Document ID: SEC-2018-0521-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market LLC
Posted Date: 2018-03-29T04:00Z

[Federal Register Volume 83, Number 61 (Thursday, March 29, 2018)]
[Notices]
[Pages 13547-13552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06298]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82940; File No. SR-NASDAQ-2018-019]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Transaction Fees at Chapter XV, Section 2, Which 
Governs the Pricing for Nasdaq Participants Using The Nasdaq Options 
Market

March 23, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 13, 2018, 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.
---------------------------------------------------------------------------

    \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 Exchange's transaction fees at 
Chapter XV, Section 2, which governs the pricing for Nasdaq 
Participants using The Nasdaq Options Market (``NOM''), Nasdaq's 
facility for executing and routing standardized equity and index 
options.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.cchwallstreet.com/, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

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

[[Page 13548]]

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 purpose of the proposed rule change is to amend NOM pricing at 
Chapter XV, Section 2 to modify the NOM Market Maker,\3\ Customer \4\ 
and Professional \5\ Rebates to Add Liquidity in Penny and Non-Penny 
Pilot Options. The Exchange also proposes to increase the Customer and 
Professional Fee for Removing Liquidity in SPY Options. Each change is 
discussed below.
---------------------------------------------------------------------------

    \3\ The term ``NOM Market Maker'' or (``M'') is a Participant 
that has registered as a Market Maker on NOM pursuant to Chapter 
VII, Section 2, and must also remain in good standing pursuant to 
Chapter VII, Section 4. In order to receive NOM Market Maker pricing 
in all securities, the Participant must be registered as a NOM 
Market Maker in at least one security.
    \4\ 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 Chapter I, Section 
1(a)(48)).
    \5\ 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 Chapter I, Section 1(a)(48). All Professional orders shall be 
appropriately marked by Participants.
---------------------------------------------------------------------------

NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options
    The Exchange proposes to amend the Tier 6 NOM Market Maker Rebate 
to Add Liquidity in Penny Pilot Options by modifying the criteria to 
qualify for this tier and by increasing the rebate amount. Today, the 
Exchange has a six tier rebate structure for paying the NOM Market 
Maker Rebate to Add Liquidity in Penny Pilot Options as follows:

------------------------------------------------------------------------
                                                       Rebate to add
                 Monthly volume                          liquidity
------------------------------------------------------------------------
Tier 1: Participant adds NOM Market Maker         $0.20.
 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 NOM Market Maker         $0.25.
 liquidity in Penny Pilot Options and/or Non-
 Penny Pilot Options above 0.10% to 0.25% of
 total industry customer equity and ETF option
 ADV contracts per day in a month.
Tier 3: Participant adds NOM Market Maker         $0.30 or $0.40 in the
 liquidity in Penny Pilot Options and/or Non-      following symbols
 Penny Pilot Options above 0.25% to 0.60% of       AAPL, QQQ, IWM, SPY
 total industry customer equity and ETF option     and VXX.
 ADV contracts per day in a month.
Tier 4: Participant adds NOM Market Maker         $0.32 or $0.40 in the
 liquidity in Penny Pilot Options and/or Non-      following symbols
 Penny Pilot Options of above 0.60% to 0.90% of    AAPL, QQQ, IWM, VXX
 total industry customer equity and ETF option     and SPY.
 ADV contracts per day in a month.
Tier 5: Participant adds NOM Market Maker         $0.40.
 liquidity in Penny Pilot Options and/or Non-
 Penny Pilot Options of above 0.30% of total
 industry customer equity and ETF option ADV
 contracts per day in a month and qualifies for
 the Tier 7 or Tier 8 Customer and/or
 Professional Rebate to Add Liquidity in Penny
 Pilot Options.
Tier 6: Participant adds NOM Market Maker         $0.42.
 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 and qualifies for
 the Tier 7 or Tier 8 Customer and/or
 Professional Rebate to Add Liquidity in Penny
 Pilot Options or Participant adds NOM Market
 Maker liquidity in Penny Pilot Options and/or
 Non-Penny Pilot Options above 0.90% of total
 industry customer equity and ETF option ADV
 contracts per day in a month.
------------------------------------------------------------------------

