Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Chapter XV, Entitled “Options Pricing,” at Section 2 Governing Pricing for NASDAQ Members, 70032-70036 [2015-28683]

Download as PDF 70032 Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices increase the volume of contracts traded in options listed on NOM. To the extent that this purpose is achieved, all the Exchange’s market participants should benefit from the improved market liquidity. Enhanced market quality and increased transaction volume that results from the anticipated increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and to attract order flow. The Exchange believes that the proposal reflects this competitive environment. 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.10 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: 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±130. 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±2015±130 and should be submitted on or before December 3, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–28685 Filed 11–10–15; 8:45 am] BILLING CODE 8011–01–P mstockstill on DSK4VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2015–130 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76363; File No. SR– NASDAQ–2015–127] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Chapter XV, Entitled ‘‘Options Pricing,’’ at Section 2 Governing Pricing for NASDAQ Members November 5, 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 October 23, 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 the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s transaction fees at Chapter XV, Section 2 entitled ‘‘NASDAQ Options Market—Fees and Rebates,’’ which governs pricing for NASDAQ members using the NASDAQ Options Market (‘‘NOM’’), NASDAQ’s facility for executing and routing standardized equity and index options. While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on November 2, 2015. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and 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 1 15 10 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Sep<11>2014 18:15 Nov 10, 2015 11 17 Jkt 238001 PO 00000 CFR 200.30–3(a)(12). Frm 00098 Fmt 4703 Sfmt 4703 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\12NON1.SGM 12NON1 Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes the following two changes to the NOM transaction fees set forth at Chapter XV, Section 2 for executing and routing standardized equity and index options under the Penny Pilot 3 and Non-Penny Pilot options program. The proposed changes are as follows: Fees for Removing Liquidity in Penny Pilot Options: the Exchange proposes to: 1. Decrease fees from $0.54 to $0.50 per contract for all Participant categories other than Customer, which remains at $0.48. mstockstill on DSK4VPTVN1PROD with NOTICES 3 The Penny Pilot was established in March 2008 and has since been expanded and extended through June 30, 2016. 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 [sic] 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); 79 FR 31151 [sic] (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); 73686 (December 2, 2014), 79 FR 71477 (November 25, 2014) (SR– NASDAQ–2014–115) (notice of filing and immediate effectiveness and extension and replacement of Penny Pilot through June 30, 2015) and 75283 (June 24, 2015), 80 FR 37347 (June 30, 2015) (SR–NASDAQ–2015–063) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Extension of the Exchange’s Penny Pilot Program and Replacement of Penny Pilot Issues That Have Been Delisted.) See also NOM Rules, Chapter VI, Section 5. VerDate Sep<11>2014 18:15 Nov 10, 2015 Jkt 238001 2. Removes the Fees for Removing liquidity in SPY,4 which will be equivalent to other Fees for Removing Liquidity in Penny Pilot Options. 3. Renumber current note ‘‘3’’ as note ‘‘1’’ in Chapter XX [sic], Section 2(1). Rebate to Add Liquidity in Penny Pilot Options: the Exchange proposes to 1. Remove note ‘‘d’’ of Chapter XV, Section 2(1) because this incentive to reduce certain Fees for Removing Liquidity in Penny Pilot Options is no longer relevant as those fees are being reduced herein. 2. Amend note ‘‘e’’ of Chapter XV, Section 2(1) to reduce one of the incentives being offered to Participants that qualify for Tier 8 of the Customer and Professional Penny Pilot Options Rebates to Add Liquidity and amend qualifications for the rebate to ‘‘in a month.’’ 3. Renumber current note ‘‘e’’ as note ‘‘c’’ in Chapter XV, Section 2(1). Each specific change is described in greater detail below. Change 1—Fees for Removing Liquidity in Penny Pilot Options The Exchange proposes, beginning November 2, 2015, to decrease from $0.54 to $0.50 per contract the Fees for Removing Liquidity in Penny Pilot Options for all Participant categories other than Customer,5 which will remain unchanged at $0.48. This will represent a decrease of $0.04 per contract of liquidity removed in the Professional,6 Firm,7 NOM Market Maker,8 Non-NOM Market Maker,9 and Broker Dealer 10 categories. The 4 SPDR® S&P 500® ETF Trust. 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 [sic] broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Chapter I, Section 1(a)(48)). 6 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. 7 The term ‘‘Firm’’ or (‘‘F’’) applies to any transaction that is identified by a Participant for clearing in the Firm range at OCC. 8 The term ‘‘NOM Market Maker’’ or (‘‘M’’) is 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. 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 5 The PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 70033 Exchange believes that these fee reductions will benefit market participants and encourage them to send greater order flow to NOM. The Exchange also proposes to remove the current fees listed in Chapter XV, Section 2(1) for executions in SPY, as these fees will now be the same fees assessed for all other Penny Pilot Options and are simply redundant with the proposed changes herein. Specifically, the fees assessed for executions in SPY will remain $0.48 per contact for Customer and $0.50 per contract for all other Participants, the same fees proposed herein for all other Penny Pilot Options. The Exchange also proposes to renumber current note ‘‘3’’ as note ‘‘1’’ in Chapter XX [sic], Section 2(1) as notes ‘‘1’’ and ‘‘2’’ were previously eliminated. Change 2—Rebate To Add Liquidity in Penny Pilot Options The Exchange is proposing to remove note ‘‘d’’ of Chapter XV, Section 2(1) because this incentive to reduce certain Fees for Removing Liquidity in Penny Pilot Options is no longer relevant as those fees are being reduced. Note ‘‘d’’ currently states: Participants that qualify for Customer or Professional Rebate to Add Liquidity Tier 8 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 $0.50 per contract The Exchange’s proposal in Change 1 would reduce the Fees for Removing Liquidity in Penny Pilot Options for Professionals, Firms, NOM Market Makers, Non-NOM Market Makers, and Broker Dealers to $0.50 per contract. This incentive would no longer be relevant and the Exchange is therefore proposing to remove note ‘‘d.’’ The Exchange also proposes to amend note ‘‘e’’ of Chapter XV, Section 2(1) to reduce one of the incentives being offered to Participants that qualify for Tier 8 of the Customer and Professional Penny Pilot Options Rebates to Add Liquidity.11 Note ‘‘e’’ currently states: other transaction fees applicable within a particular category. 11 Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.75% or more 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 30,000 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 qualifies for rebates under the Qualified Market Maker (‘‘QMM’’) Program set forth in Rule 7014. E:\FR\FM\12NON1.SGM 12NON1 70034 Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices e Participants that [sic] add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.15% or more of total industry customer equity and ETF option ADV contracts per day 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; or (2) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.40% or more of total industry customer equity and ETF option ADV contracts per day in a month will receive an additional $0.05 per contract Penny Pilot Options Customer Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month; or (3) (a) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.85% of total industry customer equity and ETF option ADV contracts per day from October 22, 2015 through October 30, 2015 and (b) has added liquidity in all securities through one or more of its Nasdaq Market Center MPIDs that represent 1.00% or more of Consolidated Volume from October 22, 2015 through October 30, 2015 will receive an additional $0.05 per contract Penny Pilot Options Customer Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options from October 22, 2015 through October 30, 2015. Consolidated Volume shall mean the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of an equity member’s trading activity, expressed as a percentage of or ratio to Consolidated Volume, the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity. mstockstill on DSK4VPTVN1PROD with NOTICES Specifically, the Exchange is amending the third incentive in note ‘‘e’’ which currently states: (a) add Customer, Professional, Firm, NonNOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or NonPenny Pilot Options above 0.85% of total industry customer equity and ETF option ADV contracts per day from October 22, 2015 through October 30, 2015 and (b) has added liquidity in all securities through one or more of its Nasdaq Market Center MPIDs that represent 1.00% or more of Consolidated Volume from October 22, 2015 through October 30, 2015 will receive an additional $0.05 per contract Penny Pilot Options Customer Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options from October 22, 2015 through October 30, 2015. Consolidated Volume shall mean the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting VerDate Sep<11>2014 18:15 Nov 10, 2015 Jkt 238001 facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of an equity member’s trading activity, expressed as a percentage of or ratio to Consolidated Volume, the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity. The Exchange proposes to reduce this incentive from $0.05 to $0.03 per contract and amend the time period of October 22, 2015 through October 30, 2015 to ‘‘in a month.’’ The Exchange filed a mid-month amendment for October 2015 which necessitated this rule text. This text is not necessary going forward and will revert to the standard ‘‘in a month.’’ 12 The Exchange believes that despite the decrease, this incentive will continue to encourage market participants to send additional order flow to achieve this incentive. The Exchange also proposes to renumber current note ‘‘e’’ as note ‘‘c’’ in Chapter XV, Section 2(1) as note ‘‘c’’ was previously eliminated. 2. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,13 in general, and with Section 6(b)(4) and 6(b)(5) of the Act,14 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which NASDAQ operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Change 1—Fees for Removing Liquidity in Penny Pilot Options Decreasing the Fees for Removing Liquidity in Penny Pilot Options from $0.54 to $0.50 per contract for all Participant categories other than Customer is reasonable because the lower fees should encourage these participants to send additional order flow to the Exchange and the additional order flow should benefit all market participants. Decreasing the Fees for Removing Liquidity in Penny Pilot Options from $0.54 to $0.50 per contract for all Participant categories other than Customer is equitable and not unfairly discriminatory because the Exchange would uniformly assess all nonCustomers a Penny Pilot Options Fee for 12 This incentive will apply monthly going forward. 