Document ID: SEC-2014-0433-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2014-03-18T04:00Z

[Federal Register Volume 79, Number 52 (Tuesday, March 18, 2014)]
[Notices]
[Pages 15172-15179]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05875]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71703; File No. SR-NASDAQ-2014-023]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to NASDAQ Options Market Fees and Rebates

March 12, 2014.
    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 March 3, 2014, 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 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 Substance 
of the Proposed Rule Change

    NASDAQ proposes to modify Chapter XV, entitled ``Options 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 
amending Customer \3\ and Professional \4\ Rebates To Add Liquidity in 
Penny Pilot Options \5\; amending note d and adopting proposed note e; 
amending NOM Market Maker \6\ Rebates to Add Liquidity in Penny Pilot 
Options; and amending the NOM Market Maker Fee for Removing Liquidity 
in Penny Pilot Options.
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    \3\ The term ``Customer'' means 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'' 
(as that term is defined in Chapter I, Section 1(a)(48)). See 
Chapter XV.
    \4\ The term ``Professional'' 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 appropriately 
marked by Participants. See Chapter XV.
    \5\ The Penny Pilot was established in March 2008 and in October 
2009 was expanded and extended through June 30, 2014. 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); 67325 (June 29, 2012), 77 FR 40127 (July 6, 2012) (SR-
NASDAQ-2012-075) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through December 31, 2012); 
68519 (December 21, 2012), 78 FR 136 (January 2, 2013) (SR-NASDAQ-
2012-143) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through June 30, 2013); 
69787 (June 18, 2013), 78 FR 37858 (June 24, 2013) (SR-NASDAQ-2013-
082) and 71105 (December 17, 2013), 78 FR 77530 (December 23, 2013) 
(SR-NASDAQ-2013-154). See also NOM Rules, Chapter VI, Section 5.
    \6\ The term ``NOM Market Maker'' means a Participant that has 
registered as a Market Maker on NOM pursuant to Chapter VII, Section 
2, and must also remain in good standing pursuant to Chapter VII, 
Section 4. In order to receive NOM Market Maker pricing in all 
securities, the Participant must be registered as a NOM Market Maker 
in at least one security. See Chapter XV.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ proposes to amend Customer, Professional and Market Maker 
Rebates to Add Liquidity in Penny Pilot Options in order to continue to 
incentivize Participants to select NOM as a venue when directing order 
flow. The Exchange also proposes to increase the NOM Market Maker Fee 
for Removing Liquidity in Penny Pilot Options in permit the Exchange to 
continue to offer rebate incentives to attract liquidity to the 
Exchange. Specifically, the Exchange proposes to amending Tier 1, Tier 
2, Tier 3, Tier 4, and Tier 5 Customer and Professional Rebates to Add 
Liquidity in Penny Pilot Options by modifying certain percentage 
metrics; amending note d, which is applicable to Customer and 
Professional rebate Tiers 7 and 8, and adopting proposed note e, which 
would be applicable to Customer and Professional rebate Tier 8; 
amending Tier 1, Tier 2, Tier 3, Tier 4, and Tier 5, and adding Tier 6, 
regarding NOM Market Maker Rebates to Add Liquidity in Penny Pilot 
Options by modifying certain percentage metrics; and amending the NOM 
Market Maker Fee for Removing Liquidity in Penny Pilot Options.

Rebates for Adding Customer and/or Professional Liquidity

    The Exchange currently pays Customer and Professional Rebates to 
Add Liquidity in Penny Pilot Options based on an eight tier rebate 
structure, which is found in Chapter XV Section 2(1), as follows:

[[Page 15173]]

------------------------------------------------------------------------
                                                        Rebate to add
                              Monthly volume              liquidity
------------------------------------------------------------------------
Tier 1..............  Participant adds Customer and/ $0.25.
                       or Professional liquidity in
                       Penny Pilot Options and/or
                       Non-Penny Pilot Options 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/ $0.42.
                       or Professional 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.
Tier 3..............  Participant adds Customer and/ $0.43.
                       or Professional 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.
Tier 4..............  Participant adds Customer and/ $0.45.
                       or Professional liquidity in
                       Penny Pilot Options and/or
                       Non-Penny Pilot Options
                       above 0.40% or more of total
                       industry customer equity and
                       ETF option ADV contracts per
                       day in a month.
Tier 5..............  Participant adds (1) Customer  $0.45.
                       and/or Professional
                       liquidity in Penny Pilot
                       Options and/or Non-Penny
                       Pilot Options 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 100,000 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 in Penny Pilot
                       Options.
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 in Penny Pilot
                       Options.
Tier 8..............  Participant adds Customer and/ $0.48 (Customer)
                       or Professional liquidity in   and $0.47
                       Penny Pilot Options and/or     (Professional).
                       Non-Penny Pilot Options of
                       0.75% or more of national
                       customer volume in multiply-
                       listed equity and ETF
                       options classes in a month.
------------------------------------------------------------------------

