[Federal Register Volume 78, Number 62 (Monday, April 1, 2013)]
[Notices]
[Pages 19549-19552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-07475]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69236; File No. SR-NASDAQ-2013-049]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Fees and Rebates for Mini Options
March 26, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on March 15, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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
[[Page 19550]]
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify Chapter XV, Section 2, entitled
``NASDAQ Options Market--Fees and Rebates,'' which governs pricing for
NASDAQ members using the NASDAQ Options Market (``NOM''), NASDAQ's
facility for executing and routing standardized equity and index
options, to establish fees and rebates for the option contracts
overlying 10 shares of a security (``Mini Options'') applicable to
NASDAQ members using NOM.\3\
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\3\ See Securities Exchange Act Release No. 68720 (Jan. 24,
2013), 78 FR 6382 (Jan. 30, 2013).
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The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at the Exchange's principal office, 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 purpose of this proposal is to modify Chapter XV, Section 2,
entitled ``NASDAQ Options Market--Fees and Rebates,'' to establish fees
and rebates for Mini Options applicable to NASDAQ members using NOM.
Specifically, the Exchange is proposing to assess market
participants on a per trade basis the following fees and rebates on
Mini Options:
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Professional,
firm, broker/
Customer dealer, non- NOM market
NOM market maker
maker
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Rebate to Add Liquidity......................................... $0.030 $0.000 $0.015
Fee to Remove Liquidity......................................... $0.049 $0.049 $0.049
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The Exchange believes that the $0.030 and $0.015 rebate per trade
for Customers and NOM Market Makers, respectively, should encourage
these market participants to trade Mini Options on NOM and serves as a
means to incentivize order flow and to promote this new infant product
for trading on NOM. The Exchange is not offering at this time any
rebate per trade to Professionals, Firms, Broker/Dealers, or Non-NOM
Market Makers.
The Fee to Remove Liquidity for all market participants will be
$0.049 on a per trade basis. The Exchange believes that this is an
equitable allocation of reasonable fees since the Exchange is assessing
all market participants the same rate to transact trades in Mini
Options.
On a per trade basis, the Rebate to Add Liquidity or Fee to Remove
Liquidity will be rounded to the nearest $0.01 using standard rounding
rules. For example, a NOM Market Maker adding liquidity is contra to a
Customer removing liquidity for seven contracts. The NOM Market Maker's
total Rebate to Add Liquidity for this transaction will be $0.105
rounded to $0.11 and the Customer will be assessed $0.343 rounded to
$0.34.
Additionally, Mini Options volume will not count toward the Penny
Pilot and Non-Penny pilot tiers, where applicable.
While the changes to the NOM rules pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative on March 18, 2013.
2. Statutory Basis
The Exchange believes that its proposal to amend its rules is
consistent with Section 6(b) of the Act \4\ in general, and furthers
the objectives of Sections 6(b)(4) of the Act \5\ in particular, in
that it is an equitable allocation of reasonable fees and other charges
among Exchange members and other persons using its facilities.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
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Even though the Exchange is proposing lower per trade fees as
compared to standard option contracts, as it believes is necessary for
the product to trade on NOM due to its smaller exercise and assignment
value of a Mini Option, the Exchange recognizes the costs to the
Exchange to process quotes and orders in Mini Options, perform
regulatory surveillance and retain quotes and orders for archival
purposes will be comparable to the same as a for a standard contract.
The Exchange believes, therefore, that adopting the proposed fees for
Mini Options is appropriate, not unreasonable, not unfairly
discriminatory and not burdensome on competition between participants
or between the Exchange and other exchanges in the listed options
market place.
