[Federal Register Volume 86, Number 82 (Friday, April 30, 2021)]
[Notices]
[Pages 22989-22996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09026]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91677; File No. SR-NASDAQ-2021-021]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend The Nasdaq Options Market's Pricing Schedule at Options 7, 
Section 1, General Provisions, and Options 7, Section 2, Nasdaq Options 
Market--Fees and Rebates

April 26, 2021.
    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 April 13, 2021, 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

[[Page 22990]]

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 Nasdaq Options Market's 
(``NOM'') Pricing Schedule at Options 7, Section 1, General Provisions, 
and Options 7, Section 2, Nasdaq Options Market--Fees and Rebates.
    The Exchange originally filed the proposed pricing changes on April 
1, 2021 (SR-NASDAQ-2021-016). On April 9, 2021, the Exchange withdrew 
SR-NASDAQ-2021-016 and filed SR-NASDAQ-2021-019. The Exchange is 
withdrawing SR-NASDAQ-2021-019 and filing this rule change on April 13, 
2021.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 Exchange proposes to amend NOM's Pricing Schedule at Options 7, 
Section 1, General Provisions. The Exchange proposes to relocate 
certain rule text concerning equity tier calculations from current 
Options 7, Section 2(4) to Options 7, Section 1 and add a new defined 
term to Options 7, Section 1. The Exchange proposes to amend Options 7, 
Section 2(1) to add rule text to make clear the applicable pricing and 
also amend the Tier 3 NOM Market Maker Rebate to Add Liquidity in Penny 
Symbols. The Exchange proposes to amend Options 7, Section 2(2) to 
amend a title. Finally, the Exchange proposes to amend Options 7, 
Section 2(3) regarding Nasdaq BX Inc.'s (``BX'') Routing Fees. Each 
change shall be described below.
Options 7, Section 1
    The Exchange proposes to define the term ``Non-Customer'' within 
Options 7, Section 1. The Exchange proposes to provide, ``The term 
``Non-Customer'' applies to transactions for the accounts of NOM Market 
Makers, Non-NOM Market Makers, Firms, Professionals, Broker-Dealers and 
JBOs.'' This defined term will bring greater clarity to NOM's Options 7 
Rules. The term ``Non-Customer'' is currently utilized within the fees 
for routing at Options 7, Section 2(3). The addition of this defined 
term does not amend the manner in which the Exchange currently applies 
the term with respect to its Routing Fees. The term ``Customer'' \3\ is 
currently defined and this term applies to Participants that are not 
customers. This change would be non-substantive.
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    \3\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(47)).
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Options 7, Section 2
    Currently, the below rule text is located within Options 7, Section 
2(4).
    (a) For purposes of determining equity tier calculations under this 
section, any day that the market is not open for the entire trading day 
will be excluded from such calculation.
    (b) Removal of Days for Purposes of Options Pricing Tiers:
    (i)
    (A) Any day that the Exchange announces in advance that it will not 
be open for trading will be excluded from the options tier calculations 
set forth in its Pricing Schedule; and (B) any day with a scheduled 
early market close (``Scheduled Early Close'') may be excluded from the 
options tier calculations only pursuant to paragraph (iii) below.
    (ii) The Exchange may exclude the following days (``Unanticipated 
Events'') from the options tier calculations only pursuant to paragraph 
(iii) below, specifically any day that: (A) The market is not open for 
the entire trading day, (B) the Exchange instructs Participants in 
writing to route their orders to other markets, (C) the Exchange is 
inaccessible to Participants during the 30-minute period before the 
opening of trade due to an Exchange system disruption, or (D) the 
Exchange's system experiences a disruption that lasts for more than 60 
minutes during regular trading hours.
    (iii) If a day is to be excluded as a result of paragraph (i)(B) or 
(ii) above, the Exchange will exclude the day from any Participant's 
monthly options tier calculations as follows:
    (A) the Exchange may exclude from the ADV calculation any Scheduled 
Early Close or Unanticipated Event; and
    (B) the Exchange may exclude from any other applicable options tier 
calculation provided for in its Pricing Schedule (together with 
(ii)(A), ``Tier Calculations'') any Scheduled Early Close or 
Unanticipated Event.
    Provided, in each case, that the Exchange will only remove the day 
for Participants that would have a lower Tier Calculation with the day 
included.
    This rule text describes the equity tier calculations when 
excluding certain days. The Exchange is relocating this rule text, 
without change, to Options 7, Section 1, General Provisions. The 
Exchange believes that this information is better suited to Section 1 
along with other general information because the rule applies to 
Options 7 pricing.
    The Exchange proposes to amend the qualification for the Tier 3 
Rebate to Add Liquidity in Penny Symbols. Fees and Rebates for 
Execution of Contracts on The Nasdaq Options Market are as follows:
    \3\ The NOM Market Maker Rebate to Add Liquidity in Penny Symbols 
will be paid per the highest tier achieved below.

