80 FR 81407 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NASDAQ Options Market-Fees and Rebates

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 249 (December 29, 2015)

Page Range		81407-81409
FR Document		2015-32653

Federal Register, Volume 80 Issue 249 (Tuesday, December 29, 2015)

[Federal Register Volume 80, Number 249 (Tuesday, December 29, 2015)]
[Notices]
[Pages 81407-81409]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-32653]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76739; File No. SR-NASDAQ-2015-153]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend NASDAQ Options Market--Fees and Rebates

December 22, 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 December 15, 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.
---------------------------------------------------------------------------

\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

The Exchange proposes to amend Chapter XV, entitled ``Options
Pricing,'' at Section 2, which governs pricing for Exchange members
using the NASDAQ Options Market (``NOM''), the Exchange's facility for
executing and routing standardized equity and index options.
The Exchange purposes [sic] to remove specific rule text added in
SR-NASDAQ-2015-149,\3\ which was applicable only to the mid-month
pricing change.\4\ This proposal removes the specific December 2015
dates from the rule text so the rebates will apply in January 2016.
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments [sic] become operative on
January 4, 2016.
---------------------------------------------------------------------------

\3\ This proposed rule change is not yet published. This
proposed rule change was filed on December 2, 2015.
\4\ The Commission notes that after the Exchange filed this
proposal, the notice for SR-NASDAQ-2015-149 was published for public
comment. See Securities Exchange Act Release No. 76651 (December 15,
2015), 80 FR 79387 (December 21, 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 to amend Chapter XV, Section 2, entitled
``NASDAQ Options Market--Fees and Rebates'' to amend Tier 8 of the
Customer and Professional Penny Pilot Options \5\ Rebates to Add
Liquidity. The proposed rule change is detailed below.
---------------------------------------------------------------------------

\5\ 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 [sic]
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 [sic] (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) [sic], 79 FR 71477
(November 25, 2014) [sic] (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 and extension and replacement of Penny Pilot). See
also NOM Rules, Chapter VI, Section 5.
---------------------------------------------------------------------------

Customer and Professional Penny Pilot Options Rebates To Add Liquidity

Today, the Exchange offers Participants tiered Customer and
Professional rebates based on various criteria, with rebates ranging
from $0.20 to $0.48 per contract.\6\ The Exchange filed SR-NASDAQ-2015-
149,\7\ on December 2, 2015, to amend Tier 8 of the Customer and
Professional Penny Pilot Options Rebates to Add Liquidity tiers.
Participants may qualify for Customer and Professional Penny Pilot
Options Rebates to Add Liquidity by adding a certain amount of
liquidity as specified by each tier.\8\
---------------------------------------------------------------------------

\6\ See NOM's Rules at Chapter XV, Section 2(1).
\7\ See note 3 above.
\8\ Tiers 6 and 7 are calculated based on Total Volume. Total
Volume is defined as Customer, Professional, Firm, Broker-Dealer,
Non-NOM Market Maker, and NOM Market Maker volume in Penny Pilot
Options and/or Non-Penny Pilot Options which either adds or removes
liquidity on NOM. See note ``b'' in Section 2(1) of Chapter XV. The
Exchange utilizes data from The Options Clearing Corporation
(``OCC'') to determine the total industry customer equity and ETF
options ADV figure. OCC classifies equity and ETF options volume
under the equity options category. Also, both customer and
professional orders that are transacted on options exchanges clear
in the customer range at OCC and therefore both customer and
professional volume would be included in the total industry figure
to calculate rebate tiers.
---------------------------------------------------------------------------

The Exchange proposes to amend Tier 8 of the Customer and
Professional Penny Pilot Options Rebate to Add Liquidity, which states
``Participant adds Customer, Professional, Firm, Non-NOM Market Maker,
and/or Broker-

[[Page 81408]]

Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options
above 0.75% or more of total industry customer equity and ETF option
ADV contracts per day in a month or Participant adds (1) Customer and/
or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 30,000 or more contracts per day in a month and (2) the
Participant has certified for the Investor Support Program \9\ set
forth in Rule 7014 from December 2, 2015 through December 31, 2015'' to
remove the reference to the December dates. The date range, from
December 2, 2015 to December 31, 2015, was added to accommodate a mid-
month pricing change that impacted that specific timeframe. The
Exchange intends to continue to offer Participants the opportunity to
earn the Tier 8 Customer and Professional Penny Pilot Options Rebate to
Add Liquidity and therefore proposes to remove the specific date range.
Tier 8 will be offered to Participants as of January 4, 2016 and
forward.
---------------------------------------------------------------------------

