Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Penny Pilot Options, 13943-13946 [2015-06018]
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Federal Register / Vol. 80, No. 51 / Tuesday, March 17, 2015 / Notices
of such transactions that meet the
Suppression Criteria. FINRA stated that
this additional information would
facilitate a more effective surveillance
program and improve post-trade
transparency. The Commission believes
that these new requirements are
reasonably designed to carry out these
objectives and are therefore consistent
with the Act. Furthermore, the
Commission does not believe that
commenters raised any issue that would
preclude approval of this proposal, and
that FINRA reasonably responded to the
comments in Amendment No. 1.
VI. Accelerated Approval
The Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,31 for approving the proposed rule
change, as modified by Amendment No.
1 thereto, prior to the 30th day after
publication of Amendment No. 1 in the
Federal Register. Amendment No. 1
responds to the specific issue regarding
the implementation timeframe raised by
both comment letters. Furthermore,
Amendment No. 1 clarifies when the
Suppression Indicator should be
included as well as when to determine
non-member affiliate status. The
Commission notes that the rest of the
proposed rule change is not being
amended and was subject to a full
notice-and-comment period. These
revisions add clarity to the proposal and
do not raise any novel regulatory
concerns. Accordingly, the Commission
finds that good cause exists to approve
the proposal, as modified by
Amendment No. 1, on an accelerated
basis.
VII. Conclusion
IT IS THEREFORE ORDERED
pursuant to Section 19(b)(2) of the Act 32
that the proposed rule change (SR–
FINRA–2014–050), as modified by
Amendment No. 1, be and hereby is
approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Brent J. Fields,
Secretary.
[FR Doc. 2015–06012 Filed 3–16–15; 8:45 am]
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74475; File No. SR–
NASDAQ–2015–019]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Penny Pilot Options
March 11, 2015.
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 February
27, 2015, 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’’),3 NASDAQ’s
facility for executing and routing
standardized equity and index options.
Specifically, NOM proposes to amend
certain Fees for Removing Liquidity.
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on March 2, 2015.
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 NOM is a facility of NASDAQ. References in
this proposal to Chapter and Series refer to NOM
rules, unless otherwise indicated.
2 17
31 15
U.S.C. 78s(b)(2).
32 15 U.S.C. 78s(b)(2).
33 17 CFR 200.30–3(a)(12).
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13943
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ proposes to modify Chapter
XV, entitled ‘‘Options Pricing,’’ at
Section 2(1) governing the fees assessed
for option orders entered into NOM.
Specifically, the Exchange proposes to
increase the Professional,4 Firm,5 NOM
Market Maker,6 Non-NOM Market
Maker,7 and Broker-Dealer 8 Penny Pilot
Options 9 Fees for Removing Liquidity.
4 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. The
Exchange initially established Professional pricing
in order to ‘‘. . . bring additional revenue to the
Exchange.’’ See Securities Exchange Act Release
No. 64494 (May 13, 2011), 76 FR 29014 (May 19,
2011) (SR–NASDAQ–2011–066). In this filing, the
Exchange addressed the perceived favorable pricing
of Professionals who were assessed fees and paid
rebates like a Customer prior to the filing; and noted
that a Professional, unlike a retail Customer, has
access to sophisticated trading systems that contain
functionality not available to retail Customers.
5 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at The Options
Clearing Corporation (‘‘OCC’’).
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. 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).
7 The term ‘‘Non-NOM Market Maker’’ 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.
8 The term ‘‘Broker-Dealer’’ applies to any
transaction which is not subject to any of the other
transaction fees applicable within a particular
category.
9 The Penny Pilot was established in March 2008
and was last extended in 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); and 73686 (November 25,
2014), 79 FR 71477 (December 2, 2014) (SR–
NASDAQ–2014–115) (notice of filing and
immediate effectiveness extending the Penny Pilot
through June 30, 2015). All Penny Pilot Options
listed on the Exchange can be found at https://
www.nasdaqtrader.com/Micro.aspx?id=phlx.
