Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Notices 1201 

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

2 17 CFR 240.19b–4. 

3For a detailed description of the Investor 

Support Program, see Securities Exchange Act 

Release No. 63270 (November 8, 2010), 75 FR 69489 

(November 12, 2010) (NASDAQ–2010–141) (notice 

of filing and immediate effectiveness)(the ‘‘ISP 

Filing’’). See also Securities Exchange Act Release 

No. 76505 (December 2, 2010), 75 FR 76505 

(December 8, 2010) (NASDAQ–2010–153)(notice of 

filing and immediate effectiveness regarding 

exclusion of partial trading days from certain ISP 

calculations). 

4The Commission has recently expressed its 

concern that a significant percentage of the orders 

of individual investors are executed at over the 

counter (‘‘OTC’’) markets, that is, at off-exchange 

markets; and that a significant percentage of the 

orders of institutional investors are executed in 

dark pools. Securities Exchange Act Release No. 

61358 (January 14, 2010), 75 FR 3594 (January 21, 

2010) (Concept Release on Equity Market Structure, 

‘‘Concept Release’’). In the Concept Release, the 

Commission has recognized the strong policy 

preference under the Act in favor of price 

transparency and displayed markets. The 

Commission published the Concept Release to 

invite public comment on a wide range of market 

structure issues, including high frequency trading 

and un-displayed, or ‘‘dark,’’ liquidity. See also 

Mary L. Schapiro, Strengthening Our Equity Market 

Structure (Speech at the Economic Club of New 

York, Sept. 7, 2010) (‘‘Schapiro Speech,’’ available 

on the Commission Web site)(comments of 

Commission Chairman on what she viewed as a 

troubling trend of reduced participation in the 

equity markets by individual investors, and that 

nearly 30 percent of volume in U.S.-listed equities 

is executed in venues that do not display their 

liquidity or make it generally available to the 

public). 

5The term ‘‘Participation Ratio’’ is defined as: For 

a given member in a given month, the ratio of (i) 

the number of shares of liquidity provided in orders 

entered by the member through any of its NASDAQ 

ports and executed in the NASDAQ Market Center 

during such month to (ii) the consolidated volume 

of shares of System Securities in executed orders 

Continued 

Interested persons may submit 

comments on whether the Postal 

Service’s filings in the captioned 

dockets are consistent with the policies 

of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 

part 3015, and 39 CFR part 3020, 

subpart B. Comments are due no later 

than January 12, 2011. The public 

portions of these filings can be accessed 

via the Commission’s Web site (http:// 

www.prc.gov). 

The Commission appoints Paul L. 

Harrington to serve as Public 

Representative in these dockets. 

III. Ordering Paragraphs 

It is ordered: 

1. The Commission establishes Docket 

Nos. MC2011–17 and CP2011–56 for 

consideration of the matters raised in 

each docket. 

2. Pursuant to 39 U.S.C. 505, Paul L. 

Harrington is appointed to serve as 

officer of the Commission (Public 

Representative) to represent the 

interests of the general public in these 

proceedings. 

3. Comments by interested persons in 

these proceedings are due no later than 

January 12, 2011. 

4. The Secretary shall arrange for 

publication of this order in the Federal 

Register. 

By the Commission. 

Shoshana M. Grove, 

Secretary. 

[FR Doc. 2011–95 Filed 1–6–11; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63628; File No. SR– 

NASDAQ–2010–154] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change by the 

NASDAQ Stock Market LLC To 

Enhance the Investor Support Program 

January 3, 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 December 

21, 2010, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ or the ‘‘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 selfregulatory organization. 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 changes to the fee 

provisions of Rule 7014 (Investor 

Support Program) to enhance the 

Investor Support Program in respect of: 

Certain assumed Baseline Participation 

Ratio values for firms that did not add 

liquidity in August 2010; the addition of 

liquidity through Indirect Order Flow; 

liquidity executed at or above $1; and a 

certification provision. 

