Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Chapter XV, Section 2, 91216-91220 [2016-30259]
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secondary market trading in Shares will
take place at negotiated prices, not at a
current offering price described in a
Fund’s prospectus, and not at a price
based on NAV. Applicants state that (a)
secondary market trading in Shares does
not involve a Fund as a party and will
not result in dilution of an investment
in Shares, and (b) to the extent different
prices exist during a given trading day,
or from day to day, such variances occur
as a result of third-party market forces,
such as supply and demand. Therefore,
applicants assert that secondary market
transactions in Shares will not lead to
discrimination or preferential treatment
among purchasers. Finally, applicants
represent that share market prices will
be disciplined by arbitrage
opportunities, which should prevent
Shares from trading at a material
discount or premium from NAV.
6. With respect to Funds that effect
creations and redemptions of Creation
Units in-kind and that are based on
certain Underlying Indexes that include
foreign securities, applicants request
relief from the requirement imposed by
section 22(e) in order to allow such
Funds to pay redemption proceeds
within fifteen calendar days following
the tender of Creation Units for
redemption. Applicants assert that the
requested relief would not be
inconsistent with the spirit and intent of
section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the
actual payment of redemption proceeds.
7. Applicants request an exemption to
permit Funds of Funds to acquire Fund
Shares beyond the limits of section
12(d)(1)(A) of the Act; and the Funds,
and any principal underwriter for the
Funds, and/or any broker or dealer
registered under the Exchange Act, to
sell Shares to Funds of Funds beyond
the limits of section 12(d)(1)(B) of the
Act. The application’s terms and
conditions are designed to, among other
things, help prevent any potential (i)
undue influence over a Fund through
control or voting power, or in
connection with certain services,
transactions, and underwritings, (ii)
excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are Affiliated
Persons, or Second Tier Affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
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redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
investment positions currently held by
the Funds. Applicants also seek relief
from the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its Shares to and redeem its
Shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.3
The purchase of Creation Units by a
Fund of Funds directly from a Fund will
be accomplished in accordance with the
policies of the Fund of Funds and will
be based on the NAVs of the Funds.
9. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016–30251 Filed 12–15–16; 8:45 am]
BILLING CODE 8011–01–P
3 The requested relief would apply to direct sales
of Shares in Creation Units by a Fund to a Fund
of Funds and redemptions of those Shares.
Applicants, moreover, are not seeking relief from
section 17(a) for, and the requested relief will not
apply to, transactions where a Fund could be
deemed an Affiliated Person, or a Second-Tier
Affiliate, of a Fund of Funds because an Adviser or
an entity controlling, controlled by or under
common control with an Adviser provides
investment advisory services to that Fund of Funds.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79532; File No. SR–
NASDAQ–2016–166]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange’s Transaction Fees at
Chapter XV, Section 2
December 12, 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 December
1, 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 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. Nasdaq
proposes to implement a new rebate for
adding liquidity for Customer and
Professional orders in Penny and NonPenny Pilot Options as described further
below.
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
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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
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1. Purpose
The Exchange proposes to create an
alternative method for earning a rebate
for adding liquidity for both Customers 3
and Professionals 4 in Penny Pilot 5 and
Non-Penny Pilot Options. For
Customers and Professionals transacting
in Penny Pilot Options, the Exchange
currently pays a volume-based tiered
rebate to add liquidity. That rebate
consists of 8 tiers, ranging from $0.20
per contract to $0.48 per contract, with
the volume requirements increasing
with each tier. Thus, a NOM Participant
would qualify for a rebate of $0.20 per
contract in Tier 1 for Customers and
Professionals if it added 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. In
comparison, a Participant would qualify
for a rebate of $0.48 in Tier 8 for
Customers and Professionals if it 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 if the 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
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 (‘‘OCC’’) which is not for the
account of broker or dealer or for the account of a
‘‘Professional’’ (as that term is defined in Chapter
I, Section 1(a)(48)).
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.
See Securities Exchange Act Release No. 57579
(March 28, 2008), 73 FR 18587 (April 4, 2008) (SR–
NASDAQ–2008–026) (notice of filing and
immediate effectiveness establishing Penny Pilot).
