81 FR 33572 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options Pricing at Chapter XV, Section 2
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 102 (May 26, 2016)
Federal Register Volume 81, Issue 102 (May 26, 2016)
| Page Range | 33572-33575 | |
| FR Document | 2016-12386 |
[Federal Register Volume 81, Number 102 (Thursday, May 26, 2016)] [Notices] [Pages 33572-33575] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-12386] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77878; File No. SR-NASDAQ-2016-070] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options Pricing at Chapter XV, Section 2 May 20, 2016. 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 10, 2016, 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.\3\ The Exchange proposes to amend certain Penny Pilot Options \4\ pricing. --------------------------------------------------------------------------- \3\ References in this proposal to Chapter and Series refer to NOM rules, unless otherwise indicated. \4\ The Penny Pilot was established in March 2008 and was last extended in 2015. 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); and 75283 (June 24, 2015), 80 FR 37347 (June 30, 2015) (SR- NASDAQ-2015-063) (notice of filing and immediate effectiveness extending the Penny Pilot through June 30, 2016). All Penny Pilot Options listed on the Exchange can be found at http://www.nasdaqtrader.com/Micro.aspx?id=phlx. --------------------------------------------------------------------------- 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 certain amendments to the NOM transaction fees set forth at Chapter XV, Section 2, for executing and routing standardized equity and index Penny Pilot Options. Specifically, the Exchange proposes to reduce the fee for Customer \5\ or Professional \6\ that removes liquidity in SPY Options.\7\ The proposed change is discussed below. --------------------------------------------------------------------------- \5\ The term ``Customer'' or (``C'') applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (``OCC'') which is not for the account of broker or dealer or for the account of a ``Professional'' (as that term is defined in Chapter I, Section 1(a)(48)). \6\ The term ``Professional'' or (``P'') means any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s) pursuant to Chapter I, Section 1(a)(48). All Professional orders shall be appropriately marked by Participants. \7\ Options overlying Standard and Poor's Depositary Receipts/ SPDRs (``SPY'') are based on the SPDR exchange-traded fund (``ETF''), which is designed to track the performance of the S&P 500 Index. --------------------------------------------------------------------------- The Exchange currently assesses Customer, Professional, Firm,\8\ Non-NOM Market Maker,\9\ NOM Market [[Page 33573]] Maker,\10\ and Broker-Dealer \11\ a $0.50 per contract Fee for Removing Liquidity in Penny Pilot Options.\12\ The Exchange proposes a slightly reduced Fee for Removing Customer and Professional Liquidity in SPY Options, which are the largest volume Penny Pilot Options traded on the Exchange. Excluding the proposed change in SPY Options, the Penny Pilot Options Fee for Removing Liquidity, as also the Penny Pilot Options Rebate to Add Liquidity does not change. --------------------------------------------------------------------------- \8\ The term ``Firm'' or (``F'') applies to any transaction that is identified by a Participant for clearing in the Firm range at OCC. \9\ The term ``Non-NOM Market Maker'' or (``O'') is a registered market maker on another options exchange that is not a NOM Market Maker. A Non-NOM Market Maker must append the proper Non-NOM Market Maker designation to orders routed to NOM. \10\ 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. \11\ The term ``Broker-Dealer'' or (``B'') applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. \12\ Customer, Professional, Firm, Non-NOM Market Maker, NOM Market Maker, and Broker-Dealer are NOM Participants. The term ``Participant'' or ``Options Participant'' means a firm, or organization that is registered with the Exchange pursuant to Chapter II of these Rules for purposes of participating in options trading on NOM as a ``Nasdaq Options Order Entry Firm'' or ``Nasdaq Options Market Maker''. --------------------------------------------------------------------------- Change 1--Penny Pilot Options: Change Fee for Removing Customer and Professional Liquidity in SPY Options The Exchange proposes to modify the Penny Pilot Options fees and rebates schedule (per executed contract) to slightly reduce the fee when a Customer or Professional removes liquidity in SPY Options. Specifically, the Exchange proposes to make note 3 applicable to Customer and Professional Penny Pilot Options in Chapter XV, Section 2(1), and to state that ``A Customer or Professional that removes liquidity in SPY Options will be assessed a fee of $0.47 per contract.'' Currently, the fee for removing Penny Pilot Options liquidity, which includes SPY Options, is $0.50 per contract. The Exchange is proposing to decrease the noted SPY Option Fee for Removing Liquidity at this time because it believes that the proposed decrease will incentivize Participants to send Customer and Professional Order flow to the Exchange. This enables the Exchange to remain competitive with other options exchanges. The Exchange is also making two housekeeping changes in NOM Chapter XV, Section 2(1). First, the Exchange is correcting a typo in Penny Pilot Options Rebate to Add Liquidity and indicating that note ``d'' is applicable to Professional just as it is to Customer.