[Federal Register Volume 79, Number 247 (Wednesday, December 24, 2014)]
[Notices]
[Pages 77587-77588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30122]



[[Page 77587]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73879; File No. SR-NASDAQ-2014-122]


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

December 18, 2014.
    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 December 12, 2014, 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.
---------------------------------------------------------------------------

    \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

    NASDAQ proposes to amend the manner in which the Exchange assesses 
Port Fees which are located 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.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments become operative on January 2, 
2015.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com 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 Exchange proposes to increase Port Fees for the following ports 
from $550.00 to $600.00 per port, per month, per mnemonic: Order Entry 
Ports,\3\ CTI Ports,\4\ OTTO Ports,\5\ ITTO Ports,\6\ BONO Ports,\7\ 
Order Entry DROP Ports,\8\ OTTO Drop Ports \9\ and SQF Ports \10\ 
(collectively ``NOM Ports''). ITTO and BONO Port fees will continue to 
be assessed to non-NOM Participants and NOM Participants.
---------------------------------------------------------------------------

    \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. NOM Market 
Makers rely on data available through the SQF Port to provide them 
the necessary information to perform market making activities.
---------------------------------------------------------------------------

    Each NOM Participant is assigned a Market Participant Identifier or 
``mnemonic'' \11\ and in some cases, certain NOM Participants request 
multiple mnemonics for purposes of accounting for trading activity. 
These mnemonics identify users at a particular NOM Participant. The 
Exchange bills its port fees based on the number of mnemonics 
configured for each port. By way of example, if a NOM Participant, ABC, 
requested 2 ports from the Exchange and further requested that each 
port be configured to be accessed by 4 mnemonics or in some cases 
account numbers,\12\ the NOM Participant would be billed for 8 ports at 
the rate of $550 per port for that month. All billing is captured at 
the Participant level. NOM Participants may choose to have multiple 
mnemonics or in some case multiple account numbers for the convenience 
of conducting their business, however only one mnemonic and one account 
number is required to conduct business on NOM.
---------------------------------------------------------------------------

    \11\ A mnemonic is a unique identifier consisting of a four 
character alpha code.
    \12\ Account numbers are assigned by the Exchange and associated 
with particular NOM Participants.
---------------------------------------------------------------------------

2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of section 6 of the Act,\13\ in general, and with 
section 6(b)(4) and 6(b)(5) of the Act,\14\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that increasing the fees for the NOM Ports 
from $550 to $600 per port, per month, per

[[Page 77588]]

mnemonic is reasonable because it would allow the Exchange to keep pace 
with increasing technology costs. The increased Port Fees reflect the 
increased costs that the Exchange bears with respect to maintaining 
ports. The Port Fees are reasonable because they enable the Exchange to 
offset, in part, its connectivity costs associated with making such 
ports available, including costs based on gateway software and hardware 
enhancements and resources dedicated to gateway development, quality 
assurance, and support. The Exchange's Port Fees are in line with costs 
for ports at other options exchanges.\15\
---------------------------------------------------------------------------

    \15\ Miami International Securities Exchange LLC (``MIAX'') 
assesses ports fees that range from $1,000 to $5,000 depending on 
connectivity levels. See MIAX's Fee Schedule. ISE Gemini, LLC (``ISE 
Gemini'') assesses port fees that range from $750-$12,500 depending 
on connectivity levels. See ISE Gemini's Fee Schedule. Finally, C2 
Options Exchange, Incorporated (``C2'') assesses port fees that 
range from $500--$1,000 depending on connectivity levels. See C2's 
Fee Schedule.
---------------------------------------------------------------------------

    The Exchange believes that increasing the fees for the NOM Port 
Fees from $550 to $600 per port, per month, per mnemonic is equitable 
and not unfairly discriminatory because the Exchange assesses the same 
fees for all ports to all NOM participants.

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 believes the proposed fee 
change is reasonably designed to be fair and equitable, and therefore, 
will not unduly burden any particular group of market participants 
trading on the Exchange. The Exchange's proposal increases fees for all 
ports for all NOM Participants. The proposed fees are designed to 
ensure a fair and reasonable use of Exchange resources by allowing the 
Exchange to recoup for certain of its connectivity costs, while 
continuing to offer competitive rates to NOM Participants.

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.\16\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2014-122 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-122. 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-2014-122 and 
should be submitted on or before January 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30122 Filed 12-23-14; 8:45 am]
BILLING CODE 8011-01-P