Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchanges Pricing Schedule at Options 7, 10161-10164 [2019-05087]

Download as PDF Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, protect investors and the public interest by ensuring that market participants can more easily navigate, understand and comply with the Fee Schedules. The Exchange believes that, by ensuring that such documents accurately reflect the name change of its affiliate NYSE Chicago, the proposed change would reduce potential investor or market participant confusion by providing market participants with clarity as to what connectivity is included in the purchase of access to the LCN and IP network. Similarly, correcting the typographical error in the third sentence of the first paragraph under ‘‘Connectivity to Third Party Data Feeds’’ would remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, protect investors and the public interest because the change would clarify Exchange rules and alleviate any possible market participant confusion. For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable co-location fees, requirements, terms and conditions established from time to time by the Exchange. For these reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,12 the Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because it is ministerial in nature and is not designed to have any competitive impact, but rather to update references and correct a typographical error, thereby clarifying the Fee Schedules and alleviating any possible market participant confusion. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. 12 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 17:54 Mar 18, 2019 Jkt 247001 10161 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b–4(f)(3) 14 thereunder in that the proposed rule change is concerned solely with the administration of the Exchange. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 15 of the Act to determine whether the proposed rule change should be approved or disapproved. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. 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–NYSEARCA–2019–11, and should be submitted on or before April 9, 2019. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Eduardo A. Aleman, Deputy Secretary. 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– NYSEARCA–2019–11 on the subject line. SECURITIES AND EXCHANGE COMMISSION 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–NYSEARCA–2019–11. 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 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(3). 15 15 U.S.C. 78s(b)(2)(B). [FR Doc. 2019–05090 Filed 3–18–19; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–85303; File No. SR– NASDAQ–2019–011] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchanges Pricing Schedule at Options 7 March 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 28, 2019, 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 Exchanges Pricing Schedule at Options 13 15 16 17 14 17 1 15 PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. E:\FR\FM\19MRN1.SGM 19MRN1 10162 Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices 7, which governs the pricing for Nasdaq participants using The Nasdaq Options Market (‘‘NOM’’), Nasdaq’s facility for executing and routing standardized equity and index options. While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on March 1, 2019. 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 The Exchange proposes to create an alternative way for Participants to earn the Tier 3 NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options. Today as set forth in Options 7, Section 2(1), the Exchange offers NOM Market Maker Rebates to Add Liquidity in Penny Pilot Options. These rebates are structured as a six tier program ranging from $0.20 to $0.48 per contract, with increasing volume requirements for each tier. Participants currently receive a $0.30 per contract (or $0.40 per contract in the symbols AAPL, QQQ, IWM, SPY and VXX) Tier 3 rebate for adding NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.20% to 0.60% of total industry customer equity and ETF option ADV contracts per day in a month. As proposed, a Participant will also earn the Tier 3 rebate if the Participant meets the following alternative qualifications: (1) Transacts in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.70% or more of Consolidated Volume (‘‘CV’’) 3 which 3 Consolidated Volume shall mean the total consolidated volume reported to all consolidated VerDate Sep<11>2014 17:54 Mar 18, 2019 Jkt 247001 adds liquidity in the same month on The Nasdaq Stock Market,4 (2) transacts in Tape B securities 5 through one or more of its Nasdaq Market Center MPIDs that represent 0.18% or more of CV which adds liquidity in the same month on The Nasdaq Stock Market, and (3) executes greater than 0.01% of CV via Market-on-Close/Limit-on-Close (‘‘MOC/LOC’’) 6 volume within The Nasdaq Stock Market Closing Cross in the same month. The Exchange also proposes to make related clean-up changes by renumbering the existing method to qualify for Tier 3 as paragraph (a) and the proposed alternative as paragraph (b). 