[Federal Register Volume 76, Number 70 (Tuesday, April 12, 2011)]
[Notices]
[Pages 20420-20422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8627]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64210; File No. SR-NASDAQ-2011-046]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Rebates and Fees in Penny Pilot and Non-Penny Pilot Options

April 6, 2011.
    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 March 31, 2011, 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 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes 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. Specifically, NOM proposes to: (i) Modify pricing for the 
Penny Pilot \3\ Options with respect to the Customer Rebate to Add 
Liquidity; \4\ and (ii) modify pricing for both Penny Pilot Options and 
All Other Options with respect to the Fees for Removing Liquidity.\5\
---------------------------------------------------------------------------

    \3\ The Penny Pilot was established in March 2008 and in October 
2009 was expanded and extended through December 31, 2010. See 
Securities Exchange Act Release Nos. 57579 (March 28, 2008), 73 FR 
18587 (April 4, 2008) (SR-NASDAQ-2008-026)(notice of filing and 
immediate effectiveness establishing Penny Pilot); 60874 (October 
23, 2009), 74 FR 56682 (November 2, 2009) (SR-NASDAQ-2009-091) 
(notice of filing and immediate effectiveness expanding and 
extending Penny Pilot); 60965 (November 9, 2009), 74 FR 59292 
(November 17, 2009) (SR-NASDAQ-2009-097) (notice of filing and 
immediate effectiveness adding seventy-five classes to Penny Pilot); 
61455 (February 1, 2010), 75 FR 6239 (February 8, 2010) (SR-NASDAQ-
2010-013)(notice of filing and immediate effectiveness adding 
seventy-five classes to Penny Pilot); and 62029 (May 4, 2010), 75 FR 
25895 (May 10, 2010) (SR-NASDAQ-2010-053)(notice of filing and 
immediate effectiveness adding seventy-five classes to Penny Pilot). 
See also Exchange Rule Chapter VI, Section 5.
    \4\ An order that adds liquidity is one that is entered into NOM 
and rests on the NOM book.
    \5\ An order that removes liquidity is one that is entered into 
NOM and that executes against an order resting on the NOM book.
---------------------------------------------------------------------------

    While changes pursuant to this proposal are effective upon filing, 
the Exchange has designated these changes to be operative for 
transactions on April 1, 2011.
    The text of the proposed rule change is set forth below. Proposed 
new text is in italics and deleted text is in brackets.
* * * * *

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 20421]]



                                                Fees and Rebates
                                             [Per executed contract]
----------------------------------------------------------------------------------------------------------------
                                                                                  Non-NOM market    NOM market
                                                     Customer          Firm            maker           maker
----------------------------------------------------------------------------------------------------------------
Penny Pilot Options:
    Rebate to Add Liquidity.....................        $0.3[2]6           $0.10           $0.25           $0.30
    Fee for Removing Liquidity..................         0.4[3]5            0.45            0.45            0.45
NDX and MNX:
    Rebate to Add Liquidity.....................            0.10            0.10            0.10            0.20
    Fee for Removing Liquidity..................            0.50            0.50            0.50            0.40
All Other Options:
    Fee for Adding Liquidity....................            0.00            0.45            0.45            0.30
    Fee for Removing Liquidity..................         0.4[3]5            0.45            0.45            0.45
    Rebate to Add Liquidity.....................            0.20            0.00            0.00            0.00
----------------------------------------------------------------------------------------------------------------

    (2) No Change
    (3) No Change
    (4) No Change
* * * * *
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.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 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
    NASDAQ is proposing to modify Rule 7050 governing the rebates and 
fees assessed for options orders entered into NOM. Specifically, NASDAQ 
is proposing to modify pricing for the Penny Pilot Options with respect 
to the Customer Rebate to Add Liquidity and also modify both Penny 
Pilot Options and All Other Options with respect to the Customer Fees 
for Removing Liquidity.
Customer Rebate To Add Liquidity
    The Exchange currently pays a Rebate to Add Liquidity of $0.32 per 
executed contract to members providing liquidity through NOM in options 
included in the Penny Pilot and in the clearing capacity of 
``Customer.'' The Exchange proposes to amend this rebate so that a 
Customer would receive a Rebate to Add Liquidity of $0.36 per 
contract.\6\ The Exchange believes that this increase in the Rebate to 
Add Liquidity would serve to incentivize Customers to add greater 
liquidity to the options listed for trading on NOM.
---------------------------------------------------------------------------