\13\ Second, the Exchange is adding ``unless otherwise stated'' in note ``. . .'' for better readability and clarity. The sentence as modified will read: ``To determine the applicable percentage of total industry customer equity and ETF option average daily volume, unless otherwise stated, the Participant's Penny Pilot and Non-Penny Pilot Customer and/or Professional volume that adds liquidity will be included.'' --------------------------------------------------------------------------- \13\ See Securities Exchange Act Release No. 77661 (April 20, 2016), 81 FR 24668 (April 26, 2016) (SR-NASDAQ-2016-055) (notice of filing and immediate effectiveness), wherein the Exchange proposed to make note ``d'' applicable to Professional just as it is to Customer. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal to amend its Pricing Schedule is consistent with Section 6(b) of the Act,\14\ in general, and furthers the objectives of Section 6(b)(4) and (b)(5) of the Act,\15\ 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. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f(b). \15\ 15 U.S.C. 78f(b)(4), (5). --------------------------------------------------------------------------- The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ``has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.'' \16\ --------------------------------------------------------------------------- \16\ Securities Exchange Act Release No. 51808 (June 29, 2005), 70 FR 37496 at 37499 (File No. S7-10-04) (``Regulation NMS Adopting Release'') [sic]. --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \17\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\18\ As the court emphasized, the Commission ``intended in Regulation NMS that `market forces, rather than regulatory requirements' play a role in determining the market data . . . to be made available to investors and at what cost.'' \19\ --------------------------------------------------------------------------- \17\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \18\ See id. at 534-535. \19\ See id. at 537. --------------------------------------------------------------------------- Further, ``[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .'' \20\ Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. --------------------------------------------------------------------------- \20\ See id. at 539 (quoting Securities Exchange Act Commission at [sic] Release No. 59039 (December 2, 2008), 73 FR 74770 at 74782- 74783 (December 9, 2008) (SR-NYSEArca-2006-21)). --------------------------------------------------------------------------- The Exchange believes that the proposed change is reasonable, equitable and not unfairly discriminatory for the following reasons. Change 1--Penny Pilot Options: Change Fee for Removing Customer and Professional Liquidity in SPY Options The Exchange proposes to modify the Penny Pilot Options fees and rebates schedule (per executed contract) to slightly reduce the fee when a Customer or Professional removes liquidity in SPY Options. Specifically, the Exchange proposes to make note 3 applicable to Customer and Professional Penny Pilot Options in Chapter XV, Section 2(1), and to state that ``A Customer or Professional that removes liquidity in SPY Options will be assessed a fee of $0.47 per contract.'' Currently, the fee is $0.50 per contract. The Exchange is proposing to decrease the noted SPY Option-related fee at this time because it believes that the proposed decrease will incentivize Participants to send Customer and Professional Order flow to the Exchange. This enables the Exchange to remain competitive with other options exchanges. The Exchange's proposal to reduce the noted SPY Option Fee for Removing Liquidity is reasonable because NOM Participants will continue to be incentivized, even more so with the proposed fee reduction, to send order flow to NOM. The proposed rule change is reasonable because it continues to encourage market participant behavior through the fees and rebates system, which is an accepted methodology [[Page 33574]] among options exchanges.