Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rules 7014 and 7018, 17272-17276 [2013-06319]
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Federal Register / Vol. 78, No. 54 / Wednesday, March 20, 2013 / Notices
discriminatory because the proposal
simply moves the Additional Select
Symbols from one category of fees into
another category thereby applying fees
currently in effect. Further, the
Exchange believes that it is equitable
and not unfairly discriminatory to
amend its list of Select Symbols to add
the Additional Select Symbols to the
Select Symbols because the fees
applicable to the Select Symbols would
apply uniformly to all categories of
participants in the same manner. All
market participants who trade the Select
Symbols would be uniformly subject to
the fees and rebates applicable to those
symbols.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
ISE does not believe that the proposed
rule change will impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. This rule change,
which proposes to move a group of
symbols to an existing category of
symbols, does not impose any burden
on competition. With this proposed rule
change, the Additional Select Symbols
will be subject to fees and rebates that
are already in place on the Exchange
and therefore, do not impose any
additional burden on competition that is
not necessary or appropriate in
furthering the purposes of the Act. The
Exchange believes that the proposed
changes promote competition, as they
are designed to allow the Exchange to
better compete for order flow and
improve the Exchange’s competitive
position.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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 26 and
subparagraph (f)(2) of Rule 19b-4
thereunder,27 because it establishes a
due, fee, or other charge imposed by
ISE.
At any time within 60 days of the
filing of such proposed rule change, the
26 15
U.S.C. 78s(b)(3)(A)(ii).
27 17 CFR 240.19b–4(f)(2).
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Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or 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 rulecomments@sec.gov. Please include File
Number SR–ISE–2013–19 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–ISE–2013–19. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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;
the Commission does not edit personal
identifying information from
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submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–ISE–
2013–19 and should be submitted on or
before April 10, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–06394 Filed 3–19–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69133; File No. SR–
NASDAQ–2013–042]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
Rules 7014 and 7018
March 14, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that on March 1,
2013, 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 NASDAQ. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ is proposing changes to its
schedule of fees and rebates for
execution of orders for securities priced
at $1 or more under Rule 7018, as well
as a minor change to its Routable Order
Program under Rule 7014. The changes
pursuant to this proposal are effective
upon filing, and the Exchange will
implement the proposed rule changes
on March 1, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
www.nasdaq.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 78, No. 54 / Wednesday, March 20, 2013 / Notices
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. 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
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Designated Retail Orders
NASDAQ proposes to introduce new
liquidity provider credit tiers for orders
designated by a member as Designated
Retail Orders. The proposed change is
part of an ongoing effort by NASDAQ to
use financial incentives to encourage
greater participation in NASDAQ by
members that represent retail
customers.3 For purposes of the
proposed new tiers and credits, a
Designated Retail Order would be
defined as an agency or riskless
principal 4 order that originates from a
natural person and is submitted to
NASDAQ by a member that designates
it pursuant to Rule 7018, provided that
no change is made to the terms of the
3 Thus, the change complements NASDAQ’s
existing Investor Support Program (‘‘ISP’’) and
Routable Order Program (‘‘ROP’’) under Rule 7014,
both of which provide enhanced rebates for orders
with characteristics associated with retail investors.
The Commission has expressed concern that a
significant percentage of the orders of individual
investors are executed in over-the-counter markets,
that is, at off-exchange markets. Securities Exchange
Act Release No. 61358 (January 14, 2010), 75 FR
3594 (January 21, 2010) (Concept Release on Equity
Market Structure, ‘‘Concept Release’’). In the
Concept Release, the Commission recognized the
strong policy preference under the Act in favor of
price transparency and displayed markets. See also
Mary L. Schapiro, Strengthening Our Equity Market
Structure (Speech at the Economic Club of New
York, Sept. 7, 2010) (‘‘Schapiro Speech,’’ available
on the Commission Web site) (comments of
Commission Chairman on what she viewed as a
troubling trend of reduced participation in the
equity markets by individual investors, and that a
significant percentage of volume in U.S.-listed
equities is executed in venues that do not display
their liquidity or make it generally available to the
public).
4 To qualify as a Designated Retail Order, a
riskless principal order must satisfy the criteria set
forth in FINRA Rule 5320.03. These criteria include
that the member maintain supervisory systems to
reconstruct, in a time-sequenced manner, all orders
that are entered on a riskless principal basis; and
the member submits a report, contemporaneously
with the execution of the facilitated order, that
identifies the trade as riskless principal.
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order with respect to price or side of
market and the order does not originate
from a trading algorithm or any other
computerized methodology. If a member
enters Designated Retail Orders through
an MPID through which (i) at least 90%
of the shares of liquidity provided
during the month are provided through
Designated Retail Orders, and (ii) the
member accesses, provides, or routes
shares of liquidity that represent at least
0.10% of Consolidated Volume 5 during
the month, the member will receive a
credit of $0.0034 per share executed for
Designated Retail Orders that provide
liquidity if they are displayed orders.
