Federal Register / Vol. 76, No. 50 / Tuesday, March 15, 2011 / Notices 14111 

1Financial Reporting Release No. 70. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The term ‘‘Options Participant’’ or ‘‘Participant’’ 

means a firm or organization that is registered with 

the Exchange pursuant to Chapter II of the NOM 

Rules for purposes of participating in options 

trading on NOM as a ‘‘Nasdaq Options Order Entry 

Firm’’ or ‘‘Nasdaq Options Market Maker.’’ 

4See NOM Rules, Chapter VII, Section 2. 

5See NOM Rules, Chapter VII, Section 5(a). 

6See NOM Rules, Chapter VII, Section 2(a). 

7See NOM Rules, Chapter VII, Section 2. 

8See NOM Rules, Chapter VII, Rule 2(c). 

9See NOM Rules, Chapter VII, Section 4(b). 

support fee or fees, determined in 

accordance with Section 109 of the Act. 

On April 25, 2003, the Commission 

issued a policy statement concluding 

that the Financial Accounting Standards 

Board (‘‘FASB’’) and its parent 

organization, the Financial Accounting 

Foundation (‘‘FAF’’), satisfied the 

criteria for an accounting standardsetting body under the Act, and 

recognizing the FASB’s financial 

accounting and reporting standards as 

‘‘generally accepted’’ under Section 108 

of the Act.1 As a consequence of that 

recognition, the Commission undertook 

a review of the FASB’s accounting 

support fee for calendar year 2011. In 

connection with its review, the 

Commission also reviewed the budget 

for the FAF and the FASB for calendar 

year 2011. 

Section 109 of the Act also provides 

that the standard setting body can have 

additional sources of revenue for its 

activities, such as earnings from sales of 

publications, provided that each 

additional source of revenue shall not 

jeopardize, in the judgment of the 

Commission, the actual or perceived 

independence of the standard setter. In 

this regard, the Commission also 

considered the interrelation of the 

operating budgets of the FAF, the FASB 

and the Governmental Accounting 

Standards Board (‘‘GASB’’), the FASB’s 

sister organization, which sets 

accounting standards used by State and 

local government entities. The 

Commission has been advised by the 

FAF that neither the FAF, the FASB nor 

the GASB accept contributions from the 

accounting profession. 

After its review, the Commission 

determined that the 2011 annual 

accounting support fee for the FASB is 

consistent with Section 109 of the Act. 

Accordingly, 

It is ordered, pursuant to Section 109 

of the Act, that the FASB may act in 

accordance with this determination of 

the Commission. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–5847 Filed 3–14–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64054; File No. SR– 

NASDAQ–2011–036] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify 

NASDAQ Options Market Rules 

Chapter VII, Various Sections, Dealing 

With Market Maker Obligations 

March 8, 2011. 

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 March 3, 

2011, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’), filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NASDAQ. 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 

NASDAQ proposes to amend Chapter 

VII, Section 3, Continuing Market Maker 

Registration, Section 5, Obligations of 

Market Makers, and Section 6, Market 

Maker Quotations, of the NASDAQ 

rulebook for the NASDAQ Options 

Market (‘‘NOM’’) to: (a) Permit market 

maker assignment by option rather than 

by series; (b) adopt a $5 quotation 

spread parameter; and (c) amend the 

quoting requirement for Market Makers 

as explained further below. These 

changes are scheduled to be 

implemented on NOM on or about May 

31, 2011; the Exchange will announce 

the implementation schedule by 

Options Trader Alert, once the rollout 

schedule, which will be based in part on 

NOM participants’ readiness, is 

finalized. 

The text of the proposed rule change 

is available at 

nasdaq.cchwallstreet.com, at 

NASDAQ’s principal office, 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, 

NASDAQ 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. 

NASDAQ has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to strengthen Market Maker 

obligations. The NASDAQ Options 

Market (‘‘NOM’’), the options trading 

facility of The NASDAQ Stock Market 

LLC, has been fully operational for over 

two years. During this time, NASDAQ 

has carefully considered the role of 

Market Makers in the NOM marketplace 

and their concomitant obligations. 

An Options Market Maker is a 

Participant 3 registered with NASDAQ 

as a Market Maker.4 Market Makers on 

NOM have certain obligations such as 

maintaining two-sided markets and 

participating in transactions that are 

‘‘reasonably calculated to contribute to 

the maintenance of a fair and orderly 

market.’’ 5 To register as a Market Maker, 

a Participant must file a written 

application with Nasdaq Regulation, 

which will consider an applicant’s 

market making ability and other factors 

it deems appropriate in determining 

whether to approve an applicant’s 

registration.6 All Market Makers are 

designated as specialists on NOM for all 

purposes under the Act or rules 

thereunder.7 The NOM Rules place no 

limit on the number of qualifying 

entities that may become Market 

Makers.8 The good standing of a Market 

Maker may be suspended, terminated, 

or withdrawn if the conditions for 

approval cease to be maintained or the 

Market Maker violates any of its 

agreements with NASDAQ or any 

provisions of the NOM Rules.9

Currently, a Participant that has 

qualified as a Market Maker may register 

to make markets in individual series of 


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14112 Federal Register / Vol. 76, No. 50 / Tuesday, March 15, 2011 / Notices 

10See NOM Rules, Chapter VII, Section 3(a). 

