Document ID: SEC-2015-2112-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC,
Posted Date: 2015-12-21T05:00Z

[Federal Register Volume 80, Number 244 (Monday, December 21, 2015)]
[Notices]
[Pages 79375-79381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31934]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76647; File No. SR-NASDAQ-2015-148]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend NASDAQ Options Market--Fees and Rebates

December 15, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 1, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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 entitled ``NASDAQ Options Market--Fees and 
Rebates,'' which governs pricing for Nasdaq members using the NASDAQ 
Options Market (``NOM''), Nasdaq's facility for executing and routing 
standardized equity and index options.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of 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 various changes to the NOM transaction fees 
and rebates set forth at Chapter XV, Section 2 for executing and 
routing standardized equity and index options under the Non-Penny Pilot 
Options program, as well as other changes.
    The proposed changes are as follows:
    Fees for Removing Liquidity in Non-Penny Pilot Options: The 
Exchange proposes to:
    1. Increase fees from $0.94 to $1.10 per contract for all 
Participant categories other than Customer, which remains at $0.85 per 
contract.
    2. Offer Participants that send Professional, Firm, Non-NOM Market 
Maker, NOM Market Maker and/or Broker-Dealer order flow an opportunity 
to lower the Fees for Removing Liquidity in Non-Penny Pilot Options 
from $1.10 to $1.03 per contract provided they qualify for Customer or 
Professional Penny Pilot \3\ Options Rebates to Add Liquidity Tiers 7 
or 8.
---------------------------------------------------------------------------

    \3\ The Penny Pilot was established in March 2008 and has since 
been expanded and extended through June 30, 2016. See Securities 
Exchange Act Release Nos. 57579 (March 28, 2008), 73 FR 18587 (April 
4, 2008) (SR-NASDAQ-2008-026) (notice of filing and immediate 
effectiveness establishing Penny Pilot); 60874 (October 23, 2009), 
74 FR 56682 (November 2, 2009)(SR-NASDAQ-2009-091) (notice of filing 
and immediate effectiveness expanding and extending Penny Pilot); 
60965 (November 9, 2009), 74 FR 59292 (November 17, 2009)(SR-NASDAQ-
2009-097) (notice of filing and immediate effectiveness adding 
seventy-five classes to Penny Pilot); 61455 (February 1, 2010), 75 
FR 6239 (February 8, 2010) (SR-NASDAQ-2010-013) (notice of filing 
and immediate effectiveness adding seventy-five classes to Penny 
Pilot); 62029 (May 4, 2010), 75 FR 25895 (May 10, 2010) (SR-NASDAQ-
2010-053) (notice of filing and immediate effectiveness adding 
seventy-five classes to Penny Pilot); 65969 (December 15, 2011), 76 
FR 79268 (December 21, 2011) (SR-NASDAQ-2011-169) (notice of filing 
and immediate effectiveness [sic] extension and replacement of Penny 
Pilot); 67325 (June 29, 2012), 77 FR 40127 (July 6, 2012) (SR-
NASDAQ-2012-075) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through December 31, 2012); 
68519 (December 21, 2012), 78 FR 136 (January 2, 2013) (SR-NASDAQ-
2012-143) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through June 30, 2013); 
69787 (June 18, 2013), 78 FR 37858 (June 24, 2013) (SR-NASDAQ-2013-
082) (notice of filing and immediate effectiveness and extension and 
replacement of Penny Pilot through December 31, 2013); 71105 
(December 17, 2013), 78 FR 77530 (December 23, 2013) (SR-NASDAQ-
2013-154) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through June 30, 2014); 79 
FR 31151 (May 23, 2014), 79 FR 31151 (May 30, 2014) (SR-NASDAQ-2014-
056) (notice of filing and immediate effectiveness and extension and 
replacement of Penny Pilot through December 31, 2014); 73686 
(November 25, 2014), 79 FR 71477 (December 2, 2014) (SR-NASDAQ-2014-
115) (notice of filing and immediate effectiveness and extension and 
replacement of Penny Pilot through June 30, 2015) and 75283 (June 
24, 2015), 80 FR 37347 (June 30, 2015) (SR-NASDAQ-2015-063) (notice 
of filing and immediate effectiveness of a Proposed Rule Change 
Relating to Extension of the Exchange's Penny Pilot Program and 
Replacement of Penny Pilot Issues That Have Been Delisted.) See also 
NOM Rules, Chapter VI, Section 5.
---------------------------------------------------------------------------

    3. Offer Participants that send NOM Market Maker order flow an 
opportunity to lower the Fee for Removing Liquidity in Non-Penny Pilot 
Options from $1.10 to $1.08 per contract provided they qualify for 
Customer or Professional Penny Pilot Options Rebate to Add Liquidity 
Tiers 2, 3, 4, 5 or 6.

