Document ID: SEC-2012-2160-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2012-12-28T05:00Z

[Federal Register Volume 77, Number 249 (Friday, December 28, 2012)]
[Notices]
[Pages 76572-76574]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31153]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68502; File No. SR-NASDAQ-2012-139]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Port Fees and a Participant Fee

December 20, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on December 12, 2012, 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 
NASDAQ. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,'' 
governing pricing for NASDAQ members using the NASDAQ Options Market 
(``NOM''), NASDAQ's facility for executing and routing standardized 
equity and index options. Specifically, NOM proposes to amend Section 3 
entitled ``NASDAQ Options Market--Access Services'' to increase all 
port fees. The Exchange also proposes to adopt a Participant Fee.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments related to fee increases 
will be operative on January 2, 2013.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries,

[[Page 76573]]

set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

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

1. Purpose
    NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,'' 
at Section 3 entitled ``NASDAQ Options Market--Access Services'' to 
increase all port fees. The Exchange believes that these increases are 
necessary to keep pace with escalating technology costs. The Exchange 
also proposes adopting a Participant Fee to recoup costs associated 
with the administration of the Exchange's members.
Port Fees
    The Exchange currently assesses certain port fees in Section 3(b) 
of Chapter XV. Specifically, the Exchange assesses a $500 per port, per 
month fee on Order Entry Ports,\3\ CTI Ports,\4\ OTTO Ports,\5\ ITTO 
Ports,\6\ BONO Ports,\7\ Order Entry DROP Ports \8\ and OTTO Drop 
Ports.\9\ The Exchange assesses a $250 per port, per month fee for SQF 
Ports.\10\ The Exchange is proposing to increase the Order Entry Port, 
CTI Port, OTTO Port, ITTO Port, BONO Port, Order Entry DROP Port and 
OTTO Drop Port fees from $500 to $550 per port, per month. The Exchange 
also proposes to increase the SQF Port Fee from $250 to $550 per port, 
per month. The Exchange believes that these increases are necessary to 
keep pace with escalating technology costs.
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    \3\ The Order Entry Port Fee is a connectivity fee in connection 
with routing orders to the Exchange via an external order entry 
port. NOM Participants access the Exchange's network through order 
entry ports. A NOM Participant may have more than one order entry 
port.
    \4\ CTI offers real-time clearing trade updates. A real-time 
clearing trade update is a message that is sent to a member after an 
execution has occurred and contains trade details. The message 
containing the trade details is also simultaneously sent to The 
Options Clearing Corporation. The trade messages are routed to a 
member's connection containing certain information. The 
administrative and market event messages include, but are not 
limited to: System event messages to communicate operational-related 
events; options directory messages to relay basic option symbol and 
contract information for options traded on the Exchange; complex 
strategy messages to relay information for those strategies traded 
on the Exchange; trading action messages to inform market 
participants when a specific option or strategy is halted or 
released for trading on the Exchange; and an indicator which 
distinguishes electronic and non-electronically delivered orders.
    \5\ OTTO provides a method for subscribers to send orders and 
receive status updates on those orders. OTTO accepts limit orders 
from system subscribers, and if there is a matching order, the 
orders will execute. Non-matching orders are added to the limit 
order book, a database of available limit orders, where they are 
matched in price-time priority.
    \6\ ITTO is a data feed that provides quotation information for 
individual orders on the NOM book, last sale information for trades 
executed on NOM, and Order Imbalance Information as set forth in NOM 
Rules Chapter VI, Section 8. ITTO is the options equivalent of the 
NASDAQ TotalView/ITCH data feed that NASDAQ offers under NASDAQ Rule 
7023 with respect to equities traded on NASDAQ. As with TotalView, 
members use ITTO to ``build'' their view of the NOM book by adding 
individual orders that appear on the feed, and subtracting 
individual orders that are executed. See Chapter VI, Section 1 at 
subsection (a)(3)(A).
    \7\ BONO\SM\ is a data feed that provides the NOM Best Bid and 
Offer (``NOM NBBO'') and last sale information for trades executed 
on NOM. The NOM NBBO and last sale information are identical to the 
information that NOM sends the Options Price Regulatory Authority 
(``OPRA'') and which OPRA disseminates via the consolidated data 
feed for options. BONO is the options equivalent of the NASDAQ Basic 
