[Federal Register Volume 74, Number 84 (Monday, May 4, 2009)]
[Notices]
[Pages 20514-20516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-10118]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59822; File No. SR-NASDAQ-2009-034]


 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Modifying Rule 7050 Governing Pricing for The NASDAQ Options Market 
(``NOM'')

April 27, 2009.
    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 9, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') 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 Nasdaq. Nasdaq has filed this proposal 
pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ [sic] Nasdaq has designated this proposal as 
establishing or changing a due, fee, or other charge applicable only to 
members, which renders the proposed rule change effective upon filing. 
The Commission is publishing this notice and [sic] order 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq has filed a proposed rule change to modify Rule 7050 
governing pricing for Nasdaq members using the NASDAQ Options Market 
(``NOM''), Nasdaq's facility for executing and routing standardized 
equity and index options. Proposed new language is underlined [sic]; 
proposed deletions are in brackets.\5\
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    \5\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://nasdaqomx.cchwallstreet.com.
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* * * * *
7050. NASDAQ Options Market
    The following charges shall apply to the use of the order execution 
and routing services of the NASDAQ Options Market for all securities.
    (1) Fees for Execution of Contracts on the NASDAQ Options Market

[[Page 20515]]



Except as specified below,     $0.45 per executed contract.
 the charge to member
 entering order that executes
 in the NASDAQ Options Market.
For a pilot period ending      $0.45 per executed contract.
 July 31, 2009, charge for
 members or non-members
 entering order via the
 Options Intermarket Linkage
 that executes in the Nasdaq
 Options Market.
Charge to members entering     No fee.
 orders in options on QQQQ,
 SPY, DIA, IWM, AAPL BAC, C,
 GS, JPM, RIMM, XLE, XLF, and
 XOM with an account type
 ``Customer'' that executes
 and remove liquidity entered
 by another member.
Credit to member providing     $0.30 per executed contract.
 liquidity through the NASDAQ
 Options Market.
Credit to member providing     $0.35 per executed contract.
 liquidity using price-
 improving orders through the
 NASDAQ Options Market.
 


                                                Fees and Rebates
                                             [Per executed contract]
----------------------------------------------------------------------------------------------------------------
                                                                     Customer          Firm        Market maker
----------------------------------------------------------------------------------------------------------------
Penny Pilot Options:                                              ..............  ..............  ..............
    Rebate to Add Liquidity.....................................           $0.25           $0.25           $0.25
    Fee for Removing Liquidity..................................            Free            0.45            0.45
All Other Options:                                                ..............  ..............  ..............
    Fee for Adding Liquidity....................................            Free            0.30            0.30
    Fee for Removing Liquidity..................................  ..............            0.45            0.45
    Rebate for Removing Liquidity...............................            0.20  ..............  ..............
----------------------------------------------------------------------------------------------------------------
Transactions in which the same participant is the buyer and the seller shall be charged a net fee of $0.10 per
  executed contract.
For a pilot period ending July 31, 2009, the charge for members or non-members entering order via the Options
  Intermarket Linkage that executes in the Nasdaq Options Market shall be $0.45 per executed contract.

     (2)-(4) No change.
* * * * *

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. The 
text of these statements may be examined at the places specified in 
Item III below [sic], and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq is modifying NASDQ Rule 7050, the fee schedule for NOM, in 
several ways. First, Nasdaq is making several changes that apply to 
orders with an account type of ``Customer.'' Specifically, Nasdaq is 
expanding a pricing program to lower the fee for the execution of 
options contracts for certain orders in certain options on the NASDAQ 
Options Market (``NOM''). On January 12, 2009, Nasdaq began permitting 
orders with an account type of ``Customer'' to take liquidity \6\ for 
free in certain options. Nasdaq applied the new fee provision to 
options on four exchange-traded funds: QQQQ, SPY, DIA, and IWM. Nasdaq 
later expanded that program to apply the reduced fee provision to 
options on the following equities: AAPL, BAC, C, GS, JPM, RIMM, XLE, 
XLF, and XOM. That proposal accomplished its goal of attracting 
liquidity to the Nasdaq Options Market.
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    \6\ An order that takes liquidity is one that is entered into 
NOM and that executes against an order resting on the NOM book.
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    Accordingly, Nasdaq now proposes to expand the application of that 
rule to additional options classes. Specifically, Nasdaq is expanding 
the program to all options that are included in the Options Penny Pilot 
Program. Nasdaq will monitor the trading of options on these equities 
to ensure that the proposal is operating in a fashion that promotes the 
interests of investors.
    Nasdaq is also changing the fee structure for ``Customer'' orders 
in options not included in the Options Penny Pilot Program. 
Specifically, Nasdaq will charge no execution fees for members 
providing liquidity through the NASDAQ Options Market with an account 
type ``Customer.'' Nasdaq will also offer a credit of $0.20 per 
executed contract to members entering orders in options with an account 
type ``Customer'' that execute and remove liquidity entered by another 
member in options that are not included in the Options Penny Pilot 
Program.
    Second, Nasdaq is modifying NASDAQ Rule 7050 to further distinguish 
between options that are included in the Options Penny Pilot Program 
and those that are not. Specifically, NOM will provide a credit of 
$0.25 to members providing liquidity through NOM in options included in 
the Options Penny Pilot Program. [sic], and charge a fee of $0.30 to 
members providing liquidity in the capacity of ``firm'' or ``market 
maker'' (as opposed to ``customer'') through NOM for options that are 
not included in Options Penny Pilot Program.
    Third, Nasdaq is modifying NASDAQ Rule 7050 with respect to all 
options to change the distinction between orders that interact with 
other members' orders and those that interact with orders from the same 
firm. Specifically, Nasdaq will charge a fee of $0.10 per executed 
contract when a member order executes against the order entered by the 
same firm. Similarly, Nasdaq will not offer a credit or charge a fee 
when a member order provides liquidity to an order entered by the same 
firm.
    Fourth, Nasdaq is eliminating the special pricing currently offered 
for Price Improving Orders. Going forward, Price Improving Orders will 
be subject to the standard fee schedule set forth in NASDAQ Rule 7050 
as amended by this proposed rule change.
    Nasdaq believes that the proposed fees are competitive, fair and 
reasonable, and non-discriminatory in that they apply equally to all 
similarly situated members and customers. As with all fees, Nasdaq may 
adjust these proposed fees in response to competitive conditions by 
filing a new proposed rule change.
2. Statutory Basis

[[Page 20516]]

    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with Section 
6(b)(5) of the Act,\8\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. As one of seven options 
market in the national market system, Nasdaq's fees must be competitive 
and low in order for Nasdaq to attract order flow, execute orders, and 
grow as a market. Nasdaq believes that its fees are fair and reasonable 
and consistent with the Exchange Act.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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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. To the contrary, 
Nasdaq has designed its fees to compete effectively for the execution 
of options contracts and to reduce the overall cost to investors of 
options trading.

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

    Pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and Rule 19b-
4(f)(2) thereunder,\10\ Nasdaq has designated this proposal as 
establishing or changing a due, fee, or other charge applicable only to 
members, which renders the proposed rule change effective upon filing. 
Nasdaq will make the proposed pricing schedule operational on April 13, 
2009.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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 e-mail to [email protected]. Please include 
File Number SR-NASDAQ-2009-034 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-2009-034. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying 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 such 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 No. SR-NASDAQ-2009-034 and should be 
submitted on or before May 26, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-10118 Filed 5-1-09; 8:45 am]
BILLING CODE 8010-01-P