\21\ It is reasonable to incentivize bringing flow to the Exchange by offering reduced fees. --------------------------------------------------------------------------- \21\ See, e.g., fee and rebate schedules of other options exchanges, including, but not limited to, NASDAQ BX, Inc. (``BX Options''), NASDAQ PHLX LLC (``Phlx''), and Chicago Board Options Exchange (``CBOE''). --------------------------------------------------------------------------- The Exchange believes it is equitable and not unfairly discriminatory to continue to charge the Fee for Removing Liquidity, as also the Rebate to Add Liquidity, in order to incentivize Professionals and Customers to bring liquidity to the Exchange. Such liquidity, and in particular Customer liquidity, attracts other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attract Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. The Exchange believes it is equitable and not unfairly discriminatory to make the proposed reduction in the Fee for Removing Liquidity because it will be applied uniformly across all similarly situated Participants, while promoting bringing liquidity to the Exchange. The Exchange also believes that it is equitable and not unfairly discriminatory to make sure that Customer and Professional are harmonized and treated the same, as proposed. As noted, liquidity attracts other market participants. Customer and Professional liquidity benefits all market participants by providing more trading opportunities, which attract Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. The proposed changes enhance the competitiveness of the Exchange by continuing to incentivize bringing flow to the Exchange. The Exchange does not believe that the two housekeeping changes have any impact on the reasonable and equitable and not unfairly discriminatory nature of the proposal. The Exchange desires to continue to incentivize members and member organizations, through the Exchange's rebate and proposed reduced fee structure, to select the Exchange as a venue for bringing liquidity and trading by offering competitive pricing. Such competitive, differentiated pricing exists today on other options exchanges. The Exchange's goal is creating and increasing incentives to attract orders to the Exchange that will, in turn, benefit all market participants through increased liquidity at the Exchange. 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. Specifically, the Exchange does not believe that its proposal to make changes to its Fee for Removing Liquidity where a Customer or Professional removes liquidity in SPY Options, as per proposed note 3, will impose any undue burden on competition, as discussed below. The Exchange operates in a highly competitive market in which many sophisticated and knowledgeable market participants can readily and do send order flow to competing exchanges if they deem fee levels or rebate incentives at a particular exchange to be excessive or inadequate. Additionally, new competitors have entered the market and still others are reportedly entering the market shortly. These market forces ensure that the Exchange's fees and rebates remain competitive with the fee structures at other trading platforms. In that sense, the Exchange's proposal is actually pro-competitive because the Exchange is simply continuing its fees and rebates for Penny Pilot Options, and enhancing its fee structure in order to remain competitive in the current environment. The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In terms of intra-market competition, the Exchange notes that price differentiation among different market participants operating on the Exchange (e.g., Customer and Professional as opposed to others) is reasonable. Customer and Professional activity, for example, enhances liquidity on the Exchange for the benefit of all market participants and benefits all market participants by providing more trading opportunities, which attracts market makers. An increase in the activity of these market participants (particularly in response to pricing) in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Moreover, in this instance, the proposed changes to reduce the Fee for Removing Liquidity where Customer or Professional removes liquidity in SPY Options does not impose a burden on competition because the Exchange's execution and routing services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Additionally, the changes proposed herein are pro-competitive to the extent that they continue to allow the Exchange to promote and maintain order executions. 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.\22\ --------------------------------------------------------------------------- \22\ 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 [[Page 33575]] 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 CommentsUse 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-2016-070 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-2016-070. 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-2016-070 and should be submitted on or before June 16, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-12386 Filed 5-25-16; 8:45 am] BILLING CODE 8011-01-P
![33572 Federal Register / Vol. 81, No. 102 / Thursday, May 26, 2016 / Notices
Securities and Exchange Commission For the Commission, by the Division of at http://nasdaq.cchwallstreet.com, at
(‘‘Commission’’), pursuant to Section Trading and Markets, pursuant to delegated the principal office of the Exchange, and
authority.7
19(b)(1) of the Securities Exchange Act at the Commission’s Public Reference
of 1934 (‘‘Act’’) 1 and Rule 19b–4 Robert W. Errett, Room.
thereunder,2 a proposed rule change Deputy Secretary.
