
[Federal Register Volume 80, Number 201 (Monday, October 19, 2015)]
[Notices]
[Pages 63261-63263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26425]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76131; File No. SR-NASDAQ-2015-113]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Chapter XV, Entitled ``Options Pricing,'' at Section 2 Governing 
Pricing for NASDAQ Members

October 13, 2015.
    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 September 29, 2015, 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 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 modify Chapter XV, entitled ``Options 
Pricing,'' at Section 2 governing pricing for NASDAQ members using the 
NASDAQ Options Market (``NOM''), NASDAQ's facility for executing and 
routing standardized equity and index options. Specifically, NOM 
proposes to amend certain Penny Pilot Options \3\ rebates currently 
applicable to NOM Market Makers.\4\
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    \3\ See Securities Exchange Act Release Nos. 57579 (March 28, 
2008), 73 FR 18587 (April 4, 2008) (SR-NASDAQ-2008-026) (notice of 
filing and immediate effectiveness establishing Penny Pilot); 60874 
(October 23, 2009), 74 FR 56682 (November 2, 2009)(SR-NASDAQ-2009-
091) (notice of filing and immediate effectiveness expanding and 
extending Penny Pilot); 60965 (November 9, 2009), 74 FR 59292 
(November 17, 2009)(SR-NASDAQ-2009-097) (notice of filing and 
immediate effectiveness adding seventy-five classes to Penny Pilot); 
61455 (February 1, 2010), 75 FR 6239 (February 8, 2010) (SR-NASDAQ-
2010-013) (notice of filing and immediate effectiveness adding 
seventy-five classes to Penny Pilot); 62029 (May 4, 2010), 75 FR 
25895 (May 10, 2010) (SR-NASDAQ-2010-053) (notice of filing and 
immediate effectiveness adding seventy-five classes to Penny Pilot); 
65969 (December 15, 2011), 76 FR 79268 (December 21, 2011) (SR-
NASDAQ-2011-169) (notice of filing and immediate effectiveness 
extension and replacement of Penny Pilot); 67325 (June 29, 2012), 77 
FR 40127 (July 6, 2012) (SR-NASDAQ-2012-075) (notice of filing and 
immediate effectiveness and extension and replacement of Penny Pilot 
through December 31, 2012); 68519 (December 21, 2012), 78 FR 136 
(January 2, 2013) (SR-NASDAQ-2012-143) (notice of filing and 
immediate effectiveness and extension and replacement of Penny Pilot 
through June 30, 2013); 69787 (June 18, 2013), 78 FR 37858 (June 24, 
2013) (SR-NASDAQ-2013-082) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
December 31, 2013); 71105 (December 17, 2013), 78 FR 77530 (December 
23, 2013) (SR-NASDAQ-2013-154) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
June 30, 2014); 79 FR 31151 (May 23, 2014), 79 FR 31151 (May 30, 
2014) (SR-NASDAQ-2014-056) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
December 31, 2014); 73686 (December 2, 2014), 79 FR 71477 (November 
25, 2014) (SR-NASDAQ-2014-115) (notice of filing and immediate 
effectiveness and extension and replacement of Penny Pilot through 
June 30, 2015) and 75283 (June 24, 2015), 80 FR 37347 (June 30, 
2015) (SR-NASDAQ-2015-063) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change Relating to Extension of the 
Exchange's Penny Pilot Program and Replacement of Penny Pilot Issues 
That Have Been Delisted.) See also NOM Rules, Chapter VI, Section 5.
    \4\ The term ``NOM Market Maker'' means 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.
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    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments be operative on October 1, 
2015.
    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

[[Page 63262]]

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
    NASDAQ proposes to modify Chapter XV, entitled ``Options Pricing,'' 
at Section 2(1) governing the rebates and fees assessed for option 
orders entered into NOM. The Exchange proposes to amend the NOM Market 
Maker Penny Pilot Options Rebates to Add Liquidity to add the iShares 
Russell 2000 ETF ``IWM'' to Tiers 3 and 4 of the NOM Market Maker Penny 
Pilot Options Rebates to Add Liquidity. The Exchange believes that 
additional rebate opportunities offered by the addition of IWM to Tiers 
3 and 4 of the NOM Market Maker Penny Pilot Options Rebates to Add 
Liquidity will attract additional order flow to NOM to the benefit of 
all market participants.
NOM Market Maker Rebates To Add Liquidity
    Today, the Exchange pays NOM Market Maker Penny Pilot Options 
Rebates to Add Liquidity based on various criteria in six tiers with 
rebates which range from $0.20 to $0.42 per contract as noted below.

