fund
asabaliauskas on DSK5VPTVN1PROD with NOTICES
[File No. 811–21930]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On August 29,
2014, applicant made a liquidating
distribution to its shareholders, based
on net asset value. Applicant incurred
no expenses in connection with the
liquidation.
Filing Date: The application was filed
on October 29, 2014.
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Applicant’s Address: PO Box 130982,
Carlsbad, CA 92013.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–28175 Filed 11–28–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73676; File No. SR–
NASDAQ–2014–105]
Self-Regulatory Organizations; The
NASDAQ Stock Market, LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Rebates in Penny Pilot Options
November 24, 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 November
10, 2014, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by NASDAQ. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to modify Chapter
XV, entitled ‘‘Options Pricing,’’ at
Section 2 governing pricing for
NASDAQ members using the NASDAQ
Options Market (‘‘NOM’’), NASDAQ’s
facility for executing and routing
standardized equity and index options.
Specifically, NOM proposes to amend
certain Penny Pilot Options 3 rebates
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Penny Pilot was established in March 2008
and in October 2009 was expanded and 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
2 17
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currently applicable to Customers,4
Professionals 5 and NOM Market
Makers.6
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 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.
filing and immediate effectiveness adding seventyfive 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) (notice of filing
and immediate effectiveness and extension and
replacement of Penny Pilot through December 31,
2013); 71105 (December 17, 2013), 78 FR 77530
(December 23, 2013) (SR–NASDAQ–2013–154)
(notice of filing and immediate effectiveness and
extension and replacement of Penny Pilot through
June 30, 2014); and 79 FR 31151 (May 23, 2014),
79 FR 31151 (May 30, 2014) (SR–NASDAQ–2014–
056) ((notice of filing and immediate effectiveness
and extension and replacement of Penny Pilot
through December 31, 2014). See also NOM Rules,
Chapter VI, Section 5.
4 The term ‘‘Customer’’ applies to any transaction
that is identified by a Participant for clearing in the
Customer range at The Options Clearing
Corporation (‘‘OCC’’) which is not for the account
of broker or dealer or for the account of a
‘‘Professional’’ (as that term is defined in Chapter
I, Section 1(a)(48)).
5 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.
6 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.
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Federal Register / Vol. 79, No. 230 / Monday, December 1, 2014 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ proposes to modify Chapter
XV, entitled ‘‘Options Pricing,’’ at
Section 2(1) governing the rebates and
fees assessed for option orders entered
into NOM. The Exchange proposes to
amend certain qualifications related to
Customer and Professional Penny Pilot
Options Rebates to Add Liquidity tiers
to offer Participants a greater
opportunity to earn Customer and
Professional rebates. The Exchange also
proposes to modify NOM Market Maker
Penny Pilot Options Rebates to Add
Liquidity to offer additional rebate
opportunities. The Exchange believes
that additional rebate opportunities will
attract additional order flow to the
Exchange to the benefit of all market
participants.
Customer and Professional Rebates To
Add Liquidity
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Today, the Exchange offers tiered
Penny Pilot Options Rebates to Add
Liquidity to Customers and
Professionals based on various criteria
with rebates ranging from $0.20 to $0.48
per contract. Participants may qualify
for Customer and Professional Penny
Pilot Options Rebates to Add Liquidity
in Tiers 1–5 and Tier 8 by adding a
certain amount of Customer and/or
Professional liquidity in Penny Pilot
Options or Non-Penny Pilot Options as
specified by each tier.7 The Exchange is
proposing to amend these tiers and
permit Participants to add Customer,
Professional, Firm,8 Non-NOM Market
7 Tiers 6 and 7 are calculated based on Total
Volume. Total Volume is defined as Customer,
Professional, Firm, Broker-Dealer, Non-NOM
Market Maker and NOM Market Maker volume in
Penny Pilot Options and/or Non-Penny Pilot
Options which either adds or removes liquidity on
NOM. See note ‘‘b’’ in Section 2, Chapter XV. The
Exchange utilizes data from OCC to determine the
total industry customer equity and ETF options
ADV figure. OCC classifies equity and ETF options
volume under the equity options category. Also,
both customer and professional orders that are
transacted on options exchanges clear in the
customer range at OCC and therefore both customer
and professional volume would be included in the
total industry figure to calculate rebate tiers. This
is the case today for the Total Volume number that
appear in Tiers 6 and 7 of the Customer and
Professional rebate today, which includes Customer
and Professional numbers in both the numerator
and denominator of that percentage. These tiers will
remain unchanged by this proposal.
8 The term ‘‘Firm’’ or (‘‘F’’) applies to any
transaction that is identified by a Participant for
clearing in the Firm range at OCC.
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Maker 9 and/or Broker-Dealer 10
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options in order to
qualify for the Customer and/or
Professional Penny Pilot Options
Rebates to Add Liquidity in Tiers 1–5
and Tier 8.
Tier 1 currently offers Participants
that add Customer and/or Professional
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
a $0.20 per contract rebate. The
Exchange is proposing to amend Tier 1
to provide that Participants that add
Customer, Professional, Firm, Non-NOM
Market Maker and/or Broker-Dealer
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
would continue to receive a $0.20 per
contract rebate.
