Document ID: SEC-2015-1951-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2015-11-20T05:00Z

[Federal Register Volume 80, Number 224 (Friday, November 20, 2015)]
[Notices]
[Pages 72763-72767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29601]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76445; File No. SR-NASDAQ-2015-133]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Create a Market Access and Routing Subsidy or ``MARS''

November 16, 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 November 2, 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.
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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 amend the Exchange's transaction fees at 
Chapter XV, Section 2 entitled ``NASDAQ Options Market--Fees and 
Rebates,'' which governs pricing for Nasdaq Participants using the 
NASDAQ Options Market (``NOM''), Nasdaq's facility for executing and 
routing standardized equity and index options. The Exchange proposes to 
create a subsidy program, the Market Access and Routing Subsidy or 
``MARS,'' for NOM Participants that provide certain order routing 
functionalities \3\ to other NOM Participants and/or use such 
functionalities themselves.
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    \3\ The order routing functionalities permit a NOM Participant 
to provide access and connectivity to other Participants as well 
utilize such access for themselves. The Exchange notes that under 
this arrangement it will be possible for one NOM Participant to be 
eligible for payments under MARS, while another NOM Participant 
might potentially be liable for transaction charges associated with 
the execution of the order, because those orders were delivered to 
the Exchange through a NOM Participant's connection to the Exchange 
and that Participant qualified for the MARS Payment. Consider the 
following example: both Participants A and B are NOM Participants 
but A does not utilize its own connections to route orders to the 
Exchange, and instead utilizes B's connections. Under this program, 
B will be eligible for the MARS Payment while A is liable for any 
transaction charges resulting from the execution of orders that 
originate from A, arrive at the Exchange via B's connectivity, and 
subsequently execute and clear at The Options Clearing Corporation 
or ``OCC,'' where A is the valid executing clearing Participant or 
give-up on the transaction. Similarly, where B utilizes its own 
connections to execute transactions, B will be eligible for the MARS 
Payment, but would also be liable for any transaction [sic] 
resulting from the execution of orders that originate from B, arrive 
at the Exchange via B's connectivity, and subsequently execute and 
clear at OCC, where B is the valid executing clearing Participant or 
give-up on the transaction.
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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.

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
    NOM proposes a new subsidy program, MARS, which would pay a subsidy 
to NOM Participants that provide certain order routing functionalities 
to other NOM Participants and/or use such functionalities themselves. 
Generally, under MARS, NOM proposes to make payments to participating 
NOM Participants to subsidize their costs of providing routing services 
to route orders to NOM. The Exchange believes that MARS will attract 
higher volumes of electronic equity and ETF options volume to the 
Exchange from non-NOM Participants as well as NOM Participants.
MARS System Eligibility
    To qualify for MARS, a NOM Participant's routing system 
(hereinafter ``System'') would be required to meet certain criteria. 
Specifically the Participant's System would be required to: (1) Enable 
the electronic routing of orders to all of the U.S. options exchanges, 
including NOM; (2) provide current consolidated market data from the 
U.S. options exchanges; and (3) be capable of interfacing with NOM's 
API to access current NOM match engine functionality. The NOM 
Participant's System would also need to cause NOM to be one of the top 
three default destination exchanges for individually executed 
marketable orders if NOM is at the national best bid or offer 
(``NBBO''), regardless of size or time, but allow any user to manually 
override NOM as the default destination on an order-by-order basis.
    The Exchange would require NOM Participants desiring to participate 
in MARS \4\ to complete a form, in a manner prescribed by the Exchange, 
and reaffirm their information on a quarterly basis to the Exchange. 
Any NOM Participant would be permitted to apply for MARS, provided the 
above-referenced requirements are met,

