Document ID: SEC-2013-1673-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-09-27T04:00Z

[Federal Register Volume 78, Number 188 (Friday, September 27, 2013)]
[Notices]
[Pages 59740-59743]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-23539]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70470; File No. SR-NASDAQ-2013-117]

Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Make Minor Modifications To Pricing Incentive Programs Under NASDAQ's 
Schedule of Fees and Credits Applicable To Trading on the NASDAQ 
Options Market

September 23, 2013.
    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 September 9, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ is proposing to make minor modifications to pricing 
incentive programs under NASDAQ's schedule of fees and credits 
applicable to trading on the NASDAQ Options Market (``NOM''). 
Specifically, NASDAQ is proposing to exclude from volume-based pricing 
calculations any trading day on which NOM is closed for trading due to 
early closing or a market-wide trading halt. This exclusion exists 
today for the

[[Page 59741]]

trading of [sic] on NASDAQ's equities trading facility.\3\
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    \3\ NASDAQ is not proposing to exclude trading on the day of the 
Russell Reconstitution from the calculation of volume-based pricing 
for the trading of options. The Russell Reconstitution has little or 
no impact on options trading because the options market does not 
operate a closing cross such as occurs on the equities market. Thus, 
there is little or no impact on the volume of options trades.
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    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 those statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ Options Rule Chapter XV, Section 2 contains a number of 
pricing incentive programs that are designed to encourage member 
participation in NOM by increasing rebates or reducing fees for firms 
that trade on NOM in increasingly higher volumes.
    NASDAQ has determined for purposes of calculating Monthly Volume 
Tiers under Chapter XV, Section 2, any day that the market is not open 
for the entire trading day should be excluded from such calculation. 
This formulation would exclude, for example, days on which the market 
closes early for holiday observances. It would also exclude days where 
NOM declares a trading halt in all securities or honors a market-wide 
halt initiated by another market. This would apply to the market-wide 
trading halt of approximately three hours on August 22, 2013, which NOM 
plans to exclude from Monthly Volume Tiers for the month of August.
    The proposed rule change will impacted [sic] billing rates for all 
eight Monthly Volume Tiers by which NOM determines the rebate per share 
for firms that add Customer and/or Professional liquidity based on 
increasing percentages of total industry customer equity and ETF option 
average daily volume (``ADV'') contracts per day in a month (Tiers 1 
through 4). It would also apply to the calculation of Average Daily 
Volume for a specific member (Tiers 5 through 8). The rebates range 
from $0.25 to $0.48 per contract:

 
 
 
Tier 1...................  Participant adds Customer and/          $0.25
                            or Professional liquidity of
                            up to 0.20% of total
                            industry customer equity and
                            ETF option average daily
                            volume (``ADV'') contracts
                            per day in a month.
Tier 2...................  Participant adds Customer and/          $0.40
                            or Professional liquidity of
                            0.21% to 0.30% of total
                            industry customer equity and
                            ETF option ADV contracts per
                            day in a month.
Tier 3...................  Participant adds Customer and/          $0.43
                            or Professional liquidity of
                            0.31% to 0.49% of total
                            industry customer equity and
                            ETF option ADV contracts per
                            day in a month.
Tier 4...................  Participant adds Customer and/          $0.45
                            or Professional liquidity of
                            0.5% or more of total
                            industry customer equity and
                            ETF option ADV contracts per
                            day in a month.
Tier 5...................  Participant adds (1) Customer           $0.42
                            and/or Professional
                            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.
Tier 6...................  Participant has Total Volume            $0.45
                            of 115,000 or more contracts
                            per day in a month, of which
                            25,000 or more contracts per
                            day in a month must be
                            Customer and/or Professional
                            liquidity.
Tier 7...................  Participant has Total Volume            $0.47
                            of 150,000 or more contracts
                            per day in a month, of which
                            50,000 or more contracts per
                            day in a month must be
                            Customer and/or Professional
                            liquidity.
Tier 8...................  Participant (1) has Total               $0.48
                            Volume of 325,000 or more
                            contracts per day in a
                            month, or (2) Participant
                            has Total Volume of 200,000
                            or more contracts per day in
                            a month, of which 70,000 or
                            more contracts per day in a
                            month must be Customer and/
                            or Professional liquidity or
                            (3) adds Customer and/or
                            Professional liquidity of
                            1.00% or more of national
                            customer volume in multiply-
                            listed equity and ETF
                            options classes in a month.
 

