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Self-Regulatory Organizations; NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Options Fees
Feb 14, 2012 (SECURITIES AND EXCHANGE COMMISSION RELEASE/ContentWorks via COMTEX) --
February 8, 2012.
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 January 31, 2012, 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 NASDAQ. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE
FOOTNOTE 2 17 CFR 240.19b-4. END FOOTNOTE
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The NASDAQ Stock Market LLC proposes to modify Chapter XV, entitled "Option Fees," at Sec. 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 the applicability of the Customer Rebate to Add Liquidity and Fee for Removing Liquidity for the Penny Pilot /3/ Options ("Penny Options").
FOOTNOTE 3 The Penny Pilot was established in March 2008 and in October 2009 was expanded and extended through June 30, 2012. 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). See also Exchange Rule Chapter VI, Section 5. END FOOTNOTE
While changes to the Fee Schedule pursuant to this proposal are effective upon filing, the Exchange has designated these changes to be operative on February 1, 2012.
The text of the proposed rule change is available on the Exchange's Web site at http://www.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. 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
NASDAQ proposes to modify Chapter XV, entitled "Option Fees," at Sec. 2 governing the rebates and fees assessed for option orders entered into NOM. Specifically, the Exchange is proposing to modify the four tier structure for paying Customer Rebates to Add Liquidity in Penny Pilot Options. The Exchange proposes to increase the tiers to five tiers and further incentivize NOM Participants to route Customer orders to the Exchange by paying an additional rebate for certain orders after the NOM Participant has met a volume criteria. The Exchange believes that incentivizing NOM Participants to send additional Customer orders to the Exchange will benefit all market participants by adding liquidity to the market.
Specifically, the Exchange currently pays a Customer Rebate to Add Liquidity in Penny Pilot Options based on the following tier structure:
..........................Monthly volume............Rebate to add
....................................................liquidity
Tier 1....................Participant adds Customer..$0.26
..........................liquidity of up to 49,999
..........................contracts per day in a
..........................month
Tier 2....................Participant adds Customer 0.42
..........................liquidity of 50,000 or
..........................more contracts per day in
..........................a month
Tier 3..*a................Participant adds (1)......0.43
..........................Customer liquidity of
..........................100,000 or more contracts
..........................per day in a month, and
..........................(2) NOM Market Maker
..........................liquidity of 40,000 or
..........................more contracts per day in
..........................a month
Tier 4..*b................Participant adds (1)......0.40
..........................Customer liquidity of
..........................25,000 or more contracts
..........................per day in a month, and
..........................(2) the Participant has
..........................certified for the
..........................Investor Support Program
..........................set forth in Rule 7014;
..........................and (3) the Participant
..........................executed at least one
..........................order on NASDAQ's equity
..........................market
....*a For purposes of Tier 3, the Exchange will aggregate the trading activity of separate NOM Participants when computing average daily volumes where 75 percent common ownership or control exists between NOM Participants.
....*b For purposes of Tier 4, the Exchange will allow a NOM Participant to qualify for the rebate if a NASDAQ member under common ownership with the NOM Participant has certified for the Investor Support Program and executed at least one order on NASDAQ's equity market. Common ownership is defined as 75 percent common ownership or control.
The Exchange proposes to amend the Customer Rebate to Add Liquidity in Penny Pilot Options to a five tier structure as follows:
..........................Monthly volume............Rebate to add
....................................................liquidity
Tier 1....................Participant adds Customer..$0.26
..........................liquidity of up to 14,999
..........................contracts per day in a
..........................month
Tier 2....................Participant adds Customer 0.38
..........................liquidity of 15,000 to
..........................49,999 contracts per day
..........................in a month
Tier 3....................Participant adds Customer 0.42
..........................liquidity of 50,000 or
..........................more contracts per day in
..........................a month
Tier 4..*a................Participant adds (1)......0.43
..........................Customer liquidity of
..........................100,000 or more contracts
..........................per day in a month, and
..........................(2) NOM Market Maker
..........................liquidity of 40,000 or
..........................more contracts per day in
..........................a month
Tier 5..*b................Participant adds (1)......0.40
..........................Customer liquidity of
..........................25,000 or more contracts
..........................per day in a month, (2)
..........................the Participant has
..........................certified for the
..........................Investor Support Program
..........................set forth in Rule 7014;
..........................and (3) the Participant
..........................executed at least one
..........................order on NASDAQ's equity
..........................market
....*a For purposes of Tier 4, the Exchange will aggregate the trading activity of separate NOM Participants when computing average daily volumes where 75 percent common ownership or control exists between NOM Participants.
....*b For purposes of Tier 5, the Exchange will allow a NOM Participant to qualify for the rebate if a NASDAQ member under common ownership with the NOM Participant has certified for the Investor Support Program and executed at least one order on NASDAQ's equity market. Common ownership is defined as 75 percent common ownership or control.
Currently, Tier 1 firms that add up to 49,999 contracts per day in a month of liquidity, in a Penny Pilot Option, receive a rebate of $0.26 per contract. The Exchange is proposing to amend Tier 1 to change the contract amount to 14,999 contracts with the same $0.26 per contract rebate. Based on past experience, the Exchange anticipates that all firms currently receiving the $0.26 rebate will maintain their current level of rebate or achieve a higher rebate in Tier 2.
The Exchange is proposing a new Tier 2 with a $0.38 per contract rebate for firms that add Customer liquidity in Penny Pilot Options between 15,000 to 49,999 contracts per day in a month. This proposed new tier would result in a greater rebate for current Tier 1 Participants who add liquidity between 15,000 and 49,999 contracts.
The Exchange is not proposing any changes to current Tiers 2, 3 and 4 other than to rename them as Tiers 3, 4 and 5, respectively. The Exchange would also make conforming amendments to current notes "a" and "b" to reference newly named Tiers 4 and 5, respectively, as well.
--This is a summary of a Federal Register article originally published on the page number listed below--
Citation: "77 FR 8312"
Document Number: "Release No. 34-66360; File No. SR-NASDAQ-2012-022"
Federal Register Page Number: "8312"
"Notices"
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