13 15 U.S.C. 78f. 14 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 Removing Liquidity of $0.50 per contract. Customers would be assessed the lowest Penny Pilot Options Fee for Removing Liquidity of $0.48 per contract. Customer order flow enhances liquidity on the Exchange for the benefit of all market participants and 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 elimination of the SPY Fees for Removing Liquidity in Penny Pilot Options is reasonable because these fees will be the same as the Fees for Removing Liquidity in Penny Pilot Options for all other Penny Pilot Options. The pricing would be redundant. The elimination of the SPY Fees for Removing Liquidity in Penny Pilot Options is equitable and not unfairly discriminatory because the Exchange would uniformly assess all nonCustomers a SPY Penny Pilot Options Fee for Removing Liquidity of $0.50 per contract, as is the case today and Customers would continue to be assessed the lowest Penny Pilot Options Fee for Removing Liquidity of $0.48 per contract. Customer order flow enhances liquidity on the Exchange for the benefit of all market participants and benefits all market participants by providing more trading opportunities, which attracts market makers. The Exchange’s proposal to renumber current note ‘‘3’’ as note ‘‘1’’ in Chapter XX [sic], Section 2(1) is reasonable, equitable and not unfairly discriminatory because it will add order to the pricing schedule. Change 2—Rebate To Add Liquidity in Penny Pilot Options The Exchange’s proposal to remove note ‘‘d’’ of Chapter XV, Section 2(1) is reasonable because this incentive to reduce certain Fees for Removing Liquidity in Penny Pilot Options is no longer relevant as those fees are being reduced in this proposal. The Exchange’s proposal to remove note ‘‘d’’ of Chapter XV, Section 2(1) is equitable and not unfairly discriminatory because this incentive to reduce Fees for Removing Liquidity in Penny Pilot Options will not be offered to any Participant. The Exchange’s proposal to amend note ‘‘e’’ of Chapter XV, Section 2(1) to reduce one of the incentives being offered to Participants that qualify for Tier 8 of the Customer and Professional Penny Pilot Options Rebates to Add E:\FR\FM\12NON1.SGM 12NON1 Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices Liquidity from an additional $0.05 per contract incentive to $0.03 per contract is reasonable because, despite the reduction in the incentive being offered, the opportunity to earn a higher rebate of $0.51 15 per contract, provided the qualifications are met, will incentivize Participants to transact an even greater number of qualifying Customer and/or Professional volume, which liquidity will benefit other market participants by providing them the opportunity to interact with that liquidity. The Exchange’s proposal to permit Participants to obtain a higher rebate of $0.51 per contract, provided they qualify for the Tier 8 rebate and the new criteria of note ‘‘e’’ 16 by adding volume in a month, which includes the addition of options and equity volume, is reasonable because the Exchange is encouraging market participants to send order flow to both the options and equity markets to receive the rebate. Incentivizing Participants to add options liquidity through the payment of an additional rebate is not novel and exists today.17 Today, the Customer and Professional Penny Pilot Options Rebate to Add Liquidity Tier 8 includes, as part of the qualifying criteria, a certification for the Investor Support Program 18 as mstockstill on DSK4VPTVN1PROD with NOTICES 15 Tier 8 pays a rebate of $0.48 per contract and the additional rebate proposed for note ‘‘e’’ (new note ‘‘c’’) would be a $0.03 per contract rebate for a total of $0.51 per contract. 16 The note ‘‘e’’ incentive being amended requires Participants to (a) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.85% of total industry customer equity and ETF option ADV contracts per day in a month and (b) add liquidity in all securities through one or more of its Nasdaq Market Center MPIDs that represent 1.00% or more of Consolidated Volume in a month in order to receive an additional $0.03 per contract Penny Pilot Options Customer Rebate to Add Liquidity. This is the incentive as proposed in this rule change. 17 Note ‘‘e’’ provides two other opportunities, aside from the incentive which is being amended, to earn a higher rebate. 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 1.15% or more of total industry customer equity and ETF option ADV contracts per day in a month 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; or Participants may add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.40% or more of total industry customer equity and ETF option ADV contracts per day in a month to receive an additional $0.05 per contract Penny Pilot Options Customer Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month. 18 For a detailed description of the Investor Support Program or ISP, see Securities Exchange Act Release No. 63270 (November 8, 2010), 75 FR 69489 (November 12, 2010) (NASDAQ–2010–141) (notice of filing and immediate effectiveness) (the ‘‘ISP Filing’’). See also Securities Exchange Act VerDate Sep<11>2014 18:15 Nov 10, 2015 Jkt 238001 set forth in Rule 7014 and qualification in the QMM Program.19 These two programs are equity programs which require participation in the form of adding liquidity. The concept of participating in the equities market as a means to qualify for an options rebate exists today. The Exchange’s proposal would require Participants to add liquidity in all securities through one or more of its Nasdaq Market Center MPIDS that represent 1.00% or more of Consolidated Volume during the month. Consolidated Volume shall mean the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of an equity member’s trading activity, expressed as a percentage of or ratio to Consolidated Volume, the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity. The Exchange’s proposal to amend note ‘‘e’’ of Chapter XV, Section 2(1) to reduce one of the incentives being offered to Participants that qualify for Tier 8 of the Customer and Professional Penny Pilot Options Rebates to Add Liquidity from an additional $0.05 per contract incentive to $0.03 per contract is equitable and not unfairly discriminatory because all Participants may qualify for Tier 8 and the additional note ‘‘e’’ incentive. Qualifying Participants will be uniformly paid the rebate provided the requirements are met in a month. The Exchange’s proposal to permit Participants to receive an additional $0.03 per contract rebate in addition to the Tier 8 rebate of $0.48 per contract, Release Nos. 63414 (December 2, 2010), 75 FR 76505 (December 8, 2010) (NASDAQ–2010–153) (notice of filing and immediate effectiveness); and 63628 (January 3, 2011), 76 FR 1201 (January 7, 2011) (NASDAQ–2010–154) (notice of filing and immediate effectiveness). 