Document ID: SEC-2017-1197-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2017-07-17T04:00Z

[Federal Register Volume 82, Number 135 (Monday, July 17, 2017)]
[Notices]
[Pages 32731-32734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14891]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81121; File No. SR-NASDAQ-2017-067]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Customer and Professional Penny Pilot Options Tier 8 Rebate 
To Add Liquidity

July 11, 2017.

    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 June 30, 2017, 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

[[Page 32732]]

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 Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the NASDAQ Options Market LLC's 
(``NOM'') pricing at Chapter XV, Section 2(1), to amend the Customer 
\3\ and Professional \4\ Penny Pilot Options Tier 8 Rebate to Add 
Liquidity.
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    \3\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional.'' See Chapter XV.
    \4\ The term ``Professional'' or (``P'') means any person or 
entity that (i) is not a broker or dealer in securities, and (ii) 
places more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s) pursuant 
to Chapter I, Section 1(a)(48). All Professional orders shall be 
approximately marked by Participants.
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    While changes to the Pricing Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on July 3, 2017.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://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
    The Exchange proposes to amend the Customer and Professional Penny 
Pilot Options Rebate to Add Liquidity tiers. Specifically, the Exchange 
proposes to amend the current qualifications related to the Tier 8 
Customer and Professional Penny Pilot Options rebate. The proposed new 
Tier 8 qualifications should continue to attract Customer and 
Professional order flow to NOM. This order flow benefits other market 
participants through order interaction.
    Today, the Exchange pays Customer and Professional Penny Pilot 
Options Rebates to Add Liquidity as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                 Rebate to add
                     Tier                                      Monthly volume                      liquidity
----------------------------------------------------------------------------------------------------------------
1............................................  Participant adds Customer, Professional, Firm,              $0.20
                                                Non-NOM Market Maker and/or Broker-Dealer
                                                liquidity in Penny Pilot Options and/or Non-
                                                Penny Pilot Options of up to 0.10% of total
                                                industry customer equity and ETF option
                                                average daily volume (``ADV'') contracts per
                                                day in a month.
2............................................  Participant adds Customer, Professional, Firm,               0.25
                                                Non-NOM Market Maker and/or Broker-Dealer
                                                liquidity in Penny Pilot Options and/or Non-
                                                Penny Pilot Options above 0.10% to 0.20% of
                                                total industry customer equity and ETF option
                                                ADV contracts per day in a month.
3............................................  Participant adds Customer, Professional, Firm,               0.42
                                                Non-NOM Market Maker and/or Broker-Dealer
                                                liquidity in Penny Pilot Options and/or Non-
                                                Penny Pilot Options above 0.20% to 0.30% of
                                                total industry customer equity and ETF option
                                                ADV contracts per day in a month.
4............................................  Participant adds Customer, Professional, Firm,               0.43
                                                Non-NOM Market Maker and/or Broker-Dealer
                                                liquidity in Penny Pilot Options and/or Non-
                                                Penny Pilot Options above 0.30% to 0.40% of
                                                total industry customer equity and ETF option
                                                ADV contracts per day in a month.
5............................................  Participant adds Customer, Professional, Firm,               0.45
                                                Non-NOM Market Maker and/or Broker-Dealer
                                                liquidity in Penny Pilot Options and/or Non-
                                                Penny Pilot Options above 0.40% to 0.75% of
                                                total industry customer equity and ETF option
                                                ADV contracts per day in a month.
6............................................  Participant has Total Volume of 100,000 or                   0.45
                                                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 in Penny Pilot Options.
7............................................  Participant has Total Volume of 150,000 or                   0.47
                                                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 in Penny Pilot Options.
8............................................  Participant adds Customer, Professional, Firm,               0.48
                                                Non-NOM Market Maker and/or Broker-Dealer
                                                liquidity in Penny Pilot Options and/or Non-
                                                Penny Pilot Options above 0.75% or more of
                                                total industry customer equity and ETF option
                                                ADV contracts per day in a month, or
                                                Participant adds: (1) Customer and/or
                                                Professional liquidity in Penny Pilot Options
                                                and/or Non-Penny Pilot Options of 0.25% or
                                                more of total industry customer equity and
                                                ETF option ADV contracts per day in a month,
                                                and (2) has added liquidity in all securities
                                                through one or more of its Nasdaq Market
                                                Center MPIDs that represent 1.00% or more of
                                                Consolidated Volume in a month or qualifies
                                                for MARS (defined below).
----------------------------------------------------------------------------------------------------------------

