Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee, 5119-5122 [2019-02742]

Download as PDF Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices on the NRC’s public website at https:// www.nrc.gov/site-help/esubmittals.html, by email to MSHD.Resource@nrc.gov, or by a tollfree call at 1–866–672–7640. The NRC Electronic Filing Help Desk is available between 9 a.m. and 6 p.m., Eastern Time, Monday through Friday, excluding government holidays. Participants who believe that they have a good cause for not submitting documents electronically must file an exemption request, in accordance with 10 CFR 2.302(g), with their initial paper filing stating why there is good cause for not filing electronically and requesting authorization to continue to submit documents in paper format. Such filings must be submitted by: (1) First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555–0001, Attention: Rulemaking and Adjudications Staff; or (2) courier, express mail, or expedited delivery service to the Office of the Secretary, 11555 Rockville Pike, Rockville, Maryland 20852, Attention: Rulemaking and Adjudications Staff. Participants filing adjudicatory documents in this manner are responsible for serving the document on all other participants. Filing is considered complete by first-class mail as of the time of deposit in the mail, or by courier, express mail, or expedited delivery service upon depositing the document with the provider of the service. A presiding officer, having granted an exemption request from using E-Filing, may require a participant or party to use E-Filing if the presiding officer subsequently determines that the reason for granting the exemption from use of E-Filing no longer exists. Documents submitted in adjudicatory proceedings will appear in the NRC’s electronic hearing docket which is available to the public at https:// adams.nrc.gov/ehd, unless excluded pursuant to an order of the Commission or the presiding officer. If you do not have an NRC-issued digital ID certificate as described in this notice, click cancel when the link requests certificates and you will be automatically directed to the NRC’s electronic hearing dockets where you will be able to access any publicly available documents in a particular hearing docket. Participants are requested not to include personal privacy information, such as social security numbers, home addresses, or personal phone numbers in their filings, unless an NRC regulation or other law requires submission of such information. For example, in some instances, individuals provide home addresses in order to demonstrate VerDate Sep<11>2014 17:16 Feb 19, 2019 Jkt 247001 5119 proximity to a facility or site. With respect to copyrighted works, except for limited excerpts that serve the purpose of the adjudicatory filings and would constitute a Fair Use application, participants are requested not to include copyrighted materials in their submission. The Commission will issue a notice or order granting or denying a hearing request or intervention petition, designating the issues for any hearing that will be held and designating the Presiding Officer. A notice granting a hearing will be published in the Federal Register and served on the parties to the hearing. For further details with respect to this application, see the application dated December 11, 2018. Government Employees appointed by the President. The meeting is closed. Name of Committee: President’s Commission on White House Fellowships Mid-Year Meeting. Date: March 13–15, 2019. Time: 8:00 a.m.–5:30 p.m. Place: Eisenhower Executive Office Building, 1650 Pennsylvania Avenue NW, Washington, DC 20502. Agenda: The Commission holds a mid-year meeting to talk with current Fellows on how their placements are going and discuss preparation for future events. FOR FURTHER INFORMATION CONTACT: Elizabeth D. Pinkerton, 712 Jackson Place NW, Washington, DC 20503, Phone: 202–395–4522. VI. Access to Sensitive Unclassified Non-Safeguards Information for Contention Preparation President’s Commission on White House Fellowships. Alexys Stanley, Regulatory Affairs Analyst. Any person who desires access to proprietary, confidential commercial information that has been redacted from the application should contact the applicant by telephoning Jeff Bartelme, Licensing Manager, at 608–210–1735, for the purpose of negotiating a confidentiality agreement or a proposed protective order with the applicant. If no agreement can be reached, persons who desire access to this information may file a motion with the Secretary and addressed to the Commission that requests the issuance of a protective order. Dated at Rockville, Maryland, this 14th day of February 2019. For the Nuclear Regulatory Commission. Steven T. Lynch, Project Manager, Research and Test Reactors Licensing Branch, Division of Licensing Projects, Office of Nuclear