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Federal Register / Vol. 80, No. 51 / Tuesday, March 17, 2015 / Notices
No change is proposed to Customer 10
Penny Pilot Options Fees for Removing
Liquidity.
Section 2 NASDAQ Options Market—
Fees and Rebates
Pilot Options in Chapter IV, Section 2(1)
as follows:
Penny Pilot Fees for Removing Liquidity
The Exchange proposes to amend the
Fees for Removing Liquidity in Penny
(1) FEES FOR EXECUTION OF CONTRACTS ON THE NASDAQ OPTIONS MARKET
Fees and rebates (per executed contract)
Customer
Penny Pilot Options:
Fee for Removing Liquidity .......................................
Today, Professionals, Firms, NonNOM Market Makers, NOM Market
Makers, and Broker-Dealers are assessed
a $0.49 per contract Fee for Removing
Liquidity in a Penny Pilot Option.11
The Exchange proposes to increase
the Penny Pilot Fee for Removing
Liquidity for Professionals, Firms, NonNOM Market Makers, NOM Market
Makers, and Broker-Dealers by a penny,
from $0.49 to $0.50 per contract.12 The
Exchange is increasing the Fees for
Removing Liquidity in Penny Pilot
Options so that it will be able to
continue to offer rebates to Customers,
Professionals, Firms, Non-NOM Market
Makers, NOM Market Makers, and
Broker-Dealers to attract liquidity and
encourage order interaction on NOM.13
The Exchange will still allow
participants that qualify for Customer or
Professional Rebate to Add Liquidity
Tiers 7 or 8 in a given month to be
assessed a Professional, Firm, Non-NOM
Market Maker, NOM Market Maker, or
Broker-Dealer Fee for Removing
Liquidity in Penny Pilot Options of
$0.48 per contract.
$0.48
Professional
$0.50 d
$0.50 d
using any facility or system which
NASDAQ operates or controls as
described in detail below.
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2. Statutory Basis
NASDAQ believes that the proposed
fee changes are consistent with the
provisions of Section 6 of the Act,14 in
general, and with Section 6(b)(4) of the
Act,15 in particular, in that they provide
for the equitable allocation of reasonable
dues, fees and other charges among
members and issuers and other persons
Penny Pilot Fees for Removing Liquidity
The Exchange’s proposal to increase
the Professional, Firm, Non-NOM
Market Maker, NOM Market Maker, and
Broker-Dealer Fees for Removing
Liquidity in Penny Pilot Options from
$0.49 to $0.50 per contract is reasonable
because the increase will afford the
Exchange the opportunity to offer
additional and increased rebates to
these Exchange participants, which
should benefit all market participants
through increased liquidity and order
interaction. The Exchange believes that
rebates incentivize Participants to select
the Exchange as a venue to post
liquidity and attract additional order
flow to the benefit of all market
participants. Incentivizing Participants
to post liquidity will also benefit
Participants through increased order
interaction. Increased liquidity, and in
particular Customer liquidity (as noted,
the fee for removing Customer liquidity
continues to be lower than for removing
other liquidity) provides more trading
opportunities, which attracts other
Participants, including NOM Market
Makers.16 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. Moreover, in constructing
10 The term ‘‘Customer’’ applies to any
transaction that is identified by a Participant for
clearing in the Customer range at the 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)).
11 In addition, note d states that Participants that
qualify for Customer or Professional Rebate to Add
Liquidity Tiers 7 or 8 (the highest rebate tiers) in
a given month will be assessed a Professional, Firm,
Non-NOM Market Maker, NOM Market Maker, or
Broker-Dealer Fee for Removing Liquidity in Penny
Pilot Options of $0.48 per contract and a Customer
Fee for Removing Liquidity in Penny Pilot Options
of $0.47 per contract. See Chapter XV, Section 2(1).
