[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62807-62809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24570]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70614; File No. SR-NASDAQ-2013-129]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Schedule of Fees and Credits Applicable to Execution and 
Routing of Orders in Securities Priced at $1 or More per Share Under 
Rule 7018

October 4, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on September 27, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ is proposing amend its schedule of fees and credits 
applicable to execution and routing of orders in securities priced at 
$1 or more per share under Rule 7018. NASDAQ will implement the 
proposed rule change on October 1, 2013.
    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. 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 is proposing several changes to its schedule of fees and 
credits applicable to execution and routing of orders in securities 
priced at $1 or more per share under Rule 7018. First, NASDAQ currently 
offers a credit of $0.0020 per share executed for midpoint pegged and 
midpoint post-only orders (``midpoint orders'') that provide liquidity 
if a member provides an average daily volume of more than 5 million 
shares through midpoint orders during the month and the member's 
average daily volume of liquidity provided through midpoint orders 
during the month is at least 2 million shares more than in April 2013. 
NASDAQ is proposing to eliminate this pricing tier for midpoint orders, 
because no member has ever qualified for it. Accordingly, NASDAQ 
believes that the tier has been ineffective at encouraging

[[Page 62808]]

members to make greater use of midpoint orders, and may be eliminated 
without member impact. Under tiers that will remain in place, NASDAQ 
pays a credit of $0.0017 per share executed for midpoint orders if the 
member provides an average daily volume of 5 million or more shares 
through midpoint orders during the month (without any requirement for 
an increase above prior levels), and a credit of $0.0014 per share 
executed for midpoint orders if the member provides an average daily 
volume of less than 5 million shares through midpoint orders during the 
month.
    Second, NASDAQ is modifying certain routing fees applicable to 
orders routed to NASDAQ OMX PSX (``PSX''), so that the applicable fees 
for routing to that venue will be generally consistent with fees for 
routing to other venues. Specifically, NASDAQ currently charges $0.0028 
per share executed for orders using the SOLV or SAVE routing strategies 
\3\ that execute at PSX, while charging $0.0030 per share executed when 
such orders execute at most other venues.\4\ NASDAQ is increasing the 
fee for routing to PSX to match the $0.0030 per share executed fee for 
other most venues. Similarly, NASDAQ currently charges $0.0028 per 
share executed for order using the TFTY routing strategy \5\ that 
execute at PSX, while charging $0.0030 per share executed when such 
orders execute at the New York Stock Exchange (``NYSE'').\6\ NASDAQ is 
increasing the fee for routing to PSX to match this $0.0030 per share 
executed fee. The changes are designed to increase revenue in a period 
of persistent low trading volumes and to simplify the routing fee 
schedule. The changes are unlikely to have a significant impact on 
members that use NASDAQ's routing services, since relatively few routed 
orders are executed at PSX.
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    \3\ SAVE is a routing option under which orders may either (i) 
route to BX and PSX, check the NASDAQ book for available shares, and 
then route to other destinations on the applicable routing table, or 
(ii) may check NASDAQ first and then route to destinations on the 
applicable routing table. If shares remain un-executed after 
routing, they are posted to the book. Once on the book, if the order 
is subsequently locked or crossed by another market center, NASDAQ 
will not route the order to the locking or crossing market center. 
SOLV is a routing option under which orders may either (i) route to 
BX and PSX, check NASDAQ, and then route to other destinations on 
the applicable routing table, or (ii) may check NASDAQ first and 
then route to destinations on the applicable routing table. If 
shares remain un-executed after routing, they are posted to the 
book. Once on the book, if the order is subsequently locked or 
crossed by another accessible market center, NASDAQ will route the 
order to the locking or crossing market center.
    \4\ The exception is NASDAQ OMX BX (``BX''). For SAVE and SOLV 
orders that execute at BX, NASDAQ charges no fee and pays no rebate, 
reflecting the fact that BX itself pays a small credit with respect 
to orders that access liquidity.
    \5\ TFTY is a routing option under which orders check NASDAQ for 
available shares only if so instructed by the entering firm and are 
thereafter routed to destinations on the applicable routing table. 
If shares remain un-executed after routing, they are posted to the 
book. Once on the book, if the order is subsequently locked or 
crossed by another market center, the System will not route the 
order to the locking or crossing market center.
    \6\ The routing table applicable to TFTY generally favors 
routing destinations that charge no or low execution fees, and would 
generally route to such destinations before routing to higher cost 
destinations such as NYSE and PSX. For TFTY orders that execute at 
BX (which pays a small credit for executions), NASDAQ charges no fee 
and pays no rebate. For TFTY orders that execute at destinations 
other than BX, PSX, and NYSE, NASDAQ charges $0.0005 per share 
executed, consistent with the lower cost of routing to such 
destinations.
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    Third, NASDAQ is reducing the credit paid with respect to QCST and 
QDRK orders \7\ that execute at BX from $0.0014 per share executed to 
$0.0011 per share executed. The change will make the credit paid with 
respect to orders routed to BX more consistent with the credits paid by 
BX itself, which have been modified in recent months.\8\ In addition, 
the change will reduce costs in a period of persistent low trading 
volumes and is unlikely to have a significant impact on members that 
use NASDAQ's routing services, since relatively few routed orders are 
executed at BX.
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    \7\ QDRK is a routing option under which orders check NASDAQ for 
available shares and simultaneously route the remaining shares to 
destinations on the applicable routing table that are not posting 
Protected Quotations within the meaning of Regulation NMS. If shares 
remain un-executed after routing, they are posted on the book. Once 
on the book, if the order is subsequently locked or crossed by 
another market center, NASDAQ will not route the order to the 
locking or crossing market center.
     QCST is a routing option under which orders check NASDAQ for 
available shares and simultaneously route the remaining shares to 
destinations on the applicable routing table that are not posting 
Protected Quotations within the meaning of Regulation NMS and to 
certain, but not all, exchanges. If shares remain un-executed after 
routing, they are posted on the book. Once on the book, if the order 
is subsequently locked or crossed by another market center, NASDAQ 
will not route the order to the locking or crossing market center.
    \8\ SR-BX-2013-054 (September 27, 2013); Securities Exchange Act 
Release No. 70339 (September 6, 2013), 78 FR 56249 (September 12, 
2013) (SR-BX-2013-051). Depending on volumes of orders routed to BX 
in a given month, NASDAQ may receive a credit of either $0.0013 or 
$0.0007 per share executed with respect to such orders. The 
reduction of the credit paid by NASDAQ thereby reduces the extent to 
which NASDAQ pays an extra credit to encourage the use of the QDRK 
and QCST strategies, which were introduced earlier in the year but 
which have seen a recent increase in use. Securities Exchange Act 
Release No. 68839 (February 6, 2013), 78 FR 9957 (February 12, 2013) 
(SR-NASDAQ-2013-014).
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\9\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\10\ 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.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The change to eliminate the rebate tier applicable to midpoint 
orders is reasonable because the tier has never applied to any members 
since its inception and therefore the change will not result in a fee 
increase. Similarly, the change is consistent with an equitable 
allocation of fees and is not unfairly discriminatory because members 
that use midpoint orders will continue to be eligible for the tiers for 
which they currently qualify (either $0.0017 or $0.0014 per share 
executed, depending on their volume levels). Accordingly, the change 
will not affect the allocation of fees and rebates among members and 
will not have a discriminatory impact on any members.
    The change with respect to fees for routing to PSX is reasonable 
because it will make the applicable fees for routing to PSX consistent 
with the fees for routing to other venues. Moreover, the change will 
result in a modest increase of only $0.0002 per share executed for 
SAVE, SOLV, and TFTY orders when they access liquidity on PSX. The 
change is consistent with an equitable allocation of fees and not 
unfairly discriminatory because it will eliminate an existing disparity 
between the fees charged for routing to PSX and routing to certain 
other destinations, thereby making the applicable fees more consistent. 
In addition, the change is equitable and not unfairly discriminatory 
because it affects only those members that opt to use NASDAQ's optional 
routing services, and will in any event have a minimal impact because 
few orders using the strategies execute at PSX.
    The change with respect to QCST and QDRK orders routed to BX is 
reasonable because it will make the credit paid by NASDAQ more 
consistent with the credit received by NASDAQ from BX with respect to 
such orders. Moreover, the change will result in a modest decrease of 
only $0.0003 per share executed with respect to the applicable