    Today, the Exchange pays a $0.48 per contract rebate \5\ to 
Participants that

[[Page 32733]]

qualify for a Tier 8 Customer or Professional Penny Pilot Options 
Rebate to Add Liquidity by adding Customer, Professional, Firm,\6\ Non-
NOM Market Maker \7\ and/or Broker-Dealer \8\ liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options above 0.75% or more of total 
industry customer equity and ETF option ADV contracts per day in a 
month, or adding: (1) Customer and/or Professional liquidity in Penny 
Pilot Options and/or Non-Penny Pilot Options of 0.25% or more of total 
industry customer equity and ETF option ADV contracts per day in a 
month, and (2) has added liquidity in all securities through one or 
more of its Nasdaq Market Center MPIDs that represent 1.00% or more of 
Consolidated Volume in a month or qualifies for MARS.\9\
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    \5\ Note ``c,'' which is applicable to the Tier 8 rebate, 
provides additional rebates to Participants that: (1) Add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer 
liquidity in Penny Pilot Options and/or Non- Penny Pilot Options of 
1.15% or more of total industry customer equity and ETF option ADV 
contracts per day in a month will receive an additional $0.02 per 
contract Penny Pilot Options Customer and/or Professional Rebate to 
Add Liquidity for each transaction which adds liquidity in Penny 
Pilot Options in that month; or (2) add Customer, Professional, 
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny 
Pilot Options and/or Non-Penny Pilot Options of 1.30% or more of 
total industry customer equity and ETF option ADV contracts per day 
in a month will receive an additional $0.05 per contract Penny Pilot 
Options Customer and/or Professional Rebate to Add Liquidity for 
each transaction which adds liquidity in Penny Pilot Options in that 
month; or (3) (a) add Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or 
Non-Penny Pilot Options above 0.80% of total industry customer 
equity and ETF option ADV contracts per day in a month, (b) add 
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Non-Penny Pilot Options above 0.15% of total 
industry customer equity and ETF option ADV contracts per day in a 
month, and (c) execute greater than 0.04% of Consolidated Volume 
(``CV'') via Market-on-Close/Limit-on-Close (``MOC/LOC'') volume 
within the NASDAQ Stock Market Closing Cross within a month will 
receive an additional $0.05 per contract Penny Pilot Options 
Customer and/or Professional Rebate to Add Liquidity for each 
transaction which adds liquidity in Penny Pilot Options in a month.
    Consolidated Volume shall mean the total consolidated volume 
reported to all consolidated transaction reporting plans by all 
exchanges and trade reporting facilities during a month in equity 
securities, excluding executed orders with a size of less than one 
round lot. For purposes of calculating Consolidated Volume and the 
extent of an equity member's trading activity, expressed as a 
percentage of or ratio to Consolidated Volume, the date of the 
annual reconstitution of the Russell Investments Indexes shall be 
excluded from both total Consolidated Volume and the member's 
trading activity.
    \6\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
    \7\ The term ``Non-NOM Market Maker'' or (``O'') is a registered 
market maker on another options exchange that is not a NOM Market 
Maker. A Non-NOM Market Maker must append the proper Non-NOM Market 
Maker designation to orders routed to NOM.
    \8\ The term ``Broker-Dealer'' or (``B'') applies to any 
transaction which is not subject to any of the other transaction 
fees applicable within a particular category.
    \9\ NOM Participants that have System Eligibility and have 
executed the requisite number of Eligible Contracts in a month are 
paid MARS rebates based on average daily volume in a month. See 
Chapter XV, Section 2(6).
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    The Exchange is proposing to continue to pay a $0.48 per contract 
rebate provided, a NOM Participant adds Customer, Professional, Firm, 
Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options above 0.75% or more of total 
industry customer equity and ETF option ADV contracts per day in a 
month, or Participant adds: (1) Customer and/or Professional liquidity 