19 A QMM is a NASDAQ member that makes a significant contribution to market quality by providing liquidity at the national best bid and offer (‘‘NBBO’’) in a large number of stocks for a significant portion of the day. In addition, the NASDAQ equity member must avoid imposing the burdens on NASDAQ and its market participants that may be associated with excessive rates of entry of orders away from the inside and/or order cancellation. The designation ‘‘QMM’’ reflects the QMM’s commitment to provide meaningful and consistent support to market quality and price discovery by extensive quoting at the NBBO in a large number of securities. In return for its contributions, certain financial benefits are provided to a QMM with respect to a particular MPID (a ‘‘QMM MPID’’), as described under Rule 7014(e). PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 70035 provided they qualify for Tier 8 and add options and equity volume as specified in the new note ‘‘e’’ criteria,20 is equitable and not unfairly discriminatory because market participants today may qualify for a comparable or a higher rebate through alternative means that does not require participation in NOM. The Exchange’s proposal to amend the time period of October 22, 2015 through October 30, 2015 to ‘‘in a month’’ is reasonable because unlike last month when the the [sic] Exchange filed a mid-month amendment for October 2015, the amended language is intended to capture the entire month going forward. The Exchange’s proposal to amend the time period of October 22, 2015 through October 30, 2015 to ‘‘in a month’’ is equitable and not unfairly discriminatory because the note ‘‘e’’ qualifications would be uniformly calculated for a month for all Participants. The Exchange’s proposal to renumber current note ‘‘e’’ as note ‘‘c’’ in Chapter XX [sic], Section 2(1) is reasonable, equitable and not unfairly discriminatory because it will add order to the pricing schedule. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any inter-market burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange operates in a highly competitive market 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. Additionally, new competitors have entered the market and still others are reportedly entering the market shortly. These market forces ensure that the Exchange’s fees and rebates remain competitive with the fee structures at other trading platforms. In that sense, the Exchange’s proposal is actually pro-competitive because the Exchange is simply responding to competition by adjusting rebates and fees in order to remain competitive in the current environment. Decreasing the Fees for Removing Liquidity in Penny Pilot Options from $0.54 to $0.50 per contract for all Participant categories other than Customer does not create an intramarket undue burden on competition because all Participants would be 20 See E:\FR\FM\12NON1.SGM note 16. 12NON1 70036 Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices assessed the same fee, except Customers. Customer order flow is unique in that it enhances liquidity on the Exchange for the benefit of all market participants and benefits all market participants by providing more trading opportunities, which attracts market makers. The elimination of the SPY Fees for Removing Liquidity in Penny Pilot Options does not create an intra-market undue burden on competition because all Penny Pilot Options will be assessed the same [sic] as the Fees for Removing Liquidity. The Exchange’s proposal to remove note ‘‘d’’ of Chapter XV, Section 2(1) does not create an intra-market undue burden on competition because this incentive to reduce certain Fees for Removing Liquidity in Penny Pilot Options is no longer relevant as those fees are being reduced in this proposal. The Exchange’s proposal to amend note ‘‘e’’ of Chapter XV, Section 2(1) to reduce one of the incentives being offered to Participants that qualify for Tier 8 of the Customer and Professional Penny Pilot Options Rebates to Add Liquidity from an additional $0.05 per contract incentive to $0.03 per contract does not create an intra-market undue burden on competition because all Participants may qualify for Tier 8 and the additional incentive. The Exchange’s proposal to amend the time period of October 22, 2015 through October 30, 2015 to ‘‘in a month’’ does not create an intra-market undue burden on competition because the amended language is intended to capture the entire month going forward and was previously intended to reflect the effectiveness of a prior rule change. The remaining renumbering changes do not create an intra-market undue burden on competition because the amendments are non-substantive in nature. mstockstill on DSK4VPTVN1PROD with NOTICES 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.21 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 21 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Sep<11>2014 18:15 Nov 10, 2015 Jkt 238001 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–2015–127 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–2015–127. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 NASDAQ–2015–127, and should be submitted on or before December 3, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–28683 Filed 11–10–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76370; File No. SR–Phlx– 2015–90] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Business Continuity and Disaster Recovery Plans Testing Requirements November 5, 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 November 2, 2015, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt business continuity and disaster recovery plans (‘‘BC/DR Plans’’) testing requirements for certain Exchange Member Organizations 3 and PSX Participants 4 (‘‘Participants’’) in 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The term ‘‘Member Organization’’ is defined as ‘‘a corporation, partnership (general or limited), limited liability partnership, limited liability company, business trust or similar organization, transacting business as a broker or a dealer in securities and which has the status of a member organization by virtue of (i) admission to membership given to it by the Membership Department pursuant to the provisions of Rules 900.1 or 900.2 or the By-Laws or (ii) the transitional rules adopted by the Exchange pursuant to Section 6–4 of the By-Laws. References herein to officer or partner, when used in the context of a member organization, shall include any person holding a similar position in any organization other than a corporation or partnership that has the status of a member organization.’’ See Exchange Rule 1(o). 4 The term ‘‘PSX Participant’’ or ‘‘Participant’’ is defined as ‘‘an entity that fulfills the obligations 1 15 E:\FR\FM\12NON1.SGM 12NON1