For all other Designated Retail Orders
that are displayed orders and that
provide liquidity, the credit will be
$0.0033 per share executed. With
respect to Designated Retail Orders that
are not displayed, NASDAQ’s existing
credits for midpoint pegged and
midpoint peg post-only orders
(‘‘midpoint orders’’) and other forms of
non-displayed orders would apply.6
A member wishing to qualify for
either of these tiers may do so by
designating orders as Designated Retail
Orders, either on an order-by-order
basis, or by designating all orders on a
particular order entry port as Designated
Retail Orders.7 The member would be
required to attest, in a form prescribed
by NASDAQ, that it has implemented
policies and procedures that are
reasonably designed to ensure that every
order designated by the member as a
‘‘Designated Retail Order’’ complies
with NASDAQ’s definition of a
Designated Retail Order, as described
above.
The member’s written policies and
procedures must be reasonably designed
to assure that it will only designate
orders as Designated Retail Orders if all
requirements of a Designated Retail
Order are met. Such written policies
and procedures must require the
member to (i) exercise due diligence
before entering a Designated Retail
Order to assure that entry as a
Designated Retail Order is in
compliance with the requirements
specified by NASDAQ, and (ii) monitor
5 ‘‘Consolidated Volume’’ is defined as the total
consolidated volume reported to all consolidated
transaction plans by all exchanges and trade
reporting facilities.
6 Specifically, NASDAQ provides a credit of
$0.0017 per share executed for midpoint orders if
the member provides an average daily volume of
more than 3 million shares through midpoint orders
during the month, $0.0015 per share executed for
midpoint orders if the member provides an average
daily volume of 3 million or fewer shares through
midpoint orders during the month, and $0.0010 per
share executed for other orders that are not
displayed.
7 A Designated Retail Order flag will be made
available for the purpose of designating orders.
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17273
whether orders entered as Designated
Retail Orders meet the applicable
requirements. If the member represents
Designated Retail Orders from another
broker-dealer customer, the member’s
supervisory procedures must be
reasonably designed to assure that the
orders it receives from such brokerdealer customer that it designates as
Designated Retail Orders meet the
definition of a Designated Retail Order.
The member must (i) obtain an annual
written representation, in a form
acceptable to NASDAQ, from each
broker-dealer customer that sends it
orders to be designated as Designated
Retail Orders that entry of such orders
as Designated Retail Orders will be in
compliance with the requirements
specified by NASDAQ, and (ii) monitor
whether its broker-dealer customer’s
Designated Retail Order flow continues
to meet the applicable requirements.8
NASDAQ may disqualify a member
from qualifying for Designated Retail
Order rebates if NASDAQ determines,
in its sole discretion, that a member has
failed to abide by the requirements
proposed herein, including, for
example, if a member designates orders
submitted to NASDAQ as Designated
Retail Orders but those orders fail to
meet any of the requirements of
Designated Retail Orders.
New Tier for Members Active in the
NASDAQ Market Center and the
NASDAQ Options Market
NASDAQ is proposing to introduce a
new liquidity provider credit tier for
members that are active in both the
Nasdaq Market Center and the NASDAQ
Options Market (‘‘NOM’’). At present,
NASDAQ provides a credit of $0.0027
per share executed for displayed orders
that provide liquidity if a member has
(i) shares of liquidity provided in all
securities during the month
representing more than 0.10% of
Consolidated Volume, through one or
more of its Nasdaq Market Center
MPIDs, and (ii) an average daily volume
during the month of more than 100,000
contracts of liquidity accessed or
provided through one or more of its
NOM MPIDs. NASDAQ provides a
credit of $0.0029 per share executed for
displayed orders that provide liquidity
if a member has (i) shares of liquidity
provided in all securities during the
month representing more than 0.15% of
Consolidated Volume, through one or
more of its Nasdaq Market Center
MPIDs, and (ii) an average daily volume
8 FINRA will, on behalf of NASDAQ, review a
member’s compliance with these requirements
through an exam-based review of the member’s
internal controls.