[[Page 72764]]

including a robust and reliable System. The Participant would be solely 
responsible for implementing and operating its System.
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    \4\ For example, a NOM Participant that desires to qualify for 
MARS in November must complete the form and submit it to the 
Exchange no later than the last business day of November. Such form 
will require the NOM Participant to identify the NOM Participant 
seeking the MARS Payment and must list, among other things, the 
connections utilized by the NOM Participant to provide Exchange 
access to other NOM Participants and/or itself. MARS Payments would 
be made one month in arrears (i.e., a MARS Payment earned for 
activity in November would be paid to the qualifying NOM Participant 
in December), as is the case with all other transactional payments 
and assessments made by the Exchange.
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MARS Eligible Contracts
    A MARS Payment would be made to NOM Participants that have System 
Eligibility and have routed at least 5,000 Eligible Contracts daily in 
a month, which were executed on NOM. For the purpose of qualifying for 
the MARS Payment, Eligible Contracts may include Firm,\5\ Non-NOM 
Market Maker,\6\ Broker-Dealer,\7\ Joint Back Office or ``JBO'' \8\ or 
Professional \9\ equity option orders that add liquidity and are 
electronically delivered and executed. Eligible Contracts do not 
include Mini-Option orders.\10\
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    \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 ``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 ``Joint Back Office'' or ``JBO'' applies to any 
transaction that is identified by a Participant for clearing in the 
Firm range at OCC and is identified with an origin code as a JBO. A 
JBO will be priced the same as a Broker-Dealer as of September 1, 
2014. A JBO participant is a Participant that maintains a JBO 
arrangement with a clearing broker-dealer (``JBO Broker'') subject 
to the requirements of Regulation T Section 220.7 of the Federal 
Reserve System as further discussed in Chapter XIII, Section 5.
    \9\ 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.
    \10\ Mini Options are further specified in Chapter XV, Section 
2(4).
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    NOM Participants using an order routing functionality provided by 
another Participant or its own functionality will continue to be 
required to comply with best execution obligations.\11\ Specifically, 
just as with any Customer \12\ order and any other routing 
functionality, a NOM Participant will continue to have an obligation to 
consider the availability of price improvement at various markets and 
whether routing a Customer order through a functionality that 
incorporates the features described above would allow for access to 
such opportunities if readily available. Moreover, a NOM Participant 
would need to conduct best execution evaluations on a regular basis, at 
a minimum quarterly, that include its use of any router incorporating 
the features described above.
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    \11\ See Nasdaq Rule 5310A.
    \12\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at OCC which is not for the account of [sic] broker or dealer 
or for the account of a ``Professional'' (as that term is defined in 
Chapter I, Section 1(a)(48)).
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MARS Payment
    NOM Participants that have System Eligibility and have executed the 
Eligible Contracts in a month may receive the MARS Payment of $0.10 per 
contract. The MARS Payment will be paid only on executed Firm orders 
that add liquidity and which are routed to NOM through a participating 
NOM Participant's System. No payment will be made with respect to 
orders that are routed to NOM, but not executed.
    A Participant will not be entitled to receive any other revenue for 
the use of its System specifically with respect to orders routed to 
NOM. The Exchange believes that the MARS Payment will subsidize the 
costs of NOM Participants in providing the routing services.
    The Exchange proposes to add the MARS to new Chapter XV, Section 
2(6), entitled ``Market Access and Routing Subsidy (``MARS'').''
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \13\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act \14\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among Participants and issuers and other persons using 
any facility or system which the Exchange operates or controls, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, for example, the Commission indicated that market forces should 
generally determine the price of non-core market data because national 
market system regulation ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \15\ Likewise, in NetCoalition v. 
NYSE Arca, Inc., 615 F.3d 525 (D.C. Cir. 2010), the DC Circuit upheld 
the Commission's use of a market-based approach in evaluating the 
fairness of market data fees against a challenge claiming that Congress 
mandated a cost-based approach.\16\ As the court emphasized, the 
Commission ``intended in Regulation NMS that `market forces, rather 
than regulatory requirements' play a role in determining the market 
data . . . to be made available to investors and at what cost.'' \17\
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    \15\ Exchange Act Release No. 34-51808 (June 9, 2005) 
(``Regulation NMS Adopting Release'').
    \16\ See NetCoalition, 615 F.3d at 534.
    \17\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \18\ Although the Court and 
the SEC were discussing the cash equities markets, the Exchange 
believes that, as discussed above, these views apply with equal force 
to the options markets.
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    \18\ NetCoalition I, 615 F.3d at 539 (quoting ArcaBook Order, 73 
FR at 74782-74783).
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    The Exchange believes that MARS is reasonable because it is 
designed to attract higher volumes of electronic equity and ETF options 
volume to the Exchange, which will benefit all NOM Participants by 
offering greater price discovery, increased transparency, and an 
increased opportunity to trade on the Exchange. Moreover, the Exchange 
believes that the proposed subsidy offered by MARS is both equitable 
and not unfairly discriminatory because any qualifying NOM Participant 
that offers market access and connectivity to the Exchange and/or 
utilizes such functionality themselves may earn the MARS Payment for 
all Eligible Contracts.
MARS System Eligibility
    The Exchange believes that requiring NOM Participants to maintain 
their Systems according to the various requirements set forth by the 
Exchange in order to qualify for MARS is reasonable because the 
Exchange seeks to encourage market participants to send higher volumes 
of orders to NOM, which will contribute to the Exchange's depth of book 
as well as to the top of book liquidity. The Exchange also believes 
that the proposed MARS is reasonable because it is designed to enhance 
the competitiveness of the Exchange, particularly with respect to