[FR Doc. 2016–12387 Filed 5–25–16; 8:45 am] II. Self-Regulatory Organization’s
relating to requiring listed companies to
Statement of the Purpose of, and
publicly disclose compensation or other BILLING CODE 8011–01–P
Statutory Basis for, the Proposed Rule
payments by third parties to board of
Change
director’s members or nominees. The
SECURITIES AND EXCHANGE
proposed rule change was published for In its filing with the Commission, the
COMMISSION
comment in the Federal Register on Exchange included statements
April 5, 2016.3 The Commission has [Release No. 34–77878; File No. SR– concerning the purpose of and basis for
received five comments on the proposal NASDAQ–2016–070]
the proposed rule change and discussed
by four commenters.4 any comments it received on the
Self-Regulatory Organizations; The
Section 19(b)(2) of the Act 5 provides NASDAQ Stock Market LLC; Notice of proposed rule change. The text of these
that within 45 days of the publication of Filing and Immediate Effectiveness of statements may be examined at the
notice of the filing of a proposed rule Proposed Rule Change To Amend places specified in Item IV below. The
change, or within such longer period up Options Pricing at Chapter XV, Section Exchange has prepared summaries, set
to 90 days as the Commission may 2 forth in sections A, B, and C below, of
designate if it finds such longer period the most significant aspects of such
May 20, 2016.
to be appropriate and publishes its statements.
Pursuant to Section 19(b)(1) of the
reasons for so finding or as to which the
Securities Exchange Act of 1934 A. Self-Regulatory Organization’s
self-regulatory organization consents,
(‘‘Act’’) 1, and Rule 19b–4 thereunder,2 Statement of the Purpose of, and
the Commission shall either approve the notice is hereby given that on May 10, Statutory Basis for, the Proposed Rule
proposed rule change, disapprove the 2016, The NASDAQ Stock Market LLC Change
proposed rule change, or institute (‘‘NASDAQ’’ or ‘‘Exchange’’) filed with
proceedings to determine whether the the Securities and Exchange 1. Purpose
proposed rule change should be Commission (‘‘SEC’’ or ‘‘Commission’’)
disapproved. The 45th day after The Exchange proposes certain
the proposed rule change as described
publication of the notice for this amendments to the NOM transaction
in Items I, II, and III, below, which Items
proposed rule change is May 20, 2016. have been prepared by the Exchange. fees set forth at Chapter XV, Section 2,
The Commission is extending this 45- The Commission is publishing this for executing and routing standardized
day time period for Commission action notice to solicit comments on the equity and index Penny Pilot Options.
on the proposed rule change. proposed rule change from interested Specifically, the Exchange proposes to
persons. reduce the fee for Customer 5 or
The Commission finds it appropriate Professional 6 that removes liquidity in
to designate a longer period within I. Self-Regulatory Organization’s SPY Options.7 The proposed change is
which to take action on the proposed Statement of the Terms of Substance of discussed below.
rule change so that it has sufficient time the Proposed Rule Change
to consider this proposed rule change. The Exchange currently assesses
The Exchange proposes to amend
Accordingly, the Commission, pursuant Customer, Professional, Firm,8 Non-
Chapter XV, entitled ‘‘Options Pricing,’’
to Section 19(b)(2) of the Act,6 and for NOM Market Maker,9 NOM Market
at Section 2, which governs pricing for
the reason noted above, designates July Exchange members using the NASDAQ 5 The term ‘‘Customer’’ or (‘‘C’’) applies to any
4, 2016, as the date by which the Options Market (‘‘NOM’’), the transaction that is identified by a Participant for
Commission shall either approve or Exchange’s facility for executing and clearing in the Customer range at The Options
disapprove, or institute proceedings to routing standardized equity and index Clearing Corporation (‘‘OCC’’) which is not for the
determine whether to disapprove, the options.3 The Exchange proposes to account of broker or dealer or for the account of a
amend certain Penny Pilot Options 4 ‘‘Professional’’ (as that term is defined in Chapter
proposed rule change (File No. SR– I, Section 1(a)(48)).
