[Federal Register Volume 78, Number 45 (Thursday, March 7, 2013)]
[Notices]
[Pages 14872-14874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05247]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69006 ; File No. SR-NASDAQ-2013-034]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to a Pricing Clarification

February 28, 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 February 21, 2013, 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 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

    NASDAQ proposes to clarify the billing of port fees in Chapter XV, 
entitled ``Options Pricing,'' which governs pricing for NASDAQ members 
using the NASDAQ Options Market (``NOM''), NASDAQ's facility for 
executing and routing standardized equity and index options.
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to clarify the manner in which the 
Exchange assesses certain port fees which are noted in Chapter XV, 
Section 3 entitled ``NASDAQ Options Market--Access Services.'' 
Specifically, the Exchange assesses a fee of $550 per port, per month 
for the following port fees: Order Entry Ports,\3\ CTI Ports,\4\ OTTO 
Ports,\5\ ITTO Ports,\6\ BONO Ports,\7\ Order Entry

[[Page 14873]]

DROP Ports,\8\ OTTO Drop Ports \9\ and SQF Ports.\10\ Each NOM 
Participant is assigned a Market Participant Identifier or ``mnemonic'' 
\11\ and in some cases, certain Participants request multiple mnemonics 
for purposes of accounting for trading activity. The Exchange bills per 
port and in the case of Participants that hold multiple mnemonics the 
Exchange bills for each port assigned to that Participant, taking into 
account the total number of ports by mnemonic. For example, if a 
Participant, ABC, with two mnemonics, EFGH and IJKL, requested 3 ports 
under the EFGH mnemonic and four ports under the IJKL mnemonic, the 
Participant would be billed for a total of 7 ports per month. All 
billing is captured at the Participant level.
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    \3\ The Order Entry Port Fee is a connectivity fee in connection 
with routing orders to the Exchange via an external order entry 
port. NOM Participants access the Exchange's network through order 
entry ports. A NOM Participant may have more than one order entry 
port.
    \4\ CTI offers real-time clearing trade updates. A real-time 
clearing trade update is a message that is sent to a member after an 
execution has occurred and contains trade details. The message 
containing the trade details is also simultaneously sent to The 
Options Clearing Corporation. The trade messages are routed to a 
member's connection containing certain information. The 
administrative and market event messages include, but are not 
limited to: system event messages to communicate operational-related 
events; options directory messages to relay basic option symbol and 
contract information for options traded on the Exchange; complex 
strategy messages to relay information for those strategies traded 
on the Exchange; trading action messages to inform market 
participants when a specific option or strategy is halted or 
released for trading on the Exchange; and an indicator which 
distinguishes electronic and non-electronically delivered orders.
    \5\ 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.
    \6\ ITTO is a data feed that provides quotation information for 
individual orders on the NOM book, last sale information for trades 
executed on NOM, and Order Imbalance Information as set forth in NOM 
Rules Chapter VI, Section 8. ITTO is the options equivalent of the 
NASDAQ TotalView/ITCH data feed that NASDAQ offers under NASDAQ Rule 
7023 with respect to equities traded on NASDAQ. As with TotalView, 
members use ITTO to ``build'' their view of the NOM book by adding 
individual orders that appear on the feed, and subtracting 
individual orders that are executed. See Chapter VI, Section 1 at 
subsection (a)(3)(A).
    \7\ BONO\SM\ is a data feed that provides the NOM Best Bid and 
Offer (``NOM NBBO'') and last sale information for trades executed 
on NOM. The NOM NBBO and last sale information are identical to the 
information that NOM sends to the Options Price Regulatory Authority 
(``OPRA'') and which OPRA disseminates via the consolidated data 
feed for options. BONO is the options equivalent of the NASDAQ Basic 
data feed offered for equities under NASDAQ Rule 7047. See Chapter 
VI, Section 1 at subsection (a)(3)(B).
    \8\ The DROP interface provides real time information regarding 
orders sent to NOM and executions that occurred on NOM. The DROP 
interface is not a trading interface and does not accept order 
messages.
    \9\ The OTTO DROP data feed provides real-time information 
regarding orders entered through OTTO and the execution of those 
orders. The OTTO DROP data feed is not a trading interface and does 
not accept order messages.
    \10\ 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.
    \11\ A mnemonic is a unique identifier consisting of a four 
character alpha code.
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    The Exchange has consistently billed ports in this manner. For 
purposes of clarity, the Exchange proposes to add the words ``per 
mnemonic'' to Chapter XV, Section 3(b). Participants may choose to have 
multiple mnemonics for the convenience of conducting their business, 
however only one mnemonic is required to conduct business on NOM. 
Participants that desire to have multiple mnemonics and utilize various 
ports under multiple mnemonics are and will continue to be billed for 
each port that is assigned to that Participant. Each Participant may 
select the manner in which they choose to designate their ports for 
billing by mnemonic. The ports are differentiated by the mnemonic and 
port number.
    The Exchange does not believe that there is confusion among market 
participants regarding port billing. The Exchange proposes this 
clarification to make clear that the term ``per port'' includes 
multiple mnemonics for each Participant.
2. Statutory Basis
    NASDAQ believes that its proposal to amend Chapter XV of the Rules 
to specify that each mnemonic's ports will be billed is consistent with 
Section 6(b) of the Act \12\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \13\ in particular. The Exchange's proposal 
to clarify its pricing is intended to provide greater clarity to market 
participants with respect to the application of port fees in Chapter 
XV, Section 3. The Exchange believes the addition of the reference to 
mnemonics will provide additional transparency to Chapter XV, Section 
3(b) of the Exchange's Rules.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange does not believe that there is confusion among market 
participants with respect to port billing, but rather that the addition 
of the words ``per mnemonic'' to Chapter XV, Section 3(b) would serve 
to provide transparency and guidance to the benefit of all market 
participants. The Exchange believes that the proposal is consistent 
with Section 6(b)(5) in that it is designed to promote just and 
equitable principles of trade, 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, by clarifying 
the manner in which ports are billed.
    The Exchange is not amending the manner in which it applies pricing 
for ports today. This proposal merely codifies the manner in which the 
Exchange assesses ports today.

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. The Exchange is merely clarifying its port 
billing to specify that ``per port'' includes all ports assigned to a 
particular Participant regardless of whether they are broken down by 
mnemonic. The Exchange believes that this clarification will provide 
greater transparency to market participants. The Exchange does not 
believe that this amendment creates intramarket competition among 
Participants as it is applied uniformly to all Participants. The 
Exchange believes that clarifying port billing provides market 
participants clear guidance.

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

    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)(ii) of the Act \14\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \15\ 17 CFR 240.19b-4 (f)(6).
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    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. The Exchange has 
provided the Commission written notice of its intent to file the 
proposed rule change, along with a brief description and text of the 
proposed rule change, at least five business days prior to the date of 
filing of the proposed rule change.

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-2013-034 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-2013-034. 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

[[Page 14874]]

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 such filing also will be available for inspection 
and copying at the principal office of NASDAQ. 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-2013-034, and should be submitted 
on or before March 28, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05247 Filed 3-6-13; 8:45 am]
BILLING CODE 8011-01-P