Document ID: SEC-2011-1397-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-09-16T04:00Z

[Federal Register Volume 76, Number 180 (Friday, September 16, 2011)]
[Notices]
[Pages 57776-57778]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23722]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65318; File No. SR-NASDAQ-2011-124]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fees for Members Using the NASDAQ Options Market

September 12, 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 September 6, 2011, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by NASDAQ. 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 proposes to modify pricing for NASDAQ members using the 
NASDAQ Market Center. NASDAQ will implement the proposed change on 
September 6, 2011. The text of the proposed rule change is available at 
http://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, NASDAQ included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASDAQ has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    NASDAQ is proposing to modify Rule 7050 governing the rebates and 
fees

[[Page 57777]]

assessed for option orders entered into NOM. Specifically, NASDAQ is 
proposing to modify pricing for the Customer Rebate to Add Liquidity in 
Penny Options by adding an additional volume achievement to earn an 
enhanced rebate. The Exchange currently pays a Customer Rebate to Add 
Liquidity in Penny Options based on six volume tiers as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                  Rebate to add
                                                                 Monthly volume                     liquidity
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Tier 1........................................  Participant adds Customer liquidity of up to               $0.26
                                                 24,999 contracts per day in a month.
Tier 2........................................  Participant adds Customer liquidity of 25,000--            $0.34
                                                 59,999 contracts per day in a month.
Tier 3........................................  Participant adds Customer liquidity of 60,000-             $0.38
                                                 124,999 contracts per day in a month.
Tier 4........................................  Participant adds Customer liquidity of 125,000             $0.40
                                                 or more contracts per day in a month.
Tier 5........................................  Participant adds (1) Customer liquidity of                 $0.40
                                                 60,000 or more contracts per day in a month,
                                                 and (2) NOM Market Maker liquidity of 60,000
                                                 or more contracts per day in a month.
Tier 6........................................  Participant adds Customer liquidity of 25,000              $0.35
                                                 or more contracts per day in a month, and (2)
                                                 the Participant simultaneously qualifies for
                                                 credit under the Investor Support Program set
                                                 forth in Rule 7014.
----------------------------------------------------------------------------------------------------------------

    To further encourage firms that route Customer orders to increase 
Customer order flow to the Exchange, the Exchange is proposing to 
modify the Customer Rebates to Add Liquidity in Penny Pilot by adding a 
monthly volume target for NOM Participants that qualify for Tiers 2 and 
6. Specifically, firms that qualify for Tier 2 by adding Customer 
Liquidity in Penny Options of 25,000 to 59,999 contracts per day for 
the month, can receive an additional $0.02 rebate by contributing 
750,000 contracts of Customer Liquidity in Penny Options between 
September 6 and September 30, 2011. Also, firms that qualify for Tier 6 
by adding Customer Liquidity in Penny Options of 25,000 or more 
contracts per day for the month and also qualifying for a credit under 
NASDAQ's Investor Support Program (set forth in Rule 7014),\3\ can 
receive an additional $0.02 rebate by contributing 750,000 contracts of 
Customer Liquidity in Penny Options between September 6 and September 
30, 2011. NOM Participants that qualify for these two new tiers will 
receive an additional $0.02 rebate only for executions occurring 
between September 6 and September 30, 2011; volume executed on 
September 1, 2011 and September 2, 2011 will not be eligible.
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    \3\ For a detailed description of the Investor Support Program, 
see Securities Exchange Act Release No. 63270 (November 8, 2010), 75 
FR 69489 (November 12, 2010) (NASDAQ-2010-141) (notice of filing and 
immediate effectiveness) (the ``ISP Filing''). See also Securities 
Exchange Act Release 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).
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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.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed new pricing tiers are 
equitable, reasonable and not unfairly discriminatory because they 
continue an existing program to encourage broker-dealers 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 further believes that limiting the new tiers to firms 
already qualifying for Tiers 2 and 6 (and not those that qualify for 
Tier 3, 4 and 5) is equitable and not unfairly discriminatory because 
NOM Participants in Tiers 3, 4, and 5 already earn a higher rebate. For 
example, a NOM Participant that qualify [sic] for the new tiers will 
receive a rebate of either $0.36 or $0.37 per contract, whereas NOM 
Participants that qualify for Tiers 3, 4 and 5 receive a $0.38 per 
contract rebate.
    The Exchange believes that the proposed new pricing tiers for 
Customer Rebates to Add Liquidity in Penny Options is equitable and not 
unfairly discriminatory because the Exchange will uniformly pay a 
Rebate to Add Liquidity to Customers executing Penny Options based on 
the 750,000 volume target and monthly tiers proposed and discussed 
herein.
    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 rebate scheme is competitive and similar to other rebates and 
tiers opportunities in place on other exchanges. The Exchange believes 
that this competitive marketplace materially impacts the rebates 
present on the Exchange today and substantially influenced the proposal 
set forth above.

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. Because the market 
for order execution is extremely competitive, members may readily opt 
to disfavor NASDAQ's execution services if they believe that 
alternatives offer them better value. For this reason and the reasons 
discussed in connection with the statutory basis for the proposed rule 
change, the Exchange does not believe that the proposed changes will 
impair the ability of members or competing order execution venues to 
maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\6\ At any time

[[Page 57778]]

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.
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    \6\ 15 U.S.C. 78s(b)(3)(a)(ii).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2011-124 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-2011-124. 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-
2011-124 and should be submitted on or before October 7, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23722 Filed 9-15-11; 8:45 am]
BILLING CODE 8011-01-P