Nasdaq–2016–013). pricing. 6 The term ‘‘Professional’’ or (‘‘P’’) means any
The text of the proposed rule change person or entity that (i) is not a broker or dealer in
1 15 U.S.C. 78s(b)(1).
is available on the Exchange’s Web site securities, and (ii) places more than 390 orders in
2 17
listed options per day on average during a calendar
CFR 240.19b–4.
1 15 U.S.C. 78s(b)(1). month for its own beneficial account(s) pursuant to
3 See Securities Exchange Act Release No. 77481
2 17 CFR 240.19b–4. Chapter I, Section 1(a)(48). All Professional orders
(Mar. 30, 2016), 81 FR 19678. 3 References in this proposal to Chapter and shall be appropriately marked by Participants.
4 See Letters to Brent J. Fields, Secretary, 7 Options overlying Standard and Poor’s
Series refer to NOM rules, unless otherwise
Commission, from Andrew A. Schwartz, Associate indicated. Depositary Receipts/SPDRs (‘‘SPY’’) are based on
Professor of Law, University of Colorado Law 4 The Penny Pilot was established in March 2008 the SPDR exchange-traded fund (‘‘ETF’’), which is
School, Boulder, Colorado dated April 25 and 26, and was last extended in 2015. See Securities designed to track the performance of the S&P 500
2016; Bobby Franklin, President & CEO, National Exchange Act Release Nos. 57579 (March 28, 2008), Index.
sradovich on DSK3TPTVN1PROD with NOTICES
8 The term ‘‘Firm’’ or (‘‘F’’) applies to any
Venture Capital Association dated April 26, 2016; 73 FR 18587 (April 4, 2008) (SR–NASDAQ–2008–
John Hayes, Chair, Corporate Governance 026) (notice of filing and immediate effectiveness transaction that is identified by a Participant for
Committee, Business Roundtable dated April 26, establishing Penny Pilot); and 75283 (June 24, clearing in the Firm range at OCC.
9 The term ‘‘Non-NOM Market Maker’’ or (‘‘O’’) is
2016; and John Endean, President, American 2015), 80 FR 37347 (June 30, 2015) (SR–NASDAQ–
Business Conference dated April 28, 2016. 2015–063) (notice of filing and immediate a registered market maker on another options
5 15 U.S.C. 78s(b)(2).
effectiveness extending the Penny Pilot through exchange that is not a NOM Market Maker. A Non-
June 30, 2016). All Penny Pilot Options listed on NOM Market Maker must append the proper Non-
6 Id.
the Exchange can be found at http:// NOM Market Maker designation to orders routed to
7 17 CFR 200.30–3(a)(31). www.nasdaqtrader.com/Micro.aspx?id=phlx. NOM.
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![Federal Register / Vol. 81, No. 102 / Thursday, May 26, 2016 / Notices 33573
Maker,10 and Broker-Dealer 11 a $0.50 Second, the Exchange is adding ‘‘unless Further, ‘‘[n]o one disputes that
per contract Fee for Removing Liquidity otherwise stated’’ in note ‘‘. . .’’ for competition for order flow is ‘fierce.’
in Penny Pilot Options.12 The Exchange better readability and clarity. The . . . As the SEC explained, ‘[i]n the U.S.
proposes a slightly reduced Fee for sentence as modified will read: ‘‘To national market system, buyers and
Removing Customer and Professional determine the applicable percentage of sellers of securities, and the broker-
Liquidity in SPY Options, which are the total industry customer equity and ETF dealers that act as their order-routing
largest volume Penny Pilot Options option average daily volume, unless agents, have a wide range of choices of
traded on the Exchange. Excluding the otherwise stated, the Participant’s where to route orders for execution’;
proposed change in SPY Options, the Penny Pilot and Non-Penny Pilot [and] ‘no exchange can afford to take its
Penny Pilot Options Fee for Removing Customer and/or Professional volume market share percentages for granted’
Liquidity, as also the Penny Pilot that adds liquidity will be included.’’ because ‘no exchange possesses a
Options Rebate to Add Liquidity does monopoly, regulatory or otherwise, in
2. Statutory Basis
not change. the execution of order flow from broker
The Exchange believes that its dealers’. . . .’’ 20 Although the court and
Change 1—Penny Pilot Options: Change proposal to amend its Pricing Schedule
Fee for Removing Customer and the SEC were discussing the cash
is consistent with Section 6(b) of the equities markets, the Exchange believes
Professional Liquidity in SPY Options Act,14 in general, and furthers the
that these views apply with equal force
The Exchange proposes to modify the objectives of Section 6(b)(4) and (b)(5) of
to the options markets.