Agencies

[Federal Register Volume 80, Number 218 (Thursday, November 12, 2015)]
[Notices]
[Pages 70032-70036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28683]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76363; File No. SR-NASDAQ-2015-127]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Chapter XV, Entitled ``Options Pricing,'' at Section 2 Governing 
Pricing for NASDAQ Members

November 5, 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 October 23, 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 the 
Exchange. 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

    The Exchange proposes to amend the Exchange's transaction fees at 
Chapter XV, Section 2 entitled ``NASDAQ Options Market--Fees and 
Rebates,'' which governs pricing for NASDAQ members using the NASDAQ 
Options Market (``NOM''), NASDAQ's facility for executing and routing 
standardized equity and index options.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on November 2, 2015.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and 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

[[Page 70033]]

forth in sections A, B, and C below, of the most significant aspects of 
such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes the following two changes to the NOM 
transaction fees set forth at Chapter XV, Section 2 for executing and 
routing standardized equity and index options under the Penny Pilot \3\ 
and Non-Penny Pilot options program.
---------------------------------------------------------------------------

    \3\ The Penny Pilot was established in March 2008 and has since 
been expanded and extended through June 30, 2016. 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 [sic] 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); 
79 FR 31151 [sic] (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); 
73686 (December 2, 2014), 79 FR 71477 (November 25, 2014) (SR-
NASDAQ-2014-115) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through June 30, 2015) and 
75283 (June 24, 2015), 80 FR 37347 (June 30, 2015) (SR-NASDAQ-2015-
063) (Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Relating to Extension of the Exchange's Penny Pilot 
Program and Replacement of Penny Pilot Issues That Have Been 
Delisted.) See also NOM Rules, Chapter VI, Section 5.
---------------------------------------------------------------------------

    The proposed changes are as follows:
    Fees for Removing Liquidity in Penny Pilot Options: the Exchange 
proposes to:
    1. Decrease fees from $0.54 to $0.50 per contract for all 
Participant categories other than Customer, which remains at $0.48.
    2. Removes the Fees for Removing liquidity in SPY,\4\ which will be 
equivalent to other Fees for Removing Liquidity in Penny Pilot Options.
---------------------------------------------------------------------------

    \4\ SPDR[supreg] S&P 500[supreg] ETF Trust.
---------------------------------------------------------------------------

    3. Renumber current note ``3'' as note ``1'' in Chapter XX [sic], 
Section 2(1).
    Rebate to Add Liquidity in Penny Pilot Options: the Exchange 
proposes to
    1. Remove note ``d'' of Chapter XV, Section 2(1) because this 
incentive to reduce certain Fees for Removing Liquidity in Penny Pilot 
Options is no longer relevant as those fees are being reduced herein.
    2. Amend note ``e'' of Chapter XV, Section 2(1) to reduce one of 
the incentives being offered to Participants that qualify for Tier 8 of 
the Customer and Professional Penny Pilot Options Rebates to Add 
Liquidity and amend qualifications for the rebate to ``in a month.''
    3. Renumber current note ``e'' as note ``c'' in Chapter XV, Section 
2(1).
    Each specific change is described in greater detail below.
Change 1--Fees for Removing Liquidity in Penny Pilot Options
    The Exchange proposes, beginning November 2, 2015, to decrease from 
$0.54 to $0.50 per contract the Fees for Removing Liquidity in Penny 
Pilot Options for all Participant categories other than Customer,\5\ 
which will remain unchanged at $0.48. This will represent a decrease of 
$0.04 per contract of liquidity removed in the Professional,\6\ 
Firm,\7\ NOM Market Maker,\8\ Non-NOM Market Maker,\9\ and Broker 
Dealer \10\ categories. The Exchange believes that these fee reductions 
will benefit market participants and encourage them to send greater 
order flow to NOM.
---------------------------------------------------------------------------

    \5\ 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 [sic] broker or dealer or for the account of a 
``Professional'' (as that term is defined in Chapter I, Section 
1(a)(48)).
    \6\ 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.
    \7\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
    \8\ The term ``NOM Market Maker'' or (``M'') is 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.
    \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.
---------------------------------------------------------------------------

    The Exchange also proposes to remove the current fees listed in 
Chapter XV, Section 2(1) for executions in SPY, as these fees will now 
be the same fees assessed for all other Penny Pilot Options and are 
simply redundant with the proposed changes herein. Specifically, the 
fees assessed for executions in SPY will remain $0.48 per contact for 
Customer and $0.50 per contract for all other Participants, the same 
fees proposed herein for all other Penny Pilot Options.
    The Exchange also proposes to renumber current note ``3'' as note 
``1'' in Chapter XX [sic], Section 2(1) as notes ``1'' and ``2'' were 
previously eliminated.
Change 2--Rebate To Add Liquidity in Penny Pilot Options
    The Exchange is proposing to remove note ``d'' of Chapter XV, 
Section 2(1) because this incentive to reduce certain Fees for Removing 
Liquidity in Penny Pilot Options is no longer relevant as those fees 
are being reduced. Note ``d'' currently states:

    Participants that qualify for Customer or Professional Rebate to 
Add Liquidity Tier 8 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 
$0.50 per contract