\9\ For a detailed description of the Investor Support Program
(``ISP''), see Securities Exchange Act Release No. 63270 (November
8, 2010), 75 FR 69489 (November 12, 2010) (NASDAQ-2010-141) (notice
of filing and immediate effectiveness) (the ``ISP Filing''). See
also Securities Exchange Act Release Nos. 63414 (December 2, 2010),
75 FR 76505 (December 8, 2010) (NASDAQ-2010-153) (notice of filing
and immediate effectiveness); and 63628 (January 3, 2011), 76 FR
1201 (January 7, 2011) (NASDAQ-2010-154) (notice of filing and
immediate effectiveness).
---------------------------------------------------------------------------

The Exchange believes the Tier 8 Customer and Professional Penny
Pilot Option Rebate to Add Liquidity will continue to incentivize
market participants to send order flow to NOM, the resulting liquidity
will benefit all market participants.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act,\10\ in general, and with Section 6(b)(4) and
6(b)(5) of the Act,\11\ 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.
Customer volume is important because it continues to attract liquidity
to the Exchange, which benefits all market participants. Further, with
respect to Professional liquidity, the Exchange initially established
Professional pricing in order to ``. . . bring additional revenue to
the Exchange.'' \12\ The Exchange noted in the Professional Filing that
it believes ``. . . that the increased revenue from the proposal would
assist the Exchange to recoup fixed costs.'' \13\ In addition, the
Exchange noted in that filing that it believes that establishing
separate pricing for a Professional, which ranges between that of a
Customer and market maker, accomplishes this objective.\14\
---------------------------------------------------------------------------

\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4) and (5).
\12\ See Securities Exchange Act Release No. 64494 (May 13,
2011), 76 FR 29014 (May 19, 2011) (SR-NASDAQ-2011-066)
(``Professional Filing''). In this filing, the Exchange addressed
the perceived favorable pricing of Professionals who were assessed
fees and paid rebates like a Customer prior to the filing. The
Exchange noted in that filing that a Professional, unlike a retail
Customer, has access to sophisticated trading systems that contain
functionality not available to retail Customers.
\13\ See Professional Filing.
\14\ See Professional Filing. The Exchange also [sic] in the
Professional Filing that it believes the role of the retail Customer
in the marketplace is distinct from that of the Professional and the
Exchange's fee proposal at that time accounted for this distinction
by pricing each market participant according to their roles and
obligations.
---------------------------------------------------------------------------

Customer and Professional Penny Pilot Options Rebates To Add Liquidity

The Exchange's proposal to amend Tier 8 of the Customer and
Professional Penny Pilot Options Rebate to Add Liquidity to remove the
December 2, 2015 to December 31, 2015 date range is reasonable because
the Exchange seeks to continue to incentivize Participants to send
order flow to NOM. The Exchange believes that the heightened volume
requirement to qualify for Tier 8, as compared with other tier volume
requirements, combined with the requirement to continue to certify for
the Investor Support Program will continue to incentivize Participants
to transact an even greater number of qualifying Customer and/or
Professional volume, which liquidity will benefit other market
participants by providing them the opportunity to interact with that
liquidity. The Exchange notes that incentivizing Participants to add
options liquidity through the payment of an additional rebate is not
novel as, today, Tier 8 permits the additional [sic] of equity volume
to qualify for this rebate. The concept of participating in the
equities market as a means to qualify for an options rebate exists
today. This participation benefits the Nasdaq Market Center as well as
the NOM market by incentivizing order flow to these markets. This
rebate recognizes the prevalence of trading in which members
simultaneously trade different asset classes within the same strategy.
Participants will continue to be required to add liquidity to both the
options and equities requirement if they qualify for the Tier 8 rebate
utilizing the second method.\15\ Because cash equities and options
markets are linked, with liquidity and trading patterns on one market
affecting those on the other, the Exchange believes that pricing
incentives that encourage market participant activity in NOM also
support price discovery and liquidity provision in the Nasdaq Market
Center.
---------------------------------------------------------------------------

\15\ There are two ways to qualify for the Tier 8 rebate, as
amended by this proposal, either: (1) Participant adds Customer,
Professional, Firm, Non-NOM Market Maker, and/or Broker-Dealer
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options
above 0.75% or more of total industry customer equity and ETF option
ADV contracts per day in a month; or (2) Participant adds Customer
and/or Professional liquidity in Penny Pilot Options and/or Non-
Penny Pilot Options of 30,000 or more contracts per day in a month
and the Participant has certified for the Investor Support Program
set forth in Rule 7014.
---------------------------------------------------------------------------

The Exchange's proposal to amend Tier 8 of the Customer and
Professional Penny Pilot Options Rebate to Add Liquidity to remove the
December 2, 2015 to December 31, 2015 date range is equitable and not
unfairly discriminatory because all Participants may continue to
qualify for Tier 8. Qualifying Participants will continue to be
uniformly paid a $0.48 per contract rebate.

