[Federal Register Volume 78, Number 242 (Tuesday, December 17, 2013)]
[Notices]
[Pages 76347-76349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29898]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71044; File No. SR-NASDAQ-2013-150]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Make Modifications to Fees and Credits Under Rules 7014 and 7018

December 11, 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 November 29, 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 Substance 
of the Proposed Rule Change

    NASDAQ proposes to make changes to its schedule of fees and credits 
applicable to execution of orders under Rule 7018, and related changes 
in Rule 7014. NASDAQ proposes to implement the proposed rule change on 
December 2, 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, 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 those 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In November 2013, NASDAQ introduced a rebate tier under which it 
provides a credit of $0.0029 per share executed for displayed orders 
that provide liquidity if a member (i) has shares of liquidity provided 
in all securities during the month representing more than 0.10% of 
Consolidated Volume during the month, through one or more of its NASDAQ 
Market Center MPIDs, and (ii) adds Total NASDAQ Options Market 
(``NOM'') Market Maker Volume, as defined in Chapter XV, Section 2 of 
the NOM rules, of 90,000 or more contracts per day executed during the 
month through one or more of its NOM MPIDs.\3\ NASDAQ is amending the 
tier by reducing the requirement for Total NOM Market Maker Volume to 
80,000 or more contracts per day. Pricing tiers that require 
participation in both the NASDAQ Market Center and NOM recognize the 
prevalence of trading in which members simultaneously trade different 
asset classes within the same strategy. Because cash equities and 
options markets are linked, with liquidity and trading patterns on one 
market affecting those on the other, NASDAQ believes that pricing 
incentives that encourage market participant activity in NOM also 
support price discovery and liquidity provision in the NASDAQ Market 
Center. The change enhances these incentives by reducing the 
requirement for participation in this tier.
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    \3\ Securities Exchange Act Release No. 70860 (November 13, 
2013), 78 FR 69512 (November 19, 2013) (SR-NASDAQ-2013-138).
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    Second, NASDAQ is amending Rule 7018(e), which governs fees for 
orders that execute in the NASDAQ Opening Cross (the ``Cross''), to 
eliminate an erroneous reference to a potential $0.0005 per share 
executed charge for ``Day'' orders (i.e., orders designated to have a 
time-in-force under which they remain in effect until executed or the 
end of either regular market hours at 4:00 p.m. or the end of the 
System hours at 8:00 p.m.) that execute in the Cross. Charging Day 
orders that participate in the Cross would mean that virtually all 
orders in the Cross would be subject to a fee, which is not consistent 
with NASDAQ's intention or past practice. Rather, the reference appears 
to have been included in the rule in error. Accordingly, NASDAQ is 
deleting the reference to make it clear that Day orders executing in 
the Cross are not to be charged.
    Finally, NASDAQ is amending the definition of ``Consolidated 
Volume'' in Rules 7018 and 7014 to exclude executed orders with a size 
of less than one round lot. In addition, NASDAQ is modifying some of 
the words used in both definitions to make them use consistent 
terminology (but is not thereby changing their meanings). The amended 
definitions refer to ``the total consolidated volume reported to all 
consolidated transaction reporting plans by all exchanges and trade 
reporting facilities during a month, excluding executed orders with a 
size of less than one round lot.'' The exclusion for executed orders of 
less than a round lot is necessitated by recent amendments to the 
Consolidated Tape Association and NASDAQ UTP Plans \4\ under which odd 
lots must be reported to the consolidated tape. These amendments are 
taking effect in December 2013. When calculating a member's percentage, 
NASDAQ has historically included odd lots in the member's own total 
volume, but excluded them from Consolidated Volume, since they have not 
historically been included in the trades reported to consolidated 
transaction reporting plans. Accordingly, including odd lots in the 
calculation of a member's percentage of Consolidated Volume would make 
it more difficult for members to achieve certain percentages, and thus 
could constitute an unintended de facto price increase. To avoid this 
result, odd lots will be excluded from the definitions of Consolidated 
Volume for pricing purposes, but would continue to be included in the 
member's own total volume.
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    \4\ Securities Exchange Act Release No. 70794 (October 31, 
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05); Securities 
Exchange Act Release No. 70793 (October 31, 2013), 78 FR 66788 
(November 6, 2013) (File No. S7-24-89).