    The Exchange is proposing to make amendments to Customer and 
Professional Rebate to Add Liquidity Tiers 1 through 5 as noted below.
    The Exchange proposes to amend the Tier 1 Customer and Professional 
Penny Pilot Options Rebates to Add Liquidity by modifying the 
percentage of volume from 0.20% to 0.10% of the total industry customer 
equity and ETF option ADV contracts per day in a month (generally known 
in this proposal as the ``percentage eligibility metric''). The 
Exchange proposes to also reduce from $0.25 to $0.20 per contract the 
Tier 1 Customer and Professional Rebates to Add Liquidity. This 
amendment simultaneously modifies the percentage eligibility metric and 
the rebate for Tier 1. With this amendment, the Exchange would pay a 
Tier 1 $0.20 per contract rebate to Participants that add Customer and/
or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of up to 0.10% of total industry customer equity and ETF option 
ADV contracts per day in a month.
    The Exchange proposes to amend the Tier 2 Customer and Professional 
Penny Pilot Options Rebates to Add Liquidity by modifying the 
percentage of volume from above 0.20% to 0.30% to above 0.10% to 0.20% 
of the total industry customer equity and ETF option ADV contracts per 
day in a month. The Exchange proposes to also reduce from $0.42 to 
$0.25 per contract the Customer and Professional Tier 2 Rebates to Add 
Liquidity. This amendment simultaneously modifies the percentage 
eligibility metric and the rebate for Tier 2. With this amendment, the 
Exchange would pay a Tier 2 $0.25 per contract rebate to Participants 
that add Customer and/or Professional liquidity in Penny Pilot Options 
and/or Non-Penny Pilot Options above 0.10% to 20% of total industry 
customer equity and ETF option ADV contracts per day in a month.
    The Exchange proposes to amend the Tier 3 Customer and Professional 
Penny Pilot Options Rebates to Add Liquidity by modifying the 
percentage of volume from above 0.30% to 0.40% to above 0.20% to 0.30% 
of the total industry customer equity and ETF option ADV contracts per 
day in a month. The Exchange proposes to also reduce from $0.43 to 
$0.42 per contract the Customer and Professional Tier 3 Rebates to Add 
Liquidity. This amendment simultaneously modifies the percentage 
eligibility metric and the rebate for Tier 3. With this amendment, the 
Exchange would pay a Tier 3 $0.42 per contract rebate to Participants 
that add Customer and/or Professional liquidity in Penny Pilot Options 
and/or Non-Penny Pilot Options above 0.20% to 30% of total industry 
customer equity and ETF option ADV contracts per day in a month.
    The Exchange proposes to amend the Tier 4 Customer and Professional 
Penny Pilot Options Rebates to Add Liquidity by changing the percentage 
eligibility metric from above 0.40% to above 0.30% to 0.40% of the 
total industry customer equity and ETF option ADV contracts per day in 
a month. The Exchange proposes to also reduce from $0.45 to $0.43 per 
contract the Customer and Professional Tier 4 Rebates to Add Liquidity. 
This amendment simultaneously modifies the percentage eligibility 
metric and the rebate for Tier 4. The Exchange believes that deleting 
the words ``or more'' brings greater clarity to the rule text as 
proposed. With this amendment, the Exchange would pay a Tier 4 rebate 
of $0.43 per contract to Participants that add Customer and/or 
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options from above 0.40% to above 0.30% to 0.40% of total industry 
customer equity and ETF option ADV contracts per day in a month.
    The Exchange proposes to amend the Tier 5 Customer and Professional 
Penny Pilot Options Rebates to Add Liquidity to add an alternative to 
the current contracts per day metric. Specifically, the Exchange 
proposes to add the alternative metric of above 0.40% of total industry 
customer equity and ETF option ADV contracts per day in a month to the 
requirements to qualify for Tier 5. With this amendment, the Exchange 
would pay a Tier 5 $0.45 per contract rebate where Participants add 
Customer and/or Professional liquidity in Penny Pilot Options and/or 
Non-Penny Pilot Options above 0.40% of total industry customer equity 
and ETF option ADV contracts per day in a month, or Participant adds 
liquidity per the current Tier 5 metric where Participant adds (1) 
Customer and/or Professional liquidity in Penny Pilot Options and/or 
Non-Penny Pilot

[[Page 15174]]

Options 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. The Exchange is not amending the current 
qualification for the Tier 5 Customer and Professional rebate, but is 
adding an alternate method to qualify for the tier to provide 
Participants another opportunity to earn a rebate.
    The Exchange would continue to incentivize Participants, with 
Customer and Professional Tiers 1 through 5 rebates, as amended, to 
direct liquidity to the Exchange by paying the specified rebates to 
those Participants that add Customer and/or Professional liquidity in 
Penny Pilot Options and/or Non-Penny Pilot Options according to metrics 
keyed to industry customer equity and ETF option average ADV contracts 
per day in a month.
    There are also four explanatory notes applicable to Customer and 
Professional Tiers 5 through 8, notes b:

\a\ 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.
\b\ For purposes of Tiers 6, 7 and 8, ``Total Volume'' shall be defined 
as Customer, Professional, Firm, Broker-Dealer, Non-NOM Market Maker 
and NOM Market Maker volume in Penny Pilot Options and/or Non-Penny 
Pilot Options which either adds or removes liquidity on NOM.
\c\ For purposes of Tiers 6, 7 and 8, the Exchange will allow NOM 
Participants under Common Ownership to aggregate their volume to 
qualify for the rebate.
\d\ Participants that qualify for Customer or Professional Rebate to 
Add Liquidity Tiers 7 or 8 in a given month will be assessed a 
Professional, Firm, Non-NOM Market Maker or Broker-Dealer Fee for 
Removing Liquidity in Penny Pilot Options of $0.48 per contract.

