[Federal Register Volume 80, Number 164 (Tuesday, August 25, 2015)]
[Notices]
[Pages 51615-51617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20933]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75739; File No. SR-NASDAQ-2015-101]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Chapter XV, Section 3 Entitled ``NASDAQ Options Market--Access
Services''
August 19, 2015.
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 August 13, 2015, 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
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 waive SQF Port \3\ Fees under certain
circumstances for NASDAQ members using the NASDAQ Options Market
(``NOM''), NASDAQ's facility for executing and routing standardized
equity and index options.
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\3\ 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. NOM Market
Makers rely on data available through the SQF Port to provide them
the necessary information to perform market making activities.
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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.
[[Page 51616]]
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 to offer NOM Participants that transition
from OTTO Ports to SQF Ports \4\ an SQF Port Fee waiver for that given
month. Today, the Exchange assesses a $750.00 per port, per month, per
mnemonic fee for OTTO Ports and SQF Ports. The Exchange is proposing to
amend chapter XV, section 3(b) to provide, ``NOM Participants will not
be assessed an SQF Port Fee in the month in which the NOM Participant
has canceled an OTTO Port and transitioned to an SQF Port. In order to
receive the waiver, the Participant is required to provide the Exchange
with written notification of the transition.''
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\4\ 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.
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The Exchange seeks to incentivize NOM Market Makers to transition
from OTTO to SQF Ports by providing a waiver of the SQF Port Fee in the
month in which such transition occurs.\5\ The NOM Participant must
provide the Exchange with written notification to receive the waiver.
By way of example, if a NOM Market Maker has 5 OTTO Ports as of August
1, 2015 and decides to cancel the 5 OTTO Ports on August 20, 2015 and
acquire 5 SQF Ports, provided written notice of such transition was
received by the Exchange, the NOM Participant will be invoiced $3,750
for the 5 OTTO Ports (5 x $750) and $0 for the 5 new SQF Ports for the
month of August 2015.
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\5\ OTTO Ports fees will still apply for the month in which the
NOM Participant transitions to SQF Ports.
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NOM Market Makers utilize OTTO and SQF ports for their market
making business, which require a greater throughput as compared to the
other ports. The Exchange believes that by offering this SQF Port Fee
waiver a greater number of NOM Market Makers will transition to SQF
Ports, which offers a more robust protocol.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of section 6 of the Act,\6\ in general, and with section
6(b)(4) and 6(b)(5) 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, and is not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposal to incentivize NOM Participants to
transition from OTTO Ports to SQF Ports by offering a waiver of the SQF
Port Fee is reasonable because the Exchange believes that SQF Ports
provides NOM Market Makers greater benefits in performing their market
making functions by offering more robust protocols. Also, NOM
Participants will benefit from the ability to make this transition
without incurring SQF and OTTO Port fees in a single month; they will
only incur OTTO Port Fees, provided the proper notice is provided to
the Exchange.
The Exchange's proposal to incentivize NOM Participants to
transition from OTTO Ports to SQF Ports by offering a waiver of the SQF
Port Fee is equitable and not unfairly discriminatory because the
Exchange is offering all NOM Market Makers the opportunity to
transition from OTTO Ports to SQF Ports without incurring an SQF Port
Fee, provided the proper written notification is provided to the
Exchange. NOM Market Makers are valuable market participants that
provide liquidity in the marketplace and incur costs unlike other
market participants because NOM Market Makers add value through
continuous quoting \8\ and the commitment of capital. NOM Market Makers
provide a critical liquidity function across thousands of individual
option puts and option calls, a function no other market participants
are obligated to perform. The Exchange believes that offering the SQF
Port Fee waiver to NOM Market Makers is equitable and not unfairly
discriminatory because of the obligations \9\ borne by NOM Market
Makers as compared to other market participants. Encouraging NOM Market
Makers to transition to the more robust SQF Port benefits all market
participants because NOM Market Makers provide a critical liquidity
function which adds greater liquidity benefits for all NOM Participants
in the quality of order interaction and enhanced execution quality.
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\8\ Pursuant to Chapter VII (Market Participants), Section 5
(Obligations of Market Makers), in registering as a market maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Further, all Market
Makers are designated as specialists on NOM for all purposes under
the Act or rules thereunder. See Chapter VII, Section 5.
\9\ See note 8.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change will not impose any burden on competition
not necessary or appropriate in furtherance of the purposes of the Act.
Offering NOM Market Makers the opportunity to transition from OTTO
Ports to SQF Ports, at no additional cost, does not impose any undue
burden on intra-market competition because NOM Market Makers have
obligations \10\ to the market which are not borne by other market
participants. NOM Market Makers provide a critical liquidity function
across thousands of individual option puts and option calls, a function
no other market participants are obligated to perform. The Exchange
does not believe that offering NOM Market Makers the opportunity to
transition from OTTO Ports to SQF Ports at no additional cost imposes
an undue burden on inter-market competition because other options
exchanges similarly offer NOM Market Makers the ability to obtain the
necessary information to perform market making activities.\11\
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\10\ See note 8.
\11\ NASDAQ OMX PHLX LLC (``Phlx'') and NASDAQ OMX BX, Inc.
(``BX'') offer SQF Ports to its market makers. See Phlx's Pricing
Schedule and BX Rules at Chapter XV, Section 3.
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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. These market forces ensure that the Exchange's fees and
rebates remain competitive with the fee structures at other trading
platforms.
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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.\12\ 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 to determine whether
the proposed rule should be approved or disapproved.
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\12\ 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-2015-101 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-2015-101. 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-2015-101 and should
be submitted on or before September 15, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assitant Secretary.
[FR Doc. 2015-20933 Filed 8-24-15; 8:45 am]
BILLING CODE 8011-01-P