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Federal Register / Vol. 78, No. 54 / Wednesday, March 20, 2013 / Notices
during the month of more than 100,000
contracts of liquidity accessed or
provided through one or more of its
NOM MPIDs. Finally, NASDAQ
currently provides a credit of $0.00295
per share executed for displayed orders
that provide liquidity if a member has
(i) shares of liquidity provided in all
securities during the month
representing more than 1.0% of
Consolidated Volume, through one or
more of its Nasdaq Market Center
MPIDs, and (ii) an average daily volume
during the month of more than 200,000
contracts of liquidity accessed or
provided through one or more of its
NOM MPIDs. Under the proposed
additional tier, NASDAQ will provide a
credit of $0.0030 per share executed for
displayed orders that provide liquidity
if a member (i) has shares of liquidity
provided in all securities during the
month representing at least 0.45% of
Consolidated Volume during the month,
through one or more of its Nasdaq
Market Center MPIDs, and (ii) qualifies
for the Penny Pilot Tier 7 Customer and
Professional Rebate to Add Liquidity
under Chapter XV, Section 2 of the
NOM rules during the month through
one or more of its NOM MPIDs. The Tier
7 Customer and Professional Rebate is
being proposed for NOM through a
contemporaneous proposed rule
change.9 A NOM Participant may
qualify for the Tier 7 Customer and
Professional Rebate if it (i) has Total
Volume 10 of 325,000 or more contracts
per day in a month, (2) adds Customer
and Professional liquidity of 1.00% or
more of national customer volume in
multiply-listed equity and ETF options
classes in a month, or (iii) adds
9 SR–NASDAQ–2013–041
(March 1, 2013).
Volume’’ is defined as Customer,
Professional, Firm, Broker-Dealer, Non-NOM
Market Maker and NOM Market Maker volume in
Penny Pilot Options and Non-Penny Pilot Options
that either adds or removes liquidity on NOM. The
term ‘‘Customer’’ 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 a broker or dealer or for the account of a
Professional. The term ‘‘Professional’’ means any
person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar
month for its own beneficial account(s) pursuant to
Chapter I, Section 1(a)(48) of the NOM Rules. The
term ‘‘Non-NOM Market Maker’’ means a registered
market maker on another options exchange that is
not a NOM Market Maker. The term ‘‘NOM Market
Maker’’ means a Participant that has registered as
a Market Maker on NOM pursuant to Chapter VII,
Section 2 of the NOM Rules, and must also remain
in good standing pursuant to Chapter VII, Section
4 of the NOM Rules. The term ‘‘Firm’’ applies to
any transaction that is identified by a Participant for
clearing in the Firm range at OCC. The term
‘‘Broker-Dealer’’ applies to any transaction that is
not subject to any of the other transaction fees
applicable within a particular category.
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10 ‘‘Total
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Customer and Professional liquidity of
60,000 or more contracts per day in a
month and NOM Market Maker
liquidity of 30,000 or more per day per
month. Thus, as with existing tiers that
require participation in both the Nasdaq
Market Center and NOM, the criteria for
the new tier establish volume thresholds
that must be met on both markets in
order to receive the higher rebate. In
doing so, the pricing incentive
recognizes the prevalence of trading in
which members simultaneously trade
different asset classes within the same
strategy. Because cash equities and
options markets are linked, with
liquidity and trading patterns on one
market affecting those on the other,
NASDAQ believes that pricing
incentives that encourage market
participant activity in NOM also
support price discovery and liquidity
provision in the Nasdaq Market Center.
Designated Securities Pricing
In December 2012,11 NASDAQ
introduced a discounted execution fee
of $0.0028 per share executed for certain
securities designated in the rule
(‘‘Designated Securities’’).12 The
discounted fee applied to all orders in
Designated Securities entered through
an MPID through which a member
accessed, provided, or routed shares of
liquidity that represent more than
0.25% of Consolidated Volume during
the month, including a daily average
volume of at least 2 million shares of
liquidity provided. NASDAQ is
proposing to eliminate the discount for
Designated Securities, effective March 1,
2013. The program has not been
successful at achieving its goal of
materially altering NASDAQ’s market
share of executions of trades in
Designated Securities, and accordingly
NASDAQ believes that it may
appropriately be discontinued.
Routable Order Program
In February 2013, NASDAQ
introduced a new Routable Order
Program aimed at encouraging greater
participation in NASDAQ by members
that represent retail customers.13
NASDAQ is now proposing a minor
enhancement to the program to broaden
its availability. Under the program, a
member must have an MPID through
which it provides an average daily
11 Securities Exchange Act Release No. 68421
(December 13, 2012), 77 FR 75232 (December 19,
2012) (SR–NASDAQ–2012–135).
12 In February 2013, NASDAQ amended the list
of Designated Securities. Securities Exchange Act
Release No. 68905 (February 12, 2013), 78 FR 11716
(February 19, 2013) (SR–NASDAQ–2013–023).
13 Securities Exchange Act Release No. 68905
(February 12, 2013), 78 FR 11716 (February 19,
2013) (SR–NASDAQ–2013–023).
