[Federal Register Volume 82, Number 222 (Monday, November 20, 2017)]
[Notices]
[Pages 55128-55130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25037]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82068; File No. SR-NASDAQ-2017-120]


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

November 14, 2017.
    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 November 1, 2017, 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 transaction fees at 
Rule 7018 to: (i) Change the volume threshold needed to qualify for one 
of the credits for displayed quotes and orders that provide liquidity 
on the Exchange; and (ii) add a new credit for both providing liquidity 
to, and removing liquidity from, the Exchange.
    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 (i) change the volume 
threshold needed to qualify for one of the credits for displayed quotes 
and orders that provide liquidity on the Exchange; and (ii) add a new 
credit for displayed quotes and orders that provide liquidity to, and 
remove liquidity from, the Exchange.
    Rule 7018 sets forth the fees and credits for use of the order 
execution and routing services of Nasdaq for securities priced at $1 or 
more. Rule 7018(a)(1) sets forth the fees and credits for the execution 
and routing of orders in Nasdaq-listed securities; Rule 7018(a)(2) sets 
forth the fees and credits for the execution and routing of securities 
listed on the New York Stock Exchange LLC (``NYSE''), and Rule 
7018(a)(3) sets forth the fees and credits for the execution and 
routing of securities listed on exchanges other than Nasdaq and NYSE 
(``Tape B Securities'').
    Currently, Nasdaq pays a credit of $0.0029 per share executed for 
securities listed on Nasdaq, NYSE and Tape B Securities when the member 
adds liquidity in all securities through one or more of its Nasdaq 
Market Center MPIDs that represents more than 0.45% of Consolidated 
Volume during the month.\3\ Nasdaq now proposes to change this 
requirement so that the member must add liquidity in all securities 
through one or more of its Nasdaq Market Center MPIDs that represents 
more than 0.60% of Consolidated Volume during the month for securities 
listed on Nasdaq, NYSE and Tape B Securities. Nasdaq is therefore 
amending the relevant language in Rule 7018(a)(1), (a)(2) and (a)(3) to 
reflect this change. The amount of the credit remains unchanged.
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    \3\ Rule 7018(a) defines Consolidated Volume to mean ``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 
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.''
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    Nasdaq is making this change because it believes the new volume 
requirement is more closely aligned to the amount of the credit. This 
increase is also reflective of the Exchange's desire to provide 
incentives to attract order flow to the Exchange in return for 
significant market-improving behavior. By modestly increasing the 
volume of liquidity that a member must add during the month in order to 
qualify for the corresponding credit, this change will help ensure that 
members are providing significant market-improving behavior in return 
for credits.
    Nasdaq is also proposing to add a new credit for securities that 
are listed on Nasdaq, NYSE and Tape B Securities. Specifically, the 
member will qualify for a rebate of $0.0029 per share executed if the 
member (i) removes liquidity in all securities through one or more of 
its Nasdaq Market Center MPIDs that represents more than 0.70% of 
Consolidated Volume during the month, and (ii) adds liquidity in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represents more than 0.50% of Total Consolidated Volume during the 
month. Nasdaq is therefore amending the relevant language in Rule 
7018(a)(1), (a)(2) and (a)(3) to reflect this change. Nasdaq is adding 
this rebate to incentivize members to both add and remove liquidity on 
the Exchange in Nasdaq and NYSE-listed securities and Tape B 
securities, and to provide members with another way in which they may 
qualify for a rebate.
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 changing the requirement that members 
add liquidity that represents more than 0.45% of Consolidated Volume to 
require members to add liquidity that represents more than 0.60% of 
Consolidated Volume during the month in order to qualify for the 
$0.0029 credit is reasonable. The Exchange notes that it is not 
changing the amount of the

[[Page 55129]]

