Document ID: SEC-2015-0582-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2015-04-06T04:00Z

[Federal Register Volume 80, Number 65 (Monday, April 6, 2015)]
[Notices]
[Pages 18450-18452]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-07749]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74616; File No. SR-NASDAQ-2015-027]

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 31, 2015.
    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 25, 2015, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to amend the manner in which the Exchange assesses 
Port Fees which are located in Chapter XV, entitled ``Options 
Pricing,'' which governs pricing for NASDAQ members using the NASDAQ 
Options Market (``NOM''), NASDAQ's facility for executing and routing 
standardized equity and index options.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments become operative on April 1, 
2015.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to increase Port Fees for the following ports 
from $600.00 to $650.00 per port, per month, per mnemonic: Order Entry 
Port,\3\ CTI Port,\4\ ITTO Port,\5\ BONO Port,\6\ Order

[[Page 18451]]

Entry DROP Port Fees \7\ and OTTO Drop Ports.\8\ The OTTO Port \9\ will 
be increased from $600.00 to $750.00 per port, per month, per mnemonic, 
and the SQF Port \10\ will be increased from $600.00 to $750.00 per 
port, per month. ITTO and BONO Port fees will continue to be assessed 
to non-NOM Participants and NOM Participants.
---------------------------------------------------------------------------

    \3\ The Order Entry Port Fee is a connectivity fee in connection 
with routing orders to the Exchange via an external order entry 
port. NOM Participants access the Exchange's network through order 
entry ports. A NOM Participant may have more than one order entry 
port.
    \4\ CTI offers real-time clearing trade updates. A real-time 
clearing trade update is a message that is sent to a member after an 
execution has occurred and contains trade details. The message 
containing the trade details is also simultaneously sent to The 
Options Clearing Corporation. The trade messages are routed to a 
member's connection containing certain information. The 
administrative and market event messages include, but are not 
limited to: System event messages to communicate operational-related 
events; options directory messages to relay basic option symbol and 
contract information for options traded on the Exchange; complex 
strategy messages to relay information for those strategies traded 
on the Exchange; trading action messages to inform market 
participants when a specific option or strategy is halted or 
released for trading on the Exchange; and an indicator which 
distinguishes electronic and non-electronically delivered orders.
    \5\ ITTO is a data feed that provides quotation information for 
individual orders on the NOM book, last sale information for trades 
executed on NOM, and Order Imbalance Information as set forth in NOM 
Rules Chapter VI, Section 8. ITTO is the options equivalent of the 
NASDAQ TotalView/ITCH data feed that NASDAQ offers under NASDAQ Rule 
7023 with respect to equities traded on NASDAQ. As with TotalView, 
members use ITTO to ``build'' their view of the NOM book by adding 
individual orders that appear on the feed, and subtracting 
individual orders that are executed. See Chapter VI, Section 1 at 
subsection (a)(3)(A).
    \6\ BONO\SM\ is a data feed that provides the NOM Best Bid and 
Offer (``NOM NBBO'') and last sale information for trades executed 
on NOM. The NOM NBBO and last sale information are identical to the 
information that NOM sends to the Options Price Regulatory Authority 
(``OPRA'') and which OPRA disseminates via the consolidated data 
feed for options. BONO is the options equivalent of the NASDAQ Basic 
data feed offered for equities under NASDAQ Rule 7047. See Chapter 
VI, Section 1 at subsection (a)(3)(B).
    \7\ The DROP interface provides real time information regarding 
orders sent to NOM and executions that occurred on NOM. The DROP 
interface is not a trading interface and does not accept order 
messages.
    \8\ The OTTO DROP data feed provides real-time information 
regarding orders entered through OTTO and the execution of those 
orders. The OTTO DROP data feed is not a trading interface and does 
not accept order messages.
    \9\ OTTO provides a method for subscribers to send orders and 
receive status updates on those orders. OTTO accepts limit orders 
from system subscribers, and if there is a matching order, the 
orders will execute. Non-matching orders are added to the limit 
order book, a database of available limit orders, where they are 
matched in price-time priority.
    \10\ SQF ports are ports that receive inbound quotes at any time 
within that month. The SQF Port allows a NOM Participant to access 
information such as execution reports and other relevant data 
through a single feed. For example, this data would show which 
symbols are trading on NOM and the current state of an options 
symbol (i.e., open for trading, trading, halted or closed). Auction 
notifications and execution reports are also available. NOM Market 
Makers rely on data available through the SQF Port to provide them 
the necessary information to perform market making activities.
---------------------------------------------------------------------------

    Each NOM Participant is assigned a market participant identifier or 
``mnemonic'' \11\ and in some cases, certain NOM Participants request 
multiple mnemonics for purposes of accounting for trading activity. 
These mnemonics identify users at a particular NOM Participant. The 
Exchange bills its port fees based on the number of mnemonics 
configured for each port. By way of example, if a NOM Participant, ABC, 
requested 2 ports from the Exchange and further requested that each 
port be configured to be accessed by 4 mnemonics or in some cases 
account numbers,\12\ the NOM Participant, today, would be billed for 8 
ports at the rate of $600 per port for that month. All billing is 
captured at the Participant level. NOM Participants may choose to have 
multiple mnemonics or in some case multiple account numbers for the 
convenience of conducting their business, however only one mnemonic and 
one account number is required to conduct business on NOM. The 
aforementioned will not apply to SQF ports, which are not billed by 
mnemonic.
---------------------------------------------------------------------------

    \11\ A mnemonic is a unique identifier consisting of a four 
character alpha code.
    \12\ Account numbers are assigned by the Exchange and associated 
with particular NOM Participants.
---------------------------------------------------------------------------

