
[Federal Register Volume 80, Number 249 (Tuesday, December 29, 2015)]
[Notices]
[Pages 81407-81409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32653]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76739; File No. SR-NASDAQ-2015-153]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend NASDAQ Options Market--Fees and Rebates

December 22, 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 December 15, 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.
---------------------------------------------------------------------------

    \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 Chapter XV, entitled ``Options 
Pricing,'' at Section 2, which governs pricing for Exchange members 
using the NASDAQ Options Market (``NOM''), the Exchange's facility for 
executing and routing standardized equity and index options.
    The Exchange purposes [sic] to remove specific rule text added in 
SR-NASDAQ-2015-149,\3\ which was applicable only to the mid-month 
pricing change.\4\ This proposal removes the specific December 2015 
dates from the rule text so the rebates will apply in January 2016. 
While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments [sic] become operative on 
January 4, 2016.
---------------------------------------------------------------------------

    \3\ This proposed rule change is not yet published. This 
proposed rule change was filed on December 2, 2015.
    \4\ The Commission notes that after the Exchange filed this 
proposal, the notice for SR-NASDAQ-2015-149 was published for public 
comment. See Securities Exchange Act Release No. 76651 (December 15, 
2015), 80 FR 79387 (December 21, 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 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 Chapter XV, Section 2, entitled 
``NASDAQ Options Market--Fees and Rebates'' to amend Tier 8 of the 
Customer and Professional Penny Pilot Options \5\ Rebates to Add 
Liquidity. The proposed rule change is detailed below.
---------------------------------------------------------------------------

    \5\ 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 [sic] 
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 [sic] (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) [sic], 79 FR 71477 
(November 25, 2014) [sic] (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 and extension and replacement of Penny Pilot). See 
also NOM Rules, Chapter VI, Section 5.
---------------------------------------------------------------------------

Customer and Professional Penny Pilot Options Rebates To Add Liquidity

    Today, the Exchange offers Participants tiered Customer and 
Professional rebates based on various criteria, with rebates ranging 
from $0.20 to $0.48 per contract.\6\ The Exchange filed SR-NASDAQ-2015-
149,\7\ on December 2, 2015, to amend Tier 8 of the Customer and 
Professional Penny Pilot Options Rebates to Add Liquidity tiers. 
Participants may qualify for Customer and Professional Penny Pilot 
Options Rebates to Add Liquidity by adding a certain amount of 
liquidity as specified by each tier.\8\
---------------------------------------------------------------------------

    \6\ See NOM's Rules at Chapter XV, Section 2(1).
    \7\ See note 3 above.
    \8\ Tiers 6 and 7 are calculated based on Total Volume. Total 
Volume is defined as Customer, Professional, Firm, Broker-Dealer, 
Non-NOM Market Maker, and NOM Market Maker volume in Penny Pilot 
Options and/or Non-Penny Pilot Options which either adds or removes 
liquidity on NOM. See note ``b'' in Section 2(1) of Chapter XV. The 
Exchange utilizes data from The Options Clearing Corporation 
(``OCC'') to determine the total industry customer equity and ETF 
options ADV figure. OCC classifies equity and ETF options volume 
under the equity options category. Also, both customer and 
professional orders that are transacted on options exchanges clear 
in the customer range at OCC and therefore both customer and 
professional volume would be included in the total industry figure 
to calculate rebate tiers.
---------------------------------------------------------------------------

    The Exchange proposes to amend Tier 8 of the Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity, which states 
``Participant adds Customer, Professional, Firm, Non-NOM Market Maker, 
and/or Broker-

[[Page 81408]]

Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 
above 0.75% or more of total industry customer equity and ETF option 
ADV contracts per day in a month or Participant adds (1) Customer and/
or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of 30,000 or more contracts per day in a month and (2) the 
Participant has certified for the Investor Support Program \9\ set 
forth in Rule 7014 from December 2, 2015 through December 31, 2015'' to 
remove the reference to the December dates. The date range, from 
December 2, 2015 to December 31, 2015, was added to accommodate a mid-
month pricing change that impacted that specific timeframe. The 
Exchange intends to continue to offer Participants the opportunity to 
earn the Tier 8 Customer and Professional Penny Pilot Options Rebate to 
Add Liquidity and therefore proposes to remove the specific date range. 
Tier 8 will be offered to Participants as of January 4, 2016 and 
forward.
---------------------------------------------------------------------------

    \9\ For a detailed description of the Investor Support Program 
(``ISP''), see Securities Exchange Act Release No. 63270 (November 
8, 2010), 75 FR 69489 (November 12, 2010) (NASDAQ-2010-141) (notice 
of filing and immediate effectiveness) (the ``ISP Filing''). See 
also Securities Exchange Act Release Nos. 63414 (December 2, 2010), 
75 FR 76505 (December 8, 2010) (NASDAQ-2010-153) (notice of filing 
and immediate effectiveness); and 63628 (January 3, 2011), 76 FR 
1201 (January 7, 2011) (NASDAQ-2010-154) (notice of filing and 
immediate effectiveness).
---------------------------------------------------------------------------

