Document ID: SEC-2015-1355-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter XV, Section 2 Entitled "NASDAQ Options Market-Fees and Rebates"
Posted Date: 2015-08-13T04:00Z

[Federal Register Volume 80, Number 156 (Thursday, August 13, 2015)]
[Notices]
[Pages 48612-48615]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-19875]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75647; File No. SR-NASDAQ-2015-090]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Chapter XV, Section 2 Entitled ``NASDAQ Options Market--Fees and 
Rebates''

August 7, 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 July 31, 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 the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Chapter XV, Section 2 entitled ``NASDAQ Options Market--Fees and 
Rebates,'' 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 such changes to become operative on August 3, 
3015.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

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

[[Page 48613]]

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 expand eligibility for one of the 
incentives under the Penny Pilot Options Rebates to Add Liquidity. The 
Penny Pilot was established in March 2008 and has since been expanded 
and extended through June 30, 2016.\3\ Today, the Exchange pays 
Customers \4\ and Professionals \5\ a Penny Pilot Options Rebate to Add 
Liquidity based on the following tiered rebate structure:
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    \3\ 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) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
December 31, 2013); 71105 (December 17, 2013), 78 FR 77530 (December 
23, 2013) (SR-NASDAQ-2013-154) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
June 30, 2014); 79 FR 31151 (May 23, 2014), 79 FR 31151 (May 30, 
2014) (SR-NASDAQ-2014-056) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
December 31, 2014); 73686 (December 2, 2014), 79 FR 71477 (November 
25, 2014) (SR-NASDAQ-2014-115) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
June 30, 2015) and 75283 (June 24, 2015), 80 FR 37347 (June 30, 
2015) (SR-NASDAQ-2015-063) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change Relating to Extension of the 
Exchange's Penny Pilot Program and Replacement of Penny Pilot Issues 
That Have Been Delisted.) See also NOM Rules, Chapter VI, Section 5.
    \4\ The term ``Customer'' refers to a customer in a transaction 
that is marked by a Participant in the Customer range for clearing 
purposes at The Options Clearing Corporation (``OCC''). Such a 
transaction is not for the account of a broker, dealer or 
``Professional'' (see next footnote).
    \5\ 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), See Chapter I, 
Section 1(a)(48). All Professional orders must be appropriately 
marked by Participants.

------------------------------------------------------------------------
                                                           Rebate to add
                     Monthly volume                          liquidity
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Tier 1--Participant adds Customer, Professional, Firm,             $0.20
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options of
 up to 0.10% of total industry customer equity and ETF
 option average daily volume (``ADV'') contracts per day
 in a month.............................................
Tier 2--Participant adds Customer, Professional, Firm,              0.25
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.10% to 0.20% of total industry customer equity
 and ETF option ADV contracts per day in a month........
Tier 3--Participant adds Customer, Professional, Firm,              0.42
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.20% to 0.30% of total industry customer equity
 and ETF option ADV contracts per day in a month........
Tier 4--Participant adds Customer, Professional, Firm,              0.43
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.30% to 0.40% of total industry customer equity
 and ETF option ADV contracts per day in a month........
Tier 5--Participant adds Customer, Professional, Firm,              0.45
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.40% to 0.75% of total industry customer equity
 and ETF option ADV contracts per day in a month, or
 Participant adds (1) Customer 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 of 100,000 or more             0.45
 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 of 150,000 or more             0.47
 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, Professional, Firm,              0.48
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.75% or more of total industry customer equity
 and ETF option ADV contracts per day in a month or
 Participant adds (1) Customer and/or Professional
 liquidity in Penny Pilot Options and/or Non-Penny Pilot
 Options of 30,000 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 qualifies for rebates under the Qualified
 Market Maker (``QMM'') Program set forth in Rule 7014..
------------------------------------------------------------------------

    The Exchange is proposing to expand eligibility for one of the 
incentives applicable to Tier 8 Customer Penny Pilot Options Rebate to 
Add Liquidity. The Tier 8 Customer and Professional Penny Pilot Options 
Rebate to Add Liquidity is currently $0.48 per contract if Participants 
add Customer, Professional, Firm,\6\ Non-NOM Market Maker \7\ and/or 
Broker-Dealer \8\ liquidity in Penny Pilot Options and/or Non-Penny 
Pilot Options above 0.75% of total industry customer equity and ETF 
option ADV of contracts traded in a month. This rebate also applies if 
(1) the Participant adds Customer and/or Professional liquidity in 
Penny Pilot Options and/or Non-Penny Pilot Options of 30,000 or more 
contracts per day in a month, (2) the Participant has certified for the 
Investor Support

[[Page 48614]]