Specifically, the proposed Fee to Remove Liquidity is equitable and
not unfairly discriminatory because all market participants will be
charged the same fee of $0.049 per contract. The Exchange believes that
treating all market participants equally, in turn, will increase order
flow and will provide increased liquidity to the market and benefit all
participants. The Exchange also believes that the proposed $0.049 per
contract Fee to Remove Liquidity is equitable and not unfairly
discriminatory because in the current U.S. options market many of the
standard contracts are quoted in pennies. Under this pricing structure,
the minimum penny tick increment equates to a $1.00 economic value
difference per contract, given that a single standardized U.S. options
contract covers 100 shares of the underlying stock. Where contracts are
quoted in $0.05 increments (non-pennies), the economic value per tick
is $5.00 in proceeds to the investor transacting in these contracts.
Since the Exchange is planning to file to permit Mini Options to have
the same minimum tick as permitted for standard options, including
penny increments, the minimum penny tick increment equates to a $0.10
economic value in comparison to fee structures on
[[Page 19551]]
standard options on the make-take exchanges, including NOM, where
securities quoted in penny increments are commonly in the $0.30 to
$0.45 per contract range. A $0.30 per contract rebate in a penny quoted
security is a rebate equivalent to 30% of the value of the minimum
tick. A $0.45 per contract fee in a penny quoted security is a charge
equivalent to 45% of the value of the minimum tick. For Mini Options
the proposed Fee to Remove Liquidity is $0.049 or 49% of the proposed
value of that minimum tick, but still less than 50% of the proposed
value of that minimum tick as in the case with standard options trading
in penny increments today.
The Exchange believes that the proposed Rebate to Add Liquidity for
Mini Options is equitable and not unfairly discriminatory because
Customers and NOM Market Makers, receiving rebates of $0.030 and $0.015
per trade respectively, would be the only market participants to
receive a rebate. The Exchange believes that it is reasonable to assess
Customers and NOM Market Makers lower fees as compared to other market
participants because these market participants contribute to the market
in terms of liquidity and trading environment as compared to other
market participants. For NOM Market Makers this includes its specific
Market Maker quoting obligations and certain other obligations to the
market that do not apply to other market participants.\6\ The Exchange
believes that the differentiation between the rebates offered to
Customers as compared with all other market participants, including NOM
Market Makers, is justified and not unfairly discriminatory because it
is in recognition of the important contribution that Customers provide
to the market place. Increased Customer liquidity benefits all market
participants seeking to provide liquidity to Customers.
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\6\ See Exchange Rules Section VII, Market Participants,
Sections 5, Obligations of Market Makers, and Section 6, Market
Maker Quotations.
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Finally, the Exchange believes that the proposed fees and rebates
are reasonable and not unfairly discriminatory because the fees are
consistent with price differentiation that exists today on all option
exchanges.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that by
offering Mini Options it will encourage order flow to be directed to
the Exchange, which will benefit all market participants by increasing
liquidity on the Exchange. The Exchange will assess a Fee to Remove
Liquidity of $0.049 per contract on all market participants,
essentially treating market participants equally and ignoring their
varying contributions to the market. Additionally, Customers and NOM
Market Makers are eligible for a Rebate to Add Liquidity. The Exchange
believes these pricing amendments do not impose a burden on competition
but rather that the proposed rule change will continue to promote
competition on the Exchange and position the Exchange as an attractive
alternative when compared to other options exchanges.
The Exchange believes that the adoption of the proposed fees and
rebates for Mini Options, which will be listed for trading on one or
more exchange, will not impose any unnecessary burden on intramarket
competition. The Exchange operates in a highly competitive market,
comprised of eleven exchanges, where market participants are highly
knowledgeable and can easily and without any material impediments,
direct Mini Options orders to the options exchange that they believe is
the most attractive for their business.
Accordingly, the fees that are assessed and the rebates paid by the
Exchange described in the above proposal are influenced by these robust
market forces and therefore must remain competitive with fees charged
and rebates paid by other venues on other products and therefore must
continue to be reasonable and equitably allocated.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor 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.\7\ 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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\7\ 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-2013-049 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 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-049. 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-2013-049 and should
be submitted on or before April 22, 2013.
[[Page 19552]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-07475 Filed 3-29-13; 8:45 am]
BILLING CODE 8011-01-P