[[Page 79376]]

    Rebate to Add Liquidity in Non-Penny Pilot Options: the Exchange 
proposes to
    1. Reduce the Customer Rebate to Add Liquidity in Non-Penny Pilot 
Options from $0.84 to $0.80 per contract.
    2. Offer Participants that send Customer order flow an opportunity 
to increase the Non-Penny Pilot Options Rebate to Add Liquidity by 
$0.10 per contract by qualifying for Customer or Professional Penny 
Pilot Options Rebate to Add Liquidity Tiers 2, 3, 4, 5 or 6 in a month 
for a total rebate of $.90 per contract.
    3. Offer Participants that send Customer order flow an opportunity 
to increase the Non-Penny Pilot Options Rebate to Add Liquidity by 
qualifying for Customer or Professional Penny Pilot Options Rebate to 
Add Liquidity Tiers 7 or 8 in a month, by increasing the current 
additional rebate from $0.01 to $0.20 per contract, in addition to the 
proposed $0.80 per contract Customer rebate for a total rebate of $1.00 
per contract.
    Note ``c'' and note ``1'' of Chapter XV, Section 2(1):
    1. Amend note ``c'' criteria (3)(a) to decrease the percentage of 
total industry customer equity and ETF option ADV contract per day in a 
month from 0.85% to 0.75%.
    2. Amend note ``c'' criteria 3(b) to increase the amount of 
Consolidated Volume by increasing the percentage from 1.00% to 1.10% or 
more of Consolidated Volume in a month.
    3. Conform the language in the rule text in note ``1'' and note 
``c.''
    Each specific change is described in greater detail below.
Fees for Removing Liquidity in Non-Penny Pilot Options
    The Exchange proposes, beginning December 1, 2015, to increase the 
Professional,\4\ Firm,\5\ Non-NOM Market Maker,\6\ NOM Market Maker \7\ 
and Broker Dealer \8\ Non-Penny Pilot Options Fees for Removing 
Liquidity from $0.94 to $1.10 per contract.\9\ While the Exchange is 
increasing these fees, it will also offer Participants an opportunity 
to lower these fees by adding liquidity to NOM. Participants that 
qualify for the Customer or Professional Penny Pilot Options Rebate to 
Add Liquidity Tier 7 or 8 in a month will be assessed a lower Non-Penny 
Pilot Options Fee for Removing Liquidity of $1.03 per contract, reduced 
from $1.10 per contract, for each transaction which removes liquidity 
in Non-Penny Pilot Options in a month. Participants that add NOM Market 
Maker Liquidity may also reduce the Non-Penny Pilot Options Fee for 
Removing Liquidity from $1.10 to $1.08 per contract for each 
transaction which removes liquidity in Non-Penny Pilot Options in a 
month, if they qualify for Customer or Professional Penny Pilot Options 
Rebate to Add Liquidity Tiers 2, 3, 4, 5 or 6. The Exchange believes 
that while the Non-Penny Pilot Options Fees for Removing Liquidity are 
being increased, the opportunity to earn a discounted fee by providing 
liquidity will incentivize Participants to select NOM as a venue and in 
turn benefit other market participants with the opportunity to interact 
with such liquidity.
---------------------------------------------------------------------------

    \4\ The term ``Professional'' means any person or entity that 
(i) is not a broker or dealer in securities, and (ii) places more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s) pursuant to Chapter 
I, Section 1(a)(48). All Professional orders shall be appropriately 
marked by Participants.
    \5\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
    \6\ 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.
    \7\ 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.
    \8\ 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.
    \9\ The Customer Non-Penny Pilot Options Fee for Removing 
Liquidity will remain at $0.85 per contract.
---------------------------------------------------------------------------