    The Exchange is proposing to amend note d, which is applicable to 
Tiers 7 and 8, and to adopt note e, which would be applicable to Tier 
8.
    In particular, the Exchange proposes to amend note d to indicate 
that it is applicable to Participants under Common Ownership.\7\ As 
such, note d would be applicable not only to individual Participants 
but also to Participants under 75% common ownership or control. The 
Exchange also proposes to add NOM Market Makers to the list of 
participants to which a Fee for Removing Liquidity in Penny Pilot 
Options will be assessed. With this amendment, note d would state that 
``Participants or Participants under Common Ownership that qualify for 
Customer or Professional Rebate to Add Liquidity Tiers 7 or 8 in a 
given month will be assessed a Professional, Firm, Non-NOM Market 
Maker, NOM Market Maker or Broker-Dealer Fee for Removing Liquidity in 
Penny Pilot Options of $0.48 per contract.'' \8\
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    \7\ The term ``Common Ownership'' shall mean Participants under 
75% common ownership or control. See Chapter XV definitions.
    \8\ Commensurate with adding a reference to NOM Market Maker in 
note d as amended, the Exchange proposes to add a reference to note 
d in the line reflecting a NOM Market Maker Fee for Removing 
Liquidity in Penny Pilot Options, and to amend the Fee for Removing 
Liquidy from $0.48 to $0.49 per contract, as proposed herein.
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    The Exchange also proposes to adopt note e that would be applicable 
to Tier 8 Customer Rebates.\9\ The proposed note would add an 
additional $0.02 per contract Penny Pilot Options Customer Rebate to 
Add Liquidity in addition to the Penny Pilot Option Customer rebate of 
$0.48 per contract currently applicable to Tier 8. With this amendment, 
proposed note e would state that Participants that add Customer and/or 
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of 1.25% or more of national customer volume in multiply-listed 
equity and ETF options classes in a month will receive an additional 
$0.02 per contract Penny Pilot Options Customer Rebate to Add Liquidity 
for each transaction which adds liquidity in Penny Pilot Options in 
that month. As such, Participants would continue to earn a $0.47 per 
contract Professional Rebate per Tier 8, but, with this proposal, would 
be able to earn a $0.50 per contract Customer Rebate per note e.
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    \9\ Tier 8 pays a $0.48 per contract Customer Rebate to Add 
Liquidity in Penny Pilot Options and a $0.47 per contract 
Professional Rebate to Add Liquidity in Penny Pilot Options.
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Rebates for Adding NOM Market Maker Liquidity
    The Exchange currently pays NOM Market Maker Rebates to Add 
Liquidity based on a five tier rebate structure, which is found in 
Chapter XV Section 2(1), as follows:

------------------------------------------------------------------------
                                                        Rebate to add
                              Monthly volume              liquidity
------------------------------------------------------------------------
Tier 1..............  Participant adds NOM Market    $0.25.
                       Maker liquidity in Penny
                       Pilot Options and/or Non-
                       Penny Pilot Options of up to
                       29,999 contracts per day in
                       a month.
Tier 2..............  Participant adds NOM Market    $0.30.
                       Maker liquidity in Penny
                       Pilot Options and/or Non-
                       Penny Pilot Options of
                       30,000 to 59,999 contracts
                       per day in a month.
Tier 3..............  Participant adds NOM Market    $0.32.
                       Maker liquidity in Penny
                       Pilot Options and/or Non-
                       Penny Pilot Options of
                       60,000 to 69,999 contracts
                       per day in a month.
Tier 4..............  Participant adds NOM Market    $0.32 or $0.38 in
                       Maker liquidity in Penny       the following
                       Pilot Options and/or Non-      symbols BAC, GLD,
                       Penny Pilot Options of         IWM, QQQ and VXX
                       70,000 or more contracts per   or $0.40 in SPY.
                       day in a month.
Tier 5..............  Participant adds NOM Market    $0.40.
                       Maker liquidity in Penny
                       Pilot Options and/or Non-
                       Penny Pilot Options of
                       40,000 or more contracts per
                       day in a month and qualifies
                       for the Tier 7 or Tier 8
                       Customer and/or Professional
                       Rebate to Add Liquidity in
                       Penny Pilot Options.
------------------------------------------------------------------------

    For purposes of qualifying for a NOM Market Maker Penny Pilot 
Options Rebate to Add Liquidity tier, the Exchange today calculates the 
number of contracts per day in a month. Similarly to the metric used to 
calculate Customer and/or Professional Rebates to add Liquidity in 
Penny Pilot Options, the Exchange proposes to make certain amendments 
to the NOM Market Maker Rebate to Add Liquidity Tiers 1 through 5, and 
add a new Tier 6, to establish a metric of total industry customer 
equity and ETF option ADV contracts per day in a month.
    The Exchange proposes to modify the Tier 1 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 29,999 
contracts per day in a month to 0.10% of total industry customer equity 
and ETF option ADV contracts per day in a month. The Exchange proposes 
to also

[[Page 15175]]