12 Customers will continue to be assessed a Penny
Pilot Option Fee for Removing Liquidity of $0.48
per contract.
13 The Customer and Professional Rebate to Add
Liquidity in Penny Pilot Options is earned pursuant
to eight Monthly Volume Tiers. The NOM Market
Maker Rebate to Add Liquidity in Penny Pilot
Options is earned pursuant to six different Monthly
Volume Tiers. The concept of ‘‘Common
Ownership’’ (Participants under 75% common
ownership or control) applies to pricing in Chapter
XV, Section 2 for which a volume threshold or
volume percentage is required to obtain the pricing.
See Chapter XV, Section 2(1).
14 15 U.S.C. 78f.
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Non-NOM
market
maker
Firm
$0.50 d
NOM
market
maker
$0.50 d
Brokerdealer
$0.50 d
the Exchange’s fee and rebate program,
the Exchange aims to remain
competitive with other venues so that it
is a superior choice for market
participants when posting orders. The
Exchange believes that the fee resulting
from the proposed increase is still less
than the rates assessed by other options
for certain Penny Pilot Options.17
The Exchange believes that it is
equitable and not unfairly
discriminatory to increase Fees for
Removing Liquidity in Penny Pilot
Options for Professionals, Firms, NonNOM Market Makers, NOM Market
Makers, and Broker-Dealers because all
market participants, other than
Customers, will continue to be assessed
a uniform fee. As explained herein,
order flow brings unique benefits to the
market through increased liquidity
which benefits all NOM Participants.18
Further, the Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to offer Participants that
qualify for Customer or Professional
Rebate to Add Liquidity Tiers 7 or 8 in
a given month to be assessed a
Professional, Firm, Non-NOM Market
Maker, NOM Market Maker, or BrokerDealer Fee for Removing Liquidity in
Penny Pilot Options of $0.48 per
contract instead of the proposed $0.50
per contract. The increase in the
differential from $0.01 to $0.02 is
reasonable, equitable and not unfairly
discriminatory because it is consistent
with differentials at competing options
15 15
U.S.C. 78f(b)(4).
obligations of Market Makers, see Chapter
VII, Section 5. For Market Maker quotations (e.g.
firm quotes, continuous quotes), see Chapter VII,
Section 6.
17 See, for example, the Miami International
Securities Exchange LLC (‘‘MIAX’’) Fee Schedule.
Specifically, orders executed for the account of nonMIAX market makers will be assessed $0.55 per
contract in options overlying EEM, GLD, IWM,
QQQ, and SPY.
18 See supra note 16 regarding continuous
quoting and the commitment of capital by NOM
Market Makers.
16 For
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exchanges. For example, NASDAQ
OMX PHLX (‘‘PHLX’’) provides that any
member or member organization under
Common Ownership with another
member or member organization that
qualifies for Customer Rebate Tiers 2, 3,
4 or 5 in Section B of the Pricing
Schedule will be assessed $0.60 per
contract, a reduction of $0.10 from the
standard rate of $0.70 assessed
Professional, Firm and Broker-Dealer.19
The Exchange, and its facility NOM,
operates in a highly competitive market,
comprised of twelve exchanges, in
which market participants can easily
and readily direct order flow to
competing venues if they deem fee
levels at a particular venue to be
excessive or rebates to be inadequate.
Accordingly, the fees that are assessed
and the rebates paid by the Exchange, as
described in the proposal, are
influenced by these robust market forces
and therefore must remain competitive
with fees charged and rebates paid by
other venues and therefore must
continue to be reasonable and equitably
allocated to those members that opt to
direct orders to the Exchange rather
than competing venues.
The proposed fees are designed to
ensure a fair and reasonable use of
Exchange resources by allowing the
Exchange to recoup costs while
continuing to attract liquidity and offer
connectivity at competitive rates to
Exchange members and member
organizations.
