Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing at Chapter XV, Section 2 Entitled “Nasdaq Options Market-Fees and Rebates”, 40803-40805 [2018-17635]
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40803
Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Brent J. Fields,
Secretary.
[FR Doc. 2018–17628 Filed 8–15–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83824; File No. SR–
NASDAQ–2018–063]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange’s Pricing at Chapter XV,
Section 2 Entitled ‘‘Nasdaq Options
Market—Fees and Rebates’’
August 10, 2018.
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 31,
2018, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘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 pricing at Chapter XV,
Section 2 entitled ‘‘Nasdaq Options
Market—Fees and Rebates,’’ which
governs pricing for Nasdaq Participants
using The Nasdaq Options Market LLC
(‘‘NOM’’), Nasdaq’s facility for
executing and routing standardized
equity and index options. The Exchange
proposes to amend an incentive offered
today related to its subsidy program, the
Market Access and Routing Subsidy or
‘‘MARS.’’
While the changes proposed herein
are effective upon filing, the Exchange
has designated the amendments become
operative on August 1, 2018.
The text of the proposed rule change
is available on the Exchange’s website 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
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18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Generally, under MARS, the Exchange pays
participating NOM Participants to subsidize their
costs of providing routing services to route orders
to NOM. The Exchange believes that the proposed
amendment to MARS will continue to attract higher
volumes of electronic equity and ETF options
volume to the Exchange from non-NOM
Participants as well as NOM Participants. The order
routing functionalities permit NOM Participants to
provide access and connectivity to other
Participants as well as utilize such access for
themselves. The Exchange notes that one NOM
Participant is eligible for payments under MARS,
while another NOM Participant might potentially
be liable for transaction charges associated with the
execution of the order, because those orders were
delivered to the Exchange through a NOM
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NOM proposes to amend the
Exchange’s pricing at Chapter XV,
Section 2 entitled ‘‘Nasdaq Options
Market—Fees and Rebates.’’
Specifically, the Exchange proposes to
amend an incentive in note ‘‘d’’ offered
to NOM Participants that qualify for any
MARS Payment Tier in Chapter XV,
Section 2(6) related to the MARS
subsidy program. MARS pays a subsidy
to NOM Participants that provide
certain order routing functionalities to
other NOM Participants and/or use such
functionalities themselves.3
Background on MARS
Today, to qualify for MARS, a NOM
Participant’s routing system (hereinafter
‘‘System’’) is required to meet certain
criteria.4
MARS Payments are made to NOM
Participants that have System Eligibility
and have routed the requisite number of
Eligible Contracts daily in a month
(‘‘Average Daily Volume’’), which were
executed on NOM.5 Today, NOM
Participants that have System Eligibility
and have executed the requisite number
of Eligible Contracts in a month will be
paid the following rebates: 6
Average Daily
Volume
(‘‘ADV’’)
Tiers
1
2
3
4
5
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
Participant’s connection to the Exchange and that
Participant qualified for the MARS Payment.
4 Specifically the Participant’s System is 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. The Participant’s
System would also need to cause NOM to be one
of the top three default destination exchanges for
(a) individually executed marketable orders if NOM
is at the national best bid or offer (‘‘NBBO’’),
regardless of size or time, or (b) orders that establish
a new NBBO on NOM’s Order Book, but allow any
user to manually override NOM as a default
destination on an order-by-order basis. Any NOM
Participant is permitted to avail itself of this
arrangement, provided that its order routing
functionality incorporates the features described
herein and the Participant satisfies NOM that it
PO 00000
Frm 00060
Fmt 4703
Sfmt 4703
2,000
5,000
10,000
20,000
45,000
MARS
payment
(penny)
$0.07
0.09
0.11
0.15
0.17
MARS
payment
(non-penny)
$0.15
0.20
0.30
0.50
0.60
appears to be robust and reliable. Participants
remain solely responsible for implementing and
operating its System.
5 For the purpose of qualifying for the MARS
Payment, Eligible Contracts may include Firm, NonNOM Market Maker, Broker-Dealer, or Joint Back
Office or ‘‘JBO’’ equity option orders that add
liquidity and are electronically delivered and
executed. Eligible Contracts do not include Mini
Option orders.
6 The specified MARS Payments are 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. No payments are made
with respect to orders that are routed to NOM, but
not executed. Also, a Participant is not entitled to
receive any other revenue from the Exchange for the
use of its System specifically with respect to orders
routed to NOM.