Penny Pilot Options fees and rebates the Act,15 in particular, in that it
schedule (per executed contract) to provides for the equitable allocation of The Exchange believes that the
slightly reduce the fee when a Customer reasonable dues, fees and other charges proposed change is reasonable,
or Professional removes liquidity in SPY among members and issuers and other equitable and not unfairly
Options. Specifically, the Exchange persons using any facility or system discriminatory for the following
proposes to make note 3 applicable to which the Exchange operates or reasons.
Customer and Professional Penny Pilot controls, and is not designed to permit Change 1—Penny Pilot Options: Change
Options in Chapter XV, Section 2(1), unfair discrimination between Fee for Removing Customer and
and to state that ‘‘A Customer or customers, issuers, brokers, or dealers. Professional Liquidity in SPY Options
Professional that removes liquidity in The Commission and the courts have
SPY Options will be assessed a fee of repeatedly expressed their preference The Exchange proposes to modify the
$0.47 per contract.’’ Currently, the fee for competition over regulatory Penny Pilot Options fees and rebates
for removing Penny Pilot Options intervention in determining prices, schedule (per executed contract) to
liquidity, which includes SPY Options, products, and services in the securities slightly reduce the fee when a Customer
is $0.50 per contract. markets. In Regulation NMS, while or Professional removes liquidity in SPY
The Exchange is proposing to adopting a series of steps to improve the Options. Specifically, the Exchange
decrease the noted SPY Option Fee for current market model, the Commission proposes to make note 3 applicable to
Removing Liquidity at this time because highlighted the importance of market Customer and Professional Penny Pilot
it believes that the proposed decrease forces in determining prices and SRO Options in Chapter XV, Section 2(1),
will incentivize Participants to send revenues and, also, recognized that and to state that ‘‘A Customer or
Customer and Professional Order flow current regulation of the market system Professional that removes liquidity in
to the Exchange. This enables the ‘‘has been remarkably successful in SPY Options will be assessed a fee of
Exchange to remain competitive with promoting market competition in its $0.47 per contract.’’ Currently, the fee is
other options exchanges. broader forms that are most important to $0.50 per contract.
The Exchange is also making two investors and listed companies.’’ 16
housekeeping changes in NOM Chapter Likewise, in NetCoalition v. Securities The Exchange is proposing to
XV, Section 2(1). First, the Exchange is and Exchange Commission 17 decrease the noted SPY Option-related
correcting a typo in Penny Pilot Options (‘‘NetCoalition’’) the D.C. Circuit upheld fee at this time because it believes that
Rebate to Add Liquidity and indicating the Commission’s use of a market-based the proposed decrease will incentivize
that note ‘‘d’’ is applicable to approach in evaluating the fairness of Participants to send Customer and
Professional just as it is to Customer.13 market data fees against a challenge Professional Order flow to the
claiming that Congress mandated a cost- Exchange. This enables the Exchange to
10 The term ‘‘NOM Market Maker’’ or (‘‘M’’) is a based approach.18 As the court remain competitive with other options
Participant that has registered as a Market Maker on emphasized, the Commission ‘‘intended exchanges.
NOM pursuant to Chapter VII, Section 2, and must in Regulation NMS that ‘market forces,
also remain in good standing pursuant to Chapter The Exchange’s proposal to reduce
VII, Section 4. In order to receive NOM Market rather than regulatory requirements’ the noted SPY Option Fee for Removing
Maker pricing in all securities, the Participant must play a role in determining the market Liquidity is reasonable because NOM
be registered as a NOM Market Maker in at least one data . . . to be made available to Participants will continue to be
security. investors and at what cost.’’ 19
11 The term ‘‘Broker-Dealer’’ or (‘‘B’’) applies to
incentivized, even more so with the
any transaction which is not subject to any of the proposed fee reduction, to send order
other transaction fees applicable within a particular NASDAQ–2016–055) (notice of filing and flow to NOM.
category. immediate effectiveness), wherein the Exchange
12 Customer, Professional, Firm, Non-NOM
proposed to make note ‘‘d’’ applicable to The proposed rule change is
Professional just as it is to Customer. reasonable because it continues to
Market Maker, NOM Market Maker, and Broker-
sradovich on DSK3TPTVN1PROD with NOTICES
14 15 U.S.C. 78f(b).