    The Exchange's proposal in Change 1 would reduce the Fees for 
Removing Liquidity in Penny Pilot Options for Professionals, Firms, NOM 
Market Makers, Non-NOM Market Makers, and Broker Dealers to $0.50 per 
contract. This incentive would no longer be relevant and the Exchange 
is therefore proposing to remove note ``d.''
    The Exchange also proposes to amend note ``e'' of Chapter XV, 
Section 2(1) to reduce one of the incentives being offered to 
Participants that qualify for Tier 8 of the Customer and Professional 
Penny Pilot Options Rebates to Add Liquidity.\11\ Note ``e'' currently 
states:
---------------------------------------------------------------------------

    \11\ Participant adds Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options 
and/or Non-Penny Pilot Options above 0.75% or more 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 30,000 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 qualifies for rebates under the Qualified Market Maker 
(``QMM'') Program set forth in Rule 7014.


[[Page 70034]]


---------------------------------------------------------------------------

    \e\ Participants that [sic] add Customer, Professional, Firm, 
Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options of 1.15% or more of total 
industry customer equity and ETF option ADV contracts per day 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; or (2) add 
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of 1.40% or more of total industry customer equity and ETF 
option ADV contracts per day in a month will receive an additional 
$0.05 per contract Penny Pilot Options Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Pilot 
Options in that month; or (3) (a) add Customer, Professional, Firm, 
Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options above 0.85% of total industry 
customer equity and ETF option ADV contracts per day from October 
22, 2015 through October 30, 2015 and (b) has added liquidity in all 
securities through one or more of its Nasdaq Market Center MPIDs 
that represent 1.00% or more of Consolidated Volume from October 22, 
2015 through October 30, 2015 will receive an additional $0.05 per 
contract Penny Pilot Options Customer Rebate to Add Liquidity for 
each transaction which adds liquidity in Penny Pilot Options from 
October 22, 2015 through October 30, 2015. Consolidated Volume shall 
mean the total consolidated volume reported to all consolidated 
transaction reporting plans by all exchanges and trade reporting 
facilities during a month in equity securities, excluding executed 
orders with a size of less than one round lot. For purposes of 
calculating Consolidated Volume and the extent of an equity member's 
trading activity, expressed as a percentage of or ratio to 
Consolidated Volume, the date of the annual reconstitution of the 
Russell Investments Indexes shall be excluded from both total 
Consolidated Volume and the member's trading activity.

    Specifically, the Exchange is amending the third incentive in note 
``e'' which currently states:

    (a) add Customer, Professional, Firm, Non-NOM Market Maker and/
or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny 
Pilot Options above 0.85% of total industry customer equity and ETF 
option ADV contracts per day from October 22, 2015 through October 
30, 2015 and (b) has added liquidity in all securities through one 
or more of its Nasdaq Market Center MPIDs that represent 1.00% or 
more of Consolidated Volume from October 22, 2015 through October 
30, 2015 will receive an additional $0.05 per contract Penny Pilot 
Options Customer Rebate to Add Liquidity for each transaction which 
adds liquidity in Penny Pilot Options from October 22, 2015 through 
October 30, 2015. Consolidated Volume shall mean the total 
consolidated volume reported to all consolidated transaction 
reporting plans by all exchanges and trade reporting facilities 
during a month in equity securities, excluding executed orders with 
a size of less than one round lot. For purposes of calculating 
Consolidated Volume and the extent of an equity member's trading 
activity, expressed as a percentage of or ratio to Consolidated 
Volume, the date of the annual reconstitution of the Russell 
Investments Indexes shall be excluded from both total Consolidated 
Volume and the member's trading activity.

    The Exchange proposes to reduce this incentive from $0.05 to $0.03 
per contract and amend the time period of October 22, 2015 through 
October 30, 2015 to ``in a month.'' The Exchange filed a mid-month 
amendment for October 2015 which necessitated this rule text. This text 
is not necessary going forward and will revert to the standard ``in a 
month.'' \12\ The Exchange believes that despite the decrease, this 
incentive will continue to encourage market participants to send 
additional order flow to achieve this incentive.
---------------------------------------------------------------------------

    \12\ This incentive will apply monthly going forward.
---------------------------------------------------------------------------

    The Exchange also proposes to renumber current note ``e'' as note 
``c'' in Chapter XV, Section 2(1) as note ``c'' was previously 
eliminated.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\13\ in general, and with 
Section 6(b)(4) and 6(b)(5) of the Act,\14\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system which NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