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 any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The alternative method to qualify for the Tier 3 NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options proposed above is reasonable because it will create an additional opportunity for Participants to earn the Tier 3 rebate by incentivizing Participants to transact greater volume on The Nasdaq Stock Market in order to qualify for the Tier 3 rebate on NOM. The Exchange notes transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of an equity member’s trading activity, expressed as a percentage of or ratio to Consolidated Volume, the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity. 4 In calculating total volume, the Exchange would add the Participant’s total volume transacted on The Nasdaq Stock Market in a given month across its Nasdaq Market Center MPIDs which adds liquidity, and will divide this number by the total industry Consolidated Volume. 5 Tape B securities are securities that are listed on exchanges other than The Nasdaq Stock Market or the New York Stock Exchange. 6 MOC/LOC, as set forth in Nasdaq Rule 4754, represents the volume in The Nasdaq Stock Market Closing Cross that allows market participants to contribute order flow that will result in executions at the official closing price for the day in the Nasdaq listed security. A ‘‘MOC Order’’ is an order type entered without a price that may be executed only during the Nasdaq Closing Cross, which refers to the equity closing cross. A ‘‘LOC Order’’ is an order type entered with a price that may be executed only in the Nasdaq Closing Cross. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 that this proposal is designed as a means to improve market quality by providing Participants with an incentive to increase their provision of liquidity on the Exchange’s equity and options markets. Today, Participants that add NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.20% to 0.60% of total industry customer equity and ETF option ADV contracts per day in a month are paid a $0.30 per contract (or $0.40 per contract in the symbols AAPL, QQQ, IWM, SPY and VXX) Tier 3 rebate. This proposal would provide participants with additional opportunities to earn the same Tier 3 NOM Market Maker rebate, and will encourage Participants to send order flow to both the options and equity markets to receive the rebate. Furthermore, the concept of linking incentive on NOM to activity on The Nasdaq Stock Market exists today. The Exchange currently offers rebates on NOM that relate to activity on The Nasdaq Stock Market.9 Similarly, The Nasdaq Stock Market offers credits that are based on activity on NOM.10 As such, the Exchange believes that the volume requirement to transact in all securities through one or more of the Participant’s Nasdaq Market Center MPIDs that represent 0.70% or more of Consolidated Volume (‘‘CV’’) which adds liquidity in the same month on The Nasdaq Stock Market is reasonable because the Exchange already offers rebates based on similar volume requirements.11 Similarly, the volume requirement to execute greater than 0.01% of CV via Market-on-Close/Limiton-Close (‘‘MOC/LOC’’) volume within The Nasdaq Stock Market Closing Cross in the same month is reasonable because 9 For example, one of the qualifications in the $0.48 per contract Tier 6 Customer and Professional Rebate to Add Liquidity in Penny Pilot Options requires that the Participant add liquidity in all securities through one or more of its Nasdaq Market Center MPIDs that represent 1.00% or more of Consolidated Volume in a month or qualifies for MARS. See Options 7, Section 2(1). Also, for example, note ‘‘e’’ of the NOM Pricing Schedule provides that Participants that transact in all securities through one or more of its Nasdaq Market Center MPIDs that represent 3.00% or more of Consolidated Volume in the same month on The Nasdaq Stock Market will receive a $0.52 per contract rebate to add liquidity in Penny Pilot Options as Customer or Professional and $1.00 per contract rebate to add liquidity in Non-Penny Pilot Options as Customer or Professional. See Options 7, Section 2(1). 10 For example, Nasdaq offers a credit of $0.0029 per share if the member adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/ or Non- Penny Pilot Options of 1.15% or more of total industry ADV in the customer clearing range for Equity and ETF option contracts per day in a month on NOM. See Equity 7, Section 118(a)(1). 11 See note 9 above. E:\FR\FM\19MRN1.SGM 19MRN1 Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices the Exchange already offers rebates based on similar volume requirements.12 The volume requirement to transact in Tape B securities through one or more of the Participant’s Nasdaq Market Center MPIDs that represent 0.18% or more of CV which adds liquidity in the same month on The Nasdaq Stock Market is a new requirement, which must be met in addition to the other two volume requirements proposed above. The Exchange believes that the Tape B volume requirement is reasonable because linking rebates on NOM to activity on The Nasdaq Stock Market in this manner will encourage Participants to add liquidity on The Nasdaq Stock Market, which will benefit all market participants by way of interacting with that liquidity on the equity market. By encouraging market participants to increase their participation on the equities market by transacting in Tape B securities, the Exchange is rewarding Participants with an opportunity to earn an additional options incentive, provided all requirements are met. Overall, the