Document ID: SEC-2014-0999-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2014-06-16T04:00Z

[Federal Register Volume 79, Number 115 (Monday, June 16, 2014)]
[Notices]
[Pages 34372-34374]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13936]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72362; File No. SR-NASDAQ-2014-060]

Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Joint Back Office Pricing

June 10, 2014.
    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 May 29, 2014, 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. 
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

    NASDAQ proposes to amend Chapter XV (Options Pricing) on The NASDAQ 
Options Market (``NOM''), NASDAQ's facility for executing and routing 
standardized equity and index options to assess joint back office 
(``JBO'') \3\ participants pricing the same as Broker-Dealers \4\ and 
require JBO participants to utilize a new origin code to identify JBO 
orders.
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    \3\ A JBO participant is a Participant organization 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. See also Exchange Rules at Chapter 
XIII, Section 5.
    \4\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.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 to introduce a new origin code which will be 
used to indicate orders for a JBO account to be cleared into the Firm 
range at The Options Clearing Corporation (``OCC'') for purposes of 
pricing only. Further, the Exchange proposes to assess fees and pay 
rebates to JBO Orders the same as Broker-Dealers.
    Currently, JBO orders clear in the Firm \5\ range at OCC as do Firm 
orders. The Exchange is proposing to introduce an origin code for 
Participants to identify orders for a JBO account. The origin code will 
simplify the process of identifying JBO orders for purposes of pricing 
only. Participants would be required to mark their JBO orders in 
accordance with the technical specifications definitions which are 
provided by the Exchange. This rule change will not impact the manner 
in which JBO orders are treated for purposes of other Exchange Rules 
including but not limited to priority in the Exchange's System. With 
this proposal, JBO orders will continue to be cleared in the Firm range 
at OCC. Today, JBO orders are assessed transaction fees and paid 
rebates the same as Firms. The Exchange's current pricing does not 
differentiate Firms and Broker-Dealers. These market participants are 
assessed the same fees and paid the same rebates. There will be no 
impact as a result of this rule change as far as pricing because Firms 
and

[[Page 34373]]

Broker-Dealers are assessed the same fees and paid the same rebates.
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    \5\ The term ``Firm'' applies to any transaction that is 
identified by a Participant for clearing in the Firm range at OCC.
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    The Exchange proposes to amend Chapter XV of the NOM Rules to 
define the term JBO in the preface as follows: ``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.'' Also, the Exchange describes a 
JBO participant as ``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.''
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \7\ in particular, in that it is designed to promote 
just and equitable principles of trade, 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. 
Adding an origin code to JBO orders is a more efficient manner in which 
to identify those orders separate and apart from other orders entered 
on NOM. In addition, JBO orders will continue to clear in the Firm 
range at OCC as is the case today. The Exchange will more easily be 
able to discern the pricing associated with clearly identified JBO 
orders. This will eliminate any potential confusion, thereby removing a 
potential impediment to and perfecting the mechanism for a free and 
open market and a national market system, and, in general, protecting 
investors and the public interest. The Exchange believes that 
automating this process of manually identifying JBO Orders will promote 
just and equitable principles of trade by creating an identifiable 
method of distinguishing JBO orders entered into the Exchange's System. 
The Exchange believes that automating this process is a more efficient 
manner in which to identify and bill these types of orders.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general, and with 
Section 6(b)(4) and 6(b)(5) 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 the Exchange operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange believes that its proposal to assess 
pricing for JBO orders the same as for Broker-Dealers is reasonable 
because the Exchange believes that the business of a JBO is similar to 
that of an away market maker and other Broker-Dealers. A JBO 
participant maintains a JBO arrangement with a JBO Broker pursuant to 
Section 220.7 of Regulation T. Similarly, an away market maker is a 
member of another national securities exchange registered as a market 
maker in an options class(es). An away marker maker is considered to be 
a Broker-Dealer as the market maker is not subject to market making 
obligations on the Exchange similar to other NOM Market Makers. The 
Chicago Board Options Exchange, Incorporated (``CBOE'') assesses manual 
equity option JBO orders fees the same as broker-dealer and electronic 
equity option JBO orders fees the same as a Professional.\10\
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4) and (5).
    \10\ See CBOE's Fees Schedule.
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    The Exchange believes that it is reasonable to assess the same fees 
and pay the same rebates on JBO orders as are paid and assessed to a 
Broker-Dealer because the Exchange believes a JBO participant's 
business is similar to that of a Broker-Dealer and should therefore be 
priced the same. The Exchange believes that its proposal to assess JBO 
orders pricing the same as Broker-Dealers is equitable and not unfairly 
discriminatory because the Exchange will uniformly assess JBO orders 
the same fees and pay the same rebates as today are assessed and paid 
to a Broker-Dealer, which today are the same fees and rebates 
applicable to a Firm. There will be no impact as far as pricing with 
this proposal because Firms and Broker-Dealers are assessed the same 
fees and paid the same rebates.

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 not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange is assessing fees to all JBOs 
in a similar manner with this proposal. JBO participants would be 
assessed fees and paid rebates the same as Broker-Dealers. The Exchange 
believes that assessing JBO Orders the same as Broker-Dealers does not 
impose a burden on competition because a JBO participant's business is 
similar to that of a Broker-Dealer and should therefore be priced the 
same. Also, today, Firms and Broker-Dealer fees and rebates are the 
same.
    Further, utilizing an origin code to identify JBO Orders does not 
impose an unfair burden on competition. The Exchange believes that 
automating the process of manually identifying JBO Orders by creating 
an identifiable method of distinguishing JBO orders entered into the 
Exchange's System would assist the Exchange in regulating its market. 
In addition, CBOE utilizes an origin code today to identify JBO Orders.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \11\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \12\ 17 CFR 240.19b-4(f)(6).
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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. The Exchange has 
provided the Commission written notice of its intent to file the 
proposed rule change, along with a brief description and text of the 
proposed rule change, at least five business days prior to the date of 
filing of the proposed rule change

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 34374]]

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-2014-060 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-2014-060. 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-2014-060 and 
should be submitted on or before July 7, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13936 Filed 6-13-14; 8:45 am]
BILLING CODE 8011-01-P