[[Page 72765]]

those exchanges that offer their own front-end order entry system or 
one they subsidize in some manner.\19\ The Exchange believes that 
requiring Participants to maintain their Systems according to the 
various requirements set forth by the Exchange in order to qualify for 
MARS is equitable and not unfairly discriminatory because these 
requirements will uniformly apply to all Participants desiring to 
qualify for MARS.
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    \19\ See, e.g., supra note 10 [sic]; Securities Exchange Act 
Release No. 34-54121 (July 10, 2006), 71 FR 40566 (July 17, 2006) 
(SR-ISE-2006-31) (describing PrecISE, which is a front-end, order 
entry application for trading options utilized by International 
Securities Exchange LLC).
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    The Exchange also notes that the Chicago Board of [sic] Options 
Exchange, Inc. (``CBOE'') currently offers a similar Order Routing 
Subsidy (``ORS''), which, similar to the current proposal, allows CBOE 
Participants [sic] to enter into subsidy arrangements with CBOE Trading 
Permit Holders (``TPHs'') that provide certain order routing 
functionalities to other CBOE TPHs and/or use such functionalities 
themselves.\20\ Also, NYSE MKT LLC (``NYSE MKT'') had a Market Access 
and Connectivity Subsidy (``MAC'') which allowed NYSE MKT Participants 
[sic] to enter into subsidy arrangements with ATP Holders that provided 
certain order routing functionalities to other ATP Holders and/or use 
such functionalities themselves. The NYSE MKT program was 
discontinued.\21\ Finally, in 2007, NASDAQ OMX PHLX LLC (``Phlx'') 
offered a Market Access Provider Subsidy or ``MAPs'' as a per contract 
fee payable by the Phlx to Eligible Market Access Providers for 
Eligible Contracts submitted by MAPs for execution on Phlx. The subsidy 
was applicable to any Phlx member organization that qualified as a MAP 
and elected to participate for that calendar month.\22\
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    \20\ See note 34 [sic]. CBOE's programs permit both CBOE 
Participants and CBOE non-Participants to be eligible for a rebate. 
CBOE Participants are eligible to receive exchange transaction fees 
on transactions that earn a non-CBOE Participant a subsidy payment.
    \21\ See note 35 [sic]. See also Securities Exchange Act Release 
No. 75609 (August 11 [sic], 2015), 80 FR 48132 (August 5 [sic], 
2015) (SR-NYSEMKT-2015-059).
    \22\ See Securities Exchange Act Release No. 56274 (August 16, 
2007), 72 FR 48720 (August 24, 2007) (SR-Phlx-2007-54). This program 
is no longer being offered.
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MARS Eligible Contracts
    The Exchange believes that excluding the volumes attributable to 
Mini Options is reasonable, equitable, and not unfairly discriminatory 
for the reasons below. Mini Options are also subject to separate 
pricing.\23\ The Exchange does not desire to pay an additional subsidy 
on top of the already discounted rates for Mini Options. Because all 
NOM Participants seeking to qualify for MARS would be treated equally 
with respect to excluding Mini Options volume, the proposal to exclude 
this volume from the MARS Payment is not inequitable or unfairly 
discriminatory.
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    \23\ See NOM's Rules at Chapter XV Section 2(5) [sic]
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    The Exchange further notes that while MARS is only being offered to 
qualifying NOM Participants for electronically-executed equity option 
orders for Firms, Non-NOM Market Makers, Broker-Dealers, JBOs or 