data feed offered for equities under NASDAQ Rule 7047. See Chapter 
VI, Section 1 at subsection (a)(3)(B).
    \8\ The DROP interface provides real time information regarding 
orders sent to NOM and executions that occurred on NOM. The DROP 
interface is not a trading interface and does not accept order 
messages.
    \9\ The OTTO DROP data feed will provide real-time information 
regarding orders entered through OTTO and the execution of those 
orders. The OTTO DROP data feed is not a trading interface and does 
not accept order messages.
    \10\ SQF ports are ports that receive inbound quotes at any time 
within that month. The SQF Port allows a NOM Participant to access 
information such as execution reports and other relevant data 
through a single feed. For example, this data would show which 
symbols are trading on NOM and the current state of an options 
symbol (i.e., open for trading, trading, halted or closed). Auction 
notifications and execution reports are also available.
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Participant Fee
    The Exchange is proposing to adopt a Participant Fee of $500 per 
month, per participant applicable to NOM Participants. The Exchange is 
proposing to create a new Sec. 10 in Chapter XV entitled ``Participant 
Fee--Options.'' The Exchange believes that the Participant Fee would 
recoup costs associated with the administration of the Exchange's 
members.
2. Statutory Basis
    NASDAQ believes that the proposed rule changes are consistent with 
the provisions of Section 6 of the Act,\11\ in general, and with 
Section 6(b)(4) of the Act,\12\ in particular, in that they provide for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which NASDAQ operates or controls.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the adoption of a Participant Fee for 
NOM Participants of $500 per month is reasonable because the Exchange 
is seeking to recoup costs related to membership administration. The 
proposed fee is less than similar fees at other options exchanges.\13\ 
In addition, the Exchange believes that the adoption of a Participant 
Fee is equitable and not unfairly discriminatory because the 
Participant Fee will be the same for every NOM Participant.
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    \13\ See the Chicago Board Options Exchange, Incorporated's Fees 
Schedule. Per month a Market Maker Trading Permit is $5,500, a SPX 
Tier Appointment is $3,000, a VIX Tier Appointment is $2,000, a 
Floor Broker Trading Permit is $9,000, an Electronic Access Permit 
is $1,600 and there is no access fee for a CBSX Trading Permit. See 
also the International Securities Exchange LLC's Schedule of Fees. 
Per month an Electronic Access Member is assessed $500.00 for 
membership and a market maker is assessed from $2,000 to $4,000 per 
membership depending on the type of market maker. See also C2 
Options Exchange, Incorporated's Fees Schedule. Per month, a market-
maker is assessed a $5,000 permit fee, an Electronic Access Permit 
is assessed a $1,000 permit fee and a SPXM Tier appointment is 
assessed a $4,000 fee after March 31, 2013. See also NYSE Arca, 
Inc.'s Fee Schedule. Per month, a Floor Broker, Office and Clearing 
Firm is assessed a $1,000 per month fee for the first Options 
Trading Permit (``OTP'') and $250 thereafter, and a market maker is 
assessed a $4,000 per month fee for one to four OTPs and $2,000 
thereafter. As of January 2, 2012, NASDAQ OMX PHLX LLC (``Phlx'') 
will assess members transacting business on Phlx a $2,100 fee per 
month and members not transacting business on Phlx a $7,500 fee per 
month. See Phlx's Pricing Schedule and SR-Phlx-2012-140 (not yet 
published).
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    The Exchange believes that the increase to the Port Fees is 
reasonable because it would allow the Exchange to keep pace with 
increasing technology costs. The Exchange believes that the increase to 
the Order Entry Port, CTI Port, OTTO Port, ITTO Port, BONO Port, Order 
Entry DROP Port and OTTO Drop Port fees from $500 to $550 per port, per 
month is equitable and not unfairly discriminatory because the Exchange 
is seeking to assess the same fees for all of its ports, including the 
SQF Port Fee. The SQF Port Fee will increase from $250 to $550, which 
is the greatest increase. The Exchange believes that this increase is 
equitable and not unfairly discriminatory, as mentioned, because the 
Exchange would assess the same rate for all ports to all NOM 
Participants.

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

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The Exchange 
believes that its fees are competitive with fees at other options 
exchanges.

[[Page 76574]]

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.\14\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-139 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-NASDAQ-2012-139. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of NASDAQ. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2012-139 and should 
be submitted on or before January 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31153 Filed 12-27-12; 8:45 am]
BILLING CODE 8011-01-P