11See proposed NOM Rules, Chapter VII, Section 

6(d)(i)(2). 

12See proposed NOM Rules, Chapter VII, Section 

6(d)(ii). 

13For example, on a normal trading day, which 

lasts 390 minutes (from 9:30 a.m. to 4 p.m.), quoting 

in a series would need to be maintained for the total 

of at least 351 minutes in order to meet the 90%- 

of-the-trading-day threshold. In a shortened trading 

session, the total number of minutes the quote must 

be maintained would be lowered proportionately 

(and the same percentage threshold would apply). 

14Any such higher percentage would involve an 

appropriate advance announcement, which would 

then be available on the Exchange’s Web site. In the 

illustration above, if the Exchange set the threshold, 

for example, at 99% (rather than 90%), then on a 

normal trading day, quoting would need to be 

maintained for 386 (rather than 351) minutes out of 

the total of 390 minutes. 

15For these purposes, an adjusted option series is 

an option series wherein one option contract in the 

series represents the delivery of other than 100 

shares of underlying stock or Exchange-Traded 

Fund Shares. 

16 15 U.S.C. 78f(b). 

17 15 U.S.C. 78f(b)(5). 

options.10 Instead, NASDAQ proposes 

to require that Market Makers register by 

option. Thus, once so registered, a NOM 

Market Maker is subject to the market 

making obligations in all series of that 

option, except Quarterly Options Series, 

adjusted option series and any options 

series until the time to expiration for 

such series is less than nine months.11

In order to effect this change, NASDAQ 

proposes to amend various provisions in 

Sections 3, 5 and 6 of Chapter VII that 

currently refer to ‘‘series.’’ NASDAQ 

believes that registration by option 

rather than series should spread the 

benefits of Market Maker quoting across 

all series of an option, which should, in 

turn, result in higher quality markets. 

NASDAQ also proposes to adopt 

quotation spread parameters, also 

known as bid/ask differentials, which 

establish the maximum permissible 

width between a Market Maker’s bid 

and an offer in a particular series. 

Specifically, NASDAQ proposes to 

adopt a $5 wide quote spread 

parameters for all options.12 Currently, 

NOM Market Makers are not subject to 

quote spread parameters, such that the 

requirement for a two-sided market can 

be met with a quotation that is very 

wide. NASDAQ believes that a $5 quote 

spread parameter for NOM Market 

Makers should result in narrower 

markets, and thereby, improve the 

quality of NOM’s markets. 

Lastly, NASDAQ proposes to amend 

its quotation requirement for Market 

Makers. Today, NOM Market Makers are 

required to make markets on a 

continuous basis in at least 75% of the 

options series in which the Market 

Maker is registered. NASDAQ proposes 

to change this requirement to 60% of 

the series; in those series, to satisfy this 

requirement with respect to quoting a 

series, a Market Maker must quote such 

series 90% of the trading day (as a 

percentage of the total number of 

minutes in such trading day) 13 or such 

higher percentage as the Exchange may 

announce in advance.14 Nasdaq 

Regulation may consider exceptions to 

the requirement to quote 90% (or 

higher) of the trading day based on 

demonstrated legal or regulatory 

requirements or other mitigating 

circumstances. Although the proposed 

60% requirement is lower than the 

current 75%, the Exchange is also 

proposing herein to adopt, for the first 

time, a quote spread requirement and a 

requirement to register by option rather 

than by series, which are considerable 

changes for Market Makers. NASDAQ 

believes that this new 60% quoting 

requirement is needed to balance the 

proposed, new quotation spread 

parameters. 

Under this proposal, NASDAQ 

recognizes that certain options series 

present special challenges for Market 

Makers, due to nontraditional terms. 

Accordingly, NASDAQ proposes that 

Quarterly Option Series, adjusted option 

series, and any option series until the 

time to expiration for such series is less 

than nine months be treated differently. 

Specifically, under this proposal, 

Market Makers shall not be subject to 

the continuous quoting obligation in 

Section 6(d) of NOM rules in any 

Quarterly Option Series, any adjusted 

option series,15 and any option series 

until the time to expiration for such 

series is less than nine months. 

Accordingly, the requirement to make 

two-sided markets set forth in 5(a)(i) of 

NOM Rules shall not apply to Market 

Makers respecting Quarterly Option 

Series, adjusted option series, and series 

with an expiration of nine months or 

greater. 

