Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 22015 

24 15 U.S.C. 78s(b)(3)(A)(iii). 

25 17 CFR 240.19b–4(f)(6). 

26 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s 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. 

27 17 CFR 240.19b–4(f)(6). 

28 17 CFR 240.19b–4(f)(6)(iii). 

29For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

30 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Exchange’s existing technology platform 

for Non-FLEX trading, which should 

make the FLEX System more efficient 

and effective and easier for users to 

understand. The Exchange believes that 

the further refinements being proposed 

in this instant rule change filing should 

also serve to further those objectives by 

more clearly and accurately describing 

the operation of the enhanced System 

and deleting superfluous and 

unnecessary provisions in the FLEX 

rules. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition that is 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 

The Exchange neither solicited or 

received comments on the proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 24 and Rule 

19b–4(f)(6) thereunder.25 Because the 

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 

prior to 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, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act and Rule 19b–4(f)(6)(iii) 

thereunder.26

A proposed rule change filed under 

Rule 19b–4(f)(6) 27 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b4(f)(6)(iii),28 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. 

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because such waiver will allow CBOE to 

codify the revisions to its rules to more 

clearly and accurately describe the 

operation of its new system for FLEX 

Options prior to implementation. 

Therefore, the Commission designates 

the proposal operative upon filing.29

At any time within 60 days of the 

filing of such 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 email to rulecomments@sec.gov. Please include File 

Number SR–CBOE–2012–033 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–CBOE–2012–033. 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 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 the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; 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–CBOE– 

2012–033 and should be submitted on 

or before May 3, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–8839 Filed 4–11–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66768; File No. SR– 

NASDAQ–2012–048] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Customer Fees and Rebates in Penny 

Pilot Options 

April 6, 2012. 

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 April 2, 

2012, 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 NASDAQ. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

mstockstill on DSK4VPTVN1PROD with NOTICES

22016 Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 

3The Penny Pilot was established in March 2008 

and in October 2009 was expanded and extended 

through June 30, 2012. 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); 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); 65969 (December 15, 2011, 

76 FR 79268 (December 21, 2011) (SR–NASDAQ– 

2011–169) (notice of filing and immediate 

effectiveness extension and replacement of Penny 

Pilot). See also Exchange Rule Chapter VI, Section 

5. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASDAQ proposes to modify Chapter 

XV, entitled ‘‘Option Pricing,’’ at 

Section 2 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 amend 

the Penny Pilot 3 Options (‘‘Penny 

Options’’) Customer Rebates to Add 

Liquidity and Penny Options Customer 

Fee for Removing Liquidity. The 

Exchange also proposes to make other 

minor amendments to the Section 2. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaq.cchwall 

street.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. 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 proposes to modify Chapter 

XV, entitled ‘‘Option Pricing,’’ at 

Section 2 governing the rebates and fees 

assessed for option orders entered into 

NOM. Specifically, the Exchange is 

proposing to modify the five tier 

structure for paying Customer Rebates to 

Add Liquidity in Penny Options. The 

Exchange proposes to amend various 

rebate tiers to further incentivize NOM 

Participants to route Customer orders in 

Penny Options to the Exchange by 

paying additional rebates for certain 

orders after the NOM Participant has 

met a volume criteria and also removing 

certain criteria to qualify for a rebate. 

The Exchange believes that 

incentivizing NOM Participants to send 

additional Customer orders in Penny 

Options to the Exchange will benefit all 

market participants by adding liquidity 

to the market. 

Specifically, the Exchange currently 

pays a Customer Rebate to Add 

Liquidity in Penny Options based on the 

following tier structure: 

* * * The Customer Rebate to Add 

Liquidity in Penny Pilot Options will be 

paid as noted below. Each Customer 

order of 5,000 or more, displayed or 

non-displayed contracts, which adds 

liquidity in Penny Pilot Options, will 

qualify for an additional rebate of $0.01 

per contract provided the NOM 

Participant has qualified for a rebate in 

Tier 2, 3, 4 or 5 for that month. 