Professionals that add liquidity and not, for example, on the 
electronic volumes of NOM Customers or NOM Market Makers \24\ the 
Exchange believes this is reasonable, equitable and not unfairly 
discriminatory for the reasons below. With respect to Customer orders, 
the Exchange notes that Customer orders have the ability to earn 
rebates today.\25\ Additionally, Customers are assessed lower 
transaction fees with certain fees.\26\ The Exchange believes that the 
availability of these rebates for Customer volumes as well as certain 
lower transaction fees does not warrant paying an additional subsidy on 
Customer volumes in MARS. With respect to NOM Market Makers, the 
Exchange offers NOM Market Makers certain rebates \27\ and assesses 
them lower transaction fees, as compared to other market 
participants.\28\ The Exchange believes that the rebates coupled with 
the lower transaction fees already provide ample incentive for 
attracting NOM Market Maker volumes to the Exchange and that no further 
subsidy is warranted at this time.
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    \24\ 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.
    \25\ See NOM's Rules at Chapter XV, Section 2(1).
    \26\ Id.
    \27\ Id.
    \28\ Id.
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    The proposed MAC [sic] Subsidy is designed to attract higher margin 
business to the Exchange, business which at present has no opportunity 
to transact at rates anywhere close to the rate assessed to Customers 
and NOM Market Makers. To offer the proposed subsidy on Customer or NOM 
Market Maker electronic volume would require funding from some other 
source, such as raising fees for other Participants. As a result, the 
Exchange believes it is appropriate to permit eligibility based on the 
following type of volume: Firm, Non-NOM Market Maker, Broker-Dealer, 
JBO and Professional, which Participants are charged higher per 
contract transaction fees than other market Participants. The Exchange 
notes that it is commonplace within the options industry for exchanges 
to charge different rates and/or offer different rebates depending upon 
the capacity in which a participant is trading. For these reasons, the 
Exchange believes that the proposed change to offer a MARS Payment to 
qualifying NOM Participants on certain electronic volume is reasonable, 
equitable and not unfairly discriminatory for the reasons mentioned 
herein.
    Finally, the Exchange believes that 5,000 Eligible Contracts is a 
reasonable level of contracts, because the Exchange is only counting 
add liquidity from Firms, Non-NOM Market Makers, Broker-Dealers, JBOs 
and Professionals which are electronically delivered and executed. The 
Exchange is not counting remove liquidity and therefore the number 
reflects what the Exchange believes to be an appropriate level of 
commitment from NOM Participants. The Exchange believes that 5,000 
Eligible Contracts is equitable and not unfairly discriminatory because 
this level will be uniformly applied to all qualifying Participants.
MARS Payment
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to pay the proposed MARS Payment to NOM 
Participants that have System Eligibility and have executed the 
Eligible Contracts, even when a different NOM Participant may be liable 
for transaction charges resulting from the execution of the orders upon 
which the subsidy might be paid. The Exchange notes that this sort of 
arrangement already exists on other options exchanges such as Phlx 
which pays a Qualified Contingent Cross (``QCC'') Rebate for floor 
transactions.\29\ Today, this arrangement on Phlx results in a 
situation where the floor broker is