    The Exchange proposes to amend the criteria to qualify for Tier 6, 
which currently offers two alternative methods of qualifying for the 
$0.42 per contract rebate in that tier. The first method is a two-
pronged requirement that the Participant (i) add NOM Market Maker 
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 
0.80% of total industry customer equity and ETF option average daily 
volume (``ADV'') contracts per day in a month and (ii) qualifies for 
the Tier 7 or Tier 8 Customer and/or Professional Rebate to Add 
Liquidity in Penny Pilot Options. The alternative is a requirement that 
the Participant add NOM Market Maker liquidity in Penny Pilot Options 
and/or Non-Penny Pilot Options above 0.90% of total industry customer 
equity and ETF option ADV contracts per day in a month. The Exchange is 
proposing to eliminate the first method, and to amend the alternative 
by increasing the 0.90% total industry customer equity and ETF option 
ADV threshold to 0.95% and adding two new requirements to qualify for 
the Tier 6 rebate. As such, the proposed Tier 6 criteria will have 
three prongs and require that the Participant (i) add NOM Market Maker 
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, (ii) execute 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 (iii) add Firm,\6\ Broker-
Dealer \7\ and Non-NOM Market Maker \8\ liquidity in Non-Penny Pilot 
Options of 10,000 or more contracts per day in a month. ``Total 
Volume'' will have the same meaning as the definition currently in note 
b of Section 2(1), specifically as Customer, Professional, Firm, 
Broker-Dealer, Non-NOM Market Maker and NOM Market Maker volume in 
Penny Pilot Options and/or Non-Penny Pilot Options which either adds or 
removes liquidity on NOM. Lastly, the Exchange proposes to increase the

[[Page 13549]]

current Tier 6 rebate amount from $0.42 to $0.48 per contract.
---------------------------------------------------------------------------

    \6\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
    \7\ 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.
    \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.
---------------------------------------------------------------------------

NOM Market Maker Rebate To Add Liquidity in Non-Penny Pilot Options
    The Exchange proposes to create an alternative method for 
Participants to earn a rebate for adding NOM Market Maker liquidity in 
Non-Penny Pilot Options. Today, the Exchange charges Participants a 
$0.35 per contract NOM Market Maker Fee for Adding Liquidity in Non-
Penny Pilot Options. To encourage Participants to add NOM Market Maker 
liquidity in Non-Penny Pilot Options, the Exchange currently offers 
incentives to reduce this fee or earn a rebate, provided the 
Participants meet the volume-based requirements in note ``5,'' Section 
2(1). Specifically, Participants who add NOM Market Maker liquidity in 
Non-Penny Pilot Options of 7,500 to 9,999 ADV contracts per day in a 
month would be assessed a $0.00 per contract Non- Penny Options Fee for 
Adding Liquidity in that month. In addition, Participants that add NOM 
Market Maker liquidity in Non-Penny Pilot Options of 10,000 or more ADV 
contracts per day in a month would receive a $0.30 per contract Non-
Penny Rebate to Add Liquidity for that month instead of paying the Non-
Penny Fee for Adding Liquidity.
    The Exchange now proposes an additional rebate in new note ``6'' 
for NOM Market Makers that add liquidity in Non-Penny Pilot Options. 
Specifically, Participants that qualify for the proposed Tier 6 NOM 
Market Maker Rebate to Add Liquidity in Penny Pilot Options, as 
discussed above, 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 ``5'' incentive will receive the greater of the note 
``5'' or note ``6'' incentive.
Customer and Professional Rebate To Add Liquidity in Penny Pilot 
Options
    The Exchange proposes a number of changes to the Rebates to Add 
Customer and Professional Liquidity in Penny Pilot Options set forth in 
Section 2(1). First, the Exchange is proposing to modify the eight tier 
rebate structure to a six tier rebate structure. The Exchange currently 
pays a volume-based tiered Customer and Professional Rebate to Add 
Liquidity in Penny Pilot Options as follows:

