[Federal Register Volume 84, Number 171 (Wednesday, September 4, 2019)]
[Notices]
[Pages 46570-46573]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19005]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86794; File No. SR-NASDAQ-2019-067]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend The Nasdaq Options Market LLC (``NOM'') Pricing at Options 7

August 28, 2019.
    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 22, 2019, The Nasdaq Stock Market LLC

[[Page 46571]]

(``Nasdaq'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II, 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 Nasdaq Options Market LLC 
(``NOM'') pricing at Options 7, Section 3 titled ``Nasdaq Options 
Market--Ports and Other Services.'' The amendment will describe the 
pricing with respect to an upcoming technology infrastructure 
migration.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments become operative on September 3, 
2019.
    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 NOM pricing at Options 7, Section 3 
titled ``Nasdaq Options Market--Ports and Other Services.'' The 
Exchange previously filed a fee proposal to not assess a fee for 
duplicative FIX Ports,\3\ CTI Ports \4\ and FIX DROP Ports \5\ to new 
FIX Ports, CTI Ports and FIX DROP Ports, during the month of August 
2019, in connection with an upcoming technology infrastructure 
migration.\6\ With this rule change, the Exchange proposes to not 
assess a fee for duplicative FIX Ports, CTI Ports and FIX DROP Ports to 
new FIX Ports, CTI Ports and FIX DROP Ports, during the month of 
September 2019 to allow additional time for the Exchange to migrate its 
technology.
---------------------------------------------------------------------------

    \3\ Financial Information eXchange'' or '' FIX'' is an interface 
that allows Participants and their Sponsored Customers to connect, 
send, and receive messages related to orders to and from the 
Exchange. Features include the following: (1) Execution messages; 
(2) order messages; and (3) risk protection triggers and cancel 
notifications. See Chapter VI, Section 21(a)(i)(A).
    \4\ Clearing Trade Interface (``CTI'') is a real-time clearing 
trade update message that is sent to a Participant after an 
execution has occurred and contains trade details specific to that 
Participant. The information includes, among other things, the 
following: (i) The Clearing Member Trade Agreement or ``CMTA'' or 
The Options Clearing Corporation or ``OCC'' number; (ii) Exchange 
badge or house number; (iii) the Exchange internal firm identifier; 
(iv) an indicator which will distinguish electronic and non-
electronically delivered orders; (v) liquidity indicators and 
transaction type for billing purposes; and (vi) capacity. See 
Chapter VI, Section 19(b)(1).
    \5\ FIX DROP is a real-time order and execution update message 
that is sent to a Participant after an order been received/modified 
or an execution has occurred and contains trade details specific to 
that Participant. The information includes, among other things, the 
following: (i) Executions; (ii) cancellations; (iii) modifications 
to an existing order; and (iv) busts or post-trade corrections. See 
Chapter VI, Section 19(b)(3).
    \6\ See Securities Exchange Act Release No. 86507 (July 29, 
2019), 84 FR 37934 (August 2, 2019) (SR-NASDAQ-2019-056).
---------------------------------------------------------------------------

Description of Migration and Pricing Impact
    In connection with this migration, Participants may request new FIX 
Ports, CTI Ports and FIX DROP Ports during the month of September 2019, 
which are duplicative of the type and quantity of their current ports, 
at no additional cost to allow for testing of the new ports and allow 
for continuous connection to the match engine during the transition 
period.\7\ For example, a NOM Participant with 3 FIX Ports, 1 CTI Port 
and 1 FIX DROP Port on September 3, 2019 could request 3 new FIX Ports, 
1 CTI Port and 1 FIX DROP Port for the month of September 2019 at no 
additional cost. The NOM Participant would be assessed only for the 
legacy market ports, in this case 3 FIX Ports, 1 CTI Port and 1 FIX 
DROP Port, for the month of September 2019 and would not be assessed 
for the new ports, which are duplicative of the current ports. A 
Participant may acquire any additional legacy ports during the month of 
September 2019 and would be assessed the charges indicated in the 
current Pricing Schedule. The migration does not require a Participant 
to acquire any additional ports, rather the migration requires a new 
port to replace any existing ports provided the Participant desired to 
maintain the same number of ports.\8\ A Participant desiring to enter 
orders into NOM is required to obtain 1 FIX Port. A Participant may 
also obtain order and execution ports, such as a CTI Port and/or a FIX 
DROP Port, to receive clearing and execution messages. The number of 
additional FIX or order and execution ports obtained by a Participant 
is dependent on the Participant's business needs.
---------------------------------------------------------------------------

    \7\ Participants would contact Market Operations to acquire new 
duplicative FIX Ports, CTI Ports and FIX DROP Ports. See Options 
Technical Update #2019-3.
    \8\ The migration is 1:1 and therefore would not require a 
Participant to acquire new ports, nor would it reduce the number of 
ports needed to connect.
---------------------------------------------------------------------------

Applicability to and Impact on Participants \9\
---------------------------------------------------------------------------

