Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Notices 52369 

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

2 17 CFR 240.19b–4. 

3The Penny Pilot was established in March 2008 

and in October 2009 was expanded and extended 

through December 31, 2010. See Securities 

Exchange Act Release Nos. 57579 (March 28, 2008), 

73 FR 18587 (April 4, 2008) (SR–NASDAQ–2008– 

026) (notice of filing and immediate effectiveness 

establishing Penny Pilot); 60874 (October 23, 2009), 

74 FR 56682 (November 2, 2009) (SR–NASDAQ– 

2009–091) (notice of filing and immediate 

effectiveness expanding and extending Penny 

Pilot); 60965 (November 9, 2009), 74 FR 59292 

(November 17, 2009) (SR–NASDAQ–2009–097) 

(notice of filing and immediate effectiveness adding 

seventy-five classes to Penny Pilot); 61455 

(February 1, 2010), 75 FR 6239 (February 8, 2010) 

(SR–NASDAQ–2010–013) (notice of filing and 

immediate effectiveness adding seventy-five classes 

to Penny Pilot); and 62029 (May 4, 2010), 75 FR 

25895 (May 10, 2010) (SR–NASDAQ–2010–053) 

(notice of filing and immediate effectiveness adding 

seventy-five classes to Penny Pilot). See also 

Exchange Rule Chapter VI, Section 5. 

The law judge found that, in sales of 

variable annuities to elderly customers, 

Respondents violated Section 17(a) of 

the Securities Act of 1933, Section 10(b) 

of the Securities Exchange Act of 1934, 

and Exchange Act Rule 10b–5, and 

Exchange Act Section 17(a) and 

Exchange Act Rule 17a–3. The law 

judge also found that Collins failed to 

reasonably supervise Brown within the 

meaning of Exchange Act Sections 

15(b)(4)(E) and 15(b)(6). For these 

violations, the law judge issued ceaseand-desist orders against Respondents, 

ordered Respondents to disgorge 

commissions earned from selling certain 

variable annuities, barred Respondents 

from associating with a broker, dealer, 

or investment adviser, and imposed a 

third-tier civil monetary penalty of 

$130,000 against each Respondent. 

Issues likely to be considered at oral 

argument include whether Respondents 

violated the above provisions and, if so, 

the extent to which, under the 

circumstances, sanctions are warranted. 

For further information, please 

contact the Office of the Secretary at 

(202) 551–5400. 

Dated: August 17, 2011. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21463 Filed 8–18–11; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65138; File No. SR– 

NASDAQ–2011–112] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Customer Rebates in Penny Pilot 

Options 

August 15, 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 August 5, 

2011, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘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 modify 

Exchange Rule 7050 governing pricing 

for NASDAQ members using the 

NASDAQ Options Market (‘‘NOM’’), 

NASDAQ’s facility for executing and 

routing standardized equity and index 

options. Specifically, NOM proposes to 

modify pricing for the Penny Pilot 3

Options (‘‘Penny Options’’) with respect 

to the Customer Rebate to Add 

Liquidity. 

The text of the proposed rule change 

is set forth below. Proposed new text is 

in italics and deleted text is in 

[brackets]. 

* * * * * 

7050. NASDAQ Options Market 

The following charges shall apply to the 

use of the order execution and routing 

services of the NASDAQ Options Market for 

all securities. 

(1) Fees for Execution of Contracts on the 

NASDAQ Options Market 

FEES AND REBATES

[per executed contract] 

Customer Professional Firm Non-NOM 

market maker 

NOM market 

maker 

Penny Pilot Options: 

Rebate to Add Liquidity ................................................ ◊ [$0.36 ] $0.29 $0.10 $0.25 $0.30 

Fee for Removing Liquidity ........................................... $0.45 $0.45 $0.45 $0.45 $0.45 

NDX and MNX: 

Rebate to Add Liquidity ................................................ $0.10 $0.10 $0.10 $0.10 $0.20 

Fee for Removing Liquidity ........................................... $0.50 $0.50 $0.50 $0.50 $0.40 