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volume of at least 35 million shares of
displayed liquidity using orders that
employ the SCAN or LIST routing
strategies,14 including an average daily
volume of at least 2 million shares that
are provided prior to the NASDAQ
Opening Cross and/or after the
NASDAQ Closing Cross. Under the
proposed change, a qualifying member
must have an MPID through which it (i)
provides an average daily volume of at
least 35 million shares of displayed
liquidity using orders that employ the
SCAN or LIST routing strategies, and (ii)
provides displayed liquidity and/or
routes an average daily volume of at
least 2 million shares prior to the
NASDAQ Opening Cross and/or after
the NASDAQ Closing Cross using orders
that employ the SCAN or LIST
strategies. Thus, the satisfaction of the
volume requirements for participation
in the program would not be affected by
the extent to which, during pre- and
post-market hours, routable orders
execute at NASDAQ or at another venue
to which they are routed prior to posting
to the NASDAQ book. The change
reflects the fact that wider spreads
during pre- and post-market hours make
it more likely that orders will be
marketable against quotes posted at
other markets and therefore will route
rather than posting to the NASDAQ
book. The pricing associated with SCAN
and LIST orders entered by ROP
participants through a qualifying MPID
is not being altered.15
14 SCAN is a basic routing strategy that is widely
used by firms that represent retail customers. SCAN
orders check the Nasdaq Market Center System for
available shares, while remaining shares are
simultaneously routed to destinations on the
applicable routing table. If shares remain unexecuted after routing, they are posted on the book.
Once on the book, if the order is subsequently
locked or crossed by another market center, the
System will not route the order to the locking or
crossing market center. LIST is a routing strategy
that is used by firms that wish for their orders to
participate in the opening and closing processes of
each security’s primary listing exchange, to access
liquidity on all exchanges if marketable, and
otherwise to post to the NASDAQ book. Members,
including those that represent retail customers, use
the LIST strategy to offload on the Exchange and its
routing broker the technical complexity associated
with routing orders to participate in the market
open and/or close.
15 For orders in securities priced at $1 per share
or more, NASDAQ charges a fee of $0.0029 per
share executed with respect to such orders when
they access liquidity in the Nasdaq Market Center,
and provides a credit of $0.0037 per share executed
with respect to such orders when they provide
liquidity on NASDAQ. For orders in securities
priced less than $1 per share, NASDAQ charges a
fee of 0.30% of the total transaction cost with
respect to such orders when they access liquidity
in the Nasdaq Market Center, and provides a credit
of $0.00003 per share executed if they are
designated for display and provide liquidity after
posting to the book.
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2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,16 in
general, and with Sections 6(b)(4) and
6(b)(5) of the Act,17 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 or
system which NASDAQ operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The proposed changes with respect to
the ROP and the tiers for Designated
Retail Orders are reflective of
NASDAQ’s ongoing efforts to use
pricing incentive programs to attract
orders of retail customers to NASDAQ
and improve market quality. As
NASDAQ noted in its filing to introduce
the ROP, the goal of that program is to
provide meaningful incentives for
members that represent significant
numbers of retail customers to increase
their participation in NASDAQ. The
proposed change to the program is
reasonable because it will broaden the
availability of the significant fee
reductions available through the
program, thereby reducing the costs of
members that represent retail customers
and that take advantage of the program,
and potentially also reducing costs to
the customers themselves. The change is
consistent with an equitable allocation
of fees because it will make it easier for
more members to qualify for the
program. NASDAQ further believes that
the proposed change is not
unreasonably discriminatory because it
will ensure that eligibility to participate
in the program is not affected by the
extent to which orders that are entered
during pre- and post-market hours route
to quotes of other trading venues against
which they are marketable rather than
posting to the NASDAQ book.
The proposed pricing tiers for
Designated Retail Orders are reasonable
because they reflect the availability of a
significant fee reduction for members
that represent retail customers.
NASDAQ believes that it is reasonable
to use fee reductions as a means to
encourage greater retail participation in
NASDAQ. Because retail orders are
likely to reflect long-term investment
intentions, they promote price discovery
and dampen volatility. Accordingly,
their presence in the NASDAQ market
has the potential to benefit all market
participants. For this reason, NASDAQ
believes that it is equitable to provide
16 15
17 15
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
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significant financial incentives to
encourage greater retail participation in
the market. NASDAQ further believes
that the proposal is equitable and not
unreasonably discriminatory because it
will significantly broaden the retail
pricing incentives already provided
through the ROP and the ISP by offering
a meaningful pricing incentive ($0.0033
per share executed) that is available to
all members that are able to attest that
orders designated by them for
participation in the program meet the
definition of a Designated Retail Order.