Reactor Regulation. [FR Doc. 2019–02788 Filed 2–19–19; 8:45 am] BILLING CODE 7590–01–P OFFICE OF PERSONNEL MANAGEMENT [FR Doc. 2019–02726 Filed 2–19–19; 8:45 am] BILLING CODE 6325–44–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85124; File No. SR– NASDAQ–2019–006] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee February 13, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 1, 2019, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. President’s Commission on White House Fellowships Advisory Committee: Closed Meeting I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change President’s Commission on White House Fellowships, Office of Personnel Management. ACTION: Notice of meeting. The Exchange proposes to revise The Nasdaq Options Market LLC’s Rules (‘‘NOM’’) at Options 7, Section 5 to amend the Nasdaq Options Regulatory Fee or ‘‘ORF.’’ The text of the proposed rule change is available on the Exchange’s website at AGENCY: The President’s Commission on White House Fellowships (PCWHF) was established by an Executive Order in 1964. The PCWHF is an advisory committee composed of Special SUMMARY: PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 1 15 2 17 E:\FR\FM\20FEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 20FEN1 5120 Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose Currently, Nasdaq assesses an ORF of $0.0008 per contract side. The Exchange proposes to increase this ORF to $0.0020 per contract side as of February 1, 2019. In light of recent market volumes, the Exchange is proposing to increase the amount of ORF that will be collected by the Exchange. The proposal would allow the Exchange to increase the per contract amount of ORF in order to offset the Exchange anticipated regulatory costs. The Exchange’s proposed change to the ORF should balance the Exchange’s regulatory revenue against the anticipated regulatory costs. The Exchange also proposes to delete obsolete language in the rule text as described herein. Collection of ORF Currently, NOM assesses its ORF for each customer option transaction that is either: (1) Executed by a Participant on NOM; or (2) cleared by a NOM Participant at The Options Clearing Corporation (‘‘OCC’’) in the customer range,3 even if the transaction was executed by a non-member of NOM, regardless of the exchange on which the transaction occurs.4 If the OCC clearing member is a NOM Participant, ORF is assessed and collected on all cleared customer contracts (after adjustment for 3 Participants must record the appropriate account origin code on all orders at the time of entry in order. The Exchange represents that it has surveillances in place to verify that members mark orders with the correct account origin code. 4 The Exchange uses reports from OCC when assessing and collecting the ORF. VerDate Sep<11>2014 17:16 Feb 19, 2019 Jkt 247001 CMTA 5); and (2) if the OCC clearing member is not a NOM Participant, ORF is collected only on the cleared customer contracts executed at NOM, taking into account any CMTA instructions which may result in collecting the ORF from a non-member. By way of example, if Broker A, a NOM Participant, routes a customer order to CBOE and the transaction executes on CBOE and clears in Broker A’s OCC Clearing account, ORF will be collected by NOM from Broker A’s clearing account at OCC via direct debit. While this transaction was executed on a market other than NOM, it was cleared by a NOM Participant in the member’s OCC clearing account in the customer range, therefore there is a regulatory nexus between NOM and the transaction. If Broker A was not a NOM Participant, then no ORF should be assessed and collected because there is no nexus; the transaction did not execute on NOM nor was it cleared by a NOM Participant. In the case where a Participant both executes a transaction and clears the transaction, the ORF is assessed to and collected from that Participant. In the case where a Participant executes a transaction and a different member clears the transaction, the ORF is assessed to and collected from the Participant who clears the transaction and not the Participant who executes the transaction. In the case where a nonmember executes a transaction at an away market and a Participant clears the transaction, the ORF is assessed to and collected from the Participant who clears the transaction. In the case where a Participant executes a transaction on NOM and a non-member clears the transaction, the ORF is assessed to the Participant that executed the transaction on NOM and collected from the nonmember who cleared the transaction. In the case where a Participant executes a transaction at an away market and a non-member clears the transaction, the ORF is not assessed to the Participant who executed the transaction or collected from the non-member who cleared the transaction because the Exchange does not have access to the data to make absolutely certain that ORF should apply. Further, the data does not allow the Exchange to identify the Participant executing the trade at an away market. ORF Revenue and Monitoring of ORF The Exchange monitors the amount of revenue collected from the ORF to 5 CMTA or Clearing Member Trade Assignment is a form of ‘‘give-up’’ whereby the position will be assigned to a specific clearing firm at OCC. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 ensure that it, in combination with other regulatory fees and fines, does not exceed regulatory costs. In determining whether an expense is considered a regulatory cost, the Exchange reviews all costs and makes determinations if there is a nexus between the expense and a regulatory function. The Exchange notes that fines collected by the Exchange in connection with a disciplinary matter offset ORF. The ORF is designed to recover a material portion of the costs to the Exchange of the supervision and regulation of its members, including performing routine surveillances, investigations, examinations, financial monitoring, and policy, rulemaking, interpretive, and enforcement activities. The Exchange believes that revenue generated from the ORF, when combined with all of the Exchange’s other regulatory fees, will cover a material portion, but not all, of the Exchange’s regulatory costs. The Exchange will continue to monitor the amount of revenue collected from the ORF to ensure that it, in combination with its other regulatory fees and fines, does not exceed regulatory costs. If the Exchange determines regulatory revenues exceed regulatory costs, the Exchange will adjust the ORF by submitting a fee change filing to the Commission. Proposal The Exchange proposes to increase the ORF from $0.0008 to $0.0020 per contract side as of February 1, 2019. In light of recent market volumes, the Exchange is proposing to increase the amount of ORF that will be collected by the Exchange. The proposal would allow the Exchange to increase the per contract amount of ORF in order to offset the Exchange anticipated regulatory costs. The Exchange proposes to add the following rule text to Options 7, Section 5, ‘‘NOM Participants will be assessed an Options Regulatory Fee of $0.0020 per contract side as of February 1, 2019.’’ The Exchange regularly reviews its ORF to ensure that the ORF, in combination with its other regulatory fees and fines, does not exceed regulatory costs. The Exchange believes this adjustment will permit the Exchange to cover a material portion of its regulatory costs, while not exceeding regulatory costs. The Exchange notified Participants via an Options Trader Alert of the proposed change to the ORF thirty (30) calendar days prior to the proposed operative date, February 1, 2019.6 The 6 See E:\FR\FM\20FEN1.SGM Options Trader Alert #2018–46. 20FEN1 Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices Exchange believes that the prior notification market participants will ensure market participants are prepared to configure their systems to account properly for the ORF. Finally, the Exchange proposes to remove the following rule text from Options 7, Section 5, ‘‘NOM Participants are assessed an Options Regulatory Fee of $0.0027 per contract side. NOM Participants will be assessed an Options Regulatory Fee of $0.0008 per contract side as of August 1, 2018’’. This text is obsolete as it references prior ORF rates which were effective in the past. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 7 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act 8 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 its facility and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that increasing the ORF from $0.0008 to $0.0020 per contract side as of February 1, 2019 is reasonable because with this increase, the Exchange would recoup additional regulatory revenue to offset anticipated regulatory costs. The Exchange believes that the proposed adjustments noted herein will serve to balance the Exchange’s regulatory revenue against the anticipated regulatory costs. The Exchange believes that increasing the ORF from $0.0008 to $0.0020 per contract side as of February 1, 2019 is equitable and not unfairly discriminatory because assessing the ORF to each Participant for options transactions cleared by OCC in the customer range where the execution occurs on another exchange and is cleared by a NOM Participant is an equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. OCC collects the ORF on behalf of NOM from Exchange clearing members for all customer transactions they clear or from nonmembers for all customer transactions they clear that were executed on NOM. The Exchange believes the ORF ensures fairness by assessing fees to Participants based on the amount of customer options business they conduct. Regulating customer trading activity is