Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify NASDAQ Options Market LLC Pricing at Chapter XV, 50029-50034 [2016-17909]
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Federal Register / Vol. 81, No. 146 / Friday, July 29, 2016 / Notices
objectives of Section 6(b)(5) of the Act 10
in particular, in that it is designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that its
proposal to update Exchange Rule
11.25(a) to include IEX will ensure that
the rule correctly identifies and publicly
states on a market-by-market basis the
specific network processor data feeds
that the Exchange utilizes for the
handling, routing, and execution of
orders, and for performing the
regulatory compliance checks related to
each of those functions. The proposed
rule change also removes impediments
to and perfects the mechanism of a free
and open market and protects investors
and the public interest because it
provides additional specificity, clarity
and transparency.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the
contrary, the Exchange believes the
proposal would enhance competition
because including all of the exchanges
enhances transparency and enables
investors to better assess the quality of
the Exchange’s execution and routing
services.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate,
10 15
U.S.C. 78f(b)(5).
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it has become effective pursuant to
Section 19(b)(3)(A) 11 of the Exchange
Act and Rule 19b–4(f)(6) thereunder.12
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–
NSX–2016–06 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NSX–2016–06. 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
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
PO 00000
11 15
12 17
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50029
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–NSX–
2016–06, and should be submitted on or
before August 19, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–17906 Filed 7–28–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78406; File No. SR–
NASDAQ–2016–100]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify
NASDAQ Options Market LLC Pricing
at Chapter XV
July 25, 2016
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 July 12,
2016, 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 modify the
NASDAQ Options Market LLC’s
(‘‘NOM’’) pricing at Chapter XV,
Sections 2(1) and 2(6) to: (i) Amend
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 81, No. 146 / Friday, July 29, 2016 / Notices
Customer 3 and Professional 4 Penny
Pilot Options 5 Rebate to Add Liquidity
tiers; (ii) amend the Customer and
Professional Penny Pilot Options Fee for
Removing Liquidity; and (iii) amend the
Market Access and Routing Subsidy or
‘‘MARS.’’
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
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 three NOM
pricing amendments at Chapter XV as
described below in greater detail.
Pricing Change Number 1: Chapter XV,
Section 2(1)—Customer and
Professional Penny Pilot Options Rebate
To Add Liquidity
The Exchange proposes to amend the
Customer and Professional Penny Pilot
Options Rebate to Add Liquidity tiers.
Specifically, the Exchange proposes to
amend the current qualifications related
to the Tier 8 Customer and Professional
Penny Pilot Options rebate. The
proposed new Tier 8 qualifications
should continue to attract Customer and
Professional order flow to NOM. This
order flow benefits other market
participants through order interaction.
Today, the Exchange pays Customer
and Professional Penny Pilot Options
Rebates to Add Liquidity as follows:
Rebate to add
liquidity
($)
Monthly volume
Tier 1 ..............................
Tier 2 ..............................
Tier 3 ..............................
Tier 4 ..............................
Tier 5 ..............................
Tier 6 b ............................
Tier 7 b ............................
Tier 8 ..............................
Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of up to 0.10% of total industry customer equity and ETF option average daily volume (‘‘ADV’’) contracts per day in a month.
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 0.10% to 0.20% of total industry
customer equity and ETF option ADV contracts per day in a month.
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 0.20% to 0.30% of total industry
customer equity and ETF option ADV contracts per day in a month.
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 0.30% to 0.40% of total industry
customer equity and ETF option ADV contracts per day in a month.
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 0.40% to 0.75% of total industry
customer equity and ETF option ADV contracts per day in a month.
Participant has Total Volume of 100,000 or more contracts per day in a month, of which 25,000 or
more contracts per day in a month must be Customer and/or Professional liquidity in Penny Pilot
Options.
Participant has Total Volume of 150,000 or more contracts per day in a month, of which 50,000 or
more contracts per day in a month must be Customer and/or Professional liquidity in Penny Pilot
Options.
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, and (2) 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 in a month or qualifies for MARS (defined below).
0.20
0.25
0.42
0.43
0.45
0.45
0.47
c 0.48
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Today, the Exchange pays a $0.48 per
contract rebate 6 to Participants that add
3 The term ‘‘Customer’’ or (‘‘C’’) applies to any
transaction that is identified by a Participant for
clearing in the Customer range at The Options
Clearing Corporation which is not for the account
of broker or dealer or for the account of a
‘‘Professional.’’ See Chapter XV.
4 The term ‘‘Professional’’ or (‘‘P’’) 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.
5 The Penny Pilot was established in March 2008
and was last extended in 2016. See Securities
Exchange Act Release Nos. 57579 (March 28, 2008),
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73 FR 18587 (April 4, 2008) (SR–NASDAQ–2008–
026) (notice of filing and immediate effectiveness
establishing Penny Pilot); and 78037 (June 10,
2016), 81 FR 39299 (June 16, 2016) (SR–NASDAQ–
2016–052) (notice of filing and immediate
effectiveness extending the Penny Pilot through
December 31, 2016). All Penny Pilot Options listed
on the Exchange can be found at https://
www.nasdaqtrader.com/
MicroNews.aspx?id=OTA2016-15.
6 Note ‘‘c,’’ which is applicable to the Tier 8
rebate, provides additional rebates to Participants
that execute certain volume on NOM. Participants
that: (1) Add Customer, Professional, Firm, NonNOM 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
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customer equity and ETF option ADV contracts per
day in a month receive an additional $0.02 per
contract Penny Pilot Options Customer and/or
Professional 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 1.30% or more of
total industry customer equity and ETF option ADV
contracts per day in a month receive an additional
$0.05 per contract Penny Pilot Options Customer
and/or Professional 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
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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, and
(2) 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
in a month or qualifies for MARS.7 The
Exchange is proposing to continue to
pay a $0.48 per contract rebate
provided, NOM 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 0.25% or
more of total industry customer equity
and ETF option ADV contracts per day
in a month,8 and (2) has added liquidity
in all securities through one or more of
its Nasdaq Market Center MPIDs that
represent 1.00% or more of
Maker and/or Broker-Dealer liquidity in Penny Pilot
Options and/or Non-Penny Pilot Options above
0.80% of total industry customer equity and ETF
option ADV contracts per day in a month, (b) add
Customer, Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer liquidity in Non-Penny
Pilot Options above 0.15% of total industry
customer equity and ETF option ADV contracts per
day in a month, and (c) execute greater than 0.04%
of Consolidated Volume (‘‘CV’’) via Market-onClose/Limit-on-Close (‘‘MOC/LOC’’) volume within
the NASDAQ Stock Market Closing Cross within a
month receive an additional $0.05 per contract
Penny Pilot Options Customer and/or Professional
Rebate to Add Liquidity for each transaction which
adds liquidity in Penny Pilot Options in a month.