Rebate To Add Liquidity in Non-Penny Pilot Options
    The Exchange proposes, beginning December 1, 2015, to decrease the 
Non-Penny Pilot Options Customer Rebate to Add Liquidity from $0.84 to 
$0.80 per contract. While the Exchange is decreasing this Customer 
rebate, it will also offer Participants an opportunity to obtain a 
higher rebate by adding liquidity to NOM. Participants that send 
Customer order flow will have an opportunity to earn an additional Non-
Penny Pilot Options Rebate to Add Liquidity of $0.10 per contract, in 
addition to the proposed $0.80 per contract rebate, for a total rebate 
of $0.90 per contract, by qualifying for Customer or Professional Penny 
Pilot Options Rebate to Add Liquidity Tiers 2, 3, 4, 5 or 6 in a month. 
Also Participants that send Customer order flow will continue to be 
offered an opportunity to earn an increased additional Non-Penny Pilot 
Options Rebate to Add Liquidity by qualifying for Customer or 
Professional Penny Pilot Options Rebate to Add Liquidity Tiers 7 or 8 
in a month, but the additional rebate will increase from $0.01 to $0.20 
per contract, above the proposed $0.80 per contract rebate, for a total 
rebate of $1.00 per contract in a month. The Exchange believes that, 
while the Non-Penny Pilot Options Customer Rebate to Add Liquidity is 
being decreased, the opportunity to earn a higher rebate by adding 
liquidity will incentivize Participants to select NOM as a venue and in 
turn benefit other market participants with the opportunity to interact 
with such liquidity.
Note ``c'' and Note ``1'' of Chapter XV, Section 2(1)
    The Exchange proposes to amend current note ``c'' which permits 
Participants that qualify for the Tier 8 Customer and Professional 
Penny Pilot Options Rebate to Add Liquidity \10\ to achieve a higher 
rebate. Currently, note ``c'' states: ``[P]articipants 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 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 1.40% 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 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 0.85% of total industry customer equity and 
ETF option ADV contracts per day in a

[[Page 79377]]

month and (b) 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 will receive an additional $0.03 per 
contract Penny Pilot Options Customer Rebate to Add Liquidity for each 
transaction which adds liquidity in Penny Pilot Options.'' \11\
---------------------------------------------------------------------------

    \10\ Tier 8 of the Customer and Professional Rebate to Add 
Liquidity Tiers pays a $0.48 per contract rebate to 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 above 0.75% or more of total industry customer equity 
and ETF option ADV contracts per day in a month or Participants that 
add (1) Customer and/or Professional liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options of 30,000 or more contracts 
per day in a month, (2) the Participant has certified for the 
Investor Support Program set forth in Rule 7014, and (3) the 
Participant qualifies for rebates under the Qualified Market Maker 
(``QMM'') Program set forth in Rule 7014.
    \11\ Consolidated Volume means 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.
---------------------------------------------------------------------------

    First, the Exchange proposes to amend note ``c'' to amend criteria 
(3)(a) to decrease the percentage of total industry customer equity and 
ETF option ADV contract per day in a month from 0.85% to 0.75%. The 
Exchange believes that this decrease will offer Participants an 
opportunity to qualify for this incentive by amending the qualification 
to require less volume. Second, the Exchange proposes to amend criteria 
3(b) to increase the amount of Consolidated Volume by increasing the 
percentage from 1.00% to 1.10% or more of Consolidated Volume in a 
month to achieve the additional $0.03 per contract Penny Pilot Options 
Customer Rebate to Add Liquidity for each transaction which adds 
liquidity in Penny Pilot Options. While this note 3(b) incentive 
requirement is being increased, the other requirement in note 3(a) is 
being lowered. The Exchange believes that this incentive will continue 
to encourage Participants to add even more liquidity on NOM to earn a 
higher rebate. The Exchange is not amending the other criteria, (1) and 
(2), in note ``c'' to qualify for the additional rebate. Also, note 
``c'' is being amended to add the phrase ``in a month'' for additional 
clarity.
    Finally, the Exchange proposes to conform the language in the rule 
text in note ``1'' of Chapter XV, Section 2(1) by rewording the rule 
text for consistency and also referring to ``a month'' instead of a 
``given month.''
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\12\ in general, and with 
Section 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 or system which Nasdaq operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