credit, which has been addressed in previous filings,\6\ and believes 
that the credit continues to be reasonable because it remains 
unchanged. Nasdaq believes that the change to the volume threshold is 
reasonable because the increased volume threshold is more closely 
aligned to the corresponding credit than the current volume threshold. 
This increase is also reflective of the Exchange's desire to provide 
incentives to attract order flow to the Exchange in return for 
significant market-improving behavior. By modestly increasing the 
volume of liquidity that a member must add during the month in order to 
qualify for the corresponding credit, this change will help ensure that 
members are providing significant market-improving behavior in return 
for credits.
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    \6\ See, e.g., Securities Exchange Act Release No. 64453 (May 
10, 2011), 76 FR 28252 (May 16, 2011) (SR-NASDAQ-2011-062).
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    The Exchange believes that the increase in the volume threshold 
needed to qualify for the $0.0029 credit is an equitable allocation and 
is not unfairly discriminatory because the Exchange will apply the same 
credit to all similarly situated members that meet its requirements. 
The credit and its corresponding volume requirement will apply equally 
to transactions in Nasdaq and NYSE-listed and Tape B Securities. The 
Exchange believes that the new volume requirement will not 
significantly impact the number of members that will likely qualify for 
the corresponding credit, since the new volume threshold is a modest 
increase over the current volume threshold. Participation in the 
Exchange's various credit tiers is completely voluntary, and members 
may always elect to either qualify for the corresponding credit by 
adding sufficient liquidity to the Exchange to meet the new volume 
requirement, or by electing to qualify for a different credit. Finally, 
by modestly increasing the volume of liquidity that a member must add 
during the month in order to qualify for the corresponding credit, this 
change will help ensure that members are providing significant market-
improving behavior in return for credits.
    Nasdaq believes that the new credit tier for adding and removing 
liquidity is reasonable. Nasdaq notes that the amount of the credit is 
either comparable or identical to other credits that it offers pursuant 
to Rule 7018, and believes that the requirements are comparable to 
other requirements needed to qualify for other credits.\7\ Nasdaq also 
believes that the amount of the credit is closely aligned to its 
corresponding requirements. With this credit and its corresponding 
requirements, Nasdaq is attempting to incentivize members to both add 
liquidity to, and remove liquidity from, the Exchange in meaningful 
amounts, which contributes to the Exchange's overall market quality and 
benefits all Exchange participants.
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    \7\ For example, Nasdaq currently pays a credit of $0.0027 per 
share executed for a member (i) with shares of liquidity accessed in 
all securities through one or more of its Nasdaq Market Center MPIDs 
that represent more than 0.40% of Consolidated Volume during the 
month, and (ii) with shares of liquidity provided in all securities 
through one or more of its Nasdaq Market Center MPIDs that represent 
more than 0.15% of Consolidated Volume during the month, and (iii) 
provides a daily average of at least 800,000 shares of nondisplayed 
liquidity through one or more of its Nasdaq Market Center MPIDs 
during the month.
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    Nasdaq also believes that the new credit tier for adding and 
removing liquidity is an equitable allocation and is not unfairly 
discriminatory. As with the change discussed above, the Exchange will 
apply the same credit and its corresponding volume requirements to all 
similarly situated members that meet its requirements. The new credit 
will apply equally to transactions in Nasdaq and NYSE-listed and Tape B 
Securities. Participation in the Exchange's various credit tiers is 
completely voluntary, and members may always elect to either qualify 
for this new credit by adding sufficient liquidity to, and removing 
sufficient liquidity from, the Exchange to meet the new volume 
requirements, or by electing to qualify for a different credit. With 
this credit and its corresponding requirements, Nasdaq is attempting to 
incentivize members to both add liquidity to, and remove liquidity 
from, the Exchange in meaningful amounts, which contributes to the 
Exchange's overall market quality and benefits all Exchange 
participants.

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 change to the volume threshold for 
the $0.0029 credit 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. The Exchange will apply the same volume thresholds to all 
members for transactions in Nasdaq and NYSE-listed and Tape B 
Securities. Participation in the Exchange's various credit tiers is 
completely voluntary, and Nasdaq does not believe that the new volume 
threshold will significantly impact the number of members that will 
likely qualify for the corresponding credit. Members may always elect 
to either qualify for the new volume threshold by adding sufficient 
liquidity to the Exchange to meet the new volume requirement, or by 
electing to qualify for a different credit. As such, the Exchange 
believes that the proposed volume threshold will not negatively impact 
who will qualify for the corresponding credit, but will rather have a 
positive impact on overall market quality as members increase their 
participation in the market to qualify for that credit. If, however, 
the Exchange is incorrect and the changes proposed herein are 
unattractive to members, it is likely that Nasdaq will lose market 
share as a result.
    Similarly, the proposed new credit tier for adding and removing 
liquidity 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. The Exchange will apply the same volume thresholds to all 
members for transactions in Nasdaq and NYSE-listed and Tape B 
Securities. Participation in the Exchange's various credit tiers is 
completely voluntary, and members may always elect to either qualify 
for the new credit by adding sufficient liquidity to, and removing 
sufficient liquidity from, the Exchange to meet the new volume 
requirements, or by electing to qualify for a different credit. As 
such, the Exchange believes that the proposed credit will have a 
positive

[[Page 55130]]

impact on overall market quality by incentivizing members to add and 
remove liquidity from the Exchange in meaningful amounts. If, however, 
the Exchange is incorrect and the changes proposed herein are 
unattractive to members, 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 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.\8\
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    \8\ 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-2017-120 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-2017-120. 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-120, and should 
be submitted on or before December 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25037 Filed 11-17-17; 8:45 am]
 BILLING CODE 8011-01-P