Consolidated Volume means 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. This note ‘‘c’’ is not being amended
with this proposal.
7 NOM Participants that have System Eligibility
and have executed the requisite number of Eligible
Contracts in a month are paid MARS rebates based
on average daily volume in a month. See Chapter
XV, Section 2(6).
8 For reference, in May 2016, 0.25% of total
industry customer equity and ETF option ADV
equated to approximately 28,000 contracts.
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Consolidated Volume in a month or
qualifies for MARS.
The Exchange’s proposal to amend
the current qualification from 30,000 or
more contracts per day in a month to
0.25% or more of total industry
customer equity and ETF option ADV
contracts provides Participants the
ability to qualify for this tier in lower
industry ADV months because the
percentage would be tied to the industry
volume and not represent a fixed
number. If the industry volume were to
increase in a given month, the
Participant will have greater
opportunity to execute a higher number
of contracts because the entire industry
has more volume available to execute.
For example in May 2016, 0.25% of
total industry customer equity and ETF
option ADV contracts represented
approximately 28,000 contracts as
compared to the requisite 30,000
contracts which Tier 8 currently
requires. Because volume was lower in
the month of May 2016, market
participants would have been better able
to continue to meet the Tier 8
requirement with a percentage tied to
volume as compared to a fixed number
of contracts.
The Exchange also proposes to amend
note ‘‘d,’’ which applies to the Customer
and Professional Penny Pilot Options
Rebate to Add Liquidity tiers. Currently,
note ‘‘d’’ provides that NOM
Participants that qualify for MARS
Payment Tiers 9 1, 2 or 3 will receive an
additional $0.05 per contract in addition
to any Penny Pilot Options Customer
and/or Professional Rebate to Add
Liquidity Tiers they may qualify for in
that month, unless the Participant
qualifies for a higher note ‘‘c’’ rebate,10
9 MARS Payments are currently based on a 3 tier
rebate based on average daily volume (‘‘ADV’’). The
Exchange pays a MARS Payment of $0.07 for ADV
of 2,500 Eligible Contracts. The Exchange pays a
MARS Payment of $0.09 for ADV of 5,000 Eligible
Contracts. Finally, the Exchange pays a MARS
Payment of $0.11 for AVD of 10,000 Eligible
Contracts. The MARS Payment is paid on all
executed Eligible Contracts that add liquidity,
which are routed to NOM through a participating
NOM Participant’s System and meet the requisite
Eligible Contracts ADV. See Chapter XV, Section
2(6).
10 The note ‘‘c’’ incentive in Chapter XV, Section
2 provides that Participants that: (1) 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 and/or Professional 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 1.30%
or more of total industry customer equity and ETF
option ADV contracts per day in a month will
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50031
in which case the Participants would
receive the appropriate note ‘‘c’’ rebate
they qualified for in that month.
The Exchange proposes to amend note
‘‘d’’ of Chapter XV, Section 2(1) to lower
the additional rebate on Penny Pilot
Options Customer and/or Professional
Rebates to Add Liquidity from $0.05 to
$0.03 per contract. The Exchange
believes that despite lowering the
additional incentive from $0.05 to $0.03
per contract, the note ‘‘d’’ incentive will
continue to incentivize NOM
Participants to participate in MARS and
send qualifying order flow to the
Exchange. The $0.03 per contract
incentive would continue to attract
Penny Pilot Option liquidity to NOM.
All market participants benefit from the
increased order interaction when more
order flow is available on NOM.
Pricing Change Number 2: Chapter XV,
Section 2(6)—MARS Pricing
The Exchange currently offers a
Market Access and Routing Subsidy or
‘‘MARS’’ to qualifying NOM
Participants in Chapter XV, Section 2(6).
NOM Participants that have System
Eligibility 11 and have executed the
receive an additional $0.05 per contract Penny Pilot
Options Customer and/or Professional 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 0.80% of total industry customer
equity and ETF option ADV contracts per day in a
month, (b) add Customer, Professional, Firm, NonNOM Market Maker and/or Broker-Dealer liquidity
in Non-Penny Pilot Options above 0.15% of total
industry customer equity and ETF option ADV
contracts per day in a month, and (c) execute
greater than 0.04% of Consolidated Volume (‘‘CV’’)
via Market-on-Close/Limit-on-Close (‘‘MOC/LOC’’)
volume within the NASDAQ Stock Market Closing
Cross within a month will receive an additional
$0.05 per contract Penny Pilot Options Customer
and/or Professional Rebate to Add Liquidity for
each transaction which adds liquidity in Penny
Pilot Options in a 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. NOM
Participants that qualify for a note ‘‘c’’ incentive
receive the greater of the note ‘‘c’’ or note ‘‘d’’
incentive.
11 To qualify for MARS, the Participant’s routing
system (‘‘System’’) would be required to: (1) Enable
the electronic routing of orders to all of the U.S.
options exchanges, including NOM; (2) provide
current consolidated market data from the U.S.
options exchanges; and (3) be capable of interfacing
with NOM’s API to access current NOM match
engine functionality. Further, the Participant’s
System would also need to cause NOM to be the
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requisite number of Eligible Contracts in
a month are paid rebates based on
average daily volume (‘‘ADV’’) in a
month. Today, MARS Payments are
currently based on a 3 tier rebate based
on ADV. The Exchange pays a MARS
Payment of $0.07 for ADV of 2,500
Eligible Contracts. The Exchange pays a
MARS Payment of $0.09 for ADV of
5,000 Eligible Contracts. Finally, the
Exchange pays a MARS Payment of
$0.11 for ADV of 10,000 Eligible
Contracts. The MARS Payment is paid
on all executed Eligible Contracts that
add liquidity, which are routed to NOM
through a participating NOM
Participant’s System and meet the
requisite Eligible Contracts ADV.
