Document ID: SEC-2013-0081-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-01-15T00:00Z

[Federal Register Volume 78, Number 10 (Tuesday, January 15, 2013)]
[Notices]
[Pages 3055-3058]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00633]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68609; File No. SR-NASDAQ-2013-001]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Routing Fees

January 9, 2013.
    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 January 2, 2013, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to modify Chapter XV, Section 2, entitled ``NASDAQ

[[Page 3056]]

Options Market--Fees and Rebates,'' which govern pricing for NASDAQ 
members using the NASDAQ Options Market (``NOM''), NASDAQ's facility 
for executing and routing standardized equity and index options, to 
amend Routing Fees.
    The text of the proposed rule change is provided in Exhibit 5. The 
text of the proposed rule change is also 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. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to recoup costs that the Exchange 
incurs for routing and executing certain orders in equity options to 
away markets. The Exchange proposes to amend Routing Fees for the 
following away markets: BATS Exchange, Inc. (``BATS''), BOX Options 
Exchange LLC (``BOX''), NASDAQ OMX BX, Inc. (``BX Options''), the 
Chicago Board Exchange Incorporated (``CBOE''), the International 
Securities Exchange LLC (``ISE''), NYSE ARCA, Inc. (``NYSE Arca'') and 
NASDAQ OMX PHLX LLC (``Phlx''). These away markets amended their 
transaction fees and the Exchange desires to amend its Routing Fees to 
reflect the amended transaction cost for routing to these away markets. 
In addition, the Exchange proposes to adopt Routing Fees when routing 
orders to Miami International Securities Exchange, LLC (``MIAX'').
    Today, the Exchange's Rules at Chapter XV, Section 2(4) include the 
following fees for routing Customer, Firm, Market Maker and 
Professional orders:

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Customer          Firm             MM         Professional
----------------------------------------------------------------------------------------------------------------
BATS Penny......................................           $0.55           $0.55           $0.55           $0.55
BATS non-Penny..................................            0.86            0.91            0.91            0.91
BOX.............................................            0.11            0.55            0.55            0.11
BX Options......................................            0.11            0.54            0.54            0.54
CBOE............................................            0.11            0.55            0.55            0.31
CBOE orders greater than 99 contracts in NDX,               0.29            0.55            0.55            0.31
 MNX ETFs, ETNs & HOLDRs........................
C2..............................................            0.55            0.55            0.55            0.55
ISE.............................................            0.11            0.55            0.55            0.29
ISE Select Symbols..............................            0.35            0.55            0.55            0.39
NYSE Arca Penny Pilot...........................            0.55            0.55            0.55            0.55
NYSE Arca Non Penny Pilot.......................            0.11            0.55            0.55            0.11
NYSE AMEX.......................................            0.11            0.55            0.55            0.31
PHLX (for all options other than PHLX Select                0.11            0.55            0.55            0.31
 Symbols).......................................
PHLX Select Symbols.............................            0.50            0.55            0.55            0.51
----------------------------------------------------------------------------------------------------------------

    NASDAQ currently recoups clearing and transaction charges incurred 
by the Exchange as well as certain other costs incurred by the Exchange 
when routing to away markets, such as administrative and technical 
costs associated with operating the order router, membership fees at 
away markets, and technical costs associated with routing.\3\ For 
example, the Exchange incurs costs related to the Nasdaq Options 
Services LLC (``NOS''), a member of the Exchange and the Exchange's 
exclusive order router.\4\ Each time NOS routes an order to an away 
market, NOS is charged a clearing fee \5\ and, in the case of certain 
exchanges, a transaction fee is also charged in certain symbols, which 
fees are passed through to the Exchange. The Exchange proposes to 
recoup a portion of the above costs along with the away market's 
routing fee when routing to an away market. The Exchange is proposing 
to amend various away market fees to account for amendments to fees to 
remove liquidity at those markets. The Exchange currently assesses an 
$0.11 per contract fixed routing fee in addition to the away market's 
transaction fee.
---------------------------------------------------------------------------

