[Federal Register Volume 80, Number 123 (Friday, June 26, 2015)]
[Notices]
[Pages 36877-36879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15694]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75261; File No. SR-NASDAQ-2015-062]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Nasdaq Rules 7014 and 7018

June 22, 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 June 15, 2015, 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 changes to Nasdaq Rule 7014, including adding a 
national best bid or best offer (``NBBO'') Program, amending Nasdaq 
Rule 7018 rebates, eliminating Nasdaq Rule 7018(a)(4) that governs fees 
and credits for execution of orders in select symbols, and increasing 
the monthly cap on fees charged for participation in the Nasdaq Opening 
Cross in Nasdaq Rule 7018(e).
    The text of the proposed rule change is available at 
nasdaq.cchwallstreet.com at Nasdaq 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 proposes to amend Nasdaq Rules 7014 and 7018 by eliminating 
the fees and credits for execution of orders in select symbols 
(``Select Symbol Program'') under Nasdaq Rule 7018(a)(4). The Exchange 
proposes to make corresponding changes to remove references to the 
Select Symbol Program in Nasdaq Rule 7014(b) and (e). Additionally, 
Nasdaq proposes to clarify Nasdaq Rule 7014(b) by removing an outdated 
reference to subsection (f) and specifying the rebates and credits are 
from Nasdaq Rule 7018(a), as well as to clarify that the rebate in 
Nasdaq Rule 7018(e) will be in addition to any rebate payable under 
Nasdaq Rule 7018(a).
    The Exchange also proposes to amend Nasdaq Rule 7014 by adding the 
NBBO Program to the rule as subsection (g). Under the NBBO Program, 
Nasdaq will provide a rebate per share executed with respect to all 
other displayed orders (other than Designated Retail Orders, as defined 
in Nasdaq Rule 7018) in securities priced at $1 or more per share that 
provide liquidity and establish the NBBO. The rebate will be in 
addition to any rebate or credit payable under Nasdaq Rule 7018(a) and 
the Investor Support Program (``ISP'') and Qualified Market Maker 
(``QMM'') Program under Nasdaq Rule 7014.
    To qualify for the $0.0002 per share executed rebate under the NBBO 
Program, a member must either: (1) Execute shares of liquidity provided 
in all securities through one or more of its MPIDs that represents 
0.475% or more of consolidated volume (``Consolidated Volume'') during 
the month, or (2) add Nasdaq Options Market (``NOM'') market maker 
liquidity, as defined in chapter XV, section 2 of the NOM rules, in 
penny pilot options and/or non-penny pilot options above 0.90% of total 
industry customer equity and exchange-traded fund (``ETF'') option 
average daily volume (``ADV'') contracts per day in a month.
    Next, Nasdaq proposes to amend midpoint pricing credit tiers in 
Nasdaq Rule 7018(a)(1), (2) and (3). Specifically, in Nasdaq Rule 
7018(a)(1) currently there is a credit of $0.0017 per share executed 
for midpoint orders if the member provides an average daily volume of 
between 5 million and less than 6 million shares through midpoint 
orders during the month. The credit of $0.0017 per share executed for 
midpoint orders will now be available if the member provides an average 
daily volume of 3 million or more shares through midpoint orders during 
the month. The same change is being made in Nasdaq Rule 7018(b) and 
(c), but for the $0.0020 per share executed credit for midpoint orders 
tier. Additional language is being modified within each of these 
subsections solely for purposes of clarification.
    Finally, the Exchange proposes to amend Nasdaq Rule 7018(e) by 
increasing the monthly maximum amount that firms are subject to for 
executing orders in the Nasdaq Opening Cross from $20,000 to $30,000 
(provided that such firms add at least one million shares of liquidity, 
on average, per month). The change is intended to keep the charges 
incurred by members to participate in the Nasdaq Opening Cross 
comparable to the charges incurred by the New York Stock Exchange 
(``NYSE'') members to participate in its opening process.\3\
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    \3\ See SR-NYSE-2015-28 (as of yet unpublished).
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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,\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 designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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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 the proposed changes to Nasdaq Rule 7018 to 
eliminate the Select Symbol Program

