[Federal Register Volume 79, Number 178 (Monday, September 15, 2014)]
[Notices]
[Pages 55055-55056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21871]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73025; File No. SR-NASDAQ-2014-089]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7018 Fees

September 9, 2014.
    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 August 28, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II and 
III below, which Items have been prepared by the Exchange. 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 to modify NASDAQ Rule 7018 [sic] fees assessed 
for execution and routing securities listed on NASDAQ, the New York 
Stock Exchange (``NYSE'') and on exchanges other than NASDAQ and NYSE.
    The text of the proposed rule change is available at 
nasdaq.cchwallstreet.com at NASDAQ's principal office, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing to amend NASDAQ Rule 7018 to modify fees 
assessed for execution and routing securities listed on NASDAQ (``Tape 
C''), NYSE (``Tape A'') and on exchanges other than NASDAQ and the NYSE 
(``Tape B'').
    The Exchange is proposing to no longer offer a recently adopted 
credit \3\ provided to members that qualify under certain requirements 
of the Market Quality Incentive Programs of Rule 7014. Specifically, 
NASDAQ will no longer provide a credit of $0.0001 per share executed to 
a member that either qualifies for a credit under Rule 7014(c)(3) or 
that is designated as a Qualified Market Maker (``QMM'') under Rule 
7014(d). The credit currently provided is based on the shares executed 
through the qualifying MPID under Rules 7014(c)(3) or 7014(d), and is 
provided in addition to any other credit or rebate for which the member 
may qualify. NASDAQ believes that the elimination of this program is 
warranted since it has failed to increase liquidity in Tape A 
securities or to provide members with additional incentive to improve 
market quality.
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    \3\ See Securities Exchange Act Release No. 72810 (August 11, 
2014), 79 FR 48281 (August 15, 2014) (SR-NASDAQ-2014-078).
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    Additionally, a member with (i) shares of liquidity provided in all 
securities during the month representing more than 0.15% of 
Consolidated Volume during the month, through one or more of its Nasdaq 
Market Center MPIDs, and (ii) Total Volume, as defined in Chapter XV, 
Section 2 of the Nasdaq Options Market rules, of 100,000 or more 
contracts per day in a month executed through one or more of its Nasdaq 
Option Market MPIDs qualifies for a credit of $0.0029 per share 
executed. NASDAQ is proposing to decrease the Consolidated Volume 
requirement for this tier from 0.15% to shares representing more than 
0.10% of Consolidated Volume. The Exchange believes that the proposed 
lower Consolidated Volume requirement will encourage market participant 
activity and will also support price discovery and liquidity provision.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\4\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\5\ 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. This proposal is reasonable, equitable and not 
unfairly discriminatory for the reasons noted below.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that eliminating the recently adopted $0.0001 per 
share executed credit in NYSE-listed securities provided to members 
that either qualify for a credit under Rule 7014(c)(3) or that is [sic] 
designated as a QMM under Rule 7014(d) is consistent with an equitable 
allocation of a reasonable fee and not unfairly discriminatory. 
Specifically, the Exchange believes it is equitable and not unfairly 
discriminatory because it is being eliminated for all members that meet 
the requirements of either Rule 7014(c)(3) or 7014(d) and that receive 
the credit for its [sic] executions in NYSE-listed securities. NASDAQ 
also believes that eliminating the credit is reasonable because the 
Exchange has determined that although the credit was designed to 
increase liquidity in Tape A securities and to provide members with 
additional incentive to improve market quality, the program failed to 
have such an impact.
    NASDAQ also believes the proposed rule change is reasonable since 
the Exchange must balance its desire to provide certain incentives with 
the costs the Exchange incurs in providing such incentives, which 
ultimately affect the ability to sustain them. As a consequence, NASDAQ 
must choose carefully the credits it provides, so that it promotes 
activity it deems most important while foregoing offering other 
credits, which may also improve market quality yet prove too costly. 
NASDAQ notes that the credit, in the end, did not suffice as an 
additional incentive to members to improve the quality of the market in 
NYSE-listed securities on NASDAQ.
    NASDAQ believes that the proposed rule changes to the rebate tiers 
through which members may earn a $ 0.0029 per share executed rebate are 
reasonable because they will make it easier for members to receive a 
rebate at that level, by lowering the volume requirements for existing 
tiers. In addition, the proposed rule changes are consistent with an 
equitable allocation of fees because they reflect an allocation of

[[Page 55056]]

rebates to liquidity providers designed to encourage beneficial market 
activity, with greater incentives for market participants to provide 
liquidity and the proposed rule changes are not unfairly discriminatory 
because they apply uniformly across all markets. Finally, the changes 
are not unfairly discriminatory because they increase the availability 
of higher rebates without eliminating any of the other means by which a 
member may earn a higher rebate under Rule 7018(a).

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

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\6\ 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, the changes to routing fees and 
credits do not impose a burden on competition because NASDAQ's routing 
services are optional and are the subject of competition from other 
exchanges and broker-dealers that offer routing services, as well as 
[sic] the ability of members to develop their own routing capabilities. 
In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that NASDAQ will lose market share as a 
result.
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    \6\ 15 U.S.C. 78f(b)(8).
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    Accordingly, 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.

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)(ii) of the Act.\7\ 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)(ii).
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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-2014-089 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-089. 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 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-2014-
089, and should be submitted on or before October 6, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O' Neill,
Deputy Secretary.
[FR Doc. 2014-21871 Filed 9-12-14; 8:45 am]
BILLING CODE 8011-01-P