E:\FR\FM\16AUN1.SGM
16AUN1
40804
Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices
NOM Participants that qualify for
Customer 7 and Professional 8 Penny
Pilot Options Rebate to Add Liquidity
Tier 6 will receive an extra $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.
sradovich on DSK3GMQ082PROD with NOTICES
Incentive
Today, the Exchange pays certain
Customer and Professional Penny Pilot
Options Rebates to Add Liquidity.
These rebates are structured as a 6 tier
rebate program ranging from $0.20 to
$0.48 per contract, with increasing
volume requirements for each tier. In
addition to the Customer and
Professional Penny Pilot Options
Rebates to Add Liquidity, the NOM
Participant may also qualify for an
additional rebate provided the NOM
Participant qualifies for any MARS
Payment Tier for each transaction which
adds liquidity in Penny Pilot Options in
that month. Further, the Exchange pays
an additional $0.04 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, in
addition to qualifying Penny Pilot
Options Customer and/or Professional
Rebate to Add Liquidity Tiers 1–6.9
Also, today, NOM Participants that
qualify for a note ‘‘c’’ incentive receive
the greater of the note ‘‘c’’ or note ‘‘d’’
incentive.10
The Exchange now proposes to amend
note ‘‘d’’ to increase the additional
$0.04 per contract Penny Pilot Options
Customer and/or Professional Rebate to
Add Liquidity currently offered to NOM
Participants that qualify for any MARS
Payment Tier in addition to qualifying
for Customer and/or Professional Rebate
to Add Liquidity Tier 1 to $0.05 per
contract for each transaction which adds
liquidity in Penny Pilot Options in that
month. For those NOM Participants that
qualify for Customer and/or Professional
7 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.
8 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. See
Chapter XV.
9 See Chapter XV, Section 2(1), note ‘‘d.’’
10 The note ‘‘c’’ incentive can be found at Chapter
XV, Section 2(1) and provides additional incentives
to NOM Participants that qualify for the Penny Pilot
Options Customer and/or Professional Rebate to
Add Liquidity Tier 6 in addition to meeting certain
criteria specified in note ‘‘c’’.
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17:15 Aug 15, 2018
Jkt 244001
Rebate to Add Liquidity Tiers 2–6, the
Exchange will continue to provide the
additional $0.04 per contract rebate for
each transaction that adds liquidity in
Penny Pilot Options in that month,
provided the NOM Participant also
qualifies for any MARS Payment Tier.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,11 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,12 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among Participants and issuers and
other persons using any facility or
system which the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes it is reasonable
to amend note ‘‘d’’ in Chapter XV,
Section 2(1) to increase the additional
$0.04 per contract rebate for NOM
Participants qualifying for Penny Pilot
Options Customer and/or Professional
Rebate to Add Liquidity Tier 1 in
addition to qualifying for any MARS
Payment tier to $0.05 per contract for
each transaction that adds liquidity in
Penny Pilot Options for that month. The
proposed amendment should continue
to encourage NOM Participants to
qualify for the Penny Pilot Options
Customer and/or Professional Rebate to
Add Liquidity Tier 1 in addition to any
MARS Payment tier, thereby executing
a greater amount of order flow on NOM
to the benefit of all market participants
who may interact with the order flow.
Furthermore, the proposed changes will
allow the Exchange to remain
competitive with other options
exchanges that offer similar
incentives.13
Further, the Exchange’s proposal to
amend the note ‘‘d’’ incentive as
described above is equitable and not
unfairly discriminatory. All NOM
Participants are eligible to qualify for a
MARS Payment, provided they have
System Eligibility, and all NOM
11 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
13 See MIAX PEARL Fee Schedule, Section 1(a).
MIAX PEARL offers priority customers and nonpriority customers a $0.25 per contract maker rebate
in tier 1 for adding liquidity in penny classes. See
Cboe BZX Options Exchange (‘‘BZX’’) Fee
Schedule. BZX offers customers and professionals
a base rebate of $0.25 per contract for adding
liquidity in penny pilot options. Under NOM’s
proposal, NOM Participants would similarly have
the opportunity to earn up a $0.25 per contract
Penny Pilot Options Customer and/or Professional
Rebate to Add Liquidity in Tier 1 (i.e., the $0.20 per
contract Tier 1 rebate plus the additional $0.05 note
‘‘d’’ incentive), provided they meet the requisite
qualifications.
