[Federal Register Volume 77, Number 77 (Friday, April 20, 2012)]
[Notices]
[Pages 23788-23791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9529]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66817; File No. SR-NASDAQ-2012-050]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Routing Fees
April 16, 2012.
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 April 11, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange
[[Page 23789]]
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by NASDAQ.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASDAQ Stock Market LLC proposes to modify Chapter XV, Section
2, governing pricing for NASDAQ members using the NASDAQ Options Market
(``NOM''), NASDAQ's facility for executing and routing standardized
equity and index options.
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaq.cchwallstreet.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change. 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 purpose of this rule filing is to recoup costs that the
Exchange incurs for routing and executing Customer, Firm, Market Maker
and Professional orders in equity and index options to the BATS
Exchange, Inc. (``BATS''). The Exchange's Routing Fees are located at
Chapter XV, Section 2, entitled ``NASDAQ Options Market-Fees and
Rebates,'' and are as follows:
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Exchange Customer Firm MM Professional
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BATS............................................ $0.55 $0.55 $0.55 $0.55
BOX............................................. 0.11 0.55 0.55 0.11
CBOE............................................ 0.11 0.55 0.55 0.31
CBOE orders greater than 99 contracts in NDX, 0.29 0.55 0.55 0.31
MNX ETFs, ETNs & HOLDRs........................
C2.............................................. 0.55 0.55 0.55 0.55
ISE............................................. 0.11 0.55 0.55 0.29
ISE Select Symbols *............................ 0.31 0.55 0.55 0.39
NYSE Arca Penny Pilot........................... 0.55 0.55 0.55 0.55
NYSE Arca Non Penny Pilot....................... 0.11 0.55 0.55 0.11
NYSE AMEX....................................... 0.11 0.55 0.55 0.31
PHLX (for all options other than PHLX Select 0.11 0.55 0.55 0.31
Symbols).......................................
PHLX Select Symbols **.......................... 0.50 0.55 0.55 0.51
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* These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing
Liquidity in Select Symbols. See ISE's Schedule of Fees for the complete list of symbols that are subject to
these fees.
** These fees are applicable to orders routed to PHLX that are subject to Rebates and Fees for Adding and
Removing Liquidity in Select Symbols. See PHLX's Pricing Schedule for the complete list of symbols that are
subject to these fees.
The Exchange is proposing to amend the current BATS Routing Fees by
renaming those fees as ``BATS Penny.'' \3\ The Exchange is not
proposing to amend the current rate of $0.55 per contract for
Customers, Firms, Market Makers, and Professionals but proposes to
apply those fees solely to Penny options routed to BATS.
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\3\ BATS defines Penny options as those issues that are quoted
pursuant to BATS Rule 21.5, Interpretation and Policy .01.
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The Exchange proposes to create new Routing Fees to BATS for non-
Penny options. BATS recently adopted a $0.75 per contract non-Penny fee
for customers that remove liquidity from the BATS Options order book
and a $0.80 per contract non-Penny fee for professionals, firms and
market makers that remove liquidity from the BATS Options order
book.\4\ The Exchange is proposing to adopt BATS non-Penny Routing Fees
to account for the new BATS fees to remove liquidity and other routing
costs incurred by the Exchange when routing to BATS, as follows:
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\4\ See SR-BATS-2012-015.
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Exchange Customer Firm MM Professional
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BATS non-Penny.................................. $0.86 $0.91 $0.91 $0.91
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NASDAQ Options Services LLC (``NOS''), a member of the Exchange, is
the Exchange's exclusive order router. Each time NOS routes to away
markets NOS is charged a $0.06 clearing fee and, in the case of certain
exchanges, a transaction fee is also charged in certain symbols, which
are passed through to the Exchange. The Exchange currently recoups
clearing and transaction charges incurred by the Exchange when
Customer, Firm, Market Maker and Professional orders are routed to an
away market. The Exchange currently recoups clearing and transaction
charges incurred by the Exchange as well as certain other costs
incurred by the Exchange when routing to away markets, such as
administrative and technical costs associated with operating NOS, the
Exchange's exclusive order router; the Exchange's membership fees at
away markets; and technical costs associated with routing.\5\
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\5\ In addition to membership fees and transaction fees, the
Exchange also incurs an Options Regulatory Fee when routing to an
away market that assesses that fee.
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The Exchange is adopting BATS non-Penny Routing Fees to account for
the BATS remove fees of $0.75 per contract for customer orders and
$0.80 per contract for professional, firm and market maker orders, the
$0.06 clearing
[[Page 23790]]
cost and another $0.05 per contract associated with administrative and
technical costs associated with operating NOS.
