[Federal Register Volume 81, Number 221 (Wednesday, November 16, 2016)]
[Notices]
[Pages 80701-80703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27472]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79277; File No. SR-NASDAQ-2016-150]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the NBBO Program

November 9, 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 October 31, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's NBBO Program at Rule 
7014(g) to change the qualification criteria required to receive the 
$0.0004 per share executed NBBO Program rebate in NYSE-listed 
securities and in Securities Listed on Exchanges other than Nasdaq and 
NYSE.
    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 the Exchange's 
NBBO Program at Rule 7014(g) to change the qualification criteria 
required to receive the $0.0004 per share executed NBBO Program rebate 
in NYSE-listed securities and in Securities Listed on Exchanges other 
than Nasdaq and NYSE. The NBBO Program provides two rebates per share 
executed with respect to 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, establish the NBBO,

[[Page 80702]]

and displayed a quantity of at least one round lot at the time of 
execution. The rebates provided are in addition to any rebate or credit 
payable under Rule 7018(a) and other programs under Rule 7014. The 
rebates are provided to executions from orders originating on ports 
that meet certain requirements. To qualify for the $0.0004 per share 
executed NBBO Program rebate in NYSE-listed securities and in 
Securities Listed on Exchanges other than Nasdaq and NYSE a member must 
execute shares of liquidity provided in all securities through one or 
more of its Nasdaq Market Center MPIDs that represents 1.0% or more of 
Consolidated Volume during the month and the order must have been 
entered on a port that has a ratio of at least 25% NBBO liquidity 
provided\3\ to liquidity provided during the month.
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    \3\ NBBO liquidity provided means liquidity provided from orders 
(other than Designated Retail Orders, as defined in Nasdaq Rule 
7018), that establish the NBBO, and displayed a quantity of at least 
one round lot at the time of execution.
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    The Exchange is proposing to amend one of the data points used in 
the calculation of the ratio required for a port to qualify for the 
$0.0004 per share executed NBBO Program rebate to now compare liquidity 
provided by displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) to NBBO liquidity provided. Thus, the 
Exchange is using a more limited category of liquidity (i.e., displayed 
quotes/orders) against which NBBO liquidity provided is compared to 
determine a member's ratio. For example, under the current rule if a 
member provides 100,000 shares of displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) in a month (30,000 of 
which is NBBO liquidity) and it provides 100,000 of midpoint liquidity 
(non-displayed) during the same month, the member's ratio would be 15% 
(30,000 shares of NBBO liquidity divided by 200,000 shares of liquidity 
provided). Under the proposed change using this example, the ratio 
would be 30% based on 30,000 shares of NBBO liquidity provided divided 
by 100,000 shares of displayed quotes/orders (other than Supplemental 
Orders or Designated Retail Orders) provided (the member's 100,000 
shares of non-displayed liquidity is not included). As a consequence, 
this member would not qualify for the $0.0004 per share executed NBBO 
Program rebate in NYSE-listed securities and in Securities Listed on 
Exchanges other than Nasdaq and NYSE under the current criteria, but 
would under the amended criteria.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of 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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is an equitable 
allocation and is not unfairly discriminatory because it makes it 
easier to qualify for the rebate. As a consequence, the Exchange is 
making the rebate more achievable for members, which may in turn, 
attract new members to the program. The Exchange notes that the program 
rewards members that provide liquidity that sets the NBBO, thus 
improving the market for all participants. To the extent the proposed 
change is successful in attracting more members to participate in the 
program, all participants will benefit from the increased competition 
in setting the NBBO. The Exchange further notes that a member that 
currently qualifies for the rebate would qualify for the rebate under 
the amended criteria. Last, the proposed change does not alter the 
amount of the rebate provided. Thus, the Exchange believes that the 
amount of the rebate continues to be reasonable for the reasons stated 
by the Exchange when the rebate was adopted.

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 and rebates 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 changes to the criteria required of 
members to receive a rebate under the NBBO Program make it easier for 
members to qualify for a rebate under the program, with the intent of 
making the program more attractive to members. Thus, the proposed 
change promotes competition for order flow among trading venues, and 
does not impose a burden on competition because the Exchange's 
execution services are completely voluntary and subject to extensive 
competition both from other exchanges and from off-exchange venues, 
which may provide similar incentives to their members. In sum, if the 
changes proposed herein are unattractive to market participants, it is 
likely that the Exchange will 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.

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.\6\
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    \6\ 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:

[[Page 80703]]

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-2016-150 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-2016-150. 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 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-2016-150 and should 
be submitted on or before December 7, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
Brent J. Fields,
Secretary.
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    \7\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-27472 Filed 11-15-16; 8:45 am]
 BILLING CODE 8011-01-P