By offering competitive pricing, the
Exchange desires to incentivize
members and member organizations,
through the Exchange’s rebate and fee
structure, to select NOM as a venue for
bringing liquidity to the Exchange and
trading. Such competitive, differentiated
pricing exists today on other options
exchanges. The Exchange’s goal is
creating and increasing incentives to
attract orders that will, in turn, benefit
all market participants through
increased 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.
In the Exchange’s fee schedule for
Removing Liquidity in Penny Pilot
Options, Customers have had to pay the
lowest fee, and this continues to be
reflected in the pricing schedule. The
Exchange does not believe the proposed
differential would result in any burden
on competition as between Participants.
19 See
PHLX’s Pricing Schedule.
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18:09 Mar 16, 2015
The Exchange believes that continuing
to assess Customers the current fee
while increasing the fee for other
Participants creates competition among
options exchanges because the
Exchange believes that this may cause
market participants to select NOM as a
venue to send Customer and other order
flow. The Exchange believes that
incentivizing Participants to post
liquidity on NOM benefits NOM
Participants through increased order
interaction.
The Exchange’s proposal to increase
the Professional, Firm, Non-NOM
Market Maker, NOM Market Maker, and
Broker-Dealer Fees for Removing
Liquidity in Penny Pilot Options does
not misalign the current fees on NOM.
As noted, Customers were assessed less
than other participants before the
proposal, and will continue to be
assessed less under the new fee. The
Exchange believes that other market
participants benefit from incentivizing
order flow as explained herein. As
noted, Customers continue to pay a
lower Fee for Removing Liquidity in
Penny Pilot Options, which is currently
the case for most fees on NOM that are
either not assessed to a Customer or
where a Customer is assessed the lowest
fee because of the liquidity such order
flow brings to the Exchange. Also, NOM
Market Makers have obligations 20 to the
market which are not borne by other
market participants and therefore the
Exchange believes that NOM Market
Makers are entitled to a lower fee.
For the reasons specified herein, the
Exchange does not believe this proposal
will result in any burden on
competition. The Exchange operates in
a highly competitive market comprised
of twelve U.S. options exchanges in
which sophisticated and knowledgeable
market participants can readily send
order flow to competing exchanges if
they deem fee levels or rebate incentives
at a particular exchange to be excessive
or inadequate. The Exchange believes
that this competitive marketplace
impacts the fees and 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.
20 See
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(ii) of
the Act,21 the Exchange has designated
this proposal as establishing or changing
a due, fee, or other charge imposed on
any person, whether or not the person
is a member of the self-regulatory
organization, which renders the
proposed rule change effective upon
filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2015–019 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2015–019. 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
21 15
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U.S.C. 78s(b)(3)(A)(ii).
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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–2015–019 and should be
submitted on or before April 7, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Brent J. Fields,
Secretary.
[FR Doc. 2015–06018 Filed 3–16–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: U.S. Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
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Extension:
Reports of Evidence of Material Violations.
SEC File No. 270–514, OMB Control No.
3235–0572.
Notice is hereby given that pursuant
to the Paperwork Reduction Act (PRA)
of 1995, 44 U.S.C. Sections 3501–3520,
the Securities and Exchange
Commission (‘‘Commission’’) is
soliciting comments on the collection of
information summarized below. The
Commission plans to submit the
existing collection of information to the
Office of Management and Budget for
extension of the previously approved
collection of information discussed
below.
On February 6, 2003, the Commission
published final rules, effective August 5,
2003, entitled ‘‘Standards of
Professional Conduct for Attorneys
Appearing and Practicing Before the
Commission in the Representation of an
Issuer’’ (17 CFR 205.1–205.7). The
information collection embedded in the
rules is necessary to implement the
22 17
CFR 200.30–3(a)(12).