Exchange believes that the tiered NOM Market Maker Rebates to Add Liquidity in Penny Pilot Options with the proposed Tier 3 alternative will continue to reflect the progressively increasing rebate requirements that offer incentives to earn the highest NOM Market Maker rebate by bringing the most order flow to the Exchange. The Exchange also believes that the proposed Tier 3 alternative is equitable and not unfairly discriminatory because all eligible Participants that qualify for these incentives will uniformly receive the rebate. The Exchange believes that the proposed volume requirements are proportionate to the amount of the Tier 3 rebate and equitably reflect the purpose of the proposed Tier 3 alternative, which is to incentivize Participants to transact greater volume on both the Exchange’s equity and options markets. In addition, the Exchange believes that it is equitable 12 See note ‘‘c’’ of Options 7, Section 2(1), offering Participants that qualify for the $0.48 per contract Tier 6 Customer and Professional Rebate to Add Liquidity in Penny Pilot Options an additional $0.05 per contract rebate if they meet the requisite volume thresholds in clause (3) of note ‘‘c,’’ including executing greater than 0.04% of Consolidated Volume (‘‘CV’’) via Market-on-Close/ Limit-on- Close (‘‘MOC/LOC’’) volume within The Nasdaq Stock Market Closing Cross within a month; and note ‘‘f’’ of Options 7, Section 2(1), offering Participants a $0.55 per contract Customer and Professional Rebate to Add Liquidity in Penny Pilot Options if they meet the requisite volume thresholds, including executing greater than 0.04% of Consolidated Volume (‘‘CV’’) via Market-onClose/Limit-on-Close (‘‘MOC/LOC’’) volume within The Nasdaq Stock Market Closing Cross within a month. VerDate Sep<11>2014 17:54 Mar 18, 2019 Jkt 247001 and not unfairly discriminatory to offer this rebate to NOM Participants that transact as NOM Market Makers and also transact on The Nasdaq Stock Market. Any NOM Participant may trade on The Nasdaq Stock Market because they are approved members.13 Furthermore, unlike other market participants, NOM Market Makers add value through continuous quoting and the commitment of capital.14 Because NOM Market Makers have these obligations to the market and regulatory requirements that normally do not apply to other market participants, the Exchange believes that offering these rebates to only NOM Market Makers is equitable and not unfairly discriminatory in light of their obligations. Finally, encouraging NOM Market Makers to add greater liquidity benefits all market participants in the quality of order interaction. 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 pricing changes proposed above are generally designed to attract additional order flow to the Exchange, which strengthens the Exchange’s competitive position. Greater liquidity benefits all market participants by providing more trading opportunities and attracting greater participation by market makers. An increase in the activity of these market participants in turn facilitates tighter spreads. The Exchange operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive. Because 13 Although a NOM Participant may incur additional labor and/or costs to establish connectivity to The Nasdaq Stock Market, there are no additional membership fees for NOM Participants that want to transact on The Nasdaq Stock Market. 14 Pursuant to Chapter VII (Market Participants), Section 5 (Obligations of Market Makers), in registering as a market maker, an Options Participant commits himself to various obligations. Transactions of a Market Maker in its market making capacity must constitute a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and Market Makers should not make bids or offers or enter into transactions that are inconsistent with such course of dealings. Further, all Market Makers are designated as specialists on NOM for all purposes under the Act or rules thereunder. See Chapter VII, Section 5. PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 10163 competitors are free to modify their own fees and rebates in response, the Exchange believes that the degree to which pricing changes in this market may impose any burden on competition is extremely limited. 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 temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2019–011 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–2019–011. 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 15 15 E:\FR\FM\19MRN1.SGM U.S.C. 78s(b)(3)(A)(ii). 19MRN1 10164 Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. 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–2019–011, and should be submitted on or before April 9, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–05087 Filed 3–18–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its NYSE American Equities Price List and the NYSE American Options Fee Schedule Related to Co-Location Services March 13, 2019. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on March 1, 2019, NYSE American LLC (‘‘NYSE American’’ or the ‘‘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 selfCFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 17:54 Mar 18, 2019 Jkt 247001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its NYSE American Equities Price List (‘‘Price List’’) and the NYSE American Options Fee Schedule (‘‘Fee Schedule’’) related to co-location services to make a ministerial change to reflect the name change of its affiliate Chicago Stock Exchange, Inc. and to correct a typographical error. The proposed change is available on the Exchange’s website at www.nyse.