Change 1--Fees for Removing Liquidity in Penny Pilot Options
    Decreasing the Fees for Removing Liquidity in Penny Pilot Options 
from $0.54 to $0.50 per contract for all Participant categories other 
than Customer is reasonable because the lower fees should encourage 
these participants to send additional order flow to the Exchange and 
the additional order flow should benefit all market participants.
    Decreasing the Fees for Removing Liquidity in Penny Pilot Options 
from $0.54 to $0.50 per contract for all Participant categories other 
than Customer is equitable and not unfairly discriminatory because the 
Exchange would uniformly assess all non-Customers a Penny Pilot Options 
Fee for Removing Liquidity of $0.50 per contract. Customers would be 
assessed the lowest Penny Pilot Options Fee for Removing Liquidity of 
$0.48 per contract. Customer order flow enhances liquidity on the 
Exchange for the benefit of all market participants and 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 elimination of the SPY Fees for Removing Liquidity in Penny 
Pilot Options is reasonable because these fees will be the same as the 
Fees for Removing Liquidity in Penny Pilot Options for all other Penny 
Pilot Options. The pricing would be redundant.
    The elimination of the SPY Fees for Removing Liquidity in Penny 
Pilot Options is equitable and not unfairly discriminatory because the 
Exchange would uniformly assess all non-Customers a SPY Penny Pilot 
Options Fee for Removing Liquidity of $0.50 per contract, as is the 
case today and Customers would continue to be assessed the lowest Penny 
Pilot Options Fee for Removing Liquidity of $0.48 per contract. 
Customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants and benefits all market participants by 
providing more trading opportunities, which attracts market makers.
    The Exchange's proposal to renumber current note ``3'' as note 
``1'' in Chapter XX [sic], Section 2(1) is reasonable, equitable and 
not unfairly discriminatory because it will add order to the pricing 
schedule.
Change 2--Rebate To Add Liquidity in Penny Pilot Options
    The Exchange's proposal to remove note ``d'' of Chapter XV, Section 
2(1) is reasonable because this incentive to reduce certain Fees for 
Removing Liquidity in Penny Pilot Options is no longer relevant as 
those fees are being reduced in this proposal.
    The Exchange's proposal to remove note ``d'' of Chapter XV, Section 
2(1) is equitable and not unfairly discriminatory because this 
incentive to reduce Fees for Removing Liquidity in Penny Pilot Options 
will not be offered to any Participant.
    The Exchange's proposal to amend note ``e'' of Chapter XV, Section 
2(1) to reduce one of the incentives being offered to Participants that 
qualify for Tier 8 of the Customer and Professional Penny Pilot Options 
Rebates to Add

[[Page 70035]]

Liquidity from an additional $0.05 per contract incentive to $0.03 per 
contract is reasonable because, despite the reduction in the incentive 
being offered, the opportunity to earn a higher rebate of $0.51 \15\ 
per contract, provided the qualifications are met, will incentivize 
Participants to transact an even greater number of qualifying Customer 
and/or Professional volume, which liquidity will benefit other market 
participants by providing them the opportunity to interact with that 
liquidity. The Exchange's proposal to permit Participants to obtain a 
higher rebate of $0.51 per contract, provided they qualify for the Tier 
8 rebate and the new criteria of note ``e'' \16\ by adding volume in a 
month, which includes the addition of options and equity volume, is 
reasonable because the Exchange is encouraging market participants to 
send order flow to both the options and equity markets to receive the 
rebate. Incentivizing Participants to add options liquidity through the 
payment of an additional rebate is not novel and exists today.\17\ 
Today, the Customer and Professional Penny Pilot Options Rebate to Add 
Liquidity Tier 8 includes, as part of the qualifying criteria, a 
certification for the Investor Support Program \18\ as set forth in 
Rule 7014 and qualification in the QMM Program.\19\ These two programs 
are equity programs which require participation in the form of adding 
liquidity. The concept of participating in the equities market as a 
means to qualify for an options rebate exists today. The Exchange's 
proposal would require Participants to add liquidity in all securities 
through one or more of its Nasdaq Market Center MPIDS that represent 
1.00% or more of Consolidated Volume during the month. Consolidated 
Volume shall mean the total consolidated volume reported to all 
consolidated transaction reporting plans by all exchanges and trade 
reporting facilities during a month in equity securities, excluding 
executed orders with a size of less than one round lot. For purposes of 
calculating Consolidated Volume and the extent of an equity member's 
trading activity, expressed as a percentage of or ratio to Consolidated 
Volume, the date of the annual reconstitution of the Russell 
Investments Indexes shall be excluded from both total Consolidated 
Volume and the member's trading activity.
---------------------------------------------------------------------------

    \15\ Tier 8 pays a rebate of $0.48 per contract and the 
additional rebate proposed for note ``e'' (new note ``c'') would be 
a $0.03 per contract rebate for a total of $0.51 per contract.
    \16\ The note ``e'' incentive being amended requires 
Participants to (a) add Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or 
Non-Penny Pilot Options above 0.85% of total industry customer 
equity and ETF option ADV contracts per day in a month and (b) add 
liquidity in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 1.00% or more of Consolidated Volume in 
a month in order to receive an additional $0.03 per contract Penny 
Pilot Options Customer Rebate to Add Liquidity. This is the 
incentive as proposed in this rule change.
    \17\ Note ``e'' provides two other opportunities, aside from the 
incentive which is being amended, to earn a higher rebate. 
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 1.15% or more of total industry customer 
equity and ETF option ADV contracts per day in a month 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; or Participants may add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer 
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 
1.40% or more of total industry customer equity and ETF option ADV 
contracts per day in a month to receive an additional $0.05 per 
contract Penny Pilot Options Customer Rebate to Add Liquidity for 
each transaction which adds liquidity in Penny Pilot Options in that 
month.
    \18\ For a detailed description of the Investor Support Program 
or ISP, see Securities Exchange Act Release No. 63270 (November 8, 
2010), 75 FR 69489 (November 12, 2010) (NASDAQ-2010-141) (notice of 
filing and immediate effectiveness) (the ``ISP Filing''). See also 
Securities Exchange Act Release Nos. 63414 (December 2, 2010), 75 FR 
76505 (December 8, 2010) (NASDAQ-2010-153) (notice of filing and 
immediate effectiveness); and 63628 (January 3, 2011), 76 FR 1201 
(January 7, 2011) (NASDAQ-2010-154) (notice of filing and immediate 
effectiveness).
    \19\ A QMM is a NASDAQ member that makes a significant 
contribution to market quality by providing liquidity at the 
national best bid and offer (``NBBO'') in a large number of stocks 
for a significant portion of the day. In addition, the NASDAQ equity 
member must avoid imposing the burdens on NASDAQ and its market 
participants that may be associated with excessive rates of entry of 
orders away from the inside and/or order cancellation. The 
designation ``QMM'' reflects the QMM's commitment to provide 
meaningful and consistent support to market quality and price 
discovery by extensive quoting at the NBBO in a large number of 
securities. In return for its contributions, certain financial 
benefits are provided to a QMM with respect to a particular MPID (a 
``QMM MPID''), as described under Rule 7014(e).
---------------------------------------------------------------------------