[[Page 36878]]

under Nasdaq Rule 7018(a)(4), as well as the removal of corresponding 
references in Nasdaq Rule 7014(b) and (e), are reasonable because the 
Exchange has fulfilled its commitment in its continuing efforts to 
improve market quality to consider the impact the pricing has had on 
market quality and off-exchange volume of existing Select Symbols and 
has now gathered sufficient meaningful data to determine to eliminate 
the program.\6\ Nasdaq believes that the data generated by this 
experimental approach contributed to the on-going debate on the 
structure of U.S. markets. The Exchange believes this proposed rule 
change is equitable and not unfairly discriminatory because its 
liquidity provider rebates continue to be set at reasonable levels and 
apply uniformly to all members that qualify. The Exchange also believes 
that these proposed rule changes are also equitable and not unfairly 
discriminatory because the elimination of this program applies 
uniformly to all members.
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    \6\ See Securities Exchange Act Release No. 73967 (December 30, 
2014), 80 FR 594 (January 6, 2015) (SR-NASDAQ-2014-128).
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    The Exchange believes that the clarifying change to Nasdaq Rule 
7014(b) of removing an outdated reference to subsection (f) and 
specifying the rebates and credits are from Nasdaq Rule 7018(a), as 
well as stipulating that the rebate in Nasdaq Rule 7018(e) will be in 
addition to any rebate payable under Nasdaq Rule 7018(a), are 
reasonable because these modifications will enhance the clarity and 
reduce possible confusion among members, which serves to benefit the 
marketplace. The Exchange also believes that these proposed rule 
changes are also equitable and not unfairly discriminatory because they 
apply uniformly to all members who qualify for the programs.
    The Exchange believes that the proposed rule change to amend Nasdaq 
Rule 7014 by adding the NBBO Program to the rule as subsection (g) is 
reasonable because it provides an opportunity for members that qualify 
to receive a rebate of $0.0002 per share executed for all other 
displayed orders (other than Designated Retail Orders, as defined in 
Rule 7018) in securities priced at $1 or more per share that provide 
liquidity and establish the NBBO.\7\ The rebate will be in addition to 
any rebate or credit payable under Rule 7018(a) and the ISP and QMM 
Program under Rule 7014. To qualify to receive this rebate, members 
must either (1) execute shares of liquidity provided in all securities 
through one or more of its [sic] Nasdaq Market Center MPIDs that 
represents 0.475% or more of Consolidated Volume during the month, or 
(2) add NOM market maker liquidity, as defined in Chapter XV, Section 2 
of the NOM rules, in penny pilot options and/or non-penny pilot options 
above 0.90% of total industry customer equity and ETF option ADV 
contracts per day in a month.
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    \7\ This is similar to other programs originating from the BATS 
Global Markets 2011 filing. See Securities Exchange Act Release No. 
73967 (January 3, 2011), 80 FR 594 (January 7, 2011) (SR-BATS-2010-
038).
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    Additionally, Nasdaq believes this rule change is equitable and not 
unfairly discriminatory because the $0.0002 per share executed rebate 
under the NBBO Program is open to all members on an equal basis and 
provides a rebate for activity that improves the exchange's market 
quality through increased activity and by encouraging the setting of 
the NBBO. The NBBO Program encourages higher levels of liquidity 
provision into the price discovery process and is consistent with the 
overall goals of enhancing market quality. Also, the Exchange believes 
that the two specific conditions (either of which a member can meet to 
qualify for this rebate) are equitable and not unfairly discriminatory 
because each represents an attainable level for members to achieve and 
to qualify for this rebate. In addition, requiring a member to execute 
shares of liquidity provided in all securities through one or more of 
its Nasdaq Market Center MPIDs that represents 0.475% or more of 
Consolidated Volume during the month represents a lower Consolidated 
Volume requirement than the QMM Program, but the NBBO Program rebates 
do not apply to all shares of liquidity provided, and thus the 
Consolidated Volume threshold is lower.
    The proposed NBBO Program is intended to encourage members to add 
liquidity at prices that benefit all Nasdaq market participants and the 
Nasdaq market itself, and enhance price discovery. Nasdaq believes that 
the level of the rebate available through the NBBO Program ($0.0002 per 
share executed) is reasonable in that it does not reflect a 
disproportionate increase above the rebates provided to all members 
with respect to the provision of displayed liquidity under Rule 
7018(a). The QMM and ISP Programs both provide members with the 
opportunity to receive additional rebates of $0.0002 per share 
executed. Nasdaq further notes that the NBBO Program is consistent with 
the Act's requirement for an equitable allocation of fees because 
members that provide liquidity and establish the NBBO benefit all 
investors by promoting price discovery and increasing the depth of 
liquidity available. Such members also benefit Nasdaq itself by 
enhancing its competitiveness as a market that attracts actionable 
orders. Accordingly, Nasdaq believes that it is consistent with an 
equitable allocation of fees to pay an enhanced rebate in recognition 
of these benefits to Nasdaq and its market participants. The Exchange 
further notes that the NBBO Program is consistent with an equitable 
allocation of fees because it is immediately available to all market 
participants that qualify. Finally, Nasdaq believes that the NBBO 
Program and the payment of a higher rebate with respect to qualifying 
orders is not unfairly discriminatory because it is intended to promote 
the benefits described above, and because the additional rebate amount 
is in line with the rebate paid with respect to other displayed 
liquidity-providing orders.
    The Exchange believes that the proposed rule change to amend 
midpoint pricing credit tiers in Nasdaq Rule 7018(a)(1), (2) and (3) is 
reasonable because it creates a more attainable credit tier (3 million 
or more rather than between 5 million and 6 million) for members that 
execute midpoint orders. Also, Nasdaq believes this rule change is 
equitable and not unfairly discriminatory because all members that 
qualify are eligible to receive the corresponding rebate under Tapes A, 
B or C. The proposed rule change is intended to encourage members to 
execute midpoint orders and to further enhance liquidity. The Exchange 
also believes that the additional language being modified within each 
of these subsections solely for purposes of clarification will enhance 
the clarity and reduce possible confusion among members, which serves 
to benefit the marketplace.
    Nasdaq believes that the proposed change to the monthly cap on fees 
charged for participation in the Nasdaq Opening Cross (provided that 
such firms add at least one million shares of liquidity, on average, 
per month) from $20,000 to $30,000 in Nasdaq Rule 7018(e) is reasonable 
because it ensures that total monthly costs of members to participate 
in the Nasdaq Opening Cross are comparable to the monthly costs of 
members to participate in the opening process of Nasdaq's primary 
competitor. As is currently the case, once a member reaches the cap, 
its marginal rate thereafter will be zero and its blended rate will 
decrease with each additional transaction. Nasdaq believes that the 
proposed change reflects an equitable allocation of fees because it 
believes that the Nasdaq Opening Cross provides an extremely robust 
price discovery