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.
Customer and Professional Penny Pilot Options Rebates To Add Liquidity
The Exchange's proposal to amend Tier 8 of the Customer and
Professional Penny Pilot Options Rebate to Add Liquidity to remove the
December 2, 2015 to December 31, 2015 date range does not impose an
undue burden on intra-market competition because all Participants are
eligible to qualify for the Tier 8 Customer or Professional Rebate to
Add Liquidity, provided they meet the qualifications. Also, the Tier 8
rebate will be uniformly paid to those Participants that are eligible
for the rebate.
As noted above, continuing to incentivize Participants to add not
only options but equities volume does not impose an undue burden on
intra-market competition because cash equities and options markets are
linked, with liquidity and trading patterns on one market affecting
those on the other; the Exchange believes that pricing incentives that
encourage market

[[Page 81409]]

participant activity in NOM also support price discovery and liquidity
provision in the Nasdaq Market Center. Further, the pricing incentives
require significant levels of liquidity provision, which benefits all
market participants on NOM and the Nasdaq Market Center.

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.\16\
---------------------------------------------------------------------------

\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2015-153 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-2015-153. 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-2015-153, and should
be submitted on or before January 19, 2016.
---------------------------------------------------------------------------

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

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Brent J. Fields,
Secretary.
[FR Doc. 2015-32653 Filed 12-28-15; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 249 / Tuesday, December 29, 2015 / Notices 81407

