[Federal Register Volume 83, Number 58 (Monday, March 26, 2018)]
[Notices]
[Pages 12988-12990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06012]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82905; File No. SR-NASDAQ-2018-021]


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 To Charge No Transaction Fee for 
Execution of Midpoint Extended Life Orders

March 20, 2018.
    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 9, 2018, 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 charge no transaction fee for execution of Midpoint 
Extended Life Orders. While these amendments are effective upon filing, 
the Exchange has designated the proposed amendments to be operative on 
March 12, 2018.
    The text of the proposed rule change is available on the Exchange's 
website 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 
transaction fees at Rule 7018 to charge no transaction fee for 
execution of Midpoint Extended Life Orders. On March 7, 2018, the 
Commission approved the Exchange's proposal to adopt a new Order Type, 
the Midpoint Extended Life Order.\3\ The Midpoint Extended Life Order 
is an Order Type with a Non-Display Order Attribute that is priced at 
the midpoint between the NBBO and that will not be eligible to execute 
until the Holding Period of one half of a second has passed after 
acceptance of the Order by the System. Once a Midpoint Extended Life 
Order becomes eligible to execute by existing unchanged for the Holding 
Period, the Order may only execute against other eligible Midpoint 
Extended Life Orders. The Exchange will begin offer Midpoint Extended 
Life Orders on March 12, 2018.\4\
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    \3\ See Securities Exchange Act Release No. 82825 (March 7, 
2018) (SR-NASDAQ-2017-074) (pending publication in the Federal 
Register).
    \4\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2018-20.
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    Under Rule 7018, the Exchange assesses fees for Orders entered into 
the Nasdaq System. The fees cover Orders in all three tapes and in 
securities both priced $1 and above (Rule 7018(a)), and below $1 (Rule 
7018(b)). The Exchange is proposing initially to not charge a 
transaction fee for execution of Midpoint Extended Life Orders. 
Allowing transactions to occur at no cost will promote use of the 
Midpoint Extended Life Order, which will help bring liquidity in 
Midpoint Extended Life Orders to the Exchange and promote market 
quality. The Exchange plans to adopt fees for Midpoint Extended Life 
Orders in the future and will do so through the SEC rulemaking 
process.\5\ Accordingly, the Exchange is proposing to amend Rule 
7018(a)(1)-(3) to note that members executing a Midpoint Extended Life 
Order will be

[[Page 12989]]

assessed a charge of $0.0000 per share executed. The Exchange is 
amending Rule 7018(b) to note that members executing a Midpoint 
Extended Life Order will be assessed a charge of 0.0% of the total 
transaction cost.\6\ The Exchange is also adding rule text to an 
existing fee under Rule 7018(b) to make it clear that Midpoint Extended 
Life Orders are excluded from the fee.
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    \5\ Id.
    \6\ Unlike fees for transactions in securities price at $1 or 
greater, which are assessed on a per share executed basis, fees for 
transactions in securities less than $1 are assessed fees based on a 
percentage of the total transaction cost.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that not charging a fee for executions in 
Midpoint Extended Life Orders is reasonable because the Exchange does 
not currently charge for transactions in other Orders under Rule 7018. 
Specifically, the exchange does not charge a fee for transactions in 
Orders with a RTFY routing Order Attribute.\9\ Such an Order must meet 
the definition of Designated Retail Order, which requires, among other 
things, that the Order not originate from a trading algorithm or any 
other computerized methodology.\10\ Thus, allowing transactions of the 
RTFY Order Attribute at no cost is designed to promote the Exchange as 
a venue for retail investor Orders. Likewise, the Exchange is proposing 
to allow transactions in Midpoint Extended Life Orders at no cost to 
promote use of such Orders and consequently the quality of the market 
in Midpoint Extended Life Orders. As discussed extensively in its 
proposal,\11\ the Exchange believes that the Midpoint Extended Life 
Order is consistent with the Act because it is emblematic of a core 
function of a national securities exchange, namely matching buyers and 
sellers of securities on a transparent and well-regulated market, and 
helping these buyers and sellers come together to receive the best 
execution possible. The Exchange achieves this by permitting Midpoint 
Extended Life Orders to execute solely against other Midpoint Extended 
Life Orders at the midpoint of the NBBO in return for providing market-
improving behavior in the form of a longer-lived midpoint order. 
Accordingly, the Exchange believes that allowing transactions of 
Midpoint Extended Life Orders at no cost is reasonable.
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    \9\ RTFY is a routing option available for an order that 
qualifies as a Designated Retail Order under which orders check the 
System for available shares only if so instructed by the entering 
firm and are thereafter routed to destinations on the System routing 
table. If shares remain unexecuted after routing, they are posted to 
the book. Once on the book, should the order subsequently be locked 
or crossed by another market center, the System will not route the 
order to the locking or crossing market center. RTFY is designed to 
allow orders to participate in the opening, reopening and closing 
process of the primary listing market for a security. See Rule 
4758(a)(1)(A)(v)b.
    \10\ See Rule 7018.
    \11\ See note 3, supra.
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    The Exchange also believes that not charging a fee for executions 
in Midpoint Extended Life Order is an equitable allocation and is not 
unfairly discriminatory because the Exchange will apply the same fee to 
all similarly situated members. The Midpoint Extended Life Order may be 
used by any market participant that is willing to satisfy the 
requirements of the Order Type and therefore qualify for the proposed 
zero fee tiers. Moreover, members not interested in using Midpoint 
Extended Life Orders will continue to have the ability to enter 
midpoint Orders in the Nasdaq System, which have both fees and credits 
associated with their execution.\12\ As noted above, the Exchange 
intends to assess fees for transactions in Midpoint Extended Life 
Orders in the near future,\13\ once it has had time to assess the 
nature of the market in Midpoint Extended Life Orders to determine the 
appropriate fee. Accordingly, the proposed fee does not discriminate in 
any way.
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    \12\ Based on whether the member is removing or adding 
liquidity. See Rule 7018(a)(b).
    \13\ Any fee change will be made by the rule change filing 
process with the Commission.
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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 proposal to assess no fee for executions of 
Midpoint Extended Life Orders will not place any burden on competition, 
but rather will help launch the proposed new Order Type by making it 
attractive to members that seek to execute at the midpoint with like-
minded members. To the extent the proposal is successful in promoting 
liquidity in Midpoint Extended Life Orders, other markets may be 
incented to provide a competitive response by innovating like the 
Exchange has done in this instance. To the extent the proposal is not 
successful in promoting liquidity in Midpoint Extended Life Orders, it 
would have no meaningful impact on competition as few transactions in 
Midpoint Extended Life Orders would occur. In sum, if the proposal to 
assess no fees for executions of Midpoint Extended Life Orders is 
unattractive to market participants, it is likely that the Exchange 
will not gain any market share as a result and therefore no competitive 
impact. 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.\14\
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    \14\ 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

[[Page 12990]]

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-2018-021 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-2018-021. 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 website (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 website 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 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-2018-021, and should be submitted 
on or before April 16, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-06012 Filed 3-23-18; 8:45 am]
 BILLING CODE 8011-01-P