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]
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Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices
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Government Employees appointed by
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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.
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Non-Safeguards Information for
Contention Preparation
President’s Commission on White House
Fellowships.
Alexys Stanley,
Regulatory Affairs Analyst.
Any person who desires access to
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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:
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1 15
2 17
E:\FR\FM\20FEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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.
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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.
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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
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Options Trader Alert #2018–46.
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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.
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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
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U.S.C. 78s(b)(3)(A)(ii).
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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).
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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).
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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.
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\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.
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\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.
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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