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Standards of Professional Conduct for
Attorneys prescribed by the rule and
required by Section 307 of the SarbanesOxley Act of 2002 (15 U.S.C. 7245). The
rules impose an ‘‘up-the-ladder’’
reporting requirement when attorneys
appearing and practicing before the
Commission become aware of evidence
of a material violation by the issuer or
any officer, director, employee, or agent
of the issuer. An issuer may choose to
establish a qualified legal compliance
committee (‘‘QLCC’’) as an alternative
procedure for reporting evidence of a
material violation. In the rare cases in
which a majority of a QLCC has
concluded that an issuer did not act
appropriately, the QLCC may
communicate that information to the
Commission. The collection of
information is, therefore, an important
component of the Commission’s
program to discourage violations of the
federal securities laws and promote
ethical behavior of attorneys appearing
and practicing before the Commission.
The respondents to this collection of
information are attorneys who appear
and practice before the Commission
and, in certain cases, the issuer, and/or
officers, directors and committees of the
issuer. In providing quality
representation to issuers, attorneys may
report evidence of violations to others
within the issuer, including the Chief
Legal Officer, the Chief Executive
Officer, and, where necessary, the
directors. In addition, officers and
directors investigate evidence of
violations and report within the issuer
the results of the investigation and the
remedial steps they have taken or
sanctions they have imposed. Except as
discussed below, we believe that the
reporting requirements imposed by the
rule are ‘‘usual and customary’’
activities that do not add to the burden
that would be imposed by the collection
of information.
Certain aspects of the collection of
information, however, may impose a
burden. For an issuer to establish a
QLCC, the QLCC must adopt written
procedures for the confidential receipt,
retention, and consideration of any
report of evidence of a material
violation. We estimate for purposes of
the PRA that there are approximately
11,396 issuers that are subject to the
rules.1 Of these, we estimate that
approximately 3.3 percent, or 373, have
1 This figure is based on the estimated 8,145
operating companies that filed annual reports on
Form 10–K, Form 20–F, or Form 40–F during the
2013 fiscal year (the most recent data currently
available), and the estimated 3,251 investment
companies that filed periodic reports on Form N–
SAR between June 1, 2013 and May 31, 2014 (the
most recent data currently available).
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established or will establish a QLCC.2
Establishing the written procedures
required by the rule should not impose
a significant burden. We assume that an
issuer would incur a greater burden in
the year that it first establishes the
procedures than in subsequent years, in
which the burden would be incurred in
updating, reviewing, or modifying the
procedures. For purposes of the PRA,
we assume that an issuer would spend
6 hours every three-year period on the
procedures. This would result in an
average burden of 2 hours per year.
Thus, we estimate for purposes of the
PRA that the total annual burden
imposed by the collection of
information would be 746 hours.
Assuming half of the burden hours will
be incurred by outside counsel at a rate
of $500 per hour would result in a cost
of $186,500.
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid OMB control
number.
Written comments are requested on:
(a) Whether the collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information has practical utility; (b) the
accuracy of the Commission’s estimate
of the burden[s] of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology.
The public may view the background
documentation for this information
collection at the following Web site,
www.reginfo.gov . Comments should be
directed: (i) to Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503
or by sending an email to:
Shagufta_Ahmed@omb.eop.gov; and (ii)
to Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F St. NE., Washington, DC
20549 or by sending an email to
2 This estimate is based on the issuer-filings made
with the Commission during the past three years
that include a reference to the issuer’s QLCC.
E:\FR\FM\17MRN1.SGM
17MRN1
]]>Agencies
[Federal Register Volume 80, Number 51 (Tuesday, March 17, 2015)]
[Notices]
[Pages 13943-13946]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06018]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74475; File No. SR-NASDAQ-2015-019]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Penny Pilot Options
March 11, 2015.
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 February 27, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by NASDAQ.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,''
at Section 2 governing pricing for NASDAQ members using the NASDAQ
Options Market (``NOM''),\3\ NASDAQ's facility for executing and
routing standardized equity and index options. Specifically, NOM
proposes to amend certain Fees for Removing Liquidity.
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\3\ NOM is a facility of NASDAQ. References in this proposal to
Chapter and Series refer to NOM rules, unless otherwise indicated.