    \6\ A Firm would continue to receive $0.10 per contract, a Non-
NOM Market Maker would continue to receive $0.25 per contract and a 
NOM Market Makers would continue to receive $0.30 per contract to 
add liquidity.
---------------------------------------------------------------------------

Customer Fees for Removing Liquidity
    The Exchange assesses a Fee for Removing Liquidity of $0.43 per 
executed contract to members removing liquidity through NOM in options 
included both the Penny Pilot and All Other Options and in the clearing 
capacity of ``Customer.'' The Exchange proposes to amend these fees so 
that a Customer would pay a Fee to Remove Liquidity of $0.45 per 
contract.\7\ The Exchange is proposing to uniformly assess all market 
participants the same fee to remove liquidity.
---------------------------------------------------------------------------

    \7\ A Firm, Non-NOM Market Makers and NOM Market Makers would 
continue to be assessed $0.45 per contract for removing liquidity.
---------------------------------------------------------------------------

    While changes pursuant to this proposal are effective upon filing, 
the Exchange has designated these changes to be operative for 
transactions on April 1, 2011.
2. Statutory Basis
    NASDAQ believes that the proposed rule changes are consistent with 
the provisions of Section 6 of the Act,\8\ in general, and with Section 
6(b)(4) of the Act,\9\ 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed increase in the Customer 
Rebate to Add Liquidity in the Penny Pilot Options is both equitable 
and reasonable because the Exchange is seeking to provide the 
appropriate incentives to broker-dealers acting as agent for Customer 
orders to select the Exchange as a venue to post Customer orders. The 
Exchange believes that the proposed increase in the rebate is also 
reasonable because the rebate is consistent with other rebates being 
paid at the BATS Exchange, Inc. (``BATS'') for orders that add 
liquidity to the BATS Options book.\10\
---------------------------------------------------------------------------

    \10\ See BATS' BZX Exchange Fee Schedule.
---------------------------------------------------------------------------

    The Exchange believes that the proposed increase in the Fee to 
Remove Liquidity for Customers in both the Penny Pilot Options and All 
Other Options is both reasonable and equitable because the Exchange 
would uniformly assess a $0.45 per contract Fee to Remove Liquidity on 
all market participants.
    The Exchange believes its proposal to increase the Fee for Adding 
Liquidity for Customers in both the Penny Pilot Options and All Other 
Options is also reasonable because the fees are within the range of 
fees assessed by other exchanges employing similar pricing schemes. 
Specifically, NYSE Arca, Inc. (``NYSE Arca'') assesses a customer fee 
for taking liquidity of $0.45 for electronic executions in penny pilot 
issues and foreign currency options and assesses a firm and broker 
dealer standard execution fee of $0.50 for electronic executions in 
options not included in the penny pilot.\11\
---------------------------------------------------------------------------

    \11\ See NYSE Arca's Fee Schedule.
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive market comprised of 
nine U.S. options exchanges in which sophisticated and knowledgeable 
market participants can readily send order flow to competing exchanges 
if

[[Page 20422]]

they deem fee levels at a particular exchange to be excessive. The 
Exchange believes that the proposed rebate and fees are competitive and 
similar with rebates and fees in place on other exchanges. The Exchange 
believes that this competitive marketplace impacts the rebates and fees 
present on the Exchange today and substantially influences the 
proposals set forth above.

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.

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\ and paragraph (f)(2) of Rule 19b-4 
\13\ thereunder. 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2011-046 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-2011-046. 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 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 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-
2011-046 and should be submitted on or before May 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8627 Filed 4-11-11; 8:45 am]
BILLING CODE 8011-01-P