Program \9\ set forth in Rule 7014, and (3) the Participant qualifies 
for rebates under the Qualified Market Maker (``QMM'') Program \10\ set 
forth in Rule 7014.
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    \6\ The term ``Firm'' refers to a firm participating in a 
transaction marked by a Participant in the Firm range for clearing 
purposes at OCC.
    \7\ The term ``NOM Market Maker'' is 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.
    \8\ The term ``Broker-Dealer'' refers to a broker or dealer 
participating in a transaction when such transaction is not subject 
to transaction fees applicable to specific categories of transaction 
participants (other than brokers and dealers).
    \9\ For a detailed description of the ISP, 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).
    \10\ A QMM is a NASDAQ member that makes a significant 
contribution to market quality by providing liquidity at the 
national best bid and offer (``NBBO'') in a large number of stocks 
for a significant portion of the day. In addition, the NASDAQ equity 
member must avoid imposing the burdens on NASDAQ and its market 
participants that may be associated with excessive rates of entry of 
orders away from the inside and/or order cancellation. The 
designation ``QMM'' reflects the QMM's commitment to provide 
meaningful and consistent support to market quality and price 
discovery by extensive quoting at the NBBO in a large number of 
securities. In return for its contributions, certain financial 
benefits are provided to a QMM with respect to a particular MPID (a 
``QMM MPID''), as described under Rule 7014(e).
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    Participants that qualify for the Tier 8 rebate and add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity 
in Penny Pilot Options and/or Non- Penny Pilot Options of 1.25% or more 
of total industry customer equity and ETF option ADV of contracts 
traded in a month today also receive an additional $0.02 per contract 
Penny Pilot Options Customer \11\ Rebate to Add Liquidity for each 
transaction which adds liquidity in Penny Pilot Options in that 
month.\12\
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    \11\ This $0.02 per contract incentive applies only to the Tier 
8 Customer rebate, and not the Professional rebate.
    \12\ See note ``e'' in Chapter XV, Section 2(1).
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    The Exchange is proposing to expand eligibility for this additional 
incentive under the Tier 8 Customer rebate by amending the 
qualification as follows: ``Participants that add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity 
in Penny Pilot Options and/or Non- Penny Pilot Options of 1.15% or more 
of total industry customer equity and ETF option ADV contracts per day 
in a month will receive an additional $0.02 per contract Penny Pilot 
Options Customer Rebate to Add Liquidity for each transaction which 
adds liquidity in Penny Pilot Options in that month.'' By lowering the 
percentage of total industry customer equity and ETF options ADV of 
contracts in a month required to be reached in order to qualify for the 
additional $0.02 per contract rebate, the Exchange expects that a 
greater number of Participants qualifying for the Tier 8 rebate will 
also receive the added incentive.
    The Exchange expects that expanded eligibility for this incentive 
will encourage Participants to add greater liquidity to NOM. While the 
changes proposed herein are effective upon filing, the Exchange has 
designated such changes to become operative on August 3, 3015.
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.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to expand incentive eligibility is 
reasonable because it will incentivize Participants to add liquidity in 
Penny Pilot Options and/or Non-Penny Pilot Options. Participants that 
qualify for the Tier 8 rebate may choose to add greater liquidity to 
NOM because of the lower percentage qualifier (1.25% to 1.15%) to 
obtain the additional $0.02 per contract Customer rebate.
    The Exchange's proposal to expand incentive eligibility is 
equitable and not unfairly discriminatory because all eligible 
Participants may qualify for the Tier 8 Customer Penny Pilot Options 
Rebate to Add Liquidity, provided they have the requisite volume. The 
added $0.0.2 per contract incentive will be uniformly paid in addition 
to the Tier 8 rebate. Customer liquidity is critically important to the 
market and all market participants. Greater customer liquidity benefits 
all market participants by providing more trading opportunities, which 
attracts market makers. An increase in the activity by market makers in 
turn facilitates tighter spreads and further order flow.

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

    The proposed rule change will not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the Act. 
The proposed expanded incentive will incentivize market participants to 
add greater liquidity on NOM to obtain the added $0.02 per contract 
Customer rebate. Customer liquidity is critically important to the 
market and benefits all market participants. Greater customer liquidity 
benefits all market participants by providing more trading 
opportunities and attracting greater participation by specialists and 
market makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads. All Participants are eligible for 
the rebates if they transact the requisite volume.
    The Exchange operates in a highly competitive market 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 ensure that the Exchange's fees and 
rebates remain competitive with the fee structures at other trading 
platforms.

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.\15\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-090 on the subject line.

[[Page 48615]]

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-2015-090. 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-2015-090 and should 
be submitted on or before September 3, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-19875 Filed 8-12-15; 8:45 am]
BILLING CODE 8011-01-P