------------------------------------------------------------------------
                                                           Rebate to add
                     Monthly volume                          liquidity
------------------------------------------------------------------------
Tier 1: Participant adds Customer, Professional, Firm,             $0.20
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options of
 up to 0.10% of total industry customer equity and ETF
 option average daily volume (``ADV'') contracts per day
 in a month.............................................
Tier 2: Participant adds Customer, Professional, Firm,              0.25
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.10% to 0.20% of total industry customer equity
 and ETF option ADV contracts per day in a month........
Tier 3: Participant adds Customer, Professional, Firm,              0.42
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.20% to 0.30% of total industry customer equity
 and ETF option ADV contracts per day in a month........
Tier 4: Participant adds Customer, Professional, Firm,              0.43
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.30% to 0.40% of total industry customer equity
 and ETF option ADV contracts per day in a month........
Tier 5: Participant adds Customer, Professional, Firm,              0.45
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.40% to 0.75% of total industry customer equity
 and ETF option ADV contracts per day in a month........
Tier 6: Participant has Total Volume of 100,000 or more             0.45
 contracts per day in a month, of which 25,000 or more
 contracts per day in a month must be Customer and/or
 Professional liquidity in Penny Pilot Options..........
Tier 7: Participant has Total Volume of 150,000 or more             0.47
 contracts per day in a month, of which 50,000 or more
 contracts per day in a month must be Customer and/or
 Professional liquidity in Penny Pilot Options..........
Tier 8: Participant adds Customer, Professional, Firm,              0.48
 Non-NOM Market Maker and/or Broker-Dealer liquidity in
 Penny Pilot Options and/or Non-Penny Pilot Options
 above 0.75% or more of total industry customer equity
 and ETF option ADV contracts per day in a month, or
 Participant adds: (1) Customer and/or Professional
 liquidity in Penny Pilot Options and/or Non-Penny Pilot
 Options of 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)............
------------------------------------------------------------------------

    For purposes of Tiers 6 and 7, ``Total Volume'' is defined as 
Customer, Professional, Firm, Broker-Dealer, Non-NOM Market Maker and 
NOM Market Maker volume in Penny Pilot Options and/or Non-Penny Pilot 
Options which either adds or removes liquidity on NOM. The Exchange now 
proposes to eliminate Tiers 6 and 7, and renumber current Tier 8 as 
Tier 6. The Exchange will also make a number of related clean-up 
changes to remove all references in Chapter XV to current Tier 6 or 
Tier 7, and renumber all references to Tier 8 to Tier 6. In particular, 
the proposed clean-ups are in notes ``1,'' ``d,'' ``e'' and ``f'' in 
Section 2(1), in the Tier 5 NOM Market Maker Rebate to Add Liquidity in 
Penny Pilot Options in Section 2(1), and in the qualifier for the 
additional $0.09 per contract rebate applicable to the Market Access 
and Routing Subsidy Payment tiers in Section 2(6). Further, the 
Exchange would delete the portion of note ``b'' that states ``For 
purposes of Tiers 6 and 7'' and relocate the remaining rule text that 
contains the definition of ``Total Volume'' to a new corresponding note 
to the proposed Tier 6 NOM Market Maker Rebate to Add Liquidity in 
Penny Pilot Options. As discussed above, the second prong of the 
proposed Tier 6 rebate will contain a Total Volume qualifier.
    Further, the Exchange proposes to decrease the Customer and 
Professional Rebate to Add Liquidity in Penny Pilot Options set forth 
in note ``e'' of Section 2(1). Today, a Participant may receive a $0.53 
per contract Rebate to Add Liquidity in Penny Pilot Options as Customer 
or Professional if that Participant transacts in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent 3.00% or 
more of Consolidated Volume \9\ in the same month on The Nasdaq Stock 
Market. Participants that qualify for this rebate would not be eligible 
for any other Customer and Professional rebates in Tiers 1 through 8, 
or other rebate incentives for Customer and Professional order flow in 
Chapter XV, Section 2(1) of NOM

[[Page 13550]]

Rules.\10\ The Exchange now proposes to decrease this note ``e'' 
incentive from $0.53 to $0.52 per contract for Customers and 
Professionals transacting in Penny Pilot Options.
---------------------------------------------------------------------------

    \9\ Consolidated Volume would be determined as set forth in 
Nasdaq Rule 7018(a).
    \10\ In calculating total volume, the Exchange will add the NOM 
Participant's total volume transacted on the NASDAQ Stock Market in 
a given month across its Nasdaq Market Center MPIDs, and will divide 
this number by the total industry Consolidated Volume.
---------------------------------------------------------------------------

Customer and Professional Fee for Removing Liquidity in SPY Options
    The Exchange currently charges NOM Participants a Penny Pilot 
Options Fee for Removing Customer or Professional Liquidity that is 
$0.50 per contract, excluding SPY. For NOM Participants that remove 
Customer or Professional liquidity in SPY, this fee is reduced to $0.48 
per contract.\11\ The Exchange now proposes to amend this fee so that 
the Penny Pilot Options Fee for Removing Customer or Professional 
Liquidity in SPY will be increased from $0.48 to $0.49 per contract.
---------------------------------------------------------------------------

