Document ID: SEC-2020-1451-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2020-09-10T04:00Z

[Federal Register Volume 85, Number 176 (Thursday, September 10, 2020)]
[Notices]
[Pages 55887-55902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19946]

[[Page 55887]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89767; File No. SR-NASDAQ-2020-056]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Proposed Rule Change To Amend The NASDAQ Options Market LLC Pricing 
Schedule at Options 7, Section 2 and Update Other Rule Text Within 
Options 7, Section 1 and Options 7, Section 5

September 3, 2020.
    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 August 21, 2020, 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.
---------------------------------------------------------------------------

    \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

    The Exchange proposes to amend The NASDAQ Options Market LLC 
(``NOM'') Pricing Schedule at Options 7, Section 2, ``Nasdaq Options 
Market Fees and Rebates.'' The Exchange also proposes to amend certain 
rule citations within Options 7, update other rule text within Options 
7, Section 1, ``Collection of Exchange Fees and Other Claims-Nasdaq 
Options Market,'' and Options 7, Section 5, ``Nasdaq Options Regulatory 
Fee.''
    The Exchange originally filed the proposed pricing changes on 
August 3, 2020 as SR-NASDAQ-2020-047. On August 13, 2020, the Exchange 
withdrew that filing and submitted SR-NASDAQ-2020-052. On August 21, 
2020, the Exchange withdrew SR-NASDAQ-2020-052 and replaced it with 
this proposal.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend NOM's Pricing Schedule at Options 7, 
Section 2, ``Nasdaq Options Market Fees and Rebates.'' The Exchange 
also proposes to amend certain rule citations within Options 7, update 
other rule text within Options 7, Section 1, ``Collection of Exchange 
Fees and Other Claims-Nasdaq Options Market,'' and Options 7, Section 
5, ``Nasdaq Options Regulatory Fee.'' Each change will be described 
below.
Options 7, Section 2
    Today, NOM Options 7, Section 2(1) provides for various fees and 
rebates applicable to NOM Participants. Today, the table of fees and 
rebates is divided into Penny Pilot Options and Non-Penny Pilot 
Options.\3\ The Exchange pays Customer \4\ and Professional \5\ Rebates 
to Add Liquidity in Penny Symbols based on a table. To determine the 
applicable percentage of total industry customer equity and ETF option 
average daily volume, unless otherwise stated, the Participant's Penny 
and Non-Penny Symbol Customer and/or Professional volume that adds 
liquidity is included. The table for Customer and Professional Rebates 
to Add Liquidity in Penny Symbols is currently as follows:
---------------------------------------------------------------------------

    \3\ The Exchange proposes to replace the terms ``Pilot Options'' 
and ``Pilot'' with ``Symbol'' or ``Symbols'' throughout Options 7, 
Section 2. On April 1, 2020, the Commission approved the amendment 
to the OLPP to make permanent the Pilot Program (the ``OLPP 
Program''). See Securities Exchange Act Release No. 88532 (April 1, 
2020), 85 FR 19545 (April 7, 2020) (File No. 4-443) (``Approval 
Order''). The Exchange recently filed a proposal to amend NOM 
Options 3, Section 3 to conform the rule to Section 3.1 of the Plan 
for the Purpose of Developing and Implementing Procedures Designed 
to Facilitate the Listing and Trading of Standardized Options (the 
``OLPP''). See Securities Exchange Act Release No. 89167 (June 26, 
2020), 85 FR 39953 (July 2, 2020) (SR-NASDAQ-2020-036). The 
Exchange's proposal amended NOM Options 3, Section 3 to refer to a 
Penny Interval Program instead of a Penny Pilot Program. This 
proposed change conforms the name of the program and removes a 
reference to a list of Penny Pilot Program symbols. The Exchange's 
proposal hereafter utilizes the term ``Penny Symbols'' and ``Non-
Penny Symbols'' for these reasons.
    \4\ As proposed within Options 7, Section 1, the term 
``Customer'' or (``C'') applies to any transaction that is 
identified by a Participant for clearing in the Customer range at 
The Options Clearing Corporation (``OCC'') which is not for the 
account of broker or dealer or for the account of a ``Professional'' 
(as that term is defined in Options 1, Section 1(a)(47)).
    \5\ As proposed within Options 7, Section 1 the term 
``Professional'' or (``P'') means any person or entity that (i) is 
not a broker or dealer in securities, and (ii) places more than 390 
orders in listed options per day on average during a calendar month 
for its own beneficial account(s) pursuant to Options 1, Section 
1(a)(47). All Professional orders shall be appropriately marked by 
Participants.

[[Page 55888]]

------------------------------------------------------------------------
                                                           Rebate to add
      Monthly  volume                                        liquidity
------------------------------------------------------------------------
Tier 1....................  Participant adds Customer,             $0.20
                             Professional, Firm, 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,              0.25
                             Professional, Firm, 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,              0.42
                             Professional, Firm, 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,              0.43
                             Professional, Firm, 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,              0.45
                             Professional, Firm, Non-NOM
                             Market Maker and/or Broker-
                             Dealer liquidity in Penny
                             Pilot Options and/or Non-
                             Penny Pilot Options above
                             0.40% to 0.80% of total
                             industry customer equity
                             and ETF option ADV
                             contracts per day in a
                             month.
Tier 6....................  Participant adds Customer,          \c\ 0.48
                             Professional, Firm, Non-NOM
                             Market Maker and/or Broker-
                             Dealer liquidity in Penny
                             Pilot Options and/or Non-
                             Penny Pilot Options above
                             0.80% or more of total
                             industry customer equity
                             and ETF option ADV
                             contracts per day in a
                             month, or Participant adds:
                             (1) Customer and/or
                             Professional liquidity in
                             Penny Pilot Options and/or
                             Non-Penny Pilot Options of
                             0.20% or more of total
                             industry customer equity
                             and ETF option ADV
                             contracts per day in a
                             month, and (2) has added
                             liquidity in all securities
                             through one or more of its
                             Nasdaq Market Center MPIDs
                             that represent 1.00% or
                             more of Consolidated Volume
                             in a month or qualifies for
                             MARS (defined below).
------------------------------------------------------------------------

    Further, pursuant to current note ``d'', with respect to Customer 
and Professional Rebates to Add Liquidity in Penny Symbols, this note 
provides that, NOM Participants that qualify for any MARS Payment Tier 
in Section (6) will receive: (1) An additional $0.05 per contract Penny 
Pilot Options Customer and/or Professional Rebate to Add Liquidity for 
each transaction which adds liquidity in Penny Pilot Options in that 
month, in addition to qualifying Customer and/or Professional Rebate to 
Add Liquidity Tier 1, or (2) an additional $0.04 per contract Penny 
Pilot Options Customer and/or Professional Rebate to Add Liquidity for 
each transaction which adds liquidity in Penny Pilot Options in that 
month, in addition to qualifying Penny Pilot Options Customer and/or 
Professional Rebate to Add Liquidity Tiers 2-6. NOM Participants that 
qualify for a note ``c'' incentive will receive the greater of the note 
``c'' \6\ or note ``d'' incentive.
---------------------------------------------------------------------------

    \6\ Current note ``c'' of Options 7, Section 2(1) provides, 
``Participants that: (1) add Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options 
and/or Non-Penny Pilot Options of 1.15% or more of total industry 
customer equity and ETF option ADV contracts per day in a month will 
receive an additional $0.02 per contract Penny Pilot Options 
Customer and/or Professional Rebate to Add Liquidity for each 
transaction which adds liquidity in Penny Pilot Options in that 
month; or (2) add Customer, Professional, Firm, Non-NOM Market Maker 
and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-
Penny Pilot Options of 1.30% or more of total industry customer 
equity and ETF option ADV contracts per day in a month will receive 
an additional $0.05 per contract Penny Pilot Options Customer and/or 
Professional Rebate to Add Liquidity for each transaction which adds 
liquidity in Penny Pilot Options in that month; or (3) (a) add 
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options above 0.80% of total industry customer equity and ETF option 
ADV contracts per day in a month, (b) add Customer, Professional, 
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Non-
Penny Pilot Options above 0.12% of total industry customer equity 
and ETF option ADV contracts per day in a month, and (c) execute 
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within The Nasdaq Stock 
Market Closing Cross within a month will receive an additional $0.05 
per contract Penny Pilot Options Customer and/or Professional Rebate 
to Add Liquidity for each transaction which adds liquidity in Penny 
Pilot Options in a month. Consolidated Volume shall mean the total 
consolidated volume reported to all consolidated transaction 
reporting plans by all exchanges and trade reporting facilities 
during a month in equity securities, excluding executed orders with 
a size of less than one round lot. For purposes of calculating 
Consolidated Volume and the extent of an equity member's trading 
activity, expressed as a percentage of or ratio to Consolidated 
Volume, the date of the annual reconstitution of the Russell 
Investments Indexes shall be excluded from both total Consolidated 
Volume and the member's trading activity.''
---------------------------------------------------------------------------

    Also, pursuant to current note ``e'', NOM Participants that 
transact in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 3.00% or more of Consolidated Volume in the 
same month on The Nasdaq Stock Market will receive a $0.50 per contract 
rebate to add liquidity in Penny Pilot Options as Customer or 
Professional and $1.00 per contract rebate to add liquidity in Non-
Penny Pilot Options as Customer or Professional. Participants that 
qualify for this rebate would not be eligible for any other rebates in 
Tiers 1-6 or other rebate incentives on NOM for Customer and 
Professional order flow in Options 7, Section 2(1).
    Finally, pursuant to current note ``f'', NOM Participants that (a) 
add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 
above 1.20% of total industry customer equity and ETF option ADV 
contracts per day in a month, (b) execute greater than 0.04% of 
Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close (``MOC/
LOC'') volume within The Nasdaq Stock Market Closing Cross within a 
month, and (c) add greater than 1.5 million shares per day of 
nondisplayed volume within The Nasdaq Stock Market within a month will 
receive a $0.55 per contract rebate to add liquidity in Penny Pilot 
Options as Customer or Professional and $1.05 per contract rebate to 
add liquidity in Non-Penny Pilot Options as Customer or Professional. 
Participants that qualify for this rebate would not be eligible for any 
other rebates in Tiers 1-6 or other rebate incentives on NOM for 
Customer and Professional order flow in Options 7, Section 2(1).
Penny Symbols
    Today, Firms,\7\ Non-NOM Market Makers,\8\ and Broker-Dealers \9\ 
are paid a $0.10 per contract Rebate to Add

[[Page 55889]]

Liquidity in Penny Symbols. NOM Market Makers \10\ are paid Rebates to 
Add Liquidity in Penny Symbols will be paid as noted below.
---------------------------------------------------------------------------

    \7\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC. See Options 7, Section 1.
    \8\ The term ``Non-NOM Market Maker'' or (``O'') is a registered 
market maker on another options exchange that is not a NOM Market 
Maker. A Non-NOM Market Maker must append the proper Non-NOM Market 
Maker designation to orders routed to NOM. See Options 7, Section 1.
    \9\ The term ``Broker-Dealer'' or (``B'') applies to any 
transaction which is not subject to any of the other transaction 
fees applicable within a particular category. See Options 7, Section 
1.
    \10\ As proposed, the term ``NOM Market Maker'' or (``M'') is a 
Participant that has registered as a Market Maker on NOM pursuant to 
Options 2, Section 1, and must also remain in good standing pursuant 
to Options 2, Section 9. 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 proposed Options 7, 
Section 1.