    \3\ In addition to membership fees and transaction fees, the 
Exchange also incurs an Options Regulatory Fee (``ORF'') when it 
routes to an away market that assesses an ORF.
    \4\ See Exchange Rules at Chapter VI, Section 11(e) (Order 
Routing).
    \5\ The Options Clearing Corporation (``OCC'') assesses $0.01 
per contract side.
---------------------------------------------------------------------------

    BATS assesses the following fees for removing liquidity from the 
BATS Options order book in all other securities, or Non-Penny Pilot 
Securities, as follows: $0.84 per contract for a Professional, Firm or 
Market Maker order and $0.75 per contract for a Customer order.\6\ The 
Exchange is proposing to amend the BATS Non-Penny Pilot Routing Fees by 
increasing the Firm, Market Maker and Professional Routing Fees from 
$0.91 to $0.94 per contract.\7\ The Exchange proposes to make a 
technical amendment for consistency to the ``BATS non-Penny'' category 
to rename it ``BATS Non-Penny Pilot.'' The Exchange also proposes to 
rename the ``BATS Penny'' Routing Fees as the ``BATS Penny Pilot'' 
Routing Fees for consistency in the Routing Fees.
---------------------------------------------------------------------------

    \6\ See BATS BZX Exchange Fee Schedule.
    \7\ The Exchange computed the BATS Non-Penny Pilot Routing Fees 
by adding an $0.11 per contract fixed fee to the away market's 
transaction fee. The Exchange proposes to cap the Firm, Market Maker 
and Professional BATS Non-Penny Pilot Routing Fees at $0.94 per 
contract similar to NYSE Arca and BX Options Routing Fees. The 
Exchange is not proposing to amend the Customer Routing Fee in BATS 
Non-Penny Pilot Options.
---------------------------------------------------------------------------

    BOX amended its Professional fees to assess a Professional non-
auction transaction fee of $0.20 per contact.\8\ The Exchange is 
proposing to increase the BOX Professional Routing Fee from $0.11 to 
$0.31 per contract.\9\
---------------------------------------------------------------------------

    \8\ See BOX Options Exchange Fee Schedule.
    \9\ The Exchange computed the BOX Professional Routing Fee by 
adding an $0.11 per contract fixed fee to the away market's 
transaction fee.
---------------------------------------------------------------------------

    BX Options recently adopted Non-Penny Pilot Pricing.\10\ The 
Exchange is

[[Page 3057]]

proposing to amend the title of the current BX Options Routing Fees 
from ``BX Options'' to ``BX Options Penny Pilot'' and create a new 
category of Routing Fees entitled ``BX Options Non-Penny Pilot.'' The 
Exchange is proposing to adopt the following BX Options Non-Penny Pilot 
Routing Fees: $0.11 per contract for a Customer and $0.94 per contract 
for a Firm, Market Maker and Professional.\11\
---------------------------------------------------------------------------

    \10\ See SR-BX-2012-074 (not yet published). BX Options Non-
Penny Pilot Fees to Remove Liquidity are as follows: Customer is not 
assessed a fee, a BX Options Market Maker and Non-Customer are 
assessed an $0.88 per contract fee. A Non-Customer includes a 
Professional, Firm, Broker-Dealer and Non-BX Options Market Maker.
    \11\ The Exchange computed the BX Options Customer Non-Penny 
Pilot Routing Fee by assessing only the $0.11 per contract fixed 
fee. The Exchange computed the Firm, Market Maker and Professional 
Routing Fees by adding $0.11 per contract to the away market's 
transaction fee. The Exchange determined to cap the Firm, Market 
Maker and Professional Routing Fees at $0.94 per contract similar to 
BATS and NYSE Arca Routing Fees.
---------------------------------------------------------------------------