The text of the proposed rule change 

is available at http:// 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing changes to 

the fee provisions of Rule 7014 to 

enhance the Investor Support Program 

in respect of: Certain assumed Baseline 

Participation Ratio values for firms that 

did not add liquidity in August 2010; 

the addition of liquidity through 

Indirect Order Flow; liquidity executed 

at or above $1; and a certification 

provision. 

The Exchange established an Investor 

Support Program (‘‘ISP’’) that enables 

NASDAQ members to earn a monthly 

fee credit for providing additional 

liquidity to NASDAQ and increasing the 

NASDAQ-traded volume of what are 

generally considered to be retail and 

institutional investor orders in 

exchange-traded securities (‘‘targeted 

liquidity’’).3 The goal of the ISP is to 

incentivize members to provide such 

targeted liquidity to the NASDAQ 

Market Center.4 The Exchange noted in 

the ISP Filing that maintaining and 

increasing the proportion of orders in 

exchange-listed securities executed on a 

registered exchange (rather than relying 

on any of the available off-exchange 

execution methods) would help raise 

investors’ confidence in the fairness of 

their transactions and would benefit all 

investors by deepening NASDAQ’s 

liquidity pool, supporting the quality of 

price discovery, promoting market 

transparency and improving investor 

protection. 

The Exchange now proposes several 

adjustments to the Investor Support 

Program. The primary objective in 

making these adjustments is to moderate 

the ability of members (firms), on a 

prospective basis, from gaining ISP fee 

credits without effectively adding 

targeted liquidity to NASDAQ. This 

proposal clearly furthers the ISP goal of 

incentivizing members to provide 

targeted liquidity to the Exchange. 

First, the ISP generally compares a 

member’s Participation Ratio for the 

current month to the same member’s 

Participation Ratio in August 2010 

(known as the ‘‘Baseline Participation 

Ratio’’).5 This ratio is determined by 


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1202 Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Notices 

reported to all consolidated transaction reporting 

plans by all exchanges and trade reporting facilities 

during such month. Rule 7014(d)(4). Using the 

consolidated volume language of subsection 

(d)(4)(ii), the term ‘‘Consolidated Volume’’ is 

defined as the consolidated volume of shares of 

System Securities in executed orders reported to all 

consolidated transaction reporting plans by all 

exchanges and trade reporting facilities during such 

month. Rule 7014(d)(5). The term Consolidated 

Volume is substituted for current consolidated 

volume language throughout the rule. 

6The term ‘‘System Securities’’ is defined as all 

securities listed on NASDAQ and all securities 

subject to the Consolidated Tape Association Plan 

and the Consolidated Quotation Plan. Rule 4751(b). 

7See Proposed Rule 7014(d)(2). 

8The Exchange notes that while the Baseline 

Participation Ratio is rounded to three decimal 

places in the rule for ease of notation, for ISP billing 

purposes the Baseline Participation Ratio will not 

be rounded in this manner. 

9The .485% Baseline Participation Ratio is 

calculated as follows: 

(22 * 35 million shares)/(August consolidated 

volume * 22). There were 22 trading days in the 

month of August 2010. The consolidated volume for 

August 2010 was 165.846 billion (rounded). 

10The Exchange notes that the Indirect Order 

Flow proposal is not discriminatory against anyone, 

but to the contrary affords the Exchange a clearer 

picture of how all ISP participants provided flow 

in August. The Exchange notes further that while 

the Baseline Participation Ratio by definition 

always refers to August 2010, Indirect Order Flow 

was not applied during the ISP’s initial months of 

operation (November and December) and will be 

applied prospectively. 

11The term ‘‘Added Liquidity’’ is defined as: For 

a given member in a given month, the number of 

shares calculated by (i) subtracting from such 

member’s Participation Ratio for that month the 

member’s Baseline Participation Ratio, and then (ii) 

multiplying the resulting difference by the average 

daily consolidated volume of shares of System 

Securities in executed orders reported to all 

consolidated transaction reporting plans by all 

exchanges and trade reporting facilities during such 

month; provided that if the result is a negative 

number, the Added Liquidity amount shall be 

deemed zero. Rule 7014(d)(1). The term ‘‘System 

Securities’’ is defined as: All securities listed on 

NASDAQ and all securities subject to the 

Consolidated Tape Association Plan and the 

Consolidated Quotation Plan. Rule 4751(b). 