The Exchange proposes to provide an
additional incentive to the MARS
Payment in Chapter XV, Section 2(6) by
offering NOM Participants that qualify
for Customer or Professional Penny Pilot
Options Rebate to Add Liquidity Tier
8 12 an additional $0.09 per contract
rebate applicable to MARS Payment
tiers. This $0.09 rebate would be in
addition to any MARS Payment Tier 13
on MARS Eligible Contracts that the
NOM Participant qualifies for in a given
month. This incentive is intended to
encourage NOM Participants to
continue to send more order flow to the
Exchange in either Penny Pilot or NonPenny Pilot Options to qualify for the
Customer and Professional Penny Pilot
Options Tier 8 rebate to earn the
additional MARS Payment. All market
participants benefit from the increased
order interaction when more order flow
is available on NOM.
one of the top three default destination exchanges
for individually executed marketable orders if NOM
is at the national best bid or offer (‘‘NBBO’’),
regardless of size or time, but allow any user to
manually override NOM as a default destination on
an order-by-order basis. Any NOM Participant
would be permitted to avail itself of this
arrangement, provided that its order routing
functionality incorporates the features described
above and satisfies NOM that it appears to be robust
and reliable. The Participant remains solely
responsible for implementing and operating its
System. See Chapter XV, Section 2(6).
12 With the proposal herein, to be eligible for Tier
8, a Participant is required to add Customer,
Professional, Firm, Non-NOM Market Maker and/or
Broker-Dealer liquidity in Penny Pilot Options and/
or Non-Penny Pilot Options above 0.75% 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 0.25% or more of total industry
customer equity and ETF option ADV contracts per
day in a month, and (2) 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 in a month or qualifies for
MARS.
13 See note 9 above.
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Pricing Change Number 3: Chapter XV,
Section 2(1)—Penny Pilot Options Fee
for Removing Liquidity
The Exchange is proposing to amend
note ‘‘4,’’ which is currently reserved, to
lower the Customer and Professional
Penny Pilot Options Fees for Removing
Liquidity from $0.50 14 to $0.48 per
contract, excluding SPY,15 for NOM
Participants that qualify for MARS
Payment Tiers 1, 2 or 3.
The Exchange believes that offering
NOM Participants the opportunity to
lower the Customer and Professional
Penny Pilot Options Fees for Removing
Liquidity by qualifying for MARS
Payment Tiers 1, 2 or 3 and transacting
MARS Eligible Contracts,16 will
incentivize NOM Participants to send
more MARS Eligible Contracts to NOM.
All market participants benefit from the
increased order interaction when more
order flow is available on NOM.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,17 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,18 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, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 19
14 Currently, the Customer and Professional
Penny Pilot Options Fees for Removing Liquidity
are $0.50 per contract.
15 Note ‘‘3’’ of the Pricing Schedule offers
Customers and Professionals that remove liquidity
in SPY Options a lower Customer and Professional
Penny Pilot Options Fees for Removing Liquidity of
$0.47 per contract.
16 MARS Eligible Contracts include electronic
Firm, Non-NOM Market Maker, Broker-Dealer or
Joint Back Office orders that add liquidity,
excluding Mini Options. See Chapter XV, Section
2(6).
17 15 U.S.C. 78f(b).
18 15 U.S.C. 78f(b)(4) and (5).
19 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
PO 00000
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Likewise, in NetCoalition v. Securities
and Exchange Commission 20
(‘‘NetCoalition’’) the D.C. Circuit upheld
the Commission’s use of a market-based
approach in evaluating the fairness of
market data fees against a challenge
claiming that Congress mandated a costbased approach.21 As the court
emphasized, the Commission ‘‘intended
in Regulation NMS that ‘market forces,
rather than regulatory requirements’
play a role in determining the market
data . . . to be made available to
investors and at what cost.’’ 22
Further, ‘‘[n]o one disputes that
competition for order flow is ‘fierce.’
. . . As the SEC explained, ‘[i]n the U.S.
national market system, buyers and
sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 23 Although the court
and the SEC were discussing the cash
equities markets, the Exchange believes
that these views apply with equal force
to the options markets.
Pricing Change Number 1: Chapter XV,
Section 2(1)—Customer and
Professional Penny Pilot Options Rebate
to Add Liquidity
The Exchange’s proposal to amend
the current qualifications related to the
Tier 8 Customer and Professional Penny
Pilot Options Rebate to Add Liquidity is
reasonable because the rebate should
continue to attract Customer and
Professional order flow to NOM. The
additional Customer and Professional
order flow to NOM benefits other
market participants by providing
additional liquidity with which to
interact. Amending the current
qualification from 30,000 or more
contracts per day in a month to 0.25%
or more of total industry customer
equity and ETF option ADV contracts
provides Participants the ability to
qualify for this tier in months with
lower industry ADV because the
required number of contracts would be
directly correlated to industry volume.
With this proposal, members that
consistently send order flow to the
Exchange may continue to qualify for
20 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
21 See NetCoalition, at 534–535.
22 Id. at 537.
23 Id. at 539 (quoting Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR
74770, 74782–83 (December 9, 2008) (SR–
NYSEArca–2006–21)).
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asabaliauskas on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 81, No. 146 / Friday, July 29, 2016 / Notices
Tier 8 rebates. The Exchange’s proposal
to amend the current qualification from
30,000 or more contracts per day in a
month to 0.25% or more of total
industry customer equity and ETF
option ADV contracts provides
Participants the ability to qualify for this
tier in lower industry ADV months
because the percentage would be tied to
the industry volume and not represent
a fixed number. If the industry volume
were to increase in a given month the
Participant will have greater
opportunity to execute a higher number
of contracts because the entire industry
has more volume available to execute.
The Exchange notes that utilizing a
percentage as compared to a fixed
number is not novel. Today, NOM
Customer and Professional Penny Pilot
Options Tiers 1 through 5 utilize a
percentage of total industry customer
equity and ETF option ADV contracts
per day in a month.24
The Exchange’s proposal to amend
the current qualifications related to the
Tier 8 Customer and Professional Penny
Pilot Options Rebate to Add Liquidity is
equitable and not unfairly
discriminatory because all Participants
are eligible to earn rebates. These
rebates would be uniformly paid to all
qualifying Participants.
The Exchange’s proposal to amend
note ‘‘d,’’ which applies to any
Customer and Professional Penny Pilot
Options Rebates to Add Liquidity tier,
to lower the per contract Penny Pilot
Options Customer and/or Professional
Rebate to Add Liquidity incentive from
$0.05 to $0.03 per contract is reasonable
as discussed hereafter. Despite lowering
the incentive, the reduced rebate would
continue to attract Penny Pilot Options
liquidity to NOM and also would
continue to incentivize market
participants to participate in MARS. All
market participants benefit from the
increased order interaction when more
order flow is available on NOM.