                             Monthly Volume
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Tier 1...................  Participant adds NOM Market Maker liquidity
                            in Penny Symbols and/or Non-Penny Symbols of
                            up to 0.10% of total industry customer
                            equity and ETF option average daily volume
                            (``ADV'') contracts per day in a month.
Tier 2...................  Participant adds NOM Market Maker liquidity
                            in Penny Symbols and/or Non-Penny Symbols
                            above 0.10% to 0.20% of total industry
                            customer equity and ETF option ADV contracts
                            per day in a month.

[[Page 22991]]

 
Tier 3...................  Participant: (a) Adds NOM Market Maker
                            liquidity in Penny Symbols and/or Non-Penny
                            Symbols above 0.20% to 0.60% of total
                            industry customer equity and ETF option ADV
                            contracts per day in a month: Or (b)(1)
                            transacts in all securities through one or
                            more of its Nasdaq Market Center MPIDs that
                            represent 0.70% or more of Consolidated
                            Volume (``CV'') which adds liquidity in the
                            same month on The Nasdaq Stock Market, (2)
                            transacts in Tape B securities through one
                            or more of its Nasdaq Market Center MPIDs
                            that represent 0.18% or more of CV which
                            adds liquidity in the same month on The
                            Nasdaq Stock Market, and (3) executes
                            greater than 0.01% of CV via Market-on-Close/
                            Limit-on-Close (``MOC/LOC'') volume within
                            The Nasdaq Stock Market Closing Cross in the
                            same month.
Tier 4...................  Participant adds NOM Market Maker liquidity
                            in Penny Symbols and/or Non-Penny Symbols of
                            above 0.60% of total industry customer
                            equity and ETF option ADV contracts per day
                            in a month.
Tier 5...................  Participant adds NOM Market Maker liquidity
                            in Penny Symbols and/or Non-Penny Symbols of
                            above 0.40% of total industry customer
                            equity and ETF option ADV contracts per day
                            in a month and transacts in all securities
                            through one or more of its Nasdaq Market
                            Center MPIDs that represent 0.40% or more of
                            Consolidated Volume (``CV'') which adds
                            liquidity in the same month on The Nasdaq
                            Stock Market.
Tier 6...................  Participant: (a)(1) Adds NOM Market Maker
                            liquidity in Penny Symbols and/or Non-Penny
                            Symbols above 0.95% of total industry
                            customer equity and ETF option ADV contracts
                            per day in a month, (2) executes Total
                            Volume of 250,000 or more contracts per day
                            in a month, of which 30,000 or more
                            contracts per day in a month must be
                            removing liquidity, and (3) adds Firm,
                            Broker-Dealer and Non-NOM Market Maker
                            liquidity in Non-Penny Symbols of 10,000 or
                            more contracts per day in a month; or (b)(1)
                            adds NOM Market Maker liquidity in Penny
                            Symbols and/or Non-Penny Symbols above 1.50%
                            of total industry customer equity and ETF
                            option ADV contracts per day in a month, and
                            (2) executes Total Volume of 250,000 or more
                            contracts per day in a month, of which
                            15,000 or more contracts per day in a month
                            must be removing liquidity.
------------------------------------------------------------------------

