[Federal Register Volume 78, Number 188 (Friday, September 27, 2013)]
[Notices]
[Pages 59740-59743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23539]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70470; File No. SR-NASDAQ-2013-117]
Self-Regulatory Organizations; the NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Make Minor Modifications To Pricing Incentive Programs Under NASDAQ's
Schedule of Fees and Credits Applicable To Trading on the NASDAQ
Options Market
September 23, 2013.
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 September 9, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I and II
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.
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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 is proposing to make minor modifications to pricing
incentive programs under NASDAQ's schedule of fees and credits
applicable to trading on the NASDAQ Options Market (``NOM'').
Specifically, NASDAQ is proposing to exclude from volume-based pricing
calculations any trading day on which NOM is closed for trading due to
early closing or a market-wide trading halt. This exclusion exists
today for the
[[Page 59741]]
trading of [sic] on NASDAQ's equities trading facility.\3\
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\3\ NASDAQ is not proposing to exclude trading on the day of the
Russell Reconstitution from the calculation of volume-based pricing
for the trading of options. The Russell Reconstitution has little or
no impact on options trading because the options market does not
operate a closing cross such as occurs on the equities market. Thus,
there is little or no impact on the volume of options trades.
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The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com, at NASDAQ'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, NASDAQ 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 those 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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ Options Rule Chapter XV, Section 2 contains a number of
pricing incentive programs that are designed to encourage member
participation in NOM by increasing rebates or reducing fees for firms
that trade on NOM in increasingly higher volumes.
NASDAQ has determined for purposes of calculating Monthly Volume
Tiers under Chapter XV, Section 2, any day that the market is not open
for the entire trading day should be excluded from such calculation.
This formulation would exclude, for example, days on which the market
closes early for holiday observances. It would also exclude days where
NOM declares a trading halt in all securities or honors a market-wide
halt initiated by another market. This would apply to the market-wide
trading halt of approximately three hours on August 22, 2013, which NOM
plans to exclude from Monthly Volume Tiers for the month of August.
The proposed rule change will impacted [sic] billing rates for all
eight Monthly Volume Tiers by which NOM determines the rebate per share
for firms that add Customer and/or Professional liquidity based on
increasing percentages of total industry customer equity and ETF option
average daily volume (``ADV'') contracts per day in a month (Tiers 1
through 4). It would also apply to the calculation of Average Daily
Volume for a specific member (Tiers 5 through 8). The rebates range
from $0.25 to $0.48 per contract:
Tier 1................... Participant adds Customer and/ $0.25
or Professional liquidity of
up to 0.20% of total
industry customer equity and
ETF option average daily
volume (``ADV'') contracts
per day in a month.
Tier 2................... Participant adds Customer and/ $0.40
or Professional liquidity of
0.21% to 0.30% of total
industry customer equity and
ETF option ADV contracts per
day in a month.
Tier 3................... Participant adds Customer and/ $0.43
or Professional liquidity of
0.31% to 0.49% of total
industry customer equity and
ETF option ADV contracts per
day in a month.
Tier 4................... Participant adds Customer and/ $0.45
or Professional liquidity of
0.5% or more of total
industry customer equity and
ETF option ADV contracts per
day in a month.
Tier 5................... Participant adds (1) Customer $0.42
and/or Professional
liquidity of 25,000 or more
contracts per day in a
month, (2) the Participant
has certified for the
Investor Support Program set
forth in Rule 7014, and (3)
the Participant executed at
least one order on NASDAQ's
equity market.
Tier 6................... Participant has Total Volume $0.45
of 115,000 or more contracts
per day in a month, of which
25,000 or more contracts per
day in a month must be
Customer and/or Professional
liquidity.
Tier 7................... Participant has Total Volume $0.47
of 150,000 or more contracts
per day in a month, of which
50,000 or more contracts per
day in a month must be
Customer and/or Professional
liquidity.