----------------------------------------------------------------------------------------------------------------
            Monthly volume                                                             Rebate to add liquidity
----------------------------------------------------------------------------------------------------------------
Tier 1................................  Participant adds NOM Market Maker liquidity  $0.20.
                                         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 NOM Market Maker liquidity  $0.25.
                                         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: (a) Adds NOM Market Maker       $0.30 or $0.40 in the
                                         liquidity in Penny Pilot Options and/or      following symbols AAPL,
                                         Non-Penny Pilot Options above 0.20% to       QQQ, IWM, SPY and VXX.
                                         0.60% of total industry customer equity
                                         and ETF option ADV contracts per day in a
                                         month: Or (b)(1) transacts in all
                                         securities through one or more of its
                                         Nasdaq Market Center MPIDs that represent
                                         0.70% or more of Consolidated Volume
                                         (``CV'') which adds liquidity in the same
                                         month on The Nasdaq Stock Market, (2)
                                         transacts in Tape B securities through one
                                         or more of its Nasdaq Market Center MPIDs
                                         that represent 0.18% or more of CV which
                                         adds liquidity in the same month on The
                                         Nasdaq Stock Market, and (3) executes
                                         greater than 0.01% of CV via Market-on-
                                         Close/Limit-on-Close (``MOC/LOC'') volume
                                         within The Nasdaq Stock Market Closing
                                         Cross in the same month.
Tier 4................................  Participant adds NOM Market Maker liquidity  $0.32 or $0.40 in the
                                         in Penny Pilot Options and/or Non-Penny      following symbols AAPL,
                                         Pilot Options of above 0.60% to 0.90% of     QQQ, IWM, VXX and SPY.
                                         total industry customer equity and ETF
                                         option ADV contracts per day in a month.
Tier 5 .............................  Participant adds NOM Market Maker liquidity  $0.44.
                                         in Penny Pilot Options and/or Non-Penny
                                         Pilot Options of above 0.40% of total
                                         industry customer equity and ETF option
                                         ADV contracts per day in a month and
                                         transacts in all securities through one or
                                         more of its Nasdaq Market Center MPIDs
                                         that represent 0.40% or more of
                                         Consolidated Volume (``CV'') which adds
                                         liquidity in the same month on The Nasdaq
                                         Stock Market.
Tier 6................................  Participant: (a)(1) Adds NOM Market Maker    $0.48.
                                         liquidity in Penny Pilot Options and/or
                                         Non-Penny Pilot Options above 0.95% of
                                         total industry customer equity and ETF
                                         option ADV contracts per day in a month,
                                         (2) executes Total Volume of 250,000 or
                                         more contracts per day in a month, of
                                         which 30,000 or more contracts per day in
                                         a month must be removing liquidity, and
                                         (3) adds Firm, Broker-Dealer and Non-NOM
                                         Market Maker liquidity in Non-Penny Pilot
                                         Options of 10,000 or more contracts per
                                         day in a month; or (b)(1) adds NOM Market
                                         Maker liquidity in Penny Pilot Options and/
                                         or Non-Penny Pilot Options above 1.50% of
                                         total industry customer equity and ETF
                                         option ADV contracts per day in a month,
                                         and (2) executes Total Volume of 250,000
                                         or more contracts per day in a month, of
                                         which 15,000 or more contracts per day in
                                         a month must be removing liquidity.
----------------------------------------------------------------------------------------------------------------

Total Volume is defined as Customer, Professional, Firm, Broker-Dealer, 
Non876K54-NOM Market Maker and NOM Market Maker volume in Penny Symbols 
and/or Non-Penny Symbols which either adds or removes liquidity on NOM. 
Pursuant to current note ``##'', NOM Participants that qualify for the 
Tier 5 NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options 
and add NOM Market Maker liquidity in Penny Pilot Options and/or Non-
Penny Pilot Options of above 0.50% of total industry customer equity 
and ETF option ADV contracts per day in a month, will receive a $0.46 
per contract rebate to add liquidity in Penny Pilot Options as Market 
Maker in lieu of the Tier 5 rebate.
    The Exchange assesses Customers and Professionals a $0.48 per 
contract Fee for Removing Liquidity in Penny Symbols. Firms, Non-NOM 
Market Makers, NOM Market Makers and Broker-Dealers are assessed a 
$0.50 per contract Fee for Removing Liquidity in Penny Symbols.
    With respect to the fees assessed to Non-NOM Market Makers and NOM 
Market Makers, pursuant to current note ``2'', Participants that add 
1.30% of Customer, Professional, Firm, Broker-Dealer or Non-NOM Market 
Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 
of total industry customer equity and ETF option ADV contracts per day 
in a month are subject to the following pricing applicable to 
executions: A $0.48 per contract Penny Pilot Options Fee for Removing 
Liquidity when the Participant is (i) both the buyer and the seller or 
(ii) the Participant removes liquidity from another Participant under 
Common Ownership. Further, Participants that add 1.50% of Customer, 
Professional, Firm, Broker-Dealer or Non-NOM Market Maker liquidity in 
Penny Pilot Options and/or Non-Penny Pilot Options of total industry 
customer equity and ETF option ADV contracts per day in a month and 
meet or exceed the cap for The Nasdaq Stock Market Opening Cross during 
the month are subject to the following pricing applicable to executions 
less than 10,000 contracts: A $0.32 per contract Penny Pilot Options 
Fee for Removing Liquidity when the Participant is (i) both the buyer 
and seller or (ii) the Participant removes liquidity from another 
Participant under Common Ownership. Finally, Participants that add 
1.75% of Customer, Professional, Firm, Broker-Dealer or Non-NOM Market 
Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 
of total industry customer equity and ETF option ADV contracts per day 
in a month are subject to the following pricing applicable to 
executions less than 10,000 contracts: A $0.32 per contract Penny Pilot 
Options Fee for Removing Liquidity when the

[[Page 55890]]

Participant is (i) both the buyer and seller or (ii) the Participant 
removes liquidity from another Participant under Common Ownership.
Non-Penny Symbols
    Today, the Exchange assesses no Fee for Adding Liquidity to 
Customers and Professionals in Non-Penny Symbols. Firms, Non-NOM Market 
Makers and Broker-Dealers are assessed a $0.45 per contract Fee for 
Adding Liquidity in Non-Penny Symbols. Finally, NOM Market Makers are 
assessed a $0.35 per contract Fee for Adding Liquidity in Non-Penny 
Symbols. The NOM Market Maker Fee for Adding Liquidity in Non-Penny 
Symbols will apply unless Participants meet the volume thresholds set 
forth in current note ``5''.
    Pursuant to current note ``5'', Participants that add NOM Market 
Maker liquidity in Non-Penny Symbols of 7,500 to 9,999 ADV contracts 
per day in a month are assessed a $0.00 per contract Non-Penny Options 
Fee for Adding Liquidity in that month. Participants that add NOM 
Market Maker liquidity in Non-Penny Pilot Options of 10,000 or more ADV 
contracts per day in a month receive the Non-Penny Rebate to Add 
Liquidity for that month instead of paying the Non-Penny Fee for Adding 
Liquidity.
    The Exchange assesses Customers and Professionals an $0.85 per 
contact Fee for Removing Liquidity in Non-Penny Symbols. Firms, Non-NOM 
Market Makers, NOM Market Makers and Broker-Dealers are assessed a 
$1.10 Fee for Removing Liquidity in Non-Penny Symbols.
    Customers and Professionals are paid an $0.80 per contract Rebate 
to Add Liquidity in Non-Penny Symbols. Pursuant to current note ``1'', 
a Participant that qualifies for Customer or Professional Penny Pilot 
Options Rebate to Add Liquidity Tiers 2, 3, 4, or 5 in a month will 
receive an additional $0.10 per contract Non-Penny Pilot Options Rebate 
to Add Liquidity for each transaction which adds liquidity in Non-Penny 
Pilot Options in that month. A Participant that qualifies for Customer 
or Professional Penny Pilot Options Rebate to Add Liquidity Tier 6 in a 
month will receive an additional $0.20 per contract Non-Penny Pilot 
Options Rebate to Add Liquidity for each transaction which adds 
liquidity in Non-Penny Pilot Options in that month.
    Further, as discussed above, pursuant to current note ``e'', NOM 
Participants that transact in all securities through one or more of its 
Nasdaq Market Center MPIDs that represent 3.00% or more of Consolidated 
Volume in the same month on The Nasdaq Stock Market will receive a 
$0.50 per contract rebate to add liquidity in Penny Pilot Options as 
Customer or Professional and $1.00 per contract rebate to add liquidity 
in Non-Penny Pilot Options as Customer or Professional. Participants 
that qualify for this rebate would not be eligible for any other 
rebates in Tiers 1-6 or other rebate incentives on NOM for Customer and 
Professional order flow in Options 7, Section 2(1).
    Finally, as discussed above, pursuant to current note ``f'', NOM 
Participants that (a) add Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-
Penny Pilot Options above 1.20% of total industry customer equity and 
ETF option ADV contracts per day in a month, (b) execute greater than 
0.04% of Consolidated Volume (``CV'') via Market-on-Close/Limit-on-
Close (``MOC/LOC'') volume within The Nasdaq Stock Market Closing Cross 
within a month, and (c) add greater than 1.5 million shares per day of 
nondisplayed volume within The Nasdaq Stock Market within a month will 
receive a $0.55 per contract rebate to add liquidity in Penny Pilot 
Options as Customer or Professional and $1.05 per contract rebate to 
add liquidity in Non-Penny Pilot Options as Customer or Professional. 
Participants that qualify for this rebate would not be eligible for any 
other rebates in Tiers 1-6 or other rebate incentives on NOM for 
Customer and Professional order flow in Options 7, Section 2(1).
    Firms, Non-NOM Market Makers and Broker-Dealers are not eligible 
for a Rebate to Add Liquidity in Non-Penny Symbols.
    NOM Market Makers receive a $0.30 per contract Rebate for Adding 
Liquidity in Non-Penny Symbols, when the NOM Market Maker qualifies for 
the volume thresholds set forth in note ``5'', which was described 
above. Additionally, if a NOM Market Maker qualifies for note ``6'', 
they may receive additional incentives. Current note ``6'' provides 
that Participants that qualify for the Tier 6 NOM Market Maker Rebate 
to Add Liquidity in Penny Pilot Options will receive a $0.86 per 
contract NOM Market Maker Rebate to Add Liquidity in Non-Penny Pilot 
Options.\11\ Participants that qualify for a note ``&'' incentive in 
the MARS Payment Schedule in Options 7, Section 2(6) receive an 
additional $0.02 per contract NOM Market Maker Rebate to Add Liquidity 
in Non-Penny Pilot Options, in addition to receiving an $0.86 per 
contract NOM Market Maker Rebate to Add Liquidity in Non-Penny Pilot 
Options. Participants that qualify for a note ``5'' incentive receive 
the greater of the note ``5'' or note ``6'' incentive.
---------------------------------------------------------------------------

    \11\ Current note ``6'' of Options 7, Section 2(1) provides, 
``Participants that qualify for the Tier 6 NOM Market Maker Rebate 
to Add Liquidity in Penny Pilot Options will receive a $0.86 per 
contract NOM Market Maker Rebate to Add Liquidity in Non-Penny Pilot 
Options. Participants that qualify for a note ``&'' incentive in the 
MARS Payment Schedule in Section (6) will receive an additional 
$0.02 per contract NOM Market Maker Rebate to Add Liquidity in Non-
Penny Pilot Options, in addition to receiving a $0.86 per contract 
NOM Market Maker Rebate to Add Liquidity in Non-Penny Pilot Options. 
Participants that qualify for a note ``5'' incentive will receive 
the greater of the note ``5'' or note ``6'' incentive.''
---------------------------------------------------------------------------

Proposal
    The Exchange proposes to restructure NOM's Pricing Schedule within 
Options 7, Section 2 for Penny and Non-Penny Symbols. The Exchange's 
proposal introduces new tables as explained in detail below.
    The Exchange proposes to rename Options 7, Section 2(1) ``Fees and 
Rebates for Execution of Contracts on The Nasdaq Options Market.'' This 
section is currently titled ``Fees for Execution of Contracts on The 
Nasdaq Options Market.'' This change is proposed as the Exchange 
provides for rebates within Options 7, Section 2(1).
    First, the Exchange proposes the below new table for its Rebates to 
Add Liquidity in Penny Symbols.