    CBOE amended its fees in Select Symbols to assess a Professional 
transaction fee of $0.30 per contract.\12\ The Exchange is proposing to 
increase the CBOE Professional Routing Fee from $0.31 to $0.41 per 
contract.\13\ In addition, the Exchange is proposing to amend the 
Professional Routing Fee for CBOE orders greater than 99 contracts in 
ETFs, ETNs and HOLDRs of $0.31 per contract to ``N/A.'' The Exchange 
noted a $0.31 per contract fee, which is the same fee for the 
Professional CBOE Routing Fee, at the time that the Exchange created 
the CBOE orders greater than 99 contracts Routing Fee category. This 
was an error because the Routing Fees for CBOE orders greater than 99 
contracts only apply to Customer orders and not Professional orders. 
The Exchange has never assessed the Professional Routing Fee for CBOE 
orders greater than 99 contracts on a Professional because it was only 
able to route Customer orders over 99 contracts to CBOE in this 
category. The Exchange proposes to amend the fee rate to display ``N/
A'' because a Professional would not qualify for this category. 
Additionally, the Exchange proposes to update the title of the Routing 
Fee to ``CBOE orders greater than 99 contracts in ETFs and ETNs'' to 
remove the HOLDRs product, which is no longer listed on CBOE.
---------------------------------------------------------------------------

    \12\ See CBOE's Fees Schedule.
    \13\ The Exchange computed the CBOE Professional Routing Fee by 
adding an $0.11 per contract fixed fee to the away market's 
transaction fee.
---------------------------------------------------------------------------

    The Exchange is proposing to rename the ``ISE'' Routing Fees as the 
``ISE (Standard)'' Routing Fees to further distinguish this fee from 
the ISE Select Symbols Routing Fees. ISE amended its Professional 
Customer Non-Select Symbols or ``Standard'' fee to $0.20 per 
contract.\14\ The Exchange is proposing to increase the newly named ISE 
(Standard) Professional Routing Fee from $0.29 to $0.31 per 
contract.\15\ Additionally, ISE amended its Professional Customer taker 
fee in Select Symbols to $0.33 per contract.\16\ The Exchange is 
proposing to increase the ISE (Select Symbols) Professional Routing Fee 
from $0.39 to $0.44 per contract.\17\
---------------------------------------------------------------------------

    \14\ See ISE's Fee Schedule.
    \15\ The Exchange computed the ISE (Standard) Professional 
Routing Fee by adding an $0.11 per contract fixed fee to the away 
market's transaction fee.
    \16\ See ISE's Fee Schedule.
    \17\ The Exchange computed the ISE (Select Symbols) Professional 
Routing Fee by adding an $0.11 per contract fixed fee to the away 
market's transaction fee.
---------------------------------------------------------------------------

    NYSE Arca assesses the following take liquidity fees: $0.79 per 
contact for a Customer and $0.85 per contract for a Firm and Broker-
Dealer.\18\ The Exchange is proposing to amend the NYSE Arca Non-Penny 
Pilot Routing Fees as follows: the Customer and Professional Routing 
Fees will increase from $0.11 to $0.90 per contract, and the Firm and 
Market Maker Routing Fees will increase from $0.55 to $0.94 per 
contract.\19\
---------------------------------------------------------------------------

    \18\ See NYSE ARCA General Options and Trading Permit (OTP) 
Fees.
    \19\ The Exchange computed the NYSE Arca Non-Penny Pilot 
Customer and Routing Fees by adding an $0.11 per contract fixed fee 
to the away market's transaction fee. Because NYSE Arca does not 
have a Professional category, Professional orders would be routed as 
Customer to NYSE Arca. In light of this, the Professional Routing 
Fee was computed the same as the Customer Routing Fee. With respect 
to the Firm and Market Maker Routing Fees, the Exchange added an 
$0.11 per contract fixed fee to the away market's transaction fee 
and determined to cap the Routing Fees at $0.94 per contract similar 
to BATS and BX Options.
---------------------------------------------------------------------------

    Phlx recently amended its fees in Select Symbols to assess no 
Customer Fee to Remove Liquidity and to decrease the Professional Fee 
for Removing Liquidity in Select Symbols from $0.45 to $0.44 per 
contract.\20\ The Exchange is proposing to decrease the Phlx Select 
Symbols Customer Routing Fee from $0.50 to $0.11 per contract and 
increase the Professional Routing Fee from $0.51 to $0.55 per 
contract.\21\
---------------------------------------------------------------------------

    \20\ See SR-Phlx-2013-01 (not yet published). Phlx lists its 
Select Symbols in Section I of its Pricing Schedule.
    \21\ The Exchange is proposing to assess a Customer the $0.11 
per contract fixed fee as there is no transaction fee when routing a 
Customer order to Phlx in Select Symbols. The Exchange is also 
proposing to add the $0.11 per contract fixed fee to the away 
market's transaction fee to compute the Professional Routing Fee in 
Select Symbols. The Exchange proposes to cap the fee at $0.55 per 
contract similar to the Firm and Market Maker Routing Fee in PHLX 
Select Symbols.
---------------------------------------------------------------------------