Tier 8................... Participant (1) has Total $0.48
Volume of 325,000 or more
contracts per day in a
month, or (2) Participant
has Total Volume of 200,000
or more contracts per day in
a month, of which 70,000 or
more contracts per day in a
month must be Customer and/
or Professional liquidity or
(3) adds Customer and/or
Professional liquidity of
1.00% or more of national
customer volume in multiply-
listed equity and ETF
options classes in a month.
If the Exchange did not exclude aberrant low volume days when
calculating ADV for the month, as a result of the decreased trading
volume, the numerator for the calculation (e.g., trading volume) would
be correspondingly lower, but the denominator for the threshold
calculations (e.g., the number of trading days) would not be decreased.
This would result in an effective cost increase.
The proposed rule change would also apply to the monthly volume
tiers NOM uses to determine the Rebate to Add Liquidity:
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Monthly volume Rebate to add liquidity
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Tier 1.............. Participant adds NOM $0.25.
Market Maker liquidity
in Penny Pilot Options
of up to 39,999
contracts per day in a
month.
Tier 2.............. Participant adds NOM $0.30.
Market Maker liquidity
in Penny Pilot Options
of 40,000 to 69,999
contracts per day in a
month.
Tier 3.............. Participant adds NOM $0.32.
Market Maker liquidity
in Penny Pilot Options
of 70,000 to 99,999
contracts per day in a
month.
Tier 4.............. Participant adds NOM $0.32 or $0.38 in the
Market Maker liquidity following symbols BAC,
in Penny Pilot Options GLD, IWM, QQQ and VXX
of 100,000 or more or $0.40 in SPY.
contracts per day in a
month.
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[[Page 59742]]
The proposal does not apply to other transaction fees or rebates in
Section 2, or to other fees on the pricing schedule outside of Section
2.
Absent the authority to exclude days that the market is not open
for the entire trading day, members will experience an effective
increase in fees or decrease in rebates. The artificially low volumes
of trading on such days reduce the average daily activity of NOM
members both daily and monthly. Accordingly, excluding such days from
the monthly calculation will diminish the likelihood of an effective
increase in the cost of trading on NOM, a result that is unintended and
undesirable to NOM and to NOM members.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\4\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\5\ 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, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4) and (5).
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NASDAQ believes that the proposed change to eliminate from the
calculation days on which the market is not open the entire trading day
is reasonable because it preserves NASDAQ's full intent behind adopting
volume-based pricing. The proposed change is equitable and non-
discriminatory because it applies equally to all members and to all
volume tiers. In the event that NASDAQ identifies a disparate impact on
one or another volume tier in the future, NASDAQ may determine to
modify that volume tier via an additional proposed rule change.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. NASDAQ 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, NASDAQ 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, NASDAQ believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In this instance, the proposed rule change should not impact
competition because it merely preserves the full intent of NASDAQ's
already-filed prices. Moreover, the proposed rule change regarding days
on which the market is not open the entire trading day will result in
an effective reduction of fees or increase in rebates such that the
total cost of trading on NOM should decline. This is evidence that a
proposed rule change is pro-competitive rather than anti-competitive.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\7\
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \8\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\9\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\8\ 17 CFR 240.19b-4(f)(6).
\9\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
NASDAQ wishes to exclude August 22, 2013, from the calculation of
volume-based pricing for August of 2013. Waiver will allow the Exchange
to immediately implement the proposed rule change, thereby reducing the
potential for confusion among member organizations and the public about
how the Exchange will calculate volume-based pricing for August of
2013. Therefore, the Commission hereby waives the 30-day operative
delay and designates the proposal operative upon filing.\10\
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\10\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \11\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(2)(B).
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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-2013-117 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-2013-117. 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
[[Page 59743]]
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 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 offices 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-2013-117, and should
be submitted on or before October 18, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23539 Filed 9-26-13; 8:45 am]
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