80 FR 70030 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Chapter XV, Entitled “Options Pricing,” at Section 2 Governing Pricing for NASDAQ Members

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 218 (November 12, 2015)

[Federal Register Volume 80, Number 218 (Thursday, November 12, 2015)]
[Notices]
[Pages 70030-70032]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-28685]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76365; File No. SR-NASDAQ-2015-130]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Chapter XV, Entitled ``Options Pricing,'' at Section 2 Governing 
Pricing for NASDAQ Members

November 5, 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 October 29, 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 members using the NASDAQ 
Options Market (``NOM''), NASDAQ's facility for executing and routing 
standardized equity and index options.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on November 2, 2015.
    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
    The Exchange proposes the following change to the NOM transaction 
fees set forth at Chapter XV, Section 2 for executing and routing 
standardized equity and index options under the Penny Pilot \3\ Options 
program.
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    \3\ The Penny Pilot was established in March 2008 and has since 
been expanded and extended through June 30, 2016. See Securities 
Exchange Act Release Nos. 57579 (March 28, 2008), 73 FR 18587 (April 
4, 2008) (SR-NASDAQ-2008-026) (notice of filing and immediate 
effectiveness establishing Penny Pilot); 60874 (October 23, 2009), 
74 FR 56682 (November 2, 2009) (SR-NASDAQ-2009-091) (notice of 
filing and immediate effectiveness expanding and extending Penny 
Pilot); 60965 (November 9, 2009), 74 FR 59292 (November 17, 2009) 
(SR-NASDAQ-2009-097) (notice of filing and immediate effectiveness 
adding seventy-five classes to Penny Pilot); 61455 (February 1, 
2010), 75 FR 6239 (February 8, 2010) (SR-NASDAQ-2010-013) (notice of 
filing and immediate effectiveness adding seventy-five classes to 
Penny Pilot); 62029 (May 4, 2010), 75 FR 25895 (May 10, 2010) (SR-
NASDAQ-2010-053) (notice of filing and immediate effectiveness 
adding seventy-five classes to Penny Pilot); 65969 (December 15, 
2011), 76 FR 79268 (December 21, 2011) (SR-NASDAQ-2011-169) (notice 
of filing and immediate effectiveness extension and replacement of 
Penny Pilot); 67325 (June 29, 2012), 77 FR 40127 (July 6, 2012) (SR-
NASDAQ-2012-075) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through December 31, 2012); 
68519 (December 21, 2012), 78 FR 136 (January 2, 2013) (SR-NASDAQ-
2012-143) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through June 30, 2013); 
69787 (June 18, 2013), 78 FR 37858 (June 24, 2013) (SR-NASDAQ-2013-
082) (notice of filing and immediate effectiveness and extension and 
replacement of Penny Pilot through December 31, 2013); 71105 
(December 17, 2013), 78 FR 77530 (December 23, 2013) (SR-NASDAQ-
2013-154) (notice of filing and immediate effectiveness and 
extension and replacement of Penny Pilot through June 30, 2014); 79 
FR 31151 (May 23, 2014), 79 FR 31151 (May 30, 2014) (SR-NASDAQ-2014-
056) (notice of filing and immediate effectiveness and extension and 
replacement of Penny Pilot through December 31, 2014); 73686 
(December 2, 2014), 79 FR 71477 (November 25, 2014) (SR-NASDAQ-2014-
115) (notice of filing and immediate effectiveness and extension and 
replacement of Penny Pilot through June 30, 2015) and 75283 (June 
24, 2015), 80 FR 37347 (June 30, 2015) (SR-NASDAQ-2015-063) (Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Extension of the Exchange's Penny Pilot Program and 
Replacement of Penny Pilot Issues That Have Been Delisted.) See also 
NOM Rules, Chapter VI, Section 5.
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    The proposed change is as follows:
    Fees for Removing Liquidity in Penny Pilot Options: the Exchange 
proposes to:
    1. Increase the Non-NOM Market Maker\4\ fee from $0.50 to $0.55 per

[[Page 70031]]