    The Exchange is proposing to increase OTTO and SQF Ports from 
$600.00 to $750.00, per port, per month, per mnemonic for the OTTO Port 
and per port, per month for the SQF port. All other port fees (Order 
Entry Port, CTI Port, ITTO Port, BONO Port, Order Entry DROP Port and 
OTTO Drop Ports) will increase from $600.00 to $650.00 per port, per 
month, per mnemonic. NOM Market Makers utilize OTTO and SQF ports for 
their market making business, which ports require a greater throughput 
as compared to the other ports mentioned herein. The Exchange expends 
greater resources to provide the OTTO and SQF ports, which is the 
reason for the increased fee for these ports as compared to other 
ports.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\13\ in general, and with 
Section 6(b)(4) and 6(b)(5) of the Act,\14\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that increasing the Order Entry Port, CTI 
Port, ITTO Port, BONO Port, Order Entry DROP Port and OTTO DROP Port 
fees from $600 to $650 per port, per month, per mnemonic is reasonable 
because it would allow the Exchange to keep pace with increasing 
technology costs. The increased Port Fees reflect the increased costs 
that the Exchange bears with respect to maintaining ports. The Port 
Fees are reasonable because they enable the Exchange to offset, in 
part, its connectivity costs associated with making such ports 
available, including costs based on gateway software and hardware 
enhancements and resources dedicated to gateway development, quality 
assurance, and support. The Exchange's Port Fees are in line with costs 
for ports at other options exchanges.\15\
---------------------------------------------------------------------------

    \15\ Miami International Securities Exchange LLC (``MIAX'') 
assesses ports fees that range in price up to $1,000 depending on 
connectivity levels. See MIAX's Fee Schedule. ISE Gemini, LLC (``ISE 
Gemini'') assesses port fees that range from $750-$15,000 depending 
on connectivity levels. See ISE Gemini's Fee Schedule. Finally, C2 
Options Exchange, Incorporated (``C2'') assesses port fees that 
range from $500-$1,000 depending on connectivity levels. See C2's 
Fee Schedule. See also NASDAQ OMX PHLX LLC's (``Phlx'') Pricing 
Schedule. Phlx assesses higher fees which range from $2,500 to 
$15,000 for its Active SQF Port which is utilized by Phlx market 
makers as compared to $550 for Order Entry Ports.
---------------------------------------------------------------------------

    The Exchange believes that increasing the Order Entry Ports, CTI 
Ports, ITTO Ports, BONO Ports, Order Entry DROP Port and OTTO DROP Port 
fees from $600 to $650 per port, per month, per mnemonic is equitable 
and not unfairly discriminatory because the Exchange assesses the same 
fees for all ports to all NOM participants.
    The Exchange believes that increasing the OTTO Port and SQF Port 
Fees from $600 to $750 is reasonable because it would allow the 
Exchange to keep pace with increasing technology costs. NOM Market 
Makers utilize the OTTO and SQF ports, which ports require a greater 
throughput as compared to the other ports mentioned herein. The 
Exchange expends greater resources to provide the OTTO and SQF ports, 
which is the reason for the increased fee as compared to other ports. 
The increased Port Fees reflect the increased costs that the Exchange 
bears with respect to maintaining ports. The Port Fees are reasonable 
because they enable the Exchange to offset, in part, its connectivity 
costs associated with making such NOM Market Maker ports available, 
including costs based on gateway software and hardware enhancements and 
resources dedicated to gateway development, quality assurance, and 
support. The Exchange's Port Fees are in line with costs for ports at 
other options exchanges.\16\
---------------------------------------------------------------------------

    \16\ Id.
---------------------------------------------------------------------------

    The Exchange believes that increasing the OTTO Port and SQF Port 
Fees from $600 to $750 is equitable and not unfairly discriminatory 
because the Exchange assesses the same fees for these ports which are 
utilized by NOM Market Makers for any NOM market participant desiring 
these ports.

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 the proposed fee 
change is reasonably designed to be fair and equitable, and therefore, 
will not unduly burden any particular group of market participants 
trading on the Exchange. The Exchange's proposal to increase all port 
fees for all NOM Participants with respect to the Order Entry Port, CTI 
Port, ITTO Port, BONO Port, Order Entry DROP Port and OTTO DROP Port 
fees from $600 to $650 does not create an undue burden on competition. 
The proposed fees are designed to ensure a fair and reasonable use of 
Exchange resources by allowing the Exchange to

[[Page 18452]]

recoup for certain of its connectivity costs, while continuing to offer 
competitive rates to NOM Participants.
    With respect to the OTTO Port and SQF Port Fees, the increase in 
the port fees from $600 to $750 is greater. These ports are utilized by 
NOM Market Makers in connection with marking markets. NOM Market Makers 
utilize the OTTO and SQF ports, which ports require a greater 
throughput as compared to the other ports mentioned herein. The 
Exchange expends greater resources to provide the OTTO and SQF ports, 
which is the reason for the increased fee as compared to other ports. 
The increased Port Fees reflect the increased costs that the Exchange 
bears with respect to maintaining ports. The Exchange does not believe 
these fee increases create an undue burden on competition. Moreover, 
the Exchange believes that its fee increases are competitive with 
similar fees at other options exchanges.\17\
---------------------------------------------------------------------------

    \17\ See note 15.
---------------------------------------------------------------------------

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.\18\ 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.
---------------------------------------------------------------------------

    \18\ 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-2015-027 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2015-027. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-027 and should 
be submitted on or before April 27, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-07749 Filed 4-3-15; 8:45 am]
BILLING CODE 8011-01-P