12 15 U.S.C. 78f. 

13 15 U.S.C. 78f(b)(4) and (5). 

measuring the number of shares in 

liquidity-providing orders entered by 

the member (through any NASDAQ 

port) and executed on NASDAQ and 

dividing this number by the 

consolidated (across all trading venues) 

share volume of System Securities 6

traded in the given month.7

The Exchange recognizes that some 

current members may not be able to 

establish a Baseline Participation Ratio 

for August 2010 (e.g., they did not add 

liquidity in August, or were not 

members). For such members, the 

Exchange proposes to add a provision 

that assumes a specified value in the 

Participation Ratio for August 2010. 

Specifically, the Exchange proposes 

new language in subsection (d)(2) 

stating that in calculating the August 

2010 Participation Ratio, if the result is 

zero (no liquidity was added), the 

Baseline Participation Ratio shall be 

deemed to be 0.485% (when rounded to 

three decimal places 8), which 

corresponds to an average daily volume 

(‘‘adv’’) of 35 million shares in August 

2010 (the ‘‘deemed ratio’’).9 The 

Exchange believes that 35 million adv is 

reasonable in light of the daily trading 

volumes in the competitive equity 

trading market. The Exchange believes 

further that the deemed ratio (which 

would be uniformly applicable to all 

members that did not contribute 

liquidity in August) is fair and equitable 

in that it should minimize such 

members gaining an advantage over 

members that contributed liquidity in 

August, and would not tend to unfairly 

exclude members adding targeted 

liquidity to the Exchange from the ISP. 

Second, the Baseline Participation 

Ratio now captures the number of 

shares of liquidity provided in orders 

that are entered by the member directly 

through any of its NASDAQ ports and 

executed in the NASDAQ Market Center 

in August 2010. A member might have 

provided liquidity to NASDAQ, 

however, through means other than 

directly through its own NASDAQ ports 

(e.g., indirectly thorough other 

members). The Exchange proposes an 

amendment to capture this indirect 

liquidity (indirect order flow) when 

establishing a member’s Participation 

Ratio for the month of August 2010. 

Specifically, the Exchange proposes 

new language in subsection (d)(2) 

stating that in calculating the August 

2010 Participation Ratio, the numerator 

shall be increased by the amount (if any) 

of the member’s August 2010 Indirect 

Order Flow. 

Indirect Order Flow is defined in new 

subsection (d)(5), for purposes of the 

rule, as the number of shares of liquidity 

provided in orders entered into the 

NASDAQ Market Center at the 

member’s direction by another member 

with minimal substantive 

intermediation by such other member 

and executed in the NASDAQ Market 

Center during such month. NASDAQ 

will assess whether a member entering 

orders provided substantive 

intermediation to another member based 

on how much discretion the entering 

member had in selecting such key order 

attributes as symbol, price, size and 

time in force. 

The Exchange believes that including 

Indirect Order Flow when calculating 

the August 2010 ratio should discourage 

(and properly account for) members 

simply changing how, or through whom 

(e.g., via aggregation) they send liquidity 

to the Exchange to gain ISP fee payment 

without effectively increasing the 

amount of targeted liquidity sent to the 

Exchange. This proposal, which is 

equally applicable to all, is directly 

conducive to the goal of adding new 

liquidity to the Exchange. As such, the 

Indirect Order Flow proposal is fair and 

equitable to all members. Moreover, the 

Exchange believes that it is decidedly 

non-discriminatory because it promotes 

accurate accounting of flow from all 

sources, thus minimizing the ability of 

any particular group of members from 

gaining an advantage over others.10

Third, to determine the amount of the 

ISP credit pursuant to the program, 

NASDAQ would multiply $0.0003 by 

the lower of: The number of shares of 

displayed liquidity provided in orders 

entered by the member thorough its ISPdesignated ports and executed in the 

NASDAQ Market Center during the 

given month; or the amount of Added 

Liquidity 11 for the given month. The 

established goal of the ISP is to attract 

certain targeted retail and institution 

liquidity. The Exchange believes that 

this type of retail and institutional 

liquidity would generally be executed at 

or above $1. The Exchange therefore 

proposes to amend the definition of 

shares of displayed liquidity in 

subsection (b)(1) to clarify that such 

liquidity must be executed at a price at 

or above $1 in the NASDAQ Market 

Center in order to qualify for the ISP. 