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

Fees for Removing Liquidity in Non-Penny Pilot Options
    The Exchange's proposal to increase the Professional, Firm, Non-NOM 
Market Maker, NOM Market Maker and Broker Dealer Non-Penny Pilot 
Options Fees for Removing Liquidity from $0.94 to $1.10 per contract is 
reasonable, because these fees serve to offset the Exchange's 
incentives to increase the Non-Penny Pilot Options Customer rebate up 
to $1.00 per contract. The Exchange is amending the Non-Penny Pilot 
Options Rebate to Add Liquidity to pay a proposed decreased rebate of 
$0.80 per contract, but with an opportunity to earn a higher rebate of 
$0.90 per contract or $1.00 per contract, depending on the 
Participant's qualifications for Customer or Professional Rebates to 
Add Liquidity in Penny Pilot Options. The Exchange seeks to encourage 
Participants to send more Customer or Professional Order flow to obtain 
an even higher Customer rebate than is offered today.\14\ The Exchange 
believes that this benefits the Exchange in two ways: (1) The Exchange 
is encouraging Participants to qualify for Customer or Professional 
Penny Pilot Options rebate tiers, which requires Participants to send 
Penny and/or Non-Penny Pilot Options order flow to the Exchange; and 
(2) the Exchange is incentivizing Participants to transact more 
Customer Non-Penny Pilot Options on NOM. Additional order flow benefits 
all market participants, because they are afforded an opportunity to 
interact with the increased order flow. Customer order flow enhances 
liquidity on the Exchange for the benefit of all market participants 
and benefits all market participants by providing more trading 
opportunities, which attracts market makers.\15\ 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. Customers will continue to be 
assessed an $0.85 per contract Non-Penny Pilot Options Fee for Removing 
Liquidity, because Customer liquidity offers unique benefits to the 
market which benefits all market participants. Further, the Exchange 
believes the proposed fees for removing liquidity are consistent with 
fees assessed by other options exchanges.\16\ Also, the Exchange 
believes that encouraging 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.
---------------------------------------------------------------------------

    \14\ Today, the Customer Rebate to Add Liquidity in Non-Penny 
Pilot Options is $0.84 per contract.
    \15\ Customers continue to be assessed the lowest Non-Penny 
Pilot Options Fee for Removing Liquidity of $0.85 per contract. This 
fee is not being amended with this proposal.
    \16\ Today, BOX Options Exchange LLC assesses a $1.07 Non-Penny 
Pilot take fee to Professional Customers and Broker-Dealers when 
removing customer liquidity. See BOX Options Exchange Fee Schedule.
---------------------------------------------------------------------------

    The Exchange's proposal to increase the Professional, Firm, Non-NOM 
Market Maker, NOM Market Maker and Broker Dealer Non-Penny Pilot 
Options Fees for Removing Liquidity from $0.94 to $1.10 per contract is 
equitable and not unfairly discriminatory, because all Participants, 
other than Customers, are being assessed the same Non-Penny Pilot 
Options Fees for Removing Liquidity. Customer order flow, unlike other 
order flow, enhances liquidity on the Exchange for the benefit of all 
market participants and benefits all market participants by providing 
more trading opportunities, which attracts market makers. Customers 
continue to be assessed the lowest Non-Penny Pilot Options Fee for 
Removing Liquidity of $0.85 per contract.
    The Exchange's proposal to offer Participants an opportunity to 
reduce the Professional, Firm, Non-NOM Market Maker, NOM Market Maker 
and Broker Dealer Non-Penny Pilot Options Fees for Removing Liquidity 
from $1.10 to $1.03 per contract is reasonable, because the Exchange 
believes that offering Participants an opportunity to reduce fees by 
qualifying for Customer or Professional Rebates to Add Liquidity in 
Penny Pilot Options Tiers 7 or 8 will benefit all Participants from the 
increased liquidity such rebate tiers will attract to the Exchange, 
while reducing fees.
    The Exchange's proposal to offer Participants an opportunity to 
reduce the Professional, Firm, Non-NOM Market Maker, NOM Market Maker 
and Broker Dealer Non-Penny Pilot Options Fees for Removing Liquidity 
from $1.10 to $1.03 per contract is equitable and not unfairly 
discriminatory, because all non-Customer Participants may qualify for 
this fee discount. Customers pay a lower fee of $0.85 per contract, 
because Customer order flow enhances liquidity on the Exchange for the 
benefit of all market participants and benefits all market participants 
by providing more