    \11\ See Chapter XV, Section 2(1), note 3. Firms, Non-NOM Market 
Makers, NOM Market Makers and Broker-Dealers are assessed a $0.50 
per contract Penny Pilot Options Fee for Removing Liquidity in SPY, 
similar to other Penny Pilot Options.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

NOM Market Maker Rebate To Add Liquidity in Penny Pilot Options
    The Exchange believes that the proposed changes to the criteria to 
qualify for the Tier 6 NOM Market Maker Rebate to Add Liquidity in 
Penny Pilot Options and the proposed increase in the rebate amount from 
$0.42 to $0.48 per contract are reasonable, equitable and not unfairly 
discriminatory.
    As discussed above, the Exchange is proposing to eliminate the 
first method to qualify for Tier 6, and amend the alternative method by 
increasing the total industry customer equity and ETF option ADV 
threshold from 0.90% to 0.95% and adding two new volume-based 
requirements to qualify for Tier 6. Accordingly, the proposed three-
pronged criteria to qualify for Tier 6 will require that Participants 
(1) add NOM Market Maker 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) execute 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) 
add 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. The 
Exchange notes that the proposed $0.48 per contract Tier 6 rebate will 
be the highest available NOM Market Maker Rebate to Add Liquidity in 
Penny Pilot Options. The Exchange believes that the proposed $0.48 per 
contract Tier 6 rebate is reasonable because it will require three 
components to be met by Participants in order to qualify for that 
rebate. These requirements require more volume to be submitted on NOM 
than the current highest rebate (i.e., the current Tier 6 NOM Market 
Maker Rebate to Add Liquidity in Penny Pilot Options) requires today.
    The Exchange believes that the first prong (add NOM Market Maker 
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) is reasonable because the Exchange already allows 
Participants to earn rebates today based on percentages of total 
industry customer equity and ETF option ADV. While the percentage 
threshold has increased from 0.90% to 0.95%, the Exchange is offering 
to pay a rebate of $0.48 per contract, the highest rebate, for 
Participants that meet this higher threshold. The second prong (execute 
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) 
is reasonable because the Exchange already allows Participants to 
obtain rebates today based on Total Volume, and requiring a certain 
amount of the Total Volume to consist of volume that removes liquidity 
will attract both liquidity providers and removers to NOM. The third 
prong (add 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) 
is reasonable because the Exchange is incentivizing Participants to 
send Non-Penny Pilot Firm, Broker-Dealer and Non-NOM Market Maker order 
flow to NOM. Overall, the Exchange believes that the proposed Tier 6 
rebate will continue to encourage Participants to send additional order 
flow to NOM in either Penny or Non-Penny Pilot Options to qualify for 
the higher Tier 6 rebate. All market participants benefit from the 
increased order interaction when more order flow is available on NOM.
    The Exchange believes that the proposed Tier 6 NOM Market Maker 
Rebate to Add Liquidity in Penny Pilot Options is equitable and not 
unfairly discriminatory because all similarly-situated Participants are 
equally capable of qualifying for the proposed rebate, and the rebate 
will be uniformly paid to all qualifying Participants. Further, the 
Exchange believes that it is equitable and not unfairly discriminatory 
to only offer this rebate to Participants that transact as NOM Marker 
Makers because NOM Market Makers, unlike other market participants, add 
value through continuous quoting \14\ and the commitment of capital. In 
addition, encouraging NOM Market Makers to add greater liquidity 
benefits all Participants in the quality of order interaction. The 
Exchange believes it is equitable and not unfairly discriminatory to 
offer only NOM Market Makers the opportunity to earn the Tier 6 rebate 
described above because of the obligations borne by these market 
participants, as noted herein.
---------------------------------------------------------------------------

    \14\ 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.
---------------------------------------------------------------------------

NOM Market Maker Rebate To Add Liquidity in Non-Penny Pilot Options
    The Exchange believes that the proposed $0.86 per contract NOM 
Market Maker Rebate to Add Liquidity in Non-Penny Pilot Options offered 
to Participants if they qualify for the Tier 6 NOM Market Maker Rebate 
to Add Liquidity in Penny Pilot Options is reasonable, equitable and 
not unfairly discriminatory. The Exchange notes that the proposed $0.86 
per contract rebate set forth in new note ``6'' will be the highest 
available incentive provided to Participants that add NOM Market Maker 
liquidity in Non-Penny Pilot Options.\15\ The Exchange believes that