Reference Room, 100 F Street NE., The Exchange purposes [sic] to Customer and Professional Penny Pilot
Washington, DC 20549, on official remove specific rule text added in SR– Options Rebates To Add Liquidity
business days between the hours of NASDAQ–2015–149,3 which was Today, the Exchange offers
10:00 a.m. and 3:00 p.m. Copies of the applicable only to the mid-month Participants tiered Customer and
filing also will be available for pricing change.4 This proposal removes Professional rebates based on various
inspection and copying at the principal the specific December 2015 dates from criteria, with rebates ranging from $0.20
office of the Exchange. All comments the rule text so the rebates will apply in to $0.48 per contract.6 The Exchange
received will be posted without change; January 2016. While the changes filed SR–NASDAQ–2015–149,7 on
the Commission does not edit personal proposed herein are effective upon December 2, 2015, to amend Tier 8 of
identifying information from filing, the Exchange has designated the the Customer and Professional Penny
submissions. You should submit only amendments [sic] become operative on Pilot Options Rebates to Add Liquidity
information that you wish to make January 4, 2016. tiers. Participants may qualify for
available publicly. All submissions The text of the proposed rule change Customer and Professional Penny Pilot
should refer to File Number SR–Phlx– is available on the Exchange’s Web site Options Rebates to Add Liquidity by
2015–102 and should be submitted on at http://nasdaq.cchwallstreet.com, at adding a certain amount of liquidity as
or before January 19, 2016. the principal office of the Exchange, and specified by each tier.8
For the Commission, by the Division of at the Commission’s Public Reference The Exchange proposes to amend Tier
Trading and Markets, pursuant to delegated Room. 8 of the Customer and Professional
authority.11 II. Self-Regulatory Organization’s Penny Pilot Options Rebate to Add
Brent J. Fields, Statement of the Purpose of, and Liquidity, which states ‘‘Participant
Secretary. Statutory Basis for, the Proposed Rule adds Customer, Professional, Firm, Non-
[FR Doc. 2015–32651 Filed 12–28–15; 8:45 am] Change NOM Market Maker, and/or Broker-
BILLING CODE 8011–01–P In its filing with the Commission, the
2010), 75 FR 25895 (May 10, 2010) (SR–NASDAQ–
Exchange included statements 2010–053) (notice of filing and immediate
concerning the purpose of and basis for effectiveness adding seventy-five classes to Penny
SECURITIES AND EXCHANGE
the proposed rule change and discussed Pilot); 65969 (December 15, 2011), 76 FR 79268
COMMISSION (December 21, 2011) (SR–NASDAQ–2011–169)
any comments it received on the
(notice of filing and immediate effectiveness [sic]
[Release No. 34–76739; File No. SR– proposed rule change. The text of these extension and replacement of Penny Pilot); 67325
NASDAQ–2015–153] statements may be examined at the (June 29, 2012), 77 FR 40127 (July 6, 2012) (SR–
places specified in Item IV below. The NASDAQ–2012–075) (notice of filing and
Self-Regulatory Organizations; The Exchange has prepared summaries, set immediate effectiveness and extension and
NASDAQ Stock Market LLC; Notice of replacement of Penny Pilot through December 31,
forth in sections A, B, and C below, of 2012); 68519 (December 21, 2012), 78 FR 136
Filing and Immediate Effectiveness of the most significant aspects of such (January 2, 2013) (SR–NASDAQ–2012–143) (notice
Proposed Rule Change To Amend statements. of filing and immediate effectiveness and extension
NASDAQ Options Market—Fees and and replacement of Penny Pilot through June 30,
Rebates A. Self-Regulatory Organization’s 2013); 69787 (June 18, 2013), 78 FR 37858 (June 24,
Statement of the Purpose of, and 2013) (SR–NASDAQ–2013–082) (notice of filing
December 22, 2015. and immediate effectiveness and extension and
Statutory Basis for, the Proposed Rule replacement of Penny Pilot through December 31,
Pursuant to Section 19(b)(1) of the Change 2013); 71105 (December 17, 2013), 78 FR 77530
Securities Exchange Act of 1934 (December 23, 2013) (SR–NASDAQ–2013–154)
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 1. Purpose (notice of filing and immediate effectiveness and
notice is hereby given that on December The Exchange proposes to amend extension and replacement of Penny Pilot through
June 30, 2014); 79 FR 31151 [sic] (May 23, 2014),
15, 2015, The NASDAQ Stock Market Chapter XV, Section 2, entitled 79 FR 31151 (May 30, 2014) (SR–NASDAQ–2014–
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed ‘‘NASDAQ Options Market—Fees and 056) (notice of filing and immediate effectiveness
with the Securities and Exchange Rebates’’ to amend Tier 8 of the and extension and replacement of Penny Pilot
Commission (‘‘SEC’’ or ‘‘Commission’’) Customer and Professional Penny Pilot through December 31, 2014); 73686 (December 2,
2014) [sic], 79 FR 71477 (November 25, 2014) [sic]
the proposed rule change as described Options 5 Rebates to Add Liquidity. The (SR–NASDAQ–2014–115) (notice of filing and
in Items I, II, and III below, which Items proposed rule change is detailed below. immediate effectiveness and extension and
have been prepared by the Exchange. replacement of Penny Pilot through June 30, 2015)
The Commission is publishing this 3 This proposed rule change is not yet published. and 75283 (June 24, 2015), 80 FR 37347 (June 30,
This proposed rule change was filed on December 2015) (SR–NASDAQ–2015–063) (notice of filing
notice to solicit comments on the and immediate effectiveness and extension and
2, 2015.
proposed rule change from interested 4 The Commission notes that after the Exchange replacement of Penny Pilot). See also NOM Rules,
persons. filed this proposal, the notice for SR–NASDAQ– Chapter VI, Section 5.
6 See NOM’s Rules at Chapter XV, Section 2(1).
2015–149 was published for public comment. See
I. Self-Regulatory Organization’s Securities Exchange Act Release No. 76651 7 See note 3 above.
Statement of the Terms of Substance of (December 15, 2015), 80 FR 79387 (December 21, 8 Tiers 6 and 7 are calculated based on Total

the Proposed Rule Change 2015). Volume. Total Volume is defined as Customer,
5 See Securities Exchange Act Release Nos. 57579 Professional, Firm, Broker-Dealer, Non-NOM
The Exchange proposes to amend (March 28, 2008), 73 FR 18587 (April 4, 2008) (SR– Market Maker, and NOM Market Maker volume in
Chapter XV, entitled ‘‘Options Pricing,’’ NASDAQ–2008–026) (notice of filing and Penny Pilot Options and/or Non-Penny Pilot
at Section 2, which governs pricing for immediate effectiveness establishing Penny Pilot); Options which either adds or removes liquidity on
asabaliauskas on DSK5VPTVN1PROD with NOTICES