Since that date, the Penny Pilot has been expanded
and is currently extended through December 31,
2016 or the date of permanent approval, if earlier.
See Securities Exchange Act Release No. 78037
(June 10, 2016), 81 FR 39299 (June 16, 2016) (SR–
NASDAQ–2016–052).
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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.6
Currently, Customers and
Professionals transacting in Non-Penny
Pilot Options on NOM receive a $0.80
per contract Rebate to Add Liquidity. In
addition, a Participant that qualifies for
a Customer or Professional Penny Pilot
Options Rebate to Add Liquidity in
Tiers 2, 3, 4, 5 or 6 in a month will
receive an additional $0.10 per contract
Non-Penny Pilot Options Rebate to Add
Liquidity for each transaction which
adds liquidity in Non-Penny Pilot
Options in that month. Furthermore, a
Participant that qualifies for a Customer
or Professional Penny Pilot Options
Rebate to Add Liquidity in Tiers 7 or 8
in a month will receive an additional
$0.20 per contract Non-Penny Pilot
Options Rebate to Add Liquidity for
each transaction which adds liquidity in
Non-Penny Pilot Options in that month.
The Exchange now proposes to add an
additional rebate to Customers and
Professionals for adding liquidity in
both Penny Pilot and Non-Penny Pilot
Options. Specifically, a NOM
Participant will receive a $0.53 per
contract Rebate to Add Liquidity in
Penny Pilot Options as a Customer or
Professional, and $1.00 per contract
Rebate to Add Liquidity in Non-Penny
Pilot Options as a Customer or
Professional, if that NOM Participant
transacts on the NASDAQ Stock Market
through one or more of its Nasdaq
Market Center MPIDs in the same
month, and such transactions in all
securities on the NASDAQ Stock Market
that month through all of its Nasdaq
Market Center MPIDs represent 3.00%
or more of Consolidated Volume.7
Participants that qualify for this rebate
would not be eligible for any other
rebates in Tiers 1–8 or other rebate
incentives on NOM for Customer and
Professional order flow in Chapter XV,
Section 2(1).
For purposes of calculating the NOM
Participant’s total volume, the Exchange
will add the NOM Participant’s total
volume transacted on the NASDAQ
Stock Market in a given month across its
Nasdaq Market Center MPIDs, and will
6 MARS refers to the Market Access and Routing
Subsidy, which is set forth in Chapter XV, Section
6 [sic]. The MARS payment comprises four volumebased tiers, and is paid to NOM Participants that
route eligible contracts to NOM through a
participating NOM Participant’s System. The MARS
Payment will be paid on all executed Eligible
Contracts that add liquidity. See Chapter XV,
Section 6 [sic].
7 Consolidated Volume would be determined as
set forth in Nasdaq Rule 7018(a).
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divide this number by the total industry
Consolidated Volume.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,8 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,9 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.’’ 10
Likewise, in NetCoalition v. Securities
and Exchange Commission 11
(‘‘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.12 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.’’13
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
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
10 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
11 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
12 See NetCoalition, at 534–535.
13 Id. at 537.
9 15
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dealers’. . . .’’ 14 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.
The Exchange notes that the purpose
of the proposed rebates is to incentivize
NOM Participants to transact greater
volume on the NASDAQ Stock Market
in order to qualify for a higher rebate on
NOM. The Exchange believes that the
amount of the rebate ($0.53 per contract
for Penny Pilot Options and $1.00 per
contract for Non-Penny Pilot Options)
and the volume threshold for qualifying
for the rebate (3.00% or more of
Consolidated Volume) are reasonable.
With respect to the rebate for Penny
Pilot Options, the Exchange notes that
the proposed $0.53 per contract rebate
is the same as the highest rebate
currently available to Customers and
Professionals for adding liquidity in
Penny Pilot Options.15 The Exchange
14 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)).