                                                        Rebates To Add Liquidity in Penny Symbols
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Tier 1          Tier 2          Tier 3          Tier 4          Tier 5          Tier 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Customer 1 8 9 10.......................................         ($0.20)         ($0.25)         ($0.42)         ($0.43)         ($0.45)     \7\ ($0.48)
Professional 1 9 10.....................................          (0.20)          (0.25)          (0.42)          (0.43)          (0.45)          (0.48)
Broker-Dealer...........................................          (0.10)          (0.10)          (0.10)          (0.10)          (0.10)          (0.10)
Firm....................................................          (0.10)          (0.10)          (0.10)          (0.10)          (0.10)          (0.10)
Non-NOM Market Maker....................................          (0.10)          (0.10)          (0.10)          (0.10)          (0.10)          (0.10)

[[Page 55891]]

 
NOM Market Maker \3\....................................          (0.20)          (0.25)      \4\ (0.30)      \4\ (0.32)     \11\ (0.44)          (0.48)
--------------------------------------------------------------------------------------------------------------------------------------------------------

Customer Rebates To Add Liquidity in Penny Symbols
    With respect to Customer Rebates to Add Liquidity in Penny Symbols, 
the rebates paid for each tier \12\ will continue to be the same. Also, 
the Exchange is relocating the current tier qualifications within new 
note ``1,'' with no changes. No changes are being made to the Customer 
Rebates to Add Liquidity in Penny Symbols, the rebates are simply being 
restructured into a new format.
---------------------------------------------------------------------------

    \12\ Today, the Exchange pays Customers, in Penny Symbols the 
following Rebates to Add Liquidity: $0.20 per contract for Tier 1, 
$0.25 per contract for Tier 2, $0.42 per contract for Tier 3, $0.43 
per contract for Tier 4, $0.45 per contract for Tier 5, and $0.48 
per contract for Tier 6.
---------------------------------------------------------------------------

    Today, note ``c'' \13\ is referenced with respect to Customer and 
Professional Tier 6 Rebate to Add Liquidity in Penny Symbols. The 
Exchange proposes to relocate note ``c'' to new note ``7'' \14\ and 
amend the note. New note ``7'' is being amended to remove the incentive 
rebate applicable to Professionals orders as they relate to Rebates to 
Add Liquidity in Penny Symbols. With this proposal, new note ``7'' 
would provide that Participants that add Customer, Professional, Firm, 
Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Symbols 
and/or Non-Penny Symbols of 1.15% or more of total industry customer 
equity and ETF option ADV contracts per day in a month receive an 
additional $0.02 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbols in 
that month. With this proposal, only a Customer would receive the 
additional $0.02 per contract incentive. Today, 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 
1.30% or more of total industry customer equity and ETF option ADV 
contracts per day in a month receive an additional $0.05 per contract 
Penny Pilot Options Customer and/or Professional Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Pilot 
Options in that month. With this proposal, only a Customer would 
receive the additional $0.05 per contract incentive. Finally, today, 
Participants that add (a) Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-
Penny Pilot Options above 0.80% of total industry customer equity and 
ETF option ADV contracts per day in a month; (b) add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity 
in Non-Penny Pilot Options above 0.12% of total industry customer 
equity and ETF option ADV contracts per day in a month, and (c) execute 
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-Close/
Limit-on-Close (``MOC/LOC'') volume within The Nasdaq Stock Market 
Closing Cross within a month receive an additional $0.05 per contract 
Penny Pilot Options Customer and/or Professional Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Pilot 
Options in a month. With this proposal, only a Customer would receive 
the additional $0.05 per contract incentive. A Professional order would 
no longer receive the additional incentives. The Exchange believes that 
despite no longer offering certain incentives for Professional orders, 
the Exchange will continue to attract order flow to NOM. The 
description and calculation of Consolidated Volume \15\ remains 
unchanged.
---------------------------------------------------------------------------

    \13\ See note 6 above.
    \14\ Proposed new note ``7'' provides, ``Participants that: (1) 
add Customer, Professional, Firm, Non-NOM Market Maker and/or 
Broker-Dealer liquidity in Penny Symbols and/or Non-Penny Symbols 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 Symbol Customer Rebate to Add Liquidity for each 
transaction which adds liquidity in Penny Symbol in that month; or 
(2) add Customer, Professional, Firm, Non-NOM Market Maker and/or 
Broker-Dealer liquidity in Penny Symbols and/or Non-Penny Symbols of 
1.30% or more of total industry customer equity and ETF option ADV 
contracts per day in a month will receive an additional $0.05 per 
contract Penny Symbol Customer Rebate to Add Liquidity for each 
transaction which adds liquidity in Penny Symbols in that month; or 
(3) (a) add Customer, Professional, Firm, Non-NOM Market Maker and/
or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny Symbols 
above 0.80% of total industry customer equity and ETF option ADV 
contracts per day in a month, (b) add Customer, Professional, Firm, 
Non-NOM Market Maker and/or Broker-Dealer liquidity in Non-Penny 
Symbols above 0.12% of total industry customer equity and ETF option 
ADV contracts per day in a month, and (c) execute greater than 0.04% 
of Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close 
(``MOC/LOC'') volume within The Nasdaq Stock Market Closing Cross 
within a month will receive an additional $0.05 per contract Penny 
Symbol Customer Rebate to Add Liquidity for each transaction which 
adds liquidity in Penny Symbols in a month. Consolidated Volume 
shall mean the total consolidated volume reported to all 
consolidated transaction reporting plans by all exchanges and trade 
reporting facilities during a month in equity securities, excluding 
executed orders with a size of less than one round lot. For purposes 
of calculating Consolidated Volume and the extent of an equity 
member's trading activity, expressed as a percentage of or ratio to 
Consolidated Volume, the date of the annual reconstitution of the 
Russell Investments Indexes shall be excluded from both total 
Consolidated Volume and the member's trading activity.''
    \15\ Consolidated Volume shall mean the total consolidated 
volume reported to all consolidated transaction reporting plans by 
all exchanges and trade reporting facilities during a month in 
equity securities, excluding executed orders with a size of less 
than one round lot. For purposes of calculating Consolidated Volume 
and the extent of an equity member's trading activity, expressed as 
a percentage of or ratio to Consolidated Volume, the date of the 
annual reconstitution of the Russell Investments Indexes shall be 
excluded from both total Consolidated Volume and the member's 
trading activity. See current note ``c'' within Options 7, Section 
2.
---------------------------------------------------------------------------

    With respect to current notes ``***'', ``d'',\16\ ``e'',\17\ and 
``f,'' \18\ which apply to

[[Page 55892]]

Customer Rebates to Add Liquidity in Penny Symbols, the Exchange 
proposes to relocate these notes, respectively, to new notes ``1'', 
``8'', ``9'', and ``10''.
---------------------------------------------------------------------------

    \16\ Current note ``d'' of Options 7, Section 2(1) provides, 
``NOM Participants that qualify for any MARS Payment Tier in Section 
(6) will receive: (1) an additional $0.05 per contract Penny Pilot 
Options Customer and/or Professional Rebate to Add Liquidity for 
each transaction which adds liquidity in Penny Pilot Options in that 
month, in addition to qualifying Customer and/or Professional Rebate 
to Add Liquidity Tier 1, or (2) an additional $0.04 per contract 
Penny Pilot Options Customer and/or Professional Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Pilot 
Options in that month, in addition to qualifying Penny Pilot Options 
Customer and/or Professional Rebate to Add Liquidity Tiers 2-6. NOM 
Participants that qualify for a note ``c'' incentive will receive 
the greater of the note ``c'' or note ``d'' incentive.''
    \17\ Current note ``e'' of Options 7, Section 2(1) provides, 
``NOM Participants that transact in all securities through one or 
more of its Nasdaq Market Center MPIDs that represent 3.00% or more 
of Consolidated Volume in the same month on The Nasdaq Stock Market 
will receive a $0.50 per contract rebate to add liquidity in Penny 
Pilot Options as Customer or Professional and $1.00 per contract 
rebate to add liquidity in Non-Penny Pilot Options as Customer or 
Professional. Participants that qualify for this rebate would not be 
eligible for any other rebates in Tiers 1-6 or other rebate 
incentives on NOM for Customer and Professional order flow in 
Options 7, Section 2(1).''
    \18\ Current note ``f'' of Options 7, Section 2(1) provides, 
``NOM Participants that (a) add Customer, Professional, Firm, Non-
NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options above 1.20% of total industry 
customer equity and ETF option ADV contracts per day in a month, (b) 
execute greater than 0.04% of Consolidated Volume (``CV'') via 
Market-on-Close/Limit-on-Close (``MOC/LOC'') volume within The 
Nasdaq Stock Market Closing Cross within a month, and (c) add 
greater than 1.5 million shares per day of non-displayed volume 
within The Nasdaq Stock Market within a month will receive a $0.55 
per contract rebate to add liquidity in Penny Pilot Options as 
Customer or Professional and $1.05 per contract rebate to add 
liquidity in Non-Penny Pilot Options as Customer or Professional. 
Participants that qualify for this rebate would not be eligible for 
any other rebates in Tiers 1-6 or other rebate incentives on NOM for 
Customer and Professional order flow in Options 7, Section 2(1).''
---------------------------------------------------------------------------

    Current note ``* * *'' provides, ``The Customer and Professional 
Rebate to Add Liquidity in Penny Pilot Options will be paid as noted 
below. To determine the applicable percentage of total industry 
customer equity and ETF option average daily volume, unless otherwise 
stated, the Participant's Penny Pilot and Non-Penny Pilot Customer and/
or Professional volume that adds liquidity will be included.'' The 
Exchange proposes to relocate this note to new note 1,\19\ and amend 
the note to provide, ``The Customer and Professional Rebate to Add 
Liquidity in Penny Symbols will be paid per the highest tier achieved 
below. To determine the applicable percentage of total industry 
customer equity and ETF option average daily volume, unless otherwise 
stated, the Participant's Penny Symbol and Non-Penny Symbol Customer 
and/or Professional volume that adds liquidity will be included.'' 
While the proposed rule text is being amended to make clear that Penny 
Symbols will continue to be paid the highest tier achieved, this is the 
case today. The Exchange is not amending the manner in which the tiers 
are being applied today. As is the case today, to determine the 
applicable percentage of total industry customer equity and ETF option 
average daily volume, unless otherwise stated, the Participant's Penny 
Symbol and Non-Penny Symbol Customer and/or Professional volume that 
adds liquidity will be included.
---------------------------------------------------------------------------

    \19\ Current note 1 of Options 7, Section 2(1) is being 
relocated to new note ``12''.
---------------------------------------------------------------------------

    The Exchange proposes to relocate note ``d'' into new note ``8'' 
and amend the note. Proposed new note ``8'' removes the incentive 
rebate applicable to Professionals orders as they relate to Rebates to 
Add Liquidity in Penny Symbols, when the NOM Participant qualifies for 
any MARS Payment Tier in Options, 7 Section 2(6). Today, Customer and 
Professional orders receive an additional $0.05 per contract Penny 
Symbol Rebate to Add Liquidity for each transaction which adds 
liquidity in Penny Symbols in that month, in addition to qualifying 
Customer and/or Professional Rebate to Add Liquidity Tier 1. With this 
proposed change, only a Customer would receive the additional $0.05 per 
contract incentive. Also, today, a NOM Participant qualifies for any 
MARS Payment Tier in Options, 7 Section 2(6) may receive an additional 
$0.04 per contract Penny Symbols Customer and/or Professional Rebate to 
Add Liquidity for each transaction which adds liquidity in Penny 
Symbols in that month, in addition to qualifying Penny Symbols Customer 
Rebate to Add Liquidity Tiers 2-6. With this proposal, only a Customer 
would receive the additional $0.04 per contract incentive. The above-
referenced incentives would no longer be available to Professionals. 
The Exchange believes that despite no longer offering certain 
incentives for Professional orders, the Exchange will continue to 
attract order flow to NOM. Finally, the last sentence of current note 
``d'' is being amended to state, ``Participants that qualify for note 
``7'' and note ``8'' incentives will receive the greater of the note 
``7'' or note ``8'' incentive, but not both.'' The proposed wording, 
requires NOM Participants that qualify for both new notes ``7'' and 
``8'', to receive the greater of notes ``7'' or ``8''. Today, NOM 
Participants may only obtain the greater of notes ``c'' or ``d''. This 
new language is not substantively amending the current rule text as any 
NOM Participant could qualify for notes ``c'' or ``d'' today and, as 
currently noted within note ``d'', the NOM Participant would receive 
the greater incentive. As proposed, note ``8'' would provide:

    NOM Participants that qualify for any MARS Payment Tier in 
Section (6) will receive: (1) an additional $0.05 per contract Penny 
Symbol Customer Rebate to Add Liquidity for each transaction which 
adds liquidity in Penny Symbols in that month, in addition to 
qualifying Customer Rebate to Add Liquidity Tier 1, or (2) an 
additional $0.04 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbols 
in that month, in addition to qualifying Penny Symbol Customer 
Rebate to Add Liquidity Tiers 2-6. NOM Participants that qualify for 
note ``7'' and note ``8'' incentives will receive the greater of the 
note ``7'' or note ``8'' incentive, but not both.

    Note ``e'' is being relocated to new note ``9'' and is being 
amended. New note ``9'' provides,

    NOM Participants that transact in all securities through one or 
more of its Nasdaq Market Center MPIDs that represent 3.00% or more 
of Consolidated Volume in the same month on The Nasdaq Stock Market 
will receive a $0.50 per contract Rebate to Add Liquidity in Penny 
Symbols as Customer, a $0.48 per contract rebate as Professional, a 
$1.00 per contract Rebate to Add Liquidity in Non-Penny Symbols as 
Customer, and a $0.90 per contract Rebate to Add liquidity in Non-
Penny Symbols as Professional. Participants that qualify for this 
rebate would not be eligible for any other rebates in Tiers 1-6 or 
other rebate incentives on NOM for Customer and Professional order 
flow in Options 7, Section 2(1).