Tier 2 currently offers Participants
that add Customer and/or Professional
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options above 0.10%
to 0.20% of total industry customer
equity and ETF option ADV contracts
per day in a month a $0.25 per contract
rebate. The Exchange is proposing to
amend Tier 2 to provide that
Participants that add Customer,
Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer liquidity in
Penny Pilot Options and/or Non-Penny
Pilot Options above 0.10% to 0.20% of
total industry customer equity and ETF
option ADV contracts per day in a
month would continue to receive a
$0.25 per contract rebate.
Tier 3 currently offers Participants
that add Customer and/or Professional
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options above 0.20%
to 0.30% of total industry customer
equity and ETF option ADV contracts
per day in a month a $0.42 per contract
rebate. The Exchange is proposing to
amend Tier 3 to provide that
Participants that add Customer,
Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer liquidity in
Penny Pilot Options and/or Non-Penny
Pilot Options above 0.20% to 0.30% of
total industry customer equity and ETF
9 The term ‘‘Non-NOM Market Maker’’ or (‘‘O’’) is
a registered market maker on another options
exchange that is not a NOM Market Maker. A NonNOM Market Maker must append the proper NonNOM Market Maker designation to orders routed to
NOM
10 The term ‘‘Broker-Dealer’’ or (‘‘B’’) applies to
any transaction which is not subject to any of the
other transaction fees applicable within a particular
category.
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71147
option ADV contracts per day in a
month would continue to receive a
$0.42 per contract rebate.
Tier 4 currently offers Participants
that add Customer and/or Professional
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options above 0.30%
to 0.40% of total industry customer
equity and ETF option ADV contracts
per day in a month a $0.43 per contract
rebate. The Exchange is proposing to
amend Tier 4 to provide that
Participants that add Customer,
Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer liquidity in
Penny Pilot Options and/or Non-Penny
Pilot Options above 0.30% to 0.40% of
total industry customer equity and ETF
option ADV contracts per day in a
month would continue to receive a
$0.43 per contract rebate.
Tier 5 currently offers Participants
that add Customer and/or Professional
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options above 0.40%
of total industry customer equity and
ETF option ADV contracts per day in a
month, or Participants that add (1)
Customer and/or Professional liquidity
in Penny Pilot Options and/or NonPenny Pilot Options of 25,000 or more
contracts per day in a month, (2) the
Participant has certified for the Investor
Support Program set forth in Rule 7014,
and (3) the Participant executed at least
one order on NASDAQ’s equity market
a $0.45 per contract rebate. The
Exchange is proposing to amend Tier 5
to provide that Participants that add
Customer, Professional, Firm, Non-NOM
Market Maker and/or Broker-Dealer
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options above 0.40%
of total industry customer equity and
ETF option ADV contracts per day in a
month, or Participant adds (1) Customer
and/or Professional liquidity in Penny
Pilot Options and/or Non-Penny Pilot
Options of 25,000 or more contracts per
day in a month, (2) the Participant has
certified for the Investor Support
Program set forth in Rule 7014, and (3)
the Participant executed at least one
order on NASDAQ’s equity market
would continue to receive a $0.45 per
contract rebate.
Tier 8 currently offers Participants
that add Customer and/or Professional
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options of 0.75% or
more of national customer volume in
multiply-listed equity and ETF options
classes in a month a $0.48 per contract
Customer rebate and a $0.47 per
contract Professional rebate. The
Exchange is proposing to amend Tier 8
to provide that Participants that add
Customer, Professional, Firm, Non-NOM
Market Maker and/or Broker-Dealer
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Federal Register / Vol. 79, No. 230 / Monday, December 1, 2014 / Notices
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 would continue to
receive a $0.48 per contract Customer
rebate and a $0.47 per contract
Professional rebate.
With respect to Tier 8, today,
Participants that add Customer and/or
Professional liquidity in Penny Pilot
Options and/or Non-Penny Pilot
Options of 1.25% or more of national
customer volume in multiply-listed
equity and ETF options classes in a
month will receive an additional $0.02
per contract Penny Pilot Options Tier 8
Customer Rebate to Add Liquidity for
each transaction which adds liquidity in
Penny Pilot Options in that month. The
Exchange also proposes to amend this
incentive by also permitting Firm, NonNOM Market Maker and/or BrokerDealer liquidity to qualify for the
incentive. The amended rule text would
provide, ‘‘Participants that add
Customer, Professional, Firm, Non-NOM
Market Maker, and/or Broker-Dealer
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options of 1.25% or
more of national customer volume in
multiply-listed equity and ETF options
classes in a month will receive an
additional $0.02 per contract Penny
Pilot Options Customer Rebate to Add
Liquidity for each transaction which
adds liquidity in Penny Pilot Options in
that month.’’
NOM Market Maker Rebates To Add
Liquidity
Today, the Exchange pays NOM
Market Maker Penny Pilot Options
Rebates to Add Liquidity based on
various criteria in six tiers with rebates
which range from $0.20 to $0.42 per
contract as noted below.
Monthly
volume
Tier 1 ............
Tier 2 ............
Tier 3 ............
Tier 4 ............
Tier 5 ............
asabaliauskas on DSK5VPTVN1PROD 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 0.25% 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 0.25% 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% to 0.90% 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 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.