12 15
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Frm 00061
Fmt 4703
Sfmt 4703
Participants may be eligible for the
Penny Pilot Options Customer and/or
Professional Rebate to Add Liquidity
Tier 1 provided they execute qualifying
volume. All NOM Participants are
eligible to qualify for the note ‘‘d’’
incentive provided the requisite
requirements are met. The Exchange
would uniformly pay the additional
note ‘‘d’’ incentive to all qualifying
NOM 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. The
Exchange’s proposal to amend the note
‘‘d’’ incentive as described above does
not impose an undue burden on
competition. All NOM Participants are
eligible to qualify for a MARS Payment,
provided they have System Eligibility,
and all NOM Participants may be
eligible for a Penny Pilot Options
Customer and/or Professional Rebate to
Add Liquidity provided they execute
qualifying volume. All NOM
Participants are eligible to qualify for
the note ‘‘d’’ incentive provided the
requisite requirements are met. The
Exchange would uniformly pay the
additional note ‘‘d’’ incentive to all
qualifying NOM Participants.
Furthermore, 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. The Exchange’s proposal
reflects this competitive environment as
it will allow the Exchange remain
competitive with other options
exchanges that offer similar incentives,
as discussed above.14
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.15
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
14 See
15 15
E:\FR\FM\16AUN1.SGM
note 13 above.
U.S.C. 78s(b)(3)(A)(ii).
16AUN1
Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices
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:
sradovich on DSK3GMQ082PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2018–063 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2018–063. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
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17:15 Aug 15, 2018
Jkt 244001
to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2018–063, and
should be submitted on or before
September 6, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018–17635 Filed 8–15–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83823; File No. SR–
NASDAQ–2018–064]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Fees Under Rules 7014(e) and 7018(a)
August 10, 2018
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 August
1, 2018, 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 fees at Rule 7014(e) to apply
additional criteria required to qualify for
a fee of $0.0029 per share executed, and
to amend Rule 7018(a) to assess no fees
for Midpoint Extended Life Orders 3 in
securities of all three Tapes.4
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.cchwallstreet.com/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Rule 4702(b)(14).
4 Tape C securities are those that are listed on the
Exchange, Tape A securities are those that are listed
on NYSE, and Tape B securities are those that are
listed on exchanges other than Nasdaq or NYSE.
1 15
PO 00000
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Fmt 4703
Sfmt 4703
40805
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 purpose of the proposed rule
change is to amend the Exchange’s fees
at Rule 7014(e), concerning Qualified
Market Makers (‘‘QMMs’’),5 to apply
additional criteria required to qualify for
a fee of $0.0029 per share executed, and
to amend Rule 7018(a), concerning the
fees and credits provided for the use of
the order execution and routing services
of the Nasdaq Market Center by
members for all securities priced at $1
or more that it trades, to assess no fees
for Midpoint Extended Life Orders in
securities of all three Tapes. Rule
7014(e) provides the fees and rebates
applicable to QMMs. Rule 7018(a)(1)
sets forth the fees and credits for the
execution and routing of orders in
Nasdaq-listed securities (Tape C); Rule
7018(a)(2) sets forth the fees and credits
for the execution and routing of
securities listed on the New York Stock
Exchange LLC (Tape A); and Rule
7018(a)(3) sets forth the fees and credits
for the execution and routing of
securities listed on exchanges other than
Nasdaq and NYSE (Tape B). The
Exchange is proposing to assess no fee
for all Midpoint Extended Life Orders.
First Change
Under Rule 7014(e), the Exchange
charges a QMM $0.0030 per share
executed for removing liquidity in
Nasdaq-listed securities priced at $1 or
more, and $0.00295 per share executed
for removing liquidity in securities
priced at $1 or more per share listed on
5 To be designated a QMM, a member must meet
the following criteria: (1) The member is not
assessed any ‘‘Excess Order Fee’’ under Rule 7018
during the month; (2) the member quotes at the
NBBO at least 25% of the time during regular
market hours in an average of at least 1,000
securities per day during the month; and (3) the
member is a registered Nasdaq market maker. See
Rule 7014(d).
E:\FR\FM\16AUN1.SGM
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]]>Agencies
[Federal Register Volume 83, Number 159 (Thursday, August 16, 2018)]
[Notices]
[Pages 40803-40805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17635]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83824; File No. SR-NASDAQ-2018-063]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Exchange's Pricing at Chapter XV, Section 2 Entitled ``Nasdaq
Options Market--Fees and Rebates''
August 10, 2018.
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 31, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 pricing at Chapter
XV, Section 2 entitled ``Nasdaq Options Market--Fees and Rebates,''
which governs pricing for Nasdaq Participants using The Nasdaq Options
Market LLC (``NOM''), Nasdaq's facility for executing and routing
standardized equity and index options. The Exchange proposes to amend
an incentive offered today related to its subsidy program, the Market
Access and Routing Subsidy or ``MARS.''