Moreover, the higher rebate of $0.0034
per share executed for members that
trade higher volumes (at least 0.1% of
Consolidated Volume) and that are able
to focus the Designated Retail Orders
they introduce through a particular
MPID is consistent with existing
NASDAQ pricing policies that offer
higher rebates and/or lower fees for
members based on volume but that
require concentration of activity through
particular MPIDs as a means of
encouraging members to manage their
trading activity in a unified manner
rather than merely serving as an
aggregator of orders from sponsored
participants. NASDAQ believes that
these requirements are consistent with
an equitable allocation of fees and not
unreasonably discriminatory because
they provide the most favorable pricing
to the market participants that are most
active on NASDAQ and that thereby
promote price discovery and market
stability. These requirements also avoid
providing excessive encouragement to
members aggregating the activity of
several firms (some of whom may not
themselves by members of the
Exchange) for the sole purpose of
earning a higher rebate.18
The change with respect to
Designated Securities is reasonable:
Although it eliminates a pricing
incentive that was in effect for a short
period of time, the change causes
NASDAQ’s fees to access liquidity in
Designated Securities to revert to the
same levels as in effect for other
securities. These fees are, in turn,
consistent with the requirements
imposed by SEC Rule 610 with respect
to access fees.19 The change is also
consistent with an equitable allocation
of fees and not unreasonably
discriminatory because all members will
pay the same access fees with respect to
18 See Securities Exchange Act Release No. 64003
(March 2, 2011), 76 FR 12784 (March 8, 2011) (SR–
NASDAQ–2011–028) (discussing introduction of
fees designed to discourage aggregation for
purposes of earning a rebate).
19 17 CFR 242.610.
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17275
Designated Securities as they currently
pay with respect to all other securities.
The new tier for members active in
both the NASDAQ Market Center and
NOM is reasonable because it reflects
the availability of a significant price
reduction for members that support
liquidity on both markets. The change is
consistent with an equitable allocation
of fees because the pricing tier requires
significant levels of liquidity provision,
which benefits all market participants,
and because activity in NOM also
supports price discovery and liquidity
provision in the NASDAQ Market
Center due to the increasing propensity
of market participants to be active in
both markets and the influence of each
market on the pricing of securities in the
other. The new tier is not unreasonably
discriminatory because market
participants may qualify for a
comparable or a higher rebate through
alternative means that do not require
participation in NOM, including
through the new program for Designated
Retail Orders introduced through this
proposed rule change, through the ROP,
and through a combination of
qualification for volume-based tiers and
participation in the ISP.
Finally, NASDAQ 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,
NASDAQ 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. NASDAQ
believes that all aspects of the proposed
rule change reflect this competitive
environment because the changes reflect
significant price reductions, offset only
to a small extent by the elimination of
the program for Designated Securities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
Specifically, NASDAQ believes that
these changes reflect significant price
reductions, offset only to a small extent
by the elimination of the program for
Designated Securities. Such reductions
reflect the high degree of competition in
the cash equities markets and will
further enhance that competition by
lowering fees and possibly encouraging
NASDAQ’s competitors to make
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Federal Register / Vol. 78, No. 54 / Wednesday, March 20, 2013 / Notices
competitive responses. The market for
order execution is extremely
competitive and members may readily
opt to disfavor NASDAQ’s execution
services if they believe that alternatives
offer them better value. Accordingly,
NASDAQ believes that the degree to
which fee changes in this market may
impose any burden on competition is
extremely limited. Because competitors
are free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, NASDAQ does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 20 and paragraph (f) of Rule
19b–4 thereunder.21 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 necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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:
srobinson on DSK4SPTVN1PROD with NOTICES
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2013–042 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
U.S.C. 78s(b)(3)(A).
VerDate Mar<14>2013
18:04 Mar 19, 2013
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–06319 Filed 3–19–13; 8:45 am]
BILLING CODE 8011–01–P
SOCIAL SECURITY ADMINISTRATION
Electronic Comments
20 15
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2013–042. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2013–042 and should be
submitted on or before April 10, 2013.
Agency Information Collection
Activities: Proposed Request and
Comment Request
The Social Security Administration
(SSA) publishes a list of information
collection packages requiring clearance
by the Office of Management and
Budget (OMB) in compliance with
Public Law 104–13, the Paperwork
Reduction Act of 1995, effective October
1, 1995. This notice includes revisions
21 17
Jkt 229001
PO 00000
CFR 240.19b–4(f).
Frm 00096
Fmt 4703
and extensions of OMB-approved
information collections.
SSA is soliciting comments on the
accuracy of the agency’s burden
estimate; the need for the information;
its practical utility; ways to enhance its
quality, utility, and clarity; and ways to
minimize burden on respondents,
including the use of automated
collection techniques or other forms of
information technology. Mail, email, or
fax your comments and
recommendations on the information
collection(s) to the OMB Desk Officer
and SSA Reports Clearance Officer at
the following addresses or fax numbers.
(OMB)
Office of Management and Budget,
Attn: Desk Officer for SSA, Fax:
202–395–6974, Email address:
OIRA_Submission@omb.eop.gov.
