[Federal Register Volume 82, Number 167 (Wednesday, August 30, 2017)]
[Notices]
[Pages 41298-41300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18352]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81479; File No. SR-NASDAQ-2017-083]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Transaction Fees at Chapter XV, Section 2 Entitled 
``NASDAQ Options Market--Fees and Rebates''

August 24, 2017.
    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 August 16, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') 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 the Exchange. 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 Exchange proposes to amend the Exchange's transaction fees at 
Chapter XV, Section 2 entitled ``NASDAQ Options Market--Fees and 
Rebates
    The text of the proposed rule change is available on the Exchange's 
Web site at http://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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NOM proposes to amend the MARS subsidy program which pays a subsidy 
to NOM Participants that provide certain order routing functionalities 
to other NOM Participants and/or use such functionalities themselves. 
Generally, under MARS, the Exchange pays participating NOM Participants 
to subsidize their costs of providing routing services to route orders 
to NOM. The Exchange believes that the proposed amendment to MARS will 
continue to attract higher volumes of electronic equity and ETF options 
volume to the Exchange from non-NOM Participants as well as NOM 
Participants.
Background
    Today, to qualify for MARS, a NOM Participant's routing system 
(hereinafter ``System'') is required to meet certain criteria. 
Specifically the Participant's System is required to: (1) Enable the 
electronic routing of orders to all of the U.S. options exchanges, 
including NOM; (2) provide current consolidated market data from the 
U.S. options exchanges; and (3) be capable of interfacing with NOM's 
API to access current NOM match engine functionality. The NOM 
Participant's System would also need to cause NOM to be one of the top 
three default destination exchanges for (a) individually executed 
marketable orders if NOM is at the national best bid or offer 
(``NBBO''), regardless of size or time, (b) orders that establish a new 
NBBO on NOM's Order Book, but allow any user to manually override NOM 
as the default destination on an order-by-order basis.\3\
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    \3\ Any NOM Participant is permitted to avail itself of this 
arrangement, provided that its order routing functionality 
incorporates the features described herein and the Participant 
satisfies NOM that it appears to be robust and reliable. 
Participants remain solely responsible for implementing and 
operating its System.
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    MARS Payment are made to NOM Participants that have System 
Eligibility and have routed the requisite number of Eligible Contracts 
daily in a month (``Average Daily Volume''), which were executed on 
NOM.\4\ Today, NOM Participants that have System Eligibility and have 
executed the requisite number of Eligible Contracts in a month will be 
paid the following rebates: \5\
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    \4\ For the purpose of qualifying for the MARS Payment, Eligible 
Contracts may include Firm, Non-NOM Market Maker, Broker-Dealer, or 
Joint Back Office or ``JBO'' equity option orders that add liquidity 
and are electronically delivered and executed. Eligible Contracts do 
not include Mini Option orders.
    \5\ The specified MARS Payment are paid on all executed Eligible 
Contracts that add liquidity, which are routed to NOM through a 
participating NOM Participant's System and meet the requisite 
Eligible Contracts ADV. No payment [sic] are made with respect to 
orders that are routed to NOM, but not executed. Also, a Participant 
is not be [sic] entitled to receive any other revenue from the 
Exchange for the use of its System specifically with respect to 
orders routed to NOM.

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                                                                   Average daily
                              Tiers                                   volume       MARS  payment   MARS  payment
                                                                     (``ADV'')        (penny)       (non-penny)
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1...............................................................           2,500       \*\ $0.07       \*\ $0.15
2...............................................................           5,000        \*\ 0.09        \*\ 0.20
3...............................................................          10,000        \*\ 0.11        \*\ 0.30
4...............................................................          20,000        \*\ 0.15        \*\ 0.50
5...............................................................          45,000        \*\ 0.17        \*\ 0.60
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    Specifically, the specified MARS Payment are paid on all executed 
Eligible Contracts that add liquidity, which are routed to NOM through 
a participating NOM Participant's System and meet the requisite 
Eligible Contracts ADV. No payments are made with respect to orders 
that are routed to NOM, but not executed.\6\
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    \6\ A Participant is not entitled to receive any other revenue 
from the Exchange for the use of its System specifically with 
respect to orders routed to NOM.
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Amendment to MARS Payment
    The Exchange proposes to amend the MARS Payment tiers at Chapter 
XV, Section 2(6) by amending current tier 1 to require an ADV of 2,000 
contracts instead of the current ADV of 2,500 contracts. The Exchange 
would continue to pay a $0.07 per contract MARS Payment for Penny 
Options and a $0.15 per contract rebate for Non-