    \9\ On May 21, 2019, the SEC Division of Trading and Markets 
(the ``Division'') issued fee filing guidance titled ``Staff 
Guidance on SRO Rule Filings Relating to Fees'' (``Guidance''). 
Within the Guidance, the Division noted, among other things, that 
the purpose discussion should address ``how the fee may apply 
differently (e.g., additional cost vs. additional discount) to 
different types of market participants (e.g., market makers, 
institutional brokers, retail brokers, vendors, etc.) and different 
sizes of market participants.'' See Guidance (available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Guidance 
also suggests that the purpose discussion should include numerical 
examples. Where possible, the Exchange is including numerical 
examples. In addition, the Exchange is providing data to the 
Commission in support of its arguments herein. The Guidance covers 
all aspects of a fee filing, which the Exchange has addressed 
throughout this filing.
---------------------------------------------------------------------------

    The proposal is not intended to impose any additional fees on any 
NOM Participants. All Participants may enter orders on NOM. As noted 
above, a NOM Participant may enter all orders on NOM through one FIX 
Port. The Exchange does not require a NOM Participant to obtain more 
than one FIX Port, however, a Participant may obtain multiple FIX 
Ports, a CTI Port or a FIX DROP Port to meet its individual business 
needs. This proposal is intended to permit a NOM Participant to migrate 
its current FIX Ports, CTI Ports and FIX DROP Ports at no additional 
costs during the month of September 2019 to allow for continuous 
connection to the Exchange. Participants would only be assessed a fee 
for their current FIX Ports, CTI Ports and FIX DROP Ports and not be 
assessed a fee for any new duplicative ports they acquire in connection 
with the technology infrastructure migration. This proposal is not 
intended to have a pricing impact.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 46572]]

of the Act,\10\ in general, and furthers the objectives of Sections 
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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The proposal is also consistent with 
Section 11A of the Act relating to the establishment of the national 
market system for securities. Moreover, the Exchange believes that its 
proposal complies with Commission guidance on SRO fee filings that the 
Commission Staff issued on May 21, 2019.\12\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
    \12\ See Guidance, supra note 8. Although the Exchange believes 
that this filing complies with the Guidance, the Exchange does not 
concede that the standards set forth in the Guidance are consistent 
with the Exchange Act and reserves its right to challenge those 
standards through administrative and judicial review, as 
appropriate.
---------------------------------------------------------------------------

The Proposal is Reasonable
    The Exchange's proposal is reasonable in several respects. As a 
threshold matter, the Exchange is subject to significant competitive 
forces in the market for options transaction services that constrain 
its pricing determinations in that market. The fact that this market is 
competitive has long been recognized by the courts. In NetCoalition v. 
Securities and Exchange Commission, the D.C. Circuit stated as follows: 
``[n]o one disputes that competition for order flow is `fierce.' . . . 
As the SEC explained, `[i]n the U.S. national market system, buyers and 
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders 
for execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \13\
---------------------------------------------------------------------------

    \13\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options transaction services. The Exchange is one of several options 
venues to which market participants may direct their order flow, and it 
represents a small percentage of the overall market. The Exchange 
believes its proposal is reasonable because it will not cause a pricing 
impact on any NOM Participant, rather the proposal is intended to 
permit NOM Participants to migrate their FIX Ports, CTI Ports and FIX 
DROP Ports to new technology at no additional cost during the month of 
September 2019. This proposal, which offers new duplicative ports to 
Participants at no cost, will allow Participants to test and maintain 
continuous connection to the Exchange during the month of September 
2019.
The Proposal Represents an Equitable Allocation and is Not Unfairly 
Discriminatory
    The Exchange believes its proposal allocates its fees fairly among 
its market participants. The proposal is equitable and not unfairly 
discriminatory. All Participants may enter orders on NOM. As noted 
above, a NOM Participant may enter all orders on NOM through one FIX 
Port. The Exchange does not require a NOM Participant to obtain more 
than one FIX Port, however, a Participant may obtain multiple FIX 
Ports, a CTI Port or a FIX DROP Port to meet its individual business 
needs. This proposal is not intended to have a pricing impact to any 
NOM Participant.

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.
Inter-Market Competition
    The proposal does not impose an undue burden on inter-market 
competition. This proposal does not amend pricing or functionality. 
Rather, this technology migration will enable NOM Participants to 
continue to connect to NOM, as is the case today, for the entry of 
orders.
Intra-Market Competition
    The proposal does not impose an undue burden on intra-market 
competition. All Participants may enter orders on NOM. As noted above, 
a NOM Participant may enter all orders on NOM through one FIX Port. The 
Exchange does not require a NOM Participant to obtain more than one FIX 
Port, however, a Participant may obtain multiple FIX Ports, a CTI Port 
or a FIX DROP Port to meet its individual business needs. This proposal 
is not intended to have a pricing impact to any NOM Participant.

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.\14\
---------------------------------------------------------------------------

    \14\ 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-2019-067 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-2019-067. 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

[[Page 46573]]

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-2019-067 and should 
be submitted on or before September 25, 2019.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19005 Filed 9-3-19; 8:45 am]
 BILLING CODE 8011-01-P