    * ``Total Volume'' shall be defined as Customer, Professional, 
Firm, Broker-Dealer, Non-NOM Market Maker and NOM Market Maker volume 
in Penny Symbols and/or Non-Penny Symbols which either adds or removes 
liquidity on NOM.
    NOM proposes to amend the qualification for the Tier 3 Market Maker 
Rebate to Add Liquidity in Penny Symbols to require:
    Participant: (a) Adds NOM Market Maker liquidity in Penny Symbols 
and/or Non-Penny Symbols above 0.20% to 0.60% of total industry 
customer equity and ETF option ADV contracts per day in a month: Or 
(b)(1) transacts in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent 0.80% or more of Consolidated Volume 
(``CV'') which adds liquidity in the same month on The Nasdaq Stock 
Market, (2) transacts in Tape B securities through one or more of its 
Nasdaq Market Center MPIDs that represent 0.15% or more of CV which 
adds liquidity in the same month on The Nasdaq Stock Market, and (3) 
executes greater than 0.01% of CV via Market-on-Close/Limit-on-Close 
(``MOC/LOC'') volume within The Nasdaq Stock Market Closing Cross in 
the same month.
    This proposal would amend the second part of the qualification for 
the Tier 3 Market Maker Rebate to Add Liquidity in Penny Symbols at 
(b)(1) by requiring Market Makers to transact in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent 0.80% or 
more of Consolidated Volume (``CV'') which adds liquidity in the same 
month on The Nasdaq Stock Market, an increase from 0.70%. Also, this 
proposal would amend the second part of the qualification for the Tier 
3 Market Maker Rebate to Add Liquidity in Penny Symbols at (b)(2) by 
requiring Market Makers to transact in Tape B securities through one or 
more of its Nasdaq Market Center MPIDs that represent 0.15% or more of 
CV which adds liquidity in the same month on The Nasdaq Stock Market, a 
decrease from 0.18%. The final portion of the second part of the 
qualification for the Tier 3 Market Maker Rebate to Add Liquidity in 
Penny Symbols at (b)(3) \4\ is not being amended. Although the first 
component of the qualification requiring Market Makers to transact in 
all securities through one or more of its Nasdaq Market Center MPIDs is 
being increased and the second component requiring Market Makers to 
transact in Tape B securities through one or more of its Nasdaq Market 
Center MPIDs is being decreased, the Exchange believes that these 
amendments may incentivize additional Market Makers to transact greater 
volume on The Nasdaq Stock Market in order to qualify for the Tier 3 
Market Maker Rebate to Add Liquidity in Penny Symbols. The Exchange 
believes that Tier 3 continues to incentivize Participants to direct 
additional order flow to NOM and The Nasdaq Stock Market.
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    \4\ Part (b)(3) of the qualification for the Tier 3 Market Maker 
Rebate to Add Liquidity in Penny Symbols requires that Market Makers 
execute greater than 0.01% of CV via Market-on-Close/Limit-on-Close 
(``MOC/LOC'') volume within The Nasdaq Stock Market Closing Cross in 
the same month.
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    NOM is not proposing to amend the corresponding Tier 3 Market Maker 
Rebate to Add Liquidity in Penny Symbols.
    The Exchange proposes to amend Options 7, Section 2(1) to add rule 
text after the title of Section 2(1), Fees and Rebates for Execution of 
Contracts on The Nasdaq Options Market. Specifically, the Exchange 
proposes to add the following note:
    Orders executed in the Opening Cross per Options 3, Section 8 are 
not subject to Options 7, Section 2(1) pricing, instead, these orders 
are subject to the pricing within Options 7, Section 2(2).
    This note ``*'' will explain at the beginning of Options 7, Section 
2(1) the pricing applicable to the transaction fees within Section 
2(1). The Exchange believes the addition of this rule text will bring 
clarity to the Section 2 pricing and make clear that the transaction 
fees within Options 7, Section 2(1) apply intra-day. This new note 
``*'' does not represent a substantive change. The proposed new note 
``*'' is intended to serve as a guidepost to Participants referring to 
the NOM Pricing Schedule.
    Currently, the Exchange's Opening Cross pricing is contained within 
Options 7, Section 2(2). The Exchange proposes to add a citation to the 
title of Options 7, Section 2(2) to the Opening Cross rule. Options 7, 
Section 2(2) would state, ``Opening Cross per Options 3, Section 8.''
    Current Options 7, Section 2(3) provides the Fees for routing 
contracts to markets other than NOM. The Exchange proposes to amend the 
BX Routing Fees.
    Currently, Non-Customers \5\ are assessed a $0.99 per contract to 
any options exchange. Customers \6\ are

[[Page 22992]]

