Document ID: SEC-2015-1423-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2015-08-25T04:00Z

[Federal Register Volume 80, Number 164 (Tuesday, August 25, 2015)]
[Notices]
[Pages 51615-51617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20933]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75739; File No. SR-NASDAQ-2015-101]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Chapter XV, Section 3 Entitled ``NASDAQ Options Market--Access 
Services''

August 19, 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 August 13, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to waive SQF Port \3\ Fees under certain 
circumstances for NASDAQ members using the NASDAQ Options Market 
(``NOM''), NASDAQ's facility for executing and routing standardized 
equity and index options.
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    \3\ SQF ports are ports that receive inbound quotes at any time 
within that month. The SQF Port allows a NOM Participant to access 
information such as execution reports and other relevant data 
through a single feed. For example, this data would show which 
symbols are trading on NOM and the current state of an options 
symbol (i.e., open for trading, trading, halted or closed). Auction 
notifications and execution reports are also available. NOM Market 
Makers rely on data available through the SQF Port to provide them 
the necessary information to perform market making activities.
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    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.

[[Page 51616]]

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 to offer NOM Participants that transition 
from OTTO Ports to SQF Ports \4\ an SQF Port Fee waiver for that given 
month. Today, the Exchange assesses a $750.00 per port, per month, per 
mnemonic fee for OTTO Ports and SQF Ports. The Exchange is proposing to 
amend chapter XV, section 3(b) to provide, ``NOM Participants will not 
be assessed an SQF Port Fee in the month in which the NOM Participant 
has canceled an OTTO Port and transitioned to an SQF Port. In order to 
receive the waiver, the Participant is required to provide the Exchange 
with written notification of the transition.''
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    \4\ OTTO provides a method for subscribers to send orders and 
receive status updates on those orders. OTTO accepts limit orders 
from system subscribers, and if there is a matching order, the 
orders will execute. Non-matching orders are added to the limit 
order book, a database of available limit orders, where they are 
matched in price-time priority.
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    The Exchange seeks to incentivize NOM Market Makers to transition 
from OTTO to SQF Ports by providing a waiver of the SQF Port Fee in the 
month in which such transition occurs.\5\ The NOM Participant must 
provide the Exchange with written notification to receive the waiver. 
By way of example, if a NOM Market Maker has 5 OTTO Ports as of August 
1, 2015 and decides to cancel the 5 OTTO Ports on August 20, 2015 and 
acquire 5 SQF Ports, provided written notice of such transition was 
received by the Exchange, the NOM Participant will be invoiced $3,750 
for the 5 OTTO Ports (5 x $750) and $0 for the 5 new SQF Ports for the 
month of August 2015.
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    \5\ OTTO Ports fees will still apply for the month in which the 
NOM Participant transitions to SQF Ports.
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    NOM Market Makers utilize OTTO and SQF ports for their market 
making business, which require a greater throughput as compared to the 
other ports. The Exchange believes that by offering this SQF Port Fee 
waiver a greater number of NOM Market Makers will transition to SQF 
Ports, which offers a more robust protocol.
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) and 6(b)(5) 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, and is not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to incentivize NOM Participants to 
transition from OTTO Ports to SQF Ports by offering a waiver of the SQF 
Port Fee is reasonable because the Exchange believes that SQF Ports 
provides NOM Market Makers greater benefits in performing their market 
making functions by offering more robust protocols. Also, NOM 
Participants will benefit from the ability to make this transition 
without incurring SQF and OTTO Port fees in a single month; they will 
only incur OTTO Port Fees, provided the proper notice is provided to 
the Exchange.
    The Exchange's proposal to incentivize NOM Participants to 
transition from OTTO Ports to SQF Ports by offering a waiver of the SQF 
Port Fee is equitable and not unfairly discriminatory because the 
Exchange is offering all NOM Market Makers the opportunity to 
transition from OTTO Ports to SQF Ports without incurring an SQF Port 
Fee, provided the proper written notification is provided to the 
Exchange. NOM Market Makers are valuable market participants that 
provide liquidity in the marketplace and incur costs unlike other 
market participants because NOM Market Makers add value through 
continuous quoting \8\ and the commitment of capital. NOM Market Makers 
provide a critical liquidity function across thousands of individual 
option puts and option calls, a function no other market participants 
are obligated to perform. The Exchange believes that offering the SQF 
Port Fee waiver to NOM Market Makers is equitable and not unfairly 
discriminatory because of the obligations \9\ borne by NOM Market 
Makers as compared to other market participants. Encouraging NOM Market 
Makers to transition to the more robust SQF Port benefits all market 
participants because NOM Market Makers provide a critical liquidity 
function which adds greater liquidity benefits for all NOM Participants 
in the quality of order interaction and enhanced execution quality.
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    \8\ 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.
    \9\ See note 8.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change will not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the Act. 
Offering NOM Market Makers the opportunity to transition from OTTO 
Ports to SQF Ports, at no additional cost, does not impose any undue 
burden on intra-market competition because NOM Market Makers have 
obligations \10\ to the market which are not borne by other market 
participants. NOM Market Makers provide a critical liquidity function 
across thousands of individual option puts and option calls, a function 
no other market participants are obligated to perform. The Exchange 
does not believe that offering NOM Market Makers the opportunity to 
transition from OTTO Ports to SQF Ports at no additional cost imposes 
an undue burden on inter-market competition because other options 
exchanges similarly offer NOM Market Makers the ability to obtain the 
necessary information to perform market making activities.\11\
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    \10\ See note 8.
    \11\ NASDAQ OMX PHLX LLC (``Phlx'') and NASDAQ OMX BX, Inc. 
(``BX'') offer SQF Ports to its market makers. See Phlx's Pricing 
Schedule and BX Rules at Chapter XV, Section 3.
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    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. These market forces ensure that the Exchange's fees and 
rebates remain competitive with the fee structures at other trading 
platforms.

[[Page 51617]]

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.\12\ 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-101 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-2015-101. 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-2015-101 and should 
be submitted on or before September 15, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assitant Secretary.
[FR Doc. 2015-20933 Filed 8-24-15; 8:45 am]
 BILLING CODE 8011-01-P