The Exchange is amending current note ``e'' to reduce the incentive 
paid to a Professional. The Exchange currently pays a $0.50 per 
contract Rebate to Add Liquidity in Penny Symbols to a Customer and a 
Professional. With this proposal, the Exchange would continue to pay a 
Customer a $0.50 per contract Rebate to Add Liquidity in Penny Symbols 
and would now pay a Professional a $0.48 per contract Rebate to Add 
Liquidity in Penny Symbols. Also, the Exchange currently pays a $1.00 
per contract Rebate to Add Liquidity in Non-Penny Symbols to a Customer 
and a Professional. With this proposal, the Exchange would continue to 
pay a Customer a $1.00 per contract Rebate to Add Liquidity in Non-
Penny Symbols and would now pay a Professional a $0.90 per contract 
Rebate to Add Liquidity in Non-Penny Symbols. The Exchange believes 
that despite lowering rebates for Professionals, the Exchange will 
continue to attract order flow to NOM.
    Note ``f'' \20\ is being relocated to note ``10'' and amended. New 
note 10 provides,
---------------------------------------------------------------------------

    \20\ See note 19 above.

    NOM Participants that (a) add Customer, Professional, Firm, Non-
NOM Market Maker and/or Broker-Dealer liquidity in Penny Symbols 
and/or Non-Penny Symbols above 1.20% of total industry customer 
equity and ETF option ADV contracts per day in a month, (b) execute 
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within The Nasdaq Stock 
Market Closing Cross within a month, and (c) add greater than 1.5 
million shares per day of non-displayed volume within The Nasdaq 
Stock Market within a month will receive a $0.55 per contract Rebate 
to Add Liquidity in Penny Symbols as Customer, a $0.48 per contract 
Rebate to Add Liquidity in Penny Symbols as Professional, and a 
$1.05 per contract Rebate to Add Liquidity in Non-Penny Symbols as 
Customer, and a $0.90 per contract Rebate to Add Liquidity in Non-
Penny Symbols as Professional. Participants that qualify for this 
rebate would not be eligible for any other rebates in Tiers 1-6 or 
other rebate incentives on NOM for Customer and Professional order 
---------------------------------------------------------------------------
flow in Options 7, Section 2(1).

The Exchange is proposing to amend the Rebates to Add Liquidity in 
Penny Symbols for Customers and Professionals to lower Professional 
rebates. Today, provided a Customer

[[Page 55893]]

qualified for the note ``f'' incentive, the Customer and Professional 
would be paid a $0.55 per contract Rebate to Add Liquidity in Penny 
Symbols as Customer or Professional and $1.05 per contract Rebate to 
Add Liquidity in Non-Penny Symbols. With this proposal, the Exchange 
proposes to continue to pay Participants a Customer Rebate to Add 
Liquidity in Penny Symbols of $0.55 per contract. As proposed, 
Participants would receive a lower Professional Rebate to Add Liquidity 
in Penny Symbols of $0.48 per contract. Also with this proposal, the 
Exchange proposes to continue to pay Participants a Customer Rebate to 
Add Liquidity in Non-Penny Symbols of $1.05 per contract. As proposed, 
Participants would receive a lower Professional Rebate to Add Liquidity 
in Non-Penny Symbols of $0.90 per contract. The Exchange believes that 
despite lowering rebates for Professionals, the Exchange will continue 
to attract order flow to NOM.
Professional Rebates To Add Liquidity in Penny Symbols
    Today, the Exchange pays Customer and Professional orders the same 
Rebates to Add Liquidity in Penny Symbols, as described above, subject 
to a six tiers of qualification and notes ``* * *'', ``d,'' ``e,'' and 
``f,'' as specifically detailed above. The Exchange proposes to pay the 
same rebates for each tier.\21\ Also, the Exchange is relocating the 
current tier qualifications within new note ``1,'' with no changes. As 
noted above, the Exchange proposes to remove or lower certain 
incentives for Professionals. While the Exchange proposes to continue 
to pay additional incentives or higher incentives for Customers, but 
not Professionals, the Exchange believes that it will continue to 
attract order flow to NOM.
---------------------------------------------------------------------------

    \21\ Today, the Exchange pays Professionals, in Penny Symbols 
the following Rebates to Add Liquidity: $0.20 per contract for Tier 
1, $0.25 per contract for Tier 2, $0.42 per contract for Tier 3, 
$0.43 per contract for Tier 4, $0.45 per contract for Tier 5, and 
$0.48 per contract for Tier 6.
---------------------------------------------------------------------------

Broker-Dealer, Firm, Non-NOM Market Maker Rebates To Add Liquidity in 
Penny Symbols
    Today, Broker-Dealers, Firms and Non-NOM Market Makers orders are 
paid a $0.10 per contract Rebate to Add Liquidity in Penny Symbols. The 
Exchange intends to continue to pay Participants who submit Broker-
Dealers, Firms and Non-NOM Market Makers orders a $0.10 per contract 
Rebate to Add Liquidity in Penny Symbols regardless of volume. 
Therefore, as proposed, Tiers 1-6 would pay a $0.10 per contract Rebate 
to Add Liquidity in Penny Symbols to Participants who submit Broker-
Dealers, Firms and Non-NOM Market Makers orders.
NOM Market Maker Rebates To Add Liquidity in Penny Symbols
    Today, NOM Market Makers are paid a Rebate to Add Liquidity in 
Penny Symbols based on a 6 tier qualifications as described above. The 
Exchange proposes to relocate the tier qualifications into note 3 
without changing any of the rule text and retaining the meaning of 
``Total Volume.''
    With respect to the rebates, the Exchange is not amending the NOM 
Market Maker Rebates to Add Liquidity in Penny Symbols. The Exchange 
proposes to create a new note ``4'' which provides, ``Participants who 
achieve the NOM Market Maker Tier 3 or Tier 4 Rebate to Add Liquidity 
will receive $0.40 per contract to add liquidity in in the following 
symbols: AAPL, SPY, QQQ, IWM, and VXX.'' This new note ``4'' captures 
the current pricing of $0.40 per contract in the following symbols 
AAPL, QQQ, IWM, VXX and SPY for NOM Market Maker Tiers 3 and 4, without 
change. Current note ``##'' is being relocated to new note ``11'' 
without change.\22\
---------------------------------------------------------------------------

    \22\ Current note ``##'' of Options 7, Section 2(1) provides, 
``NOM Participants that qualify for the Tier 5 NOM Market Maker 
Rebate to Add Liquidity in Penny Pilot Options and add NOM Market 
Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of above 0.50% of total industry customer equity and ETF 
option ADV contracts per day in a month, will receive a $0.46 per 
contract rebate to add liquidity in Penny Pilot Options as Market 
Maker in lieu of the Tier 5 rebate.''
---------------------------------------------------------------------------

    Second, the Exchange proposes to restructure the Fees and Rebates 
to Add Liquidity in Non-Penny Symbols as follows:

         Fees and Rebates To Add Liquidity in Non-Penny Symbols
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Customer 9 10 12........................................         ($0.80)
Professional 9 10 12....................................          (0.80)
Broker-Dealer...........................................            0.45
Firm....................................................            0.45
Non-NOM Market Maker....................................            0.45
NOM Market Maker 5 6....................................     0.35/(0.30)
------------------------------------------------------------------------

Customer and Professional Fees and Rebates To Add Liquidity in Non-
Penny Symbols
    The Exchange is proposing to continue to assess a Customer and a 
Professional no Fee for Adding Liquidity in Non-Penny Symbols and pay a 
Customer and a Professional an $0.80 per contract Rebate to Add 
Liquidity in Non-Penny Symbols. Notes ``e'' \23\ and ``f'',\24\ which 
are proposed to be relocated to new notes ``9'' and ``10,'' will 
continue to apply to the Customer and Professional Rebates to Add 
Liquidity in Non-Penny Symbols. The Exchange described the proposed 
amendments to new notes ``9'' and ``10'' above in the Penny Symbol 
section.
---------------------------------------------------------------------------

    \23\ See note 18 above.
    \24\ See note 19 above.
---------------------------------------------------------------------------

    Current note 1 \25\ is being relocated to new note ``12'' and 
amended. New note ``12'' will continue to apply to Customer and 
Professional Rebates to Add Liquidity in Non-Penny Symbols. As 
proposed, new note ``12'' provides,
---------------------------------------------------------------------------

    \25\ Current note 1 of Options 7, Section 2(1) provides, ``A 
Participant that qualifies for Customer or Professional Penny Pilot 
Options Rebate to Add Liquidity Tiers 2, 3, 4, or 5 in a month will 
receive an additional $0.10 per contract Non-Penny Pilot Options 
Rebate to Add Liquidity for each transaction which adds liquidity in 
Non-Penny Pilot Options in that month. A Participant that qualifies 
for Customer or Professional Penny Pilot Options Rebate to Add 
Liquidity Tier 6 in a month will receive an additional $0.20 per 
contract Non-Penny Pilot Options Rebate to Add Liquidity for each 
transaction which adds liquidity in Non-Penny Pilot Options in that 
month.''

    A Participant that qualifies for Customer or Professional Penny 
Symbol Rebate to Add Liquidity Tiers 2, 3, 4, or 5 in a month will 
receive an additional $0.10 per contract Non-Penny Symbol Rebate to 
Add Liquidity for each transaction which adds liquidity in Non-Penny 
Symbols in that month. A Participant that qualifies for Customer or 
Professional Penny Symbol Rebate to Add Liquidity Tier 6 in a month 
will receive an additional $0.20 per contract Non-Penny Symbol 
Rebate to Add Liquidity as Customer and an additional $0.10 per 
contract Non-Penny Symbol Rebate to Add Liquidity as Professional 
for such transactions which add liquidity in Non-Penny Symbols in 
---------------------------------------------------------------------------
that month.

The Exchange proposes to reduce the incentive for a Professional with 
new note ``12''. Today, both a Customer and a Professional that qualify 
for Customer or Professional Penny Symbol Rebate to Add Liquidity Tier 
6 in a month receive an additional $0.20 per contract Non-Penny Symbol 
Rebate to Add Liquidity for each transaction which adds liquidity in 
Non-Penny Symbols in that month. With this proposal, a Customer that 
qualifies for new note ``12''would continue to receive an additional 
$0.20 per contract Non-Penny Symbol Rebate to Add Liquidity for such 
transactions which add liquidity in Non-Penny Symbols in that month. 
With this proposal, a Professional that qualifies for new note ``12'' 
would now receive an additional $0.10 per contract Non-Penny Symbol 
Rebate to Add Liquidity for such transactions which add liquidity in 
Non-Penny Symbols in that month. The Exchange believes that

[[Page 55894]]

despite lowering rebates for Professionals, the Exchange will continue 
to attract order flow to NOM.
    Today, Firms, Non-NOM Market Makers and Broker Dealers pay a $0.45 
per contract Fee for Add Liquidity in Non-Penny Symbols, this will 
remain the same. Today, NOM Market Makers pay a $0.35 per contract Fee 
for Adding Liquidity in Non-Penny Symbols; this is not changing. In 
addition to this NOM Market Maker Fee for Add Liquidity in Non-Penny 
Symbols, current note ``5'' \26\ applies. Current note ``5'' will 
continue to apply, however, this note is being amended to provide, 
``The NOM Market Maker Fee for Adding Liquidity in Non-Penny Symbols 
will apply unless Participants meet the volume thresholds set forth in 
this note. Participants that add NOM Market Maker liquidity in Non-
Penny Symbols of 10,000 to 14,999 ADV contracts per day in a month will 
be assessed a $0.00 per contract Non-Penny Options Fee for Adding 
Liquidity in that month. Participants that add NOM Market Maker 
liquidity in Non-Penny Symbols of 15,000 or more ADV contracts per day 
in a month will receive the Non-Penny Rebate to Add Liquidity for that 
month instead of paying the Non-Penny Fee for Adding Liquidity.'' The 
Exchange proposes to require a greater amount of Non-Penny Symbol ADV 
(7,500 to 9,999 ADV is being increased to 10,000 to 14,999 ADV) in 
order to qualify for a $0.00 per contract Non-Penny Options Fee for 
Adding Liquidity in that month. Also, the Exchange proposes to require 
a greater amount of NOM Market Maker liquidity in Non-Penny Symbols 
(10,000 ADV is being increased to 15,000 ADV) to receive the Non-Penny 
Rebate to Add Liquidity for that month instead of paying the Non-Penny 
Fee for Adding Liquidity. The Exchange believes that this proposal will 
encourage NOM Market Makers to add a greater amount of liquidity on 
NOM.
---------------------------------------------------------------------------

    \26\ Current note ``5'' at Options 7, Section 2(1) provides, 
``The NOM Market Maker Fee for Adding Liquidity in Non-Pilot Options 
will apply unless Participants meet the volume thresholds set forth 
in this note. Participants that add NOM Market Maker liquidity in 
Non-Penny Pilot Options of 7,500 to 9,999 ADV contracts per day in a 
month will be assessed a $0.00 per contract Non-Penny Options Fee 
for Adding Liquidity in that month. Participants that add NOM Market 
Maker liquidity in Non-Penny Pilot Options of 10,000 or more ADV 
contracts per day in a month will receive the Non-Penny Rebate to 
Add Liquidity for that month instead of paying the Non-Penny Fee for 
Adding Liquidity.''
---------------------------------------------------------------------------

    Today, Firms, Non-NOM Market Makers and Broker Dealers receive no 
Rebate to Add Liquidity in Non-Penny Symbols. This will remain the 
same. Today, NOM Market Makers receive a $0.30 per contract Rebate to 
Add Liquidity, subject to notes ``5'' and ``6''.\27\ This will remain 
the same. Note ``6'' is being amended to provide,
---------------------------------------------------------------------------

    \27\ See note 12 above.