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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [Release No. 34–85302; File No. SR– NYSEAMER–2019–02] 16 17 regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1. Purpose The Exchange proposes to amend the Price List and Fee Schedule related to co-location 4 services offered by the 4 The Exchange initially filed rule changes relating to its co-location services with the Securities and Exchange Commission (‘‘Commission’’) in 2010. See Securities Exchange Act Release No. 62961 (September 21, 2010), 75 FR 59299 (September 27, 2010) (SR–NYSEAmex-2010– 80). The Exchange operates a data center in Mahwah, New Jersey (the ‘‘data center’’) from which it provides co-location services to Users. For purposes of the Exchange’s co-location services, a ‘‘User’’ means any market participant that requests to receive co-location services directly from the Exchange. See Securities Exchange Act Release No. 76009 (September 29, 2015), 80 FR 60213 (October 5, 2015) (SR–NYSEMKT–2015–67). As specified in the Price List and Fee Schedule, a User that incurs co-location fees for a particular co-location service pursuant thereto would not be subject to co-location fees for the same co-location service charged by the Exchange’s affiliates New York Stock Exchange LLC (‘‘NYSE LLC’’), NYSE Arca, Inc. (‘‘NYSE Arca’’) and NYSE National, Inc. (‘‘NYSE National’’ and together, the ‘‘Affiliate SROs’’). See Securities Exchange Act Release No. 70176 (August 13, 2013), PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 Exchange to make a ministerial change to reflect the name change of its affiliate Chicago Stock Exchange, Inc. (‘‘CHX’’) to NYSE Chicago, Inc. (‘‘NYSE Chicago’’) and to correct a typographical error. On February 15, 2019, CHX changed its name to NYSE Chicago.5 In a nonsubstantive administrative change, the Exchange proposes to update General Note 4 related to co-location services 6 as follows: • Delete references to ‘‘Chicago Stock Exchange, Inc.’’ and ‘‘CHX’’ from the first paragraph of General Note 4, replacing them with references to ‘‘NYSE Chicago, Inc.’’ and ‘‘NYSE Chicago’’; and • In the table under Included Data Products, delete ‘‘Chicago Stock Exchange (CHX)’’ from the first line and add a line for ‘‘NYSE Chicago’’ in alphabetical order after NYSE Bonds. In addition, in the third sentence of the first paragraph under ‘‘Connectivity to Third Party Data Feeds,’’ the Exchange proposes to correct a typographical error by replacing ‘‘Fees’’ with ‘‘Feeds.’’ General As is the case with all Exchange colocation arrangements, (i) neither a User nor any of the User’s customers would be permitted to submit orders directly to the Exchange unless such User or customer is a member organization, a Sponsored Participant or an agent thereof (e.g., a service bureau providing order entry services); (ii) use of the colocation services proposed herein would be completely voluntary and available to all Users on a non-discriminatory basis; 7 and (iii) a User would only incur 78 FR 50471 (August 19, 2013) (SR–NYSEMKT– 2013–67). 5 See Securities Exchange Release No. 84494 (October 26, 2018), 83 FR 54953 (November 1, 2018) (SR–CHX–2018–05). 6 General Note 4 describes the access to trading and execution systems and the connectivity to included data products which a User receives when it purchases access to the Liquidity Center Network (‘‘LCN’’) or internet protocol (‘‘IP’’) network, local area networks available in the data center. See Securities Exchange Act Release No. 79728 (January 4, 2017), 82 FR 3035 (January 10, 2017) (SR– NYSEMKT–2016–126) (notice of filing and immediate effectiveness of proposed rule change amending the Exchange’s Price List and Fee Schedule related to co-location services to increase LCN and IP network fees and add a description of access to trading and execution services and connectivity to included data products). 7 As is currently the case, Users that receive colocation services from the Exchange will not receive any means of access to the Exchange’s trading and execution systems that is separate from, or superior to, that of other Users. In this regard, all orders sent to the Exchange enter the Exchange’s trading and execution systems through the same order gateway, regardless of whether the sender is co-located in the data center or not. In addition, co-located Users do E:\FR\FM\19MRN1.SGM 19MRN1

Agencies

[Federal Register Volume 84, Number 53 (Tuesday, March 19, 2019)]
[Notices]
[Pages 10161-10164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05087]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85303; File No. SR-NASDAQ-2019-011]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchanges Pricing Schedule at Options 7

March 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 28, 2019, 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 Exchanges Pricing Schedule at 
Options

[[Page 10162]]

7, which governs the pricing for Nasdaq participants using The Nasdaq 
Options Market (``NOM''), Nasdaq's facility for executing and routing 
standardized equity and index options.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on March 1, 2019.