The Exchange’s proposal to amend
note ‘‘d,’’ which applies to the
additional Customer and Professional
Penny Pilot Options Rebate to Add
Liquidity tiers, to lower the additional
per contract Penny Pilot Options
Customer and/or Professional Rebate to
Add Liquidity incentive from $0.05 to
$0.03 per contract, is equitable and not
unfairly discriminatory because all
Participants are eligible to earn rebates
and the rebates would be uniformly
paid to all qualifying Participants. In
addition, any Participant may qualify
for MARS provided they have the
requisite System Eligibility.
Pricing Change Number 2: Chapter XV,
Section 2(6)—MARS Pricing
The Exchange’s proposal to amend
the MARS Payment to offer NOM
Participants that qualify for Customer or
Professional Penny Pilot Options Rebate
to Add Liquidity Tier 8 an additional
$0.09 per contract rebate in addition to
any MARS Payment tier on MARS
Eligible Contracts the NOM Participant
qualifies for in a given month is
reasonable because it will encourage
NOM Participants to continue to send
more order flow to the Exchange in
either Penny Pilot or Non-Penny Pilot
Options to qualify for the higher MARS
Payment. All market participants benefit
from the increased order interaction
when more order flow is available on
NOM.
The Exchange’s proposal to amend
the MARS Payment to offer NOM
Participants that qualify for Customer or
Professional Penny Pilot Options Rebate
to Add Liquidity Tier 8 an additional
$0.09 per contract rebate in addition to
any MARS Payment tier on MARS
Eligible Contracts the NOM Participant
qualifies for in a given month is
equitable and not unfairly
discriminatory because any Participant
may qualify for MARS provided they
have the requisite System Eligibility.
The Exchange will also uniformly pay
MARS rebates to qualifying Participants
on all MARS Eligible Contracts.
Pricing Change Number 3: Chapter XV,
Section 2(1)—Penny Pilot Options Fee
for Removing Liquidity
The Exchange’s proposal to amend
note ‘‘4’’ to lower the Customer and
Professional Penny Pilot Options Fees
for Removing Liquidity from $0.50 to
$0.48 per contract, excluding SPY,
provided NOM Participants qualify for
MARS Payment Tiers 1, 2 or 3 is
reasonable for the reasons which follow.
NOM Participants will be encouraged to
send additional electronic MARS
Eligible Contracts 25 to NOM to obtain
the fee reduction. This should in turn
incentivize NOM Participants to send
more order flow to NOM. All market
participants benefit from the increased
order interaction when more order flow
is available on NOM. Excluding SPY
from the note ‘‘4’’ discount is reasonable
because SPY options are among the
most highly liquid options. Today, the
Exchange prices SPY differently from
other Multiply-Listed Options.26 Other
25 See
26 See
24 See
Chapter XV, Section 2(1).
VerDate Sep<11>2014
18:42 Jul 28, 2016
note 16 above.
current note ‘‘3’’ at Chapter XV, Section
2(1).
Jkt 238001
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
50033
options exchanges price differently by
options symbol.27
The Exchange’s proposal to amend
note ‘‘4’’ to lower the Customer and
Professional Penny Pilot Options Fees
for Removing Liquidity from $0.50 to
$0.48 per contract, excluding SPY,
provided NOM Participants qualify for
MARS Payment Tiers 1, 2 or 3 is
equitable and not unfairly
discriminatory because all Participants
may qualify for MARS provided they
have the requisite System Eligibility.
The Exchange will also uniformly assess
the discounted Customer and
Professional Penny Pilot Options Fees
for Removing Liquidity to qualifying
Participants. Excluding SPY from the
note ‘‘4’’ discount is equitable and not
unfairly discriminatory because the
Exchange pays discounts today for SPY
options transactions. Today, note ‘‘3’’ of
Chapter XV, Section 2(1) assesses
Customers and Professionals that
remove liquidity in SPY Options a $0.47
per contract discounted Customer and
Professional Penny Pilot Options Fees
for Removing Liquidity. Both notes ‘‘3’’
and ‘‘4’’ of Chapter XV, Section 2(1) are
paid uniformly to all qualifying
Participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. In terms of
inter-market competition, 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, or
rebate opportunities available at other
venues to be more favorable. In such an
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
The proposed fee changes are
competitive and do not impose a burden
27 See NASDAQ PHLX LLC’s (‘‘Phlx’’) Pricing
Schedule at Section I which contains pricing for
options overlying SPY that is different from other
Multiply Listed Options pricing in Section II of that
Pricing Schedule.
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50034
Federal Register / Vol. 81, No. 146 / Friday, July 29, 2016 / Notices
on inter-market competition. Today,
other venues offer rebate programs,
discounted fees and incentives for
maintain routing systems.28 In sum, if
the changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Pricing Change Number 1: Chapter XV,
Section 2(1)—Customer and
Professional Penny Pilot Options Rebate
To Add Liquidity
The Exchange’s proposal to amend
the current qualifications related to the
Tier 8 Customer and Professional Penny
Pilot Options Rebate to Add Liquidity
does not impose an undue burden on
intra-market competition because all
Participants are eligible to earn rebates
and these rebates would be uniformly
paid to all qualifying Participants.
The Exchange’s proposal to amend
note ‘‘d,’’ which applies to the Customer
and Professional Penny Pilot Options
Rebate to Add Liquidity tiers, to lower
the additional amount of the per
contract Penny Pilot Options Customer
and/or Professional Rebate to Add
Liquidity from $0.05 to $0.03 per
contract does not impose an undue
burden on intra-market competition
because all Participants are eligible to
earn rebates and these rebates would be
uniformly paid to all qualifying
Participants. In addition, any
Participant may qualify for MARS
provided they have the requisite System
Eligibility.
Pricing Change Number 2: Chapter XV,
Section 2(6)—MARS Pricing
The Exchange’s proposal to amend
the MARS Payment to offer NOM
Participants that qualify for Customer or
Professional Penny Pilot Options Rebate
to Add Liquidity Tier 8 an additional
$0.09 per contract rebate, in addition to
any MARS Payment tier on MARS
Eligible Contracts the NOM Participant
qualifies for in a given month, does not
impose an undue burden on intramarket competition because any
Participant may qualify for MARS
provided they have the requisite System
28 See
Phlx’s Pricing Schedule at Section B
(Customer Rebate Program) and Section IV, Part E
(MARS). Also, the International Securities
Exchange LLC (‘‘ISE’’) offers a lower Market Maker
Taker Fee for Select Symbols of $0.44 per contract
for Market Makers with total affiliated Priority
Customer Complex ADV of 150,000 or more
contracts. See ISE’s Fee Schedule.