    Participants that qualify for the Tier 6 NOM Market Maker Rebate 
to Add Liquidity in Penny Symbols will receive a $0.86 per contract 
NOM Market Maker Rebate to Add Liquidity in Non-Penny Symbols. 
Participants that qualify for a Tier 7 or higher in the MARS Payment 
Schedule in Section (6) will receive an additional $0.02 per 
contract NOM Market Maker Rebate to Add Liquidity in Non-Penny 
Symbols, in addition to receiving a $0.86 per contract NOM Market 
Maker Rebate to Add Liquidity in Non-Penny Symbols. Participants 
that qualify for note ``5'' and note ``6'' incentives will receive 
the greater of the note ``5'' or note ``6'' incentive, but not both 
---------------------------------------------------------------------------
incentives.

The Exchange proposes to amend current note ``6'' to replace the 
qualification related to note ``&'' with MARS Tier 7 or higher. The 
Exchange notes that the removal of note ``&'' and addition of new MARS 
Tier 7 are discussed below in the MARS section of this proposal. Also, 
similar to the clarification that is being made in new note ``8'' with 
respect to achieving the greater of two incentives, the Exchange 
proposes to make clear in amended note ``6'' that Participants may 
qualify for either note ``5'' or note ``6'', but not both. This change 
reflects current practice
    Third, the Exchange proposes to restructure the Fees to Remove 
Liquidity in Penny and Non-Penny Symbols as follows:

         Fees To Remove Liquidity in Penny and Non-Penny Symbols
------------------------------------------------------------------------
                                                             Non-Penny
                                           Penny Symbols      Symbols
------------------------------------------------------------------------
Customer................................           $0.48           $0.85
Professional............................            0.48            0.85
Broker-Dealer...........................            0.50            1.10
Firm....................................            0.50            1.10
Non-NOM Market Maker \2\................            0.50            1.10
NOM Market Maker \2\....................            0.50            1.10
------------------------------------------------------------------------

    Today, the Exchange assesses the following Penny Symbol Fees to 
Remove Liquidity: $0.48 per contract for Customer and Professional and 
$0.50 per contract for Firms, Non-NOM Market Makers, NOM Market Makers 
and Broker-Dealers. These rates are not changing. Additionally, current 
note 2,\28\ applies to NOM Market Maker Penny Symbol Fees to Remove 
Liquidity and will continue to apply, with only changes to account for 
the reference to ``Penny Pilot,'' as explained above.
---------------------------------------------------------------------------

    \28\ Current note ``2'' of Options 7, Section 2(1) provides, 
``Participants that add 1.30% of Customer, Professional, Firm, 
Broker-Dealer or Non-NOM Market Maker liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options of total industry customer 
equity and ETF option ADV contracts per day in a month will be 
subject to the following pricing applicable to executions: a $0.48 
per contract Penny Pilot Options Fee for Removing Liquidity when the 
Participant is (i) both the buyer and the seller or (ii) the 
Participant removes liquidity from another Participant under Common 
Ownership. Participants that add 1.50% of Customer, Professional, 
Firm, Broker-Dealer or Non-NOM Market Maker liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options of total industry customer 
equity and ETF option ADV contracts per day in a month and meet or 
exceed the cap for The Nasdaq Stock Market Opening Cross during the 
month will be subject to the following pricing applicable to 
executions less than 10,000 contracts: a $0.32 per contract Penny 
Pilot Options Fee for Removing Liquidity when the Participant is (i) 
both the buyer and seller or (ii) the Participant removes liquidity 
from another Participant under Common Ownership. Participants that 
add 1.75% of Customer, Professional, Firm, Broker-Dealer or Non-NOM 
Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of total industry customer equity and ETF option ADV 
contracts per day in a month will be subject to the following 
pricing applicable to executions less than 10,000 contracts: a $0.32 
per contract Penny Pilot Options Fee for Removing Liquidity when the 
Participant is (i) both the buyer and seller or (ii) the Participant 
removes liquidity from another Participant under Common Ownership.''
---------------------------------------------------------------------------

    Today, the Exchange assesses the following Non-Penny Symbol Fees to 
Remove Liquidity: $0.85 per contract for Customers and Professionals 
and $1.10 per contract for Firms, Non-NOM Market Makers, NOM Market 
Makers and Broker-Dealers. These rates are not changing.

[[Page 55895]]

MARS Pricing
    As set forth in Options 7, Section 2(6), the Exchange currently 
offers a Market Access and Routing Subsidy (``MARS'') to qualifying 
Participants that provide certain order routing functionalities to 
other Participants and/or use such functionalities themselves. 
Generally, under MARS, the Exchange pays participating NOM Participants 
to subsidize their costs of providing routing services to route orders 
to NOM as a way to attract higher volumes of electronic equity and ETF 
options to the Exchange from market participants. In particular, 
Participants that have System Eligibility \29\ and have executed the 
requisite number of Eligible Contracts \30\ daily in a month (``Average 
Daily Volume'' or ``ADV'') are entitled to a MARS Payment. The Exchange 
currently pays the following MARS Payments according to ADV submitted 
on NOM:\31\
---------------------------------------------------------------------------

    \29\ To qualify for MARS, the Participant's routing system 
(``System'') would be required to: (1) Enable the electronic routing 
of orders to all of the U.S. options exchanges, including NOM; (2) 
provide current consolidated market data from the U.S. options 
exchanges; and (3) be capable of interfacing with NOM's API to 
access current NOM match engine functionality. Further, the 
Participant's System would also need to cause NOM to be the one of 
the top three default destination exchanges for (a) individually 
executed marketable orders if NOM is at the national best bid or 
offer (``NBBO''), regardless of size or time or (b) orders that 
establish a new NBBO on NOM's Order Book, but allow any user to 
manually override NOM as a default destination on an order-by-order 
basis. Any NOM Participant would be permitted to avail itself of 
this arrangement, provided that its order routing functionality 
incorporates the features described above and satisfies NOM that it 
appears to be robust and reliable. The Participant remains solely 
responsible for implementing and operating its System.
    \30\ For the purpose of qualifying for the MARS Payment, 
Eligible Contracts may include Firm, Non-NOM Market Maker, Broker-
Dealer, or Joint Back Office or ``JBO'' equity option orders that 
add liquidity and are electronically delivered and executed. 
Eligible Contracts do not include Mini Option orders.
    \31\ The specified MARS Payment will be paid on all executed 
Eligible Contracts that add liquidity, which are routed to NOM 
through a participating NOM Participant's System and meet the 
requisite Eligible Contracts ADV. No payment will be made with 
respect to orders that are routed to NOM, but not executed. 
Furthermore, a Participant will not be entitled to receive any other 
revenue from the Exchange for the use of its System specifically 
with respect to orders routed to NOM.

----------------------------------------------------------------------------------------------------------------
                                                                   Average daily   MARS Payment    MARS Payment
                              Tiers                                   volume          (Penny)       (Non-Penny)
----------------------------------------------------------------------------------------------------------------
1...............................................................           2,000           $0.07           $0.15
2...............................................................           5,000            0.09            0.20
3...............................................................          10,000            0.11            0.30
4...............................................................          20,000            0.15            0.50
5...............................................................          45,000            0.17            0.60
----------------------------------------------------------------------------------------------------------------

    The Exchange also provides Participants that qualify for the Tier 6 
Customer and Professional Rebate to Add Liquidity in Penny Symbols in 
Section 2(1) \32\ an additional $0.09 per contract incentive in Penny 
Pilot Options, which is paid in addition to any Penny MARS Payment tier 
on MARS Eligible Contracts the NOM Participant qualifies for in a given 
month.\33\
---------------------------------------------------------------------------

    \32\ To qualify for the Tier 6 Customer and Professional Rebate 
to Add Liquidity in Penny Symbols, the Participant must add 
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Symbols and/or Non-Penny Symbols above 
0.80% or more of total industry customer equity and ETF option ADV 
contracts per day in a month, or the Participant must add: (1) 
Customer and/or Professional liquidity in Penny Symbols and/or Non-
Penny Symbols of 0.20% or more of total industry customer equity and 
ETF option ADV contracts per day in a month, and (2) has added 
liquidity in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 1.00% or more of Consolidated Volume in 
a month or qualifies for MARS. See Options 7, Section 2(1).
    \33\ See note ``*'' in Section 2(6).
---------------------------------------------------------------------------

    In addition, the Exchange currently offers Participants that have 
total Affiliated Entity \34\ or Common Ownership \35\ average daily add 
volume (``ADAV'') of 3.00% or more of total industry customer equity 
and ETF option ADV contracts per day in a month an additional $0.01 per 
contract in Penny Symbols and an additional $0.03 per contract in Non-
Penny Symbols, in addition to any MARS Payment tier on MARS Eligible 
Contracts the Participant qualifies for in a given month.\36\
---------------------------------------------------------------------------

    \34\ The term ``Affiliated Entity'' is a relationship between an 
Appointed MM and an Appointed OFP for purposes of aggregating 
eligible volume for pricing in Options 7, Sections 2(1) and 2(6) for 
which a volume threshold or volume percentage is required to qualify 
for higher rebates or lower fees. The term ``Appointed MM'' is a NOM 
Market Maker who has been appointed by an Order Flow Provider 
(``OFP'') for purposes of qualifying as an Affiliated Entity. An OFP 
is a Participant, other than a NOM Market Maker, that submits 
orders, as agent or principal, to the Exchange. The term ``Appointed 
OFP'' is an OFP who has been appointed by a NOM Market Maker for 
purposes of qualifying as an Affiliated Entity. Participants under 
Common Ownership may not qualify as a counterparty comprising an 
Affiliated Entity. Each Participant may qualify for only one (1) 
Affiliated Entity relationship at any given time.
    \35\ The term ``Common Ownership'' shall mean Participants under 
75% common ownership or control. Common Ownership shall apply to all 
pricing in Options 7, Section 2 for which a volume threshold or 
volume percentage is required to obtain the pricing.
    \36\ See note ``[supcaret]'' in Section 2(6).
---------------------------------------------------------------------------

    For Participants that qualify for the Tier 5 MARS Payment, the 
Exchange also provides two supplemental rebates that are based on 
progressively increasing volume requirements of executed MARS Eligible 
Contracts ADV and total Affiliated Entity or Common Ownership ADAV. 
First, the Exchange offers Participants that execute at least 75,000 of 
MARS Eligible Contracts per day and have total Affiliated Entity or 
Common Ownership ADAV of 3.25% or more of total industry customer 
equity and ETF option ADV contracts per day in a month an additional 
$0.01 per contract in Penny Symbols and an additional $0.10 per 
contract in Non-Penny Symbols, in addition to MARS Payment Tier 5 on 
MARS Eligible Contracts the Participant qualifies for in a given 
month.\37\
---------------------------------------------------------------------------

    \37\ See note ``@'' in Section 2(6).
---------------------------------------------------------------------------

    Second, Participants that execute at least 100,000 of MARS Eligible 
Contracts per day and have a total Affiliated Entity or Common 
Ownership ADAV of 3.25% or more of total industry customer equity and 
ETF option ADV contracts per day in a month are eligible to receive an 
additional $0.02 per contract in Penny Symbols and an additional $0.19 
per contract in Non-Penny Symbols, in addition to MARS Payment Tier 5 
on MARS Eligible Contracts the Participant qualifies for in a given 
month.\38\ NOM Participants that qualify for the note ``&'' incentive 
would not receive the note ``@'' incentive.
---------------------------------------------------------------------------