As with all fees, the Exchange may adjust these Routing Fees in
response to competitive conditions by filing a new proposed rule
change.
2. Statutory Basis
NASDAQ NASDAQ [sic] believes that the proposed rule changes are
consistent with the provisions of Section 6 of the Act,\6\ in general,
and with Section 6(b)(4) 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.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed amendment to the current
BATS Routing Fees to rename those fees as ``BATS Penny'' and apply
those fees to Penny options routed to BATS and adopt separate Routing
Fees for non-Penny options routed to BATS is reasonable because the two
separate categories take into account the different fees to remove
liquidity assessed by BATS for non-Penny versus Penny options. The
Exchange seeks to recoup costs incurred when routing orders to BATS on
behalf of its members.
The Exchange believes that the proposed amendment to the current
BATS Routing Fees to rename those fees as ``BATS Penny'' and apply
those fees to Penny options routed to BATS and adopt separate Routing
Fees for non-Penny options routed to BATS is equitable and not unfairly
discriminatory because the Exchange will uniformly apply the BATS Penny
as well as BATS non-Penny Routing Fees to its members based on the type
of options orders routed to BATS.\8\
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\8\ See note 3.
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The proposed BATS non-Penny Routing Fees are reasonable because
they seek to recoup costs that are incurred by the Exchange when
routing Customer, Firm, Market Maker and Professional orders to BATS on
behalf of members. Each destination market's transaction charge varies
and there is a standard clearing charge for each transaction incurred
by the Exchange along with other administrative and technical costs
that are incurred by the Exchange. The Exchange believes that the
proposed Routing Fees would enable the Exchange to recover the remove
fees assessed by BATS for non-Penny options, plus clearing and other
administrative and technical fees for the execution of such orders when
routed to BATS. The Exchange also believes that the proposed BATS non-
Penny Routing Fees are equitable and not unfairly discriminatory
because they would be uniformly applied to all non-Penny orders that
are routed to BATS.
With respect to the Firm and Market Maker Routing Fees, the
Exchange initially proposed to assess fixed Routing Fees of $0.55 per
contract applicable to all away markets.\9\ The Exchange noted in that
rule change that pricing on the various options exchanges varies
significantly from exchange to exchange for non-Customer orders.
Accordingly, the Exchange proposed a $0.55 per contract side Routing
Fee in order to capture the majority of the transaction and clearing
fees for Firm and Market Maker orders, while making the Exchange's
Routing Fees easier to calculate and predict for members whose
proprietary orders are routed away. In addition, fixed Routing Fees are
easier to comprehend by the members whose orders are routed away.
Further, predicting, calculating and charging back ``pass-through''
fees is an unduly burdensome, expensive and complicated task for
members whose orders are routed away. The Exchange noted that fixed
Routing Fees for Firm and Market Maker orders should ease the burden,
expense and complexity of this task. Furthermore, fixed fees are easier
to manage and maintain for the Exchange, ensuring accurate billing and
accounting. The Exchange believes its proposal to increase the BATS
non-Penny Customer Routing Fee from $0.55 per contract to $0.86 per
contract and the Professional, Firm and Market Maker Routing Fees from
$0.55 per contract to $0.91 per contract is reasonable because the fees
proposed by BATS are not within the range of fees assessed by other
exchanges since the recent increase in the BATS fee to remove liquidity
from $0.44 per contract to $0.75 per contract for customer non-Penny
options and from $0.44 per contract to $0.80 for professionals, firms
and market makers. The Exchange believes it is reasonable to recoup the
BATS remove fees plus the clearing and other costs to recoup Routing
Fees. The Exchange believes that the increase to the Firm and Market
Maker non-Penny BATS Routing Fees are equitable and not unfairly
discriminatory because, as previously mentioned, those fees would be
similarly calculated for Customers, Firms, Market Makers and
Professionals.\10\ Additionally, the non-Penny BATS Routing Fees would
be uniformly assessed for all non-Penny orders routed to BATS.
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\9\ See Securities Exchange Act Release No. 61666 (March 5,
2010), 75 FR 12318 (March 15, 2010) (SR-NASDAQ-2010-027).
\10\ The Exchange's proposed non-Penny BATS Routing Fees are
calculated similarly for all participants by adding the fee to
remove liquidity assessed by BATS for the particular market
participant plus a fee of $.11 per contract which represents
clearing and other costs noted herein.
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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.
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.\11\ At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2012-050 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 23791]]
100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2012-050. 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
a.m. and 3 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-2012-050 and should
be submitted on or before May 11, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
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\12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-9529 Filed 4-19-12; 8:45 am]
BILLING CODE 8011-01-P