[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28757-28759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12015]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74946; File No. SR-NASDAQ-2015-052]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ Rule 7018 Governing Fees and Credits Assessed For
Execution and Routing
May 13, 2015.
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 May 7, 2015, 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 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
The Exchange proposes to modify NASDAQ Rule 7018(a)(1), (2), and
(3), governing fees and credits assessed for execution and routing
securities listed on NASDAQ (subsection 1), the New York Stock Exchange
(``NYSE'') (subsection 2) and on exchanges other than NASDAQ and NYSE
(subsection 3). NASDAQ will implement the proposed fees on May 1, 2015.
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 and
discussed any comments it received on 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 to amend NASDAQ Rule 7018(1), (2) and (3) 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''), respectively, (together, the
``Tapes''). The Exchange is proposing two categories of changes to
credits paid regarding midpoint liquidity: (1) Changes to the
calculation of Equity and Options-linked volume when the Exchange pays
rebates to members that provide liquidity via midpoint orders that are
executed; and (2) adding a tier of credits for midpoint liquidity
provided via non-displayed orders that are executed. These changes are
described in greater detail below.
Equity and Options-Linked Volume. With respect to credits paid for
members adding liquidity via midpoint orders, the Exchange currently
pays a credit of $0.0030 per share executed for members (i) with shares
of liquidity provided in all securities during the month representing
at least 0.40% of Consolidated Volume during the month, through one or
more of its Nasdaq Market Center MPIDs, and (ii) that qualifies for the
Nasdaq Options Market Customer and Professional Rebate to add Liquidity
in Penny Pilot Options Tier 8 under Chapter XV, Section 2 of the Nasdaq
Options Market rules during the month through one or more of its Nasdaq
Options Market MPIDs. The Tier 8 program requires that a ``Participant
adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options
of 0.75% or more of total industry customer equity and ETF option ADV
contracts per day in a month.'' The Tier 8 credit is designed to reward
members that add liquidity broadly across NASDAQ's equity and options
trading platform whether for trading NASDAQ, NYSE or Amex or other
exchange-listed securities.
NASDAQ is proposing to retain the credit rate of $0.0030 for this
activity tier and to modify the volume calculations for both equity and
options volume for securities on all three Tapes. First, the Exchange
is increasing the required percentage of Consolidated Volume of
equities executed from 0.40 percent to 0.60 percent per member for one
or more of that member's MPIDs. Second, NASDAQ is retaining the
existing link between equities and options trading, but it is modifying
the measure of options volume. Specifically, the Exchange is modifying
the rule to incorporate language from the Liquidity in Penny Pilot
Options Tier 8 under Chapter XV, Section 2 of the Nasdaq Options
Market. Additionally, the Exchange plans to credit members that add
liquidity of 1.25 percent or more of average daily volume (``ADV'') for
the industry in the customer clearing range \3\ in Equity and ETF
Options \4\ based upon volume added by that member in the Customer,\5\
Professional,\6\ Firm,\7\ Non-NOM Market Maker \8\ and Broker-Dealer
\9\ classifications as those classifications are defined in NOM rules.
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\3\ The term ``customer clearing range'' refers to a clearing
designation determined by the Options Clearing Corporation that
applies throughout the options industry.
\4\ This proposed rule change applies to the same categories of
options (Penny Pilot, Non-Penny Pilot, Equity and ETF options) and
the same participant liquidity (Customer, Professional, Firm, Non-
NOM Market Maker and Broker-Dealer) that are identified in Chapter
XV, Section 2 of the Nasdaq Options Market Rules, Tier 8.
\5\ As defined in Chapter XV of the Nasdaq Options Market Rules,
the term ``Customer'' or (``C'') applies to any transaction that is
identified by a Participant for clearing in the Customer range at
The Options Clearing Corporation (``OCC'') which is not for the
account of broker or dealer or for the account of a ``Professional''
(as that term is defined in Chapter I, Section 1(a)(48)).
\6\ As defined in Chapter XV of the Nasdaq Options Market Rules,
the term ``Professional'' or (``P'') means any person or entity that
(i) is not a broker or dealer in securities, and (ii) places more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s) pursuant to Chapter
I, Section 1(a)(48). All Professional orders shall be appropriately
marked by Participants.
\7\ As defined in Chapter XV of the Nasdaq Options Market Rules,
the term ``Firm'' or (``F'') applies to any transaction that is
identified by a Participant for clearing in the Firm range at OCC.
\8\ As defined in Chapter XV of the Nasdaq Options Market Rules,
the term ``Non-NOM Market Maker'' or (``O'') is a registered market
maker on another options exchange that is not a NOM Market Maker. A
Non-NOM Market Maker must append the proper Non-NOM Market Maker
designation to orders routed to NOM.
\9\ As defined in Chapter XV of the Nasdaq Options Market Rules,
the term ``Broker-Dealer'' or (``B'') applies to any transaction
which is not subject to any of the other transaction fees applicable
within a particular category.