[[Page 79378]]

trading opportunities, which attracts market makers.
    The Exchange's proposal to offer Participants that send NOM Market 
Maker order flow an opportunity to reduce the Non-Penny Pilot Options 
Fee for Removing Liquidity from $1.10 to $1.08 per contract is 
reasonable, because the Exchange seeks to encourage Participants to 
send more Penny and/or Non-Penny Pilot Options order flow to NOM to 
obtain the discount. Offering to reduce NOM Market Maker fees for 
Participants that qualify for the lower Customer or Professional Penny 
Pilot Options Tiers 2, 3, 4, 5 or 6, as well as the higher Tiers 7 and 
8,\17\ should encourage Participants to send additional order flow to 
NOM to obtain a lower fee.
---------------------------------------------------------------------------

    \17\ Participants may qualify for the reduction of the Non-Penny 
Pilot Options Fee for Removing Liquidity from $1.10 to $1.03 per 
contract for all non-Customer order flow, provided the Participant 
qualifies for Tiers 2, 3, 4, 5 or 6 [sic] of the Customer or 
Professional Penny Pilot Option Rebate to Add Liquidity.
---------------------------------------------------------------------------

    The Exchange's proposal to offer Participants that send NOM Market 
Maker order flow an opportunity to reduce the Non-Penny Pilot Options 
Fee for Removing Liquidity from $1.10 to $1.08 per contract is 
equitable and not unfairly discriminatory, because NOM Market Makers, 
unlike other market participants, add value through continuous quoting 
\18\ and the commitment of capital. Further, encouraging NOM Market 
Makers to add greater liquidity benefits all Participants in the 
quality of order interaction. The Exchange believes that it is 
equitable and not unfairly discriminatory to only offer NOM Market 
Makers the opportunity to earn a discounted fee for qualifying for the 
lower Customer or Professional Penny Pilot Options Tiers 2, 3, 4, 5 or 
6 because of the obligations borne by these market participants. Also, 
today Customers pay a lower fee of $0.85 per contract, as compared to 
NOM Market Makers. The Exchange believes it is equitable and not 
unfairly discriminatory to assess Customers a lower fee, because 
Customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants and benefits all market participants by 
providing more trading opportunities, which attracts market makers.
---------------------------------------------------------------------------

    \18\ 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.
---------------------------------------------------------------------------

