Document ID: SEC-2011-1278-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-08-26T04:00Z

[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Notices]
[Pages 53521-53524]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-21856]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65180; File No. SR-NASDAQ-2011-111]

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

August 22, 2011.
    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 10, 2011, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify Exchange Rule 7053, entitled 
``NASDAQ Options Market--Access Services,'' related to fees governing 
pricing for NASDAQ members using the NASDAQ Options Market (``NOM''), 
NASDAQ's facility for executing and routing standardized equity and 
index options.
    While fee changes pursuant to this proposal are effective upon 
filing, the Exchange has designated these changes to be operative on 
August 26, 2011.
    The text of the proposed rule change is set forth below. Proposed 
new text is in italics and deleted text is in brackets.

7053. NASDAQ Options Market--Access Services

    Part A: The following charges are assessed by Nasdaq for 
connectivity to the NASDAQ Options Market [.]for NOM 1.0:
    (a) Financial Information Exchange (FIX)

----------------------------------------------------------------------------------------------------------------
                  Ports                              Quantity                             Price
----------------------------------------------------------------------------------------------------------------
FIX Trading Port.........................  First 25 ports..............  $500/port/month.
                                           Additional ports above 25...  $250/port/month.
FIX Port for Services Other than Trading.  First 25 ports..............  $500/port/month.
                                           Additional ports above 25...  $250/port/month.
----------------------------------------------------------------------------------------------------------------

    (b) TradeInfo
     Members not subscribing to the Nasdaq Workstation using 
TradeInfo will be charged a fee of $95 per user per month.
    (c) Other Port Fees
    The following port fees shall apply in connection with the use 
of other trading telecommunication protocols:

------------------------------------------------------------------------
                           Quantity                              Price
------------------------------------------------------------------------
First 25 ports...............................................   $500 per
                                                               month for
                                                               each port
                                                                   pair.
Additional ports above 25....................................   $250 per
                                                               month for
                                                               each port
                                                                   pair.
------------------------------------------------------------------------

    Part B: The following charges are assessed by Nasdaq for 
connectivity to the NASDAQ Options Market for NOM 2.0 as of August 
26, 2011 through September 30, 2011:
    (a) TradeInfo
     Members not subscribing to the Nasdaq Workstation using 
TradeInfo will be charged a fee of $95 per user per month.
    (b) Port Fees, per port per month, as follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Order Entry Port Fee.........................................      $0.00
CTI Port Fee.................................................      $0.00
OTTO Port Fee................................................      $0.00
ITTO Port Fee................................................      $0.00
Order Entry DROP Port Fee....................................      $0.00
OTTO DROP Port Fee...........................................      $0.00
SQF Port Fee.................................................      $0.00
------------------------------------------------------------------------

    Part C: The following charges* are assessed by Nasdaq for 
connectivity to the NASDAQ Options Market as of October 3, 2011:
    (a) TradeInfo
     Members not subscribing to the Nasdaq 
Workstation using TradeInfo will be charged a fee of $95 per user 
per month.
    (b) Port Fees, per port per month, as follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Order Entry Port Fee.........................................    $500.00
CTI Port Fee.................................................    $500.00
OTTO Port Fee................................................    $500.00
ITTO Port Fee................................................    $500.00
Order Entry DROP Port Fee....................................    $500.00
OTTO DROP Port Fee...........................................    $500.00
SQF Port Fee.................................................      $0.00
------------------------------------------------------------------------

    * As of October 3, 2011, the fees in Parts A and B shall no 
longer apply. All NOM Participants will be assessed the fees in Part 
C.

    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change 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

[[Page 53522]]