(SSA)
Social Security Administration,
DCRDP, Attn: Reports Clearance
Director, 107 Altmeyer Building,
6401 Security Blvd., Baltimore, MD
21235, Fax: 410–966–2830, Email
address:
OR.Reports.Clearance@ssa.gov.
I. The information collections below
are pending at SSA. SSA will submit
them to OMB within 60 days from the
date of this notice. To be sure we
consider your comments, we must
receive them no later than May 20,
2013. Individuals can obtain copies of
the collection instruments by writing to
the above email address.
1. Request for Earnings and Benefit
Estimate Statement—20 CFR 404.810—
0960–0466. Section 205(c)(2)(A) of the
Social Security Act (Act) requires the
Commissioner of SSA to establish and
maintain records of wages paid to, and
amounts of self-employment income
derived by, each individual as well as
the periods in which such wages were
paid and such income derived. An
individual may complete and mail Form
SSA–7004 to SSA to obtain a Statement
of Earnings or Quarters of Coverage.
SSA uses the information Form SSA–
7004 collects to identify respondents’
Social Security earnings records, extract
posted earnings information, calculate
potential benefit estimates, produce the
resulting Social Security statements,
and mail them to the requesters. The
respondents are Social Security number
holders requesting information about
their Social Security earnings records
and estimates of their potential benefits.
Type of Request: Revision of an OMBapproved information collection.
22 17
Sfmt 4703
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]]>Agencies
[Federal Register Volume 78, Number 54 (Wednesday, March 20, 2013)]
[Notices]
[Pages 17272-17276]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06319]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69133; File No. SR-NASDAQ-2013-042]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend Rules 7014 and 7018
March 14, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on March 1, 2013, 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 NASDAQ.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is proposing changes to its schedule of fees and rebates for
execution of orders for securities priced at $1 or more under Rule
7018, as well as a minor change to its Routable Order Program under
Rule 7014. The changes pursuant to this proposal are effective upon
filing, and the Exchange will implement the proposed rule changes on
March 1, 2013.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nasdaq.cchwallstreet.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
[[Page 17273]]
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. 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
Designated Retail Orders
NASDAQ proposes to introduce new liquidity provider credit tiers
for orders designated by a member as Designated Retail Orders. The
proposed change is part of an ongoing effort by NASDAQ to use financial
incentives to encourage greater participation in NASDAQ by members that
represent retail customers.\3\ For purposes of the proposed new tiers
and credits, a Designated Retail Order would be defined as an agency or
riskless principal \4\ order that originates from a natural person and
is submitted to NASDAQ by a member that designates it pursuant to Rule
7018, provided that no change is made to the terms of the order with
respect to price or side of market and the order does not originate
from a trading algorithm or any other computerized methodology. If a
member enters Designated Retail Orders through an MPID through which
(i) at least 90% of the shares of liquidity provided during the month
are provided through Designated Retail Orders, and (ii) the member
accesses, provides, or routes shares of liquidity that represent at
least 0.10% of Consolidated Volume \5\ during the month, the member
will receive a credit of $0.0034 per share executed for Designated
Retail Orders that provide liquidity if they are displayed orders. For
all other Designated Retail Orders that are displayed orders and that
provide liquidity, the credit will be $0.0033 per share executed. With
respect to Designated Retail Orders that are not displayed, NASDAQ's
existing credits for midpoint pegged and midpoint peg post-only orders
(``midpoint orders'') and other forms of non-displayed orders would
apply.\6\
---------------------------------------------------------------------------
\3\ Thus, the change complements NASDAQ's existing Investor
Support Program (``ISP'') and Routable Order Program (``ROP'') under
Rule 7014, both of which provide enhanced rebates for orders with
characteristics associated with retail investors. The Commission has
expressed concern that a significant percentage of the orders of
individual investors are executed in over-the-counter markets, that
is, at off-exchange markets. Securities Exchange Act Release No.
61358 (January 14, 2010), 75 FR 3594 (January 21, 2010) (Concept
Release on Equity Market Structure, ``Concept Release''). In the
Concept Release, the Commission recognized the strong policy
preference under the Act in favor of price transparency and
displayed markets. See also Mary L. Schapiro, Strengthening Our
Equity Market Structure (Speech at the Economic Club of New York,
Sept. 7, 2010) (``Schapiro Speech,'' available on the Commission Web
site) (comments of Commission Chairman on what she viewed as a
troubling trend of reduced participation in the equity markets by
individual investors, and that a significant percentage of volume in
U.S.-listed equities is executed in venues that do not display their
liquidity or make it generally available to the public).
