[Federal Register Volume 75, Number 92 (Thursday, May 13, 2010)]
[Notices]
[Pages 27031-27033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11400]
[[Page 27031]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62056; File No. SR-NASDAQ-2010-056]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Pricing for Option Orders Routed to Away Markets and
Execution Pricing for Certain Options
May 6, 2010.
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 April 30, 2010, 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 NASDAQ.
Pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2)
thereunder,\4\ NASDAQ has designated this proposal as establishing or
changing a due, fee, or other charge, which renders the proposed rule
change effective upon filing. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ proposes to modify Rule 7050 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 expand the list of options that will be
assessed routing fees of $0.30 per contract for customer orders and
$0.55 per contract for Firm and Market Maker orders that are routed
from NOM to NASDAQ OMX PHLX, Inc. (``Phlx''), as well as update
execution pricing for certain options and increase the Firm fee for
removing liquidity in non-Penny Pilot options. NASDAQ will make the
proposed rule changes effective for transactions on or after May 3,
2010.
The text of the proposed rule change is set forth below. Italics
indicate new text.
* * * * *
7050. NASDAQ Options Market
The following charges shall apply to the use of the order execution
and routing services of the NASDAQ Options Market by members for all
securities.
(1) Fees for Execution of Contracts on the NASDAQ Options Market
Fees and Rebates
[per executed contract]
------------------------------------------------------------------------
Non-NOM NOM
Customer Firm Market Market
maker maker
------------------------------------------------------------------------
Penny Pilot Options:
Rebate to Add Liquidity. $0.25 $0.25 $0.25 $0.25
Fee for Removing $0.35 $0.45 $0.45 $0.45
Liquidity..............
IWM, QQQQ, SPY
Rebate to Add Liquidity. $0.30 $0.30 $0.30 $0.30
Fee for Removing $0.35 $0.45 $0.45 $0.45
Liquidity..............
NDX and MNX
Rebate to Add Liquidity. $0.10 $0.10 $0.10 $0.20
Fee for Removing $0.50 $0.50 $0.50 $0.40
Liquidity..............
All Other Options:
Fee for Adding Liquidity Free $0.30 $0.30 $0.30
Fee for Removing -- $0.40 $0.45 $0.45
Liquidity.............. [$0.20]
Rebate for Removing $0.20 -- -- --
Liquidity *............
------------------------------------------------------------------------
Transactions in which the same participant is the buyer and the seller
shall be charged a net fee of $0.10 per executed contract.
* No rebate will be paid when a customer order executes against another
customer order.
For a pilot period ending July 31, 2010, the charge for members or non-
members entering order via the Options Intermarket Linkage that
executes in the Nasdaq Options Market shall be $0.45 per executed
contract.
(2)-(3) No Change.
(4) Fees for routing contracts to markets other than the NASDAQ
Options Market shall be assessed as provided below. The current fees
and a historical record of applicable fees related to orders routed to
other exchanges shall be posted on the NasdaqTrader.com Web site.
------------------------------------------------------------------------
Exchange Customer Firm MM
------------------------------------------------------------------------
BATS................................... $0.36 $0.55 $0.55
BOX.................................... 0.06 0.55 0.55
CBOE................................... 0.06 0.55 0.55
ISE.................................... 0.06 0.55 0.55
NYSE Arca Penny Pilot.................. 0.50 0.55 0.55
NYSE Arca Non Penny Pilot.............. 0.06 0.55 0.55
NYSE AMEX.............................. 0.06 0.55 0.55
PHLX (for all options other than the 0.06 0.55 0.55
below listed options).................
[[Page 27032]]
PHLX (for the following options only): $0.30 $0.55 $0.55
AA, AAPL. AIG, ALL, AMD, AMR, AMZN,
BAC, BRCD, C, CAT, CSCO, DELL, DIA,
DRYS, EK, F, FAS, FAZ, GDX, GE, GLD,
GS, IBM, INTC, IWM, JPM, LVS, MGM,
MSFT, MU, NEM, NOK, PALM, PFE, POT,
QCOM, QQQQ, RIMM, SBUX, SIRI, SKF,
SLV, SMH, SNDK, SPY, T, TZA, UAUA,
UNG, USO, UYG, VZ, WYNN, X, XLF.......
------------------------------------------------------------------------
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDAQ 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. NASDAQ 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
NASDAQ is proposing to modify Rule 7050 governing the fees assessed
for options orders entered into NOM but routed to and executed on Phlx.
