[Federal Register Volume 90, Number 186 (Monday, September 29, 2025)]
[Notices]
[Pages 46693-46695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-18793]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104036; File No. SR-NASDAQ-2025-075]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Introduce a New Supplemental Credit for Displayed Quotes/Orders Under
Equity 7, Section 118(a)(1)
September 24, 2025.
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 September 16, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 introduce a new supplemental credit for
displayed quotes/orders under Equity 7, Section 118(a)(1) (Fees for
Execution and Routing of Orders). The text of the proposed rule change
is available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings, and at the
principal office of the Exchange.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
schedule of credits, at Equity 7, Section 118(a)(1).\3\ The Exchange
currently provides a supplemental credit to members for displayed
quotes/orders (other than Supplemental Orders or Designated Retail
Orders). The Exchange is proposing to add a supplemental credit of
$0.0001 per share executed to Tapes A, B and C. The credit will be
available to a member that, through one or more of its Nasdaq Market
Center MPIDs, (i) increases its volume of liquidity added in all
securities by at least 20% as a percentage of Consolidated Volume \4\
relative to the member's liquidity during the month of July 2025 and
(ii) has volume from Limit On Close orders \5\ entered between 3:55
p.m. ET and immediately prior to 3:58 p.m. ET that represent more than
0.10% of Consolidated Volume during the month.\6\ Unless otherwise
extended, this tier will expire no later than January 2026. The credit
will be in addition to other credits otherwise available to members for
adding displayed liquidity to the Exchange (other than Supplemental
Orders or Designated Retail Orders). The Exchange hopes that by
proposing the new credit it will incentivize members to increase their
liquidity providing activity on the Exchange, which will improve
overall market quality. More specifically, an increase in the volume of
late LOC orders will increase liquidity and market quality in the
Nasdaq Closing Cross.\7\
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\3\ The Exchange initially filed this fee proposal as SR-NASDAQ-
2025-072 on September 5, 2025. On, September 8, 2025, the Exchange
withdrew that filing and submitted SR-NASDAQ-073. On September 15,
the Exchange withdrew that filing and submitted this filing. All
references throughout this filing to certain rule sections shall
pertain to Nasdaq Equity 7.
\4\ Pursuant to Equity 7, Section 118(a), ``Consolidated
Volume'' shall 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.
\5\ ``Limit On Close Order'' shall have the definition set forth
in Rule 4702(b)(12)(A).
\6\ Limit On Close Orders entered between 3:55 p.m. ET and
immediately prior to 3:58 p.m. ET are also known as ``late LOC
orders.'' For the September 2025 billing cycle, the credit will be
applicable from September 5, 2025, through September 30, 2025.
\7\ The ``Nasdaq Closing Cross'' is defined as the process for
determining the price at which orders shall be executed at the close
and for executing those orders and shall include the LULD Closing
Cross and the Hybrid Closing Cross.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed change to its schedule of credits is
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for equity
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'. . . .'' \10\
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\10\ 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.'' \11\
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\11\ 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
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example, clear substitutes to the Exchange exist in the market for
equity security transaction services. The Exchange is only one of
several equity venues to which market participants may direct their
order flow. Competing equity exchanges offer similar tiered pricing
structures to that of the Exchange, including schedules of rebates and
fees that apply based upon members achieving certain volume thresholds.
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 it is reasonable to establish a new
$0.0001 per share executed transaction credit, at Equity 7, Section
118(a)(1), for a member that, through one or more of its Nasdaq Market
Center MPIDs, (i) increases its volume of liquidity added in all
securities by at least 20% as a percentage of Consolidated Volume
relative to the member's liquidity during the month of July 2025 and
(ii) has volume from Limit on Close Orders entered between 3:55 p.m. ET
and immediately prior to 3:58 p.m. ET that represent more than 0.10% of
Consolidated Volume during the month. Unless otherwise extended, this
credit will expire no later than January 2026. The new credit will
encourage additional activity on the Exchange, specifically, increased
liquidity from late LOC orders, which will improve the market quality
overall, and more specifically in the Nasdaq Closing Cross, to the
benefit of all market participants. The Exchange believes that if the
new credit is effective, then liquidity adding activity on the Exchange
will increase and market quality will improve for the benefit of all
participants. The Exchange notes that those market participants that
are dissatisfied with the proposal are free to shift their order flow
to competing venues that offer more generous pricing or less stringent
qualifying criteria. Establishing a 6-month sunset for the comparative
baseline ensures that the baseline being used for the tier does not
become outdated. The Exchange will extend the July 2025 baseline if the
baseline remains current.
It is also reasonable, equitable, and not unfairly discriminatory
for the Exchange to establish a new supplemental credit because the
proposal will encourage members to increase the extent to which they
add liquidity to the Exchange. To the extent that the Exchange succeeds
in increasing the levels of liquidity and activity on the Exchange,
then the Exchange will experience improvements in its market quality,
which stands to benefit all market participants. The Exchange notes
that the proposed credit is voluntary. The Exchange further believes
that the credit is not unfairly discriminatory because it will be
applied uniformly to all members that meet the specified criteria.
Those participants that are dissatisfied with the amendment to the
Exchange's schedule of credits are free to shift their order flow to
competing venues that provide more generous incentives or less
stringent qualifying criteria.
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.
Intramarket Competition
The Exchange does not believe that its proposal will place any
category of Exchange participant at a competitive disadvantage. The
Exchange intends for its proposals to incentivize liquidity adding
activity. The Exchange notes that its members are free to trade on
other venues to the extent they believe that the proposal is not
attractive. As one can observe by looking at any market share chart,
price competition between exchanges is fierce, with liquidity and
market share moving freely between exchanges in reaction to fee and
credit changes.
Inter-Market Competition
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 credits 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 credits in response,
and because market participants may readily adjust their order routing
practices, the Exchange believes that the degree to which adding a
supplemental credit in this market may impose any burden on competition
is extremely limited.
In this instance, the introduction of a new credit Section
118(a)(1) is intended to incentivize liquidity adding activity on the
Exchange and does not impose a burden on competition. By offering a new
credit to market participants that meet certain criteria the Exchange
is enhancing its appeal as a trading venue and encouraging increased
participation in its order execution and routing processes while
maintaining a competitive pricing structure. As discussed above, the
proposed credit does not disadvantage any specific group or market
participants. Instead, it provides equitable incentives that are
available to all members that meet the applicable criteria.
In sum, if the change proposed herein is 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
change 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.\12\
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\12\ 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:
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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-2025-075 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-2025-075. 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 filing 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-2025-075 and should be submitted
on or before October 20, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18793 Filed 9-26-25; 8:45 am]
BILLING CODE 8011-01-P