Monthly volume Rebate to add 

liquidity 

Tier 1 Participant adds Customer liquidity of up to 14,999 contracts per day in a month ............................................................... $0.26 

Tier 2 Participant adds Customer liquidity of 15,000 to 49,999 contracts per day in a month ........................................................ 0.38 

Tier 3 Participant adds Customer liquidity of 50,000 or more contracts per day in a month .......................................................... 0.42 

Tier 4 a Participant adds (1) Customer liquidity of 100,000 or more contracts per day in a month, and (2) NOM Market Maker 

liquidity of 40,000 or more contracts per day in a month ................................................................................................................ 0.43 

Tier 5 b Participant adds (1) Customer liquidity of 25,000 or more contracts per day in a month, (2) the Participant has certified 

for the Investor Support Program set forth in Rule 7014; and (3) the Participant executed at least one order on NASDAQ’s 

equity market .................................................................................................................................................................................... 0.41 

a For purposes of Tier 4, the Exchange will aggregate the trading activity of separate NOM Participants when computing average daily volumes where 75 percent common ownership or control exists between NOM Participants. b For purposes of Tier 5, the Exchange will allow a NOM Participant to qualify for the rebate if a NASDAQ member under common ownership 

with the NOM Participant has certified for the Investor Support Program and executed at least one order on NASDAQ’s equity market. Common 

ownership is defined as 75 percent common ownership or control. 

The Exchange proposes to amend the 

tier structure for Customer Rebates to 

Add Liquidity in Penny Options as 

follows: 

* * * The Customer Rebate to Add 

Liquidity in Penny Pilot Options will be 

paid as noted below. Each Customer 

order of 5,000 or more, displayed or 

non-displayed contracts, which adds 

liquidity in Penny Pilot Options, will 

qualify for an additional rebate of $0.01 

per contract provided the NOM 

Participant has qualified for a rebate in 

Tier 2, 3, 4 or 5 for that month. 

Monthly volume Rebate to add 

liquidity 

Tier 1 Participant adds Customer liquidity of up to 14,999 contracts per day in a month ............................................................... $0.26 

Tier 2 Participant adds Customer liquidity of 15,000 to 49,999 contracts per day in a month ........................................................ 0.38 

Tier 3 Participant adds Customer liquidity of 50,000 to 74,999 contracts per day in a month ........................................................ 0.43 

Tier 4 Participant adds Customer liquidity of 75,000 or more contracts per day in a month .......................................................... 0.44 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 22017 

4Aggregation is necessary and appropriate 

because certain NOM participants conduct 

Customer and NOM Market Maker trading activity 

through separate but related broker-dealers. 

5For a detailed description of the ISP, 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 Nos. 63414 

(December 2, 2010), 75 FR 76505 (December 8, 

2010) (NASDAQ–2010–153) (notice of filing and 

immediate effectiveness); and 63628 (January 3, 

2011), 76 FR 1201 (January 7, 2011) (NASDAQ– 

2010–154) (notice of filing and immediate 

effectiveness). 

6The Exchange currently pays an additional 

rebate of $0.01 per contract for each Customer order 

of 5,000 or more, displayed or non-displayed 

contracts, which adds liquidity in Penny Options as 

long as the NOM Participant qualified for a rebate 

in Tier 2, 3, 4 or 5 for that month. This is not being 

amended in this proposal. 

7See SR–Phlx–2012–35. 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(4). 

10The Exchange adopted these monthly volume 

achievement tiers in September 2011. See Securities 

Exchange Act Release Nos. 65317 (September 12, 

2011), 76 FR 57778 (September 16, 2011) (SR– 

NASDAQ–2011–124), 65317 (September 12, 2011), 

76 FR 61129 (October 3, 2011) (SR–NASDAQ– 

2011–127), 66126 (January 10, 2012), 77 FR 2335 

(January 17, 2012) (SR–NASDAQ–2012–003) and 

66360 (February 8, 2012), 77 FR 8312 (February 14, 

2012) (SR–NASDAQ–2012–022). 