    \38\ See note ``&'' in Section 2(6).
---------------------------------------------------------------------------

    The Exchange now proposes a number of changes to its MARS program. 
As an initial matter, the Exchange proposes to eliminate the additional 
incentives set forth in notes ``@'' and ``&,'' and instead offer new 
MARS Payment Tiers 6-9. The

[[Page 55896]]

proposed MARS Payment Tiers will retain some features of the note ``@'' 
and note ``&'' incentives, namely the ADV requirements of executed MARS 
Eligible Contracts, while eliminating the total Affiliated Entity or 
Common Ownership ADAV requirement. At the time the Exchange adopted the 
note ``@'' and note ``&'' incentives, the Exchange sought to encourage 
market participants to aggregate volume for purposes of qualifying for 
the additional rebates, and ultimately, increase volume and activity on 
the Exchange. These changes have met with some success, and the 
Exchange will therefore continue to incentivize this behavior through 
the note ``[supcaret]'' incentive. Nonetheless, the Exchange has yet to 
achieve the level of additional volume and activity it desires and as 
such, the Exchange proposes to reformulate its MARS program in order to 
improve the attractiveness of this program to new and existing 
Participants. As noted above, the revised MARS program will add new 
MARS Payment Tiers 6 through 9, and will also amend some of the 
existing MARS rebates. The proposed MARS pricing schedule will be as 
follows:

----------------------------------------------------------------------------------------------------------------
                                                                   Average daily
                              Tiers                                   volume       MARS Payment    MARS Payment
                                                                     (``ADV'')        (Penny)       (Non-Penny)
----------------------------------------------------------------------------------------------------------------
1...............................................................           2,000           $0.11           $0.24
2...............................................................           5,000            0.11            0.29
3...............................................................          10,000            0.11            0.39
4...............................................................          20,000            0.15            0.50
5...............................................................          45,000            0.17            0.60
6...............................................................          75,000            0.20            0.75
7...............................................................         100,000            0.20            0.78
8...............................................................         125,000            0.20            0.81
9...............................................................         150,000            0.21            0.84
----------------------------------------------------------------------------------------------------------------

    In addition, the Exchange proposes to apply the existing note 
``[supcaret]'' incentive to the new MARS Payment Tiers 6 through 9 so 
that NOM Participants that have total Affiliated Entity or Common 
Ownership ADAV of 3.00% or more of total industry customer equity and 
ETF option ADV contracts per day in a month would receive an additional 
$0.01 per contract in Penny Symbols and an additional $0.03 per 
contract in Non-Penny Symbols. This would be paid in addition to MARS 
Payment Tiers 6-9 on MARS Eligible Contracts the NOM Participant 
qualifies for in a given month, similar to how the note ``[supcaret]'' 
incentive is paid on MARS Payment Tiers 1-5 today.
    Lastly, the Exchange proposes to amend the existing note ``*'' 
incentive. As amended, NOM Participants that qualify for Customer and 
Professional Penny Symbols Rebate to Add Liquidity Tier 6 will receive 
a $0.20 per contract rebate in Penny Symbols in lieu of the Penny MARS 
Payment Tiers 1-5 on MARS Eligible Contracts the NOM Participant 
qualifies for in a given month.
Technical Amendments
    The Exchange proposes to amend Options 7 to add ``Section 1 General 
Provisions'' before the rule text. The Exchange would also remove 
``Section 1'' before the title ``Collection of Exchange Fees and Other 
Claims-Nasdaq Options Market'' and incorporate that text within the new 
Section 1, which includes other rule text. The amendment will assist 
Participants when citing to the rule text, which currently has no 
section reference. The Exchange also proposes to add the word ``The'' 
before the name ``Nasdaq Options Market.''
    The Exchange also proposes to update rule citations to reflect 
current citations.\39\ The Exchange previously relocated the Rulebook 
\40\ and certain rule citations were not updated. Finally, the Exchange 
proposes to remove an obsolete date within Options 7, Section 5, 
``Nasdaq Options Regulatory Fee.''
---------------------------------------------------------------------------

    \39\ See amendments to descriptions of terms ``Customer'', ``NOM 
Market Maker'' ``Professional,'' and ``Joint Back Office'' within 
Options 7. This section is proposed to be relocated to Options 7, 
Section 1. Current Options 7, Section 1, which described the 
Collection of Exchange Fees and Other Claims-Nasdaq Options Market, 
is also being amended.
    \40\ See Securities Exchange Act Release No. 87778 (December 17, 
2019), 84 FR 70590 (SR-NASDAQ-2019-098) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Relocate Rules 
From Its Current Rulebook Into Its New Rulebook Shell).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\41\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\42\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78 f(b).
    \42\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \43\
---------------------------------------------------------------------------

    \43\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \44\
---------------------------------------------------------------------------

    \44\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').

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

[[Page 55897]]

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow. Within this environment, market participants can freely and 
often do shift their order flow among the Exchange and competing venues 
in response to changes in their respective pricing schedules. As such, 
the proposal represents a reasonable attempt by the Exchange to 
increase its liquidity and market share relative to its competitors.
Options 7, Section 2
    The Exchange's proposal to restructure rebates and fees into new 
pricing tables, without changes to the fees and rebates or pricing 
qualifications, as applicable, is reasonable, equitable and not 
unfairly discriminatory because the restructuring is intended to bring 
greater clarity to the current fees and rebates assessed and paid by 
NOM. The Exchange believes that the new table formats allow 
Participants to more easily reference the pricing on NOM. Also, 
renaming Options 7, Section 2(1) to specifically refer to rebates is 
reasonable, equitable and not unfairly discriminatory as it will bring 
greater clarity to the pricing.
Rebates To Add Liquidity in Penny Symbols
    The Exchange's proposal to relocate note ``c'' to new note ``7'', 
and relocate note ``d'' into new note ``8'', while amending these notes 
to remove the incentive rebates for Professionals transacting Penny 
Symbols in each of those notes (``7'' and ``8'') is reasonable, 
equitable and not unfairly discriminatory. The Customer and 
Professional Rebates to Add Liquidity in Penny Symbols should continue 
to attract Customer and Professional order flow to NOM. The additional 
incentives that would now be offered solely to Customer Rebates to Add 
Liquidity in Penny Symbols, and no longer offered to Professionals, are 
intended to attract additional Customer liquidity. Today, the Exchange 
pays the same Customer and Professional Rebates to Add Liquidity in 
Penny Symbols. These rebates for Customers and Professionals will 
continue to be the same. Customer liquidity offers unique benefits to 
the market which benefits all market participants. Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attracts market makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. The Exchange believes that 
continuing to encourage Participants to add Professional liquidity 
creates competition among options exchanges because the Exchange 
believes that the rebates may cause market participants to select NOM 
as a venue to send Professional order flow. Paying the incentives \45\ 
within new notes ``7'' and ``8'' solely to Customers and not 
Professionals is consistent with the treatment of Customer orders on 
other options venues, which pay Customers the highest rebates.\46\ 
Customer liquidity is the most sought after liquidity among 
Participants and by continuing to offer the new notes ``7'' and ``8'' 
incentives only to Customers, the Exchange believes that NOM will 
continue to attract this valuable order flow. The incentives offered in 
new notes ``7'' and ``8'' would be uniformly applied to qualifying 
Participants.
---------------------------------------------------------------------------

    \45\ Today, Customers and Professionals are entitled to various 
incentives within notes ``c'' and ``d'' related to Rebates to Add 
Liquidity in Penny Symbols. See notes 6 and 17, respectively above.
    \46\ See Nasdaq PHLX LLC Options 7, Section 1. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
---------------------------------------------------------------------------

    The Exchange's proposal to relocate note ``***'' to new note 
``1'',\47\ and to modify the introduction to former note ``***'', 
proposed note ``1'', to provide, ``The Customer and Professional Rebate 
to Add Liquidity in Penny Symbols will be paid per the highest tier 
achieved below. To determine the applicable percentage of total 
industry customer equity and ETF option average daily volume, unless 
otherwise stated, the Participant's Penny Symbol and Non-Penny Symbol 
Customer and/or Professional volume that adds liquidity will be 
included,'' is reasonable, equitable and not unfairly discriminatory. 
The rule text is being amended to make clear that Penny Symbols will 
continue to be paid the highest tier achieved, as is the case today, 
the Exchange is not amending the manner in which the tiers are being 
applied today. As is the case today, to determine the applicable 
percentage of total industry customer equity and ETF option average 
daily volume, unless otherwise stated, the Participant's Penny Symbol 
and Non-Penny Symbol Customer and/or Professional volume that adds 
liquidity will be included. All Participants would continue to be 
uniformly paid the highest Customer and Professional Rebate to Add 
Liquidity tier in Penny Symbols as described in new note ``1''.
---------------------------------------------------------------------------

    \47\ Current note 1 within Options 7, Section 2(1) is being 
amended and relocated to note ``12''.
---------------------------------------------------------------------------

    The Exchange's proposal to relocate note ``e'' to new note ``9'' 
and note ``f'' into new note ``10'' and amend notes ``9'' and ``10'' to 
lower the incentive paid to a Professional for Rebates to Add Liquidity 
in Penny Symbols and Non-Penny Symbols is reasonable, equitable and not 
unfairly discriminatory.\48\ The Exchange proposes to continue to 
incentivize Professionals with this proposal, however, the Professional 
would be incentivized with a lower rebate incentive as compared to a 
Customer. With this proposal, Customer incentives within new notes 
``9'' and ``10'' would remain unchanged. As proposed, Professional 
incentives would be lowered for each of these notes.\49\ Today, the 
Exchange pays the same Customer and Professional Rebates to Add 
Liquidity in Penny Symbols and Non-Penny Symbols. These rebates for 
Customers and Professionals will continue to be the same. The Exchange 
believes that it is reasonable to continue to pay Professionals the 
same rebates as Customers, but offer lower additional incentives while 
continuing to incentivize Customers to qualify for additional 
incentives in order to obtain the highest rebates offered on NOM. 
Customer liquidity, unlike Professional liquidity, offers unique 
benefits to the market which benefits all market participants. Customer 
liquidity benefits all market participants by providing more trading 
opportunities, which attracts market makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. Paying higher rebates to Customers 
is consistent with the treatment of Customers on other options venues 
that are paid the highest rebates.\50\ Customer liquidity is the most 
sought after liquidity among Participants. With respect to 
Professionals, the Exchange believes that continuing to encourage 
Participants to add Professional

[[Page 55898]]

liquidity creates competition among options exchanges because the 
Exchange believes that the rebates may cause market participants to 
select NOM as a venue to send Professional order flow. The Exchange 
notes that is equitable and not unfairly discriminatory to lower 
incentives for Professionals, who unlike Customers, have access to 
sophisticated trading systems that contain functionality not available 
to Customers. The new notes ``9'' and ``10'' incentives would be 
uniformly applied to qualifying Participants.
---------------------------------------------------------------------------

    \48\ New notes ``9'' and ``10'' apply to both Penny Symbols and 
Non-Penny Symbols.
    \49\ As proposed, new note ``9'' would lower the Professional 
Rebate to Add Liquidity incentive in Penny Symbols from $0.50 to 
$0.48 per contract and the Professional Rebate to Add Liquidity 
incentive in Non-Penny Symbols from $1.00 to $0.90 per contract. As 
proposed, new note ``10'' would lower the Professional Rebate to Add 
Liquidity incentive in Penny Symbols from $0.55 to $0.48 per 
contract and the Professional Rebate to Add Liquidity incentive in 
Non-Penny Symbols from $1.05 to $0.90 per contract.
    \50\ See Nasdaq PHLX LLC Options 7, Section 1. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
---------------------------------------------------------------------------