    The Exchange's proposal to amend note ``e'' of Chapter XV, Section 
2(1) to reduce one of the incentives being offered to Participants that 
qualify for Tier 8 of the Customer and Professional Penny Pilot Options 
Rebates to Add Liquidity from an additional $0.05 per contract 
incentive to $0.03 per contract is equitable and not unfairly 
discriminatory because all Participants may qualify for Tier 8 and the 
additional note ``e'' incentive. Qualifying Participants will be 
uniformly paid the rebate provided the requirements are met in a month. 
The Exchange's proposal to permit Participants to receive an additional 
$0.03 per contract rebate in addition to the Tier 8 rebate of $0.48 per 
contract, provided they qualify for Tier 8 and add options and equity 
volume as specified in the new note ``e'' criteria,\20\ is equitable 
and not unfairly discriminatory because market participants today may 
qualify for a comparable or a higher rebate through alternative means 
that does not require participation in NOM.
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    \20\ See note 16.
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    The Exchange's proposal to amend the time period of October 22, 
2015 through October 30, 2015 to ``in a month'' is reasonable because 
unlike last month when the the [sic] Exchange filed a mid-month 
amendment for October 2015, the amended language is intended to capture 
the entire month going forward.
    The Exchange's proposal to amend the time period of October 22, 
2015 through October 30, 2015 to ``in a month'' is equitable and not 
unfairly discriminatory because the note ``e'' qualifications would be 
uniformly calculated for a month for all Participants.
    The Exchange's proposal to renumber current note ``e'' as note 
``c'' in Chapter XX [sic], Section 2(1) is reasonable, equitable and 
not unfairly discriminatory because it will add order to the pricing 
schedule.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inter-market burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive market 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. Additionally, new 
competitors have entered the market and still others are reportedly 
entering the market shortly. These market forces ensure that the 
Exchange's fees and rebates remain competitive with the fee structures 
at other trading platforms. In that sense, the Exchange's proposal is 
actually pro-competitive because the Exchange is simply responding to 
competition by adjusting rebates and fees in order to remain 
competitive in the current environment.
    Decreasing the Fees for Removing Liquidity in Penny Pilot Options 
from $0.54 to $0.50 per contract for all Participant categories other 
than Customer does not create an intra-market undue burden on 
competition because all Participants would be

[[Page 70036]]

assessed the same fee, except Customers. Customer order flow is unique 
in that it enhances liquidity on the Exchange for the benefit of all 
market participants and benefits all market participants by providing 
more trading opportunities, which attracts market makers.
    The elimination of the SPY Fees for Removing Liquidity in Penny 
Pilot Options does not create an intra-market undue burden on 
competition because all Penny Pilot Options will be assessed the same 
[sic] as the Fees for Removing Liquidity.
    The Exchange's proposal to remove note ``d'' of Chapter XV, Section 
2(1) does not create an intra-market undue burden on competition 
because this incentive to reduce certain Fees for Removing Liquidity in 
Penny Pilot Options is no longer relevant as those fees are being 
reduced in this proposal.
    The Exchange's proposal to amend note ``e'' of Chapter XV, Section 
2(1) to reduce one of the incentives being offered to Participants that 
qualify for Tier 8 of the Customer and Professional Penny Pilot Options 
Rebates to Add Liquidity from an additional $0.05 per contract 
incentive to $0.03 per contract does not create an intra-market undue 
burden on competition because all Participants may qualify for Tier 8 
and the additional incentive.
    The Exchange's proposal to amend the time period of October 22, 
2015 through October 30, 2015 to ``in a month'' does not create an 
intra-market undue burden on competition because the amended language 
is intended to capture the entire month going forward and was 
previously intended to reflect the effectiveness of a prior rule 
change.
    The remaining renumbering changes do not create an intra-market 
undue burden on competition because the amendments are non-substantive 
in nature.

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.\21\
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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-2015-127 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-2015-127. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-127, and should 
be submitted on or before December 3, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28683 Filed 11-10-15; 8:45 am]
BILLING CODE 8011-01-P
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