Monthly volume Rebate to add 

liquidity 

Tier 5 a Participant adds (1) Customer liquidity of 25,000 or more contracts per day in a month, (2) the Participant has certified 

for the Investor Support Program set forth in Rule 7014; and (3) the Participant executed at least one order on NASDAQ’s 

equity market .................................................................................................................................................................................... 0.42 

aFor purposes of Tier 5, the Exchange will allow a NOM Participant to qualify for the rebate if a NASDAQ member under common ownership 

with the NOM Participant has certified for the Investor Support Program and executed at least one order on NASDAQ’s equity market. Common 

ownership is defined as 75 percent common ownership or control. 

Currently, Tier 3 firms that add 

50,000 or more contracts per day in a 

month of Customer liquidity, in Penny 

Options, receive a rebate of $0.42 per 

contract. The Exchange is proposing to 

increase the Tier 3 Customer rebate from 

$0.42 per contract to $0.43 per contract. 

The Exchange also proposes to amend 

the number of contracts required to 

qualify for Tier 3 from 50,000 or more 

contracts per day in a month to require 

NOM Participants to add between 

50,000 to 74,999 contracts per day in a 

month of Customer liquidity in Penny 

Options to qualify for the increased 

$0.43 Customer rebate. 

Currently, Tier 4 firms that (1) add 

Customer liquidity of 100,000 or more 

contracts per day in a month of 

Customer order liquidity in Penny 

Options, and (2) provide 40,000 or more 

contracts per day of NOM Market Maker 

liquidity per day in a month receive a 

rebate of $0.43 per contract if both 

criteria are met. For purposes of 

determining qualification for this tier, 

the Exchange currently aggregates 4 the 

trading activity of separate NOM 

Participants in calculating the average 

daily volume if there is at least 75% 

common ownership or control between 

the NOM Participants. The Exchange 

proposes to amend the criteria to qualify 

for Tier 4 from 100,000 or more 

contracts per day in a month to 75,000 

or more contracts per day in a month of 

Customer liquidity in Penny Options 

and also remove the second criteria to 

qualify for Tier 4. The Exchange would 

therefore remove the requirement that a 

NOM Market Maker add liquidity of 

40,000 or more contracts per day in a 

month. In addition the Exchange 

proposes to increase the current Tier 4 

Customer rebate of $0.43 per contract to 

$0.44 per contract. The Exchange would 

also remove note ‘‘(a)’’, which was 

associated with the second criteria of 

Tier 4, which is no longer necessary as 

the NOM Marker Maker requirement 

would no longer be a condition to 

receive the Tier 4 Customer rebate. 

Currently, Tier 5 firms that (1) 

provide 25,000 or more contracts per 

day in a month of Customer order 

liquidity in Penny Options, (2) where 

the Participant has certified for the 

Investor Support Program (‘‘ISP’’) as set 

forth in Rule 7014 5; and (3) where the 

Participant executed at least one order 

on NASDAQ’s equity market receive a 

$0.41 per contract Customer rebate. The 

Exchange proposes to amend Tier 5 to 

increase the Customer rebate in Penny 

Options from $0.41 per contract to $0.42 

per contract. The Exchange would also 

renumber the current note ‘‘(b)’’ as note 

‘‘(a).’’ The Exchange is not proposing 

any changes to current Tiers 1 and 2.6

The Exchange also proposes to 

subsidize the proposed increased 

Customer Rebates to Add Liquidity in 

Penny Options by increasing the 

Customer Fee for Removing Liquidity in 

Penny Options from $0.44 per contract 

to $0.45 per contract. The Exchange 

believes that this increase will allow the 

Exchange to compete more effectively 

by subsidizing rebates offered on 

Customer orders. 