All Other Options: 

Fee for Adding Liquidity ................................................ $0.00 $0.20 $0.45 $0.45 $0.30 

Fee for Removing Liquidity ........................................... $0.45 $0.45 $0.45 $0.45 $0.45 

Rebate to Add Liquidity ....................................................... $0.20 $0.00 $0.00 $0.00 $0.00 

◊The Customer Rebate to Add Liquidity in 

Penny Pilot Options will be paid as follows: 

Monthly volume Rebate to add 

liquidity 

Tier 1 ............................................................................................................................................................ 0–499,999 $0.26 

Tier 2 ............................................................................................................................................................ 500,000–799,999 $0.32 

Tier 3 ............................................................................................................................................................ 800,000–1,199,999 $0.36 

Tier 4 ............................................................................................................................................................ 1,200,000 and up $0.38 


jlentini on DSK4TPTVN1PROD with NOTICES
52370 Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Notices 

4 15 U.S.C. 78f. 

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

6Pursuant 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. 

7A Firm receives a $0.10 per contract Rebate to 

Add Liquidity and a Non-NOM Market maker 

receives a $0.25 per contract Rebate to Add 

Liquidity. 

8See NYSE Arca’s Fee Schedule. 

(2)–(4) No Change 

* These fees are applicable to orders routed 

to ISE that are subject to Rebates and Fees for 

Adding and Removing Liquidity in Select 

Symbols. See ISE’s Schedule of Fees for the 

complete list of symbols that are subject to 

these fees. 

** These fees are applicable to orders 

routed to PHLX that are subject to Rebates 

and Fees for Adding and Removing Liquidity 

in Select Symbols. See PHLX’s Fee Schedule 

for the complete list of symbols that are 

subject to these fees. 

* * * * * 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

www.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 

NASDAQ is proposing to modify Rule 

7050 governing the rebates and fees 

assessed for option orders entered into 

NOM. Specifically, NASDAQ is 

proposing to modify pricing for the 

Customer Rebate to Add Liquidity in 

Penny Options to create monthly 

volume tiers. The Exchange believes the 

monthly volume thresholds will 

incentivize firms that route Customer 

orders to the Exchange to increase 

Customer order flow to the Exchange. 

The Exchange currently pays a 

Customer Rebate to Add Liquidity of 

$0.36 per executed contract to members 

providing liquidity through NOM in 

Penny Options. The Exchange proposes 

to amend this rebate so that Customers 

will receive a Rebate to Add Liquidity 

based on their total number of Customer 

contracts that add liquidity in Penny 

Options in a given month. The 

Exchange proposes to pay a Customer 

Rebate to Add Liquidity in Penny 

Options based on four volume tiers as 

follows: 

Monthly volume Rebate to add 

liquidity 

Tier 1 ............................................................................................................................................................ 0–499,999 $0.26 

Tier 2 ............................................................................................................................................................ 500,000–799,999 $0.32 

Tier 3 ............................................................................................................................................................ 800,000–1,199,999 $0.36 

Tier 4 ............................................................................................................................................................ 1,200,000 and up $0.38 

By way of example, the Exchange 

would pay a Rebate to Add Liquidity of 

$0.36 per contract to a NOM Participant 

that executed 900,000 Customer 

contracts that added liquidity in Penny 

Options in a given month. If the NOM 

Participant executed 1,500,000 

Customer contracts that added liquidity 

in Penny Options in a given month, the 

Exchange would pay a Rebate to Add 

Liquidity of $0.38 per contract. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule changes are consistent with the 

provisions of Section 6 of the Act,4 in 

general, and with Section 6(b)(4) of the 

Act,5 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 system which 

NASDAQ operates or controls. 

The Exchange believes that the 

proposed monthly tier structure for 

Customer Rebates to Add Liquidity in 

Penny Options is equitable, reasonable 

and not unfairly discriminatory because 

by incentivizing broker-dealers acting as 

agent for Customer orders to select the 

Exchange as a venue to post Customer 

orders will attract Customer order flow 

and benefit all market participants. 