reduce the Tier 1 NOM Marker Maker Rebate to Add Liquidity in Penny 
Pilot Options from $0.25 to $0.20 per contract. This amendment 
simultaneously establishes a percentage eligibility metric and modifies 
the Tier 1 rebate. With this amendment, the Exchange would pay a $0.20 
per contract rebate to Participants that add NOM Market Maker liquidity 
in Penny Pilot Options and/or Non-Penny Pilot Options of up to 0.10% of 
total industry customer equity and ETF option ADV contracts per day in 
a month.
    The Exchange proposes to modify the Tier 2 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 30,000 
to 59,999 contracts per day in a month to above 0.10% to 0.30% of total 
industry customer equity and ETF option ADV contracts per day in a 
month. The Exchange proposes to also reduce the Tier 2 NOM Market Maker 
Penny Pilot Options Rebate to Add Liquidity from $0.30 to $0.25 per 
contract. This amendment simultaneously establishes a percentage 
eligibility metric and modifies the Tier 2 rebate. With this amendment, 
the Exchange would pay a $0.25 per contract Tier 2 rebate to 
Participants that add NOM Market Maker liquidity in Penny Pilot Options 
and/or Non-Penny Pilot Options above 0.10% to 0.30% of total industry 
customer equity and ETF option ADV contracts per day in a month.
    The Exchange proposes to modify the Tier 3 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric from 
60,000 to 69,999 contracts per day in a month to above 0.30% to 0.60% 
of total industry customer equity and ETF option ADV contracts per day 
in a month. The Exchange proposes to also reduce the Tier 3 NOM Market 
Maker Penny Pilot Options Rebate to Add Liquidity from $0.32 to $0.30 
per contract. This amendment simultaneously establishes a percentage 
eligibility metric and modifies the Tier 3 rebate. With this amendment, 
the Exchange would pay a $0.30 per contract rebate to Participants that 
add NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny 
Pilot Options above 0.30% to 0.60% of total industry customer equity 
and ETF option ADV contracts per day in a month.
    The Exchange proposes to modify the Tier 4 NOM Market Maker Rebate 
to Add Liquidity by amending the metric of 70,000 or more contracts per 
day in a month to above 0.60% of total industry customer equity and ETF 
option ADV contracts per day in a month. The Exchange would continue to 
pay a Tier 4 rebate of $0.32 or $.38 per contract in symbols BAC, GLD, 
IWM, QQQ and VXX or $0.38 per contract in SPY; the rebate would be paid 
to Participants that add NOM Market Maker liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options above 0.60% of total industry 
customer equity and ETF option ADV contracts per day in a month.
    The Exchange proposes to modify the Tier 5 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 40,000 
or more contracts per day in a month to above 0.30% of total industry 
customer equity and ETF option ADV contracts per day in a month, and 
qualify for the Tier 7 or 8 Customer and/or Professional Rebate. The 
Exchange would continue to pay a Tier 5 rebate of $.40 per contract 
rebate to Participants that add NOM Market Maker liquidity in Penny 
Pilot Options and/or Non-Penny Pilot Options above 0.30% of total 
industry customer equity and ETF option ADV contracts per day in a 
month and qualify for the Tier 7 or 8 Customer and/or Professional 
Rebate to Add Liquidity in Penny Pilot Options.
    The Exchange also proposes to adopt a new Tier 6 NOM Market Maker 
Penny Pilot Options Rebate to Add Liquidity by offering Participants 
that add the highest level of NOM Market Maker liquidity a rebate. 
Proposed Tier 6 would have a format similar to other NOM Market Maker 
liquidity rebate tiers. With this amendment, the Exchange would pay a 
$0.42 per contract rebate to Participants that add NOM Market Maker 
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 and qualifies for the Tier 7 or Tier 8 Customer and/
or Professional Rebate to Add Liquidity in Penny Pilot Options.
    The Exchange would continue to incentivize Participants, with NOM 
Market Maker rebate Tiers 1 through 6 as amended, to provide liquidity 
by paying specified rebates to those Participants that add NOM Market 
Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 
according to percentage metrics keyed to industry customer equity and 
ETF option average ADV contracts per day in a month. The proposed 
percentage metrics are dynamic in that they reference total industry 
options contracts per day rather than a static number of contracts, and 
thereby make the NOM Market Maker rebate structure similar for Customer 
and/or Professional Penny Pilot Options as well as for NOM Market 
Makers for similar products (e.g. Penny Pilot Options and Non-Penny 
Pilot Options).\10\
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    \10\ The Exchange notes that if a Participant qualifies for two 
tiers, the higher rebate will be paid in a given month.
---------------------------------------------------------------------------

2. Statutory Basis
    NASDAQ believes that its proposal to amend its Pricing Schedule is 
consistent with Section 6(b) of the Act \11\ in general, and furthers 
the objectives of Section 6(b)(4) and (b)(5) of the Act \12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------

    The Exchange's goal is to modify or institute percentage 
eligibility thresholds and adjust Penny Pilot Options Rebates to Add 
Liquidity in order to continue to encourage market participants to 
direct a greater amount of Customer, Professional and NOM Market Maker 
liquidity to the Exchange. The Exchange's proposal does not eliminate 
rebates or the ability for market participants to earn rebates, but 
rather is modifying and explaining the methodology to earn rebates as 
noted herein.
Rebates for Adding Customer and/or Professional Liquidity
    The Exchange proposes to amend Tiers 1, 2, 3, 4, and 5 regarding 
Customer and Professional Penny Pilot Options Rebates to Add Liquidity 
by modifying the applicable percentage metric and amending certain 
rebates. This proposal is reasonable, equitable and not unfairly 
discriminatory for the reasons noted below.
    The Exchange's proposal to amend the Tier 1 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.25 to $0.20 per contract and also reduce the percentage eligibility 
metric from 0.20% to 0.10% is reasonable because while Participants may 
get a moderately smaller rebate, they would qualify for the rebate at a 
significantly lower percentage metric. Thus, the Exchange is still 
paying a rebate to incentivize Participants to transact a qualifying 
number of Customer and/or Professional contracts on the Exchange and 
receive a rebate. While certain Participants that currently qualify for 
certain rebate tiers may receive lower rebates with this proposal, the 
Exchange believes that the rebates will continue to incentivize NOM 
Participants to direct Customer