currently assessed a Routing Fee to Phlx of $0.13 per contract (``Fixed 
Fee'') in addition to the actual transaction fee assessed. Customers 
are also currently assessed a Routing Fee to BX of $0.13 per contract. 
In addition, as it relates to all other options exchanges, Customers 
are currently assessed a Routing Fee of $0.23 per contract (``Fixed 
Fee'') in addition to the actual transaction fee assessed. If the away 
market pays a rebate, the Routing Fee is $0.13 per contract.
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    \5\ As proposed within Options 7, Section 1, the term ``Non-
Customer'' applies to transactions for the accounts of NOM Market 
Makers, Non-NOM Market Makers, Firms, Professionals, Broker-Dealers 
and JBOs.
    \6\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(47)).
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    The Exchange now proposes to amend the BX Routing Fee to include 
the actual transaction fee assessed in addition to the ``Fixed Fee'' of 
$0.13 per contract. The proposed changes will align BX's Routing Fee 
with the current Phlx Routing Fee.
    The Exchange is proposing to recoup the actual transaction fee (in 
addition to the Fixed Fee) that is incurred by the Exchange in 
connection with routing orders, on behalf of its Participants, to BX. 
Previously, the Exchange retained the rebates paid by BX to recover the 
costs associated with providing its routing services, did not assess 
the actual transaction fees charged by BX for Customer orders, and only 
assessed such orders the $0.13 per contract Fixed Fee. This is because 
when orders are routed to BX, such orders are considered as removing 
liquidity on BX, and BX previously assessed rebates to Customer orders 
for removing liquidity. In particular, prior to the Recent Rule 
Change,\7\ Customer orders executed on BX received Penny Symbol Rebates 
to Remove Liquidity when trading against a Non-Customer, Lead Market 
Maker, BX Options Market Maker, Customer or Firm that ranged from $0.00 
to $0.35 per contract,\8\ depending on the volume tier achieved. 
Customers also previously received Non-Penny Rebates to Remove 
Liquidity of $0.80 per contract, regardless of tier and contra-party. 
As part of the Recent Rule Change, the aforementioned rebates were 
removed from the BX Pricing Schedule and replaced with a maker/taker 
fee structure where market participants are assessed a rebate or fee 
for adding liquidity to the market, or charged a fee for removing 
liquidity from the market.\9\
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    \7\ See Securities Exchange Act Release No. 91473 (April 5, 
2021), 86 FR 18562 (April 9, 2021) (SR-BX-2021-009) (``Recent Rule 
Change'').
    \8\ Participants that executed less than 0.05% of total industry 
customer equity and ETF option ADV contracts per month would receive 
no Penny Symbol Rebate to Remove Liquidity in Tier 1. Participants 
that execute 0.05% to less than 0.15% of total industry customer 
equity and ETF option ADV contracts per month would receive a $0.25 
per contract Penny Symbol Rebate to Remove Liquidity in Tier 2. 
Participants that execute 0.15% or more of total industry customer 
equity and ETF option ADV contracts per month will receive a $0.35 
per contract Penny Symbol Rebate to Remove Liquidity in Tier 3.
    \9\ See note 3 [sic] above.
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    With this recent change in the structure of BX's Pricing Schedule, 
the Exchange proposes to align the Routing Fees to BX with the current 
Routing Fees to Phlx. With this proposal, the Exchange will no longer 
retain rebates paid by BX as BX no longer provides rebates for Customer 
orders removing liquidity on BX and instead charges a taker fee for 
such orders. The Exchange will continue to assess the $0.13 per 
contract Fixed Fee for routing Customer orders to BX, and will propose 
to also charge the actual transaction fee assessed by BX.
Technical Amendments
    The Exchange proposes to amend Options 7, Section 2(3) to lowercase 
``PHLX'' and add a space that was missing within the Routing Fees to 
Phlx. The Exchange also proposes to amend the name of the Exchange from 
``BX Options'' to ``BX'' and add the words ``per contract'' within the 
Routing Fee to all other options exchanges. This amendment is not a 
substantive change, rather it is a clarification.
    Finally, the Exchange proposes to renumber Options 7, Section 2(6), 
Market Access and Routing Subsidy (``MARS''), to Options 7, Section 
2(4). The Exchange notes that the Pricing Schedule did not contain a 
Section 2(5).
Applicability to and Impact on Participants 10
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    \10\ On May 21, 2019, the SEC Division of Trading and Markets 
(the ``Division'') issued fee filing guidance titled ``Staff 
Guidance on SRO Rule Filings Relating to Fees'' (``Guidance''). 
Within the Guidance, the Division noted, among other things, that 
the purpose discussion should address ``how the fee may apply 
differently (e.g., additional cost vs. additional discount) to 
different types of market participants (e.g., market makers, 
institutional brokers, retail brokers, vendors, etc.) and different 
sizes of market participants.'' See Guidance (available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Guidance 
also suggests that the purpose discussion should include numerical 
examples. Where possible, the Exchange is including numerical 
examples. In addition, the Exchange is providing data to the 
Commission in support of its arguments herein. The Guidance covers 
all aspects of a fee filing, which the Exchange has addressed 
throughout this filing.
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    With respect to the NOM Market Maker Tier 3 rebate within Options 
7, Section 2(1), the Exchange believes that amending the second part of 
the qualification \11\ will attract greater volume to both NOM and The 
Nasdaq Stock Market.\12\ Any NOM Market Maker may obtain the Tier 3 
rebate provided the qualifications are met. Furthermore, NOM Market 
Maker Tier 3 provides two ways to achieve the NOM Tier 3 rebate of 
$0.30 per contract.\13\
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    \11\ With this proposal, the Exchange is amending the second 
part of the tier qualification for the Tier 3 Market Maker Rebate to 
Add Liquidity in Penny Symbols at (b)(1) by requiring Market Makers 
to transact in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent 0.80% or more of Consolidated 
Volume (``CV'') which adds liquidity in the same month on The Nasdaq 
Stock Market, an increase from 0.70%. Also, the Exchange is 
proposing to amend the second part of the qualification for the Tier 
3 Market Maker Rebate to Add Liquidity in Penny Symbols at (b)(2) by 
requiring Market Makers to transact in Tape B securities through one 
or more of its Nasdaq Market Center MPIDs that represent 0.15% or 
more of CV which adds liquidity in the same month on The Nasdaq 
Stock Market, a decrease from 0.18%.
    \12\ All NOM Participants are required to become members of The 
Nasdaq Stock Market pursuant to General 3 Membership and Access 
rules.
    \13\ NOM Participants may also add NOM Market Maker liquidity in 
Penny Symbols and/or Non-Penny Symbols above 0.20% to 0.60% of total 
industry customer equity and ETF option ADV contracts per day in a 
month to achieve the Tier 3 rebate. See Options 7, Section 2(1). 
Also, Participants who achieve the Tier 3 rebate will receive $0.40 
per contract to add liquidity in the following symbols: AAPL, SPY, 
QQQ, IWM, and VXX. See Options 7, Section 2(1)
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    Market Makers have certain obligations \14\ on NOM, unlike other 
market participants. Market Maker [sic] are a source of liquidity. The 
proposed amendments are generally designed to attract additional order 
flow to the Exchange by incentivizing NOM Market Makers. Greater 
liquidity benefits all market participants by providing more trading 
opportunities and attracting greater participation by market makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads. These incentives are intended to benefit 
all NOM market participants who will be able to interact with 
additional liquidity which this incentive attracts to the Exchange.
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    \14\ See Options 2, Section 5. Also, transactions of a Market 
Maker in its market making capacity must constitute a course of 
dealings reasonably calculated to contribute to the maintenance of a 
fair and orderly market, and Market Makers should not make bids or 
offers or enter into transactions that are inconsistent with such 
course of dealings. See also Options 2, Section 4.
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    Today, no NOM Market Maker has earned the Tier 3 NOM Market Maker 
Rebate to Add Liquidity in Penny Symbols a Market Maker based on the 
second part of the qualification in the last two months. The Exchange 
notes that other NOM Market Makers could have qualified for this Tier 3 
rebate, although they have qualified for different NOM Market Maker 
Rebate to Add Liquidity in Penny Symbols. NOM Market Maker Rebate to 
Add Liquidity in Penny Symbols are paid per the highest tier achieved, 
so if a NOM