Today, the Tier 3 NOM Market Maker
Penny Pilot Options Rebate to Add
Liquidity pays a $0.30 per contract
rebate, except in QQQ, SPY and VXX
which pay a $0.40 per contract rebate to
Participants that add NOM Market
Maker liquidity in Penny Pilot Options
and/or Non-Penny Pilot Options above
0.25% to 0.60% of total industry
customer equity and ETF option ADV
contracts per day in a month. The
Exchange proposes to add AAPL to the
list of symbols that are eligible for the
Tier 3 rebate of $0.40 per contract.
Today, the Exchange pays a Tier 3 NOM
Market Maker Penny Pilot Options
Rebate to Add Liquidity of $0.30 per
contract in AAPL. Today, the Tier 4
NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity pays a
$0.32 per contract rebate, except in
QQQ, SPY and VXX which pay a $0.40
per contract rebate to Participants that
add NOM Market Maker liquidity in
Penny Pilot Options and/or Non-Penny
Pilot Options of above 0.60% to 0.90%
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of total industry customer equity and
ETF option ADV contracts per day in a
month. The Exchange proposes to add
AAPL to the list of symbols that are
eligible for the Tier 4 rebate of $0.40 per
contract. Today, the Exchange pays a
Tier 4 NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity of
$0.32 per contract in AAPL. The
Exchange believes that paying a higher
rebate for AAPL transactions will
encourage a greater number of
transactions in AAPL.
Today, the Tier 6 NOM Market Maker
Penny Pilot Option Rebate to Add
Liquidity pay a $0.42 per contract rebate
to Participants that add 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
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$0.20
$0.25
$0.30 or $0.40 in the following
symbols QQQ, SPY and
VXX.
$0.32 or $0.40 in the following
symbols QQQ, VXX and
SPY.
$0.40
$0.42
Options above 0.90% of total industry
customer equity and ETF option ADV
contracts per day in a month. The
Exchange is proposing to amend the
Tier 6 NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity to also
provide that a Participant that adds
Customer, Professional, Firm, Non-NOM
Market Maker, and/or Broker-Dealer
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options of 1.40% or
more of national customer volume in
multiply-listed equity and ETF options
classes in a month may also qualify for
the Tier 6 rebate of $0.42 per contract.
This would provide Participants another
method to qualify for the rebate.
2. Statutory Basis
NASDAQ believes that the proposed
rule changes are consistent with the
provisions of Section 6 of the Act,11 in
general, and with Section 6(b)(4) of the
Act,12 in particular, in that they provide
11 15
12 15
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U.S.C. 78f.
U.S.C. 78f(b)(4).
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asabaliauskas on DSK5VPTVN1PROD with NOTICES
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 as
described in detail below.
Customer and Professional Rebates To
Add Liquidity
The Exchange’s proposal to amend
the Customer and Professional Penny
Pilot Options Rebates to Add Liquidity
Tiers 1–5 and Tier 8 to provide that
Participants may qualify for those
rebates by adding not only Customer
and Professional liquidity in Penny and/
or Non-Penny Pilot Options, as
specified in each tier, but also Firm,
Non-NOM Market Maker and BrokerDealer liquidity in Penny and/or NonPenny Pilot Options is reasonable
because the Exchange believes that the
addition of the various types of market
participant liquidity will allow
additional Participants to qualify for
these rebate tiers, who may not qualify
today, or receive higher rebates. The
Exchange believes that offering
additional types of liquidity to qualify
for the Customer and Professional
Penny Pilot Options Rebates to Add
Liquidity will incentivize Participants
to send a greater amount of order flow
to NOM.
The Exchange’s proposal to amend
the Customer and Professional Penny
Pilot Options Rebates to Add Liquidity
Tiers 1–5 and Tier 8 to provide that
Participants may qualify for those
rebates by adding not only Customer
and Professional liquidity in Penny and/
or Non-Penny Pilot Options, as
specified in each tier, but also Firm,
Non-NOM Market Maker and BrokerDealer liquidity in Penny and/or NonPenny Pilot Options is equitable and not
unfairly discriminatory because the
Exchange is permitting all types of
market participant liquidity in Tiers 1–
5 and Tier 8 of its Customer and
Professional Penny Pilot Options rebate
tiers as a means to qualify for these
rebates. Further, all Participants may
qualify to be eligible for these rebates,
provided they transact the requisite
amount of liquidity. Customer liquidity
offers unique benefits to the market
which benefits all market participants.
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts market
makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes that
encouraging Participants to add
Professional liquidity creates
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competition among options exchanges
because the Exchange believes that the
rebates may cause market participants to
select NOM as a venue to send
Professional order flow.
The Exchange believes that with
respect to Tier 8, permitting Participants
to add Firm, Non-NOM Market Maker
and/or Broker-Dealer liquidity, in
addition to Customer and Professional
liquidity, to qualify for the additional
$0.02 per contract Tier 8 incentive is
reasonable because the Exchange
believes the opportunity to calculate the
qualification for the incentive by adding
other types of market participant
liquidity will allow additional market
participants to qualify for the incentive.