[[Page 13551]]

the proposed incentive of $0.86 per contract is reasonable because it 
will require Participants to meet the stringent volume requirements set 
forth in the Tier 6 Penny Pilot Options Rebate to Add NOM Market Maker 
Liquidity, as described above. The incentives currently offered to 
Participants that add NOM Market Maker liquidity in Non-Penny Pilot 
Options as set forth in note ``5'' have significantly lower volume-
based qualification requirements than the requirements for the Tier 6 
Penny Pilot Options Rebate.\16\
---------------------------------------------------------------------------

    \15\ Today, the Exchange offers Participants a reduced fee of 
$0.00 or a rebate of $0.30, provided the Participant meets the 
volume qualifications in note 5 of Section 2(1). Specifically, 
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 would be 
assessed a $0.00 per contract Non-Penny Options Fee for Adding 
Liquidity in that month. In addition, Participants that add NOM 
Market Maker liquidity in Non-Penny Pilot Options of 10,000 or more 
ADV contracts per day in a month would receive a $0.30 per contract 
Non-Penny Rebate to Add Liquidity for that month instead of paying 
the Non-Penny Fee for Adding Liquidity.
    \16\ See note 15 above.
---------------------------------------------------------------------------

    Further, the new note ``6'' incentive is intended to encourage 
Participants who transact as NOM Market Makers to continue to send more 
order flow to the Exchange in either Penny or Non-Penny Pilot Options 
in order to qualify for the proposed Tier 6 Penny Pilot Rebate to Add 
NOM Market Maker Liquidity to earn the additional $0.86 Non-Penny 
Rebate to Add NOM Market Maker Liquidity. All market participants 
benefit from the increased order interaction when more order flow is 
available on NOM. The Exchange also believes that it is reasonable to 
offer Participants that qualify for a note ``5'' incentive the greater 
of the current note ``5'' or new note ``6'' incentive because the 
Participant will be able to receive the greater of the two rebates with 
this proposal.
    The Exchange believes that the proposed NOM Market Maker Rebate to 
Add Liquidity in Non-Penny Pilot Options is equitable and not unfairly 
discriminatory because all similarly-situated Participants are equally 
capable of qualifying for the proposed rebates, and the rebate will be 
uniformly paid to all qualifying Participants. Further, the Exchange 
believes that offering only Participants that transact as NOM Market 
Makers the opportunity to qualify for the proposed $0.86 per contract 
Rebate to Add Liquidity in Non-Penny Pilot Options is equitable and not 
unfairly discriminatory for the same reasons discussed above for the 
proposed Tier 6 Penny Pilot Options Rebate to Add NOM Market Maker 
Liquidity. It should also be noted that while the proposed $0.86 per 
contract rebate will be the highest available incentive provided to 
Participants that add NOM Market Maker liquidity in Non-Penny Pilot 
Options, the Exchange currently offers eligible Participants that 
transact as Customers and/or Professionals rebates up to $1.05 per 
contract for adding liquidity in Non-Penny Pilot Options.\17\ 
Accordingly, the Exchange believes the $0.86 per contract rebate 
proposed to be offered to Participants that transact as NOM Market 
Makers is equitable and not unfairly discriminatory because the 
proposed incentive is within the range of rebates currently offered to 
all Participants that transact on NOM and add liquidity in Non-Penny 
Pilot Options.
---------------------------------------------------------------------------

    \17\ Participants must meet the requirements in note ``f'' of 
Section 2(1) in order to qualify for this $1.05 per contract 
incentive.
---------------------------------------------------------------------------

Customer and Professional Rebate To Add Liquidity in Penny Pilot 
Options
    The Exchange believes that its proposal to modify the eight tier 
rebate structure to a six tier rebate structure by deleting the current 
Tier 6 and Tier 7 Customer and Professional Rebates to Add Liquidity, 
which currently contain Total Volume qualification requirements, is 
reasonable, equitable and not unfairly discriminatory. Participants 
will still have the opportunity to qualify for the other tiered 
Customer and Professional Rebates to Add Liquidity in Penny Pilot 
Options, which will remain unchanged, as well as the other incentives 
currently provided to Participants that add Customer and Professional 
liquidity in Penny Pilot Options.\18\
---------------------------------------------------------------------------