[[Page 22993]]

Market Maker qualifies for Tiers 4-6, that NOM Market Maker would 
receive the highest rebate they qualify for even if they qualified for 
Tier 3. With this proposal, the Exchange seeks to attract additional 
NOM Market Maker order flow in Penny Symbols from Participants that 
currently qualify for NOM Market Maker Rebate to Add Liquidity in Penny 
Symbols Tiers 1 and 2.
    With respect to the amendments to NOM's Routing Fees to BX, the 
Exchange notes that the proposed Routing Fee would apply to all NOM 
Participants uniformly.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\15\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\16\ 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. The proposal is also 
consistent with Section 11A of the Act relating to the establishment of 
the national market system for securities. Moreover, the Exchange 
believes that its proposal complies with Commission guidance on SRO fee 
filings that the Commission Staff issued on May 21, 2019.\17\
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4) and (5).
    \17\ See Guidance, supra note 7 [sic]. Although the Exchange 
believes that this filing complies with the Guidance, the Exchange 
does not concede that the standards set forth in the Guidance are 
consistent with the Exchange Act and reserves its right to challenge 
those standards through administrative and judicial review, as 
appropriate.
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    The Exchange's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \18\
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    \18\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \19\
---------------------------------------------------------------------------

    \19\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow. Within this environment, market participants can freely and 
often do shift their order flow among the Exchange and competing venues 
in response to changes in their respective pricing schedules. As such, 
the proposal represents a reasonable attempt by the Exchange to 
increase its liquidity and market share relative to its 
competitors.\20\
---------------------------------------------------------------------------