VerDate Sep<11>2014
18:42 Jul 28, 2016
Jkt 238001
Eligibility. The Exchange will also
uniformly pay MARS Payments to
qualifying Participants on all Eligible
Contracts.
Comments may be submitted by any of
the following methods:
Pricing Change Number 3: Chapter XV,
Section 2(1)—Penny Pilot Options Fee
for Removing Liquidity
• 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–2016–100 on the subject line.
The Exchange’s proposal to amend
note ‘‘4’’ to lower the Customer and
Professional Penny Pilot Options Fees
for Removing Liquidity from $0.50 to
$0.48 per contract, excluding SPY,
provided NOM Participants qualify for
MARS Payment Tiers 1, 2 or 3 does not
impose an undue burden on intramarket competition because all
Participants may qualify for MARS
provided they have the requisite System
Eligibility. The Exchange will also
uniformly assess the discounted
Customer and Professional Penny Pilot
Options Fees for Removing Liquidity to
qualifying Participants. Excluding SPY
does not impose an undue burden on
intra-market competition because today,
the Exchange offers a discount for SPY
options, which discounts are uniformly
paid to all Participants. Today, other
options exchanges price differently by
options symbol.29
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.30
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.
PO 00000
Electronic Comments
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–2016–100. 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 referto File Number SR–
NASDAQ–2016–100, and should be
submitted on or before August 19, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–17909 Filed 7–28–16; 8:45 am]
BILLING CODE 8011–01–P
29 See
note 27.
30 15 U.S.C. 78s(b)(3)(A)(ii).
Frm 00113
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31 17
E:\FR\FM\29JYN1.SGM
CFR 200.30–3(a)(12).
29JYN1
]]>Agencies
[Federal Register Volume 81, Number 146 (Friday, July 29, 2016)]
[Notices]
[Pages 50029-50034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17909]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78406; File No. SR-NASDAQ-2016-100]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ Options Market LLC Pricing at Chapter XV
July 25, 2016
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 July 12, 2016, 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 modify the NASDAQ Options Market LLC's
(``NOM'') pricing at Chapter XV, Sections 2(1) and 2(6) to: (i) Amend
[[Page 50030]]
Customer \3\ and Professional \4\ Penny Pilot Options \5\ Rebate to Add
Liquidity tiers; (ii) amend the Customer and Professional Penny Pilot
Options Fee for Removing Liquidity; and (iii) amend the Market Access
and Routing Subsidy or ``MARS.''
---------------------------------------------------------------------------
\3\ The term ``Customer'' or (``C'') applies to any transaction
that is identified by a Participant for clearing in the Customer
range at The Options Clearing Corporation which is not for the
account of broker or dealer or for the account of a
``Professional.'' See Chapter XV.
\4\ The term ``Professional'' or (``P'') 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.
\5\ The Penny Pilot was established in March 2008 and was last
extended in 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); and 78037 (June 10, 2016), 81 FR 39299 (June 16, 2016) (SR-
NASDAQ-2016-052) (notice of filing and immediate effectiveness
extending the Penny Pilot through December 31, 2016). All Penny
Pilot Options listed on the Exchange can be found at https://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2016-15.
---------------------------------------------------------------------------
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 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 three NOM pricing amendments at Chapter XV as
described below in greater detail.
Pricing Change Number 1: Chapter XV, Section 2(1)--Customer and
Professional Penny Pilot Options Rebate To Add Liquidity
The Exchange proposes to amend the Customer and Professional Penny
Pilot Options Rebate to Add Liquidity tiers. Specifically, the Exchange
proposes to amend the current qualifications related to the Tier 8
Customer and Professional Penny Pilot Options rebate. The proposed new
Tier 8 qualifications should continue to attract Customer and
Professional order flow to NOM. This order flow benefits other market
participants through order interaction.
Today, the Exchange pays Customer and Professional Penny Pilot
Options Rebates to Add Liquidity as follows:
------------------------------------------------------------------------
Rebate to add
Monthly volume liquidity ($)
------------------------------------------------------------------------
Tier 1......................... Participant adds 0.20
Customer,
Professional, Firm,
Non-NOM Market Maker
and/or Broker-Dealer
liquidity in Penny
Pilot Options and/or
Non-Penny Pilot
Options of up to 0.10%
of total industry
customer equity and
ETF option average
daily volume (``ADV'')
contracts per day in a
month.
Tier 2......................... Participant adds 0.25
Customer,
Professional, Firm,
Non-NOM Market Maker
and/or Broker-Dealer
liquidity in Penny
Pilot Options and/or
Non-Penny Pilot
Options above 0.10% to
0.20% of total
industry customer
equity and ETF option
ADV contracts per day
in a month.
Tier 3......................... Participant adds 0.42
Customer,
Professional, Firm,
Non-NOM Market Maker
and/or Broker-Dealer
liquidity in Penny
Pilot Options and/or
Non-Penny Pilot
Options above 0.20% to
0.30% of total
industry customer
equity and ETF option
ADV contracts per day
in a month.
Tier 4......................... Participant adds 0.43
Customer,
Professional, Firm,
Non-NOM Market Maker
and/or Broker-Dealer
liquidity in Penny
Pilot Options and/or
Non-Penny Pilot
Options above 0.30% to
0.40% of total
industry customer
equity and ETF option
ADV contracts per day
in a month.
Tier 5......................... Participant adds 0.45
Customer,
Professional, Firm,
Non-NOM Market Maker
and/or Broker-Dealer
liquidity in Penny
Pilot Options and/or
Non-Penny Pilot
Options above 0.40% to
0.75% of total
industry customer
equity and ETF option
ADV contracts per day
in a month.
Tier 6 b....................... Participant has Total 0.45
Volume of 100,000 or
more contracts per day
in a month, of which
25,000 or more
contracts per day in a
month must be Customer
and/or Professional
liquidity in Penny
Pilot Options.
Tier 7 b....................... Participant has Total 0.47
Volume of 150,000 or
more contracts per day
in a month, of which
50,000 or more
contracts per day in a
month must be Customer
and/or Professional
liquidity in Penny
Pilot Options.
Tier 8......................... Participant adds c 0.48
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, and (2)
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 in
a month or qualifies
for MARS (defined
below).