    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
    The Exchange proposes to create an alternative way for Participants 
to earn the Tier 3 NOM Market Maker Rebate to Add Liquidity in Penny 
Pilot Options. Today as set forth in Options 7, Section 2(1), the 
Exchange offers NOM Market Maker Rebates to Add Liquidity in Penny 
Pilot Options. These rebates are structured as a six tier program 
ranging from $0.20 to $0.48 per contract, with increasing volume 
requirements for each tier. Participants currently receive a $0.30 per 
contract (or $0.40 per contract in the symbols AAPL, QQQ, IWM, SPY and 
VXX) Tier 3 rebate for adding NOM Market Maker liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options above 0.20% to 0.60% of total 
industry customer equity and ETF option ADV contracts per day in a 
month. As proposed, a Participant will also earn the Tier 3 rebate if 
the Participant meets the following alternative qualifications: (1) 
Transacts in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 0.70% or more of Consolidated Volume 
(``CV'') \3\ which adds liquidity in the same month on The Nasdaq Stock 
Market,\4\ (2) transacts in Tape B securities \5\ through one or more 
of its Nasdaq Market Center MPIDs that represent 0.18% or more of CV 
which adds liquidity in the same month on The Nasdaq Stock Market, and 
(3) executes greater than 0.01% of CV via Market-on-Close/Limit-on-
Close (``MOC/LOC'') \6\ volume within The Nasdaq Stock Market Closing 
Cross in the same month. The Exchange also proposes to make related 
clean-up changes by renumbering the existing method to qualify for Tier 
3 as paragraph (a) and the proposed alternative as paragraph (b).
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    \3\ Consolidated Volume shall mean the total consolidated volume 
reported to all consolidated transaction reporting plans by all 
exchanges and trade reporting facilities during a month in equity 
securities, excluding executed orders with a size of less than one 
round lot. For purposes of calculating Consolidated Volume and the 
extent of an equity member's trading activity, expressed as a 
percentage of or ratio to Consolidated Volume, the date of the 
annual reconstitution of the Russell Investments Indexes shall be 
excluded from both total Consolidated Volume and the member's 
trading activity.
    \4\ In calculating total volume, the Exchange would add the 
Participant's total volume transacted on The Nasdaq Stock Market in 
a given month across its Nasdaq Market Center MPIDs which adds 
liquidity, and will divide this number by the total industry 
Consolidated Volume.
    \5\ Tape B securities are securities that are listed on 
exchanges other than The Nasdaq Stock Market or the New York Stock 
Exchange.
    \6\ MOC/LOC, as set forth in Nasdaq Rule 4754, represents the 
volume in The Nasdaq Stock Market Closing Cross that allows market 
participants to contribute order flow that will result in executions 
at the official closing price for the day in the Nasdaq listed 
security. A ``MOC Order'' is an order type entered without a price 
that may be executed only during the Nasdaq Closing Cross, which 
refers to the equity closing cross. A ``LOC Order'' is an order type 
entered with a price that may be executed only in the Nasdaq Closing 
Cross.