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on August 1,
2018.
The text of the proposed rule change is available on the Exchange's
website 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
NOM proposes to amend the Exchange's pricing at Chapter XV, Section
2 entitled ``Nasdaq Options Market--Fees and Rebates.'' Specifically,
the Exchange proposes to amend an incentive in note ``d'' offered to
NOM Participants that qualify for any MARS Payment Tier in Chapter XV,
Section 2(6) related to the MARS subsidy program. MARS pays a subsidy
to NOM Participants that provide certain order routing functionalities
to other NOM Participants and/or use such functionalities
themselves.\3\
---------------------------------------------------------------------------
\3\ Generally, under MARS, the Exchange pays participating NOM
Participants to subsidize their costs of providing routing services
to route orders to NOM. The Exchange believes that the proposed
amendment to MARS will continue to attract higher volumes of
electronic equity and ETF options volume to the Exchange from non-
NOM Participants as well as NOM Participants. The order routing
functionalities permit NOM Participants to provide access and
connectivity to other Participants as well as utilize such access
for themselves. The Exchange notes that one NOM Participant is
eligible for payments under MARS, while another NOM Participant
might potentially be liable for transaction charges associated with
the execution of the order, because those orders were delivered to
the Exchange through a NOM Participant's connection to the Exchange
and that Participant qualified for the MARS Payment.
---------------------------------------------------------------------------
Background on MARS
Today, to qualify for MARS, a NOM Participant's routing system
(hereinafter ``System'') is required to meet certain criteria.\4\
---------------------------------------------------------------------------
\4\ Specifically the Participant's System is 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. The Participant's System would also need to cause NOM
to be one of the top three default destination exchanges for (a)
individually executed marketable orders if NOM is at the national
best bid or offer (``NBBO''), regardless of size or time, or (b)
orders that establish a new NBBO on NOM's Order Book, but allow any
user to manually override NOM as a default destination on an order-
by-order basis. Any NOM Participant is permitted to avail itself of
this arrangement, provided that its order routing functionality
incorporates the features described herein and the Participant
satisfies NOM that it appears to be robust and reliable.
Participants remain solely responsible for implementing and
operating its System.
---------------------------------------------------------------------------
MARS Payments are made to NOM Participants that have System
Eligibility and have routed the requisite number of Eligible Contracts
daily in a month (``Average Daily Volume''), which were executed on
NOM.\5\ Today, NOM Participants that have System Eligibility and have
executed the requisite number of Eligible Contracts in a month will be
paid the following rebates: \6\
---------------------------------------------------------------------------
\5\ For the purpose of qualifying for the MARS Payment, Eligible
Contracts may include Firm, Non-NOM Market Maker, Broker-Dealer, or
Joint Back Office or ``JBO'' equity option orders that add liquidity
and are electronically delivered and executed. Eligible Contracts do
not include Mini Option orders.
\6\ The specified MARS Payments are 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. No payments are made with respect
to orders that are routed to NOM, but not executed. Also, a
Participant is not entitled to receive any other revenue from the
Exchange for the use of its System specifically with respect to
orders routed to NOM.
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Average Daily
Tiers Volume MARS payment MARS payment
(``ADV'') (penny) (non-penny)
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1............................................................... 2,000 $0.07 $0.15
2............................................................... 5,000 0.09 0.20
3............................................................... 10,000 0.11 0.30
4............................................................... 20,000 0.15 0.50
5............................................................... 45,000 0.17 0.60
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[[Page 40804]]
NOM Participants that qualify for Customer \7\ and Professional \8\
Penny Pilot Options Rebate to Add Liquidity Tier 6 will receive an
extra $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.
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\7\ 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.
\8\ 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. See Chapter XV.
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Incentive
Today, the Exchange pays certain Customer and Professional Penny
Pilot Options Rebates to Add Liquidity. These rebates are structured as
a 6 tier rebate program ranging from $0.20 to $0.48 per contract, with
increasing volume requirements for each tier. In addition to the
Customer and Professional Penny Pilot Options Rebates to Add Liquidity,
the NOM Participant may also qualify for an additional rebate provided
the NOM Participant qualifies for any MARS Payment Tier for each
transaction which adds liquidity in Penny Pilot Options in that month.