NOM Market Maker Rebates To Add Liquidity in Penny Symbols
    The Exchange's proposal to create a new note ``4'' which provides, 
``Participants who achieve the NOM Market Maker Tier 3 or Tier 4 Rebate 
to Add Liquidity will receive $0.40 per contract to add liquidity in 
the following symbols: AAPL, SPY, QQQ, IWM, and VXX'' is reasonable, 
equitable and not unfairly discriminatory. This new note captures the 
current pricing of $0.40 per contract in the following symbols AAPL, 
QQQ, IWM, VXX and SPY for NOM Market Maker Tiers 3 and 4. New note 
``4'' will make clear the current pricing applicable to symbols: AAPL, 
SPY, QQQ, IWM, and VXX. The current pricing, which was relocated to new 
note ``4'', would continue to be uniformly applied to all Participants 
that qualify.
Fees and Rebates To Add Liquidity in Non-Penny Symbols
    The Exchange's proposal to relocate current note 1 \51\ to new 
``12'' and amend note ``12'' is reasonable, equitable and not unfairly 
discriminatory. Today, both a Customer and a Professional that qualify 
for Customer or Professional Penny Symbol Rebate to Add Liquidity Tier 
6 in a month receive an additional $0.20 per contract Non-Penny Symbol 
Rebate to Add Liquidity for each transaction which adds liquidity in 
Non-Penny Symbols in that month. With this proposal, a Customer that 
qualifies would continue to receive an additional $0.20 per contract 
Non-Penny Symbol Rebate to Add Liquidity for such transactions which 
add liquidity in Non-Penny Symbols in that month. With this proposal, a 
Professional that qualifies would now receive an additional $0.10 per 
contract Non-Penny Symbol Rebate to Add Liquidity for such transactions 
which add liquidity in Non-Penny Symbols in that month. The Exchange 
believes that despite lowering rebates for Professionals, the Exchange 
will continue to attract order flow to NOM. The Exchange proposes to 
continue to incentivize Professionals with this proposal, however, the 
Professional would be incentivized with a lower rebate as compared to a 
Customer. The Customer incentive within new note ``12'' remains 
unchanged. Today, the Exchange pays the same Tier 6 Customer and 
Professional Rebates to Add Liquidity in Penny Symbols and Non-Penny 
Symbols. These rebates for Customers and Professionals will continue to 
be the same. Customer liquidity offers unique benefits to the market 
which benefits all market participants. Customer liquidity benefits all 
market participants by providing more trading opportunities, which 
attracts market makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. The Exchange believes that continuing to encourage 
Participants to add Professional liquidity creates competition among 
options exchanges because the Exchange believes that the rebates may 
cause market participants to select NOM as a venue to send Professional 
order flow. Paying higher rebates to Customers is consistent with the 
treatment of Customers on other options venues that are paid the 
highest rebates.\52\ Customer liquidity is the most sought after 
liquidity among Participants. The new note ``12'' incentive would be 
uniformly applied to qualifying Participants.
---------------------------------------------------------------------------

    \51\ See note 27 above.
    \52\ See Nasdaq PHLX LLC Options 7, Section 1. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
---------------------------------------------------------------------------

    The Exchange's proposal to amend current note ``5'' \53\ to 
increase the ADV thresholds (7,500 to 9,999 ADV becomes 10,000 to 
14,999 ADV and 10,000 ADV becomes 15,000 ADV) is reasonable, equitable 
and not unfairly discriminatory. The Exchange believes that the 
proposed increases in requisite ADV for the incentive related to the 
Fee for Adding Liquidity in Non-Penny Symbols will encourage NOM Market 
Makers to add a greater amount of liquidity on NOM. Any Participant may 
interact with the additional liquidity attracted by this incentive. 
Further, the Exchange would continue to uniformly apply this note ``5'' 
incentive to any qualifying Participant.
---------------------------------------------------------------------------

    \53\ See note 28 above.
---------------------------------------------------------------------------

    The Exchange's proposal to amend current note ``6'' \54\ is 
reasonable, equitable and not unfairly discriminatory. The Exchange 
proposes to amend current note ``6'' to replace the qualification 
related to note ``&'' within MARS \55\ with new ``MARS Tier 7 or 
higher.'' The Exchange believes that this replacement will continue to 
attract order flow to NOM in order to earn the amended note ``6'' 
incentive. As discussed in the MARS section of this proposal, in order 
to qualify for new MARS Tiers 7 or higher, Participants must execute at 
least 100,000 of MARS Eligible Contract per day. Thus, the proposed 
qualification for the additional note ``6'' incentive will have the 
same ADV threshold requirement as the current qualification, but will 
eliminate the total Affiliated Entity or Common Ownership ADAV 
requirement. By adjusting the qualifications for the note ``6'' 
incentive in this manner, the Exchange seeks to further encourage 
Participants to send high volumes of electronic equity and ETF options 
to NOM for execution in order to receive this rebate.
---------------------------------------------------------------------------

    \54\ See note 12 above.
    \55\ Options 7, Section 2(6) note ``&'' provides, ``NOM 
Participants that execute at least 100,000 of MARS Eligible 
Contracts per day and have total Affiliated Entity or Common 
Ownership ADAV of 3.25% 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 in Penny Pilot Options and an 
additional $0.19 per contract in Non-Penny Pilot Options, in 
addition to MARS Payment tier 5 on MARS Eligible Contracts the NOM 
Participant qualifies for in a given month. NOM Participants that 
qualify for the note ``&'' incentive will not receive the note ``@'' 
incentive.''
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    The Exchange notes that the additional note ``6'' incentive 
continues to be the highest available NOM Market Maker Rebate to Add 
Liquidity in Non-Penny Symbols (totaling $0.88 per contract).\56\ As 
proposed, the Exchange believes that the rebate qualifications are 
appropriate and commensurate with the rebate amount. In particular, 
while the Exchange will eliminate the total Affiliated Entity or Common 
Ownership ADAV requirement for this additional note ``6'' incentive, 
the Exchange will continue to require Participants to meet both the 
stringent volume requirements of executing at least 100,000 of MARS 
Eligible Contract per day (i.e., MARS Tiers 7 or higher) and the 
stringent requirements set forth in the Tier 6 NOM Market Maker Rebate 
to Add Liquidity in Penny Symbols, in order to receive this rebate.
---------------------------------------------------------------------------

    \56\ Specifically, Participants that qualify for Tier 7 or 
higher in the MARS Payment Schedule in Section (6) would receive an 
additional $0.02 per contract NOM Market Maker Rebate to Add 
Liquidity in Non-Penny Symbols, in addition to receiving a $0.86 per 
contract NOM Market Maker Rebate to Add Liquidity in Non-Penny 
Symbols, for a total rebate of $0.88 per contract.
---------------------------------------------------------------------------

    The Exchange will uniformly apply the amended note ``6'' incentive 
to all qualifying NOM Participants. Similar to

[[Page 55899]]

the clarification that is being made in other notes, with respect to 
achieving the greater of two incentives, the Exchange's proposal to 
make clear in amended note ``6'' that Participants may qualify for 
either note ``5'' or note ``6'', but not both, is reasonable, equitable 
and not unfairly discriminatory. This change will bring greater clarity 
to the application of the incentives. This change reflects current 
practice.
MARS Pricing
    The Exchange believes that the proposed changes to MARS pricing 
described above represent a reasonable attempt by the Exchange to 
fortify participation in the MARS program. In particular, the Exchange 
believes that it is reasonable to eliminate the note ``@'' and note 
``&'' incentives because it will replace them with an amended MARS 
Payment schedule comprising of modified MARS rebates and new ADV tiers. 
The Exchange must periodically assess the effectiveness of the 
incentives it provides and scale back on certain incentives so that the 
Exchange may apply its resources to other, possibly more effective, 
rebates such as the proposed MARS Payment schedule. The Exchange 
believes that the proposed MARS Payment schedule will better align the 
cost of offering the MARS program with the benefit it brings to the 
marketplace. The proposed schedule is designed to attract higher 
volumes of electronic equity and ETF options orders to the Exchange, 
which will, in turn, benefit all NOM Participants by offering greater 
price discovery, increased transparency, and an increased opportunity 
to trade on the Exchange. The Exchange intends for the proposed 
schedule to achieve these results by increasing the number of ADV tiers 
in the schedule from five to nine and, at each tier, paying a base 
rebate that will be roughly the same as or greater than that which it 
pays now. For example, qualifying Participants would be entitled to 
receive a MARS Payment of $0.11 in Tiers 1 and 2 for Penny executions 
under this proposal (compared to $0.07 and $0.09 in Tiers 1 and 2 
today), and entitled to receive MARS Payments of $0.24, $0.29, and 
$0.39 in Tiers 1, 2, and 3, respectively, for Non-Penny executions 
(compared to $0.15, $0.20, and $0.30 in Tiers 1-3 today). Furthermore, 
Participants that qualify for new MARS Payment Tiers 6-9 would receive 
base rebates ranging from $0.20 to $0.21 for Penny Symbols and from 
$0.75 to $0.84 for Non-Penny Symbols, whereas the highest base rebates 
currently available under the MARS program are $0.17 for Penny Symbols 
and $0.60 for Non-Penny Symbols.
    The Exchange also believes that the proposed ADV thresholds for new 
MARS Payment Tiers 6-9 are set at reasonable levels that would make the 
associated rebates achievable and attractive to existing and potential 
program participants. As noted above, the new MARS Payment Tiers retain 
some features of the note ``@'' and note ``&'' incentives, namely the 
ADV threshold requirements of executed MARS Eligible Contracts, while 
eliminating the total Affiliated Entity or Common Ownership ADAV 
requirement, thus making it easier to qualify for some tiers. For 
example, new MARS Payment Tiers 6 and 7 retain the note ``@'' and note 
``&'' requirements that Participants meet 75,000 and 100,000 Eligible 
Contracts ADV, respectively, to qualify for the associated MARS 
Payments without the added requirement of meeting certain total 
Affiliated Entity or Common Ownership ADAV thresholds. Taken together, 
the Exchange believes that the proposed MARS Payment Tiers will 
incentivize current and new program participants to achieve the higher 
tiers in order to receive the associated rebates.
    The Exchange also believes that it is reasonable to apply the note 
``[supcaret]'' incentive to new MARS Payment Tiers 6-9 in order to 
continue incentivizing Participants to pool their volume in order to 
meet the total Affiliated Entity or Common Ownership ADAV requirement. 
The resulting increased volume and liquidity would benefit all market 
participants by providing more trading opportunities and tighter 
spreads.
    The Exchange believes that the amended note ``*'' incentive is 
reasonable as it will continue to encourage Participants to achieve the 
highest Customer and Professional Rebate to Add Liquidity in Penny 
Symbols in Tier 6 and also qualify for MARS. As proposed, the Exchange 
will no longer provide $0.09 in Penny Symbols in addition to the Penny 
MARS Payment Tiers 1-5, but will instead provide a $0.20 per contract 
rebate in lieu of the MARS Payments. The Exchange believes this is 
reasonable for several reasons. As an initial matter, in Penny MARS 
Payment Tiers 1-3, Participants that qualify for the amended note ``*'' 
incentive would be eligible to receive a rebate that is roughly the 
same or greater than the rebate which they receive today. For example, 
Participants that qualify for Penny MARS Payment Tier 1 or Tier 2, and 
also qualify for the Tier 6 Customer and Professional Rebate to Add 
Liquidity in Penny Symbols, would receive a rebate of $0.20 per 
contract under this proposal, whereas today, they would receive $0.16 
per contract and $0.18 per contract in Tiers 1 and 2, respectively. 
While qualifying Participants would receive a lower rebate in Penny 
MARS Payment Tiers 4 and 5 under this proposal than they would 
today,\57\ the Exchange believes this is reasonable given the 
significantly higher rebates it is proposing to provide for the Non-
Penny MARS Payment Tiers to promote Non-Penny Symbol order flow to the 
Exchange. The Exchange further believes that the amended note ``*'' 
rebate will better align the cost of offering this rebate with the 
benefit it brings to the marketplace as a means of incentivizing market 
participants to add Penny Symbol order flow sent to the Exchange.
---------------------------------------------------------------------------

    \57\ Today, Participants would be eligible to receive $0.24 per 
contract and $0.26 per contract in Tiers 5 and 6, respectively, if 
they also qualify for the Tier 6 Customer and Professional Rebate to 
Add Liquidity in Penny Symbols.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to modify MARS pricing as 
described above is equitable and not unfairly discriminatory because 
all Participants may qualify for MARS provided they have requisite 
System Eligibility. In addition, while the Exchange is proposing to 
eliminate the note ``@'' and note ``&'' incentives, it will retain the 
features of these rebates in the proposed MARS Payment Tiers and in the 
note ``[supcaret]'' incentive, as discussed above. As a result, the 
Exchange does not believe that the proposed changes will have a 
disproportionate effect on any market participant type. Furthermore, 
the Exchange believes that it is equitable and not unfairly 
discriminatory to continue to offer the note ``*'' incentive to Penny 
Symbols than Non-Penny Symbols due to the Exchange's desire to 
specifically promote Penny Symbol order flow to qualify for this rebate 
in this manner. Furthermore, the Exchange is also seeking to promote 
increased Non-Penny Symbol order flow with the significant MARS rebates 
it is proposing above. Ultimately, an increase in overall order flow 
will improve the quality of NOM, and increase its attractiveness to 
existing and prospective market participants.
Technical Amendments
    The Exchange's proposal to amend Options 7 to add ``Section 1 
General Provisions'' before the rule text, remove ``Section 1'' before 
the title ``Collection of Exchange Fees and Other Claims-Nasdaq Options 
Market'' and