[[Page 15176]]

and Professional order flow to the Exchange to receive these rebates. 
However, for those Participants as for all NOM Participants, there are 
no barriers to earning greater Penny Pilot Options rebates by adding 
further liquidity on NOM in Penny Pilot Options and Non-Penny Pilot 
Options. A NOM Participant may choose to earn greater or lower rebates 
dependent on the amount of order flow directed to NOM. It also worth 
noting that the Exchange is under no obligation to offer rebates and 
does so to provide incentives to market participants to choose NOM over 
other similarly positioned options exchanges.
    The Exchange's proposal to amend the Tier 1 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.25 to $0.20 per contract and also reduce the percentage eligibility 
metric from 0.20% to 0.10% is equitable and not unfairly discriminatory 
because all eligible Participants that qualify for the Tier 1 Customer 
and Professional Penny Pilot Options Rebate to Add Liquidity will be 
uniformly paid the rebate.
    The Exchange's proposal to amend the Tier 2 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.42 to $0.25 per contract and also reduce the percentage eligibility 
metric from above 0.20% to 0.30% to above 0.10% to 0.20% is reasonable 
because, while the rebate is being reduced, the Exchange is still 
paying a rebate incentive to Participants to transact qualifying 
Customer and/or Professional volume on the Exchange. The Exchange 
believes that the amendment is reasonable because while there is a 
rebate reduction, the Exchange also proposes to significantly reduce 
the eligibility metric to achieve the rebate, and with corresponding 
drops in the metrics in this tier and other tiers, Participants may 
qualify for other rebates when directing liquidity to the Exchange. 
While the change in the Tier 2 rebate appears to be a steep reduction, 
the change was made to realign the rebate tier structure (e.g. the 
combination of Tiers 4 and 5 into a single Tier and the introduction of 
the amended Tier 1 [sic]). It also important to note that no NOM 
Participant earned the Tier 2 $0.42 rebate so far in 2014.
    The Exchange's proposal to amend the Tier 2 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.42 to $0.25 per contract and also reduce the percentage eligibility 
metric from above 0.20% to 0.30% to above 0.10% to 0.20% is equitable 
and not unfairly discriminatory because all eligible Participants that 
qualify for the Tier 2 Customer and Professional Penny Pilot Options 
Rebate to Add Liquidity will be uniformly paid the rebate.
    The Exchange's proposal to amend the Tier 3 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.43 to $0.42 per contract and also reduce the percentage eligibility 
metric from above 0.30% to 0.40% to above 0.20% to 0.30% is reasonable 
because, while the rebate is being reduced, the Exchange is still 
paying a rebate incentive to Participants to transact qualifying 
Customer and/or Professional volume on the Exchange. Participants may 
get a moderately smaller rebate, but they would qualify for the rebate 
at a significantly lower percentage metric. Thus, the Exchange is still 
paying a rebate to incentivize Participants to transact a qualifying 
number of Customer and/or Professional contracts on the Exchange and 
receive a significant rebate. It also important to note that no NOM 
Participant earned the $0.43 rebate in 2014.
    The Exchange's proposal to amend the Tier 3 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.43 to $0.42 per contract and also reduce the percentage eligibility 
metric from above 0.30% to 0.40% to above 0.20% to 0.30% is equitable 
and not unfairly discriminatory because all eligible Participants that 
qualify for the Tier 3 Customer and Professional Penny Pilot Options 
Rebate to Add Liquidity will be uniformly paid the rebate.
    The Exchange's proposal to amend the Tier 4 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.45 to $0.43 per contract and also reduce the percentage eligibility 
metric from above 0.40% to above 0.30% to 0.40% is reasonable because, 
while the rebate is being reduced, the Exchange is still paying a 
rebate incentive to Participants to transact qualifying Customer and/or 
Professional volume on the Exchange. Participants may get a moderately 
smaller rebate, but they would qualify for the rebate at a 
significantly lower percentage metric. Thus, the Exchange is still 
paying a rebate to incentivize Participants to transact a qualifying 
number of Customer and/or Professional contracts on the Exchange and 
receive a significant rebate. The criteria from Tier 4 today was merged 
into Tier 5 and current Tier 4 was amended as proposed above. It also 
important to note no NOM Participants earned rebate pursuant to the 
Tier 4 in place for February.
    The Exchange's proposal to amend the Tier 4 Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity rebates from 
$0.45 to $0.43 per contract and also reduce the percentage eligibility 
metric from above 0.40% to above 0.30% to 0.40% is equitable and not 
unfairly discriminatory because all eligible Participants that qualify 
for the Tier 4 Customer and Professional Penny Pilot Options Rebate to 
Add Liquidity will be uniformly paid the rebate.
    The Exchange believes its proposal to amend Chapter XV, Section 2 
to delete deleting the words ``or more'' in Tier 4 is reasonable, 
equitable and not unfairly discriminatory because it adds greater 
clarity to the rule text and this change would be applied uniformly in 
calculating the Tier 4 rebate. Also, the Exchange believes that this 
amendment is non-substantive and merely clarifies the rule text.
    The Exchange's proposal to adopt an alternative percentage 
eligibility metric to the Tier 5 Customer and Professional Penny Pilot 
Options Tier 5 Rebate to Add Liquidity of above 0.40% of total is 
reasonable because the additional new metric will provide another 
method for Participants to qualify for the Customer and Profesional 
Tier 5 rebate and will continue to incentivize Participants to transact 
an even greater number of qualifying Customer and/or Professional 
volume on the Exchange. Additionally, Participants that receive a Tier 
5 rebate of $0.45 per contract will continue to earn the rebate but 
will have an additional means to qualify for this rebate.
    The Exchange's proposal to adopt an alternative percentage 
eligibility metric to the Tier 5 Customer and Professional Penny Pilot 
Options Tier 5 Rebate to Add Liquidity of above 0.40% of total is 
equitable and not unfairly discriminatory because all eligible 
Participants that qualify for the Tier 5 Customer and Professional 
Penny Pilot Options Rebate to Add Liquidity will be uniformly paid the 
rebate.
    The Exchange's proposal to amend note d is reasonable because 
today, Participants under Common Ownership and NOM Market Makers are 
not included in note d. This amendment provides that all Participants 
or Participants under Common Ownership that qualify for Customer or 
Professional Rebate to Add Liquidity Tiers 7 or 8 in a given month will 
be assessed a Professional, Firm, Non-NOM Market Maker, NOM Market 
Maker or Broker-Dealer Fee for Removing Liquidity in Penny Pilot 
Options of $0.48 per contract uniformly. As is the case with the 
rebates proposed above and the fee discount provided in note d, 
competition among similarly positioned

