Document ID: SEC-2010-0714-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock MarketLLC
Posted Date: 2010-05-13T04:00Z

[Federal Register Volume 75, Number 92 (Thursday, May 13, 2010)]
[Notices]
[Pages 27031-27033]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-11400]

[[Page 27031]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62056; File No. SR-NASDAQ-2010-056]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Pricing for Option Orders Routed to Away Markets and 
Execution Pricing for Certain Options

May 6, 2010.
    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 April 30, 2010, 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 NASDAQ. 
Pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ NASDAQ has designated this proposal as establishing or 
changing a due, fee, or other charge, which renders the proposed rule 
change effective upon filing. 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 modify Rule 7050 governing pricing for NASDAQ 
members using the NASDAQ Options Market (``NOM''), NASDAQ's facility 
for executing and routing standardized equity and index options. 
Specifically, NOM proposes to expand the list of options that will be 
assessed routing fees of $0.30 per contract for customer orders and 
$0.55 per contract for Firm and Market Maker orders that are routed 
from NOM to NASDAQ OMX PHLX, Inc. (``Phlx''), as well as update 
execution pricing for certain options and increase the Firm fee for 
removing liquidity in non-Penny Pilot options. NASDAQ will make the 
proposed rule changes effective for transactions on or after May 3, 
2010.
    The text of the proposed rule change is set forth below. Italics 
indicate new text.
* * * * *

7050. NASDAQ Options Market

    The following charges shall apply to the use of the order execution 
and routing services of the NASDAQ Options Market by members for all 
securities.
    (1) Fees for Execution of Contracts on the NASDAQ Options Market

                            Fees and Rebates
                         [per executed contract]
------------------------------------------------------------------------
                                                     Non-NOM      NOM
                               Customer     Firm      Market     Market
                                                      maker      maker
------------------------------------------------------------------------
Penny Pilot Options:
    Rebate to Add Liquidity.      $0.25      $0.25      $0.25      $0.25
    Fee for Removing              $0.35      $0.45      $0.45      $0.45
     Liquidity..............
IWM, QQQQ, SPY
    Rebate to Add Liquidity.      $0.30      $0.30      $0.30      $0.30
    Fee for Removing              $0.35      $0.45      $0.45      $0.45
     Liquidity..............
NDX and MNX
    Rebate to Add Liquidity.      $0.10      $0.10      $0.10      $0.20
    Fee for Removing              $0.50      $0.50      $0.50      $0.40
     Liquidity..............
All Other Options:
    Fee for Adding Liquidity       Free      $0.30      $0.30      $0.30
    Fee for Removing                 --      $0.40      $0.45      $0.45
     Liquidity..............               [$0.20]
    Rebate for Removing           $0.20         --         --         --
     Liquidity *............
------------------------------------------------------------------------
Transactions in which the same participant is the buyer and the seller
  shall be charged a net fee of $0.10 per executed contract.
* No rebate will be paid when a customer order executes against another
  customer order.
For a pilot period ending July 31, 2010, the charge for members or non-
  members entering order via the Options Intermarket Linkage that
  executes in the Nasdaq Options Market shall be $0.45 per executed
  contract.

    (2)-(3) No Change.
    (4) Fees for routing contracts to markets other than the NASDAQ 
Options Market shall be assessed as provided below. The current fees 
and a historical record of applicable fees related to orders routed to 
other exchanges shall be posted on the NasdaqTrader.com Web site.

------------------------------------------------------------------------
                Exchange                  Customer     Firm        MM
------------------------------------------------------------------------
BATS...................................      $0.36      $0.55      $0.55
BOX....................................       0.06       0.55       0.55
CBOE...................................       0.06       0.55       0.55
ISE....................................       0.06       0.55       0.55
NYSE Arca Penny Pilot..................       0.50       0.55       0.55
NYSE Arca Non Penny Pilot..............       0.06       0.55       0.55
NYSE AMEX..............................       0.06       0.55       0.55
PHLX (for all options other than the          0.06       0.55       0.55
 below listed options).................