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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 any 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 alternative method to qualify for the Tier 3 NOM Market Maker 
Rebate to Add Liquidity in Penny Pilot Options proposed above is 
reasonable because it will create an additional opportunity for 
Participants to earn the Tier 3 rebate by incentivizing Participants to 
transact greater volume on The Nasdaq Stock Market in order to qualify 
for the Tier 3 rebate on NOM. The Exchange notes that this proposal is 
designed as a means to improve market quality by providing Participants 
with an incentive to increase their provision of liquidity on the 
Exchange's equity and options markets. Today, Participants that add NOM 
Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options above 0.20% to 0.60% of total industry customer equity and ETF 
option ADV contracts per day in a month are paid a $0.30 per contract 
(or $0.40 per contract in the symbols AAPL, QQQ, IWM, SPY and VXX) Tier 
3 rebate. This proposal would provide participants with additional 
opportunities to earn the same Tier 3 NOM Market Maker rebate, and will 
encourage Participants to send order flow to both the options and 
equity markets to receive the rebate.
    Furthermore, the concept of linking incentive on NOM to activity on 
The Nasdaq Stock Market exists today. The Exchange currently offers 
rebates on NOM that relate to activity on The Nasdaq Stock Market.\9\ 
Similarly, The Nasdaq Stock Market offers credits that are based on 
activity on NOM.\10\ As such, the Exchange believes that the volume 
requirement to transact in all securities through one or more of the 
Participant's Nasdaq Market Center MPIDs that represent 0.70% or more 
of Consolidated Volume (``CV'') which adds liquidity in the same month 
on The Nasdaq Stock Market is reasonable because the Exchange already 
offers rebates based on similar volume requirements.\11\ Similarly, the 
volume requirement to execute greater than 0.01% of CV via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within The Nasdaq Stock 
Market Closing Cross in the same month is reasonable because

[[Page 10163]]

the Exchange already offers rebates based on similar volume 
requirements.\12\
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    \9\ For example, one of the qualifications in the $0.48 per 
contract Tier 6 Customer and Professional Rebate to Add Liquidity in 
Penny Pilot Options requires that the Participant add liquidity in 
all securities through one or more of its Nasdaq Market Center MPIDs 
that represent 1.00% or more of Consolidated Volume in a month or 
qualifies for MARS. See Options 7, Section 2(1). Also, for example, 
note ``e'' of the NOM Pricing Schedule provides that Participants 
that transact in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent 3.00% or more of Consolidated 
Volume in the same month on The Nasdaq Stock Market will receive a 
$0.52 per contract rebate to add liquidity in Penny Pilot Options as 
Customer or Professional and $1.00 per contract rebate to add 
liquidity in Non-Penny Pilot Options as Customer or Professional. 
See Options 7, Section 2(1).
    \10\ For example, Nasdaq offers a credit of $0.0029 per share if 
the member adds Customer, Professional, Firm, Non-NOM Market Maker 
and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non- 
Penny Pilot Options of 1.15% or more of total industry ADV in the 
customer clearing range for Equity and ETF option contracts per day 
in a month on NOM. See Equity 7, Section 118(a)(1).
    \11\ See note 9 above.
    \12\ See note ``c'' of Options 7, Section 2(1), offering 
Participants that qualify for the $0.48 per contract Tier 6 Customer 
and Professional Rebate to Add Liquidity in Penny Pilot Options an 
additional $0.05 per contract rebate if they meet the requisite 
volume thresholds in clause (3) of note ``c,'' including executing 
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on- Close (``MOC/LOC'') volume within The Nasdaq Stock 
Market Closing Cross within a month; and note ``f'' of Options 7, 
Section 2(1), offering Participants a $0.55 per contract Customer 
and Professional Rebate to Add Liquidity in Penny Pilot Options if 
they meet the requisite volume thresholds, including executing 
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within The Nasdaq Stock 
Market Closing Cross within a month.