[[Page 15177]]

options exchanges (e.g., price/time priority) is the driver behind 
assessing NOM Market Makers the Fee for Removing Liquidity.
    The Exchange's proposal to amend note d is equitable and not 
unfairly discriminatory because as amended the note would be uniformly 
applied to all Participants.
    The Exchange's proposal to adopt note e is reasonable because 
Participants would have an opportunity to earn an additional $0.02 per 
contract Penny Pilot Options Customer Rebate to Add Liquidity for each 
transaction which adds liquidity in Penny Pilot Options in that month 
\13\ and incentivize Participants to transact an even greater number of 
qualifying Customer volume.
---------------------------------------------------------------------------

    \13\ The proposal would provide Participants an opportunity to 
earn a rebate of $0.50 per contract, similar to the rebates offered 
at BATS Options Exchange.
---------------------------------------------------------------------------

    The Exchange's proposal to adopt note e is equitable and not 
unfairly discriminatory because they will be uniformly applied to all 
Participants. All Participants will have an equal opportunity to 
benefit from the proposals if they qualify for the additional 
rebate.\14\
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    \14\ The Exchange believes that it is not unfair or unfairly 
discriminatory to offer Professionals an additional $0.02 rebate 
because by offering Professionals slightly higher rebates as 
compared to other market participants, the Exchange hopes to simply 
remain competitive with other venues so that it remains a choice for 
market participants when posting orders and the result may be 
additional Professional order flow for the Exchange.
---------------------------------------------------------------------------

    The Exchange's proposal to add a reference to note d in the line 
reflecting the NOM Market Maker Fee for Removing Liquidity in Penny 
Pilot Options Liquidity, and to amend the NOM Marker Maker Fee for 
Removing Liquidity from $0.48 to $0.49 per contract is reasonable 
because the proposed fee will be equal to the fees assessed to other 
non-Customers. Further, the Exchange's ability to offer increased 
Customer and Professional Penny Pilot Options Rebates to Add Liquidity 
is possible with a corresponding increase to the NOM Market Maker Fee 
for Removing Liquidity in Penny Pilot Options. The Exchange believes 
that the rebate brings a greater amount of liquidity to the Exchange 
which benefits all market participants. As is the case with the rebates 
proposed above and the fee discount provided in note d, competition 
among similarly positioned options exchanges (e.g., price/time 
priority) is the driver behind the inclusion of NOM Market Makers into 
note d.
    The Exchange's proposal to add a reference to note d in the line 
reflecting the NOM Market Maker Fee for Removing Liquidity in Penny 
Pilot Options Liquidity, and to amend the NOM Marker Maker Fee for 
Removing Liquidity from $0.48 to $0.49 per contract is equitable and 
not unfairly discriminatory because the Exchange is increasing the NOM 
Market Maker Fee for Removing Liquidity in Penny Pilot Options so that 
all non-Customer market participants are uniformly assessed this fee. 
Customers will continue to be assessed the lowest Fees for Removing 
Liquidity in Penny Pilot Options, as is the case today.\15\ Customer 
liquidity brings unique benefits to the market in terms of liquidity 
which benefits all market participants.
---------------------------------------------------------------------------

    \15\ The Customer removal fee is $0.47. Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attract Specialists and 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.
---------------------------------------------------------------------------

Rebates for Adding NOM Market Maker Liquidity
    The Exchange's proposal to amend NOM Market Maker Rebate to Add 
Liquidity Tiers 1, 2, 3, 4, and 5, and add new Tier 6, in Penny Pilot 
Options and establish the applicable percentage metric is reasonable, 
equitable and not unfairly discriminatory for the reasons noted below.
    The Exchange's proposal to modify the Tier 1 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 29,999 
contracts per day in a month to 0.10% of total industry customer equity 
and ETF option ADV contracts per day in a month, and to reduce the Tier 
1 rebate from $0.32 to $0.30 [sic] per contract is reasonable because 
the decreased rebate, in light of establishment of the new percentage 
eligibility metric, would be the same for adding NOM Market Maker 
liquidity as for adding Customer and/or Professional Liquidity. This 
provides pricing/rebate consistency within the tiers and is continuing 
to incentivize Participants to transact an even greater number of 
qualifying Customer and/or Professional volume on NOM.
    The Exchange's proposal to modify the Tier 1 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 29,999 
contracts per day in a month to 0.10% of total industry customer equity 
and ETF option ADV contracts per day in a month, and to reduce the Tier 
1 rebate from $0.32 to $0.30 [sic] `per contract is equitable and not 
unfairly discriminatory because all eligible Participants that qualify 
for the Tier 1 NOM Market Maker Rebate to Add Liquidity will be 
uniformly paid the rebate.
    The Exchange's proposal to modify the Tier 2 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 30,000 
to 59,999 contracts per day in a month to above 0.10% to 0.30% of total 
industry customer equity and ETF option ADV contracts per day in a 
month, and to reduce the Tier 2 rebate from $0.30 to $0.25 per contract 
is reasonable because the decreased rebate, in light of establishment 
of the new percentage eligibility metric that would be the same for 
adding NOM Market Maker liquidity as for adding Customer and/or 
Professional Liquidity will provide pricing consistency and continue to 
incentivize Participants to transact an even greater number of 
qualifying Customer and/or Professional volume on NOM.
    The Exchange's proposal to modify the Tier 2 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 30,000 
to 59,999 contracts per day in a month to above 0.10% to 0.30% of total 
industry customer equity and ETF option ADV contracts per day in a 
month, and to reduce the Tier 2 rebate from $0.30 to $0.25 per contract 
the Rebate to Add Liquidity, is equitable and not unfairly 
discriminatory because all eligible Participants that qualify for the 
Tier 2 NOM Market Maker Rebate to Add Liquidity will be uniformly paid 
the rebate.
    The Exchange's proposal to modify the Tier 3 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of from 
60,000 to 69,999 contracts per day in a month to above 0.30% to 0.60% 
of total industry customer equity and ETF option ADV contracts per day 
in a month, and to reduce the Tier 3 rebate from reduce from $0.32 to 
$0.30 per contract is reasonable because the decreased rebate, in light 
of establishment of the new percentage eligibility metric, would be the 
same for adding NOM Market Maker liquidity as for adding Customer and/
or Professional Liquidity will provide pricing consistency and continue 
to incentivize Participants to transact an even greater number of 
qualifying Customer and/or Professional volume on NOM.
    The Exchange's proposal to modify the Tier 3 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of from 
60,000 to 69,999 contracts per day in a month to above 0.30% to 0.60% 
of total industry customer equity and ETF option ADV contracts per day 
in a