Additionally, permitting other
qualifying volume to count towards
meeting the Tier 8 incentive will
incentivize Participants to send a greater
amount of order flow to NOM.
The Exchange believes that with
respect to Tier 8, permitting Participants
to add Firm, Non-NOM Market Maker
and/or Broker-Dealer liquidity, in
addition to Customer and Professional
liquidity, to qualify for the additional
$0.02 per contract Tier 8 incentive is
equitable and not unfairly
discriminatory because all Participants
are eligible for the Tier 8 incentive,
provided they transact the requisite
volume.
NOM Market Maker Penny Pilot
Options Rebates To Add Liquidity
The Exchange’s proposal to amend
the NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity Tiers
3 and 4 to increase the AAPL rebate
from $0.30 to $0.40 per contract in Tier
3 and from $0.32 to $0.40 per contract
in Tier 4 is reasonable because the
proposal seeks to encourage Participants
to transact a greater amount of AAPL
liquidity in order to receive the higher
rebate of $0.40 per contract. The
Exchange believes that offering
Participants NOM Market Makers the
ability to obtain higher rebates is
reasonable because it will encourage
additional order interaction.
The Exchange’s proposal to amend
the NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity Tiers
3 and 4 to increase the AAPL rebate
from $0.30 to $0.40 per contract in Tier
3 and from $0.32 to $0.40 per contract
in Tier 4 is equitable and not unfairly
discriminatory because all NOM Market
Makers may qualify for the Tier 3 and
Tier 4 NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity.
The Exchange believes that it is
reasonable, equitable, and not unfairly
discriminatory to adopt different pricing
for AAPL, as compared to other options,
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71149
because pricing by symbol is a common
practice on many U.S. options
exchanges as a means to incentivize
order flow to be sent to an exchange for
execution in the most actively traded
options classes, in this case actively
traded Penny Pilot Options.13 The
Exchange notes that AAPL is one of the
most actively traded options in the U.S.
The Exchange believes that this pricing
will incentivize members to transact
options on AAPL on NOM in order to
obtain the higher $0.40 per contract
rebate.
The Exchange’s proposal to amend
the Tier 6 NOM Market Maker Penny
Pilot Options Rebate to Add Liquidity to
offer an additional method 14 to qualify
for the $0.42 per contract rebate is
reasonable because additional
Participants may qualify for the Tier 6
rebate if they are able to transact the
requisite volume specified in the
additional proposed qualification to add
any type of market participant liquidity.
The Exchange also believes that this
amendment to the Tier 6 NOM Market
Maker Penny Pilot Options Rebate to
Add Liquidity will incentivize
Participants to send a greater amount of
order flow to NOM.
The Exchange’s proposal to amend
the Tier 6 NOM Market Maker Penny
Pilot Options Rebate to Add Liquidity to
offer an additional method to qualify for
the $0.42 per contract is equitable and
not unfairly discriminatory because all
Participants may qualify for the Tier 6
rebate provided they transact the
requisite amount of liquidity.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule changes will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
13 See NASDAQ OMX PHLX LLC’s Pricing
Schedule. See also the International Securities
Exchange LLC’s Fee Schedule. Both of these
markets segment pricing by symbol.
14 Today, a Participant may qualify for the NOM
Market Maker Tier 6 Rebate to Add Liquidity in
Penny Pilot Options by adding 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 qualifying for the Tier 7 or Tier
8 Customer and/or Professional Rebate to Add
Liquidity in Penny Pilot Options or adding 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
amending Tier 6 to permit a Participant to qualify
for the $0.42 per contract rebate by adding
Customer, Professional, Firm, Non-NOM Market
Maker, and/or Broker-Dealer liquidity in Penny
Pilot Options and/or Non- Penny Pilot Options of
1.40% or more of national customer volume in
multiply-listed equity and ETF options classes in a
month
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asabaliauskas on DSK5VPTVN1PROD with NOTICES
71150
Federal Register / Vol. 79, No. 230 / Monday, December 1, 2014 / Notices
The Exchange believes that amending
Tiers 1–5 and Tier 8 of the Customer
and Professional Penny Pilot Options
Rebates to Add Liquidity, as well as the
Tier 8 incentive of $0.02 per contract to
permit Participants to add all types of
market participant liquidity does not
create an undue burden on competition,
rather the proposal will incentivize
market participants to send additional
order flow to the Exchange. Customer
liquidity offers unique benefits to the
market which benefits all market
participants. Customer liquidity benefits
all market participants by providing
more trading opportunities, which
attracts market makers. An increase in
the activity of these market participants
in turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes that
encouraging Participants to add
Professional 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
Professional order flow.
The Exchange’s proposal to amend
the Tier 3 and 4 NOM Market Maker
Penny Pilot Options Rebates to Add
Liquidity to pay a higher rebate for
AAPL of $0.40 per contract, similar to
SPY, QQQ and VXX, does not create an
undue burden on competition because
all NOM Market Makers may qualify for
the Tier 3 or 4 NOM Market Maker
Penny Pilot Options Rebate to Add
Liquidity. The Exchange’s proposal to
offer another means to qualify for the
Tier 6 NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity does
not create an undue burden on
competition, rather the proposal will
incentivize market participants to send
additional order flow to the Exchange.
