[Federal Register Volume 77, Number 249 (Friday, December 28, 2012)]
[Notices]
[Pages 76572-76574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31153]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68502; File No. SR-NASDAQ-2012-139]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Port Fees and a Participant Fee
December 20, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on December 12, 2012, 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
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 the
Substance of the Proposed Rule Change
NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,''
governing pricing for NASDAQ members using the NASDAQ Options Market
(``NOM''), NASDAQ's facility for executing and routing standardized
equity and index options. Specifically, NOM proposes to amend Section 3
entitled ``NASDAQ Options Market--Access Services'' to increase all
port fees. The Exchange also proposes to adopt a Participant Fee.
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments related to fee increases
will be operative on January 2, 2013.
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. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries,
[[Page 76573]]
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
NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,''
at Section 3 entitled ``NASDAQ Options Market--Access Services'' to
increase all port fees. The Exchange believes that these increases are
necessary to keep pace with escalating technology costs. The Exchange
also proposes adopting a Participant Fee to recoup costs associated
with the administration of the Exchange's members.
Port Fees
The Exchange currently assesses certain port fees in Section 3(b)
of Chapter XV. Specifically, the Exchange assesses a $500 per port, per
month fee on Order Entry Ports,\3\ CTI Ports,\4\ OTTO Ports,\5\ ITTO
Ports,\6\ BONO Ports,\7\ Order Entry DROP Ports \8\ and OTTO Drop
Ports.\9\ The Exchange assesses a $250 per port, per month fee for SQF
Ports.\10\ The Exchange is proposing to increase the Order Entry Port,
CTI Port, OTTO Port, ITTO Port, BONO Port, Order Entry DROP Port and
OTTO Drop Port fees from $500 to $550 per port, per month. The Exchange
also proposes to increase the SQF Port Fee from $250 to $550 per port,
per month. The Exchange believes that these increases are necessary to
keep pace with escalating technology costs.
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\3\ The Order Entry Port Fee is a connectivity fee in connection
with routing orders to the Exchange via an external order entry
port. NOM Participants access the Exchange's network through order
entry ports. A NOM Participant may have more than one order entry
port.
\4\ CTI offers real-time clearing trade updates. A real-time
clearing trade update is a message that is sent to a member after an
execution has occurred and contains trade details. The message
containing the trade details is also simultaneously sent to The
Options Clearing Corporation. The trade messages are routed to a
member's connection containing certain information. The
administrative and market event messages include, but are not
limited to: System event messages to communicate operational-related
events; options directory messages to relay basic option symbol and
contract information for options traded on the Exchange; complex
strategy messages to relay information for those strategies traded
on the Exchange; trading action messages to inform market
participants when a specific option or strategy is halted or
released for trading on the Exchange; and an indicator which
distinguishes electronic and non-electronically delivered orders.
\5\ OTTO provides a method for subscribers to send orders and
receive status updates on those orders. OTTO accepts limit orders
from system subscribers, and if there is a matching order, the
orders will execute. Non-matching orders are added to the limit
order book, a database of available limit orders, where they are
matched in price-time priority.
\6\ ITTO is a data feed that provides quotation information for
individual orders on the NOM book, last sale information for trades
executed on NOM, and Order Imbalance Information as set forth in NOM
Rules Chapter VI, Section 8. ITTO is the options equivalent of the
NASDAQ TotalView/ITCH data feed that NASDAQ offers under NASDAQ Rule
7023 with respect to equities traded on NASDAQ. As with TotalView,
members use ITTO to ``build'' their view of the NOM book by adding
individual orders that appear on the feed, and subtracting
individual orders that are executed. See Chapter VI, Section 1 at
subsection (a)(3)(A).
\7\ BONO\SM\ is a data feed that provides the NOM Best Bid and
Offer (``NOM NBBO'') and last sale information for trades executed
on NOM. The NOM NBBO and last sale information are identical to the
information that NOM sends the Options Price Regulatory Authority
(``OPRA'') and which OPRA disseminates via the consolidated data
feed for options. BONO is the options equivalent of the NASDAQ Basic
data feed offered for equities under NASDAQ Rule 7047. See Chapter
VI, Section 1 at subsection (a)(3)(B).