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While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on March 2,
2015.
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,''
at Section 2(1) governing the fees assessed for option orders entered
into NOM. Specifically, the Exchange proposes to increase the
Professional,\4\ Firm,\5\ NOM Market Maker,\6\ Non-NOM Market Maker,\7\
and Broker-Dealer \8\ Penny Pilot Options \9\ Fees for Removing
Liquidity.
[[Page 13944]]
No change is proposed to Customer \10\ Penny Pilot Options Fees for
Removing Liquidity.
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\4\ 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. The Exchange initially established
Professional pricing in order to ``. . . bring additional revenue to
the Exchange.'' See Securities Exchange Act Release No. 64494 (May
13, 2011), 76 FR 29014 (May 19, 2011) (SR-NASDAQ-2011-066). In this
filing, the Exchange addressed the perceived favorable pricing of
Professionals who were assessed fees and paid rebates like a
Customer prior to the filing; and noted that a Professional, unlike
a retail Customer, has access to sophisticated trading systems that
contain functionality not available to retail Customers.
\5\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation (``OCC'').
\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. 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).
\7\ The term ``Non-NOM Market Maker'' 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.
\8\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category.
\9\ The Penny Pilot was established in March 2008 and was last
extended in 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); and 73686 (November 25, 2014), 79 FR 71477 (December 2,
2014) (SR-NASDAQ-2014-115) (notice of filing and immediate
effectiveness extending the Penny Pilot through June 30, 2015). All
Penny Pilot Options listed on the Exchange can be found at https://www.nasdaqtrader.com/Micro.aspx?id=phlx.
\10\ The term ``Customer'' applies to any transaction that is
identified by a Participant for clearing in the Customer range at
the 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)).
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Section 2 NASDAQ Options Market--Fees and Rebates
Penny Pilot Fees for Removing Liquidity
The Exchange proposes to amend the Fees for Removing Liquidity in
Penny Pilot Options in Chapter IV, Section 2(1) as follows:
(1) Fees for Execution of Contracts on the NASDAQ Options Market
----------------------------------------------------------------------------------------------------------------
Fees and rebates (per executed contract)
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Non-NOM
Customer Professional Firm market NOM market Broker-
maker maker dealer
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Penny Pilot Options:
Fee for Removing Liquidity... $0.48 $0.50 \d\ $0.50 \d\ $0.50 \d\ $0.50 \d\ $0.50 \d\
----------------------------------------------------------------------------------------------------------------
Today, Professionals, Firms, Non-NOM Market Makers, NOM Market
Makers, and Broker-Dealers are assessed a $0.49 per contract Fee for
Removing Liquidity in a Penny Pilot Option.\11\
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\11\ In addition, note d states that Participants that qualify
for Customer or Professional Rebate to Add Liquidity Tiers 7 or 8
(the highest rebate tiers) in a given month will be assessed a
Professional, Firm, Non-NOM Market Maker, NOM Market Maker, or
Broker-Dealer Fee for Removing Liquidity in Penny Pilot Options of
$0.48 per contract and a Customer Fee for Removing Liquidity in
Penny Pilot Options of $0.47 per contract. See Chapter XV, Section
2(1).
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The Exchange proposes to increase the Penny Pilot Fee for Removing
Liquidity for Professionals, Firms, Non-NOM Market Makers, NOM Market
Makers, and Broker-Dealers by a penny, from $0.49 to $0.50 per
contract.\12\ The Exchange is increasing the Fees for Removing
Liquidity in Penny Pilot Options so that it will be able to continue to
offer rebates to Customers, Professionals, Firms, Non-NOM Market
Makers, NOM Market Makers, and Broker-Dealers to attract liquidity and
encourage order interaction on NOM.\13\ The Exchange will still allow
participants that qualify for Customer or Professional Rebate to Add
Liquidity Tiers 7 or 8 in a given month to be assessed a Professional,
Firm, Non-NOM Market Maker, NOM Market Maker, or Broker-Dealer Fee for
Removing Liquidity in Penny Pilot Options of $0.48 per contract.