Fourth, the Exchange adds a 

methodology by which members can 

demonstrate their compliance with the 

requirements of Rule 7014 and the ISP. 

The Exchange proposes to add new 

subsection (e) to state that a member 

will certify to the reasonable satisfaction 

of the Exchange its Baseline 

Participation Ratio and its compliance 

with any other sections or requirements 

of this Rule if requested by NASDAQ. 

The Exchange limits such certification, 

which would be applicable to all 

program participants, to not more often 

that once a month during a member’s 

participation in the ISP. The Exchange 

believes that the certification provision 

would particularly help to ensure that 

all ISP participants may participate in 

the program on an equal, verifiable 

basis. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,12 in 

general, and with Sections 6(b)(4) and 

6(b)(5) of the Act,13 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 or 


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Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Notices 1203 

14See Section 6(b)(5) of the Act, 15 U.S.C. 

78f(b)(5). 

15See Section 6(b)(4) of the Act, 15 U.S.C. 

78f(b)(4). 

16See e.g., Concept Release (discusses the various 

venues where trades are executed). 17 15 U.S.C. 78s(b)(3)(a)(ii). 18 17 CFR 200.30–3(a)(12). 

system which NASDAQ operates or 

controls, and it is designed to promote 

just and equitable principles of trade, to 

remove impediments to and perfect the 

mechanism of a free and open market, 

and, in general, to protect investors and 

the public interest. 

The Investor Support Program 

encourages members to add targeted 

liquidity that is executed in the 

NASDAQ Market Center. The rule 

change enhances the Investor Support 

Program by proposing minor changes 

regarding certain assumed Participation 

Rate values for firms that did not add 

liquidity in August 2010; the addition of 

liquidity through Indirect Order Flow; 

liquidity executed at or above $1; and a 

certification provision. The primary 

objective in making these enhancements 

to the Investor Support Program is to 

minimize the ability of members (firms), 

on a prospective basis, from gaining ISP 

fee credits while effectively adding little 

or no targeted liquidity to NASDAQ. 

The rule change proposals ‘‘are not 

designed to permit unfair 

discrimination’’ 14 but, rather, are 

intended to promote submission of 

liquidity-providing orders to NASDAQ, 

which would benefit all NASDAQ 

members and all investors. Likewise, 

the program is consistent with the Act’s 

requirement ‘‘for the equitable allocation 

of reasonable dues, fees, and other 

charges.’’ 15 As explained in the 

immediately preceding paragraphs, the 

proposals enhance the goal of the ISP. 

Members who choose to increase the 

volume of ISP-eligible liquidityproviding orders that they submit to 

NASDAQ would be benefitting all 

investors, and therefore an additional 

credit, as contemplated in the proposed 

enhanced program, is equitable. Finally, 

NASDAQ notes that the intense 

competition among several national 

securities exchanges and numerous OTC 

venues effectively guarantees that fees 

and credits for the execution of trades 

in NMS securities remain equitable and 

are not unfairly discriminatory.16

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 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.17 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. 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

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

Number SR–NASDAQ–2010–154 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–2010–154. 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, 100 F Street, NE., 

Washington, DC 20549, 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–2010–154 and should be 

submitted on or before January 28, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–90 Filed 1–6–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63631; File No. SR–CBOE– 

2010–117] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Order Router 

Subsidy 

January 3, 2011. 

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

Securities Exchange Act of 1934, 15 

U.S.C. 78s(b)(1), notice is hereby given 

that on December 21, 2010, Chicago 

Board Options Exchange, Incorporated 

(‘‘CBOE’’ or the ‘‘Exchange’’) 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 CBOE. 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 

Chicago Board Options Exchange, 

Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) 

proposes to extend an existing program, 

under which it currently makes subsidy 


jdjones on DSK8KYBLC1PROD with NOTICES