Specifically, NASDAQ is proposing to expand the number of options to
which certain routing fees apply to reflect the expansion of the fee
schedule for adding and removing liquidity on the Phlx.\5\ NASDAQ is
also proposing to modify Rule 7050 governing the fees for execution of
contracts on NOM by updating execution pricing for IWM, QQQQ and SPY
options, as well as raise the Firm fee for removing liquidity in non-
Penny Pilot options.
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\5\ See SR-Phlx-2010-64 (April 26, 2010). For a description of
the Phlx's current fee schedule for adding and removing liquidity,
See Securities Exchange Act Release No. 61684 (March 10, 2010), 75
FR 13189 (March 18, 2010) (SR-Phlx-2010-33).
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NASDAQ currently assesses a $0.30 per contract routing fee for
customer orders, and a $0.55 per contract routing fee for Firm and
Market Maker orders routed from NOM to Phlx for options that are
subject to fees and rebates for adding and removing liquidity as
described in the Phlx fee schedule. To reflect the additions Phlx is
making to its fee schedule, NASDAQ proposes to add the following
options to the table set forth in Rule 7050(4): Brocade Communications
Systems, Inc. (``BRCD''); International Business Machines Corp.
(``IBM''); Nokia Corp. (``NOK''); Sirius XM Radio, Inc. (``SIRI''); and
Direxion Daily Small Cap Bear 3X Shares (``TZA'').
The Exchange is proposing these fees to recoup the majority of
transaction and clearing costs associated with routing orders to Phlx.
As with all fees, the Exchange may adjust these routing fees by filing
a new proposed rule change.
NASDAQ currently offers a Penny Pilot option rebate of $0.25.
NASDAQ is proposing to increase the rebate to all participants for
providing liquidity in IWM, QQQQ and SPY options to $0.30 per executed
contract.\6\ The fee to remove liquidity in these options will continue
to be the standard Penny Pilot remove fee of $0.35 for Customers and
$0.45 for Firms and Market Makers. The Exchange also proposes to
increase the Firm fee for removing liquidity in non-Penny Pilot options
from $0.20 to $0.40 per executed contract.\7\
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\6\ The rebate increase is consistent to a similar increase made
by NYSEArca. See Securities Exchange Act Release No. 61894 (April
13, 2010), 75 FR 20413 (April 19, 2010) (SR-NYSEArca-2010-24).
\7\ This fee increase is similar to rates assessed by NYSEArca
and NASDAQ OMX PHLX, Inc. for Firm electronic executions. Id.; See
Securities Exchange Act Release No. 61971 (April 23, 2010), pending
publication in the Federal Register (SR-Phlx-2010-62).
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The changes are part of the Exchange's continued effort to attract
and enhance participation on NOM. The Exchange believes these proposed
fee changes are reasonable and equitable in that they apply uniformly
to all similarly situated participants on NOM.
The Exchange has designated this proposal to be operative for
trades on or after May 3, 2010.
2. Statutory Basis
NASDAQ believes that the proposed rule changes are consistent with
the provisions of Section 6 of the Act,\8\ in general, and with Section
6(b)(4) of the Act,\9\ 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 NASDAQ operates or controls.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
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NASDAQ further believes that the proposed rule changes are
consistent with Section 6(b)(5) of the Act \10\ in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest; and is not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers, or to regulate by virtue of any authority conferred by the Act
matters not related to the purposes of the Act or the administration of
the Exchange.
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\10\ 15 U.S.C. 78f(b)(5).
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NASDAQ is one of eight options market in the national market system
for standardized options. Joining NASDAQ and electing to trade options
is entirely voluntary. Under these circumstances, NASDAQ's fees must be
competitive and low in order for NASDAQ to attract order flow, execute
orders, and grow as a market. NASDAQ thus believes that its fees are
fair and reasonable and consistent with the Exchange Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. To the contrary,
NASDAQ has designed its fees to compete effectively for the execution
and routing of options contracts and to reduce the overall cost to
investors of options trading.
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 \11\ and
[[Page 27033]]
paragraph (f)(2) of Rule 19b-4 \12\ thereunder. At any time within 60
days of the filing of the proposed rule change, the Commission may
summarily abrogate 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.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
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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 e-mail to [email protected]. Please include
File Number SR-NASDAQ-2010-056 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-2010-056. This
file number should be included on the subject line if e-mail 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 a.m. and 3 p.m. Copies of such 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
publicly available. All submissions should refer to File Number SR-
NASDAQ-2010-056 and should be submitted on or before June 3, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11400 Filed 5-12-10; 8:45 am]
BILLING CODE 8010-01-P