15 As noted above, a NOM Participant will receive
a rebate of $0.48 per contract for adding liquidity
as a Customer or Professional in Penny Pilot
Options if it qualifies for Tier 8. In addition, as
noted in footnote c of Chapter XV, Section 2, a
NOM Participant may receive an additional rebate
of up to $0.05 per contract in Penny Pilot Options,
for a total rebate of $0.53 per contract. Specifically,
Participants that: (1) Add Customer, Professional,
Firm, Non-NOM Market Maker and/or BrokerDealer liquidity in Penny Pilot Options and/or NonPenny 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, 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
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believes the proposed rebate of $0.53
per contract is reasonable when
compared to the highest rebate currently
available to Customers and
Professionals for adding liquidity in
Penny Pilot Options, as the proposed
rebate imposes comparable
requirements on NOM Participants in
order to qualify for that rebate.
Similarly, the Exchange believes the
proposed $1.00 rebate per contract for
Non-Penny Pilot Options is reasonable
because it is comparable to the rebates
that a NOM Participant currently
receives for adding liquidity in NonPenny Pilot Options as a Customer or
Professional, which range from $0.80
per contract to $1.00 per contract.
The Exchange believes that the
requirement that a NOM Participant
transact 3.00% or more in Consolidated
Volume on the NASDAQ Stock Market
is reasonable because this requirement,
while more stringent than other volumebased requirements that currently apply
to NOM Participants that transact as
Customers or Professionals in Penny
Pilot and Non-Penny Pilot Options,
reflects the fact that NOM Participants
that qualify for this rebate would
generally receive a larger rebate (for
Penny Pilot Options, $0.53 per contract
versus $0.20–$0.53 per contract and, for
Non-Penny Pilot Options, $1.00 per
contract versus $0.80–$1.00 per
contract) than they would currently
receive for transactions as Customer or
Professionals in Penny Pilot and NonPenny Pilot Options.
The Exchange believes it is reasonable
to make this rebate exclusive of any
other rebates in Tiers 1–8 or other rebate
incentives on NOM for Customer and
Professional order flow in Chapter XV,
Section 2(1). As noted above, the
proposed rebates are generally higher,
and in some cases significantly higher,
than the rebates that a NOM Participant
may currently receive for adding
liquidity in Penny Pilot and Non-Penny
Pilot Options as a Customer or
Professional. Given the size of the
proposed rebates, the Exchange believes
it is reasonable to make these rebates
exclusive of other rebates on NOM for
Customer and Professional order flow.
The Exchange also believes the other
aspects of this proposal are also
reasonable, equitable and not unfairly
discriminatory. First, the Exchange
notes that the proposed rebates apply to
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.
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both transactions in Penny Pilot and
Non-Penny Pilot Options.
Second, the Exchange believes that
linking rebates on NOM to activity on
the NASDAQ Stock Market is
reasonable, equitable, and not unfairly
discriminatory. The Exchange notes that
previous and current rebates offered by
NOM relate to activity on the NASDAQ
Stock Market.16 Similarly, the NASDAQ
Stock Market offers reduced transaction
fees that are based on activity on
NOM.17 Moreover, the Exchange notes
that any NOM Options Participant may
trade equities on the NASDAQ Stock
Market because they are approved
members.18
Third, while the requirements for
qualifying for the proposed rebates may
be more stringent than other
requirements for qualifying for other
rebates currently offered by NOM, the
Exchange believes that these
requirements are proportionate to the
amount of the proposed rebates and
equitably reflect the purpose of the
proposed rebates, which is to
incentivize NOM Participants to
transact greater volume on the NASDAQ
Stock Market. Moreover, all similarlysituated NOM Participants, e.g., those
that add liquidity in either Penny Pilot
16 For example, in SR–NASDAQ–2015–047, the
Exchange proposed to make NOM Participants that
added liquidity in Penny Pilot Stocks [sic] as a
Customer or Professional eligible for the Tier 8
rebate if, among other things, the Participant has
certified for the Investor Support Program set forth
in Rule 7014, or if the Participant qualified for
rebates under the Qualified Market Maker (‘‘QMM’’)
Program set forth in Rule 7014. See Securities
Exchange Act Release No. 74931 (May 12, 2015), 80
FR 28308 (May 18, 2015) (SR–NASDAQ–2015–047).
Currently, footnote c of the NOM fee schedule
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 above 0.80% of total
industry customer equity and ETF option ADV
contracts per day in a month, (2) 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
(3) 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.