The Exchange believes the differing
outcomes, rebates and fees created by
the Exchange’s proposed pricing
incentives contribute to the overall
health of the market place to the benefit
of all Participants that willing choose to
transact options on NOM. For the
reasons specified herein, the Exchange
does not believe this proposal creates an
undue burden on competition. The
Exchange operates in a highly
competitive market comprised of 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 proposed rebate structure and tiers
proposed herein are competitive with
VerDate Sep<11>2014
14:08 Nov 28, 2014
Jkt 235001
rebates and tiers in place on other
exchanges. The Exchange believes that
this competitive marketplace continues
to impact the rebates present on the
Exchange today and substantially
influences the proposals set forth above.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.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.
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–2014–105 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–2014–105. 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–2014–105, and should be
submitted on or before December 22,
2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–28172 Filed 11–28–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73677; File No. SR–BATS–
2014–058]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Rule 11.24 of BATS
Exchange, Inc.
November 24, 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 November
17, 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 and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
15 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00067
Fmt 4703
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E:\FR\FM\01DEN1.SGM
01DEN1
]]>Agencies
[Federal Register Volume 79, Number 230 (Monday, December 1, 2014)]
[Notices]
[Pages 71146-71150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28172]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73676; File No. SR-NASDAQ-2014-105]
Self-Regulatory Organizations; The NASDAQ Stock Market, LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Rebates in Penny Pilot Options
November 24, 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 November 10, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by NASDAQ.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,''
at Section 2 governing pricing for NASDAQ members using the NASDAQ
Options Market (``NOM''), NASDAQ's facility for executing and routing
standardized equity and index options. Specifically, NOM proposes to
amend certain Penny Pilot Options \3\ rebates currently applicable to
Customers,\4\ Professionals \5\ and NOM Market Makers.\6\
---------------------------------------------------------------------------
\3\ The Penny Pilot was established in March 2008 and in October
2009 was expanded and 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) (notice of filing and immediate
effectiveness and extension and replacement of Penny Pilot through
December 31, 2013); 71105 (December 17, 2013), 78 FR 77530 (December
23, 2013) (SR-NASDAQ-2013-154) (notice of filing and immediate
effectiveness and extension and replacement of Penny Pilot through
June 30, 2014); and 79 FR 31151 (May 23, 2014), 79 FR 31151 (May 30,
2014) (SR-NASDAQ-2014-056) ((notice of filing and immediate
effectiveness and extension and replacement of Penny Pilot through
December 31, 2014). See also NOM Rules, Chapter VI, Section 5.
\4\ The term ``Customer'' applies to any transaction that is
identified by a Participant for clearing in the Customer range at
The Options Clearing Corporation (``OCC'') which is not for the
account of broker or dealer or for the account of a ``Professional''
(as that term is defined in Chapter I, Section 1(a)(48)).
\5\ 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.
\6\ 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.
---------------------------------------------------------------------------
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 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.
[[Page 71147]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,''
at Section 2(1) governing the rebates and fees assessed for option
orders entered into NOM. The Exchange proposes to amend certain
qualifications related to Customer and Professional Penny Pilot Options
Rebates to Add Liquidity tiers to offer Participants a greater
opportunity to earn Customer and Professional rebates. The Exchange
also proposes to modify NOM Market Maker Penny Pilot Options Rebates to
Add Liquidity to offer additional rebate opportunities. The Exchange
believes that additional rebate opportunities will attract additional
order flow to the Exchange to the benefit of all market participants.
Customer and Professional Rebates To Add Liquidity
Today, the Exchange offers tiered Penny Pilot Options Rebates to
Add Liquidity to Customers and Professionals based on various criteria
with rebates ranging from $0.20 to $0.48 per contract. Participants may
qualify for Customer and Professional Penny Pilot Options Rebates to
Add Liquidity in Tiers 1-5 and Tier 8 by adding a certain amount of
Customer and/or Professional liquidity in Penny Pilot Options or Non-
Penny Pilot Options as specified by each tier.\7\ The Exchange is
proposing to amend these tiers and permit Participants to add Customer,
Professional, Firm,\8\ Non-NOM Market Maker \9\ and/or Broker-Dealer
\10\ liquidity in Penny Pilot Options and/or Non-Penny Pilot Options in
order to qualify for the Customer and/or Professional Penny Pilot
Options Rebates to Add Liquidity in Tiers 1-5 and Tier 8.
---------------------------------------------------------------------------
\7\ Tiers 6 and 7 are calculated based on Total Volume. Total
Volume is defined as Customer, Professional, Firm, Broker-Dealer,
Non-NOM Market Maker and NOM Market Maker volume in Penny Pilot
Options and/or Non-Penny Pilot Options which either adds or removes
liquidity on NOM. See note ``b'' in Section 2, Chapter XV. The
Exchange utilizes data from OCC to determine the total industry
customer equity and ETF options ADV figure. OCC classifies equity
and ETF options volume under the equity options category. Also, both
customer and professional orders that are transacted on options
exchanges clear in the customer range at OCC and therefore both
customer and professional volume would be included in the total
industry figure to calculate rebate tiers. This is the case today
for the Total Volume number that appear in Tiers 6 and 7 of the
Customer and Professional rebate today, which includes Customer and
Professional numbers in both the numerator and denominator of that
percentage. These tiers will remain unchanged by this proposal.