Exchange members using the NASDAQ 60874 (October 23, 2009), 74 FR 56682 (November NOM. See note ‘‘b’’ in Section 2(1) of Chapter XV.
2, 2009) (SR–NASDAQ–2009–091) (notice of filing The Exchange utilizes data from The Options
Options Market (‘‘NOM’’), the and immediate effectiveness expanding and Clearing Corporation (‘‘OCC’’) to determine the total
Exchange’s facility for executing and extending Penny Pilot); 60965 (November 9, 2009), industry customer equity and ETF options ADV
routing standardized equity and index 74 FR 59292 (November 17, 2009) (SR–NASDAQ– figure. OCC classifies equity and ETF options
options. 2009–097) (notice of filing and immediate volume under the equity options category. Also,
effectiveness adding seventy-five classes to Penny both customer and professional orders that are
Pilot); 61455 (February 1, 2010), 75 FR 6239 transacted on options exchanges clear in the
11 17 CFR 200.30–3(a)(12). (February 8, 2010) (SR–NASDAQ–2010–013) customer range at OCC and therefore both customer
1 15 U.S.C. 78s(b)(1). (notice of filing and immediate effectiveness adding and professional volume would be included in the
2 17 CFR 240.19b–4. seventy-five classes to Penny Pilot); 62029 (May 4, total industry figure to calculate rebate tiers.

VerDate Sep<11>2014 19:17 Dec 28, 2015 Jkt 238001 PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 E:\FR\FM\29DEN1.SGM 29DEN1

81408 Federal Register / Vol. 80, No. 249 / Tuesday, December 29, 2015 / Notices

Dealer liquidity in Penny Pilot Options revenue to the Exchange.’’ 12 The equities requirement if they qualify for
and/or Non-Penny Pilot Options above Exchange noted in the Professional the Tier 8 rebate utilizing the second
0.75% or more of total industry Filing that it believes ‘‘. . . that the method.15 Because cash equities and
customer equity and ETF option ADV increased revenue from the proposal options markets are linked, with
contracts per day in a month or would assist the Exchange to recoup liquidity and trading patterns on one
Participant adds (1) Customer and/or fixed costs.’’ 13 In addition, the market affecting those on the other, the
Professional liquidity in Penny Pilot Exchange noted in that filing that it Exchange believes that pricing
Options and/or Non-Penny Pilot believes that establishing separate incentives that encourage market
Options of 30,000 or more contracts per pricing for a Professional, which ranges participant activity in NOM also
day in a month and (2) the Participant between that of a Customer and market support price discovery and liquidity
has certified for the Investor Support maker, accomplishes this objective.14 provision in the Nasdaq Market Center.
Program 9 set forth in Rule 7014 from The Exchange’s proposal to amend
Customer and Professional Penny Pilot
December 2, 2015 through December 31, Options Rebates To Add Liquidity Tier 8 of the Customer and Professional
2015’’ to remove the reference to the Penny Pilot Options Rebate to Add
December dates. The date range, from The Exchange’s proposal to amend Liquidity to remove the December 2,
December 2, 2015 to December 31, 2015, Tier 8 of the Customer and Professional 2015 to December 31, 2015 date range
was added to accommodate a mid- Penny Pilot Options Rebate to Add is equitable and not unfairly
month pricing change that impacted Liquidity to remove the December 2, discriminatory because all Participants
that specific timeframe. The Exchange 2015 to December 31, 2015 date range may continue to qualify for Tier 8.
intends to continue to offer Participants is reasonable because the Exchange Qualifying Participants will continue to
the opportunity to earn the Tier 8 seeks to continue to incentivize be uniformly paid a $0.48 per contract
Customer and Professional Penny Pilot Participants to send order flow to NOM. rebate.
Options Rebate to Add Liquidity and The Exchange believes that the
heightened volume requirement to B. Self-Regulatory Organization’s
therefore proposes to remove the
qualify for Tier 8, as compared with Statement on Burden on Competition
specific date range. Tier 8 will be
offered to Participants as of January 4, other tier volume requirements, The Exchange does not believe that
2016 and forward. combined with the requirement to the proposed rule change will impose
The Exchange believes the Tier 8 continue to certify for the Investor any burden on competition not
Customer and Professional Penny Pilot Support Program will continue to necessary or appropriate in furtherance
Option Rebate to Add Liquidity will incentivize Participants to transact an of the purposes of the Act.
continue to incentivize market even greater number of qualifying
Customer and/or Professional volume, Customer and Professional Penny Pilot
participants to send order flow to NOM,
which liquidity will benefit other Options Rebates To Add Liquidity
the resulting liquidity will benefit all
market participants. market participants by providing them The Exchange’s proposal to amend
the opportunity to interact with that Tier 8 of the Customer and Professional
2. Statutory Basis liquidity. The Exchange notes that Penny Pilot Options Rebate to Add
The Exchange believes that the incentivizing Participants to add Liquidity to remove the December 2,
proposed rule change is consistent with options liquidity through the payment 2015 to December 31, 2015 date range
Section 6 of the Act,10 in general, and of an additional rebate is not novel as, does not impose an undue burden on
with Section 6(b)(4) and 6(b)(5) of the today, Tier 8 permits the additional [sic] intra-market competition because all
Act,11 in particular, in that it provides of equity volume to qualify for this Participants are eligible to qualify for
for the equitable allocation of reasonable rebate. The concept of participating in the Tier 8 Customer or Professional
dues, fees, and other charges among the equities market as a means to qualify Rebate to Add Liquidity, provided they
members and issuers and other persons for an options rebate exists today. This meet the qualifications. Also, the Tier 8
using any facility or system which the participation benefits the Nasdaq rebate will be uniformly paid to those
Exchange operates or controls, and is Market Center as well as the NOM Participants that are eligible for the
not designed to permit unfair market by incentivizing order flow to rebate.
discrimination between customers, these markets. This rebate recognizes As noted above, continuing to
issuers, brokers, or dealers. Customer the prevalence of trading in which incentivize Participants to add not only
volume is important because it members simultaneously trade different options but equities volume does not
continues to attract liquidity to the asset classes within the same strategy. impose an undue burden on intra-
Exchange, which benefits all market Participants will continue to be required market competition because cash
participants. Further, with respect to to add liquidity to both the options and equities and options markets are linked,
Professional liquidity, the Exchange with liquidity and trading patterns on
12 See Securities Exchange Act Release No. 64494
initially established Professional pricing one market affecting those on the other;
(May 13, 2011), 76 FR 29014 (May 19, 2011) (SR–
in order to ‘‘. . . bring additional NASDAQ–2011–066) (‘‘Professional Filing’’). In this the Exchange believes that pricing
filing, the Exchange addressed the perceived incentives that encourage market
9 For a detailed description of the Investor favorable pricing of Professionals who were
Support Program (‘‘ISP’’), see Securities Exchange assessed fees and paid rebates like a Customer prior 15 There are two ways to qualify for the Tier 8
Act Release No. 63270 (November 8, 2010), 75 FR to the filing. The Exchange noted in that filing that rebate, as amended by this proposal, either: (1)
69489 (November 12, 2010) (NASDAQ–2010–141) a Professional, unlike a retail Customer, has access
asabaliauskas on DSK5VPTVN1PROD with NOTICES