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earning a rebate and one or more different Phlx members are potentially 
liable for the Exchange transaction charges applicable to QCC Orders. 
With the QCC rebates applicable to transactions executed on the trading 
floor, Phlx does not offer a front-end for order entry; unlike some of 
the competing exchanges, Phlx has argued that it is necessary from a 
competitive standpoint to offer this rebate to the executing floor 
broker on a QCC Order.\30\ Also, all qualifying NOM Participants would 
be uniformly paid the subsidy on all qualifying volume that was routed 
by them to the Exchange and executed.
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    \29\ See Phlx's Pricing Schedule. A Floor QCC Order must: (i) Be 
for at least 1,000 contracts, (ii) meet the six requirements of Rule 
1080(o)(3) which are modeled on the QCT Exemption, (iii) be executed 
at a price at or between the NBBO; and (iv) be rejected if a 
Customer order is resting on the Exchange book at the same price. In 
order to satisfy the 1,000-contract requirement, a Floor QCC Order 
must be for 1,000 contracts and could not be, for example, two 500-
contract orders or two 500-contract legs. See Phlx Rule 1064(e). See 
also Securities Exchange Act Release No. 64688 (June 16, 2011), 76 
FR 36606 (June 22, 2011) (SR-Phlx-2011-56).
    \30\ See also Securities Exchange Act Release No. 64688 (June 
16, 2011), 76 FR 36606 (June 22, 2011) (SR-Phlx-2011-56) (Order 
Granting Approval of Proposed Rule Change Establishing a Qualified 
Contingent Cross Order for Execution on the Floor of the Exchange).
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    The Exchange believes the $0.10 per contract rate that is being 
offered to be paid as a subsidy is reasonable and will allow NOM 
Participants to price their services at a level that will enable them 
to attract order flow from market participants who would otherwise 
utilize an existing front-end order entry mechanism offered by the 
Exchange's competitors instead of incurring the cost in time and money 
to develop their own internal systems to be able to deliver orders 
directly to the Exchange's trading systems. The Exchange believes that 
offering a flat rate is reasonable because all qualifying NOM 
Participants would receive the same $0.10 per contract subsidy, 
provided they met the qualifications for MARS.
    The Exchange believes that paying the MARS payments to a NOM 
Participant, solely on electronically delivered and executed Firm 
orders that add liquidity and are submitted by the qualifying NOM 
Participant, is reasonable because, as noted herein Customers and NOM 
Market Makers are offered other pricing incentives such as rebates and 
lower fees. With respect to Non-NOM Market Makers, Professionals, JBOs 
and Broker-Dealers the Exchange believes it is reasonable to 
differentiate these market participants and Firms for the reasons which 
follow. The Exchange desires to incentivize NOM Participants to 
transact Firm, Non-NOM Market Maker, JBO, Broker-Dealer and 
Professional orders on the Exchange to qualify for MARS and receive the 
subsidy for Firm orders that add liquidity. The Exchange believes that 
this proposal may incentivize NOM Participants that receive reduced 
rates at other options exchanges to select NOM as a venue to send Firm, 
Non-NOM Market Maker, JBO, Broker-Dealer and Professional orders by 
offering competitive pricing to these market participants in the form 
of a subsidy, even though the financial benefit will only be made with 
respect to Firm orders that add liquidity. Such competitive, 
differentiated pricing exists today on other options exchanges.\31\ 
Further, the Exchange believes there is nothing impermissible about the 
MARS Payment being made solely on Firm orders that add liquidity. This 
practice is consistent with longstanding differentials between Firms, 
other Broker-Dealers, Non-NOM Market Makers and Professionals. The 
options exchanges have differentiated between: retail customers and 
professional customers; broker/dealers clearing in the ``Firm'' range 
at OCC and broker/dealers registered as market makers and away market 
makers; early-adopting market makers; and many others. The Commission 
has also permitted price differentiation based on whether an order is 
processed manually versus electronically. The proposal is consistent 
with previously established pricing proposals accepted by the 
Commission.
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    \31\ See Phlx's Pricing Schedule at Section II. Phlx offers 
Firms a Monthly Firm Fee Cap to lower transaction fees.
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    The Exchange believes that paying the MARS payments to a NOM 
Participant, solely on electronically delivered and executed Firm 
orders that add liquidity and are submitted by the qualifying NOM 
Participant, is equitable and not unfairly discriminatory because MARS 
should provide an incentive for Firms to add liquidity on NOM, which 
order flow brings increased liquidity to the Exchange for the benefit 
of all Exchange Participants. To the extent the purpose of the proposed 
MARS is achieved, all the Exchange's Participants, including Non-NOM 
Market Makers, Professionals and Broker-Dealers, should benefit from 
the improved market liquidity.
    Further, the Exchange believes that paying the MARS payments to a 
NOM Participant, solely on executed on [sic] Firm orders that add 
liquidity and not paying a subsidy for the removal of liquidity, is 
reasonable because the Exchange desires to incentivize NOM participants 
to add liquidity to NOM. Today, NOM offers rebates to Customers, 
Professionals and NOM Market Makers for adding liquidity on NOM.\32\ 
Attracting liquidity on NOM benefits all market participants who have 
an opportunity to interact with such liquidity. Further, the Exchange 
believes that paying the MARS payments to a NOM Participant, solely on 
executed Firm orders that add liquidity and not orders that remove 
liquidity, is equitable and not unfairly discriminatory because all NOM 
Participants that qualify for a MARS Payment would only be paid on add 
liquidity.
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    \32\ See NOM's Rules at Chapter XV, Section 2(1).
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    Finally, the Exchange believes that adding a new Chapter XV, 
Section 2(6) is reasonable, equitable and not unfairly discriminatory 
as it will make finding MARS easier for all 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. In terms of inter-market 
competition, the Exchange notes that it 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 with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. 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.
MARS System Eligibility
    The Exchange believes that requiring Participants to maintain their 
Systems according to the various requirements set forth by the Exchange 
in order to qualify for MARS does not create an undue burden on intra-
market competition because the proposed requirements will uniformly 
apply to all Participants desiring to qualify for MARS.
MARS Eligible Contracts
    The Exchange believes that excluding Mini Options does not create 
an undue burden on intra-market competition because this type of order 
will uniformly be excluded from the volume calculation for all 
qualifying NOM Participants for MARS.
    The Exchange believes that excluding Customer and NOM Market Makers 
orders from the types of orders that would be eligible for MARS does 
not create an undue burden on intra-market competition, because 
Customers are