Dealer are NOM Participants. The term 15 15 U.S.C. 78f(b)(4), (5).
encourage market participant behavior
‘‘Participant’’ or ‘‘Options Participant’’ means a through the fees and rebates system,
16 Securities Exchange Act Release No. 51808
firm, or organization that is registered with the
Exchange pursuant to Chapter II of these Rules for (June 29, 2005), 70 FR 37496 at 37499 (File No. S7– which is an accepted methodology
purposes of participating in options trading on 10–04) (‘‘Regulation NMS Adopting Release’’) [sic].
17 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 20 See id. at 539 (quoting Securities Exchange Act
NOM as a ‘‘Nasdaq Options Order Entry Firm’’ or
‘‘Nasdaq Options Market Maker’’. 2010). Commission at [sic] Release No. 59039 (December
13 See Securities Exchange Act Release No. 77661 18 See id. at 534–535. 2, 2008), 73 FR 74770 at 74782–74783 (December
(April 20, 2016), 81 FR 24668 (April 26, 2016) (SR– 19 See id. at 537. 9, 2008) (SR–NYSEArca–2006–21)).
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![Federal Register / Vol. 81, No. 102 / Thursday, May 26, 2016 / Notices 33575
to determine whether the proposed rule For the Commission, by the Division of DEPARTMENT OF STATE
should be approved or disapproved. Trading and Markets, pursuant to delegated
authority.23 [Public Notice: 9584]
IV. Solicitation of Comments Robert W. Errett,
Annual Certification of Shrimp-
Deputy Secretary.
Interested persons are invited to Harvesting Nations
[FR Doc. 2016–12386 Filed 5–25–16; 8:45 am]
submit written data, views and
BILLING CODE 8011–01–P AGENCY: Bureau of Oceans and
arguments concerning the foregoing,
International Environmental and
including whether the proposed rule Scientific Affairs, Department of State.
change is consistent with the Act.
DEPARTMENT OF STATE ACTION: Certification.
Comments may be submitted by any of
the following methods: [Public Notice: 9586] SUMMARY: On May 3, 2016, the
Electronic Comments Department of State certified that 14
Culturally Significant Objects Imported
shrimp-harvesting nations have a
for Exhibition Determinations: ‘‘Ed
• Use the Commission’s Internet Ruscha and the Great American West’’
regulatory program comparable to that
comment form (http://www.sec.gov/ of the United States governing the
Exhibition
rules/sro.shtml); or incidental taking of the relevant species
SUMMARY: Notice is hereby given of the of sea turtles in the course of
• Send an email to rule-comments@
following determinations: Pursuant to commercial shrimp harvesting and that
sec.gov. Please include File Number SR– the authority vested in me by the Act of the particular fishing environments of
NASDAQ–2016–070 on the subject line. October 19, 1965 (79 Stat. 985; 22 U.S.C. 26 shrimp-harvesting nations and one
Paper Comments 2459), E.O. 12047 of March 27, 1978, the economy do not pose a threat of the
Foreign Affairs Reform and incidental taking of covered sea turtles
• Send paper comments in triplicate Restructuring Act of 1998 (112 Stat. in the course of such harvesting.
to Secretary, Securities and Exchange 2681, et seq.; 22 U.S.C. 6501 note, et DATES: This notice is effective on May
Commission, 100 F Street NE., seq.), Delegation of Authority No. 234 of 26, 2016.
Washington, DC 20549–1090. October 1, 1999, Delegation of Authority FOR FURTHER INFORMATION CONTACT:
No. 236–3 of August 28, 2000 (and, as Section 609 Program Manager, Office of
All submissions should refer to File appropriate, Delegation of Authority No.