\8\ The DROP interface provides real time information regarding
orders sent to NOM and executions that occurred on NOM. The DROP
interface is not a trading interface and does not accept order
messages.
\9\ The OTTO DROP data feed will provide real-time information
regarding orders entered through OTTO and the execution of those
orders. The OTTO DROP data feed is not a trading interface and does
not accept order messages.
\10\ SQF ports are ports that receive inbound quotes at any time
within that month. The SQF Port allows a NOM Participant to access
information such as execution reports and other relevant data
through a single feed. For example, this data would show which
symbols are trading on NOM and the current state of an options
symbol (i.e., open for trading, trading, halted or closed). Auction
notifications and execution reports are also available.
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Participant Fee
The Exchange is proposing to adopt a Participant Fee of $500 per
month, per participant applicable to NOM Participants. The Exchange is
proposing to create a new Sec. 10 in Chapter XV entitled ``Participant
Fee--Options.'' The Exchange believes that the Participant Fee would
recoup costs associated with the administration of the Exchange's
members.
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\11\ in general, and with
Section 6(b)(4) of the Act,\12\ in particular, in that they provide 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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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the adoption of a Participant Fee for
NOM Participants of $500 per month is reasonable because the Exchange
is seeking to recoup costs related to membership administration. The
proposed fee is less than similar fees at other options exchanges.\13\
In addition, the Exchange believes that the adoption of a Participant
Fee is equitable and not unfairly discriminatory because the
Participant Fee will be the same for every NOM Participant.
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\13\ See the Chicago Board Options Exchange, Incorporated's Fees
Schedule. Per month a Market Maker Trading Permit is $5,500, a SPX
Tier Appointment is $3,000, a VIX Tier Appointment is $2,000, a
Floor Broker Trading Permit is $9,000, an Electronic Access Permit
is $1,600 and there is no access fee for a CBSX Trading Permit. See
also the International Securities Exchange LLC's Schedule of Fees.
Per month an Electronic Access Member is assessed $500.00 for
membership and a market maker is assessed from $2,000 to $4,000 per
membership depending on the type of market maker. See also C2
Options Exchange, Incorporated's Fees Schedule. Per month, a market-
maker is assessed a $5,000 permit fee, an Electronic Access Permit
is assessed a $1,000 permit fee and a SPXM Tier appointment is
assessed a $4,000 fee after March 31, 2013. See also NYSE Arca,
Inc.'s Fee Schedule. Per month, a Floor Broker, Office and Clearing
Firm is assessed a $1,000 per month fee for the first Options
Trading Permit (``OTP'') and $250 thereafter, and a market maker is
assessed a $4,000 per month fee for one to four OTPs and $2,000
thereafter. As of January 2, 2012, NASDAQ OMX PHLX LLC (``Phlx'')
will assess members transacting business on Phlx a $2,100 fee per
month and members not transacting business on Phlx a $7,500 fee per
month. See Phlx's Pricing Schedule and SR-Phlx-2012-140 (not yet
published).
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The Exchange believes that the increase to the Port Fees is
reasonable because it would allow the Exchange to keep pace with
increasing technology costs. The Exchange believes that the increase to
the Order Entry Port, CTI Port, OTTO Port, ITTO Port, BONO Port, Order
Entry DROP Port and OTTO Drop Port fees from $500 to $550 per port, per
month is equitable and not unfairly discriminatory because the Exchange
is seeking to assess the same fees for all of its ports, including the
SQF Port Fee. The SQF Port Fee will increase from $250 to $550, which
is the greatest increase. The Exchange believes that this increase is
equitable and not unfairly discriminatory, as mentioned, because the
Exchange would assess the same rate for all ports to all NOM
Participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule changes will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. The Exchange
believes that its fees are competitive with fees at other options
exchanges.
[[Page 76574]]
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.\14\ 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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\14\ 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-2012-139 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File Number SR-NASDAQ-2012-139. 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 such filing also will be available
for inspection and copying at the principal office of NASDAQ. 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-2012-139 and should
be submitted on or before January 18, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31153 Filed 12-27-12; 8:45 am]
BILLING CODE 8011-01-P