[[Page 15178]]

month, and to reduce the Tier 3 rebate from reduce from $0.32 to $0.30 
per contract is equitable and not unfairly discriminatory because all 
eligible Participants that qualify for the Tier 3 NOM Market Maker 
Rebate to Add Liquidity will be uniformly paid the rebate.
    The Exchange's proposal to modify the Tier 4 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of from 
70,000 or more contracts per day in a month to above 0.60% of total 
industry customer equity and ETF option ADV contracts per day in a 
month and continue to pay a Rebate to Add Liquidity is reasonable 
because the amendment will provide pricing consistency and continue to 
incentivize Participants to transact an even greater number of 
qualifying Customer and/or Professional volume on NOM.
    The Exchange's proposal to modify the Tier 4 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of from 
70,000 or more contracts per day in a month to above 0.60% of total 
industry customer equity and ETF option ADV contracts per day in a 
month and continue to pay a $0.32 or $0.38 per contract Rebate to Add 
Liquidity as currently provided, is equitable and not unfairly 
discriminatory because all eligible Participants that qualify for the 
Tier 4 NOM Market Maker Rebate to Add Liquidity will be uniformly paid 
the rebate.
    The Exchange's proposal to modify the Tier 5 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 40,000 
or more contracts per day in a month to above 0.30% of total industry 
customer equity and ETF option ADV contracts per day in a month and 
continue to pay a $0.40 per contract Rebate to Addis reasonable because 
the amendment will provide pricing consistency and continue to 
incentivize Participants to transact an even greater number of 
qualifying Customer and/or Professional volume on NOM.
    The Exchange's proposal to modify the Tier 5 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity by amending the metric of 40,000 
or more contracts per day in a month to above 0.30% of total industry 
customer equity and ETF option ADV contracts per day in a month and 
continue to pay a $0.40 Rebate to Add is equitable and not unfairly 
discriminatory because all eligible Participants that qualify for the 
Tier 5 NOM Market Maker Rebate to Add Liquidity will be uniformly paid 
the rebate.
    The Exchange's proposal to adopt a new Tier 6 NOM Market Maker 
Penny Pilot Options Rebate to Add Liquidity for Participants that add 
the highest level of NOM Market Maker liquidity that would pay a $0.42 
per contract rebate to Participants that add NOM Market Maker 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, and in addition qualify for the Tier 7 or Tier 8 Customer and/
or Professional Rebate to Add Liquidity in Penny Pilot Options \16\ is 
reasonable because the amendment will provide pricing consistency and 
continue to incentivize Participants to transact an even greater number 
of qualifying Customer and/or Professional volume on NOM.
---------------------------------------------------------------------------

    \16\ For purposes of Tier 7, Participants may add Customer, 
Professional, Firm, Broker-Dealer, Non-NOM Market Maker and NOM 
Market Maker volume in Penny Pilot Options and/or Non-Penny Pilot 
Options and for purposes of Tier 8, Participants may add Customer or 
Professional liquidity in Penny Pilot or Non-Penny Pilot Options.
---------------------------------------------------------------------------

    The Exchange's proposal to adopt a new Tier 6 NOM Market Maker 
Penny Pilot Options Rebate to Add Liquidity for Participants that add 
the highest level of NOM Market Maker liquidity that would pay a $0.42 
per contract rebate to Participants that add NOM Market Maker 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, and in addition qualify for the Tier 7 or Tier 8 Customer and/
or Professional Rebate to Add Liquidity in Penny Pilot Options \17\ is 
equitable and not unfairly discriminatory because all eligible 
Participants that qualify for the Tier 6 NOM Market Maker Rebate to Add 
Liquidity will be uniformly paid the rebate. The Exchange notes that 
NOM Market Makers have obligations to the market and regulatory 
requirements,\18\ which normally do not apply to other market 
participants. A NOM Market Maker has the obligation, for example, to 
make continuous markets, engage in a course of dealings reasonably 
calculated to contribute to the maintenance of a fair and orderly 
market, and not make bids or offers or enter into transactions that are 
inconsistent with a course of dealings. The proposed differentiation as 
between Customers and NOM Market Makers and other market participants 
recognizes the differing contributions made to the liquidity and 
trading environment on the Exchange by Customers and NOM Market Makers, 
as well as the differing mix of orders entered.
---------------------------------------------------------------------------