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\12\ Customers will continue to be assessed a Penny Pilot Option
Fee for Removing Liquidity of $0.48 per contract.
\13\ The Customer and Professional Rebate to Add Liquidity in
Penny Pilot Options is earned pursuant to eight Monthly Volume
Tiers. The NOM Market Maker Rebate to Add Liquidity in Penny Pilot
Options is earned pursuant to six different Monthly Volume Tiers.
The concept of ``Common Ownership'' (Participants under 75% common
ownership or control) applies to pricing in Chapter XV, Section 2
for which a volume threshold or volume percentage is required to
obtain the pricing. See Chapter XV, Section 2(1).
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2. Statutory Basis
NASDAQ believes that the proposed fee changes are consistent with
the provisions of Section 6 of the Act,\14\ in general, and with
Section 6(b)(4) of the Act,\15\ in particular, in that they provide 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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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4).
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Penny Pilot Fees for Removing Liquidity
The Exchange's proposal to increase the Professional, Firm, Non-NOM
Market Maker, NOM Market Maker, and Broker-Dealer Fees for Removing
Liquidity in Penny Pilot Options from $0.49 to $0.50 per contract is
reasonable because the increase will afford the Exchange the
opportunity to offer additional and increased rebates to these Exchange
participants, which should benefit all market participants through
increased liquidity and order interaction. The Exchange believes that
rebates incentivize Participants to select the Exchange as a venue to
post liquidity and attract additional order flow to the benefit of all
market participants. Incentivizing Participants to post liquidity will
also benefit Participants through increased order interaction.
Increased liquidity, and in particular Customer liquidity (as noted,
the fee for removing Customer liquidity continues to be lower than for
removing other liquidity) provides more trading opportunities, which
attracts other Participants, including NOM Market Makers.\16\ 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.
Moreover, in constructing the Exchange's fee and rebate program, the
Exchange aims to remain competitive with other venues so that it is a
superior choice for market participants when posting orders. The
Exchange believes that the fee resulting from the proposed increase is
still less than the rates assessed by other options for certain Penny
Pilot Options.\17\
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\16\ For obligations of Market Makers, see Chapter VII, Section
5. For Market Maker quotations (e.g. firm quotes, continuous
quotes), see Chapter VII, Section 6.
\17\ See, for example, the Miami International Securities
Exchange LLC (``MIAX'') Fee Schedule. Specifically, orders executed
for the account of non-MIAX market makers will be assessed $0.55 per
contract in options overlying EEM, GLD, IWM, QQQ, and SPY.
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The Exchange believes that it is equitable and not unfairly
discriminatory to increase Fees for Removing Liquidity in Penny Pilot
Options for Professionals, Firms, Non-NOM Market Makers, NOM Market
Makers, and Broker-Dealers because all market participants, other than
Customers, will continue to be assessed a uniform fee. As explained
herein, order flow brings unique benefits to the market through
increased liquidity which benefits all NOM Participants.\18\
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\18\ See supra note 16 regarding continuous quoting and the
commitment of capital by NOM Market Makers.
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Further, the Exchange believes it is reasonable, equitable and not
unfairly discriminatory to offer Participants that qualify for Customer
or Professional Rebate to Add Liquidity Tiers 7 or 8 in a given month
to be assessed a Professional, Firm, Non-NOM Market Maker, NOM Market
Maker, or Broker-Dealer Fee for Removing Liquidity in Penny Pilot
Options of $0.48 per contract instead of the proposed $0.50 per
contract. The increase in the differential from $0.01 to $0.02 is
reasonable, equitable and not unfairly discriminatory because it is
consistent with differentials at competing options
[[Page 13945]]
exchanges. For example, NASDAQ OMX PHLX (``PHLX'') provides that any
member or member organization under Common Ownership with another
member or member organization that qualifies for Customer Rebate Tiers
2, 3, 4 or 5 in Section B of the Pricing Schedule will be assessed
$0.60 per contract, a reduction of $0.10 from the standard rate of
$0.70 assessed Professional, Firm and Broker-Dealer.\19\
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\19\ See PHLX's Pricing Schedule.