------------------------------------------------------------------------
                                                          Rebate to add
        Monthly volume                                      liquidity
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Tier 1........................  Participant adds NOM    $0.20.
                                 Market Maker
                                 liquidity in Penny
                                 Pilot Options and/or
                                 Non-Penny Pilot
                                 Options of up to
                                 0.10% of total
                                 industry customer
                                 equity and ETF option
                                 average daily volume
                                 (``ADV'') contracts
                                 per day in a month.
 
Tier 2........................  Participant adds NOM    $0.25.
                                 Market Maker
                                 liquidity in Penny
                                 Pilot Options and/or
                                 Non-Penny Pilot
                                 Options above 0.10%
                                 to 0.25% of total
                                 industry customer
                                 equity and ETF option
                                 ADV contracts per day
                                 in a month.
Tier 3........................  Participant adds NOM    $0.30 or $0.40
                                 Market Maker            in the
                                 liquidity in Penny      following
                                 Pilot Options and/or    symbols AAPL,
                                 Non-Penny Pilot         QQQ, SPY and
                                 Options above 0.25%     VXX.
                                 to 0.60% of total
                                 industry customer
                                 equity and ETF option
                                 ADV contracts per day
                                 in a month.
Tier 4........................  Participant adds NOM    $0.32 or $0.40
                                 Market Maker            in the
                                 liquidity in Penny      following
                                 Pilot Options and/or    symbols AAPL,
                                 Non-Penny Pilot         QQQ,VXX and
                                 Options of above        SPY.
                                 0.60% to 0.90% of
                                 total industry
                                 customer equity and
                                 ETF option ADV
                                 contracts per day in
                                 a month.
Tier 5........................  Participant adds NOM    $0.40.
                                 Market Maker
                                 liquidity in Penny
                                 Pilot Options and/or
                                 Non-Penny Pilot
                                 Options of above
                                 0.30% of total
                                 industry customer
                                 equity and ETF option
                                 ADV contracts per day
                                 in a month and
                                 qualifies for the
                                 Tier 7 or Tier 8
                                 Customer and/or
                                 Professional Rebate
                                 to Add Liquidity in
                                 Penny Pilot Options.
Tier 6........................  Participant adds NOM    $0.42.
                                 Market Maker
                                 liquidity in Penny
                                 Pilot Options and/or
                                 Non-Penny Pilot
                                 Options above 0.80%
                                 of total industry
                                 customer equity and
                                 ETF option ADV
                                 contracts per day in
                                 a month and qualifies
                                 for the Tier 7 or
                                 Tier 8 Customer and/
                                 or Professional
                                 Rebate to Add
                                 Liquidity in Penny
                                 Pilot Options or
                                 Participant adds NOM
                                 Market Maker
                                 liquidity in Penny
                                 Pilot Options and/or
                                 Non-Penny Pilot
                                 Options above 0.90%
                                 of total industry
                                 customer equity and
                                 ETF option ADV
                                 contracts per day in
                                 a month or
                                 Participants that add
                                 Customer,
                                 Professional, Firm,
                                 Non-NOM Market Maker,
                                 and/or Broker-Dealer
                                 liquidity in Penny
                                 Pilot Options and/or
                                 Non- Penny Pilot
                                 Options of 1.40% or
                                 more of total
                                 industry customer
                                 equity and ETF option
                                 ADV contracts per day
                                 in a month.
------------------------------------------------------------------------