[[Page 72767]]

assessed lower transaction fees and are eligible for rebates. With 
respect to NOM Market Makers, the Exchange offers NOM Market Makers 
rebates and assesses them lower transaction fees as compared to other 
Participants.
    The Exchange believes that preventing Participants from receiving 
any other revenue for the use of its System, specifically with respect 
to orders routed to NOM does not create undue burden on intra-market 
competition because the Exchange would continue to uniformly apply its 
MARS requirements to all NOM Participants.
    Finally, the Exchange believes that the 5,000 Eligible Contracts 
requirement does not create an undue burden on intra-market competition 
because this level will be uniformly applied to all qualifying NOM 
Participants.
MARS Payment
    The Exchange believes that paying the proposed MARS Payment to 
qualifying NOM Participants that have System eligibility and have 
executed the Eligible Contracts does not create an undue burden on 
intra-market competition, even when a different NOM Participant, other 
than the NOM Participant receiving the subsidy, may be liable for 
transaction charges, because this sort of arrangement already exists on 
the Exchange [sic] and would be uniformly applied to all qualifying NOM 
Participants.
    The Exchange believes that paying the proposed $0.10 per contract 
MARS Payment to qualifying NOM Participants that have System 
Eligibility and have executed the Eligible Contracts in a month, solely 
on executed Firm orders that add liquidity, does not create an undue 
burden on intra-market competition because the Exchange is counting all 
Firm, Non-NOM Market Maker, JBO, Broker-Dealer and Professional volume 
toward the Eligible Contracts. Customers and NOM Market Makers are 
offered other pricing incentives such as rebates and lower fees. The 
increased order flow will bring increased liquidity to the Exchange for 
the benefit of all Participants. To the extent the purpose of the 
proposed MARS is achieved, all the Exchange's Participants, including 
Non-NOM Market Makers, Professionals and Broker-Dealers, should benefit 
from the improved market liquidity.
    The Exchange believes that paying the MARS payments to a NOM 
Participant, solely on electronically delivered and executed Firm 
orders that add liquidity, and are submitted by the qualifying NOM 
Participant, does not create an undue burden on intra-market 
competition because MARS should provide an incentive for Firms to add 
liquidity on NOM, which order flow brings increased liquidity to the 
Exchange for the benefit of all Exchange Participants. To the extent 
the purpose of the proposed MARS is achieved, all the Exchange's 
Participants, including Non-NOM Market Makers, Professionals and 
Broker-Dealers, should benefit from the improved market liquidity.
    Further, the Exchange believes that paying the MARS payments to a 
NOM Participant, solely on executed Firm orders that add liquidity and 
not paying a subsidy for the removal of liquidity does not create an 
undue burden on intra-market competition because the Exchange desires 
to incentivize NOM participants to add liquidity to NOM. Attracting 
liquidity on NOM benefits all Participants who have an opportunity to 
interact with such liquidity. Also, all NOM Participants that qualify 
for a MARS Payment would only be paid on add liquidity.

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.\33\
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    \33\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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-2015-133 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-2015-133. 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 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 available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-133, and should 
be submitted on or before December 11, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29601 Filed 11-19-15; 8:45 am]
BILLING CODE 8011-01-P