If the Exchange did not exclude aberrant low volume days when 
calculating ADV for the month, as a result of the decreased trading 
volume, the numerator for the calculation (e.g., trading volume) would 
be correspondingly lower, but the denominator for the threshold 
calculations (e.g., the number of trading days) would not be decreased. 
This would result in an effective cost increase.
    The proposed rule change would also apply to the monthly volume 
tiers NOM uses to determine the Rebate to Add Liquidity:

------------------------------------------------------------------------
   Monthly  volume                               Rebate to add liquidity
------------------------------------------------------------------------
Tier 1..............  Participant adds NOM      $0.25.
                       Market Maker liquidity
                       in Penny Pilot Options
                       of up to 39,999
                       contracts per day in a
                       month.
Tier 2..............  Participant adds NOM      $0.30.
                       Market Maker liquidity
                       in Penny Pilot Options
                       of 40,000 to 69,999
                       contracts per day in a
                       month.
Tier 3..............  Participant adds NOM      $0.32.
                       Market Maker liquidity
                       in Penny Pilot Options
                       of 70,000 to 99,999
                       contracts per day in a
                       month.
Tier 4..............  Participant adds NOM      $0.32 or $0.38 in the
                       Market Maker liquidity    following symbols BAC,
                       in Penny Pilot Options    GLD, IWM, QQQ and VXX
                       of 100,000 or more        or $0.40 in SPY.
                       contracts per day in a
                       month.
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[[Page 59742]]

The proposal does not apply to other transaction fees or rebates in 
Section 2, or to other fees on the pricing schedule outside of Section 
2.
    Absent the authority to exclude days that the market is not open 
for the entire trading day, members will experience an effective 
increase in fees or decrease in rebates. The artificially low volumes 
of trading on such days reduce the average daily activity of NOM 
members both daily and monthly. Accordingly, excluding such days from 
the monthly calculation will diminish the likelihood of an effective 
increase in the cost of trading on NOM, a result that is unintended and 
undesirable to NOM and to NOM members.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\4\ in general, and with 
Sections 6(b)(4) and 6(b)(5) 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, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that the proposed change to eliminate from the 
calculation days on which the market is not open the entire trading day 
is reasonable because it preserves NASDAQ's full intent behind adopting 
volume-based pricing. The proposed change is equitable and non-
discriminatory because it applies equally to all members and to all 
volume tiers. In the event that NASDAQ identifies a disparate impact on 
one or another volume tier in the future, NASDAQ may determine to 
modify that volume tier via an additional proposed rule change.

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. NASDAQ notes that 
it operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, NASDAQ must 
continually adjust its fees to remain competitive with other exchanges 
and with alternative trading systems that have been exempted from 
compliance with the statutory standards applicable to exchanges. 
Because competitors are free to modify their own fees in response, and 
because market participants may readily adjust their order routing 
practices, NASDAQ believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    In this instance, the proposed rule change should not impact 
competition because it merely preserves the full intent of NASDAQ's 
already-filed prices. Moreover, the proposed rule change regarding days 
on which the market is not open the entire trading day will result in 
an effective reduction of fees or increase in rebates such that the 
total cost of trading on NOM should decline. This is evidence that a 
proposed rule change is pro-competitive rather than anti-competitive.

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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \8\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\9\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
NASDAQ wishes to exclude August 22, 2013, from the calculation of 
volume-based pricing for August of 2013. Waiver will allow the Exchange 
to immediately implement the proposed rule change, thereby reducing the 
potential for confusion among member organizations and the public about 
how the Exchange will calculate volume-based pricing for August of 
2013. Therefore, the Commission hereby waives the 30-day operative 
delay and designates the proposal operative upon filing.\10\
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    \10\ For 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).
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    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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(2)(B).
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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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-117 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-2013-117. 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

[[Page 59743]]

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 10:00 
a.m. and 3:00 p.m. Copies of such filing also will be available for 
inspection and copying at the principal offices 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-2013-117, and should 
be submitted on or before October 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23539 Filed 9-26-13; 8:45 am]
BILLING CODE P