    \20\ The Exchange perceives no regulatory, structural, or cost 
impediments to market participants shifting order flow away from it 
as a result of this rule change.
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Options 7, Section 1
    The Exchange's proposal to define the term ``Non-Customer'' within 
Options 7, Section 1 is reasonable, equitable and not unfairly 
discriminatory as the amendment will bring greater clarity to NOM's 
Options 7 Rules. The term ``Non-Customer'' is currently utilized within 
the fees for routing at Options 7, Section 2(3). The addition of this 
defined term does not amend the manner in which the Exchange currently 
applies the term with respect to its routing fees. The term 
``Customer'' \21\ is currently defined and this term applies to 
Participants that are not customers. This change would be non-
substantive.
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    \21\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(47)).
---------------------------------------------------------------------------

    The Exchange's proposal to relocate the rule text relating to tier 
calculations from Options 7, Section 2(4), without change, to Options 
7, Section 1, General Provisions is reasonable, equitable and not 
unfairly discriminatory. The Exchange believes that this information is 
better suited to Section 1 along with other general information because 
the rule applies to Options 7 pricing and all Participants transacting 
on BX.
Options 7, Section 2
    The Exchange's proposal to amend the qualification for the Tier 3 
Market Maker Rebate to Add Liquidity in Penny Symbols is reasonable. 
Amending the second part of the qualification for the Tier 3 Market 
Maker Rebate to Add Liquidity in Penny Symbols at (b)(1), by requiring 
Market Makers to transact in all securities through one or more of its 
Nasdaq Market Center MPIDs that represent 0.80% or more of Consolidated 
Volume (``CV'') which adds liquidity in the same month on The Nasdaq 
Stock Market, is an increase from 0.70%. Amending the second part of 
the qualification for the Tier 3 Market Maker Rebate to Add Liquidity 
in Penny Symbols at (b)(2), by requiring Market Makers to transact in 
Tape B securities through one or more of its Nasdaq Market Center MPIDs 
that represent 0.15% or more of CV which adds liquidity in the same 
month on The Nasdaq Stock Market, is a decrease from 0.18%.\22\ 
Although the first component of the part (b) qualification requiring 
Market Makers to transact in all securities through one or more of its 
Nasdaq Market Center MPIDs is being increased and the second component 
of the part (b) qualification requiring Market Makers to transact in 
Tape B securities through one or more of its Nasdaq Market Center MPIDs 
is being decreased, the Exchange believes that these amendments may 
incentivize additional Market Makers to qualify for the Tier 3 Market 
Maker Rebate to Add Liquidity in Penny Symbols by transact greater 
volume on The Nasdaq Stock Market. The Tier 3 qualification requires 
Market Makers to qualify for either Part (a) or (b) of the 
qualification. The Exchange believes that the Tier 3 Market Maker 
Rebate to Add Liquidity in Penny Symbols will continue to incentivize 
Market Makers to direct additional order

[[Page 22994]]