17 For example, Nasdaq charges a reduced
transaction fee of $0.00295 if the member adds
Customer, Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer liquidity in Penny Pilot
Options and/or Non-Penny Pilot Options of 1.15%
or more of total industry ADV in the customer
clearing range for Equity and ETF option contracts
per day in a month on NOM. See Nasdaq Rule 7018.
18 Although a NOM Participant may incur
additional labor and/or costs to establish
connectivity to the NASDAQ Stock Market, there
are no additional membership fees for NOM
Participants that want to transact on the NASDAQ
Stock Market.
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or Non-Penny Pilot Options as either
Customers or Professionals and also
transact on the NASDAQ Stock Market,
are equally capable of qualifying for the
proposed rebates, and the same rebates
will be paid to all NOM Participants
that qualify for them.
Fourth, the Exchange believes that it
is reasonable, equitable and not unfairly
discriminatory to offer this rebate to
NOM Participants that add liquidity as
Customers or Professionals, and not to
offer this rebate to NOM Participants
that add liquidity as Firms,19 NOM
Market Makers,20 non-NOM Market
Makers, or Broker-Dealers.21 Nasdaq
notes that Customer liquidity offers
unique benefits to the market which
benefits all market participants by
providing more trading opportunities,
which attracts Specialists and Market
Makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes that
encouraging Participants to add
Professional liquidity is similarly
beneficial, as the rebates may cause
market participants to select NOM as a
venue to send Professional order flow,
increasing competition among the
exchanges. As with Customer liquidity,
the Exchange believes that increased
Professional additional order flow
should benefit other market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
mstockstill on DSK3G9T082PROD with NOTICES
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
19 The term ‘‘Firm’’ or (‘‘F’’) applies to any
transaction that is identified by a Participant for
clearing in the Firm range at OCC.
20 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.
21 The term ‘‘Broker-Dealer’’ or (‘‘B’’) applies to
any transaction which is not subject to any of the
other transaction fees applicable within a particular
category.
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18:42 Dec 15, 2016
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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 Exchange does not believe that
the proposed rebates will impose any
burden on competition that is not
necessary or appropriate. The Exchange
notes that the purpose of the proposed
rebate is to incentivize NOM
Participants to transact on the NASDAQ
Stock Market. All similarly-situated
NOM Participants, e.g., those that add
liquidity in either Penny Pilot or NonPenny Pilot Options as either Customers
or Professionals and also transact the
requisite volumes on the NASDAQ
Stock Market, are equally capable of
qualifying for the proposed rebates.
Additionally, the Exchange will pay the
same rebates to all NOM Participants
that qualify for them. The Exchange
believes that Customer and Professional
order flow provides unique benefits to
all participants on the Exchange and
may even facilitate inter-market
competition, and is therefore offering
the proposed rebates to NOM
Participants that add liquidity as either
a Customer or a Professional
accordingly. With respect to linking the
proposed rebates to a participant’s
activity on the NASDAQ Stock Market,
NOM currently offers rebates that are
based on activity on the NASDAQ Stock
Market. Similarly, the NASDAQ Stock
Market currently offers reduced
transaction fees that are based on
activity on NOM. Finally, because they
are approved members, any NOM
Options Participant may trade equities
on the NASDAQ Stock Market and
therefore attempt to qualify for the
proposed rebates.
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.
PO 00000
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.22
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 rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2016–166 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–2016–166. 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
22 15
Frm 00105
Fmt 4703
Sfmt 4703
91219
E:\FR\FM\16DEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
16DEN1
91220
Federal Register / Vol. 81, No. 242 / Friday, December 16, 2016 / Notices
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–2016–166 and should be
submitted on or before January 6, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016–30259 Filed 12–15–16; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–79524; File No. SR–
NYSEArca–2016–156]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Commentary
.02 to Rule 6.72
December 12, 2016.
mstockstill on DSK3G9T082PROD with NOTICES
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 28, 2016, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. 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
Commentary .02 to Rule 6.72 in order to
extend the Penny Pilot in options
classes in certain issues (‘‘Pilot
Program’’ or ‘‘Pilot’’) previously
approved by the Securities and
Exchange Commission (‘‘Commission’’)
through June 30, 2017. The Pilot
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:42 Dec 15, 2016
Jkt 241001
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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
23 17
Program is currently scheduled to
expire on December 31, 2016. The
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
1. Purpose
The Exchange proposes to extend the
Pilot Program,4 which is currently
scheduled to expire on December 31,
2016, until June 30, 2017.5 The
Exchange believes that extending the
Pilot would allow for further analysis of
the Pilot Program and a determination
of how the Pilot Program should be
structured in the future.