    \17\ For purposes of Tier 7, Participants may add Customer, 
Professional, Firm, Broker-Dealer, Non-NOM Market Maker and NOM 
Market Maker volume in Penny Pilot Options and/or Non-Penny Pilot 
Options and for purposes of Tier 8, Participants may add Customer or 
Professional liquidity in Penny Pilot or Non-Penny Pilot Options.
    \18\ Pursuant to Chapter VII (Market Participants), Section 5 
(Obligations of Market Makers), in registering as a market maker, an 
Options Participant commits himself to various obligations. 
Transactions of a Market Maker in its market making capacity must 
constitute a course of dealings reasonably calculated to contribute 
to the maintenance of a fair and orderly market, and Market Makers 
should not make bids or offers or enter into transactions that are 
inconsistent with such course of dealings. Further, all Market 
Makers are designated as specialists on NOM for all purposes under 
the Act or rules thereunder. See Chapter VII, Section 5.
---------------------------------------------------------------------------

    The Exchange would continue to incentivize Participants, with Tiers 
1 through 6 NOM Market Maker Penny Pilot Options Rebates to Add 
Liquidity, as amended, to provide liquidity by paying specified rebates 
to those Participants that add NOM Market Maker liquidity in Penny 
Pilot Options and/or Non-Penny Pilot Options according to percentage 
metrics keyed to industry customer equity and ETF option average ADV 
contracts per day in a month. The proposed percentage metrics are 
dynamic in nature in that they reference total industry options 
contracts per day rather than a static number of contracts per day, and 
thereby make the Rebate structure similar for Customers and/or 
Professionals as well as for NOM Market Makers for similar products 
(e.g. Penny Pilot Options and Non-Penny Pilot Options).\19\
---------------------------------------------------------------------------

    \19\ The Exchange notes that if a Participant qualifies for two 
tiers, the higher rebate will be paid.
---------------------------------------------------------------------------

    In addition, the Exchange believes it is reasonable to use 
percentage metrics keyed to industry customer equity and ETF option 
average ADV contracts per day in a month because that is a benchmark 
that Participants are comfortable with in respect to Customer and 
Professional liquidity. Moreover, while the Exchange evaluated the 
continued use of industry market maker volume, the Exchange believes 
that industry customer volume is a fair metric because it does not have 
the periodic spikes that may occur due to floor trading. Because NOM is 
an electronic market place with no trading floor, the Exchange believes 
that an industry volume metric is fair and reasonable.

[[Page 15179]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ 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.
    The Exchange believes that lowering percentage eligibility 
thresholds in Tiers 1 through 4 and adding a percentage eligibility 
metric in Tier 5 for Customer and Professional rebates, and amending 
Tiers 1 through 5 and adding Tier 6 to add percentage eligibility 
thresholds, will incentivize market participants to send additional 
order Customer and/or Professional flow to the Exchange. The attraction 
of additional order flow to the Exchange and should in turn promote 
competition. The Exchange's addition of percentage eligibility 
thresholds to the Tier 5 Customer and Professional liquidity rebate 
should encourage additional Customer and/or Professional order flow to 
the Exchange. The Exchange's addition of a new Tier 6 NOM Market Maker 
liquidity rebate for Participants that bring the largest amount of such 
liquidity should encourage Participants to direct additional NOM Market 
Maker order flow to the Exchange, and will dovetail with the amended 
rebate tiers below Tier 6.
    Added liquidity benefits all market participants by providing more 
trading opportunities, which attracts market participants to the 
Exchange. 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 Customer, 
Professional, and NOM Market Maker 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 order flow. 
The Exchange is continuing to offer rebates at specified, lower 
percentage metrics in exchange for additional add Customer, 
Professional, and NOM Market Maker order flow being executed at the 
Exchange, which additional order flow should benefit other market 
participants.
    The Exchange believes that the increase to the NOM Market Maker 
Penny Pilot Options Fees for Removing Liquidity does not create an 
undue burden on competition as the Exchange will uniformly assess non-
NOM Market Makers the same Fees for Removing Liquidity in Penny Pilot 
Options and offer these Participants the opportunity to reduce these 
fees by adding liquidity to the Exchange and qualifying for certain 
Customer and/or Professional and NOM Market Maker rebates. Thus, all 
but Customers will be assessed a uniform fee and Customers will 
continue to earn a lower fee because Customer liquidity offers unique 
benefits to the market which benefits all market participants.
    Finally, the Exchange's proposal to amend note d and adopt note e 
does not create an undue burden on competition but rather further 
clarifies the Exchange's structure of fees for removing liquidity and 
rebates for adding liquidity.
    The Exchange operates in a highly competitive market comprised of 
twelve U.S. options exchanges in which many sophisticated and 
knowledgeable market participants can readily and do send order flow to 
competing exchanges if they deem fee levels or rebate incentives at a 
particular exchange to be excessive or inadequate. These market forces 
support the Exchange belief that the proposed rebate structure and 
tiers proposed herein are competitive with rebates and tiers in place 
on other exchanges. The Exchange believes that this competitive 
marketplace continues to impact the rebates present on the Exchange 
today and substantially influences the proposals set forth above.

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.\20\ 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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2014-023 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-2014-023. 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-2014-023, and should 
be submitted on or before April 8, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05875 Filed 3-17-14; 8:45 am]
BILLING CODE 8011-01-P