[[Page 55900]]

incorporate the rule text within new Options 7, Section 1, which 
includes other rule text, is reasonable, equitable and not unfairly 
discriminatory. The Exchange believes that these proposed changes will 
assist Participants in referencing the rule text that currently has no 
section reference. The Exchange also proposes to add the word ``The'' 
before the name ``Nasdaq Options Market'' for clarity.
    The Exchange's proposal to amend Options 7, Section 2, Nasdaq 
Options Market--Fees and Rebates, to replace the terms ``Pilot 
Options'' and ``Pilot'' with ``Symbol'' or ``Symbols,'' as appropriate, 
is reasonable, equitable and not unfairly discriminatory. This 
amendment seeks to conform the name of the program.
    The Exchange's proposal to update rule citations to reflect current 
citations is reasonable, equitable and not unfairly discriminatory. The 
Exchange relocated the Rulebook \58\ and certain rule citations were 
not updated.\59\ These amendments will bring greater clarity to the 
Rules.
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    \58\ See Securities Exchange Act Release No. 87778 (December 17, 
2019), 84 FR 70590 (SR-NASDAQ-2019-098) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Relocate Rules 
From Its Current Rulebook Into Its New Rulebook Shell).
    \59\ See note 41 above.
---------------------------------------------------------------------------

    Finally, the Exchange's proposal to remove an obsolete date within 
Options 7, Section 5, ``Nasdaq Options Regulatory Fee'' is reasonable, 
equitable and not unfairly discriminatory. This amendment will bring 
greater clarity to the Rules.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intermarket Competition
    The proposal does not impose an undue burden on intermarket 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants another 
choice of where to transact options. The Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges that have been exempted from compliance with the statutory 
standards applicable to exchanges. Because competitors are free to 
modify their own fees in response, and because market participants may 
readily adjust their order routing practices, the Exchange believes 
that the degree to which fee changes in this market may impose any 
burden on competition is extremely limited.
Intramarket Competition
    The proposed amendments do not impose an undue burden on 
intramarket competition.
Options 7, Section 2
    The Exchange's proposal to restructure rebates and fees into new 
pricing tables, without changes to the fees and rebates or pricing 
qualifications, as applicable, does not impose an undue burden on 
competition because the restructuring is intended to bring greater 
clarity to the current fee and rebates assessed and paid by NOM. The 
Exchange believes that the new table formats allow Participant to more 
easily reference the pricing on NOM.
Rebates To Add Liquidity in Penny Symbols
    The Exchange's proposal to relocate note ``c'' to new note ``7'', 
and relocate note ``d'' into new note ``8, while amending these notes 
to remove the incentive rebates for Professionals transacting Penny 
Symbols in each of those notes (``7'' and ``8'') does not impose an 
undue burden on competition. Customer liquidity offers unique benefits 
to the market which benefits all market participants. Customer 
liquidity benefits all market participants by providing more trading 
opportunities, which attracts market makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. The Exchange believes that 
continuing to encourage Participants to add Professional liquidity 
creates competition among options exchanges because the Exchange 
believes that the rebates may cause market participants to select NOM 
as a venue to send Professional order flow. Paying the incentives \60\ 
within new notes ``7'' and ``8'' solely to Customers and not 
Professionals is consistent with the treatment of Customer orders on 
other options venues, which pay Customers the highest rebates.\61\ 
Customer liquidity is the most sought after liquidity among 
Participants and by continuing to offer the new notes ``7'' and ``8'' 
incentives only to Customers, the Exchange believes that NOM will 
continue to attract this valuable order flow. The incentives offered in 
new notes ``7'' and ``8'' would be uniformly applied to qualifying 
Participants.
---------------------------------------------------------------------------

    \60\ Today, Customers and Professionals are entitled to various 
incentives within notes ``c'' and ``d'' related to Rebates to Add 
Liquidity in Penny Symbols. See notes 6 and 17, respectively above.
    \61\ See Nasdaq PHLX LLC Options 7, Section 1. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
---------------------------------------------------------------------------

    The Exchange's proposal to relocate note ``***'' to new note 1,\62\ 
and instead provide, ``The Customer and Professional Rebate to Add 
Liquidity in Penny Symbols will be paid per the highest tier achieved 
below. To determine the applicable percentage of total industry 
customer equity and ETF option average daily volume, unless otherwise 
stated, the Participant's Penny Symbol and Non-Penny Symbol Customer 
and/or Professional volume that adds liquidity will be included,'' does 
not impose an undue burden on competition. All Participants would 
continue to be uniformly paid the highest Customer and Professional 
Rebate to Add Liquidity tier in Penny Symbols as described in new note 
``1''.
---------------------------------------------------------------------------

    \62\ Current note 1 within Options 7, Section 2(1) is being 
amended and relocated to new note ``12''.
---------------------------------------------------------------------------

    The Exchange's proposal to relocate note ``e'' to new note ``9'' 
and amend note ``9,'' and relocate note ``f'' into new note ``10'' and 
amend note ``10'' to lower the incentive paid to a Professional for 
Rebates to Add Liquidity in Penny Symbols and Non-Penny Symbols does 
not impose an undue burden on competition.\63\ As proposed, 
Professional incentives would be lowered for each of these notes.\64\ 
Today, the Exchange pays the same Customer and Professional Rebates to 
Add Liquidity in Penny Symbols and Non-Penny Symbols. These rebates for 
Customers and Professionals will continue to be the same. Customer 
liquidity offers unique benefits to the market which benefits all 
market participants. Customer liquidity benefits all market 
participants by providing more trading opportunities, which

[[Page 55901]]

attracts market makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. The Exchange believes that continuing to encourage 
Participants to add Professional liquidity creates competition among 
options exchanges because the Exchange believes that the rebates may 
cause market participants to select NOM as a venue to send Professional 
order flow. Paying higher rebates to Customers is consistent with the 
treatment of Customers on other options venues that are paid the 
highest rebates.\65\ Customer liquidity is the most sought after 
liquidity among Participants. The new notes ``9'' and ``10'' incentives 
would be uniformly applied to qualifying Participants.
---------------------------------------------------------------------------

    \63\ New notes ``9'' and ``10'' apply to both Penny Symbols and 
Non-Penny Symbols.
    \64\ As proposed, new note ``9'' would lower the Professional 
Rebate to Add Liquidity incentive in Penny Symbols from $0.50 to 
$0.48 per contract and the Professional Rebate to Add Liquidity 
incentive in Non-Penny Symbols from $1.00 to $0.90 per contract. As 
proposed, new note ``10'' would lower the Professional Rebate to Add 
Liquidity incentive in Penny Symbols from $0.55 to $0.48 per 
contract and the Professional Rebate to Add Liquidity incentive in 
Non-Penny Symbols from $1.05 to $0.90 per contract.
    \65\ See Nasdaq PHLX LLC Options 7, Section 1. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
---------------------------------------------------------------------------

NOM Market Maker Rebates To Add Liquidity in Penny Symbols
    The Exchange's proposal to create a new note ``4'' which provides, 
``Participants who achieve the NOM Market Maker Tier 3 or Tier 4 Rebate 
to Add Liquidity will receive $0.40 per contract to add liquidity in in 
the following symbols: AAPL, SPY, QQQ, IWM, and VXX'' does not impose 
an undue burden on competition. This new note captures the current 
pricing of $0.40 per contract in the following symbols AAPL, QQQ, IWM, 
VXX and SPY for NOM Market Maker Tiers 3 and 4. New note ``4'' will 
make clear the current pricing applicable to symbols: AAPL, SPY, QQQ, 
IWM, and VXX. The current pricing, which was relocated to new note 
``4'', would continue to be uniformly applied to all Participants that 
qualify.
Fees and Rebates To Add Liquidity in Non-Penny Symbols
    The Exchange's proposal to relocate current note 1 \66\ to new 
``12'' and amend note ``12'' does not impose an undue burden on 
competition. Today, the Exchange pays the same Tier 6 Customer and 
Professional Rebates to Add Liquidity in Penny Symbols and Non-Penny 
Symbols. These rebates for Customers and Professionals will continue to 
be the same. Customer liquidity offers unique benefits to the market 
which benefits all market participants. Customer liquidity benefits all 
market participants by providing more trading opportunities, which 
attracts market makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. Paying higher rebates to Customers is consistent with the 
treatment of Customers on other options venues that are paid the 
highest rebates.\67\ Customer liquidity is the most sought after 
liquidity among Participants. The new note ``12'' incentive would be 
uniformly applied to qualifying Participants.
---------------------------------------------------------------------------

    \66\ See note 27 above.
    \67\ See Nasdaq PHLX LLC Options 7, Section 1. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
---------------------------------------------------------------------------

    The Exchange's proposal to amend current note ``5'' \68\ to 
increase the requisite ADV related to the Fee for Adding Liquidity in 
Non-Penny Symbols (7,500 to 9,999 ADV becomes 10,000 to 14,999 ADV and 
10,000 ADV becomes 15,000 ADV) does not impose an undue burden on 
competition. The Exchange would continue to uniformly apply this note 
``5'' incentive to any qualifying Participant.
---------------------------------------------------------------------------

    \68\ See note 28 above.
---------------------------------------------------------------------------

    The Exchange's proposal to amend note ``6'' \69\ does not impose an 
undue burden on competition. The Exchange will uniformly apply the 
amended note ``6'' incentive to all qualifying NOM Participants. 
Similar to the clarification that is being made in other notes, with 
respect to achieving the greater of two incentives, the Exchange's 
proposal to make clear in amended note ``6'' that Participants may 
qualify for either note ``5'' or note ``6'', but not both, does not 
impose an undue burden on competition. This change will bring greater 
clarity to the application of the incentives. This change reflects 
current practice.
---------------------------------------------------------------------------

    \69\ See note 12 above.
---------------------------------------------------------------------------

MARS Pricing
    The Exchange does not believe that the proposed changes to MARS 
pricing will impose any undue burden on intra-market competition. As 
noted above, all Participants may qualify for MARS provided they have 
requisite System Eligibility. All of the proposed MARS pricing changes 
are generally designed to attract additional order flow to NOM, which 
strengthens NOM's competitive position. Greater liquidity benefits all 
market participants by providing more trading opportunities and 
attracting greater participation by market makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads.
Technical Amendments
    The Exchange's proposal to amend Options 7 to add ``Section 1 
General Provisions'' before the rule text, remove ``Section 1'' before 
the title ``Collection of Exchange Fees and Other Claims-Nasdaq Options 
Market'' and incorporate the rule text within new Options 7, Section 1, 
which includes other rule text, does not impose an undue burden on 
competition. The Exchange believes that these proposed changes will 
assist Participants in referencing the rule text that currently has no 
section reference. The Exchange also proposes to add the word ``The'' 
before the name ``Nasdaq Options Market'' for clarity.
    The Exchange's proposal to amend Options 7, Section 2, Nasdaq 
Options Market--Fees and Rebates, to replace the terms ``Pilot 
Options'' and ``Pilot'' with ``Symbol'' or ``Symbols,'' as appropriate, 
does not impose an undue burden on competition. This amendment seeks to 
conform the name of the program.
    The Exchange's proposal to update rule citations to reflect current 
citations does not impose an undue burden on competition. The Exchange 
relocated the Rulebook \70\ and certain rule citations were not 
updated.\71\ These amendments will bring greater clarity to the Rules.
---------------------------------------------------------------------------

    \70\ See Securities Exchange Act Release No. 87778 (December 17, 
2019), 84 FR 70590 (SR-NASDAQ-2019-098) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Relocate Rules 
From Its Current Rulebook Into Its New Rulebook Shell).
    \71\ See note 41 above.
---------------------------------------------------------------------------

    Finally, the Exchange's proposal to remove an obsolete date within 
Options 7, Section 5, ``Nasdaq Options Regulatory Fee'' does not impose 
an undue burden on competition. This amendment will bring greater 
clarity to the Rules.

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.\72\
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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

[[Page 55902]]

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-2020-056 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-2020-056. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly.
    All submissions should refer to File Number SR-NASDAQ-2020-056 and 
should be submitted on or before October 1, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\73\
---------------------------------------------------------------------------

    \73\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-19946 Filed 9-9-20; 8:45 am]
BILLING CODE 8011-01-P