------------------------------------------------------------------------
Today, the Exchange pays a $0.48 per contract rebate \6\ to
Participants that add
[[Page 50031]]
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, and (2) 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
in a month or qualifies for MARS.\7\ The Exchange is proposing to
continue to pay a $0.48 per contract rebate provided, NOM 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 0.25% or more of total industry customer equity and
ETF option ADV contracts per day in a month,\8\ and (2) 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 in a
month or qualifies for MARS.
---------------------------------------------------------------------------
\6\ Note ``c,'' which is applicable to the Tier 8 rebate,
provides additional rebates to Participants that execute certain
volume on NOM. Participants that: (1) 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 and/or Professional 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 1.30% or more of total industry customer
equity and ETF option ADV contracts per day in a month receive an
additional $0.05 per contract Penny Pilot Options Customer and/or
Professional 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 0.80% of total industry customer equity and ETF option
ADV contracts per day in a month, (b) add Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Non-
Penny Pilot Options above 0.15% of total industry customer equity
and ETF option ADV contracts per day in a month, and (c) execute
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within the NASDAQ Stock
Market Closing Cross within a month receive an additional $0.05 per
contract Penny Pilot Options Customer and/or Professional Rebate to
Add Liquidity for each transaction which adds liquidity in Penny
Pilot Options in a month. Consolidated Volume means 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. This note ``c'' is not
being amended with this proposal.
\7\ NOM Participants that have System Eligibility and have
executed the requisite number of Eligible Contracts in a month are
paid MARS rebates based on average daily volume in a month. See
Chapter XV, Section 2(6).
\8\ For reference, in May 2016, 0.25% of total industry customer
equity and ETF option ADV equated to approximately 28,000 contracts.
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The Exchange's proposal to amend the current qualification from
30,000 or more contracts per day in a month to 0.25% or more of total
industry customer equity and ETF option ADV contracts provides
Participants the ability to qualify for this tier in lower industry ADV
months because the percentage would be tied to the industry volume and
not represent a fixed number. If the industry volume were to increase
in a given month, the Participant will have greater opportunity to
execute a higher number of contracts because the entire industry has
more volume available to execute.
For example in May 2016, 0.25% of total industry customer equity
and ETF option ADV contracts represented approximately 28,000 contracts
as compared to the requisite 30,000 contracts which Tier 8 currently
requires. Because volume was lower in the month of May 2016, market
participants would have been better able to continue to meet the Tier 8
requirement with a percentage tied to volume as compared to a fixed
number of contracts.
The Exchange also proposes to amend note ``d,'' which applies to
the Customer and Professional Penny Pilot Options Rebate to Add
Liquidity tiers. Currently, note ``d'' provides that NOM Participants
that qualify for MARS Payment Tiers \9\ 1, 2 or 3 will receive an
additional $0.05 per contract in addition to any Penny Pilot Options
Customer and/or Professional Rebate to Add Liquidity Tiers they may
qualify for in that month, unless the Participant qualifies for a
higher note ``c'' rebate,\10\ in which case the Participants would
receive the appropriate note ``c'' rebate they qualified for in that
month.
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\9\ MARS Payments are currently based on a 3 tier rebate based
on average daily volume (``ADV''). The Exchange pays a MARS Payment
of $0.07 for ADV of 2,500 Eligible Contracts. The Exchange pays a
MARS Payment of $0.09 for ADV of 5,000 Eligible Contracts. Finally,
the Exchange pays a MARS Payment of $0.11 for AVD of 10,000 Eligible
Contracts. The MARS Payment is paid on all executed Eligible
Contracts that add liquidity, which are routed to NOM through a
participating NOM Participant's System and meet the requisite
Eligible Contracts ADV. See Chapter XV, Section 2(6).
\10\ The note ``c'' incentive in Chapter XV, Section 2 provides
that Participants that: (1) 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 and/or Professional 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 1.30% 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 and/or
Professional 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 0.80% of total industry customer equity and ETF option
ADV contracts per day in a month, (b) add Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Non-
Penny Pilot Options above 0.15% of total industry customer equity
and ETF option ADV contracts per day in a month, and (c) execute
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within the NASDAQ Stock
Market Closing Cross within a month will receive an additional $0.05
per contract Penny Pilot Options Customer and/or Professional Rebate
to Add Liquidity for each transaction which adds liquidity in Penny
Pilot Options in a 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. NOM Participants that
qualify for a note ``c'' incentive receive the greater of the note
``c'' or note ``d'' incentive.
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The Exchange proposes to amend note ``d'' of Chapter XV, Section
2(1) to lower the additional rebate on Penny Pilot Options Customer
and/or Professional Rebates to Add Liquidity from $0.05 to $0.03 per
contract. The Exchange believes that despite lowering the additional
incentive from $0.05 to $0.03 per contract, the note ``d'' incentive
will continue to incentivize NOM Participants to participate in MARS
and send qualifying order flow to the Exchange. The $0.03 per contract
incentive would continue to attract Penny Pilot Option liquidity to
NOM. All market participants benefit from the increased order
interaction when more order flow is available on NOM.
Pricing Change Number 2: Chapter XV, Section 2(6)--MARS Pricing
The Exchange currently offers a Market Access and Routing Subsidy
or ``MARS'' to qualifying NOM Participants in Chapter XV, Section 2(6).
NOM Participants that have System Eligibility \11\ and have executed
the
[[Page 50032]]
requisite number of Eligible Contracts in a month are paid rebates
based on average daily volume (``ADV'') in a month. Today, MARS
Payments are currently based on a 3 tier rebate based on ADV. The
Exchange pays a MARS Payment of $0.07 for ADV of 2,500 Eligible
Contracts. The Exchange pays a MARS Payment of $0.09 for ADV of 5,000
Eligible Contracts. Finally, the Exchange pays a MARS Payment of $0.11
for ADV of 10,000 Eligible Contracts. The MARS Payment is paid on all
executed Eligible Contracts that add liquidity, which are routed to NOM
through a participating NOM Participant's System and meet the requisite
Eligible Contracts ADV.
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\11\ To qualify for MARS, the Participant's routing system
(``System'') would be required to: (1) Enable the electronic routing
of orders to all of the U.S. options exchanges, including NOM; (2)
provide current consolidated market data from the U.S. options
exchanges; and (3) be capable of interfacing with NOM's API to
access current NOM match engine functionality. Further, the
Participant's System would also need to cause NOM to be the one of
the top three default destination exchanges for individually
executed marketable orders if NOM is at the national best bid or
offer (``NBBO''), regardless of size or time, but allow any user to
manually override NOM as a default destination on an order-by-order
basis. Any NOM Participant would be permitted to avail itself of
this arrangement, provided that its order routing functionality
incorporates the features described above and satisfies NOM that it
appears to be robust and reliable. The Participant remains solely
responsible for implementing and operating its System. See Chapter
XV, Section 2(6).