flow to NOM and The Nasdaq Stock Market and, in turn, market 
participants will benefit from the opportunity to interact with such 
order flow. The Exchange notes that this proposal is designed as a 
means to improve market quality by providing Participants with an 
incentive to increase their provision of liquidity on the Exchange's 
equity and options markets. Further, any NOM Market Maker may obtain 
the Tier 3 rebate provided the qualifications are met. NOM Market Maker 
Tier 3 provides two ways to achieve the NOM Tier 3 rebate of $0.30 per 
contract.\23\ These incentives are intended to benefit all NOM market 
participants who will be able to interact with additional liquidity 
which this incentive attracts to the Exchange. Market Makers have 
certain obligations \24\ on NOM, unlike other market participants. 
Market Maker are a source of liquidity. The proposed amendments are 
generally designed to attract additional order flow to the Exchange by 
incentivizing NOM Market Makers. Greater liquidity benefits all market 
participants by providing more trading opportunities and attracting 
greater participation by market makers. An increase in the activity of 
these market participants in turn facilitates tighter spreads.
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    \22\ Part (b)(3) of the qualification for the Tier 3 Market 
Maker Rebate to Add Liquidity in Penny Symbols requires that Market 
Makers execute greater than 0.01% of CV via Market-on-Close/Limit-
on-Close (``MOC/LOC'') volume within The Nasdaq Stock Market Closing 
Cross in the same month is not being amended.
    \23\ NOM Participants may also add NOM Market Maker liquidity in 
Penny Symbols and/or Non-Penny Symbols above 0.20% to 0.60% of total 
industry customer equity and ETF option ADV contracts per day in a 
month to achieve the Tier 3 rebate. See Options 7, Section 2(1). 
Also, Participants who achieve the Tier 3 rebate will receive $0.40 
per contract to add liquidity in the following symbols: AAPL, SPY, 
QQQ, IWM, and VXX. See Options 7, Section 2(1).
    \24\ See Options 2, Section 5. Also, transactions of a Market 
Maker in its market making capacity must constitute a course of 
dealings reasonably calculated to contribute to the maintenance of a 
fair and orderly market, and Market Makers should not make bids or 
offers or enter into transactions that are inconsistent with such 
course of dealings. See also Options 2, Section 4.
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    The Exchange's proposal to amend the qualification for the Tier 3 
Market Maker Rebate to Add Liquidity in Penny Symbols is equitable and 
not unfairly discriminatory as the Exchange will uniformly pay the Tier 
3 Market Maker Rebate to Add Liquidity in Penny Symbols to any 
qualifying Market Maker. NOM Market Makers add value through continuous 
quoting and the commitment of capital.\25\ Because NOM Market Makers 
have these obligations to the market and regulatory requirements that 
normally do not apply to other market participants, the Exchange 
believes that offering these rebates to only NOM Market Makers is 
equitable and not unfairly discriminatory in light of their 
obligations. Finally, encouraging NOM Market Makers to add greater 
liquidity benefits all market participants, on both NOM and The Nasdaq 
Stock Market, in the quality of order interaction.
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    \25\ See Options 2, Sections 4 and 5.
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    The Exchange's proposal to amend Options 7, Section 2(1) to add 
rule text after the title of Section 2(1), Fees and Rebates for 
Execution of Contracts on The Nasdaq Options Market, which explains the 
pricing applicable to the transaction fees within Section 2(1) is 
reasonable, equitable and not unfairly discriminatory. The Exchange 
believes the addition of this rule text will bring clarity to the 
Options 7, Section 2 pricing by making clear that the transaction fees 
within Options 7, Section 2(1) apply intra-day. This new note ``*'' 
does not represent a substantive change. The proposed new note ``*'' is 
intended to serve as a guidepost to Participants referring to the NOM 
Pricing Schedule.
    The Exchange's proposal to add a citation to the title of Options 
7, Section 2(2) to the Opening Cross rule is reasonable, equitable and 
not unfairly discriminatory. This amendment will add clarity to the 
rule text.
    The Exchange's proposal to amend the BX Customer Routing Fee within 
Options 7, Section 2(3) to start charging the actual transaction fee 
assessed by BX in addition to the current $0.13 per contract Fixed Fee 
is reasonable. As a general matter, the Exchange notes that use of the 
Exchange's routing services is completely voluntary. In the 
alternative, member organizations may submit orders to the Exchange as 
ineligible for routing or ``DNR'' to avoid Routing Fees.\26\ 
Furthermore, the Exchange operates in a highly competitive market in 
which market participants can readily select between various providers 
of routing services with different pricing. In this instance, proposing 
to assess the actual transaction fee, in addition to the current Fixed 
Fee of $0.13 per contract, is reasonable in light of the Recent Rule 
Change described above where BX no longer provides rebates to Customer 
orders that are routed to and executed on BX, and instead charges them 
a taker fee.\27\ As proposed, the Exchange would recoup the actual 
transaction cost it incurs when routing Customer orders to BX in lieu 
of collecting any rebate paid by BX. Today, the Exchange similarly 
assesses orders routed to Phlx a Fixed Fee of $0.13 per contract plus 
the actual transaction fee. As such, the proposal would align the BX 
Routing Fee with the Phlx Routing Fee.
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    \26\ See Options 5, Section 4(a)(iii)(A).
    \27\ See note 7 above.
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    The Exchange's proposal to amend the BX Customer Routing Fee within 
Options 7, Section 2(3) is equitable and not unfairly discriminatory 
because the Exchange would uniformly assess the same transaction fee 
assessed by BX for the Customer order routed to BX plus a Fixed Fee of 
$0.13 per contract.
    The Exchange's proposal to amend Options 7, Section 2(3) to 
lowercase ``PHLX,'' add a space that was missing within the Routing 
Fees to Phlx, amend the name ``BX Options'' to ``BX,'' and add the 
words ``per contract'' within the Routing Fee to all other options 
exchanges and the proposal to renumber Options 7, Section 2(6), Market 
Access and Routing Subsidy (``MARS''), to Options 7, Section 2(4) \28\ 
are reasonable, equitable and not unfairly discriminatory. These non-
substantive amendments will bring greater clarity to the Rulebook.
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    \28\ The Exchange notes that the Pricing Schedule did not 
contain a Section 2(5).
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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 
options 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. The Exchange believes that the proposed changes 
will enable the Exchange to recover the costs it incurs to route orders 
to away markets, particularly BX, while also passing along savings 
realized by leveraging Nasdaq's infrastructure and scale to market 
participants when those orders are routed to Nasdaq-affiliated options 
markets, as further discussed above.
    The Exchange also does not believe its proposal will impose an 
undue burden on intra-market competition.