[[Page 62809]]

credit. The change is consistent with an equitable allocation of fees 
and not unfairly discriminatory because it will reduce the extent to 
which NASDAQ pays an extra credit to encourage the use of the QDRK and 
QCST strategies, thereby making the credit paid to NASDAQ members more 
consistent with credits paid by BX. In addition, the change is 
equitable and not unfairly discriminatory because it affects only those 
members that opt to use NASDAQ's optional routing services, and will in 
any event have a minimal impact because few orders using the strategies 
execute at BX.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\11\ NASDAQ notes 
that it operates in a highly competitive market in which market 
participants can readily favor competing venues if they deem fee levels 
at a particular venue to be excessive, or rebate opportunities 
available at other venues to be more favorable. In such an environment, 
NASDAQ must continually adjust its fees to remain competitive with 
other exchanges and with alternative trading systems that have been 
exempted from compliance with the statutory standards applicable to 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, NASDAQ believes that the degree to which fee 
changes in this market may impose any burden on competition is 
extremely limited. In this instance, although the proposed change with 
respect to midpoint orders has the effect of eliminating a rebate tier, 
the tier had not been successful at encouraging greater use of midpoint 
orders, and so its elimination is unlikely to have an impact on the 
order routing decisions of NASDAQ members. Moreover, other incentive 
tiers with respect to midpoint orders remain in place. Similarly, the 
proposed changes with respect to routing fees are expected to have a 
minimal effect on members that opt to use NASDAQ's routing services, 
because few routed orders execute at PSX or BX; moreover, the amount of 
the fee increase (for PSX) or credit reduction (for BX) is small. In 
addition, numerous alternatives exist to the routing services offered 
by NASDAQ. Thus, if any of the changes are [sic] unattractive to market 
participants, it is likely that NASDAQ will lose market share as a 
result. As a result of these considerations, NASDAQ does not believe 
that the proposed changes will impair the ability of members or 
competing order execution venues to maintain their competitive standing 
in the financial markets.
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    \11\ 15 U.S.C. 78f(b)(8).
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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) of the Act \12\ and paragraph (f) of Rule 19b-4 
thereunder.\13\ 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
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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 email to [email protected]. Please include 
File Number SR-NASDAQ-2013-129 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-2013-129. 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 on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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-2013-129, and should be submitted on or before 
November 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24570 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P