The Exchange also proposes to make 

minor amendments to Section 2 

including amending the title of Section 

2 from ‘‘NASDAQ Options Market 

–Fees’’ to ‘‘NASDAQ Options Market 

–Fees and Rebates.’’ to more specifically 

describe the Rule. The Exchange also 

proposes to correct a cross-reference to 

the NASDAQ OMX PHLX LLC (‘‘Phlx’’) 

‘‘Fee Schedule.’’ The Exchange proposes 

to update the title of the ‘‘Fee Schedule’’ 

to the ‘‘Pricing Schedule’’ in accordance 

with a recent amendment filed by Phlx.7

2. Statutory Basis 

NASDAQ believes that the proposed 

rule changes are consistent with the 

provisions of Section 6 of the Act,8 in 

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

Act,9 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 new pricing tiers are 

reasonable, equitable and not unfairly 

discriminatory because they continue an 

existing program 10 to encourage brokerdealers acting as agent for Customer 

orders to select the Exchange as a venue 

to post Customer orders. The Exchange 

believes that its success at attracting 

Customer order flow benefits all market 

participants by improving the quality of 

order interaction and executions at the 

Exchange. The Exchange believes the 

existing monthly volume thresholds 

have incentivized firms that route 

Customer orders to the Exchange to 

increase Customer order flow to the 

Exchange. The Exchange desires to 

continue to encourage firms that route 

Customer orders to increase Customer 

order flow to the Exchange by offering 

greater Customer rebates for greater 

liquidity added to the Exchange. 

Specifically, the Exchange believes 

that the increased Customer rebates in 

Penny Options would further 

incentivize firms to continue to send 

more Customer volume to the Exchange. 

By increasing the Customer rebates in 

Tiers 3, 4 and 5 by $0.01 per contract 

each, the Exchange would further 

encourage NOM Participants to transact 

a greater number of Customer rebates in 

Penny Options. With respect to Tier 3, 

NOM Participants that qualify for these 

Customer rebates today should qualify 

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22018 Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 

11As previously mentioned, the Exchange would 

no longer require 40,000 or more contracts per day 

in a month of NOM Market Maker liquidity. 

12Tier 1 pays a rebate for NOM Participants that 

add Customer liquidity of up to 14,999 contracts 

per day in a month of Penny Options. There is no 

required minimum volume of Customer orders to 

qualify for a Customer Rebate to Add Liquidity. 13 15 U.S.C. 78s(b)(3)(A)(ii). 

for the increased rebate which continues 

to require at least 50,000 contracts per 

day in a month of Customer liquidity, 

but also amends the criteria to between 

50,000 and 74,999 contracts of Customer 

liquidity in Penny Options to qualify for 

the increased rebate of $0.43 per 

contract. NOM Participants who 

currently transact greater than 74,999 

contracts per day in a month today 

would be entitled to an even greater 

rebate because they would qualify for 

the increased Tier 4 rebate of $0.44 per 

contract. The Exchange is amending 

Tier 4 to lower the first criteria from 

100,000 or more contracts of Customer 

liquidity to 75,000 or more contracts of 

Customer liquidity in Penny Options 

and remove the second criteria to 

qualify for the Customer rebate.11

Therefore NOM Participants would only 

be required to add 75,000 or more 

contracts per day in a month of 

Customer liquidity in Penny Options to 

receive the increased Customer rebate of 

$0.44 per contract. The lower criteria in 

Tier 4 would allow NOM Participants 

that currently qualify for Tier 3, because 

they add greater than 75,000 contracts 

per day in a month of Customer 

liquidity in Penny Options, to qualify 

for the $0.44 per contract rebate and 

also encourage other NOM Participants 

to add more Customer liquidity to 

qualify for an even greater rebate than 

that offered for Tier 3. 

