[Federal Register Volume 89, Number 137 (Wednesday, July 17, 2024)]
[Notices]
[Pages 58227-58229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15668]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100497; File No. SR-NASDAQ-2024-033]


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

July 11, 2024.
    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 July 1, 2024, 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 Pricing Schedule at 
Options 7, Section 2(1), which governs the pricing for Nasdaq 
Participants using The Nasdaq Options Market (``NOM''), Nasdaq's 
facility for executing and routing standardized equity and index 
options. The proposed changes are described further below.
    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
    Pursuant to Options 7, Section 2(1), the Exchange currently 
assesses NOM Market Makers \3\ a $0.35 per contract Fee to Add 
Liquidity in Non-Penny Symbols. This fee applies unless Participants 
meet the volume thresholds set forth in note 5. Note 5 currently 
stipulates that Participants that add NOM Market Maker liquidity in 
Non-Penny Symbols of 0.05% to 0.07% of total industry customer equity 
and ETF option ADV contracts per day in a month will be assessed a 
$0.00 per contract Non-Penny Options Fee for Adding Liquidity in that 
month. Participants that add NOM Market Maker liquidity in Non-Penny 
Symbols of above 0.07% of total industry customer equity and ETF option 
ADV contracts per day in a month will receive the Non-Penny Rebate to 
Add Liquidity for that month instead of paying the Non-Penny Fee for 
Adding Liquidity. Accordingly, qualifying Participants are offered an 
opportunity to reduce the $0.35 fee or earn a rebate if they meet the 
volume-based requirements under note 5.
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    \3\ The term ``NOM Market Maker'' or (``M'') is a Participant 
that has registered as a Market Maker on NOM pursuant to Options 2, 
Section 1, and must also remain in good standing pursuant to Options 
2, Section 9. In order to receive NOM Market Maker pricing in all 
securities, the Participant must be registered as a NOM Market Maker 
in at least one security.
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    The Exchange now proposes to amend the volume thresholds and 
associated pricing in note 5 as follows:

    The NOM Market Maker Fee for Adding Liquidity in Non-Penny 
Symbols will apply unless Participants meet the volume thresholds 
set forth in this note. Participants that add NOM Market Maker 
liquidity in Non-Penny Symbols of 0.03% to 0.05% of total industry 
customer equity and ETF option ADV contracts per day in a month will 
be assessed a $0.00 per contract Non-Penny Options Fee for Adding 
Liquidity in that month. Participants that add NOM Market Maker 
liquidity in Non-Penny Symbols of above 0.05% to 0.08% of total 
industry customer equity and ETF option ADV contracts per day in a 
month will receive a Non-Penny Rebate to Add Liquidity of $0.20 per 
contract for that month instead of paying the Non-Penny Fee for 
Adding Liquidity. Participants that add NOM Market Maker liquidity 
in Non-Penny Symbols of above 0.08% of total industry customer 
equity and ETF option ADV contracts per day in a month will receive 
a Non-Penny Rebate to Add Liquidity of $0.40 per contract for that 
month instead of paying the Non-Penny Fee for Adding Liquidity.

    The Exchange will also amend the related NOM Market Maker Non-Penny 
pricing chart in Options 7, Section 2(1) to reflect the pricing 
described above. The Exchange believes that the proposed volume 
thresholds will incentivize NOM Market Makers to add greater Non-Penny 
Symbol liquidity on NOM to the benefit of all market participants. With 
the proposed changes, the Exchange is generally lowering the volume 
thresholds while increasing the rebate amounts so that NOM Market 
Makers adding the same amount of liquidity in Non-Penny Symbols today 
would get more favorable pricing either by qualifying for free 
executions or receiving a higher

[[Page 58228]]

rebate. The only exception is for NOM Market Makers that add liquidity 
in Non-Penny Symbols of above 0.07% to 0.08% as they would receive a 
$0.30 per contract rebate today versus $0.20 per contract under this 
proposal. However, the Exchange believes that its proposal will 
encourage NOM Market Makers to reach for the highest volume threshold 
to receive the significantly higher rebate of $0.40 per contract.
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'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'. . . .'' \6\
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    \6\ 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.'' \7\
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    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    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 
seventeen 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.
    The Exchange believes that its proposal to amend the volume 
thresholds in note 5 and related rebates in the manner described above 
is reasonable because it will incentivize NOM Market Makers to add 
greater Non-Penny Symbol liquidity on NOM to the benefit of all market 
participants. As discussed above, the Exchange is generally lowering 
the volume thresholds while increasing the rebate amounts with the 
proposed changes. As such, NOM Market Makers adding the same amount of 
liquidity in Non-Penny Symbols as they do today would generally get 
more favorable pricing either by qualifying for free executions or 
receiving a higher rebate. The only exception is for NOM Market Makers 
that add liquidity in Non-Penny Symbols of above 0.07% to 0.08% as they 
would receive a $0.30 per contract rebate today versus $0.20 per 
contract under this proposal. However, the Exchange believes that its 
proposal will encourage NOM Market Makers to reach for the highest 
volume threshold to receive the significantly higher rebate of $0.40 
per contract.
    The Exchange further believes that its proposal is equitable and 
not unfairly discriminatory. As discussed above, the proposed changes 
to the note 5 volume thresholds and associated pricing will be applied 
uniformly to all NOM Market Makers that add liquidity in Non-Penny 
Symbols. The Exchange does not believe that it is unfairly 
discriminatory to offer the note 5 incentives to only NOM Market Makers 
because these market participants add value through continuous quoting 
and the commitment of capital.\8\ 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 the note 5 incentives 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 in the quality of order interaction.
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    \8\ See Options 2, Sections 4 and 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 intra-market competition, the Exchange does not believe 
that its proposal will place any category of market participant at a 
competitive disadvantage. As discussed above, while the Exchange's 
proposal targets certain activity on NOM (i.e., NOM Market Makers 
adding liquidity in Non-Penny Symbols), the proposed changes are 
ultimately aimed at attracting greater order flow to the Exchange, 
which benefits all market participants by providing more trading 
opportunities.
    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. 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 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 exchanges 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.

[[Page 58229]]

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.\9\
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    \9\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2024-033 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-2024-033. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2024-033 and should 
be submitted on or before August 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-15668 Filed 7-16-24; 8:45 am]
BILLING CODE 8011-01-P