[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Notices]
[Pages 59035-59036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26910]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82239; File No. SR-NASDAQ-2017-127]


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(1)

December 8, 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 December 1, 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.
---------------------------------------------------------------------------

    \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 amend the Exchange's transaction fees at 
Chapter XV, Section 2(1), which governs the pricing for Nasdaq 
Participants 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 
website 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Exchange's transaction fees at 
Chapter XV, Section 2(1) to introduce a new NOM Market Maker \3\ Rebate 
to Add Liquidity in Non-Penny Pilot Options. Today, the Exchange 
charges Participants a $0.35 per contract NOM Market Maker Fee for 
Adding Liquidity in Non-Penny Pilot Options.\4\ To incentivize 
Participants to add NOM Market Maker liquidity in Non-Penny Pilot 
Options, the Exchange offers Participants an opportunity to reduce this 
$0.35 per contract fee to $0.00 per contract, provided the Participant 
adds NOM Market Maker liquidity in Non-Penny Pilot Options of 7,500 or 
more ADV contracts per day in a month.\5\
---------------------------------------------------------------------------

    \3\ The term ``NOM Market Maker'' or (``M'') is a Participant 
that has registered as a Market Maker on NOM pursuant to Chapter 
VII, Section 2, and must also remain in good standing pursuant to 
Chapter VII, Section 4. In order to receive NOM Market Maker pricing 
in all securities, the Participant must be registered as a NOM 
Market Maker in at least one security. See Chapter XV.
    \4\ See Chapter XV, Section 2(1).
    \5\ Id. at note 5.
---------------------------------------------------------------------------

    In order to further incentivize NOM Market Makers to transact in 
Non-Penny Pilot Options on NOM, the Exchange proposes to introduce a 
new NOM Market Maker Rebate to Add Liquidity in Non Penny-Pilot 
Options, provided the Participant adds NOM Market Maker liquidity in 
Non-Penny Pilot Options of 10,000 or more ADV contracts per day in a 
month. The Participant would receive a $0.30 per contract Rebate to Add 
Liquidity in Non-Penny Pilot Options as a NOM Market Maker. 
Participants that qualify for this proposed rebate would not be charged 
the NOM Market Maker Fee for Adding Liquidity in Non-Penny Pilot 
Options by virtue of already having qualified for the discounted fee of 
$0.00 in note 5 (i.e., by meeting the lower NOM Market Maker Non-Penny 
volume threshold of 7,500 or more ADV contracts per day).
    In essence, the Exchange is creating a new volume threshold that is 
higher than the existing threshold with this proposal. As such, there 
will be two NOM Market Maker volume-based tiers for adding liquidity in 
Non-Penny Pilot Options, the lower of which would provide a discounted 
fee of $0.00 from $0.35 for the qualifying Participant, while the 
higher would provide a rebate of $0.30 for the qualifying Participant 
in lieu of the $0.35 fee. Accordingly, the Exchange proposes to amend 
the existing volume requirement for the discounted fee in note 5 to 
state that Participants that add NOM Market Maker liquidity in Non-
Penny Pilot Options of 7,500 to 9,999 ADV contracts per day in a month 
will be assessed a $0.00 per contract Non-Penny Options Fee for Adding 
Liquidity in that month. Participants that add Non-Penny NOM Market 
Maker liquidity of 10,000 or more ADV contracts per day in a month will 
not be charged a Non-Penny Options Fee for Adding Liquidity and will 
instead receive the proposed $0.30 per contract Non-Penny Rebate to Add 
Liquidity. Finally, the Exchange proposes to clarify in note 5 that the 
$0.35 fee for adding liquidity will apply unless Participants meet the 
proposed volume thresholds, as described above.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ 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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The proposed change to offer Participants that send NOM Market 
Maker order flow the opportunity to receive a $0.30 per contract Non-
Penny Rebate to Add Liquidity, provided the Participant adds NOM Market 
Maker liquidity in Non-Penny Pilot Options of 10,000 or more ADV 
contracts per day in a month, is reasonable because the Exchange seeks 
to further incentivize Participants to add NOM Market Maker liquidity 
in Non-Penny Pilot Options to obtain the rebate. The Exchange believes 
that its proposal will encourage Participants to select NOM as a venue 
and in turn benefit other market participants with the opportunity to 
interact with such liquidity. Other options exchanges also offer 
volume-based rebates to market makers for adding liquidity.\8\
---------------------------------------------------------------------------

    \8\ See MIAX Pearl Fee Schedule, Section 1)a) for the non-penny 
maker rebates offered to MIAX Pearl market makers. See also Nasdaq 
GEMX Schedule of Fees, Section I for the non-penny maker rebates 
offered to GEMX market makers.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed NOM Market Maker Non-

[[Page 59036]]

Penny Rebate to Add Liquidity is equitable and not unfairly 
discriminatory because all NOM Market Makers can qualify for the rebate 
by meeting the volume requirements described above. Furthermore, NOM 
Market Makers, unlike other market participants, add value through 
continuous quoting \9\ and the commitment of capital. In addition, 
encouraging NOM Market Makers to add greater liquidity benefits all 
market participants in the quality of order interaction. As such, the 
Exchange believes it is equitable and not unfairly discriminatory to 
offer only NOM Market Makers the opportunity to earn the proposed 
rebate because of the obligations borne by these market participants, 
as noted herein.
---------------------------------------------------------------------------

    \9\ Pursuant to Chapter VII (Market Participants), Section 5 
(Obligations of Market Makers), in registering as a market maker, an 
Options Participant commits himself to various obligations. 
Transactions of a Market Maker in its market making capacity must 
constitute a course of dealings reasonably calculated to contribute 
to the maintenance of a fair and orderly market, and Market Makers 
should not make bids or offers or enter into transactions that are 
inconsistent with such course of dealings. Further, all Market 
Makers are designated as specialists on NOM for all purposes under 
the Act or rules thereunder. See Chapter VII, Section 5.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed change to amend the 
existing NOM Market Maker Non-Penny volume threshold from ``7,500 or 
more ADV contracts'' to ``7,500 to 9,999 ADV contracts'' is reasonable 
because the Exchange is essentially adding a higher volume-based tier 
with this proposal. The Exchange believes that the proposed change 
would clarify how the two NOM Market Maker Non-Penny tiers are 
applied--meeting the volume threshold in the lower tier would qualify 
the Participant for a discounted fee, and meeting the volume threshold 
in the higher tier would qualify the Participant for a rebate in lieu 
of the fee, as described above. In the same vein, the proposed change 
to clarify in note 5 that the $0.35 fee for adding liquidity will apply 
unless Participants meet these volume thresholds is reasonable because 
it will clarify how the fee and rebate program proposed herein will 
apply.
    The Exchange further believes that these clarifying changes to 
amend the existing NOM Market Maker Non-Penny volume threshold and 
describe how the $0.35 fee will apply are equitable and not unfairly 
discriminatory because the changes will apply to all qualifying 
Participants.

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. The proposed rebate and 
corresponding changes to the volume-based thresholds described above 
are all designed to increase competition by encouraging NOM Maker 
Makers to provide greater liquidity and maintain tight markets in Non-
Penny Pilot Options. The Exchange 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. In 
such an environment, the Exchange must continually adjust its fees to 
remain competitive. Because competitors are free to modify their own 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which fee changes in this market may impose any burden on competition 
is extremely limited.

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\
---------------------------------------------------------------------------

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

    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-2017-127 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-2017-127. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2017-127 and should be submitted 
on or before January 4, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26910 Filed 12-13-17; 8:45 am]
 BILLING CODE 8011-01-P