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[[Page 76348]]

2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The change to the tier for members active in both the NASDAQ Market 
Center and NOM is reasonable because it broadens the availability of a 
price reduction for members that support liquidity on both markets. The 
changes are consistent with an equitable allocation of fees because the 
pricing tier requires significant levels of liquidity provision, which 
benefits all market participants, and because activity in NOM also 
supports price discovery and liquidity provision in the NASDAQ Market 
Center due to the increasing propensity of market participants to be 
active in both markets and the influence of each market on the pricing 
of securities in the other. Moreover, the change has the potential to 
make the applicable credit available to a wider range of market 
participants by reducing the threshold for qualification. The change is 
not unreasonably discriminatory because market participants may qualify 
for a comparable or a higher rebate through alternative means that do 
not require participation in NOM, including through existing volume-
based NASDAQ Market Center tiers, the use of Designated Retail Orders, 
or through a combination of qualification for volume-based tiers and 
participation in NASDAQ's Investor Support Program under Rule 7014.
    The change with respect to Day orders that execute in the Cross is 
reasonable because it makes it clear that the execution of such orders 
in the Cross is free of charge, rather than being subject to a 
potential $0.0005 per share fee. The change is consistent with an 
equitable allocation of fees and is not unfairly discriminatory because 
members entering Day limit orders before the Cross do not generally 
have a strong expectation that such orders will execute in the Cross; 
rather, although such orders are given the opportunity to execute in 
the Cross if their limit price is consistent with the Cross price, 
their designation as Day orders would generally reflect an expectation 
that the order will not execute but rather will post to the NASDAQ book 
and execute thereafter only if the market moves in a manner consistent 
with the order's limit price. Accordingly, NASDAQ believes that it is 
equitable and not unfairly discriminatory to make the execution of such 
orders free when they do happen to execute in the Cross.
    The change with respect to exclusion of odd lots from the 
definition of Consolidated Volume is reasonable because it avoids a de 
facto price increase that could occur due to the upcoming requirement 
to report odd lots to the consolidated tape. Similarly, the change is 
consistent with an equitable allocation of fees and is not unfairly 
discriminatory because it will maintain the status quo with respect to 
pricing tiers and incentive programs that require calculations based on 
Consolidated Volume. Thus, the change avoids a potential inequitable 
and unfair result under which members with volumes close to a required 
percentage would be unable to achieve a pricing tier for which they had 
formerly qualified.

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. 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 and rebates 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 and 
rebates in response, and because market participants may readily adjust 
their order routing practices, NASDAQ believes that the degree to which 
fee or rebate changes in this market may impose any burden on 
competition is extremely limited. In this instance, the change to the 
tier with respect to members active in NASDAQ and NOM will serve to 
decrease members' costs, thereby enhancing NASDAQ's competitiveness. 
Similarly, the change with respect to Day orders executing in the Cross 
confirms the absence of a charge with respect to such orders, and the 
change with respect to the definition of Consolidated Volume avoids a 
potential de facto price increase, thereby also enhancing NASDAQ's 
competitiveness. Because members and competing order execution venues 
remain free to adopt competitive responses, the changes do not impair 
the ability of markets or market participants to maintain their 
competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\ 
thereunder. 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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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-2013-150 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-2013-150. 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

[[Page 76349]]

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 SR-NASDAQ-2013-150 and should 
be submitted on or before January 7, 2014.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29898 Filed 12-16-13; 8:45 am]
BILLING CODE 8011-01-P