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The Exchange proposes to provide an additional incentive to the
MARS Payment in Chapter XV, Section 2(6) by offering NOM Participants
that qualify for Customer or Professional Penny Pilot Options Rebate to
Add Liquidity Tier 8 \12\ an additional $0.09 per contract rebate
applicable to MARS Payment tiers. This $0.09 rebate would be in
addition to any MARS Payment Tier \13\ on MARS Eligible Contracts that
the NOM Participant qualifies for in a given month. This incentive is
intended to encourage NOM Participants to continue to send more order
flow to the Exchange in either Penny Pilot or Non-Penny Pilot Options
to qualify for the Customer and Professional Penny Pilot Options Tier 8
rebate to earn the additional MARS Payment. All market participants
benefit from the increased order interaction when more order flow is
available on NOM.
---------------------------------------------------------------------------
\12\ With the proposal herein, to be eligible for Tier 8, a
Participant is required to add Customer, Professional, Firm, Non-NOM
Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options
and/or Non-Penny Pilot Options above 0.75% 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 0.25% or more
of total industry customer equity and ETF option ADV contracts per
day in a month, and (2) 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 in a month or qualifies for
MARS.
\13\ See note 9 above.
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Pricing Change Number 3: Chapter XV, Section 2(1)--Penny Pilot Options
Fee for Removing Liquidity
The Exchange is proposing to amend note ``4,'' which is currently
reserved, to lower the Customer and Professional Penny Pilot Options
Fees for Removing Liquidity from $0.50 \14\ to $0.48 per contract,
excluding SPY,\15\ for NOM Participants that qualify for MARS Payment
Tiers 1, 2 or 3.
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\14\ Currently, the Customer and Professional Penny Pilot
Options Fees for Removing Liquidity are $0.50 per contract.
\15\ Note ``3'' of the Pricing Schedule offers Customers and
Professionals that remove liquidity in SPY Options a lower Customer
and Professional Penny Pilot Options Fees for Removing Liquidity of
$0.47 per contract.
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The Exchange believes that offering NOM Participants the
opportunity to lower the Customer and Professional Penny Pilot Options
Fees for Removing Liquidity by qualifying for MARS Payment Tiers 1, 2
or 3 and transacting MARS Eligible Contracts,\16\ will incentivize NOM
Participants to send more MARS Eligible Contracts to NOM. All market
participants benefit from the increased order interaction when more
order flow is available on NOM.
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\16\ MARS Eligible Contracts include electronic Firm, Non-NOM
Market Maker, Broker-Dealer or Joint Back Office orders that add
liquidity, excluding Mini Options. See Chapter XV, Section 2(6).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\17\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\18\ 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, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(4) and (5).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \19\
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\19\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission
\20\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\21\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \22\
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\20\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\21\ See NetCoalition, at 534-535.
\22\ Id. at 537.
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Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \23\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
---------------------------------------------------------------------------
\23\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------
Pricing Change Number 1: Chapter XV, Section 2(1)--Customer and
Professional Penny Pilot Options Rebate to Add Liquidity
The Exchange's proposal to amend the current qualifications related
to the Tier 8 Customer and Professional Penny Pilot Options Rebate to
Add Liquidity is reasonable because the rebate should continue to
attract Customer and Professional order flow to NOM. The additional
Customer and Professional order flow to NOM benefits other market
participants by providing additional liquidity with which to interact.
Amending the current qualification from 30,000 or more contracts per
day in a month to 0.25% or more of total industry customer equity and
ETF option ADV contracts provides Participants the ability to qualify
for this tier in months with lower industry ADV because the required
number of contracts would be directly correlated to industry volume.
With this proposal, members that consistently send order flow to the
Exchange may continue to qualify for
[[Page 50033]]
Tier 8 rebates. The Exchange's proposal to amend the current
qualification from 30,000 or more contracts per day in a month to 0.25%
or more of total industry customer equity and ETF option ADV contracts
provides Participants the ability to qualify for this tier in lower
industry ADV months because the percentage would be tied to the
industry volume and not represent a fixed number. If the industry
volume were to increase in a given month the Participant will have
greater opportunity to execute a higher number of contracts because the
entire industry has more volume available to execute. The Exchange
notes that utilizing a percentage as compared to a fixed number is not
novel. Today, NOM Customer and Professional Penny Pilot Options Tiers 1
through 5 utilize a percentage of total industry customer equity and
ETF option ADV contracts per day in a month.\24\
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\24\ See Chapter XV, Section 2(1).
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The Exchange's proposal to amend the current qualifications related
to the Tier 8 Customer and Professional Penny Pilot Options Rebate to
Add Liquidity is equitable and not unfairly discriminatory because all
Participants are eligible to earn rebates. These rebates would be
uniformly paid to all qualifying Participants.
The Exchange's proposal to amend note ``d,'' which applies to any
Customer and Professional Penny Pilot Options Rebates to Add Liquidity
tier, to lower the per contract Penny Pilot Options Customer and/or
Professional Rebate to Add Liquidity incentive from $0.05 to $0.03 per
contract is reasonable as discussed hereafter. Despite lowering the
incentive, the reduced rebate would continue to attract Penny Pilot
Options liquidity to NOM and also would continue to incentivize market
participants to participate in MARS. All market participants benefit
from the increased order interaction when more order flow is available
on NOM.
The Exchange's proposal to amend note ``d,'' which applies to the
additional Customer and Professional Penny Pilot Options Rebate to Add
Liquidity tiers, to lower the additional per contract Penny Pilot
Options Customer and/or Professional Rebate to Add Liquidity incentive
from $0.05 to $0.03 per contract, is equitable and not unfairly
discriminatory because all Participants are eligible to earn rebates
and the rebates would be uniformly paid to all qualifying Participants.
In addition, any Participant may qualify for MARS provided they have
the requisite System Eligibility.
Pricing Change Number 2: Chapter XV, Section 2(6)--MARS Pricing
The Exchange's proposal to amend the MARS Payment to offer NOM
Participants that qualify for Customer or Professional Penny Pilot
Options Rebate to Add Liquidity Tier 8 an additional $0.09 per contract
rebate in addition to any MARS Payment tier on MARS Eligible Contracts
the NOM Participant qualifies for in a given month is reasonable
because it will encourage NOM Participants to continue to send more
order flow to the Exchange in either Penny Pilot or Non-Penny Pilot
Options to qualify for the higher MARS Payment. All market participants
benefit from the increased order interaction when more order flow is
available on NOM.