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Non-Displayed Volume. Currently, NASDAQ Rule 7018 provides for
credits for the execution of non-displayed liquidity (other than via
Supplemental
[[Page 28758]]
Orders) when the member provides certain levels of liquidity and also
provides certain levels of options liquidity simultaneously. The
credits currently range from $0.0025 to $0.0005 depending upon the
orders types used and the amount of liquidity provided, where midpoint
liquidity is highest valued.
The Exchange is modifying three rebate tiers and adding a new
rebate tier across Tapes A and B only; Tape C securities will remain
unmodified. Specifically, the Exchange will raise the credit from
$0.0020 to $0.0022 per share executed for midpoint orders if the member
provides an average daily volume of 6 million or more shares through
midpoint orders during the month, and from $0.0017 to $0.0020 per share
executed for midpoint orders if the member provides an average daily
volume between 5 million and less than 6 million shares through
midpoint orders during the month. Additionally, the Exchange is adding
a new rebate tier of $0.0018 per share executed for midpoint orders if
the member provides an average daily volume between 1 million and less
than 5 million shares through midpoint orders during the month Finally,
the Exchange is retaining the rebate tier of $0.0014 per share executed
for midpoint orders but lowering the volume requirement from 5 million
to 1 million shares average daily volume of midpoint liquidity provided
during the month.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\10\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4) and (5).
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NASDAQ believes that the changes across all tapes to the
calculation of the Equity and Options-linked credit of $0.0030 for
members that provide midpoint liquidity are reasonable, equitably
allocated and not unfairly discriminatory. First, it is reasonable and
equitable to increase the required percentage of Consolidated Volume of
equities executed from 0.40 percent to 0.60 percent per member for one
or more of that member's MPIDs. This change is designed to create
incentives for members to add additional liquidity to the NASDAQ Market
Center. Liquidity is critical to the trading efficiency and quality of
the exchange, and changes to enhance liquidity should be viewed
favorably by all participants. This change will be applied equally to
all similarly situated members and therefore should not be considered
discriminatory, much less unfairly discriminatory.
NASDAQ also believes that it is reasonable, equitably allocated and
not unfairly discriminatory to retain the existing link between
equities and options trading, to modify the measure of options volume.
As with the previous change, the Exchange is requiring members to add
additional liquidity (1.25 versus 0.75 percent of ADV), and to apply
the same numerator (volume added by that member in the Customer,
Professional, Firm, Non-NOM Market Maker and Broker-Dealer
classifications) and denominator (total volume in the customer clearing
range in Equity and ETF Options) for that calculation. Again, it is
important for the Exchange to encourage members to add liquidity to the
platforms NASDAQ operates and fair to modify fees to accomplish that
important goal.
The Exchange also believes it is reasonable, equitably allocated
and not unfairly discriminatory to adjust rebate tiers for non-
displayed liquidity for Tapes A and B. NASDAQ notes that each of the
four changes results in higher rebates per executed share in the future
for the same volume of shares previously executed. Three of the four
changes are modifications to existing tiers and the fourth is the
insertion of a new volume tier, each of which is designed to reward
more generously the provision of midpoint liquidity on NASDAQ. Midpoint
liquidity is valuable to the efficient operation and competitiveness of
the Exchange, and particularly beneficial to investors matching at the
midpoint.
NASDAQ believes it is not unfairly discriminatory to apply these
changes to Tapes A and B versus Tape C because they will be absolute
rather than relative requirements. As an absolute standard, the
liquidity requirements will apply uniformly to all Market Makers
eligible to participate in the program. All members have incentives
available and equal opportunity to earn the higher rebates for adding
more liquidity in Tapes A and B securities. NASDAQ has determined that
modifying the incentives is more necessary for Tape A and B securities
than for Tape C securities due to differences in NASDAQ's share of
trading and the total volume traded in the market. If NASDAQ's
determination is incorrect, NASDAQ would expect its share of trading in
Tape C securities to decline due to intense competition in the market.
Further, all participants may qualify to be eligible for these
rebates, provided they transact the requisite amount of liquidity. It
is reasonable to emphasize customer liquidity in options trading
because it offers unique benefits to the market, which benefits all
market participants. Customer liquidity benefits all options market
participants by providing more trading opportunities, which attracts
market makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
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.\12\ 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.
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\12\ 15 U.S.C. 78f(b)(8).
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In this instance, the changes to liquidity credits for midpoint
liquidity and to equity and options-lined credits do not impose a
burden on competition because NASDAQ's execution services are
completely voluntary and subject to extensive competition both from
other exchanges and from off-exchange venues. In sum, if the changes
proposed herein are unattractive to market participants, it is likely
that NASDAQ will lose market share as a result. Accordingly, NASDAQ
does not believe that the proposed changes will impair the ability of
members or competing order execution venues to maintain
[[Page 28759]]
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
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.\13\
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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:
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-2015-052 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2015-052. 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-2015-
052, and should be submitted on or before June 9, 2015.
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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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12015 Filed 5-18-15; 8:45 am]
BILLING CODE 8011-01-P