[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42032-42034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-17330]



[[Page 42032]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67402; File No. SR-NASDAQ-2012-080]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to BX Options Routing

July 11, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 28, 2012, 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 
NASDAQ. 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 NASDAQ Stock Market LLC proposes to modify Chapter XV, Section 
2, governing pricing for NASDAQ members using the NASDAQ Options Market 
(``NOM''), NASDAQ's facility for executing and routing standardized 
equity and index options.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated these changes to be operative on July 2, 2012.
    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. 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 filing is to recoup costs that the Exchange 
incurs for routing and executing certain orders in equity options to BX 
Options.
    The Exchange's Pricing Schedule at Chapter XV, Section 2(4) 
currently includes the following fees for routing Customer, 
Professional, Firm, Broker-Dealer and Market Maker orders to away 
markets.

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Customer          Firm             MM         Professional
----------------------------------------------------------------------------------------------------------------
BATS Penny......................................           $0.55           $0.55           $0.55           $0.55
BOX.............................................            0.11            0.55            0.55            0.11
BATS Non-Penny..................................            0.86            0.91            0.91            0.91
CBOE............................................            0.11            0.55            0.55            0.31
CBOE orders greater than 99 contracts in NDX,               0.29            0.55            0.55            0.31
 MNX ETFs, ETNs & HOLDRs........................
C2..............................................            0.55            0.55            0.55            0.55
ISE.............................................            0.11            0.55            0.55            0.29
ISE Select Symbols \*\..........................            0.31            0.55            0.55            0.39
NYSE Arca Penny Pilot...........................            0.55            0.55            0.55            0.55
NYSE Arca Non-Penny Pilot.......................            0.11            0.55            0.55            0.11
NYSE AMEX.......................................            0.11            0.55            0.55            0.31
PHLX (for all options other than PHLX Select                0.11            0.55            0.55            0.31
 Symbols).......................................
PHLX Select Symbols \**\........................            0.50            0.55            0.55            0.51
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* These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing
  Liquidity in Select Symbols. See ISE's Schedule of Fees for the complete list of symbols that are subject to
  these fees.
** These fees are applicable to orders routed to PHLX that are subject to Rebates and Fees for Adding and
  Removing Liquidity in Select Symbols. See PHLX's Pricing Schedule for the complete list of symbols that are
  subject to these fees.

    The Exchange is proposing to adopt the following fees when routing 
to BX Options:

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                  Exchange                        Customer           Firm              MM          Professional
----------------------------------------------------------------------------------------------------------------
BX Options..................................           $0.11            $0.54            $0.54            $0.54
----------------------------------------------------------------------------------------------------------------

    BX Options received approval to operate a new options market \3\ 
and filed to adopt various fees and rebates which would become 
operative on July 2, 2012. Specifically, BX Options will assess a Fee 
to Remove Liquidity of $0.43 per contract to BX Options Market Makers 
and Non-Customers which includes Professionals, Firms, Broker-Dealers 
and Non-BX Options Marker Makers.\4\ Customers would not be assessed a 
Fee to Remove Liquidity on BX Options. The Exchange is seeking to adopt 
new Routing Fees to account for these new fees and other routing costs 
incurred by the Exchange when routing to BX Options as of July 2, 2012.
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    \3\ See Securities Exchange Act Release No. 67256 (June 26, 
2012) (SR-BX-2012-030).
    \4\ See Securities Exchange Act Release No. 34-67339 (July 3, 
2012) (Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change by NASDAQ OMX BX, Inc. to Adopt Transaction and Routing 
Fees). This filing became operative on July 2, 2012.

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    Nasdaq Options Services LLC (``NOS''), a member of the Exchange, is 
the Exchange's exclusive order router.\5\ NOS is the Routing Facility 
for BX Options. Each time NOS routes to away markets NOS is charged a 
$0.06 clearing fee and, in the case of certain exchanges, a transaction 
fee is also charged in certain symbols, which fees are passed through 
to the Exchange. The Exchange currently recoups clearing and 
transaction charges incurred by the Exchange as well as certain other 
costs incurred by the Exchange when routing to away markets, such as 
administrative and technical costs associated with operating NOS, 
membership fees at away markets, and technical costs associated with 
routing.\6\ The Exchange would therefore assess Customers $0.11 per 
contract, Firms would be assessed $0.54 per contract, Market Makers 
would be assessed $0.54 per contract and Professionals would be 
assessed $0.54 per contract.\7\ The Exchange proposes to title the new 
fees ``BX Options.''
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    \5\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
    \6\ In addition to membership fees and transaction fees, the 
Exchange also incurs an Options Regulatory Fee when routing to an 
away market that assesses that fee.
    \7\ The Exchange's proposed Routing Fees for BX would include 
the Fees for Removing Liquidity of $0.43 per contract, a $0.06 
clearing cost and another $0.05 per contract associated with 
administrative and technical costs associated with operating NOS, a 
total of $0.54 per contract. The Exchange would only assess a 
Customer the $0.06 clearing cost and another $0.05 per contract 
associated with administrative and technical costs associated with 
operating NOS (a total of $0.11 per contract) because a Customer is 
not assessed a Fee for Removing Liquidity on BX.
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    The Exchange also proposes other minor amendments to remove the 
following sentence from Chapter XV, Section 2(4): ``The current fees 
and a historical record of applicable fees shall be posted on the 
NasdaqTrader.com website.'' This sentence is not necessary as all rules 
are posted on the Exchange's Web site. Also, the Exchange is 
alphabetically relocating the BOX Routing Fees.
    As with all fees, the Exchange may adjust these Routing Fees in 
response to competitive conditions by filing a new proposed rule 
change.
2. Statutory Basis
    NASDAQ believes that its proposal to amend its rules is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \9\ in particular, in that it 
is an equitable allocation of reasonable fees and other charges among 
Exchange members.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed BX Options Routing Fees are 
reasonable because they seek to recoup costs that are incurred by the 
Exchange when routing Customer, Professional, Firm, Broker-Dealer, 
Specialist and Market Maker orders to BX Options on behalf of members, 
respectively. Each destination market's transaction charge varies and 
there is a standard clearing charge for each transaction incurred by 
the Exchange along with other administrative and technical costs that 
are incurred by the Exchange. The Exchange believes that the proposed 
Routing Fees would enable the Exchange to recover the remove fees 
assessed to market participants by BX Options, plus clearing and other 
administrative and technical fees for the execution of Customer, 
Professional, Firm, Broker-Dealer, Specialist and Market Maker orders 
when routed to BX Options. The Exchange also believes that the proposed 
BX Options Routing Fees are equitable and not unfairly discriminatory 
because they would be uniformly applied to all Customer, Professional, 
Firm, Broker-Dealer, Specialist and Market Maker orders that are routed 
to BX Options.
    The Exchange believes that the proposed minor amendments to remove 
the sentence referring to the Exchange's Web site information and the 
relocation of BOX Routing Fees are reasonable, equitable and not 
unfairly discriminatory because these amendments update Chapter XV, 
Section 2 of the Rules to remove an unnecessary sentence and conform 
the manner in which the Routing Fees are displayed.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ 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. In addition, a NOM Participant may 
designate an order as not available for routing to avoid routing 
fees.\10\
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    \10\ See NOM Rules at Chapter VI, Section 11.
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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.\11\ 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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    \11\ 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-2012-080 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-2012-080. 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

[[Page 42034]]

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-2012-080 and should 
be submitted on or before August 7, 2012.

    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. 2012-17330 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P