Further, the Exchange pays an additional $0.04 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,
in addition to qualifying Penny Pilot Options Customer and/or
Professional Rebate to Add Liquidity Tiers 1-6.\9\ Also, today, NOM
Participants that qualify for a note ``c'' incentive receive the
greater of the note ``c'' or note ``d'' incentive.\10\
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\9\ See Chapter XV, Section 2(1), note ``d.''
\10\ The note ``c'' incentive can be found at Chapter XV,
Section 2(1) and provides additional incentives to NOM Participants
that qualify for the Penny Pilot Options Customer and/or
Professional Rebate to Add Liquidity Tier 6 in addition to meeting
certain criteria specified in note ``c''.
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The Exchange now proposes to amend note ``d'' to increase the
additional $0.04 per contract Penny Pilot Options Customer and/or
Professional Rebate to Add Liquidity currently offered to NOM
Participants that qualify for any MARS Payment Tier in addition to
qualifying for Customer and/or Professional Rebate to Add Liquidity
Tier 1 to $0.05 per contract for each transaction which adds liquidity
in Penny Pilot Options in that month. For those NOM Participants that
qualify for Customer and/or Professional Rebate to Add Liquidity Tiers
2-6, the Exchange will continue to provide the additional $0.04 per
contract rebate for each transaction that adds liquidity in Penny Pilot
Options in that month, provided the NOM Participant also qualifies for
any MARS Payment Tier.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among Participants and issuers and other persons using
any facility or system which the Exchange operates or controls, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes it is reasonable to amend note ``d'' in
Chapter XV, Section 2(1) to increase the additional $0.04 per contract
rebate for NOM Participants qualifying for Penny Pilot Options Customer
and/or Professional Rebate to Add Liquidity Tier 1 in addition to
qualifying for any MARS Payment tier to $0.05 per contract for each
transaction that adds liquidity in Penny Pilot Options for that month.
The proposed amendment should continue to encourage NOM Participants to
qualify for the Penny Pilot Options Customer and/or Professional Rebate
to Add Liquidity Tier 1 in addition to any MARS Payment tier, thereby
executing a greater amount of order flow on NOM to the benefit of all
market participants who may interact with the order flow. Furthermore,
the proposed changes will allow the Exchange to remain competitive with
other options exchanges that offer similar incentives.\13\
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\13\ See MIAX PEARL Fee Schedule, Section 1(a). MIAX PEARL
offers priority customers and non-priority customers a $0.25 per
contract maker rebate in tier 1 for adding liquidity in penny
classes. See Cboe BZX Options Exchange (``BZX'') Fee Schedule. BZX
offers customers and professionals a base rebate of $0.25 per
contract for adding liquidity in penny pilot options. Under NOM's
proposal, NOM Participants would similarly have the opportunity to
earn up a $0.25 per contract Penny Pilot Options Customer and/or
Professional Rebate to Add Liquidity in Tier 1 (i.e., the $0.20 per
contract Tier 1 rebate plus the additional $0.05 note ``d''
incentive), provided they meet the requisite qualifications.
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Further, the Exchange's proposal to amend the note ``d'' incentive
as described above is equitable and not unfairly discriminatory. All
NOM Participants are eligible to qualify for a MARS Payment, provided
they have System Eligibility, and all NOM Participants may be eligible
for the Penny Pilot Options Customer and/or Professional Rebate to Add
Liquidity Tier 1 provided they execute qualifying volume. All NOM
Participants are eligible to qualify for the note ``d'' incentive
provided the requisite requirements are met. The Exchange would
uniformly pay the additional note ``d'' incentive to all qualifying NOM
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. The Exchange's proposal to
amend the note ``d'' incentive as described above does not impose an
undue burden on competition. All NOM Participants are eligible to
qualify for a MARS Payment, provided they have System Eligibility, and
all NOM Participants may be eligible for a Penny Pilot Options Customer
and/or Professional Rebate to Add Liquidity provided they execute
qualifying volume. All NOM Participants are eligible to qualify for the
note ``d'' incentive provided the requisite requirements are met. The
Exchange would uniformly pay the additional note ``d'' incentive to all
qualifying NOM Participants. Furthermore, 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. The Exchange's proposal reflects
this competitive environment as it will allow the Exchange remain
competitive with other options exchanges that offer similar incentives,
as discussed above.\14\
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\14\ See note 13 above.
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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.\15\
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\15\ 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
[[Page 40805]]
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 [email protected]. Please include
File Number SR-NASDAQ-2018-063 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2018-063. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2018-063, and should be submitted
on or before September 6, 2018.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-17635 Filed 8-15-18; 8:45 am]
BILLING CODE 8011-01-P