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
    NASDAQ is proposing to amend Exchange Rule 7053, titled NASDAQ 
Options Market--Access Services. Specifically, the Exchange proposes to 
amend the fees applicable to NOM Participants in connection with 
several trading system enhancements. The Exchange proposes to establish 
Access Services Fees for NOM Participants dependent on whether NOM 
Participants are utilizing the current platform or the enhanced 
platform as of August 26, 2011. The Exchange also proposes the 
implementation of new Access Services Fees for all NOM Participants as 
of October 3, 2011, at which time all NOM Participants will have been 
required to transition to the new trading platform. The proposed fees 
are intended to incentivize NOM Participants to quickly transition to 
the new trading platform prior to October 3, 2011.\3\
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    \3\ NOM Participants will be required to set up an account 
number with the Membership Department in order to transition. 
Testing will also be available as of August 6, 2011. Technical 
specifications are available on the Exchange's Web site.
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    By way of background, several enhancements will be made to the 
current NOM platform (``NOM 1.0'') which will benefit NOM Participants 
and their customers. The implementation of the enhancements will be 
referred to as NOM 2.0. The transition will begin on August 26, 2011. 
There will be additional enhancements available to NOM Participants 
with NOM 2.0.\4\ The Exchange proposes to divide Exchange Rule 7053 
into three parts.
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    \4\ Among other things, NOM 2.0 intends to provide, subject to 
Commission approval where applicable, the following: (i) An advanced 
market making interface with a common interface on NOM and NASDAQ 
OMX PHLX LLC (an option exchange operated by NASDAQ OMX) to provide 
risk monitor functionality; (ii) an Acceptable Trade Range price 
protection feature; (iii) an Order Price Protection feature; (iv) 
ITCH to Trade Options and Best of NASDAQ Options data feeds; (v) FIX 
interface; (vi) a daily open order report; (vii) support for All-or-
None orders; (viii) a cancel/replace feature of an order from DAY to 
GTC; and (ix) support for Good Til time TIF.
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    First, the Exchange proposes to continue assessing NOM Participants 
utilizing the current NOM platform or NOM 1.0, the current fees in 
Exchange Rule 7053 until October 3, 2011. The Exchange proposes to add 
a reference in Exchange Rule 7053 to title the current pricing as 
``Part A'' and add a sentence indicating this pricing is applicable to 
NOM 1.0 Participants.
    Second, the Exchange also proposes to add a ``Part B'' to Exchange 
Rule 7053, applicable to NOM Participants who have connected to NOM 
2.0. Certain fees will be waived for NOM 2.0 Participants. The port 
fees, which are listed in proposed Part B, section (b) of Exchange Rule 
7053 and described below, will be waived for NOM 2.0 Participants who 
have connected to NOM 2.0 between August 26, 2011 and September 30, 
2011.\5\ The TradeInfo Fee, described below, will not be waived for NOM 
Participants who have connected to NOM 2.0.
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    \5\ The SQF Port Fee has no charge.
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    Third, the Exchange proposes to add a ``Part C'' to Exchange Rule 
7053, which will be applicable to all NOM Participants as of October 3, 
2011. The Exchange will require that all NOM Participants convert to 
NOM 2.0 prior to October 3, 2011.
    Currently Rule 7053 contains fees assessed by Nasdaq for 
connectivity to NOM. Access Services Fees relate to ports used to: 
enter orders into the NASDAQ trading systems; receive market data; and 
enter quotes. The Exchange currently assesses the following tiered 
Financial Information Exchange (``FIX'') \6\ fees:
---------------------------------------------------------------------------

    \6\ FIX is a protocol used by NOM market participants for order 
entry, modification and cancellation and message transmittal.

----------------------------------------------------------------------------------------------------------------
                  Ports                              Quantity                             Price
----------------------------------------------------------------------------------------------------------------
FIX Trading Port.........................  First 25 ports..............  $500/port/month.
                                           Additional ports above 25...  $250/port/month.
FIX Port for Services Other than Trading.  First 25 ports..............  $500/port/month.
                                           Additional ports above 25...  $250/port/month.
----------------------------------------------------------------------------------------------------------------

    NOM Participants are currently assessed a $95 per user per month 
TradeInfo \7\ Fee if they are not subscribing to the Nasdaq 
Workstation.
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    \7\ TradeInfo allows users to scan for their NASDAQ-listed 
orders submitted in NASDAQ. Users can then perform actions on their 
orders. Users can scan for all orders in a particular security or 
all orders of a particular type, regardless of their status (open, 
canceled, executed, etc.). For example, after scanning for open 
orders the user is then able to select an open order and is allowed 
to make corrections to the order or cancel the order. TradeInfo also 
allows the users to scan other orders, such as executed, cancelled, 
broken, rejected and suspended orders.
---------------------------------------------------------------------------

    Finally, the Exchange currently assesses Other Ports the following 
tiered fees:

------------------------------------------------------------------------
                 Quantity                               Price
------------------------------------------------------------------------
First 25 ports............................  $500 per month for each port
                                             pair.
Additional ports above 25.................  $250 per month for each port
                                             pair.
------------------------------------------------------------------------

    The Exchange will continue to assess NOM Participants these above 
fees for connectivity to NOM 1.0. Beginning August 26, 2011, any NOM 
Participant with connectivity to NOM 2.0 will not be assessed fees for 
ports in Part B, section (b), as these port fees will be waived through 
September 30, 2011.\8\ NOM Participants connected to NOM 2.0 will 
continue to be subject to the TradeInfo Fee, which will continue to be 
assessed regardless of whether the NOM Participant is connected to NOM 
1.0 or NOM 2.0. If a NOM Participant is connected to both NOM 1.0 and 
NOM 2.0, the NOM Participant will be assessed the applicable current 
fees, which are listed in Part A, including the TradeInfo Fee, if 
applicable. All other fees related to NOM 2.0 will be waived through 
September 30, 2011. A NOM Participant connected to NOM 1.0 and NOM 2.0 
will only be assessed a $95 per user per month TradeInfo Fee, if 
applicable.
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    \8\ The SQF Port Fee has no charge.
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    As of October 3, 2011, the Exchange will assess new Access Services 
Fees and will discontinue the fees in Parts A and B, with the exception 
of the TradeInfo Fee which will continue to be assessed to all NOM 
Participants. The Exchange lists these new proposed fees, which are per 
port per month, in Part C, section (b) of Exchange Rule 7053. The 
Exchange also proposes to add text to Part C of Exchange Rule 7053 to 
indicate that as of October 3, 2011, only the fees in Part C are 
applicable to all NOM Participants.
    As of October 3, 2011, the Exchange is proposing to assess the 
following per port per month Access Services Fees: (i)