During this extension of the Pilot, as
is the case today, the Exchange may
replace any option class that is currently
included in the Pilot Program and that
has been delisted with the next most
actively traded, multiply listed option
class that is not yet participating in the
Pilot Program (‘‘replacement class’’). In
light of the extension, the Exchange also
proposes that any replacement class
would be determined based on national
average daily volume in the preceding
six months, and would be added on the
second trading day following January 1,
2017.6
4 See Securities Exchange Act Release No. 34–
55156 (January 23, 2007), 72 FR 4759 (February 1,
2007) (SR–NYSEArca–2006–73) (original approval
of Pilot). The Pilot has been extended several times
since the original approval, the most recent
extension was obtained in earlier this year. See
Securities Exchange Act Release No. 78174 (June
28, 2016), 81 FR 43332 (July 1, 2016) (SR–
NYSEArca–2016–88) (most recent extension of the
Pilot until December 31, 2016).
5 See proposed Commentary .02 to Rule 6.72.
6 See id. The month immediately preceding a
replacement class’s addition to the Pilot Program
(i.e., December) would not be used for purposes of
the analysis for determining the replacement class.
Thus, a replacement class to be added on the
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
This filing does not propose any
substantive changes to the Pilot
Program: All classes currently
participating will remain the same and
all minimum increments will remain
unchanged. The Exchange believes the
benefits to public customers and other
market participants who will be able to
express their true prices to buy and sell
options have been demonstrated to
outweigh the increase in quote traffic.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 7 of the
Securities Exchange Act of 1934 (the
‘‘Act’’), in general, and furthers the
objectives of Section 6(b)(5),8 in
particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system.
In particular, the proposed rule
change, which extends the Penny Pilot
Program for six months, allows the
Exchange to continue to participate in a
program that has been viewed as
beneficial to traders, investors and
public customers and viewed as
successful by the other options
exchanges participating in it.
Accordingly, the Exchange believes that
the proposal is consistent with the Act
because it would allow the Exchange to
extend the Pilot Program prior to its
expiration on December 31, 2016. The
Exchange notes that this proposal does
not propose any new policies or
provisions that are unique or unproven,
but instead relates to the continuation of
an existing program that operates on a
pilot basis.
The Exchange believes that the Pilot
Program promotes just and equitable
principles of trade by enabling public
customers and other market participants
to express their true prices to buy and
sell options to the benefit of all market
participants.
The proposal to extend the Pilot
Program is designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and to remove
second trading day following January 1, 2017 would
be identified based on The Option Clearing
Corporation’s trading volume data from June 1,
2016 through November 30, 2016. The Exchange
will announce the replacement issues to the
Exchange’s membership through a Trader Update.
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
E:\FR\FM\16DEN1.SGM
16DEN1
]]>Agencies
[Federal Register Volume 81, Number 242 (Friday, December 16, 2016)]
[Notices]
[Pages 91216-91220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30259]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79532; File No. SR-NASDAQ-2016-166]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Exchange's Transaction Fees at Chapter XV, Section 2
December 12, 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 December 1, 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 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. Nasdaq proposes to implement a
new rebate for adding liquidity for Customer and Professional orders in
Penny and Non-Penny Pilot Options as described further below.
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 91217]]
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 to create an alternative method for earning a
rebate for adding liquidity for both Customers \3\ and Professionals
\4\ in Penny Pilot \5\ and Non-Penny Pilot Options. For Customers and
Professionals transacting in Penny Pilot Options, the Exchange
currently pays a volume-based tiered rebate to add liquidity. That
rebate consists of 8 tiers, ranging from $0.20 per contract to $0.48
per contract, with the volume requirements increasing with each tier.