    Today, the Tier 3 NOM Market Maker Penny Pilot Options Rebate to 
Add Liquidity pays a $0.30 per contract rebate, except in options 
overlying Apple, Inc. (``AAPL''), PowerShares QQQ (``QQQ''), VIX ST 
Futures ETN (``VXX'') and SPDR S&P 500 (``SPY''), which pay a $0.40 per 
contract rebate to Participants that add NOM Market Maker liquidity in 
Penny Pilot Options and/or Non-Penny Pilot Options above 0.25% to 0.60% 
of total industry customer equity and ETF option ADV contracts per day 
in a month. The Exchange proposes to add IWM to the list of symbols 
that are eligible for the Tier 3 rebate of $0.40 per contract. Today, 
the Exchange pays a Tier 3 NOM Market Maker Penny Pilot Options Rebate 
to Add Liquidity of $0.30 per contract in IWM.
    Today, the Tier 4 NOM Market Maker Penny Pilot Options Rebate to 
Add Liquidity pays a $0.32 per contract rebate, except in AAPL, QQQ, 
VXX and SPY, which pay a $0.40 per contract rebate to Participants that 
add NOM Market Maker liquidity in Penny Pilot Options and/or Non-Penny 
Pilot Options of above 0.60% to 0.90% of total industry customer equity 
and ETF option ADV contracts per day in a month. The Exchange proposes 
to add IWM to the list of symbols that are eligible for the Tier 4 
rebate of $0.40 per contract. Today, the Exchange pays a Tier 4 NOM 
Market Maker Penny Pilot Options Rebate to Add Liquidity of $0.32 per 
contract in IWM.
    The Exchange believes that paying a higher rebate for IWM 
transactions will encourage a greater number of transactions in IWM.
2. Statutory Basis
    NASDAQ believes that the proposed rule changes are consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(4) of the Act,\6\ in particular, in that they provide 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 as described in detail below.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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NOM Market Maker Penny Pilot Options Rebates To Add Liquidity
    The Exchange's proposal to amend the NOM Market Maker Penny Pilot 
Options Rebate to Add Liquidity Tiers 3 and 4 to increase the IWM 
rebate from $0.30 to $0.40 per contract in Tier 3 and from $0.32 to 
$0.40 per contract in Tier 4 is reasonable because the proposal seeks 
to encourage Participants to transact a greater amount of IWM liquidity 
in order to receive the higher rebate of $0.40 per contract, provided 
Participants qualify for the Tier 3 or 4

[[Page 63263]]

rebate. The Exchange believes that offering NOM Market Makers the 
ability to obtain higher rebates is reasonable because it will 
encourage additional order interaction.
    The Exchange's proposal to amend the NOM Market Maker Penny Pilot 
Options Rebate to Add Liquidity Tiers 3 and 4 to increase the IWM 
rebate from $0.30 to $0.40 per contract in Tier 3 and from $0.32 to 
$0.40 per contract in Tier 4 is equitable and not unfairly 
discriminatory because all NOM Market Makers may qualify for the Tier 3 
and Tier 4 NOM Market Maker Penny Pilot Options Rebate to Add 
Liquidity.
    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to adopt different pricing for IWM, as compared 
to other options, because pricing by symbol is a common practice on 
many U.S. options exchanges as a means to incentivize order flow to be 
sent to an exchange for execution in the most actively traded options 
classes, in this case actively traded Penny Pilot Options.\7\ The 
Exchange notes that IWM is one of the most actively traded options in 
the U.S. The Exchange believes that this pricing will incentivize 
members to transact options on IWM on NOM in order to obtain the higher 
$0.40 per contract rebate.
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    \7\ See NASDAQ OMX PHLX LLC's Pricing Schedule. See also the 
International Securities Exchange LLC's Fee Schedule. Both of these 
markets segment pricing by symbol.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.
    The Exchange's proposal to amend the Tier 3 and 4 NOM Market Maker 
Penny Pilot Options Rebates to Add Liquidity to pay a higher rebate for 
IWM of $0.40 per contract, similar to AAPL, QQQ, SPY and VXX, does not 
create an undue burden on intra-market competition because all NOM 
Market Makers may qualify for the Tier 3 or 4 NOM Market Maker Penny 
Pilot Options Rebate to Add Liquidity.
    The Exchange's proposal addressed herein does not impose an inter-
market burden on competition because the Exchange operates in a highly 
competitive market in which many sophisticated and knowledgeable market 
participants can readily and do send order flow to competing exchanges 
if they deem fee levels or rebate incentives at a particular exchange 
to be excessive or inadequate. These market forces support the Exchange 
belief that the proposed rebate structure and tiers proposed herein are 
competitive with rebates and tiers in place on other exchanges. The 
Exchange believes that this competitive marketplace continues to impact 
the rebates present on the Exchange today and substantially influences 
the proposals set forth above. Other options markets offer similar 
rebates to incentivize market participants to direct order flow to 
their markets. The Exchange believes that continuing to offer rebates 
and increasing those rebates and providing opportunities to earn higher 
rebates will benefit the marketplace by continuing to reward liquidity 
providers and thereby offering other market participants an opportunity 
to interact with this order flow.

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) of the Act \8\ and paragraph (f) of Rule 19b-4 \9\ 
thereunder. 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 will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f).
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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-2015-113 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-2015-113. 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-2015-113, and should 
be submitted on or before November 9, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26425 Filed 10-16-15; 8:45 am]
 BILLING CODE 8011-01-P