much more labor intensive and requires 7 15 8 15 17:16 Feb 19, 2019 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. This proposal does not create an unnecessary or inappropriate intra-market burden on competition because the ORF applies to all customer activity, thereby raising regulatory revenue to offset regulatory expenses. It also supplements the regulatory revenue derived from noncustomer activity. This proposal does not create an unnecessary or inappropriate inter-market burden on competition because it is a regulatory fee that supports regulation in furtherance of the purposes of the Act. The Exchange is obligated to ensure that the amount of regulatory revenue collected from the ORF, in combination with its other regulatory fees and fines, does not exceed regulatory costs. 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. U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). VerDate Sep<11>2014 greater expenditure of human and technical resources than regulating noncustomer trading activity, which tends to be more automated and less laborintensive. As a result, the costs associated with administering the customer component of the Exchange’s overall regulatory program are materially higher than the costs associated with administering the noncustomer component (e.g., Participant proprietary transactions) of its regulatory program. The ORF is designed to recover a material portion of the costs of supervising and regulating Participants’ customer options business including performing routine surveillances, investigations, examinations, financial monitoring, and policy, rulemaking, interpretive, and enforcement activities. The Exchange will monitor the amount of revenue collected from the ORF to ensure that it, in combination with its other regulatory fees and fines, does not exceed the Exchange’s total regulatory costs. The Exchange has designed the ORF to generate revenues that, when combined with all of the Exchange’s other regulatory fees, will be less than or equal to the Exchange’s regulatory costs, which is consistent with the Commission’s view that regulatory fees be used for regulatory purposes and not to support the Exchange’s business side. Jkt 247001 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 5121 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.9 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 No. SR– NASDAQ–2019–006 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 No. SR–NASDAQ–2019–006. 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, 9 15 E:\FR\FM\20FEN1.SGM U.S.C. 78s(b)(3)(A)(ii). 20FEN1 5122 Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices 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 No. SR–NASDAQ–2019–006, and should be submitted on or before March 13, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–02742 Filed 2–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release Nos. 33–10604; 34–85118; IA– 5111; IC–33373] Adjustments to Civil Monetary Penalty Amounts Securities and Exchange Commission. ACTION: Notice of annual inflation adjustment of civil monetary penalties. AGENCY: The Securities and Exchange Commission (the ‘‘Commission’’) is publishing this notice pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the ‘‘2015 Act’’). This Act requires all agencies to annually adjust for inflation the civil monetary penalties that can be imposed under the statutes administered by the agency and publish the adjusted amounts in the Federal Register. This notice sets forth the annual inflation adjustment of the maximum amount of civil monetary penalties (‘‘CMPs’’) administered by the Commission under the Securities Act of 1933, the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), the Investment Company Act of 1940, the Investment Advisers Act of 1940, and certain penalties under the SarbanesOxley Act of 2002. These amounts are effective beginning on January 15, 2019, and will apply to all penalties imposed after that date for violations of the aforementioned statutes that occurred after November 2, 2015. FOR FURTHER INFORMATION CONTACT: Stephen M. Ng, Senior Special Counsel, SUMMARY: 10 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:16 Feb 19, 2019 Jkt 247001 Office of the General Counsel, at (202) 551–7957, or Hannah W. Riedel, Senior Counsel, Office of the General Counsel, at (202) 551–7918. SUPPLEMENTARY INFORMATION: I. Background This notice is being published pursuant to the 2015 Act,1 which amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (the ‘‘Inflation Adjustment Act’’).2 The Inflation Adjustment Act previously had been amended by the Debt Collection Improvement Act of 1996 (the ‘‘DCIA’’) 3 to require that each federal agency adopt regulations at least once every four years that adjust for inflation the CMPs that can be imposed under the statutes administered by the agency. Pursuant to