Document ID: SEC-2008-0530-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2008-04-07T04:00Z

[Federal Register: April 7, 2008 (Volume 73, Number 67)]
[Notices]               
[Page 18848-18849]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap08-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57599; File No. SR-NASDAQ-2008-027]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Establish Fees for Trading on The NASDAQ Options Market

April 1, 2008.
    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 27, 2008, The NASDAQ Stock Market LLC (``Nasdaq'') 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 substantially by Nasdaq. Nasdaq has designated this 
proposal as one establishing or changing a member due, fee, or other 
charge imposed by Nasdaq under Section 19(b)(3)(A)(ii) of the Act \3\ 
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to establish pricing for trading standardized 
equity and index options on The NASDAQ Options Market (``NOM''), 
Nasdaq's facility for the trading of standardized equity and index 
options. Nasdaq will implement this rule change on March 31, 2008, the 
expected launch date for NOM. The text of the proposed rule change is 
available at http://www.complinet.com/nasdaq, the principal offices of 
the Exchange, and 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, Nasdaq 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. Nasdaq 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 introducing fees and credits for the execution of options 
contracts within NOM. The fees are based on the pricing model currently 
in place for the trading of equities via the Nasdaq Market Center, with 
variations to reflect Nasdaq's understanding of the different 
competitive conditions in the markets that trade options.
    Specifically, Nasdaq will assess fees for the execution of options 
contracts based upon which member provides liquidity to the market and 
which member takes liquidity from the market. This model seeks to 
attract liquidity to NOM by providing credits to members that provide 
liquidity, and to assess a fee to the member whose order executes 
against an order that has provided liquidity. An order that provides 
liquidity is any order that is entered into NOM and is placed on the 
NOM book for potential execution. An order that takes liquidity is one 
that is entered into NOM and that executes against an order resting on 
the NOM book. In the case of the NOM Closing Cross, all orders entered 
during the continuous market or entered as Imbalance Only orders will 
be considered liquidity providers and all On Close orders will be 
considered liquidity takers.
    For all executions except the NOM Opening Cross, the fee for 
liquidity takers will be $0.45 per executed contract and the rebate for 
liquidity providers will be $0.30 per executed contract. For orders 
executed in the NOM Opening Cross, the fee will be $0.05 per contract 
for each side of the transaction. Executions in the Opening Cross are 
not susceptible to the liquidity provider and taker analysis described 
above because NOM will not place orders on its book prior to the 
opening of the market. Instead, NOM will place orders on the book just 
prior to and in anticipation of the execution of the NOM Opening Cross. 
In light of this difference, Nasdaq has concluded that charging all 
members equally for the execution of their orders in the NOM Opening 
Cross is the fairest way to allocate fees.
    Nasdaq will assess a routing fee for orders that are executed at 
another options market based upon the cost to Nasdaq of executing such 
orders at those markets. In order to reflect Nasdaq's cost of execution 
at away markets, the proposed fees are separated by type of option 
(penny pilot, equity/non-penny pilot, ETF or HLDS/non-penny pilot, and 
Index) and vary depending upon whether the order is being routed for a 
customer, a member firm, or a registered market maker. In addition, 
Nasdaq will pass-through surcharges that are assessed by other markets 
for the execution of specific options orders on specific underlying 
instruments.
    These options are separated into three tiers by level of surcharge 
and the options included in each tier are listed in an Options Trader 
Alert and also posted on the NasdaqTrader.com website.\5\ A copy of the 
posted fee schedule is attached as Exhibit 2 to Nasdaq's rule filing. 
Nasdaq believes that these routing fees and surcharges are competitive, 
fair and reasonable, and non-discriminatory in that they approximate 
the cost to Nasdaq of executing routed orders at an away market. As 
with all fees, Nasdaq may adjust these routing fees in response to 
competitive conditions by filing a new proposed rule change.
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    \5\ See Options Trader Alert 2008-001 (March 12, 2008) 
(announcing SEC approval of The NASDAQ Options Market rule 
proposal), at http://www.nasdaqtrader.com/TraderNews. 
aspx?id=OTA2008-001; http://www.nasdaqtrader.com/Trader.aspx? 
id=PriceListTrading2#nq--optionsex.

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[[Page 18849]]

2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\6\ in general, and with Section 
6(b)(4) of the Act,\7\ 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.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
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    Upon launch, Nasdaq will be the seventh options market in the 
national market system. Joining Nasdaq and electing to trade options is 
entirely voluntary. Under these circumstances, Nasdaq's fees must be 
competitive and low in order for Nasdaq to attract order flow, execute 
orders, and grow as a market. The Commission has already determined 
that Nasdaq's pricing model for executions--charging the liquidity 
taker and crediting the liquidity provider--is consistent with the 
Exchange Act. As such, Nasdaq believes that its fees are fair and 
reasonable and consistent with the Exchange Act.

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

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. To the contrary, 
Nasdaq states that it designed its fees to compete effectively for the 
execution and routing of options contracts and to reduce the overall 
cost to investors of options trading.

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

    Written comments were neither solicited nor received.

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-
4(f)(2) \9\ thereunder, because it establishes or changes a due, fee, 
or other charge imposed on members by Nasdaq. Accordingly, the proposal 
is effective upon filing with the Commission. At any time within 60 
days of the filing of the proposed rule change, the Commission may 
summarily abrogate 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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    Nasdaq expects to launch NOM on March 31, 2008. To lighten the 
administrative burden on firms, Nasdaq will not send firms a monthly 
bill for March based on just one day of trading. Rather, Nasdaq will 
add the fees incurred on March 31, 2008, to the invoices that firms 
will receive for the full month of options trading for April.

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-2008-027 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2008-027. 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 inspection 
and copying 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 such 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 publicly available. All 
submissions should refer to File Number SR-NASDAQ-2008-027 and should 
be submitted on or before April 28, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-7190 Filed 4-4-08; 8:45 am]

BILLING CODE 8011-01-P