Participant adds Customer, Professional, Firm, Non-
(notice of filing and immediate effectiveness) (the to sophisticated trading systems that contain NOM Market Maker, and/or Broker-Dealer liquidity
‘‘ISP Filing’’). See also Securities Exchange Act functionality not available to retail Customers. in Penny Pilot Options and/or Non-Penny Pilot
Release Nos. 63414 (December 2, 2010), 75 FR 13 See Professional Filing.
Options above 0.75% or more of total industry
76505 (December 8, 2010) (NASDAQ–2010–153) 14 See Professional Filing. The Exchange also [sic] customer equity and ETF option ADV contracts per
(notice of filing and immediate effectiveness); and in the Professional Filing that it believes the role day in a month; or (2) Participant adds Customer
63628 (January 3, 2011), 76 FR 1201 (January 7, of the retail Customer in the marketplace is distinct and/or Professional liquidity in Penny Pilot Options
2011) (NASDAQ–2010–154) (notice of filing and from that of the Professional and the Exchange’s fee and/or Non-Penny Pilot Options of 30,000 or more
immediate effectiveness). proposal at that time accounted for this distinction contracts per day in a month and the Participant
10 15 U.S.C. 78f.
by pricing each market participant according to has certified for the Investor Support Program set
11 15 U.S.C. 78f(b)(4) and (5). their roles and obligations. forth in Rule 7014.

VerDate Sep<11>2014 19:17 Dec 28, 2015 Jkt 238001 PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 E:\FR\FM\29DEN1.SGM 29DEN1

Document Created: 2015-12-29 10:15:20
Document Modified: 2015-12-29 10:15:20

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 81407