The Exchange’s proposal to increase 

the rebates in Tiers 3, 4 and 5 and 

amend the Tier 3 and 4 criteria as 

described herein is reasonable because 

it should further encourage NOM 

Participants to qualify for Customer 

rebates in Penny Options by transacting 

a greater number of Customer contracts 

in Penny Options and increase liquidity 

on NOM. Increased liquidity benefits all 

market participants on the Exchange. In 

addition, the increased Tier 5 Customer 

rebate should further encourage 

increased activity in both the NASDAQ 

Options Market and in the ISP of the 

NASDAQ equity market. The 

Exchange’s proposal to increase the 

rebates in Tiers 3, 4 and 5 as well as 

amend the criteria for Tiers 3 and 4 is 

equitable and not unfairly 

discriminatory because all NOM 

Participants that transact Customer 

orders in Penny Options are eligible for 

the Customer rebates.12 In addition, the 

proposals to amend the Tier 3 criteria to 

between 50,000 and 74,999 contracts of 

Customer liquidity in Penny Options 

and lower the Tier 4 criteria to 75,000 

or more contracts of Customer liquidity 

in Penny Options and eliminate the 

second criteria are equitable and not 

unfairly discriminatory because they 

should encourage NOM Participants 

that currently qualify for Tier 3 today to 

obtain the increased Tier 4 rebate and 

encourage other NOM Participants to 

transact additional Customer orders in 

Penny Options to obtain the increased 

rebates. 

The Exchange’s proposal to increase 

the Customer Fee for Removing 

Liquidity in Penny Options is 

reasonable because the Exchange is 

seeking to recoup costs associated with 

offering Customer rebates in Penny 

Options to attract greater liquidity to the 

Exchange. The increased liquidity 

benefits all market participants. The 

Exchange’s proposal to increase the 

Customer Fee for Removing Liquidity in 

Penny Options is equitable and not 

unfairly discriminatory because all 

market participants would uniformly be 

assessed a $0.45 per contract Customer 

Fee for Removing Liquidity in Penny 

Options. Currently, Professionals, 

Firms, Non-NOM Market Makers and 

NOM Market Makers are assessed a 

$0.45 per contract Fee for Removing 

Liquidity in Penny Options. The 

Exchange believes that increasing the 

Customer Fee for Removing Liquidity by 

$0.01 per contract ($0.44 per contract to 

$0.45 per contract) allows the Exchange 

to recoup costs and offer even greater 

Customer rebates, thereby benefitting all 

market participants by attracting 

Customer order flow to NOM. 

The Exchange’s proposals to amend 

the title of Section 2 to reflect the 

rebates offered and also update a crossreference to the Phlx fees are reasonable, 

equitable and not unfairly 

discriminatory because these 

amendments provide greater clarity and 

accuracy to the Rule text. 

The Exchange operates in a highly 

competitive market comprised of nine 

U.S. options exchanges in which 

sophisticated and knowledgeable 

market participants can and do send 

order flow to competing exchanges if 

they deem fee levels at a particular 

exchange to be excessive or rebate 

opportunities to be inadequate. The 

Exchange believes that the proposed fee 

and rebate scheme are competitive and 

similar to other fees, rebates and tier 

opportunities in place on other 

exchanges. The Exchange believes that 

this competitive marketplace materially 

impacts the fees and rebates present on 

the Exchange today and substantially 

influences the proposal 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.13 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 email to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2012–048 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–2012–048. 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 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Notices 22019 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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 the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; 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–2012–048 and should be 

submitted on or before May 3, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–8838 Filed 4–11–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66766; File No. SR–ICC– 

2012–05] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change to Membership 

Qualifications 

April 6, 2012. 

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 April 3, 

2012, ICE Clear Credit LLC (‘‘ICC’’) 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 primarily by ICC. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of Terms of Substance of the 

Proposed Rule Change 

The purpose of proposed rule change 

is to conform the ICC membership 

qualifications to be in compliance with 

Commodity Futures Trading 

Commission (‘‘CFTC’’) Regulations 

39.12(a)(2)(ii) and 39.12(a)(2)(iii) no 

later than the May 7, 2012 effective date 

of CFTC Regulations 39.12(a)(2)(ii) and 

39.12(a)(2)(iii). ICC believes these 

changes are also consistent with 

Commission Proposed Rule 17Ad– 

22(b)(7). 

As discussed in more detail in Item 

II(A) below, the changes to Chapters 1 

and 2 of the ICC Rules provide for 

amendments to the membership 

qualifications of ICC and related 

definitions. 