[[Page 36879]]

process for its members, and that accordingly, it is equitable to 
increase the maximum fees payable by members that participate in the 
process. Additionally, Nasdaq believes that the change is not unfairly 
discriminatory because it applies solely to members that opt to 
participate in the Nasdaq Opening Cross.
    Finally, 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. 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. Nasdaq believes that the proposed rule change 
reflects this competitive environment because it is designed to reduce 
fees for members that enhance the quality of Nasdaq's market.

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.\8\ 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, the Exchange believes that the degree to which 
fee changes may impose any burden on competition is extremely limited.
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    \8\ 15 U.S.C. 78f(b)(8).
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    Nasdaq believes that the degree to which fee changes in this market 
may impose any burden on competition is extremely limited or even non-
existent. In this instance, the changes to Nasdaq Rules 7014 and 7018 
do not impose a burden on competition because these Nasdaq incentive 
programs (other than the program for select symbols in Nasdaq Rule 
7018), remain in place and now also include the NBBO Program, still 
offer economically advantageous credits, and are reflective of the need 
for exchanges to offer and to let the financial incentives to attract 
order flow evolve. While the Exchange does not believe that the 
proposed changes will result in any burden on competition, if the 
changes proposed herein are unattractive to market participants, it is 
likely that Nasdaq will lose market share as a result.

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.\9\ 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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    \9\ 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-2015-062 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-2015-062. 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-
062, and should be submitted on or before July 17, 2015.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15694 Filed 6-25-15; 8:45 am]
 BILLING CODE 8011-01-P