Number SR–NASDAQ–2016–070. This Marine Conservation, Bureau of Oceans
257 of April 15, 2003), I hereby and International Environmental and
file number should be included on the determine that the objects to be
subject line if email is used. To help the Scientific Affairs, Department of State,
included in the exhibition ‘‘Ed Ruscha 2201 C Street NW., Washington, DC
Commission process and review your and the Great American West,’’
comments more efficiently, please use 20520–2758; telephone: (202) 647–3263;
imported from abroad for temporary email: DS2031@state.gov.
only one method. The Commission will exhibition within the United States, are
post all comments on the Commission’s SUPPLEMENTARY INFORMATION: Section
of cultural significance. The objects are
Internet Web site (http://www.sec.gov/ 609 of Public Law 101–162 (‘‘Sec. 609’’)
imported pursuant to loan agreements
rules/sro.shtml). Copies of the prohibits imports of certain categories of
with the foreign owners or custodians.
shrimp unless the President certifies to
submission, all subsequent I also determine that the exhibition or
the Congress by May 1, 1991, and
amendments, all written statements display of the exhibit objects at the Fine
annually thereafter, that either: (1) The
with respect to the proposed rule Arts Museums of San Francisco, de
harvesting nation has adopted a
change that are filed with the Young Museum, San Francisco,
program governing the incidental
Commission, and all written California, from on or about July 16,
capture of sea turtles in its commercial
communications relating to the 2016, until on or about October 9, 2016,
shrimp fishery comparable to the
proposed rule change between the and at possible additional exhibitions or
program in effect in the United States
Commission and any person, other than venues yet to be determined, is in the
and has an incidental take rate
those that may be withheld from the national interest. I have ordered that
comparable to that of the United States;
public in accordance with the Public Notice of these Determinations
or (2) the particular fishing environment
provisions of 5 U.S.C. 552, will be be published in the Federal Register.
in the harvesting nation does not pose
available for Web site viewing and FOR FURTHER INFORMATION CONTACT: For
a threat of the incidental taking of sea
printing in the Commission’s Public further information, including a list of turtles. The President has delegated the
Reference Room, 100 F Street NE., the imported objects, contact the Office authority to make this certification to
Washington, DC 20549, on official of Public Diplomacy and Public Affairs the Department of State (‘‘the
in the Office of the Legal Adviser, U.S. Department’’). The Department’s
business days between the hours of
Department of State (telephone: 202– Revised Guidelines for the
10:00 a.m. and 3:00 p.m. Copies of the
632–6471; email: section2459@ Implementation of Section 609 were
filing also will be available for state.gov). The mailing address is U.S.
inspection and copying at the principal published in the Federal Register on
Department of State, L/PD, SA–5, Suite July 8, 1999, at 64 FR 36946.
office of the Exchange. All comments 5H03, Washington, DC 20522–0505.
received will be posted without change; On May 3, 2016, the Department
Dated: May 19, 2016. certified 14 nations on the basis that
the Commission does not edit personal
Mark Taplin, their sea turtle protection programs are
sradovich on DSK3TPTVN1PROD with NOTICES
identifying information from
submissions. You should submit only Principal Deputy Assistant Secretary, Bureau comparable to that of the United States:
of Educational and Cultural Affairs, Colombia, Costa Rica, Ecuador, El
information that you wish to make Department of State. Salvador, Gabon, Guatemala, Guyana,
available publicly. All submissions [FR Doc. 2016–12617 Filed 5–25–16; 8:45 am] Honduras, Mexico, Nicaragua, Nigeria,
should refer to File Number SR– Pakistan, Panama, and Suriname. The
BILLING CODE 4710–05–P
NASDAQ–2016–070 and should be Department also certified 26 shrimp-
submitted on or before June 16, 2016. 23 17 CFR 200.30–3(a)(12). harvesting nations and one economy as
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Document Created: 2016-05-26 01:13:31
Document Modified: 2016-05-26 01:13:31
| 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 | 81 FR 33572 |
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