II. Self-Regulatory Organization’s 

Statement of Purpose of, and Statutory 

Basis for, the Proposed Rule Change 

In its filing with the Commission, ICC 

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. ICC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

A. Self-Regulatory Organization’s 

Statement of Purpose of, and Statutory 

Basis for, the Proposed Rule Change 

CFTC Regulation 39.12(a)(2)(ii) 

provides that ‘‘the participant 

requirements shall set forth capital 

requirements that are based on 

objective, transparent, and commonly 

accepted standards that appropriately 

match capital to risk. Capital 

requirements shall be scalable to the 

risks posed by clearing members.’’ 

Accordingly, ICC revised Rule 209 

(Risk-Based Capital Requirement) to 

provide that if at any time and for so 

long as a Clearing Participant has a 

required contribution to the ICC General 

Guaranty Fund that exceeds 25% of its 

‘‘excess net capital,’’ ICC may (in 

addition to imposing the trading activity 

limitations provided for in ICC Rule 

203(b)) require such Clearing Participant 

to prepay and maintain with ICE Clear 

Credit an amount up to the Clearing 

Participant’s assessment obligation. ICC 

Rule 102, the definitional section of the 

Rules, has been amended to define 

‘‘excess net capital’’ as the amount 

reported on Form 1–FR–FCM or FOCUS 

Report or as otherwise reported to the 

CFTC under CFTC Rule 1.12. For a 

Participant that is not an FCM or a 

Broker-Dealer, there is no standard 

equivalent to ‘‘excess net capital’’ which 

can be utilized across all types of 

Clearing Participant entities. Therefore, 

Rule 102 places the burden on the 

Clearing Participant to demonstrate that 

its capital exceeds the capital 

requirement that would be applicable to 

it if it were an FCM, as determined 

pursuant to a methodology acceptable to 

ICC. 

CFTC Regulation 39.12(a)(2)(iii) 

provides that ‘‘a derivatives clearing 

organization shall not set a minimum 

capital requirement of more than $50 

million for any person that seeks to 

become a clearing member in order to 

clear swaps’’. [Emphasis added.] 

Accordingly, ICC revised Rule 

201(b)(ii) incorporates the CFTC 

mandated $50,000,000 minimum 

adjusted net capital requirement for all 

ICC Clearing Participants. For a 

Participant that is not an FCM or a 

Broker-Dealer, there is no standard 

equivalent to ‘‘adjusted net capital’’ 

which can be utilized across all types of 

Clearing Participant entities. Therefore, 

Rule 201(b)(ii)(C) places the burden on 

the Clearing Participant to demonstrate 

that its capital exceeds the capital 

requirement that would be applicable to 

it if it were an FCM, as determined 

pursuant to a methodology acceptable to 

ICC. 

In addition, in order to promote 

compliance with the capital adequacy 

requirements, Rule 201(b)(i) has been 

amended to provide that a Clearing 

Participant must be regulated for capital 

adequacy by a competent authority such 

as the CFTC, SEC, Federal Reserve 

Board, Office of the Comptroller of the 

Currency, U.K. Financial Services 

Authority or any other regulatory body 

ICC designates from time to time for this 

purpose, or is an affiliate of an entity 

that satisfies the capital adequacy 

regulatory requirement and is subject to 

consolidated holding company group 

supervision. 

The Board of Managers approved the 

above amendments on March 22, 2012 

after receiving recommendations to 

approve from the ICE Clear Credit Risk 

Committee on March 21, 2012, and the 

ICE Clear Credit Risk Management 

Subcommittee on March 7, 2012. 

However, the ICE Clear Credit Board, 

Risk Committee and Risk Management 

Subcommittee expressed concern with 

respect the Amended Rules relating to 

Commission Proposed Rule 17Ad– 

22(b)(7) and CFTC Regulation 

39.12(a)(2)(iii) and only recommended 

approval or approved the same in order 

mstockstill on DSK4VPTVN1PROD with NOTICES