Thus, a NOM Participant would qualify for a rebate of $0.20 per
contract in Tier 1 for Customers and Professionals if it added
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. In comparison, a
Participant would qualify for a rebate of $0.48 in Tier 8 for Customers
and Professionals if it 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 if
the 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.\6\
---------------------------------------------------------------------------
\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 (``OCC'') which is not for
the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Chapter I, Section
1(a)(48)).
\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. See
Securities Exchange Act Release No. 57579 (March 28, 2008), 73 FR
18587 (April 4, 2008) (SR-NASDAQ-2008-026) (notice of filing and
immediate effectiveness establishing Penny Pilot). Since that date,
the Penny Pilot has been expanded and is currently extended through
December 31, 2016 or the date of permanent approval, if earlier. See
Securities Exchange Act Release No. 78037 (June 10, 2016), 81 FR
39299 (June 16, 2016) (SR-NASDAQ-2016-052).
\6\ MARS refers to the Market Access and Routing Subsidy, which
is set forth in Chapter XV, Section 6 [sic]. The MARS payment
comprises four volume-based tiers, and is paid to NOM Participants
that route eligible contracts to NOM through a participating NOM
Participant's System. The MARS Payment will be paid on all executed
Eligible Contracts that add liquidity. See Chapter XV, Section 6
[sic].
---------------------------------------------------------------------------
Currently, Customers and Professionals transacting in Non-Penny
Pilot Options on NOM receive a $0.80 per contract Rebate to Add
Liquidity. In addition, a Participant that qualifies for a Customer or
Professional Penny Pilot Options Rebate to Add Liquidity in Tiers 2, 3,
4, 5 or 6 in a month will receive an additional $0.10 per contract Non-
Penny Pilot Options Rebate to Add Liquidity for each transaction which
adds liquidity in Non-Penny Pilot Options in that month. Furthermore, a
Participant that qualifies for a Customer or Professional Penny Pilot
Options Rebate to Add Liquidity in Tiers 7 or 8 in a month will receive
an additional $0.20 per contract Non-Penny Pilot Options Rebate to Add
Liquidity for each transaction which adds liquidity in Non-Penny Pilot
Options in that month.
The Exchange now proposes to add an additional rebate to Customers
and Professionals for adding liquidity in both Penny Pilot and Non-
Penny Pilot Options. Specifically, a NOM Participant will receive a
$0.53 per contract Rebate to Add Liquidity in Penny Pilot Options as a
Customer or Professional, and $1.00 per contract Rebate to Add
Liquidity in Non-Penny Pilot Options as a Customer or Professional, if
that NOM Participant transacts on the NASDAQ Stock Market through one
or more of its Nasdaq Market Center MPIDs in the same month, and such
transactions in all securities on the NASDAQ Stock Market that month
through all of its Nasdaq Market Center MPIDs represent 3.00% or more
of Consolidated Volume.\7\ Participants that qualify for this rebate
would not be eligible for any other rebates in Tiers 1-8 or other
rebate incentives on NOM for Customer and Professional order flow in
Chapter XV, Section 2(1).
---------------------------------------------------------------------------
\7\ Consolidated Volume would be determined as set forth in
Nasdaq Rule 7018(a).
---------------------------------------------------------------------------
For purposes of calculating the NOM Participant's total volume, the
Exchange will add the NOM Participant's total volume transacted on the
NASDAQ Stock Market in a given month across its Nasdaq Market Center
MPIDs, and will divide this number by the total industry Consolidated
Volume.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\9\ 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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.'' \10\
---------------------------------------------------------------------------
\10\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Likewise, in NetCoalition v. Securities and Exchange Commission
\11\ (``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.\12\ 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.''\13\
---------------------------------------------------------------------------
\11\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\12\ See NetCoalition, at 534-535.
\13\ Id. at 537.
---------------------------------------------------------------------------
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
[[Page 91218]]
dealers'. . . .'' \14\ 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.
---------------------------------------------------------------------------
\14\ 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)).
