
[Federal Register Volume 78, Number 62 (Monday, April 1, 2013)]
[Notices]
[Pages 19549-19552]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07475]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69236; File No. SR-NASDAQ-2013-049]


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

March 26, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on March 15, 2013, 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

[[Page 19550]]

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 modify Chapter XV, Section 2, entitled 
``NASDAQ Options Market--Fees and Rebates,'' which governs pricing for 
NASDAQ members using the NASDAQ Options Market (``NOM''), NASDAQ's 
facility for executing and routing standardized equity and index 
options, to establish fees and rebates for the option contracts 
overlying 10 shares of a security (``Mini Options'') applicable to 
NASDAQ members using NOM.\3\
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    \3\ See Securities Exchange Act Release No. 68720 (Jan. 24, 
2013), 78 FR 6382 (Jan. 30, 2013).
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    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at the Exchange's principal office, 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 purpose of this proposal is to modify Chapter XV, Section 2, 
entitled ``NASDAQ Options Market--Fees and Rebates,'' to establish fees 
and rebates for Mini Options applicable to NASDAQ members using NOM.
    Specifically, the Exchange is proposing to assess market 
participants on a per trade basis the following fees and rebates on 
Mini Options:

----------------------------------------------------------------------------------------------------------------
                                                                                   Professional,
                                                                                   firm, broker/
                                                                     Customer      dealer, non-     NOM market
                                                                                    NOM market         maker
                                                                                       maker
----------------------------------------------------------------------------------------------------------------
Rebate to Add Liquidity.........................................          $0.030          $0.000          $0.015
Fee to Remove Liquidity.........................................          $0.049          $0.049          $0.049
----------------------------------------------------------------------------------------------------------------

    The Exchange believes that the $0.030 and $0.015 rebate per trade 
for Customers and NOM Market Makers, respectively, should encourage 
these market participants to trade Mini Options on NOM and serves as a 
means to incentivize order flow and to promote this new infant product 
for trading on NOM. The Exchange is not offering at this time any 
rebate per trade to Professionals, Firms, Broker/Dealers, or Non-NOM 
Market Makers.
    The Fee to Remove Liquidity for all market participants will be 
$0.049 on a per trade basis. The Exchange believes that this is an 
equitable allocation of reasonable fees since the Exchange is assessing 
all market participants the same rate to transact trades in Mini 
Options.
    On a per trade basis, the Rebate to Add Liquidity or Fee to Remove 
Liquidity will be rounded to the nearest $0.01 using standard rounding 
rules. For example, a NOM Market Maker adding liquidity is contra to a 
Customer removing liquidity for seven contracts. The NOM Market Maker's 
total Rebate to Add Liquidity for this transaction will be $0.105 
rounded to $0.11 and the Customer will be assessed $0.343 rounded to 
$0.34.
    Additionally, Mini Options volume will not count toward the Penny 
Pilot and Non-Penny pilot tiers, where applicable.
    While the changes to the NOM rules pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on March 18, 2013.
 2. Statutory Basis
    The Exchange believes that its proposal to amend its rules is 
consistent with Section 6(b) of the Act \4\ in general, and furthers 
the objectives of Sections 6(b)(4) of the Act \5\ in particular, in 
that it is an equitable allocation of reasonable fees and other charges 
among Exchange members and other persons using its facilities.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
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    Even though the Exchange is proposing lower per trade fees as 
compared to standard option contracts, as it believes is necessary for 
the product to trade on NOM due to its smaller exercise and assignment 
value of a Mini Option, the Exchange recognizes the costs to the 
Exchange to process quotes and orders in Mini Options, perform 
regulatory surveillance and retain quotes and orders for archival 
purposes will be comparable to the same as a for a standard contract. 
The Exchange believes, therefore, that adopting the proposed fees for 
Mini Options is appropriate, not unreasonable, not unfairly 
discriminatory and not burdensome on competition between participants 
or between the Exchange and other exchanges in the listed options 
market place.
    Specifically, the proposed Fee to Remove Liquidity is equitable and 
not unfairly discriminatory because all market participants will be 
charged the same fee of $0.049 per contract. The Exchange believes that 
treating all market participants equally, in turn, will increase order 
flow and will provide increased liquidity to the market and benefit all 
participants. The Exchange also believes that the proposed $0.049 per 
contract Fee to Remove Liquidity is equitable and not unfairly 
discriminatory because in the current U.S. options market many of the 
standard contracts are quoted in pennies. Under this pricing structure, 
the minimum penny tick increment equates to a $1.00 economic value 
difference per contract, given that a single standardized U.S. options 
contract covers 100 shares of the underlying stock. Where contracts are 
quoted in $0.05 increments (non-pennies), the economic value per tick 
is $5.00 in proceeds to the investor transacting in these contracts. 
Since the Exchange is planning to file to permit Mini Options to have 
the same minimum tick as permitted for standard options, including 
penny increments, the minimum penny tick increment equates to a $0.10 
economic value in comparison to fee structures on