contract for options overlying iShares MSCI Emerging Markets (``EEM''), 
SPDR Gold Shares (``GLD''), iShares Russell 2000 ETF (``IWM''), 
PowerShares QQQ (``QQQ''), and SPDR S&P 500 (``SPY'').
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    \4\ 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.
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    2. This rule change is based on a rule change by Miami 
International Securities Exchange LLC (``MIAX'') and is a competitive 
response to increase fees in similar manner as MIAX only with respect 
to Non-NOM Market Maker pricing in certain symbols, as described above.
    This rule change is described in greater detail below.
Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot Options
    The Exchange proposes, beginning November 2, 2015, to increase the 
Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot Options 
from $0.50 to $0.55 per contract for options overlying EEM, GLD, IWM, 
QQQ, and SPY. The Exchange notes that the Fees for Removing Liquidity 
for other Participants in Penny Pilot Options will remain the same.\5\ 
Also, Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot 
Options in all other Penny Pilot Option symbols, except EEM, GLD, IWM, 
QQQ, and SPY, will remain the same.
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    \5\ Customers, Professionals, Firms, NOM Market Makers and 
Broker-Dealers will continue to be assessed a $0.50 per contract Fee 
for Removing Liquidity in Penny Pilot Options.
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    The Exchange believes that this incentive will encourage Non-NOM 
Market Makers to transact a greater number of orders on the Exchange.
    The purpose of the proposed rule change is to increase the Non-NOM 
Market Maker Fee For Removing Liquidity in Penny Pilot Options for 
options overlying EEM, GLD, IWM, QQQ, and SPY, so that the transaction 
fees for NOM Market Makers in options overlying EEM, GLD, IWM, QQQ, and 
SPY remain lower as compared to Non-NOM Market Makers. The Exchange 
proposes to add a new note ``2'' to Chapter XV, Section (2)(1) which 
states, ``The Exchange will assess Non-NOM Market Makers a $0.55 per 
contract Fee for Removing Liquidity in Penny Pilot Options in the 
following symbols: EEM, GLD, IWM, QQQ, and SPY.'' The Exchange notes 
that maintaining this fee differential encourages market participants 
to become members and register as NOM Market Makers versus otherwise 
sending orders to the Exchange as a an away market maker.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\6\ in general, and with Section 
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which NASDAQ operates or controls, and is not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot 
Options
    The Exchange's proposal to increase the Non-NOM Market Maker Fee 
for Removing Liquidity in Penny Pilot Options for options overlying 
EEM, GLD, IWM, QQQ, and SPY from $0.50 to $0.55 per contract is 
reasonable to provide lower fees to NOM Market Makers as compared to 
Non-NOM Market Makers to encourage market participants to become 
members and register as NOM Market Makers. This rule change is also 
similar to current MIAX pricing.\8\
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    \8\ See MIAX Options Fee Schedule.
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    The Exchange's proposal to increase the Non-NOM Market Maker Fee 
for Removing Liquidity in Penny Pilot Options for options overlying 
EEM, GLD, IWM, QQQ, and SPY from $0.50 to $0.55 per contract is 
equitable and not unfairly discriminatory because the increase applies 
equally to all Non-NOM Market Makers. In addition, maintaining a higher 
transaction fee for Non-NOM Market Makers versus NOM Market Markers is 
equitable and not unfairly discriminatory because NOM Market Markers on 
the Exchange have enhanced quoting obligations that are not applicable 
to Non-NOM Market Makers.\9\
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    \9\ See NOM Rules at Chapter VII, Section 6. On a daily basis, a 
NOM Market Maker must make markets consistent with the applicable 
quoting requirements on a continuous basis.
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    In addition, charging non-members higher transaction fees is a 
common practice amongst exchanges because members are subject to other 
fees and dues associated with their membership to the Exchange that do 
not apply to non-members. The proposed differentiation as between Non-
NOM Market Makers, NOM Market Makers, and other market participants 
recognizes the differing contributions made to the liquidity and 
trading environment on the Exchange by these market participants. 
Maintaining a lower transaction fee for NOM Market Makers as compared 
to Non-NOM Market Makers should incent market participants and market 
makers on other exchanges to register as NOM Market Makers, which will 
enhance the quality of quoting and increase the volume of contracts 
traded in options listed on NOM. To the extent that this purpose is 
achieved, all the Exchange's market participants should benefit from 
the improved market liquidity. Enhanced market quality and increased 
transaction volume that results from the increase in NOM Market Maker 
activity on the Exchange will benefit all market participants and 
improve competition on the Exchange.
    The Exchange believes that establishing different pricing for 
options overlying EEM, GLD, IWM, QQQ, and SPY options as compared to 
other Penny Pilot Options is reasonable, equitable, and not unfairly 
discriminatory because EEM, GLD, IWM, and SPY options are more liquid 
options as compared to other Penny Pilot Options and the Exchange wants 
to incentivize market participants to become members and register as 
NOM Market Makers versus otherwise sending orders to the Exchange as a 
Non-NOM Market Maker.

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. The proposal is designed to 
maintain lower NOM Market Maker transaction fees for options overlying 
EEM, GLD, IWM, QQQ, and SPY as compared to Non-NOM Market Makers. To 
the extent that there is additional competitive burden on Non-NOM 
Market Makers, the Exchange believes that this is appropriate because 
charging non-members higher transaction fees is a common practice 
amongst exchanges and members are subject to other fees and dues 
associated with their membership to the Exchange that do not apply to 
non-members. The proposed differentiation as between Non-NOM Market 
Makers, NOM Market Makers, and other market participants recognizes the 
differing contributions made to the liquidity and trading environment 
on the Exchange by these market participants.
    Maintaining a lower transaction fee for NOM Market Makers should 
incent market participants and market makers on other exchanges to 
register as NOM Market Makers on the Exchange, which will enhance the 
quality of quoting and

[[Page 70032]]

increase the volume of contracts traded in options listed on NOM. To 
the extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market liquidity. 
Enhanced market quality and increased transaction volume that results 
from the anticipated increase in order flow directed to the Exchange 
will benefit all market participants and improve competition on the 
Exchange.
    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. In such an 
environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and to attract order flow. The 
Exchange believes that the proposal reflects this competitive 
environment.

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.\10\
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    \10\ 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 [email protected]. Please include 
File Number SR-NASDAQ-2015-130 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-2015-130. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-130 and should 
be submitted on or before December 3, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28685 Filed 11-10-15; 8:45 am]
BILLING CODE 8011-01-P