Rebate To Add Liquidity in Non-Penny Pilot Options
    The Exchange's proposal to decrease the Non-Penny Pilot Options 
Customer Rebate to Add Liquidity from $0.84 to $0.80 per contract is 
reasonable, because although the rebate is being decreased by $0.04 per 
contract, the Exchange is also offering Participants an opportunity to 
earn a higher rebate by sending Customer or Professional order flow to 
NOM. The Exchange proposes to offer Participants the opportunity to 
increase the Non-Penny Pilot Options Customer Rebate to Add Liquidity 
to either $0.90 or $1.00 per contract, depending on the Participant's 
qualifications for Customer or Professional Rebates to Add Liquidity in 
Penny Pilot Options. Today, only Customers are entitled to receive a 
Non-Penny Pilot Options Customer Rebate to Add Liquidity of $0.84 per 
contract. The Exchange will continue to offer Participants the 
opportunity to receive a rebate for Customer orders, albeit a reduced 
rebate. Also, by offering an opportunity to earn a higher Customer 
rebate through the addition of certain order flow to NOM, the Exchange 
seeks to encourage Participants to send more Customer or Professional 
Order flow, which benefits all market participants because they are 
afforded an opportunity to interact with the increased order flow. 
Customer liquidity offers unique benefits to the market which benefits 
all market participants. Also, the Exchange believes that encouraging 
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.
    The Exchange's proposal to decrease the Non-Penny Pilot Options 
Customer Rebate to Add Liquidity from $0.84 to $0.80 per contract is 
equitable and not unfairly discriminatory, because, today, only 
Customers are entitled to such a rebate, because Customer order flow 
brings unique benefits to the market through increased liquidity which 
benefits all market participants. Customers will continue to be offered 
a rebate, unlike other market participants.
    The Exchange's proposal to offer Participants that send Customer 
order flow an opportunity to increase the proposed lower Customer Non-
Penny Pilot Options Rebate to Add Liquidity from $0.80 to $0.90 per 
contract, provided the Participant qualifies for Customer or 
Professional Penny Pilot Options Rebate to Add Liquidity Tiers 2, 3, 4, 
5 or 6 is reasonable, because the Exchange will increase the $0.80 per 
contract rebate, thereby encouraging Participants to send more Customer 
or Professional Penny and/or Non-Penny Pilot Options order flow to the 
Exchange. This rebate incentive also incentivizes Participants to 
transact more Customer Non-Penny Pilot Options on NOM.
    The Exchange's proposal to offer Participants that send Customer 
order flow an opportunity to increase the proposed lower Customer Non-
Penny Pilot Options Rebate to Add Liquidity from $0.80 to $0.90 per 
contract, provided the Participant qualifies for Customer or 
Professional Penny Pilot Options Rebate to Add Liquidity Tiers 2, 3, 4, 
5 or 6 is equitable and not unfairly discriminatory, because Customer 
order flow, unlike other order flow, brings unique benefits to the 
market through increased liquidity which benefits all market 
participants. Customers will continue to be offered a rebate, unlike 
other market participants.
    The Exchange's proposal to offer Participants that send Customer 
order flow an opportunity to increase the proposed lower Customer Non-
Penny Pilot Options Rebate to Add Liquidity from $0.80 to $1.00 per 
contract, provided the Participant qualifies for Customer or 
Professional Penny Pilot Options Rebate to Add Liquidity Tiers 7 or 8 
is reasonable, because the Exchange will increase the $0.80 per 
contract rebate, thereby encouraging Participants to send more Customer 
or Professional Penny and/or Non-Penny Pilot Options order flow to the 
Exchange. This rebate incentive also incentivizes Participants to 
transact more Customer Non-Penny Pilot Options on NOM.
    The Exchange's proposal to offer Participants that send Customer 
order flow an opportunity to increase the proposed lower Customer Non-
Penny Pilot Options Rebate to Add Liquidity from $0.80 to $1.00 per 
contract, provided the Participant qualifies for Customer or 
Professional Penny Pilot Options Tiers 7 or 8 is equitable and not 
unfairly discriminatory, because Customer order flow, unlike other 
order flow, brings unique benefits to the market through increased 
liquidity which benefits all market participants. Customers will 
continue to be offered a rebate, unlike other market participants.
Note ``c'' and Note ``1'' of Chapter XV, Section 2(1)
    The Exchange's proposal to amend one of the three criteria in note 
``c'' to earn a higher rebate for Participants that qualify for the 
Tier 8 Customer and

[[Page 79379]]

Professional Penny Pilot Options Rebate to Add Liquidity is reasonable 
because the opportunity to earn a higher rebate of $0.51 per 
contract,\19\ provided the qualifications are met, will continue to 
incentivize Participants to transact an even greater number of 
qualifying Customer and/or Professional volume, which liquidity will 
benefit other market participants by providing them the opportunity to 
interact with that liquidity. The Exchange's proposal to offer 
Participants an opportunity to obtain a higher Tier 8 rebate of $0.51 
per contract, provided they qualify for the Tier 8 rebate criteria, 
which includes the addition of options and equity volume, is reasonable 
because the Exchange is encouraging market participants to send order 
flow to both the options and equity markets to receive the rebate. 
Incentivizing Participants to add options liquidity through the payment 
of an additional rebate is not novel and exists today. The concept of 
participating in the equities market as a means to qualify for an 
options rebate also exists today. The Exchange's proposal would amend 
one of three qualifications that Participants may qualify for in order 
to obtain an increased Tier 8 rebate.
---------------------------------------------------------------------------

    \19\ Tier 8 of the Customer and Professional Penny Pilot Options 
Rebate to Add Liquidity pays a $0.48 per contract rebate and note 
``c'' prong 3 pays an additional $0.03 per contract incentive for a 
total rebate of $0.51 per contract.
---------------------------------------------------------------------------