\8\ The term ``Firm'' or (``F'') applies to any transaction that
is identified by a Participant for clearing in the Firm range at
OCC.
\9\ The term ``Non-NOM Market Maker'' or (``O'') is a registered
market maker on another options exchange that is not a NOM Market
Maker. A Non-NOM Market Maker must append the proper Non-NOM Market
Maker designation to orders routed to NOM
\10\ The term ``Broker-Dealer'' or (``B'') applies to any
transaction which is not subject to any of the other transaction
fees applicable within a particular category.
---------------------------------------------------------------------------
Tier 1 currently offers Participants that add Customer and/or
Professional 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 a $0.20 per
contract rebate. The Exchange is proposing to amend Tier 1 to provide
that Participants that add Customer, Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer 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 would continue to receive a $0.20 per contract rebate.
Tier 2 currently offers Participants that add Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.10% to 0.20% of total industry customer equity and ETF
option ADV contracts per day in a month a $0.25 per contract rebate.
The Exchange is proposing to amend Tier 2 to provide that Participants
that add Customer, Professional, Firm, Non-NOM Market Maker and/or
Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.10% to 0.20% of total industry customer equity and ETF
option ADV contracts per day in a month would continue to receive a
$0.25 per contract rebate.
Tier 3 currently offers Participants that add Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.20% to 0.30% of total industry customer equity and ETF
option ADV contracts per day in a month a $0.42 per contract rebate.
The Exchange is proposing to amend Tier 3 to provide that Participants
that add Customer, Professional, Firm, Non-NOM Market Maker and/or
Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.20% to 0.30% of total industry customer equity and ETF
option ADV contracts per day in a month would continue to receive a
$0.42 per contract rebate.
Tier 4 currently offers Participants that add Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.30% to 0.40% of total industry customer equity and ETF
option ADV contracts per day in a month a $0.43 per contract rebate.
The Exchange is proposing to amend Tier 4 to provide that Participants
that add Customer, Professional, Firm, Non-NOM Market Maker and/or
Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.30% to 0.40% of total industry customer equity and ETF
option ADV contracts per day in a month would continue to receive a
$0.43 per contract rebate.
Tier 5 currently offers Participants that add Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.40% of total industry customer equity and ETF option
ADV contracts per day in a month, or Participants that add (1) Customer
and/or Professional liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options of 25,000 or more contracts per day in a month, (2) the
Participant has certified for the Investor Support Program set forth in
Rule 7014, and (3) the Participant executed at least one order on
NASDAQ's equity market a $0.45 per contract rebate. The Exchange is
proposing to amend Tier 5 to provide that Participants that add
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above
0.40% of total industry customer equity and ETF option ADV contracts
per day in a month, or Participant adds (1) Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 25,000 or more contracts per day in a month, (2) the
Participant has certified for the Investor Support Program set forth in
Rule 7014, and (3) the Participant executed at least one order on
NASDAQ's equity market would continue to receive a $0.45 per contract
rebate.
Tier 8 currently offers Participants that add Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 0.75% or more of national customer volume in multiply-listed
equity and ETF options classes in a month a $0.48 per contract Customer
rebate and a $0.47 per contract Professional rebate. The Exchange is
proposing to amend Tier 8 to provide that Participants that add
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer
[[Page 71148]]
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 would continue to receive a $0.48 per
contract Customer rebate and a $0.47 per contract Professional rebate.
With respect to Tier 8, today, Participants that add Customer and/
or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 1.25% or more of national customer volume in multiply-listed
equity and ETF options classes in a month will receive an additional
$0.02 per contract Penny Pilot Options Tier 8 Customer Rebate to Add
Liquidity for each transaction which adds liquidity in Penny Pilot
Options in that month. The Exchange also proposes to amend this
incentive by also permitting Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity to qualify for the incentive. The amended rule text
would provide, ``Participants that add Customer, Professional, Firm,
Non-NOM Market Maker, and/or Broker-Dealer liquidity in Penny Pilot
Options and/or Non-Penny Pilot Options of 1.25% or more of national
customer volume in multiply-listed equity and ETF options classes in a
month will receive an additional $0.02 per contract Penny Pilot Options
Customer Rebate to Add Liquidity for each transaction which adds
liquidity in Penny Pilot Options in that month.''
NOM Market Maker Rebates To Add Liquidity
Today, the Exchange pays NOM Market Maker Penny Pilot Options
Rebates to Add Liquidity based on various criteria in six tiers with
rebates which range from $0.20 to $0.42 per contract as noted below.
------------------------------------------------------------------------
Rebate to add
Monthly volume 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 0.25% of
total industry customer equity
and ETF option ADV contracts
per day in a month.
Tier 3............. Participant adds NOM Market $0.30 or $0.40 in
Maker liquidity in Penny Pilot the following
Options and/or Non-Penny Pilot symbols QQQ, SPY
Options above 0.25% to 0.60% of and VXX.
total industry customer equity
and ETF option ADV contracts
per day in a month.