in Penny Pilot Options and/or Non-Penny Pilot Options of 0.20% or more 
of total industry customer equity and ETF option ADV contracts per day 
in a month, and (2) has added liquidity in all securities through one 
or more of its Nasdaq Market Center MPIDs that represent 1.00% or more 
of Consolidated Volume in a month or qualifies for MARS.
    The Exchange's proposal to amend the current qualification from 
Customer and/or Professional liquidity in Penny Pilot Options and/or 
Non-Penny Pilot Options of 0.25% or more of total industry customer 
equity and ETF option ADV contracts per day in a month to 0.20% or more 
of total industry customer equity and ETF option ADV contracts per day 
in a month should provide Participants the ability to qualify for this 
tier by executing less contracts which represent industry volume in a 
given month. The Exchange believes that this amendment should 
incentivize Participants to transact more volume to qualify for a Tier 
8 rebate since one of the qualifiers requires a lower percentage of 
total industry customer equity and ETF option ADV contracts per day in 
a month as compared to the current percentage.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to amend the current qualifications related 
to the Tier 8 Customer and Professional Penny Pilot Options Rebate to 
Add Liquidity is reasonable because the rebate should continue to 
attract Customer and Professional order flow to NOM. The additional 
Customer and Professional order flow to NOM benefits other market 
participants by providing additional liquidity with which to interact. 
Customer liquidity offers unique benefits to the market which benefits 
all market participants. Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
market makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
The Exchange believes that encouraging Participants to add Professional 
liquidity creates competition among options exchanges because the 
Exchange believes that the rebates may cause market participants to 
select NOM as a venue to send Professional order flow. Amending the 
current qualification 0.25% or more of total industry customer equity 
and ETF option ADV contracts to 0.20% or more of total industry 
customer equity and ETF option ADV contracts affords Participants the 
ability to qualify for this Tier 8 because it requires less volume as a 
result of the proposed lower percentage of industry volume. With this 
proposal, Participants that consistently send order flow to the 
Exchange may continue to qualify for Tier 8 rebates and other 
Participants may send additional order flow to qualify for a Tier 8 
rebate with the lower requirement.
    The Exchange's proposal to amend the current qualifications related 
to the Tier 8 Customer and Professional Penny Pilot Options Rebate to 
Add Liquidity is equitable and not unfairly discriminatory because all 
Participants are eligible to earn rebates. These rebates would be 
uniformly paid to all qualifying Participants.

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. In terms of inter-market 
competition, the Exchange 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. The proposed pricing change is competitive and does not 
impose a burden on inter-market competition. If the change proposed 
herein is unattractive to market participants, it is likely that the 
Exchange will lose market share as a result. Accordingly, the Exchange 
does not believe that the proposed change will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets.
    The Exchange's proposal to amend the current qualifications related 
to the Tier 8 Customer and Professional Penny Pilot Options Rebate to 
Add Liquidity does not impose an undue burden on intra-market 
competition because all Participants are eligible to earn rebates and 
these rebates would be uniformly paid to all qualifying Participants.

[[Page 32734]]

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.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2017-067 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2017-067. 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 
10:00 a.m. and 3:00 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-2017-067 and should 
be submitted on or before August 7, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2017-14891 Filed 7-14-17; 8:45 am]
 BILLING CODE 8011-01-P