    Specifically, the Exchange believes that the proposal to amend the 
criteria in 3(a) to decrease the percentage of total industry customer 
equity and ETF option ADV contract per day in a month from 0.85% to 
0.75% to achieve the additional $0.03 per contract Penny Pilot Options 
Customer Rebate to Add Liquidity is reasonable, because the decrease 
may offer Participants an opportunity to qualify for this incentive, 
which would require less volume. The amended incentive has the 
potential to make the applicable higher rebate available to a wider 
range of market participants. The Exchange also believes that the 
proposal to amend the criteria in 3(b) to increase the amount of 
Consolidated Volume by increasing the percentage from 1.00% to 1.10% or 
more of Consolidated Volume, in a month, to obtain the additional $0.03 
per contract Penny Pilot Options Customer Rebate to Add Liquidity is 
reasonable because, despite the increase, the other requirement to 
obtain the rebate in note 3(a) is being lowered. Both the 3(a) and 3(b) 
requirements must be met in order to qualify for the additional Tier 8 
rebate pursuant to the third prong in note ``c.'' Participants may 
still qualify for the Tier 8 additional rebate by qualifying pursuant 
to note ``c'' prongs (1) or (2) as well. The Exchange believes that 
this incentive will continue to encourage Participants to add even more 
liquidity on NOM to earn a higher rebate. Finally, this participation 
benefits the Nasdaq Market Center as well as the NOM market by 
incentivizing order flow to these markets. Because cash equities and 
options markets are linked, with liquidity and trading patterns on one 
market affecting those on the other, the Exchange believes that pricing 
incentives that encourage market participant activity in NOM also 
support price discovery and liquidity provision in the Nasdaq Market 
Center.
    The Exchange's proposal to amend one of the three criteria in note 
``c'' to earn a higher rebate for Participants that qualify for the 
Tier 8 Customer and Professional Penny Pilot Options Rebate to Add 
Liquidity is equitable and not unfairly discriminatory, because all 
Participants may qualify for the Tier 8 rebate and the additional 
incentive. Qualifying Participants will be uniformly paid the rebate 
provided the requirements are met in a month. The Exchange believes 
that the proposal to amend the criteria in 3(a) to decrease the 
percentage of total industry customer equity and ETF option ADV 
contract per day in a month from 0.85% to 0.75% to achieve the 
additional $0.03 per contract Penny Pilot Options Customer Rebate to 
Add Liquidity is equitable and not unfairly discriminatory, because the 
qualification will apply uniformly to all Participants. Similarly, the 
Exchange also believes that the proposal to amend the criteria in 3(b) 
to increase the amount of Consolidated Volume by increasing the 
percentage from 1.00% to 1.10% or more of Consolidated Volume, in a 
month, to obtain the additional $0.03 per contract Penny Pilot Options 
Customer Rebate to Add Liquidity is equitable and not unfairly 
discriminatory, because the qualification will apply uniformly to all 
Participants. All Participants would continue to be required to qualify 
for both 3(a) and 3(b) to achieve the additional Tier 8 rebate pursuant 
to the third prong in note ``c.''
    The Exchange's proposal to conform the language in the rule text in 
note ``1'' of Chapter XV, Section 2(1) by rewording the rule text and 
also referring to ``a month'' instead of a ``given month'' and the 
proposal to amend note ``c'' to add the phrase ``in a month'' is 
reasonable, equitable and not unfairly discriminatory, because these 
amendments will bring consistency to the rule text.

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

    The Exchange does not believe that the proposed rule change will 
impose any inter-market burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive market in which many sophisticated and 
knowledgeable market participants can readily and do send order flow to 
competing exchanges if they deem fee levels or rebate incentives at a 
particular exchange to be excessive or inadequate. Additionally, new 
competitors have entered the market and still others are reportedly 
entering the market shortly. These market forces ensure that the 
Exchange's fees and rebates remain competitive with the fee structures 
at other trading platforms. In that sense, the Exchange's proposal is 
actually pro-competitive because the Exchange is simply responding to 
competition by adjusting rebates and fees in order to remain 
competitive in the current environment.
Fees for Removing Liquidity in Non-Penny Pilot Options
    The Exchange's proposal to increase the Professional, Firm, Non-NOM 
Market Maker, NOM Market Maker and Broker Dealer Non-Penny Pilot 
Options Fees for Removing Liquidity from $0.94 to $1.10 per contract 
does not impose an undue burden on intra-market competition, because 
all Participants, other than Customers, are being assessed the same 
Non-Penny Pilot Options Fees for Removing Liquidity. Also, Participants 
have an opportunity to reduce the Professional, Firm, Non-NOM Market 
Maker, NOM Market Maker and Broker Dealer Non-Penny Pilot Options Fees 
for Removing Liquidity from $1.10 to $1.03 per contract. All 
Participants may qualify for Tiers 7 or 8 of the Customer or 
Professional Rebates to Add Liquidity in Penny Pilot Options. All 
Participants benefit from the increased liquidity such rebate tiers 
will attract to the Exchange. Finally, Customers will continue to be 
assessed the lowest Non-Penny Pilot Options Fees for Removing Liquidity 
of $0.85 per contract, as is the case today because Customer order 
flow, unlike other order flow, brings unique benefits to the market 
through increased liquidity which benefits all market participants.
    The Exchange's proposal to offer Participants an opportunity to 
reduce the Professional, Firm, Non-NOM Market Maker, NOM Market Maker 
and