---------------------------------------------------------------------------
The Exchange notes that the purpose of the proposed rebates is to
incentivize NOM Participants to transact greater volume on the NASDAQ
Stock Market in order to qualify for a higher rebate on NOM. The
Exchange believes that the amount of the rebate ($0.53 per contract for
Penny Pilot Options and $1.00 per contract for Non-Penny Pilot Options)
and the volume threshold for qualifying for the rebate (3.00% or more
of Consolidated Volume) are reasonable. With respect to the rebate for
Penny Pilot Options, the Exchange notes that the proposed $0.53 per
contract rebate is the same as the highest rebate currently available
to Customers and Professionals for adding liquidity in Penny Pilot
Options.\15\ The Exchange believes the proposed rebate of $0.53 per
contract is reasonable when compared to the highest rebate currently
available to Customers and Professionals for adding liquidity in Penny
Pilot Options, as the proposed rebate imposes comparable requirements
on NOM Participants in order to qualify for that rebate. Similarly, the
Exchange believes the proposed $1.00 rebate per contract for Non-Penny
Pilot Options is reasonable because it is comparable to the rebates
that a NOM Participant currently receives for adding liquidity in Non-
Penny Pilot Options as a Customer or Professional, which range from
$0.80 per contract to $1.00 per contract.
---------------------------------------------------------------------------
\15\ As noted above, a NOM Participant will receive a rebate of
$0.48 per contract for adding liquidity as a Customer or
Professional in Penny Pilot Options if it qualifies for Tier 8. In
addition, as noted in footnote c of Chapter XV, Section 2, a NOM
Participant may receive an additional rebate of up to $0.05 per
contract in Penny Pilot Options, for a total rebate of $0.53 per
contract. Specifically, 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.
---------------------------------------------------------------------------
The Exchange believes that the requirement that a NOM Participant
transact 3.00% or more in Consolidated Volume on the NASDAQ Stock
Market is reasonable because this requirement, while more stringent
than other volume-based requirements that currently apply to NOM
Participants that transact as Customers or Professionals in Penny Pilot
and Non-Penny Pilot Options, reflects the fact that NOM Participants
that qualify for this rebate would generally receive a larger rebate
(for Penny Pilot Options, $0.53 per contract versus $0.20-$0.53 per
contract and, for Non-Penny Pilot Options, $1.00 per contract versus
$0.80-$1.00 per contract) than they would currently receive for
transactions as Customer or Professionals in Penny Pilot and Non-Penny
Pilot Options.
The Exchange believes it is reasonable to make this rebate
exclusive of any other rebates in Tiers 1-8 or other rebate incentives
on NOM for Customer and Professional order flow in Chapter XV, Section
2(1). As noted above, the proposed rebates are generally higher, and in
some cases significantly higher, than the rebates that a NOM
Participant may currently receive for adding liquidity in Penny Pilot
and Non-Penny Pilot Options as a Customer or Professional. Given the
size of the proposed rebates, the Exchange believes it is reasonable to
make these rebates exclusive of other rebates on NOM for Customer and
Professional order flow.
The Exchange also believes the other aspects of this proposal are
also reasonable, equitable and not unfairly discriminatory. First, the
Exchange notes that the proposed rebates apply to both transactions in
Penny Pilot and Non-Penny Pilot Options.
Second, the Exchange believes that linking rebates on NOM to
activity on the NASDAQ Stock Market is reasonable, equitable, and not
unfairly discriminatory. The Exchange notes that previous and current
rebates offered by NOM relate to activity on the NASDAQ Stock
Market.\16\ Similarly, the NASDAQ Stock Market offers reduced
transaction fees that are based on activity on NOM.\17\ Moreover, the
Exchange notes that any NOM Options Participant may trade equities on
the NASDAQ Stock Market because they are approved members.\18\
---------------------------------------------------------------------------
\16\ For example, in SR-NASDAQ-2015-047, the Exchange proposed
to make NOM Participants that added liquidity in Penny Pilot Stocks
[sic] as a Customer or Professional eligible for the Tier 8 rebate
if, among other things, the Participant has certified for the
Investor Support Program set forth in Rule 7014, or if the
Participant qualified for rebates under the Qualified Market Maker
(``QMM'') Program set forth in Rule 7014. See Securities Exchange
Act Release No. 74931 (May 12, 2015), 80 FR 28308 (May 18, 2015)
(SR-NASDAQ-2015-047).