Tier 4............. Participant adds NOM Market $0.32 or $0.40 in
Maker liquidity in Penny Pilot the following
Options and/or Non-Penny Pilot symbols QQQ, VXX
Options of above 0.60% to 0.90% and SPY.
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 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.
------------------------------------------------------------------------
Today, the Tier 3 NOM Market Maker Penny Pilot Options Rebate to
Add Liquidity pays a $0.30 per contract rebate, except in QQQ, SPY and
VXX which pay a $0.40 per contract rebate to Participants that add NOM
Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options above 0.25% to 0.60% of total industry customer equity and ETF
option ADV contracts per day in a month. The Exchange proposes to add
AAPL to the list of symbols that are eligible for the Tier 3 rebate of
$0.40 per contract. Today, the Exchange pays a Tier 3 NOM Market Maker
Penny Pilot Options Rebate to Add Liquidity of $0.30 per contract in
AAPL. Today, the Tier 4 NOM Market Maker Penny Pilot Options Rebate to
Add Liquidity pays a $0.32 per contract rebate, except in QQQ, SPY and
VXX which pay a $0.40 per contract rebate to Participants that add NOM
Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of above 0.60% to 0.90% of total industry customer equity and
ETF option ADV contracts per day in a month. The Exchange proposes to
add AAPL to the list of symbols that are eligible for the Tier 4 rebate
of $0.40 per contract. Today, the Exchange pays a Tier 4 NOM Market
Maker Penny Pilot Options Rebate to Add Liquidity of $0.32 per contract
in AAPL. The Exchange believes that paying a higher rebate for AAPL
transactions will encourage a greater number of transactions in AAPL.
Today, the Tier 6 NOM Market Maker Penny Pilot Option Rebate to Add
Liquidity pay a $0.42 per contract rebate to Participants that add 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 proposing to amend the Tier 6 NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity to also provide that a Participant that
adds Customer, Professional, Firm, Non-NOM Market Maker, and/or Broker-
Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options
of 1.40% or more of national customer volume in multiply-listed equity
and ETF options classes in a month may also qualify for the Tier 6
rebate of $0.42 per contract. This would provide Participants another
method to qualify for the rebate.
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\11\ in general, and with
Section 6(b)(4) of the Act,\12\ in particular, in that they provide
[[Page 71149]]
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 as described in detail below.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4).
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Customer and Professional Rebates To Add Liquidity
The Exchange's proposal to amend the Customer and Professional
Penny Pilot Options Rebates to Add Liquidity Tiers 1-5 and Tier 8 to
provide that Participants may qualify for those rebates by adding not
only Customer and Professional liquidity in Penny and/or Non-Penny
Pilot Options, as specified in each tier, but also Firm, Non-NOM Market
Maker and Broker-Dealer liquidity in Penny and/or Non-Penny Pilot
Options is reasonable because the Exchange believes that the addition
of the various types of market participant liquidity will allow
additional Participants to qualify for these rebate tiers, who may not
qualify today, or receive higher rebates. The Exchange believes that
offering additional types of liquidity to qualify for the Customer and
Professional Penny Pilot Options Rebates to Add Liquidity will
incentivize Participants to send a greater amount of order flow to NOM.
The Exchange's proposal to amend the Customer and Professional
Penny Pilot Options Rebates to Add Liquidity Tiers 1-5 and Tier 8 to
provide that Participants may qualify for those rebates by adding not
only Customer and Professional liquidity in Penny and/or Non-Penny
Pilot Options, as specified in each tier, but also Firm, Non-NOM Market
Maker and Broker-Dealer liquidity in Penny and/or Non-Penny Pilot
Options is equitable and not unfairly discriminatory because the
Exchange is permitting all types of market participant liquidity in
Tiers 1-5 and Tier 8 of its Customer and Professional Penny Pilot
Options rebate tiers as a means to qualify for these rebates. Further,
all Participants may qualify to be eligible for these rebates, provided
they transact the requisite amount of liquidity. Customer liquidity
offers unique benefits to the market which benefits all market
participants. Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts market makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange believes that encouraging Participants to add Professional
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 Professional order flow.
The Exchange believes that with respect to Tier 8, permitting
Participants to add Firm, Non-NOM Market Maker and/or Broker-Dealer
liquidity, in addition to Customer and Professional liquidity, to
qualify for the additional $0.02 per contract Tier 8 incentive is
reasonable because the Exchange believes the opportunity to calculate
the qualification for the incentive by adding other types of market
participant liquidity will allow additional market participants to
qualify for the incentive. Additionally, permitting other qualifying
volume to count towards meeting the Tier 8 incentive will incentivize
Participants to send a greater amount of order flow to NOM.
The Exchange believes that with respect to Tier 8, permitting
Participants to add Firm, Non-NOM Market Maker and/or Broker-Dealer
liquidity, in addition to Customer and Professional liquidity, to
qualify for the additional $0.02 per contract Tier 8 incentive is
equitable and not unfairly discriminatory because all Participants are
eligible for the Tier 8 incentive, provided they transact the requisite
volume.
NOM Market Maker Penny Pilot Options Rebates To Add Liquidity
The Exchange's proposal to amend the NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity Tiers 3 and 4 to increase the AAPL
rebate from $0.30 to $0.40 per contract in Tier 3 and from $0.32 to
$0.40 per contract in Tier 4 is reasonable because the proposal seeks
to encourage Participants to transact a greater amount of AAPL
liquidity in order to receive the higher rebate of $0.40 per contract.