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The Exchange, and its facility NOM, operates in a highly
competitive market, comprised of twelve exchanges, in which market
participants can easily and readily direct order flow to competing
venues if they deem fee levels at a particular venue to be excessive or
rebates to be inadequate. Accordingly, the fees that are assessed and
the rebates paid by the Exchange, as described in the proposal, are
influenced by these robust market forces and therefore must remain
competitive with fees charged and rebates paid by other venues and
therefore must continue to be reasonable and equitably allocated to
those members that opt to direct orders to the Exchange rather than
competing venues.
The proposed fees are designed to ensure a fair and reasonable use
of Exchange resources by allowing the Exchange to recoup costs while
continuing to attract liquidity and offer connectivity at competitive
rates to Exchange members and member organizations.
By offering competitive pricing, the Exchange desires to
incentivize members and member organizations, through the Exchange's
rebate and fee structure, to select NOM as a venue for bringing
liquidity to the Exchange and trading. Such competitive, differentiated
pricing exists today on other options exchanges. The Exchange's goal is
creating and increasing incentives to attract orders that will, in
turn, benefit all market participants through increased 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.
In the Exchange's fee schedule for Removing Liquidity in Penny
Pilot Options, Customers have had to pay the lowest fee, and this
continues to be reflected in the pricing schedule. The Exchange does
not believe the proposed differential would result in any burden on
competition as between Participants. The Exchange believes that
continuing to assess Customers the current fee while increasing the fee
for other Participants creates competition among options exchanges
because the Exchange believes that this may cause market participants
to select NOM as a venue to send Customer and other order flow. The
Exchange believes that incentivizing Participants to post liquidity on
NOM benefits NOM Participants through increased order interaction.
The Exchange's proposal to increase the Professional, Firm, Non-NOM
Market Maker, NOM Market Maker, and Broker-Dealer Fees for Removing
Liquidity in Penny Pilot Options does not misalign the current fees on
NOM. As noted, Customers were assessed less than other participants
before the proposal, and will continue to be assessed less under the
new fee. The Exchange believes that other market participants benefit
from incentivizing order flow as explained herein. As noted, Customers
continue to pay a lower Fee for Removing Liquidity in Penny Pilot
Options, which is currently the case for most fees on NOM that are
either not assessed to a Customer or where a Customer is assessed the
lowest fee because of the liquidity such order flow brings to the
Exchange. Also, NOM Market Makers have obligations \20\ to the market
which are not borne by other market participants and therefore the
Exchange believes that NOM Market Makers are entitled to a lower fee.
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\20\ See supra note 16.
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For the reasons specified herein, the Exchange does not believe
this proposal will result in any burden on competition. The Exchange
operates in a highly competitive market comprised of twelve U.S.
options exchanges in which sophisticated and knowledgeable market
participants can readily send order flow to competing exchanges if they
deem fee levels or rebate incentives at a particular exchange to be
excessive or inadequate. The Exchange believes that this competitive
marketplace impacts the fees and 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
Pursuant to Section 19(b)(3)(A)(ii) of the Act,\21\ the Exchange
has designated this proposal as establishing or changing a due, fee, or
other charge imposed on any person, whether or not the person is a
member of the self-regulatory organization, which renders the proposed
rule change effective upon filing.
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\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2015-019 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2015-019. 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
[[Page 13946]]
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-2015-019 and should
be submitted on or before April 7, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Brent J. Fields,
Secretary.
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\22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-06018 Filed 3-16-15; 8:45 am]
BILLING CODE 8011-01-P