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Penny Options.\7\ All other tiers would remain unchanged. The Exchange 
believes that the proposed change to the MARS Payment will attract 
additional liquidity to NOM.
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    \7\ Today, NOM Participants that qualify for Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity Tier 8 in 
Section 2(1) receive $0.09 per contract in addition to any MARS 
Payment tier on MARS Eligible Contracts the NOM Participant 
qualifies for in a given month. This would remain unchanged.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among Participants and issuers and other persons using any facility or 
system which the Exchange operates or controls, and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to amend Tier 1 to lower the requisite ADV 
from 2,500 to 2,000 contracts and continue to pay a MARS Payment of 
$0.07 per contract for Penny Pilot Options and $0.15 per contract for 
Non-Penny Pilot Options is reasonable because additional Participants 
would be able to qualify for a Tier 1 rebate, because of the lower 
requirement, provided the Participant has System Eligibility and 
executes the requisite ADV of Eligible Contracts. The Exchange believes 
this amendment may attract higher volumes of electronic equity and ETF 
options volume to NOM, which would in turn benefit all NOM Participants 
by offering greater price discovery, increased transparency, and an 
increased opportunity to trade on the Exchange. Also, the proposal 
should enhance the competitiveness of the Exchange, particularly with 
respect to those exchanges that offer their own front-end order entry 
system or one they subsidize in some manner. The amendment to Tier 1 
may incentivize NOM Participants to participate in MARS to obtain the 
rebate, provided the NOM Participant is eligible for MARS. Further, the 
tier structure will continue to allow NOM Participants to price their 
services at a level that will enable them to attract order flow from 
market participants who would otherwise utilize an existing front-end 
order entry mechanism offered by the Exchange's competitors instead of 
incurring the cost in time and money to develop their own internal 
systems to be able to deliver orders directly to the Exchange's System.
    The Exchange's proposal to amend Tier 1 to lower the requisite ADV 
from 2,500 to 2,000 contracts and continue to pay a MARS Payment of 
$0.07 per contract for Penny Pilot Options and $0.15 per contract for 
Non-Penny Pilot Options is equitable and not unfairly discriminatory 
because the Exchange will uniformly pay all NOM Participants the 
rebates specified in the proposed MARS Payment tiers provided the NOM 
Participant has executed the requisite ADV of Eligible Contracts. 
Moreover, the Exchange believes that the proposed MARS Payments offered 
by the Exchange are equitable and not unfairly discriminatory because 
any qualifying NOM Participant that offers market access and 
connectivity to the Exchange and/or utilize such functionality 
themselves may earn the MARS Payment for all Eligible Contracts.

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. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable.
    The Exchange's proposal to amend Tier 1 to lower the requisite ADV 
from 2,500 to 2,000 contracts and continue to pay a MARS Payment of 
$0.07 per contract for Penny Pilot Options and $0.15 per contract for 
Non-Penny Pilot Options does not impose an undue burden on intra-market 
competition because the Exchange will uniformly pay all NOM 
Participants the MARS Payments specified in the proposed MARS Payment 
tiers for Penny and Non-Penny Pilot Options provided the NOM 
Participant has executed the requisite number of Eligible Contracts.

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.\10\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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.

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-2017-083 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2017-083. 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.,

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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-2017-083, and should 
be submitted on or before September 20, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18352 Filed 8-29-17; 8:45 am]
 BILLING CODE 8011-01-P