this requirement, the Commission previously adopted regulations in 1996, 2001, 2005, 2009, and 2013 to adjust the maximum amount of the CMPs that could be imposed under the statutes the Commission administers.4 The 2015 Act replaces the inflation adjustment formula prescribed in the DCIA with a new formula for calculating the inflation-adjusted amount of CMPs. The 2015 Act requires that agencies use this new formula to re-calculate the inflation-adjusted amounts of the penalties they administer on an annual basis and publish these new amounts in the Federal Register by January 15 of each year.5 The Commission previously published the first annual adjustment required by the 2015 Act on January 6, 2017 (the ‘‘2017 Adjustment’’).6 As part of the 2017 Adjustment, the Commission promulgated 17 CFR 1 Public Law 114–74 Sec. 701, 129 Stat. 599–601 (Nov. 2, 2015), codified at 28 U.S.C. 2461 note. 2 Public Law 101–410, 104 Stat. 890–892 (1990), codified at 28 U.S.C. 2461 note. 3 Public Law 104–134, Title III, § 31001(s)(1), 110 Stat. 1321–373 (1996), codified at 28 U.S.C. 2461 note. 4 See Release Nos. 33–7361, 34–37912, IA–1596, IC–22310, dated November 1, 1996 (effective December 9, 1996), previously found at 17 CFR 201.1001 and Table I to Subpart E of Part 201; Release Nos. 33–7946, 34–43897, IA–1921, IC– 24846, dated January 31, 2001 (effective February 2, 2001), previously found at 17 CFR 201.1002 and Table II to Subpart E of Part 201; Release Nos. 33– 8530, 34–51136, IA–2348, IC–26748, dated February 9, 2005 (effective February 14, 2005), previously found at 17 CFR 201.1003 and Table III to Subpart E of Part 201; Release Nos. 33–9009, 34– 59449, IA–2845, IC–28635, dated February 25, 2009 (effective March 3, 2009), previously found at 17 CFR 201.1004 and Table IV to Subpart E of Part 201; and Release Nos. 33–9387, 34–68994, IA–3557, IC– 30408, dated February 27, 2013 (effective March 5, 2013), previously found at 17 CFR 201.1005 and Table V to Subpart E of Part 201. The penalty amounts contained in these releases have now been consolidated into Table I to 17 CFR 201.1001. 5 28 U.S.C. 2461 note Sec. 4. 6 Release Nos. 33–10276; 34–79749; IA–4599; IC– 32414 (effective Jan. 18, 2017). PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 201.1001(a) and Table I to Subsection 1001, which lists the penalty amounts for all violations that occurred on or before November 2, 2015. For violations occurring after November 2, 2015, Subsection 1001(b) provides that the applicable penalty amounts will be adjusted annually based on the formula set forth in the 2015 Act. Subsection 1001(b) further provides that these adjusted amounts will be published in the Federal Register and on the Commission’s website. The Commission subsequently published the next annual adjustment on January 8, 2018 (the ‘‘2018 Adjustment’’).7 A CMP is defined in relevant part as any penalty, fine, or other sanction that: (1) Is for a specific amount, or has a maximum amount, as provided by federal law; and (2) is assessed or enforced by an agency in an administrative proceeding or by a federal court pursuant to federal law.8 This definition applies to the monetary penalty provisions contained in four statutes administered by the Commission: The Securities Act, the Exchange Act, the Investment Company Act, and the Investment Advisers Act. In addition, the Sarbanes-Oxley Act provides the Public Company Accounting Oversight Board (the ‘‘PCAOB’’) authority to levy civil monetary penalties in its disciplinary proceedings pursuant to 15 U.S.C. 7215(c)(4)(D).9 The definition of a CMP in the Inflation Adjustment Act encompasses such civil monetary penalties.10 II. Adjusting the Commission’s Penalty Amounts for Inflation This notice sets forth the annual inflation adjustment required by the 2015 Act for all CMPs under the Securities Act, the Exchange Act, the Investment Company Act, and the Investment Advisers Act, and certain civil monetary penalties under the Sarbanes-Oxley Act. Pursuant to the 2015 Act, the penalty amounts in the 2018 Adjustment are adjusted for inflation by increasing them 7 Release Nos. 33–10451; 34–82455; IA–4842; IC– 32963 (effective Jan. 15, 2018). 8 28 U.S.C. 2461 note Sec. 3(2). 9 15 U.S.C. 7215(c)(4)(D). 10 The Commission may by order affirm, modify, remand, or set aside sanctions, including civil monetary penalties, imposed by the PCAOB. See Section 107(c) of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7217. The Commission may enforce such orders in federal district court pursuant to Section 21(e) of the Exchange Act. As a result, penalties assessed by the PCAOB in its disciplinary proceedings are penalties ‘‘enforced’’ by the Commission for purposes of the Inflation Adjustment Act. See Adjustments to Civil Monetary Penalty Amounts, Release No. 33–8530 (Feb. 4, 2005) [70 FR 7606 (Feb. 14, 2005)]. E:\FR\FM\20FEN1.SGM 20FEN1

