[Federal Register Volume 81, Number 55 (Tuesday, March 22, 2016)]
[Notices]
[Pages 15358-15360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06338]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77378; File No. SR-NASDAQ-2016-037]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Transaction Fees at Rule 7018(a)

March 16, 2016.
    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 March 7, 2016, 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 amend the Exchange's transaction fees at 
Rules 7018(a)(2) and (3) to provide a new credit to members for 
displayed quotes/orders (other than Supplemental Orders or Designated 
Retail Orders) that provide liquidity in Tape A and B securities.
    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
    The purpose of the proposed rule change is to amend Rule 7018(a)(2) 
and (3), concerning the fees and credits provided for the use of the 
order execution and routing services of the Nasdaq Market Center by 
members for all securities priced at $1 or more that it trades. The 
Exchange is proposing to provide a new credit to members for displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) that provide liquidity in

[[Page 15359]]

Tape \3\ A and B securities in addition to other credits provided under 
Rules 7018(a)(2) and (3) for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders).
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    \3\ There are three categories, or ``Tapes'' of securities, 
which are based on listing venue. Tape A securities are those that 
are listed on NYSE, Tape B securities are those that are listed on 
exchanges other than Nasdaq or NYSE, and Tape C securities are those 
that are listed on the Exchange.
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    Currently under Rules 7018(a)(2) and (3), the Exchange provides 
credits ranging from $0.0020 per share executed to $0.00305 per share 
executed to members for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) if they qualify by 
meeting the requirements of the various credit tiers under the rules.
    The Exchange is proposing to provide a new $0.0001 per share 
executed credit that would be provided to members for displayed quotes/
orders (other than Supplemental Orders or Designated Retail Orders) in 
Tape A and B securities if they have shares of liquidity provided in 
all securities during the month representing at least 0.2% of 
Consolidated Volume \4\ during the month, through one or more of its 
Nasdaq Market Center MPIDs.
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    \4\ Consolidated Volume is the total consolidated volume 
reported to all consolidated transaction reporting plans by all 
exchanges and trade reporting facilities during a month in equity 
securities, excluding executed orders with a size of less than one 
round lot. For purposes of calculating Consolidated Volume and the 
extent of a member's trading activity, expressed as a percentage of 
or ratio to Consolidated Volume, the date of the annual 
reconstitution of the Russell Investments Indexes shall be excluded 
from both total Consolidated Volume and the member's trading 
activity. See Rule 7018(a).
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    As noted, this rebate will be provided in addition to other 
displayed liquidity credits that a member qualifies for under Rules 
7018(a)(2) and (3), and will also be provided in addition to any 
rebates that a member qualifies for under the ISP, NBBO, and QMM 
programs under Rule 7014. The proposed rebate, however, will not be 
additive to LMM rebates under Rule 7014 or Designated Retail Order 
credits under Rule 7018.
    The Exchange is implementing the proposed credit on March 7, 2016, 
at which time any member that qualifies will begin to receive the 
credit. The measurement period for the Consolidated Volume required to 
qualify for the new credit will initially be calculated based on such 
volume provided from March 7, 2016 through March 31, 2016, and then 
monthly thereafter. For example, a member with shares of liquidity 
provided in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent more than 0.10% of Consolidated Volume 
during the month would qualify for a $0.0025 per share executed credit 
under Rule 7018(a). If the member provides 0.21% of Consolidated Volume 
from March 7, 2016 through March 31, 2016 it would qualify for the new 
$0.0001 additional per share executed credit. The member's credit for 
displayed quotes/orders (other than Supplemental Orders or Designated 
Retail Orders) in Tape A and B securities from March 1, 2016 through 
March 4, 2016 would be $0.0025 per share executed, and from March 7, 
2016 through March 31, 2016 would be $0.0026 per share executed 
($0.0025 credit + $0.0001 credit). If a member did not provide 0.2% of 
Consolidated Volume from March 7, 2016 through March 31, 2016 the 
member would not qualify for the additional $0.0001 credit. This is 
true regardless of the percent of Consolidated Volume provided for the 
whole month of March.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \5\ in general, and furthers the objectives of 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 the Exchange 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(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed new credit is reasonable 
because it may provide incentive to members to increase the level of 
liquidity provided to the Exchange, which will in turn benefit all 
market participants. Providing credits for displayed quotes/orders 
(other than Supplemental Orders or Designated Retail Orders) rewards 
members for improving the market through displayed liquidity. As such, 
the Exchange believes that providing an additional credit for such 
liquidity is reasonable.
    The Exchange also believes that it is reasonable to limit the 
credit to only quotes/orders in Tape A and B securities because the 
Exchange has observed a decline in overall volume on the Exchange in 
Tape A and B securities in comparison to Tape C securities, and is thus 
providing incentive to members to provide displayed liquidity in Tape A 
and B securities.
    Further, the Exchange has limited funds with which to apply in the 
form of incentives, and thus must deploy those limited funds to 
incentives that it believes will be the most effective and improve 
market quality in areas that the Exchange determines are in need of 
improvement. The Exchange believes that the proposed increased credit 
is an equitable allocation and is not unfairly discriminatory because 
the Exchange will provide the credit to all members that qualify for it 
under the rule.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange 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, the Exchange 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 in this 
market may impose any burden on competition is extremely limited.
    In this instance, the proposed new credit for displayed liquidity 
in Tape A and B securities is reflective of robust competition among 
exchanges and other trading venues and does not place any burden on 
competition whatsoever. The credit is designed to provide additional 
incentive to members to enter displayed quotes and orders in Tape A and 
B securities traded on the Exchange, which are most in need of 
improvement. To the extent the incentive is successful; it will benefit 
all market participants trading in such securities on the Exchange.
    Last, although the Exchange does not believe the proposed changes 
will be unattractive to market participants, if the changes were 
unattractive then it is likely that the Exchange would lose market 
share as a result. Accordingly, the Exchange 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.

[[Page 15360]]

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.\7\
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    \7\ 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-2016-037 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-2016-037. 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-2016-
037, and should be submitted on or before April 12, 2016.

    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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Robert W. Errett,
Deputy Secretary.
 [FR Doc. 2016-06338 Filed 3-21-16; 8:45 am]
 BILLING CODE 8011-01-P