[[Page 19551]]

standard options on the make-take exchanges, including NOM, where 
securities quoted in penny increments are commonly in the $0.30 to 
$0.45 per contract range. A $0.30 per contract rebate in a penny quoted 
security is a rebate equivalent to 30% of the value of the minimum 
tick. A $0.45 per contract fee in a penny quoted security is a charge 
equivalent to 45% of the value of the minimum tick. For Mini Options 
the proposed Fee to Remove Liquidity is $0.049 or 49% of the proposed 
value of that minimum tick, but still less than 50% of the proposed 
value of that minimum tick as in the case with standard options trading 
in penny increments today.
    The Exchange believes that the proposed Rebate to Add Liquidity for 
Mini Options is equitable and not unfairly discriminatory because 
Customers and NOM Market Makers, receiving rebates of $0.030 and $0.015 
per trade respectively, would be the only market participants to 
receive a rebate. The Exchange believes that it is reasonable to assess 
Customers and NOM Market Makers lower fees as compared to other market 
participants because these market participants contribute to the market 
in terms of liquidity and trading environment as compared to other 
market participants. For NOM Market Makers this includes its specific 
Market Maker quoting obligations and certain other obligations to the 
market that do not apply to other market participants.\6\ The Exchange 
believes that the differentiation between the rebates offered to 
Customers as compared with all other market participants, including NOM 
Market Makers, is justified and not unfairly discriminatory because it 
is in recognition of the important contribution that Customers provide 
to the market place. Increased Customer liquidity benefits all market 
participants seeking to provide liquidity to Customers.
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    \6\ See Exchange Rules Section VII, Market Participants, 
Sections 5, Obligations of Market Makers, and Section 6, Market 
Maker Quotations.
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    Finally, the Exchange believes that the proposed fees and rebates 
are reasonable and not unfairly discriminatory because the fees are 
consistent with price differentiation that exists today on all option 
exchanges.

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 Exchange believes that by 
offering Mini Options it will encourage order flow to be directed to 
the Exchange, which will benefit all market participants by increasing 
liquidity on the Exchange. The Exchange will assess a Fee to Remove 
Liquidity of $0.049 per contract on all market participants, 
essentially treating market participants equally and ignoring their 
varying contributions to the market. Additionally, Customers and NOM 
Market Makers are eligible for a Rebate to Add Liquidity. The Exchange 
believes these pricing amendments do not impose a burden on competition 
but rather that the proposed rule change will continue to promote 
competition on the Exchange and position the Exchange as an attractive 
alternative when compared to other options exchanges.
    The Exchange believes that the adoption of the proposed fees and 
rebates for Mini Options, which will be listed for trading on one or 
more exchange, will not impose any unnecessary burden on intramarket 
competition. The Exchange operates in a highly competitive market, 
comprised of eleven exchanges, where market participants are highly 
knowledgeable and can easily and without any material impediments, 
direct Mini Options orders to the options exchange that they believe is 
the most attractive for their business.
    Accordingly, the fees that are assessed and the rebates paid by the 
Exchange described in the above proposal are influenced by these robust 
market forces and therefore must remain competitive with fees charged 
and rebates paid by other venues on other products and therefore must 
continue to be reasonable and equitably allocated.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor 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.\7\ 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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    \7\ 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-049 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-2013-049. 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-2013-049 and should 
be submitted on or before April 22, 2013.


[[Page 19552]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-07475 Filed 3-29-13; 8:45 am]
BILLING CODE 8011-01-P