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    The volume requirement to transact in Tape B securities through one 
or more of the Participant's Nasdaq Market Center MPIDs that represent 
0.18% or more of CV which adds liquidity in the same month on The 
Nasdaq Stock Market is a new requirement, which must be met in addition 
to the other two volume requirements proposed above. The Exchange 
believes that the Tape B volume requirement is reasonable because 
linking rebates on NOM to activity on The Nasdaq Stock Market in this 
manner will encourage Participants to add liquidity on The Nasdaq Stock 
Market, which will benefit all market participants by way of 
interacting with that liquidity on the equity market. By encouraging 
market participants to increase their participation on the equities 
market by transacting in Tape B securities, the Exchange is rewarding 
Participants with an opportunity to earn an additional options 
incentive, provided all requirements are met. Overall, the Exchange 
believes that the tiered NOM Market Maker Rebates to Add Liquidity in 
Penny Pilot Options with the proposed Tier 3 alternative will continue 
to reflect the progressively increasing rebate requirements that offer 
incentives to earn the highest NOM Market Maker rebate by bringing the 
most order flow to the Exchange.
    The Exchange also believes that the proposed Tier 3 alternative is 
equitable and not unfairly discriminatory because all eligible 
Participants that qualify for these incentives will uniformly receive 
the rebate. The Exchange believes that the proposed volume requirements 
are proportionate to the amount of the Tier 3 rebate and equitably 
reflect the purpose of the proposed Tier 3 alternative, which is to 
incentivize Participants to transact greater volume on both the 
Exchange's equity and options markets. In addition, the Exchange 
believes that it is equitable and not unfairly discriminatory to offer 
this rebate to NOM Participants that transact as NOM Market Makers and 
also transact on The Nasdaq Stock Market. Any NOM Participant may trade 
on The Nasdaq Stock Market because they are approved members.\13\ 
Furthermore, unlike other market participants, NOM Market Makers add 
value through continuous quoting and the commitment of capital.\14\ 
Because NOM Market Makers have these obligations to the market and 
regulatory requirements that normally do not apply to other market 
participants, the Exchange believes that offering these rebates to only 
NOM Market Makers is equitable and not unfairly discriminatory in light 
of their obligations. Finally, encouraging NOM Market Makers to add 
greater liquidity benefits all market participants in the quality of 
order interaction.
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    \13\ Although a NOM Participant may incur additional labor and/
or costs to establish connectivity to The Nasdaq Stock Market, there 
are no additional membership fees for NOM Participants that want to 
transact on The Nasdaq Stock Market.
    \14\ Pursuant to Chapter VII (Market Participants), Section 5 
(Obligations of Market Makers), in registering as a market maker, an 
Options Participant commits himself to various obligations. 
Transactions of a Market Maker in its market making capacity must 
constitute a course of dealings reasonably calculated to contribute 
to the maintenance of a fair and orderly market, and Market Makers 
should not make bids or offers or enter into transactions that are 
inconsistent with such course of dealings. Further, all Market 
Makers are designated as specialists on NOM for all purposes under 
the Act or rules thereunder. See Chapter VII, Section 5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The pricing changes proposed 
above are generally designed to attract additional order flow to the 
Exchange, which strengthens the Exchange's competitive position. 
Greater liquidity benefits all market participants by providing more 
trading opportunities and attracting greater participation by market 
makers. An increase in the activity of these market participants in 
turn facilitates tighter spreads.
    The Exchange operates in a highly competitive market in which 
market participants can readily favor competing venues if they deem fee 
levels at a particular venue to be excessive, or rebate opportunities 
available at other venues to be more favorable. In such an environment, 
the Exchange must continually adjust its fees and rebates to remain 
competitive. Because competitors are free to modify their own fees and 
rebates in response, the Exchange believes that the degree to which 
pricing changes in this market may impose any burden on competition is 
extremely limited.

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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2019-011 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-2019-011. 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

[[Page 10164]]

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 
such filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. 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-2019-011, and should be submitted on or before April 9, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05087 Filed 3-18-19; 8:45 am]
BILLING CODE 8011-01-P
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