    MIAX recently filed to adopt transaction fees, which included the 
following fees applicable to all classes of options: $0.00 for a 
Priority Customer, $0.45 for a Non-MIAX Market Maker, $0.45 for a 
Broker-Dealer and $0.25 per contract for a Public Customer other than a 
Priority Customer.\22\ The Exchange is proposing to adopt MIAX Routing 
Fees as follows: $0.11 per contract for a Customer, $0.36 per contract 
for a Professional and $0.55 per contract for a Firm and Market 
Maker.\23\
---------------------------------------------------------------------------

    \22\ See MIAX's Fee Schedule.
    \23\ The Exchange computed the MIAX Routing Fees by adding an 
$0.11 per contract fixed fee to the away market's transaction fee. 
With respect to the Firm and Market Maker Routing Fees, the Exchange 
determined to cap the fees at $0.55 per contract similar to other 
Routing Fees.
---------------------------------------------------------------------------

    The Exchange is not proposing to otherwise amend other Routing Fees 
not specifically mentioned. As with all fees, the Exchange may adjust 
these Routing Fees in response to competitive conditions by filing a 
new proposed rule change.
2. Statutory Basis
    NASDAQ believes that its proposal to amend its rules is consistent 
with Section 6(b) of the Act \24\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \25\ in particular, in that it 
is an equitable allocation of reasonable fees and other charges among 
Exchange members.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange's amendments to the BATS, BOX, BX Options, CBOE, ISE, 
NYSE Arca and Phlx Routing fees as well as the adoption of MIAX Routing 
Fees are reasonable because these fees are designed to recoup costs 
that are incurred by the Exchange when routing certain orders to these 
away markets on behalf of members. Each destination market's 
transaction charge varies and there is a standard clearing charge for 
each transaction incurred by the Exchange along with other 
administrative and technical costs \26\ that are incurred by the 
Exchange. The Exchange believes that the proposed Routing Fees would 
enable the Exchange to recover the respective remove fee assessed to 
each market participant by the away market, plus clearing and other 
administrative and technical fees for the execution of orders routed to 
NOM and executed on these away markets.
---------------------------------------------------------------------------

    \26\ The Exchange utilizes the NOS a member of the Exchange and 
the Exchange's exclusive order router to route orders in options 
listed and open for trading on NOM to destination markets.
---------------------------------------------------------------------------

    The Exchange also believes that the amended Routing Fees are 
equitable and not unfairly discriminatory because these fees would be 
uniformly applied to all market participant orders that are routed to 
the respective away market to cover the cost to route the order. The

[[Page 3058]]

Exchange applied a similar methodology in calculating the routing fees 
for each market participant by adding not more than a $0.11 per 
contract fee to the away market's remove fee to determine the BX 
Options Routing Fees.\27\
---------------------------------------------------------------------------

    \27\ See BX Rules at Chapter XV, Section 2(4).
---------------------------------------------------------------------------

    The Exchange believes that the technical amendments to the titles 
of the Routing Fees are reasonable, equitable and not unfairly 
discriminatory as the amendments add clarity to the fee categories.

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 believes that the rule change 
would allow the Exchange to recoup its costs when routing orders 
designated as available for routing by the market participant. Today, 
other options exchanges also assess similar fees to recoup costs 
incurred by the Exchange to route orders to away markets. Further, a 
NOM Participant may designate an order as not available for routing to 
avoid Routing Fees.\28\ For these reasons, the Exchange does not 
believe that that the proposed fees impose a burden on competition.
---------------------------------------------------------------------------

    \28\ See NOM Rules at Chapter VI, Section 11.
---------------------------------------------------------------------------

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.\29\ 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 necessary or appropriate in the public interest, 
for the protection of investors, or 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.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2013-001 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-2013-001. 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 20549-1090, 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-2013-001, and should be submitted on or before February 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00633 Filed 1-14-13; 8:45 am]
BILLING CODE 8011-01-P