\4\ To qualify as a Designated Retail Order, a riskless
principal order must satisfy the criteria set forth in FINRA Rule
5320.03. These criteria include that the member maintain supervisory
systems to reconstruct, in a time-sequenced manner, all orders that
are entered on a riskless principal basis; and the member submits a
report, contemporaneously with the execution of the facilitated
order, that identifies the trade as riskless principal.
\5\ ``Consolidated Volume'' is defined as the total consolidated
volume reported to all consolidated transaction plans by all
exchanges and trade reporting facilities.
\6\ Specifically, NASDAQ provides a credit of $0.0017 per share
executed for midpoint orders if the member provides an average daily
volume of more than 3 million shares through midpoint orders during
the month, $0.0015 per share executed for midpoint orders if the
member provides an average daily volume of 3 million or fewer shares
through midpoint orders during the month, and $0.0010 per share
executed for other orders that are not displayed.
---------------------------------------------------------------------------
A member wishing to qualify for either of these tiers may do so by
designating orders as Designated Retail Orders, either on an order-by-
order basis, or by designating all orders on a particular order entry
port as Designated Retail Orders.\7\ The member would be required to
attest, in a form prescribed by NASDAQ, that it has implemented
policies and procedures that are reasonably designed to ensure that
every order designated by the member as a ``Designated Retail Order''
complies with NASDAQ's definition of a Designated Retail Order, as
described above.
---------------------------------------------------------------------------
\7\ A Designated Retail Order flag will be made available for
the purpose of designating orders.
---------------------------------------------------------------------------
The member's written policies and procedures must be reasonably
designed to assure that it will only designate orders as Designated
Retail Orders if all requirements of a Designated Retail Order are met.
Such written policies and procedures must require the member to (i)
exercise due diligence before entering a Designated Retail Order to
assure that entry as a Designated Retail Order is in compliance with
the requirements specified by NASDAQ, and (ii) monitor whether orders
entered as Designated Retail Orders meet the applicable requirements.
If the member represents Designated Retail Orders from another broker-
dealer customer, the member's supervisory procedures must be reasonably
designed to assure that the orders it receives from such broker-dealer
customer that it designates as Designated Retail Orders meet the
definition of a Designated Retail Order. The member must (i) obtain an
annual written representation, in a form acceptable to NASDAQ, from
each broker-dealer customer that sends it orders to be designated as
Designated Retail Orders that entry of such orders as Designated Retail
Orders will be in compliance with the requirements specified by NASDAQ,
and (ii) monitor whether its broker-dealer customer's Designated Retail
Order flow continues to meet the applicable requirements.\8\
---------------------------------------------------------------------------
\8\ FINRA will, on behalf of NASDAQ, review a member's
compliance with these requirements through an exam-based review of
the member's internal controls.
---------------------------------------------------------------------------
NASDAQ may disqualify a member from qualifying for Designated
Retail Order rebates if NASDAQ determines, in its sole discretion, that
a member has failed to abide by the requirements proposed herein,
including, for example, if a member designates orders submitted to
NASDAQ as Designated Retail Orders but those orders fail to meet any of
the requirements of Designated Retail Orders.
New Tier for Members Active in the NASDAQ Market Center and the NASDAQ
Options Market
NASDAQ is proposing to introduce a new liquidity provider credit
tier for members that are active in both the Nasdaq Market Center and
the NASDAQ Options Market (``NOM''). At present, NASDAQ provides a
credit of $0.0027 per share executed for displayed orders that provide
liquidity if a member has (i) shares of liquidity provided in all
securities during the month representing more than 0.10% of
Consolidated Volume, through one or more of its Nasdaq Market Center
MPIDs, and (ii) an average daily volume during the month of more than
100,000 contracts of liquidity accessed or provided through one or more
of its NOM MPIDs. NASDAQ provides a credit of $0.0029 per share
executed for displayed orders that provide liquidity if a member has
(i) shares of liquidity provided in all securities during the month
representing more than 0.15% of Consolidated Volume, through one or
more of its Nasdaq Market Center MPIDs, and (ii) an average daily
volume
[[Page 17274]]
during the month of more than 100,000 contracts of liquidity accessed
or provided through one or more of its NOM MPIDs. Finally, NASDAQ
currently provides a credit of $0.00295 per share executed for
displayed orders that provide liquidity if a member has (i) shares of
liquidity provided in all securities during the month representing more
than 1.0% of Consolidated Volume, through one or more of its Nasdaq
Market Center MPIDs, and (ii) an average daily volume during the month
of more than 200,000 contracts of liquidity accessed or provided
through one or more of its NOM MPIDs. Under the proposed additional
tier, NASDAQ will provide a credit of $0.0030 per share executed for
displayed orders that provide liquidity if a member (i) has shares of
liquidity provided in all securities during the month representing at
least 0.45% of Consolidated Volume during the month, through one or
more of its Nasdaq Market Center MPIDs, and (ii) qualifies for the
Penny Pilot Tier 7 Customer and Professional Rebate to Add Liquidity
under Chapter XV, Section 2 of the NOM rules during the month through
one or more of its NOM MPIDs. The Tier 7 Customer and Professional
Rebate is being proposed for NOM through a contemporaneous proposed
rule change.\9\ A NOM Participant may qualify for the Tier 7 Customer
and Professional Rebate if it (i) has Total Volume \10\ of 325,000 or
more contracts per day in a month, (2) adds Customer and Professional
liquidity of 1.00% or more of national customer volume in multiply-
listed equity and ETF options classes in a month, or (iii) adds
Customer and Professional liquidity of 60,000 or more contracts per day
in a month and NOM Market Maker liquidity of 30,000 or more per day per
month. Thus, as with existing tiers that require participation in both
the Nasdaq Market Center and NOM, the criteria for the new tier
establish volume thresholds that must be met on both markets in order
to receive the higher rebate. In doing so, the pricing incentive
recognizes the prevalence of trading in which members simultaneously
trade different asset classes within the same strategy. Because cash
equities and options markets are linked, with liquidity and trading
patterns on one market affecting those on the other, NASDAQ believes
that pricing incentives that encourage market participant activity in
NOM also support price discovery and liquidity provision in the Nasdaq
Market Center.