Agencies

[Federal Register Volume 84, Number 34 (Wednesday, February 20, 2019)]
[Notices]
[Pages 5119-5122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02742]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85124; File No. SR-NASDAQ-2019-006]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend the Options Regulatory Fee

February 13, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 1, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') 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 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise The Nasdaq Options Market LLC's 
Rules (``NOM'') at Options 7, Section 5 to amend the Nasdaq Options 
Regulatory Fee or ``ORF.''
    The text of the proposed rule change is available on the Exchange's 
website at

[[Page 5120]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, Nasdaq assesses an ORF of $0.0008 per contract side. The 
Exchange proposes to increase this ORF to $0.0020 per contract side as 
of February 1, 2019. In light of recent market volumes, the Exchange is 
proposing to increase the amount of ORF that will be collected by the 
Exchange. The proposal would allow the Exchange to increase the per 
contract amount of ORF in order to offset the Exchange anticipated 
regulatory costs. The Exchange's proposed change to the ORF should 
balance the Exchange's regulatory revenue against the anticipated 
regulatory costs. The Exchange also proposes to delete obsolete 
language in the rule text as described herein.
Collection of ORF
    Currently, NOM assesses its ORF for each customer option 
transaction that is either: (1) Executed by a Participant on NOM; or 
(2) cleared by a NOM Participant at The Options Clearing Corporation 
(``OCC'') in the customer range,\3\ even if the transaction was 
executed by a non-member of NOM, regardless of the exchange on which 
the transaction occurs.\4\ If the OCC clearing member is a NOM 
Participant, ORF is assessed and collected on all cleared customer 
contracts (after adjustment for CMTA \5\); and (2) if the OCC clearing 
member is not a NOM Participant, ORF is collected only on the cleared 
customer contracts executed at NOM, taking into account any CMTA 
instructions which may result in collecting the ORF from a non-member.
---------------------------------------------------------------------------

    \3\ Participants must record the appropriate account origin code 
on all orders at the time of entry in order. The Exchange represents 
that it has surveillances in place to verify that members mark 
orders with the correct account origin code.
    \4\ The Exchange uses reports from OCC when assessing and 
collecting the ORF.
    \5\ CMTA or Clearing Member Trade Assignment is a form of 
``give-up'' whereby the position will be assigned to a specific 
clearing firm at OCC.
---------------------------------------------------------------------------

    By way of example, if Broker A, a NOM Participant, routes a 
customer order to CBOE and the transaction executes on CBOE and clears 
in Broker A's OCC Clearing account, ORF will be collected by NOM from 
Broker A's clearing account at OCC via direct debit. While this 
transaction was executed on a market other than NOM, it was cleared by 
a NOM Participant in the member's OCC clearing account in the customer 
range, therefore there is a regulatory nexus between NOM and the 
transaction. If Broker A was not a NOM Participant, then no ORF should 
be assessed and collected because there is no nexus; the transaction 
did not execute on NOM nor was it cleared by a NOM Participant.
    In the case where a Participant both executes a transaction and 
clears the transaction, the ORF is assessed to and collected from that 
Participant. In the case where a Participant executes a transaction and 
a different member clears the transaction, the ORF is assessed to and 
collected from the Participant who clears the transaction and not the 
Participant who executes the transaction. In the case where a non-
member executes a transaction at an away market and a Participant 
clears the transaction, the ORF is assessed to and collected from the 
Participant who clears the transaction. In the case where a Participant 
executes a transaction on NOM and a non-member clears the transaction, 
the ORF is assessed to the Participant that executed the transaction on 
NOM and collected from the non-member who cleared the transaction. In 
the case where a Participant executes a transaction at an away market 
and a non-member clears the transaction, the ORF is not assessed to the 
Participant who executed the transaction or collected from the non-
member who cleared the transaction because the Exchange does not have 
access to the data to make absolutely certain that ORF should apply. 
Further, the data does not allow the Exchange to identify the 
Participant executing the trade at an away market.
ORF Revenue and Monitoring of ORF
    The Exchange monitors the amount of revenue collected from the ORF 
to ensure that it, in combination with other regulatory fees and fines, 
does not exceed regulatory costs. In determining whether an expense is 
considered a regulatory cost, the Exchange reviews all costs and makes 
determinations if there is a nexus between the expense and a regulatory 
function. The Exchange notes that fines collected by the Exchange in 
connection with a disciplinary matter offset ORF.
    The ORF is designed to recover a material portion of the costs to 
the Exchange of the supervision and regulation of its members, 
including performing routine surveillances, investigations, 
examinations, financial monitoring, and policy, rulemaking, 
interpretive, and enforcement activities.
    The Exchange believes that revenue generated from the ORF, when 
combined with all of the Exchange's other regulatory fees, will cover a 
material portion, but not all, of the Exchange's regulatory costs. The 
Exchange will continue to monitor the amount of revenue collected from 
the ORF to ensure that it, in combination with its other regulatory 
fees and fines, does not exceed regulatory costs. If the Exchange 
determines regulatory revenues exceed regulatory costs, the Exchange 
will adjust the ORF by submitting a fee change filing to the 
Commission.
Proposal
    The Exchange proposes to increase the ORF from $0.0008 to $0.0020 
per contract side as of February 1, 2019. In light of recent market 
volumes, the Exchange is proposing to increase the amount of ORF that 
will be collected by the Exchange. The proposal would allow the 
Exchange to increase the per contract amount of ORF in order to offset 
the Exchange anticipated regulatory costs. The Exchange proposes to add 
the following rule text to Options 7, Section 5, ``NOM Participants 
will be assessed an Options Regulatory Fee of $0.0020 per contract side 
as of February 1, 2019.''
    The Exchange regularly reviews its ORF to ensure that the ORF, in 
combination with its other regulatory fees and fines, does not exceed 
regulatory costs. The Exchange believes this adjustment will permit the 
Exchange to cover a material portion of its regulatory costs, while not 
exceeding regulatory costs.
    The Exchange notified Participants via an Options Trader Alert of 
the proposed change to the ORF thirty (30) calendar days prior to the 
proposed operative date, February 1, 2019.\6\ The