[[Page 27032]]

 
PHLX (for the following options only):       $0.30      $0.55      $0.55
 AA, AAPL. AIG, ALL, AMD, AMR, AMZN,
 BAC, BRCD, C, CAT, CSCO, DELL, DIA,
 DRYS, EK, F, FAS, FAZ, GDX, GE, GLD,
 GS, IBM, INTC, IWM, JPM, LVS, MGM,
 MSFT, MU, NEM, NOK, PALM, PFE, POT,
 QCOM, QQQQ, RIMM, SBUX, SIRI, SKF,
 SLV, SMH, SNDK, SPY, T, TZA, UAUA,
 UNG, USO, UYG, VZ, WYNN, X, XLF.......
------------------------------------------------------------------------

* * * * *

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 proposing to modify Rule 7050 governing the fees assessed 
for options orders entered into NOM but routed to and executed on Phlx. 
Specifically, NASDAQ is proposing to expand the number of options to 
which certain routing fees apply to reflect the expansion of the fee 
schedule for adding and removing liquidity on the Phlx.\5\ NASDAQ is 
also proposing to modify Rule 7050 governing the fees for execution of 
contracts on NOM by updating execution pricing for IWM, QQQQ and SPY 
options, as well as raise the Firm fee for removing liquidity in non-
Penny Pilot options.
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    \5\ See SR-Phlx-2010-64 (April 26, 2010). For a description of 
the Phlx's current fee schedule for adding and removing liquidity, 
See Securities Exchange Act Release No. 61684 (March 10, 2010), 75 
FR 13189 (March 18, 2010) (SR-Phlx-2010-33).
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    NASDAQ currently assesses a $0.30 per contract routing fee for 
customer orders, and a $0.55 per contract routing fee for Firm and 
Market Maker orders routed from NOM to Phlx for options that are 
subject to fees and rebates for adding and removing liquidity as 
described in the Phlx fee schedule. To reflect the additions Phlx is 
making to its fee schedule, NASDAQ proposes to add the following 
options to the table set forth in Rule 7050(4): Brocade Communications 
Systems, Inc. (``BRCD''); International Business Machines Corp. 
(``IBM''); Nokia Corp. (``NOK''); Sirius XM Radio, Inc. (``SIRI''); and 
Direxion Daily Small Cap Bear 3X Shares (``TZA'').
    The Exchange is proposing these fees to recoup the majority of 
transaction and clearing costs associated with routing orders to Phlx. 
As with all fees, the Exchange may adjust these routing fees by filing 
a new proposed rule change.
    NASDAQ currently offers a Penny Pilot option rebate of $0.25. 
NASDAQ is proposing to increase the rebate to all participants for 
providing liquidity in IWM, QQQQ and SPY options to $0.30 per executed 
contract.\6\ The fee to remove liquidity in these options will continue 
to be the standard Penny Pilot remove fee of $0.35 for Customers and 
$0.45 for Firms and Market Makers. The Exchange also proposes to 
increase the Firm fee for removing liquidity in non-Penny Pilot options 
from $0.20 to $0.40 per executed contract.\7\
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    \6\ The rebate increase is consistent to a similar increase made 
by NYSEArca. See Securities Exchange Act Release No. 61894 (April 
13, 2010), 75 FR 20413 (April 19, 2010) (SR-NYSEArca-2010-24).
    \7\ This fee increase is similar to rates assessed by NYSEArca 
and NASDAQ OMX PHLX, Inc. for Firm electronic executions. Id.; See 
Securities Exchange Act Release No. 61971 (April 23, 2010), pending 
publication in the Federal Register (SR-Phlx-2010-62).
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    The changes are part of the Exchange's continued effort to attract 
and enhance participation on NOM. The Exchange believes these proposed 
fee changes are reasonable and equitable in that they apply uniformly 
to all similarly situated participants on NOM.
    The Exchange has designated this proposal to be operative for 
trades on or after May 3, 2010.
2. Statutory Basis
    NASDAQ believes that the proposed rule changes are consistent with 
the provisions of Section 6 of the Act,\8\ in general, and with Section 
6(b)(4) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    NASDAQ further believes that the proposed rule changes are 
consistent with Section 6(b)(5) of the Act \10\ in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers, or to regulate by virtue of any authority conferred by the Act 
matters not related to the purposes of the Act or the administration of 
the Exchange.
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    \10\ 15 U.S.C. 78f(b)(5).
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    NASDAQ is one of eight options market in the national market system 
for standardized options. 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. NASDAQ thus 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 impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. To the contrary, 
NASDAQ has 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

    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 \11\ and

[[Page 27033]]

paragraph (f)(2) of Rule 19b-4 \12\ thereunder. 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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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2010-056 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2010-056. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of 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-2010-056 and should be submitted on or before June 3, 2010.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11400 Filed 5-12-10; 8:45 am]
BILLING CODE 8010-01-P