    The Exchange believes the Tier 8 Customer and Professional Penny 
Pilot Option Rebate to Add Liquidity will continue to incentivize 
market participants to send order flow to NOM, the resulting liquidity 
will benefit all market participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act,\10\ in general, and with Section 6(b)(4) and 
6(b)(5) of the Act,\11\ 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 the Exchange operates or controls, and is not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers. 
Customer volume is important because it continues to attract liquidity 
to the Exchange, which benefits all market participants. Further, with 
respect to Professional liquidity, the Exchange initially established 
Professional pricing in order to ``. . . bring additional revenue to 
the Exchange.'' \12\ The Exchange noted in the Professional Filing that 
it believes ``. . . that the increased revenue from the proposal would 
assist the Exchange to recoup fixed costs.'' \13\ In addition, the 
Exchange noted in that filing that it believes that establishing 
separate pricing for a Professional, which ranges between that of a 
Customer and market maker, accomplishes this objective.\14\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (5).
    \12\ See Securities Exchange Act Release No. 64494 (May 13, 
2011), 76 FR 29014 (May 19, 2011) (SR-NASDAQ-2011-066) 
(``Professional Filing''). In this filing, the Exchange addressed 
the perceived favorable pricing of Professionals who were assessed 
fees and paid rebates like a Customer prior to the filing. The 
Exchange noted in that filing that a Professional, unlike a retail 
Customer, has access to sophisticated trading systems that contain 
functionality not available to retail Customers.
    \13\ See Professional Filing.
    \14\ See Professional Filing. The Exchange also [sic] in the 
Professional Filing that it believes the role of the retail Customer 
in the marketplace is distinct from that of the Professional and the 
Exchange's fee proposal at that time accounted for this distinction 
by pricing each market participant according to their roles and 
obligations.
---------------------------------------------------------------------------

Customer and Professional Penny Pilot Options Rebates To Add Liquidity

    The Exchange's proposal to amend Tier 8 of the Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity to remove the 
December 2, 2015 to December 31, 2015 date range is reasonable because 
the Exchange seeks to continue to incentivize Participants to send 
order flow to NOM. The Exchange believes that the heightened volume 
requirement to qualify for Tier 8, as compared with other tier volume 
requirements, combined with the requirement to continue to certify for 
the Investor Support Program will continue to incentivize Participants 
to transact an even greater number of qualifying Customer and/or 
Professional volume, which liquidity will benefit other market 
participants by providing them the opportunity to interact with that 
liquidity. The Exchange notes that incentivizing Participants to add 
options liquidity through the payment of an additional rebate is not 
novel as, today, Tier 8 permits the additional [sic] of equity volume 
to qualify for this rebate. The concept of participating in the 
equities market as a means to qualify for an options rebate exists 
today. This participation benefits the Nasdaq Market Center as well as 
the NOM market by incentivizing order flow to these markets. This 
rebate recognizes the prevalence of trading in which members 
simultaneously trade different asset classes within the same strategy. 
Participants will continue to be required to add liquidity to both the 
options and equities requirement if they qualify for the Tier 8 rebate 
utilizing the second method.\15\ Because cash equities and options 
markets are linked, with liquidity and trading patterns on one market 
affecting those on the other, the Exchange believes that pricing 
incentives that encourage market participant activity in NOM also 
support price discovery and liquidity provision in the Nasdaq Market 
Center.
---------------------------------------------------------------------------

    \15\ There are two ways to qualify for the Tier 8 rebate, as 
amended by this proposal, either: (1) Participant adds Customer, 
Professional, Firm, Non-NOM Market Maker, and/or Broker-Dealer 
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 
above 0.75% or more of total industry customer equity and ETF option 
ADV contracts per day in a month; or (2) Participant adds Customer 
and/or Professional liquidity in Penny Pilot Options and/or Non-
Penny Pilot Options of 30,000 or more contracts per day in a month 
and the Participant has certified for the Investor Support Program 
set forth in Rule 7014.
---------------------------------------------------------------------------

    The Exchange's proposal to amend Tier 8 of the Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity to remove the 
December 2, 2015 to December 31, 2015 date range is equitable and not 
unfairly discriminatory because all Participants may continue to 
qualify for Tier 8. Qualifying Participants will continue to be 
uniformly paid a $0.48 per contract rebate.

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.
Customer and Professional Penny Pilot Options Rebates To Add Liquidity
    The Exchange's proposal to amend Tier 8 of the Customer and 
Professional Penny Pilot Options Rebate to Add Liquidity to remove the 
December 2, 2015 to December 31, 2015 date range does not impose an 
undue burden on intra-market competition because all Participants are 
eligible to qualify for the Tier 8 Customer or Professional Rebate to 
Add Liquidity, provided they meet the qualifications. Also, the Tier 8 
rebate will be uniformly paid to those Participants that are eligible 
for the rebate.
    As noted above, continuing to incentivize Participants to add not 
only options but equities volume does not impose an undue burden on 
intra-market competition because cash equities and options markets are 
linked, with liquidity and trading patterns on one market affecting 
those on the other; the Exchange believes that pricing incentives that 
encourage market

[[Page 81409]]

participant activity in NOM also support price discovery and liquidity 
provision in the Nasdaq Market Center. Further, the pricing incentives 
require significant levels of liquidity provision, which benefits all 
market participants on NOM and the Nasdaq Market Center.

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

    \16\ 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-153 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-2015-153. 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-2015-153, and should 
be submitted on or before January 19, 2016.
---------------------------------------------------------------------------

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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Brent J. Fields,
Secretary.
[FR Doc. 2015-32653 Filed 12-28-15; 8:45 am]
 BILLING CODE 8011-01-P