The Exchange's proposal to amend the MARS Payment to offer NOM
Participants that qualify for Customer or Professional Penny Pilot
Options Rebate to Add Liquidity Tier 8 an additional $0.09 per contract
rebate in addition to any MARS Payment tier on MARS Eligible Contracts
the NOM Participant qualifies for in a given month is equitable and not
unfairly discriminatory because any Participant may qualify for MARS
provided they have the requisite System Eligibility. The Exchange will
also uniformly pay MARS rebates to qualifying Participants on all MARS
Eligible Contracts.
Pricing Change Number 3: Chapter XV, Section 2(1)--Penny Pilot Options
Fee for Removing Liquidity
The Exchange's proposal to amend note ``4'' to lower the Customer
and Professional Penny Pilot Options Fees for Removing Liquidity from
$0.50 to $0.48 per contract, excluding SPY, provided NOM Participants
qualify for MARS Payment Tiers 1, 2 or 3 is reasonable for the reasons
which follow. NOM Participants will be encouraged to send additional
electronic MARS Eligible Contracts \25\ to NOM to obtain the fee
reduction. This should in turn incentivize NOM Participants to send
more order flow to NOM. All market participants benefit from the
increased order interaction when more order flow is available on NOM.
Excluding SPY from the note ``4'' discount is reasonable because SPY
options are among the most highly liquid options. Today, the Exchange
prices SPY differently from other Multiply-Listed Options.\26\ Other
options exchanges price differently by options symbol.\27\
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\25\ See note 16 above.
\26\ See current note ``3'' at Chapter XV, Section 2(1).
\27\ See NASDAQ PHLX LLC's (``Phlx'') Pricing Schedule at
Section I which contains pricing for options overlying SPY that is
different from other Multiply Listed Options pricing in Section II
of that Pricing Schedule.
---------------------------------------------------------------------------
The Exchange's proposal to amend note ``4'' to lower the Customer
and Professional Penny Pilot Options Fees for Removing Liquidity from
$0.50 to $0.48 per contract, excluding SPY, provided NOM Participants
qualify for MARS Payment Tiers 1, 2 or 3 is equitable and not unfairly
discriminatory because all Participants may qualify for MARS provided
they have the requisite System Eligibility. The Exchange will also
uniformly assess the discounted Customer and Professional Penny Pilot
Options Fees for Removing Liquidity to qualifying Participants.
Excluding SPY from the note ``4'' discount is equitable and not
unfairly discriminatory because the Exchange pays discounts today for
SPY options transactions. Today, note ``3'' of Chapter XV, Section 2(1)
assesses Customers and Professionals that remove liquidity in SPY
Options a $0.47 per contract discounted Customer and Professional Penny
Pilot Options Fees for Removing Liquidity. Both notes ``3'' and ``4''
of Chapter XV, Section 2(1) are paid uniformly to all qualifying
Participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In terms of inter-market
competition, 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, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
The proposed fee changes are competitive and do not impose a burden
[[Page 50034]]
on inter-market competition. Today, other venues offer rebate programs,
discounted fees and incentives for maintain routing systems.\28\ In
sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
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\28\ See Phlx's Pricing Schedule at Section B (Customer Rebate
Program) and Section IV, Part E (MARS). Also, the International
Securities Exchange LLC (``ISE'') offers a lower Market Maker Taker
Fee for Select Symbols of $0.44 per contract for Market Makers with
total affiliated Priority Customer Complex ADV of 150,000 or more
contracts. See ISE's Fee Schedule.
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Pricing Change Number 1: Chapter XV, Section 2(1)--Customer and
Professional Penny Pilot Options Rebate To Add Liquidity
The Exchange's proposal to amend the current qualifications related
to the Tier 8 Customer and Professional Penny Pilot Options Rebate to
Add Liquidity does not impose an undue burden on intra-market
competition because all Participants are eligible to earn rebates and
these rebates would be uniformly paid to all qualifying Participants.
The Exchange's proposal to amend note ``d,'' which applies to the
Customer and Professional Penny Pilot Options Rebate to Add Liquidity
tiers, to lower the additional amount of the per contract Penny Pilot
Options Customer and/or Professional Rebate to Add Liquidity from $0.05
to $0.03 per contract does not impose an undue burden on intra-market
competition because all Participants are eligible to earn rebates and
these rebates would be uniformly paid to all qualifying Participants.
In addition, any Participant may qualify for MARS provided they have
the requisite System Eligibility.
Pricing Change Number 2: Chapter XV, Section 2(6)--MARS Pricing
The Exchange's proposal to amend the MARS Payment to offer NOM
Participants that qualify for Customer or Professional Penny Pilot
Options Rebate to Add Liquidity Tier 8 an additional $0.09 per contract
rebate, in addition to any MARS Payment tier on MARS Eligible Contracts
the NOM Participant qualifies for in a given month, does not impose an
undue burden on intra-market competition because any Participant may
qualify for MARS provided they have the requisite System Eligibility.
The Exchange will also uniformly pay MARS Payments to qualifying
Participants on all Eligible Contracts.
Pricing Change Number 3: Chapter XV, Section 2(1)--Penny Pilot Options
Fee for Removing Liquidity
The Exchange's proposal to amend note ``4'' to lower the Customer
and Professional Penny Pilot Options Fees for Removing Liquidity from
$0.50 to $0.48 per contract, excluding SPY, provided NOM Participants
qualify for MARS Payment Tiers 1, 2 or 3 does not impose an undue
burden on intra-market competition because all Participants may qualify
for MARS provided they have the requisite System Eligibility. The
Exchange will also uniformly assess the discounted Customer and
Professional Penny Pilot Options Fees for Removing Liquidity to
qualifying Participants. Excluding SPY does not impose an undue burden
on intra-market competition because today, the Exchange offers a
discount for SPY options, which discounts are uniformly paid to all
Participants. Today, other options exchanges price differently by
options symbol.\29\
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\29\ See note 27.
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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.\30\
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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-2016-100 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-2016-100. 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 referto File Number SR-NASDAQ-2016-100, and should
be submitted on or before August 19, 2016.
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\31\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-17909 Filed 7-28-16; 8:45 am]
BILLING CODE 8011-01-P