In addition, if a technical failure or 

limitation of a system of the Exchange 

prevents a Market Maker from 

maintaining, or prevents a Market 

Maker from communicating to NOM, 

timely and accurate quotes, the duration 

of such failure or limitation shall not be 

included in any of the calculations 

under this subparagraph (i) with respect 

to the affected quotes. 

As a whole, the proposed 

amendments are intended to improve 

the quality of NOM markets, while 

carefully considering the important role 

of Market Makers in the NOM 

marketplace. Adopting quotation spread 

parameters and requiring registration 

across the series of an option are 

intended to encourage market making in 

more series; at the same time, NASDAQ 

recognizes the need to balance these 

new, more burdensome obligations with 

a lower series quoting percentage 

requirement. This balance of obligations 

should help to make the market better 

for all participants. NASDAQ believes 

that it has crafted a reasonable balance 

in this proposal. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 16 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 17

in particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. The Exchange believes 

that the proposal is appropriate and 

reasonable for Market Makers, similar to 

the rules of other options exchanges (as 

specified below) and should, at the 

same time, enhance the quality of the 

Exchange’s options markets. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: 

(i) Significantly affect the protection 

of investors or the public interest; 

(ii) Impose any significant burden on 

competition; and 

(iii) Become operative for 30 days 

from the date on which it was filed, or 

such shorter time as the Commission 

may designate, if consistent with the 

protection of investors and the public 

interest, it has become effective 

pursuant to Section 19(b)(3)(A) of the 


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Federal Register / Vol. 76, No. 50 / Tuesday, March 15, 2011 / Notices 14113 

18 15 U.S.C. 78s(b)(3)(A). 19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the self-regulatory organization 

to submit to the Commission written notice of its 

intent to file the proposed rule change, along with 

a brief description and text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. The 

Exchange has satisfied this requirement. The 

Exchange previously filed its proposal under 

Section 19(b)(2) of the Act but subsequently 

withdrew that proposal and refiled under Section 

19(b)(3)(A). See Securities Exchange Act Release 

No. 63815 (February 1, 2011), 76 FR 6646 (February 

7, 2011) (SR–NASDAQ–2011–012). 

20See NYSEArca Rule 6.35(d) and Phlx Rule 

507(b). ISE appoints by class and group. See ISE 

Rules 100(a)(6) and 802. 21See NYSEAmex Rule 925NY(b)(5), which is 

similar, but not identical, because trading auctions 

on the NYSE Amex’s floor-based exchange are 

excluded from its rule. 

22See Phlx Rule 1014(c)(i)(A)(1)(a) and (c)(i)(A)(2) 

and ISE Rule 803(b)(4). 

23Phlx Rule 1014(b)(ii)(D)(1) and (4). Securities 

Exchange Act Release No. 60084 (June 10, 2009) 

(SR–Phlx–2009–37); see also Securities Exchange 

Act Release No. 57186 (January 22, 2008), 73 FR 

4931 (January 28, 2008) (approving SR–NYSEArca– 

2007–121). 24 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78s(b)(3)(A)(ii) and 15 U.S.C. 

78s(b)(3)(A)(iii). 

3 17 CFR 240.19b–4(f)(2) and 17 CFR 240.19b– 

4(f)(4). 

Act 18 and Rule 19b–4(f)(6) 

thereunder.19

In particular, NASDAQ notes that the 

proposed rule change is similar to the 

rules of other options exchanges in a 

variety of ways. With respect to 

registration by series, most options 

exchanges require registration by option 

(also called underlying).20 With respect 

to quotation spread parameters, most 

options exchanges currently impose 

such parameters on market makers; 

some options exchanges have a $5 wide 

requirement for electronic quotes,21

while others impose $5 wide parameter 

in certain situations and narrower 

parameters in other situations, usually 

related to the opening and the particular 

market making category.22 With respect 

to the quotation requirement and 

exception for certain series, the proposal 

is identical to Phlx Rule 

1014(b)(ii)(D)(1) respecting the 60% of 

series, 90% of the trading day 

requirement, except certain series.23

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 necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2011–036 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2011–036. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room on official business 

days between the hours of 10 a.m. and 

3 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; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2011–036 and 

should be submitted on or before April 

5, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–5862 Filed 3–14–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64065; File No. SR–NSCC– 

2011–01] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Modification 

of Trade Recording Fee for Bonds and 

Other Technical Rule Changes 

March 9, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

February 28, 2011, the National 

Securities Clearing Corporation 

(‘‘NSCC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared primarily by NSCC. 

NSCC filed the proposed rule change 

pursuant to Sections 19(b)(3)(A)(ii) and 

19(b)(3)(A)(iii) of the Act 2 and Rules 

19b–4(f)(2) and 19b–4(f)(4) thereunder 3

so that the proposal was effective upon 

filing with the Commission. 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 proposed rule change amends 

Addendum A of the NSCC Rules & 

Procedures to modify NSCC’s fee 

schedule and to clarify the scope of 

trade recording fees and the 

computation of clearance activity fees. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NSCC 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. NSCC has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 


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