The Exchange believes that offering Participants NOM Market Makers the
ability to obtain higher rebates is reasonable because it will
encourage additional order interaction.
The Exchange's proposal to amend the NOM Market Maker Penny Pilot
Options Rebate to Add Liquidity Tiers 3 and 4 to increase the AAPL
rebate from $0.30 to $0.40 per contract in Tier 3 and from $0.32 to
$0.40 per contract in Tier 4 is equitable and not unfairly
discriminatory because all NOM Market Makers may qualify for the Tier 3
and Tier 4 NOM Market Maker Penny Pilot Options Rebate to Add
Liquidity.
The Exchange believes that it is reasonable, equitable, and not
unfairly discriminatory to adopt different pricing for AAPL, as
compared to other options, because pricing by symbol is a common
practice on many U.S. options exchanges as a means to incentivize order
flow to be sent to an exchange for execution in the most actively
traded options classes, in this case actively traded Penny Pilot
Options.\13\ The Exchange notes that AAPL is one of the most actively
traded options in the U.S. The Exchange believes that this pricing will
incentivize members to transact options on AAPL on NOM in order to
obtain the higher $0.40 per contract rebate.
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\13\ See NASDAQ OMX PHLX LLC's Pricing Schedule. See also the
International Securities Exchange LLC's Fee Schedule. Both of these
markets segment pricing by symbol.
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The Exchange's proposal to amend the Tier 6 NOM Market Maker Penny
Pilot Options Rebate to Add Liquidity to offer an additional method
\14\ to qualify for the $0.42 per contract rebate is reasonable because
additional Participants may qualify for the Tier 6 rebate if they are
able to transact the requisite volume specified in the additional
proposed qualification to add any type of market participant liquidity.
The Exchange also believes that this amendment to the Tier 6 NOM Market
Maker Penny Pilot Options Rebate to Add Liquidity will incentivize
Participants to send a greater amount of order flow to NOM.
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\14\ Today, a Participant may qualify for the NOM Market Maker
Tier 6 Rebate to Add Liquidity in Penny Pilot Options by adding 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 qualifying for the Tier 7 or
Tier 8 Customer and/or Professional Rebate to Add Liquidity in Penny
Pilot Options or adding 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 amending Tier 6 to permit a Participant to qualify for
the $0.42 per contract rebate by adding Customer, Professional,
Firm, Non-NOM Market Maker, and/or Broker-Dealer liquidity in Penny
Pilot Options and/or Non- Penny Pilot Options of 1.40% or more of
national customer volume in multiply-listed equity and ETF options
classes in a month
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The Exchange's proposal to amend the Tier 6 NOM Market Maker Penny
Pilot Options Rebate to Add Liquidity to offer an additional method to
qualify for the $0.42 per contract is equitable and not unfairly
discriminatory because all Participants may qualify for the Tier 6
rebate provided they transact the requisite amount of liquidity.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule changes will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
[[Page 71150]]
The Exchange believes that amending Tiers 1-5 and Tier 8 of the
Customer and Professional Penny Pilot Options Rebates to Add Liquidity,
as well as the Tier 8 incentive of $0.02 per contract to permit
Participants to add all types of market participant liquidity does not
create an undue burden on competition, rather the proposal will
incentivize market participants to send additional order flow to the
Exchange. Customer liquidity offers unique benefits to the market which
benefits all market participants. Customer liquidity benefits all
market participants by providing more trading opportunities, which
attracts market makers. An increase in the activity of these market
participants in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow from other market
participants. The Exchange believes that encouraging Participants to
add Professional 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 Professional order flow.
The Exchange's proposal to amend the Tier 3 and 4 NOM Market Maker
Penny Pilot Options Rebates to Add Liquidity to pay a higher rebate for
AAPL of $0.40 per contract, similar to SPY, QQQ and VXX, does not
create an undue burden on competition because all NOM Market Makers may
qualify for the Tier 3 or 4 NOM Market Maker Penny Pilot Options Rebate
to Add Liquidity. The Exchange's proposal to offer another means to
qualify for the Tier 6 NOM Market Maker Penny Pilot Options Rebate to
Add Liquidity does not create an undue burden on competition, rather
the proposal will incentivize market participants to send additional
order flow to the Exchange.
The Exchange believes the differing outcomes, rebates and fees
created by the Exchange's proposed pricing incentives contribute to the
overall health of the market place to the benefit of all Participants
that willing choose to transact options on NOM. For the reasons
specified herein, the Exchange does not believe this proposal creates
an undue burden on competition. The Exchange operates in a highly
competitive market comprised of 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
proposed rebate structure and tiers proposed herein are competitive
with rebates and tiers in place on other exchanges. The Exchange
believes that this competitive marketplace continues to impact the
rebates present on the Exchange today and substantially influences the
proposals set forth above.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\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.
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2014-105 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-2014-105. 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-2014-105, and should
be submitted on or before December 22, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28172 Filed 11-28-14; 8:45 am]
BILLING CODE 8011-01-P