[[Page 53523]]

Order Entry Port Fee \9\ of $500; (ii) Clearing Trade Interface 
(``CTI'') \10\ Port Fee of $500; (iii) OUCH to Trade Options (``OTTO'') 
\11\ Port Fee of $500; (iv) ITCH to Trade Options (``ITTO'') \12\ Port 
Fee of $500; (v) Order Entry Delivery of real-time execution 
information (``DROP'') \13\ Port Fee of $500; (vi) OTTO DROP Port Fee 
\14\ of $500; and (vii) Specialized Quote Feed (``SQF'') Port Fee \15\ 
of $0.00. The Exchange will also continue to assess the TradeInfo Fee.
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    \9\ 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. In NOM 1.0, this port was referred to as FIX.
    \10\ 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 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.
    \11\ 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.
    \12\ The ITTO data feed will contain all quote and order 
messages including all executions. This feed allows subscribers to 
track the full depth of the NOM quote and order book.
    \13\ 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.
    \14\ 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.
    \15\ 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.
---------------------------------------------------------------------------

    While fee changes pursuant to this proposal are effective upon 
filing, the Exchange has designated these changes to be operative on 
August 26, 2011.
2. Statutory Basis
    NASDAQ believes that its proposal to amend its schedule of fees is 
consistent with Section 6(b) of the Act \16\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \17\ in particular, in 
that it is an equitable allocation of reasonable fees and other charges 
among Exchange members and other persons using any facility or system 
which NASDAQ operates or controls.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed amendments to Exchange Rule 7053 
to waive certain Access Service Fees for a period of time to encourage 
NOM Participants to transition to NOM 2.0 is both reasonable and 
equitable. The Exchange believes that the waiver is reasonable because 
it will lower costs for NOM Participants who connect early and will not 
impact any NOM Participants who do not desire to connect until a later 
time. The Exchange also believes it is reasonable to allow NOM 
Participants a period of time to complete the transition before 
amending the Access Service Fees. All NOM Participants will be provided 
an opportunity to transition once NOM 2.0 is launched on August 26, 
2011.
    The Exchange believes the new Access Service Fees that will be in 
place on October 3, 2011 are reasonable because the fees are within the 
range of port fees that are assessed today by NOM. The Exchange 
believes that the port fees, for which the Exchange is assessing NOM 
Participants as of October 3, 2011, are equitable because they are 
being uniformly applied to all NOM Participants.
    With respect to the SQF Port Fee, for which there is no charge, the 
Exchange believes this fee is reasonable because the Exchange is 
seeking to incentivize market makers to connect to NOM 2.0.\18\ The 
Exchange believes not assessing a fee for the SQF Port, as compared to 
other ports, is just and equitable because market makers have 
obligations to the market and regulatory requirements,\19\ which 
normally do not apply to other market participants.
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    \18\ The SQF Port can only be utilized by market makers.
    \19\ Pursuant to Chapter VII (Market Participants), Section 5 
(Obligations of Market Makers), in registering as a market maker, an 
Options Participant commits himself to various obligations. 
Transactions of a Market Maker in its market making capacity must 
constitute a course of dealings reasonably calculated to contribute 
to the maintenance of a fair and orderly market, and Market Makers 
should not make bids or offers or enter into transactions that are 
inconsistent with such course of dealings. Further, all Market 
Makers are designated as specialists on NOM for all purposes under 
the Act or rules thereunder. See Chapter VII, Section 5.
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    Finally, the Exchange believes that continuing to assess the 
TradeInfo Fee on all NOM Participants, regardless of the transition 
from NOM 1.0 to NOM 2.0, is reasonable because this functionality is 
not impacted by the NOM 2.0 transition and it is reasonable to continue 
assessing the same fee for this service. The Exchange believes 
continuing to assess the TradeInfo Fee on all NOM Participants, 
regardless of the transition from NOM 1.0 to NOM 2.0, is equitable 
because all NOM Participants are uniformly assessed this fee.

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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \20\ and paragraph (f)(2) of Rule 19b-4 \21\ 
thereunder. 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.
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    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 17 CFR 240.19b-4(f)(2).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2011-111 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 53524]]

Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NASDAQ-2011-111. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NASDAQ-2011-111 and should be submitted on or before September 16, 
2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21856 Filed 8-25-11; 8:45 am]
BILLING CODE 8011-01-P