[[Page 5121]]

Exchange believes that the prior notification market participants will 
ensure market participants are prepared to configure their systems to 
account properly for the ORF.
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    \6\ See Options Trader Alert #2018-46.
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    Finally, the Exchange proposes to remove the following rule text 
from Options 7, Section 5, ``NOM Participants are assessed an Options 
Regulatory Fee of $0.0027 per contract side. NOM Participants will be 
assessed an Options Regulatory Fee of $0.0008 per contract side as of 
August 1, 2018''. This text is obsolete as it references prior ORF 
rates which were effective in the past.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act \8\ 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 its facility and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that increasing the ORF from $0.0008 to 
$0.0020 per contract side as of February 1, 2019 is reasonable because 
with this increase, the Exchange would recoup additional regulatory 
revenue to offset anticipated regulatory costs. The Exchange believes 
that the proposed adjustments noted herein will serve to balance the 
Exchange's regulatory revenue against the anticipated regulatory costs.
    The Exchange believes that increasing the ORF from $0.0008 to 
$0.0020 per contract side as of February 1, 2019 is equitable and not 
unfairly discriminatory because assessing the ORF to each Participant 
for options transactions cleared by OCC in the customer range where the 
execution occurs on another exchange and is cleared by a NOM 
Participant is an equitable allocation of reasonable dues, fees, and 
other charges among its members and issuers and other persons using its 
facilities. OCC collects the ORF on behalf of NOM from Exchange 
clearing members for all customer transactions they clear or from non-
members for all customer transactions they clear that were executed on 
NOM. The Exchange believes the ORF ensures fairness by assessing fees 
to Participants based on the amount of customer options business they 
conduct. Regulating customer trading activity is much more labor 
intensive and requires greater expenditure of human and technical 
resources than regulating non-customer trading activity, which tends to 
be more automated and less labor-intensive. As a result, the costs 
associated with administering the customer component of the Exchange's 
overall regulatory program are materially higher than the costs 
associated with administering the non-customer component (e.g., 
Participant proprietary transactions) of its regulatory program.
    The ORF is designed to recover a material portion of the costs of 
supervising and regulating Participants' customer options business 
including performing routine surveillances, investigations, 
examinations, financial monitoring, and policy, rulemaking, 
interpretive, and enforcement activities. The Exchange will monitor the 
amount of revenue collected from the ORF to ensure that it, in 
combination with its other regulatory fees and fines, does not exceed 
the Exchange's total regulatory costs. The Exchange has designed the 
ORF to generate revenues that, when combined with all of the Exchange's 
other regulatory fees, will be less than or equal to the Exchange's 
regulatory costs, which is consistent with the Commission's view that 
regulatory fees be used for regulatory purposes and not to support the 
Exchange's business side.

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. This proposal does not create 
an unnecessary or inappropriate intra-market burden on competition 
because the ORF applies to all customer activity, thereby raising 
regulatory revenue to offset regulatory expenses. It also supplements 
the regulatory revenue derived from non-customer activity. This 
proposal does not create an unnecessary or inappropriate inter-market 
burden on competition because it is a regulatory fee that supports 
regulation in furtherance of the purposes of the Act. The Exchange is 
obligated to ensure that the amount of regulatory revenue collected 
from the ORF, in combination with its other regulatory fees and fines, 
does not exceed regulatory costs.

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.\9\ 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 No. SR-NASDAQ-2019-006 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 No. SR-NASDAQ-2019-006. 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,

[[Page 5122]]

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 No. SR-NASDAQ-2019-006, and should be 
submitted on or before March 13, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02742 Filed 2-19-19; 8:45 am]
BILLING CODE 8011-01-P
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