Currently, footnote c of the NOM fee schedule 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 above 0.80% of total industry
customer equity and ETF option ADV contracts per day in a month, (2)
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 (3) 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.
\17\ For example, Nasdaq charges a reduced transaction fee of
$0.00295 if the member adds Customer, Professional, Firm, Non-NOM
Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options
and/or Non-Penny Pilot Options of 1.15% or more of total industry
ADV in the customer clearing range for Equity and ETF option
contracts per day in a month on NOM. See Nasdaq Rule 7018.
\18\ Although a NOM Participant may incur additional labor and/
or costs to establish connectivity to the NASDAQ Stock Market, there
are no additional membership fees for NOM Participants that want to
transact on the NASDAQ Stock Market.
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Third, while the requirements for qualifying for the proposed
rebates may be more stringent than other requirements for qualifying
for other rebates currently offered by NOM, the Exchange believes that
these requirements are proportionate to the amount of the proposed
rebates and equitably reflect the purpose of the proposed rebates,
which is to incentivize NOM Participants to transact greater volume on
the NASDAQ Stock Market. Moreover, all similarly-situated NOM
Participants, e.g., those that add liquidity in either Penny Pilot
[[Page 91219]]
or Non-Penny Pilot Options as either Customers or Professionals and
also transact on the NASDAQ Stock Market, are equally capable of
qualifying for the proposed rebates, and the same rebates will be paid
to all NOM Participants that qualify for them.
Fourth, the Exchange believes that it is reasonable, equitable and
not unfairly discriminatory to offer this rebate to NOM Participants
that add liquidity as Customers or Professionals, and not to offer this
rebate to NOM Participants that add liquidity as Firms,\19\ NOM Market
Makers,\20\ non-NOM Market Makers, or Broker-Dealers.\21\ Nasdaq notes
that Customer liquidity offers unique benefits to the market which
benefits all market participants by providing more trading
opportunities, which attracts Specialists and Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
The Exchange believes that encouraging Participants to add Professional
liquidity is similarly beneficial, as the rebates may cause market
participants to select NOM as a venue to send Professional order flow,
increasing competition among the exchanges. As with Customer liquidity,
the Exchange believes that increased Professional additional order flow
should benefit other market participants.
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\19\ The term ``Firm'' or (``F'') applies to any transaction
that is identified by a Participant for clearing in the Firm range
at OCC.
\20\ 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.
\21\ The term ``Broker-Dealer'' or (``B'') applies to any
transaction which is not subject to any of the other transaction
fees applicable within a particular category.
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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 Exchange does not believe that the proposed rebates will impose
any burden on competition that is not necessary or appropriate. The
Exchange notes that the purpose of the proposed rebate is to
incentivize NOM Participants to transact on the NASDAQ Stock Market.
All similarly-situated NOM Participants, e.g., those that add liquidity
in either Penny Pilot or Non-Penny Pilot Options as either Customers or
Professionals and also transact the requisite volumes on the NASDAQ
Stock Market, are equally capable of qualifying for the proposed
rebates. Additionally, the Exchange will pay the same rebates to all
NOM Participants that qualify for them. The Exchange believes that
Customer and Professional order flow provides unique benefits to all
participants on the Exchange and may even facilitate inter-market
competition, and is therefore offering the proposed rebates to NOM
Participants that add liquidity as either a Customer or a Professional
accordingly. With respect to linking the proposed rebates to a
participant's activity on the NASDAQ Stock Market, NOM currently offers
rebates that are based on activity on the NASDAQ Stock Market.
Similarly, the NASDAQ Stock Market currently offers reduced transaction
fees that are based on activity on NOM. Finally, because they are
approved members, any NOM Options Participant may trade equities on the
NASDAQ Stock Market and therefore attempt to qualify for the proposed
rebates.
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.\22\
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\22\ 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-2016-166 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-2016-166. 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
[[Page 91220]]
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-2016-166 and should be submitted on or before
January 6, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-30259 Filed 12-15-16; 8:45 am]
BILLING CODE 8011-01-P