While the Exchange is lowering the 

current Rebate to Add Liquidity for 

Customers in tiers 1 and 2, the Exchange 

believes that broker-dealers acting as 

agent for Customer orders will in fact be 

incentivized to bring additional order 

flow to the Exchange and obtain higher 

rebates. 

Furthermore, the Exchange believes 

that the proposed Customer monthly 

volume tier Rebates to Add Liquidity 

are equitable and not unfairly 

discriminatory because the Rebates to 

Add Liquidity are higher in tier levels 

2, 3 and 4 for Customers as compared 

to all other market participants. With 

respect to tier level 1, the Exchange is 

proposing to pay a Customer a lower 

Rebate to Add Liquidity as compared to 

a Professional and NOM Market Maker. 

The Exchange believes that this 

proposal is equitable because the 

Customer has the opportunity to earn 

higher rebates with the tier structure as 

compared to a Professional, who will 

only receive a $0.29 per contract Rebate 

to Add Liquidity, and a NOM Market 

Maker, who will only receive a $0.30 

per contract Rebate to Add Liquidity. 

Additionally, with respect to NOM 

Market Makers, the proposed fee 

structure is equitable because market 

makers have obligations to the market 

and regulatory requirements,6 which 

normally do not apply to other market 

participants. Customers receive a higher 

Rebate to Add Liquidity for all tiers as 

compared to a Firm and Non-NOM 

Market Maker.7

The Exchange believes the proposed 

monthly tier structure for Customer 

Rebates to Add Liquidity in Penny 

Options is also reasonable because the 

amount of the rebate is similar to a 

tiered rebate offered by NYSE Arca, Inc. 

(‘‘NYSE Arca’’). NYSE Arca pays a per 

contract rate on all posted liquidity in 

Customer Penny Pilot Issues by 

aggregating total contracts executed that 

added liquidity in Penny Pilot Issues in 

a given month.8


jlentini on DSK4TPTVN1PROD with NOTICES
Federal Register / Vol. 76, No. 162 / Monday, August 22, 2011 / Notices 52371 

9 15 U.S.C. 78s(b)(3)(A)(ii). 

10 17 CFR 240.19b–4(f)(2). 11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

The Exchange believes that the 

proposed monthly tier structure for 

Customer Rebates to Add Liquidity in 

Penny Options is equitable and not 

unfairly discriminatory because the 

Exchange would uniformly pay a Rebate 

to Add Liquidity to Customers 

executing Penny Options based on the 

monthly tiers proposed herein. 

The Exchange operates in a highly 

competitive market comprised of nine 

U.S. options exchanges in which 

sophisticated and knowledgeable 

market participants can readily send 

order flow to competing exchanges if 

they deem fee levels at a particular 

exchange to be excessive. The Exchange 

believes that the proposed rebate 

structure and tiers are competitive and 

similar to other rebates and tiers in 

place on other exchanges. The Exchange 

believes that this competitive 

marketplace impacts the rebates present 

on the Exchange today and substantially 

influences the proposals set forth above. 

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. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act 9 and paragraph 

(f)(2) of Rule 19b-4 10 thereunder. 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–2011–112 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–2011–112. 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 No. SR–NASDAQ– 

2011–112 and should be submitted on 

or before September 12, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21319 Filed 8–19–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65142; File No. SR–Phlx– 

2011–112] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NASDAQ 

OMX PHLX LLC Relating to Clarifying 

Amendments to the Rule Book 

August 16, 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 August 

8, 2011, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 

Exchange Rules 625, 3228 and Options 

Procedure Floor Advice (‘‘OFPA’’) F–10 

to eliminate unnecessary text and 

correct cross-references in Rule text. 

The Exchange also proposes to 

eliminate an unnecessary title in the 

Rule Book. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqtrader.com/ 

micro.aspx?id=PHLXfilings, at the 

principal office of the Exchange, at the 

Commission’s Public Reference Room, 

and on the Commission’s Web site at 

http://www.sec.gov. 

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. 


jlentini on DSK4TPTVN1PROD with NOTICES