September 30, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
and Rule 19b-4 thereunder,
notice is hereby given that on September 19, 2013, 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. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
NASDAQ proposes to amend the manner in which the Exchange assesses SQF Port fees which are located in Chapter XV, entitled “Options Pricing,” which governs pricing for NASDAQ members using the NASDAQ Options Market (“NOM”), NASDAQ's facility for executing and routing standardized equity and index options.
While the changes proposed herein are effective upon filing, the Exchange has designated that the amendments be operative on October 1, 2013.
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.Start Printed Page 61440
A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change
The Exchange proposes to amend the manner in which SQF Ports are assessed to NOM Participants. SQF ports are ports that receive inbound quotes at any time within that month. The SQF Port allows a NOM Participant to access information such as execution reports and other relevant data through a single feed. For example, this data would show which symbols are trading on NOM and the current state of an options symbol (i.e., open for trading, trading, halted or closed). Auction notifications and execution reports are also available. NOM Market Makers rely on data available through the SQF Port to provide them the necessary information to perform market making activities.
Today, Chapter XV, Section 3 entitled “NASDAQ Options Market—Access Services” states that the Exchange assesses a fee of $550 per port, per month, per mnemonic for the following port fees: Order Entry Ports,
Order Entry DROP Ports,
OTTO Drop Ports 
and SQF Ports. Each NOM Participant is assigned a Market Participant Identifier or “mnemonic” 
and in some cases, certain NOM Participants request multiple mnemonics for purposes of accounting for trading activity. These mnemonics identify users at a particular NOM Participant. Today, the Exchange bills its port fees based on the number of mnemonics configured for each port. By way of example, if a NOM Participant, ABC, requested 2 ports from the Exchange and further requested that each port be configured to be accessed by 4 mnemonics or in some cases account numbers,
the NOM Participant would be billed for 8 ports at the rate of $550 per port for that month. All billing is captured at the Participant level. NOM Participants may choose to have multiple mnemonics or in some case multiple account numbers for the convenience of conducting their business, however only one mnemonic and one account number is required to conduct business on NOM.
The Exchange proposes to amend the manner in which it assesses the SQF Port Fee. The Exchange would continue to assess a $550 SQF Port Fee but would instead assess that fee on a per port, per month basis. In other words, the Exchange would bill simply based on the number of ports requested by the NOM Participant and would not consider the number of users, account numbers or mnemonics assigned to each SQF Port. In the above example, the Exchange would bill a total of 2 ports for that month. The Exchange is seeking to encourage NOM Market Makers to make markets on NOM.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
in general, and with Section 6(b)(4) and 6(b)(5) of the Act,
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, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
The Exchange believes that assessing a $550 SQF Port Fee per port, instead of per port, per mnemonic by month, is reasonable because the Exchange desires to incentivize more NOM Market Makers to engage in market marking activities on NOM. The Exchange believes that amending the methodology by which it assesses SQF Port fees will result in lower costs to NOM Market Makers because the Exchange would not assess fees by mnemonic or account number at a particular NOM Participant and this would allow NOM Participants to request the number of ports necessary for their market making business at a firm level regardless of factors. If a NOM Participant does not have more than one user per port (mnemonic) the NOM Participant would continue to be assessed the same SQF Port fee and would not be impacted by this proposal. In addition, current NOM Market Makers may realize a reduction of SQF Port costs.
The Exchange believes that assessing a $550 SQF Port Fee per port, instead of per port, per mnemonic by month, is equitable and not unfairly discriminatory because unlike the Order Entry Port, CTI Port, OTTO Port, ITTO Port, BONO Port, Order Entry DROP Port and OTTO Drop Port, the SQF Port is utilized particularly by NOM Market Makers in connection with their market making activities. Unlike other NOM Participants, NOM Market Makers add value to the market through continuous quoting 
and a commitment of capital. The Exchange has traditionally assessed Start Printed Page 61441NOM Market Makers lower transaction fees as compared to other NOM Participants because NOM Market Makers have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings.
Also, because of the volume of message traffic required to quote upwards of 300,000 individual puts and calls, NOM Market Makers that utilize SQF Ports require more technology infrastructure and more ports than NOM Participants that are not engaged in market making. In addition, as previously stated, if a NOM Market Maker has only one mnemonic or account number, per port, the proposal would not yield a cost savings as that NOM Participant is effectively assessed a per port rate today, however that NOM Participant would have the opportunity to obtain other SQF Ports at a lower cost than is offered today. The Exchange believes that it is equitable and not unfairly discriminatory to assess all NOM Market Makers on a firm level rather than by the number of users (mnemonic) on each port and allow Market Makers to segregate their business in a manner that is conducive to their business needs.
The Exchange would continue to assess other port fees, other than the SQF Port, by the number of users (mnemonics) per port. This is the manner in which typically most data is billed. The Exchange is interested in billing NOM Market Makers at the firm level in order to provide them the means to lower costs and incentivize them to make markets on the Exchange which in turn benefits all other market participants through tighter markets and order interaction.
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 not necessary or appropriate in furtherance of the purposes of the Act. The Exchange's proposal seeks to provide NOM Market Makers a cost savings where a particular NOM Participant may have multiple mnemonics and account numbers associated with an SQF Port due to the manner in which they account for their trading activity and operate their technology. The Exchange does not believe that providing certain NOM Market Makers the opportunity to obtain quote information as a lower cost creates an undue burden on competition because NOM Market Makers have obligations to the market unlike other NOM Participants. Unlike other NOM Participants, NOM Market Makers add value to the market through continuous quoting 
and a commitment of capital. In addition, other market participants benefit from the tighter markets and order interaction which NOM Market Makers bring to NOM. The proposal would provide all NOM Market Makers with the opportunity to lower costs while also obtaining and utilizing the appropriate number of SQF Ports to conduct their business.
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.
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 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:
- 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 NASDAQ-2013-124. 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 NASDAQ-2013-124, and should be submitted on or before October 24, 2013.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Kevin M. O'Neill,
[FR Doc. 2013-24241 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P