    \18\ In addition to the tiered rebates, the Exchange currently 
offers eligible Participants that add Customer and Professional 
liquidity in Penny Pilot Options rebate incentives that go up to 
$0.55 per contract if the Participant meets the relevant 
requirements. See Chapter XV, Section 2(1), notes ``c''--``f.''
---------------------------------------------------------------------------

    Further, the Exchange believes it is reasonable, equitable and not 
unfairly discriminatory to make the related clean-up changes to remove 
all references in Chapter XV to current Tier 6 or Tier 7, renumber all 
references to Tier 8 to Tier 6, and relocate the definition of ``Total 
Volume'' in note ``b'' to a new corresponding note to the proposed Tier 
6 NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options. The 
proposed changes will make NOM's pricing schedule easier to read and 
eliminate any potential confusion to the benefit of members and 
investors.
    In addition, the proposed change to note ``e'' in Section 2(1) to 
decrease the Customer and Professional Rebate to Add Liquidity in Penny 
Pilot Options provided to eligible Participants that transact 3.00% or 
more in Consolidated Volume on The Nasdaq Stock Market from $0.53 to 
$0.52 per contract is reasonable because the proposed change is a 
modest reduction, and the Exchange believes that its rebate program 
will continue to incentivize Participants to transact greater volume on 
The Nasdaq Stock Market in order to qualify for a higher rebate on NOM.
    The Exchange also believes that the proposed reduction in the note 
``e'' incentive as discussed above is equitable and not unfairly 
discriminatory because any Participant that qualifies for this rebate 
will be uniformly paid the $0.52 per contract incentive for Penny Pilot 
Options. The requirements for earning this rebate will be applied 
uniformly to all market participants. Furthermore, the Exchange 
believes that it is equitable and not unfairly discriminatory to only 
offer the proposed $0.52 per contract incentive in note ``e'' to 
eligible Participants that add Customer and Professional liquidity in 
Penny Pilot Options. 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 offering a lower fee to Professionals is 
similarly beneficial, as the lower fees may cause market participants 
to select NOM as a venue to send Professional order flow, increasing 
competition among the exchanges. As with Customer liquidity, the 
Exchange believes that increased Professional order flow should benefit 
other market participants.
Customer and Professional Fee for Removing Liquidity in SPY Options
    The proposal to amend note 3 of Chapter XV, Section 2(1) to 
increase the Penny Pilot Options Fee for Removing Customer or 
Professional Liquidity in SPY from $0.48 to $0.49 per contract is 
reasonable and equitable because the proposed fee remains lower for SPY 
as compared to other Penny Pilot Options. The Exchange believes that 
the lower fee of $0.49 per contract in SPY, as compared to $0.50 per 
contract in other Penny Pilot Options, will continue to incentivize 
Participants to send Customer and Professional order flow in SPY.\19\ 
The Exchange notes that the proposed pricing for the reduced SPY fee in 
note 3 remains competitive with another options exchange.\20\
---------------------------------------------------------------------------

    \19\ SPY options are the largest volume Penny Pilot Options 
traded on the Exchange.
    \20\ CBOE C2 Exchange (``C2'') charges public customers a $0.49 
per contract taker fee and professional customers a $0.50 per 
contract taker fee, both in all penny classes except RUT. See C2 
Fees Schedule, Section 1.

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

[[Page 13552]]

    The Exchange does not believe that only offering this lower fee to 
Participants that remove Customer and Professional liquidity in SPY is 
inequitable and unfairly discriminatory. 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 offering a lower fee to 
Professionals is similarly beneficial, as the lower fees may cause 
market participants to select NOM as a venue to send Professional order 
flow, increasing competition among the exchanges. As with Customer 
liquidity, the Exchange believes that increased Professional order flow 
should benefit other market participants.

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. All of the proposed changes to 
the NOM Market Maker, Customer and Professional Rebates to Add 
Liquidity in Penny and Non-Penny Pilot Options, as well as the Customer 
and Professional Fee for Removing Liquidity in SPY Options, are 
designed to attract additional order flow to NOM, and the Exchange 
believes that its pricing remains attractive to market participants. 
The Exchange 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. 
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.

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.\21\
---------------------------------------------------------------------------

    \21\ 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 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 [email protected]. Please include 
File Number SR-NASDAQ-2018-019 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-2018-019. 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-2018-019, and should be submitted 
on or before April 19, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2018-06298 Filed 3-28-18; 8:45 am]
 BILLING CODE 8011-01-P