[[Page 22995]]

Options 7, Section 1
    The Exchange's proposal to define the term ``Non-Customer'' within 
Options 7, Section 1 does not impose an undue burden on competition as 
the amendment will bring greater clarity to NOM's Options 7 Rules.
    The Exchange's proposal to relocate the rule text from Options 7, 
Section 2(4), without change, to Options 7, Section 1, General 
Provisions does not impose an undue burden on competition. The Exchange 
believes that this information is better suited to Section 1 along with 
other general information because the rule applies to Options 7 pricing 
and all Participants transacting on BX.
    The Exchange's proposal to amend the qualification for the Tier 3 
Market Maker Rebate to Add Liquidity in Penny Symbols does not impose 
an undue burden on competition as the Exchange will uniformly pay the 
Tier 3 Market Maker Rebate to Add Liquidity in Penny Symbols to any 
qualifying Market Maker. NOM Market Makers add value through continuous 
quoting and the commitment of capital.\29\ Because NOM Market Makers 
have these obligations to the market and regulatory requirements that 
normally do not apply to other market participants, the Exchange 
believes that offering these rebates to only NOM Market Makers is 
equitable and not unfairly discriminatory in light of their 
obligations. Finally, encouraging NOM Market Makers to add greater 
liquidity benefits all market participants, on both NOM and The Nasdaq 
Stock Market, in the quality of order interaction.
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    \29\ See Options 2, Sections 4 and 5.
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Options 7, Section 2
    The Exchange's proposal to amend Options 7, Section 2(1) to add 
rule text after the title of Section 2(1), Fees and Rebates for 
Execution of Contracts on The Nasdaq Options Market, which explains the 
pricing applicable to the transaction fees within Section 2(1) does not 
impose an undue burden on competition. The Exchange believes the 
addition of this rule text will bring clarity to the Section 2 pricing, 
which is applicable to all Participants.
    The Exchange's proposal to add a citation to the title of Options 
7, Section 2(2) to the Opening Cross rule does not impose an undue 
burden on competition. This amendment will add clarity to the rule 
text.
    The Exchange's proposal to amend the BX Customer Routing Fee within 
Options 7, Section 2(3) does not impose an undue burden on competition. 
In this instance, the Exchange is proposing to charge Customer orders 
that are routed to BX the actual transaction fee assessed by BX in 
addition to the current Fixed Fee of $0.13 per contract in light of the 
fee changes under the Recent Rule Change described above where BX no 
longer provides rebates to Customer orders that are routed to and 
executed on BX, and instead charges them a taker fee.\30\ The proposed 
changes reflect the need to recover the Exchange's costs associated 
with providing its routing services. Furthermore, as noted above, the 
use of the Exchange's routing services is completely voluntary and 
optional, and the Exchange operates in a highly competitive market in 
which market participants can readily select between various providers 
of routing services with different pricing. As such, it is likely that 
the Exchange will lose market share as a result of the changes proposed 
herein if they are unattractive to market participants.
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    \30\ See note 7 above.
---------------------------------------------------------------------------

    The Exchange also does not believe its proposal will impose an 
undue burden on intra-market competition. As discussed above, the 
Exchange would uniformly assess the same transaction fee assessed by BX 
for the Customer order routed to BX plus a Fixed Fee of $0.13 per 
contract. Under this proposal, Non-Customer orders would continue to be 
assessed the $0.99 per contract routing fee and not be assessed the 
actual BX transaction fee. The Exchange does not believe its pricing 
proposal will place any market participant at a relative disadvantage 
compared to other market participants because the proposed routing fee 
for Customer orders will actually narrow the difference between the 
routing fees assessed to Customer and Non-Customer orders routed to BX.
    The Exchange's proposal to amend Options 7, Section 2(3) to 
lowercase ``PHLX,'' add a space that was missing within the Routing 
Fees to Phlx, amend the name ``BX Options'' to ``BX,'' and add the 
words ``per contract'' within the Routing Fee to all other options 
exchanges and the proposal to renumber Options 7, Section 2(6), Market 
Access and Routing Subsidy (``MARS''), to Options 7, Section 2(4) do 
not impose an undue burden on competition. These non-substantive 
amendments will bring greater clarity to the Rulebook.

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.\31\
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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-2021-021 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-2021-021. 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,

[[Page 22996]]

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-2021-021, and should 
be submitted on or before May 21, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09026 Filed 4-29-21; 8:45 am]
BILLING CODE 8011-01-P