[[Page 79380]]

Broker Dealer Non-Penny Pilot Options Fees for Removing Liquidity from 
$1.10 to $1.03 per contract does not impose an undue burden on intra-
market competition, because all Participants may qualify for the Tier 7 
or 8 Customer or Professional Rebates to Add Liquidity in Penny Pilot 
Options.
    The Exchange's proposal to offer Participants an opportunity to 
reduce the NOM Market Maker Non-Penny Pilot Options Fees for Removing 
Liquidity from $1.10 to $1.08 per contract does not impose an undue 
burden on intra-market competition, because NOM Market Makers, unlike 
other market participants, add value through continuous quoting \20\ 
and the commitment of capital. Also, today Customers are assessed a 
lower fee of $0.85 per contract because Customer order flow, unlike 
other order flow, brings unique benefits to the market through 
increased liquidity which benefits all market participants.
---------------------------------------------------------------------------

    \20\ See supra note 18.
---------------------------------------------------------------------------

Rebate To Add Liquidity in Non-Penny Pilot Options
    The Exchange's proposal to decrease the Non-Penny Pilot Options 
Customer Rebate to Add Liquidity from $0.84 to $0.80 per contract does 
not impose an undue burden on intra-market competition, because the 
Exchange continues to incentivize market participants by offering 
rebates to encourage Participants to send Customer order flow to the 
Exchange. This order flow benefits all market participants because they 
are afforded an opportunity to interact with the increased order flow. 
Customer liquidity offers unique benefits to the market which benefits 
all market participants. The Exchange continues to offer Customers this 
rebate, which is not offered to other market participants.
    The Exchange's proposal to offer Participants an opportunity to 
increase the proposed lower Non-Penny Pilot Options Customer Rebate to 
Add Liquidity from $0.80 to $0.90 per contract or from $0.80 to $1.00 
per contract does not impose an undue burden on intra-market 
competition, because the Exchange believes that Customers are entitled 
to higher rebates because Customer order flow brings unique benefits to 
the market through increased liquidity, which benefits all market 
participants. Also, the incentive encourages Participants to send 
additional order flow to NOM.
Note ``c'' and Note ``1'' of Chapter XV, Section 2(1)
    The Exchange's proposal to amend note ``c'' to continue to earn a 
$0.03 per contract higher rebate for Participants that qualify for the 
Tier 8 Customer and Professional Penny Pilot Options Rebate to Add 
Liquidity does not impose an undue burden on intra-market competition, 
because all Participants may qualify for Tier 8 as well as the 
additional incentive. Also, all qualifying Participants will be 
uniformly paid the rebate provided the requirements are met in a month.
    The Exchange believes that the proposal to amend the criteria in 
3(a) to decrease the percentage of total industry customer equity and 
ETF option ADV contract per day in a month from 0.85% to 0.75% and the 
proposal to amend the criteria in 3(b) to increase the amount of 
Consolidated Volume by increasing the percentage from 1.00% to 1.10% or 
more of Consolidated Volume in a month to achieve the additional $0.03 
per contract Penny Pilot Options Customer Rebate to Add Liquidity does 
not impose an undue burden on intra-market competition, because the 
qualification will apply uniformly to all Participants. All 
Participants would continue to be required to qualify for both 3(a) and 
3(b) to achieve the additional Tier 8 rebate pursuant to the third 
prong in note ``c.''
    The Exchange's proposal to conform the language in the rule text in 
note ``1'' by rewording the rule text and also referring to ``a month'' 
instead of a ``given month'' and amending note ``c'' to add the phrase 
``in a month'' does not create an undue burden on intra-market 
competition because the amendments are non-substantive in nature.

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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-148 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-148. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-148 and should 
be submitted on or before January 11, 2016.

[[Page 79381]]

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

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

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-31934 Filed 12-18-15; 8:45 am]
BILLING CODE 8011-01-P