---------------------------------------------------------------------------
\9\ SR-NASDAQ-2013-041 (March 1, 2013).
\10\ ``Total Volume'' is defined as Customer, Professional,
Firm, Broker-Dealer, Non-NOM Market Maker and NOM Market Maker
volume in Penny Pilot Options and Non-Penny Pilot Options that
either adds or removes liquidity on NOM. The term ``Customer''
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 a broker or dealer or for
the account of a Professional. The term ``Professional'' means any
person or entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed options per day on
average during a calendar month for its own beneficial account(s)
pursuant to Chapter I, Section 1(a)(48) of the NOM Rules. The term
``Non-NOM Market Maker'' means a registered market maker on another
options exchange that is not a NOM Market Maker. The term ``NOM
Market Maker'' means a Participant that has registered as a Market
Maker on NOM pursuant to Chapter VII, Section 2 of the NOM Rules,
and must also remain in good standing pursuant to Chapter VII,
Section 4 of the NOM Rules. The term ``Firm'' applies to any
transaction that is identified by a Participant for clearing in the
Firm range at OCC. The term ``Broker-Dealer'' applies to any
transaction that is not subject to any of the other transaction fees
applicable within a particular category.
---------------------------------------------------------------------------
Designated Securities Pricing
In December 2012,\11\ NASDAQ introduced a discounted execution fee
of $0.0028 per share executed for certain securities designated in the
rule (``Designated Securities'').\12\ The discounted fee applied to all
orders in Designated Securities entered through an MPID through which a
member accessed, provided, or routed shares of liquidity that represent
more than 0.25% of Consolidated Volume during the month, including a
daily average volume of at least 2 million shares of liquidity
provided. NASDAQ is proposing to eliminate the discount for Designated
Securities, effective March 1, 2013. The program has not been
successful at achieving its goal of materially altering NASDAQ's market
share of executions of trades in Designated Securities, and accordingly
NASDAQ believes that it may appropriately be discontinued.
---------------------------------------------------------------------------
\11\ Securities Exchange Act Release No. 68421 (December 13,
2012), 77 FR 75232 (December 19, 2012) (SR-NASDAQ-2012-135).
\12\ In February 2013, NASDAQ amended the list of Designated
Securities. Securities Exchange Act Release No. 68905 (February 12,
2013), 78 FR 11716 (February 19, 2013) (SR-NASDAQ-2013-023).
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Routable Order Program
In February 2013, NASDAQ introduced a new Routable Order Program
aimed at encouraging greater participation in NASDAQ by members that
represent retail customers.\13\ NASDAQ is now proposing a minor
enhancement to the program to broaden its availability. Under the
program, a member must have an MPID through which it provides an
average daily volume of at least 35 million shares of displayed
liquidity using orders that employ the SCAN or LIST routing
strategies,\14\ including an average daily volume of at least 2 million
shares that are provided prior to the NASDAQ Opening Cross and/or after
the NASDAQ Closing Cross. Under the proposed change, a qualifying
member must have an MPID through which it (i) provides an average daily
volume of at least 35 million shares of displayed liquidity using
orders that employ the SCAN or LIST routing strategies, and (ii)
provides displayed liquidity and/or routes an average daily volume of
at least 2 million shares prior to the NASDAQ Opening Cross and/or
after the NASDAQ Closing Cross using orders that employ the SCAN or
LIST strategies. Thus, the satisfaction of the volume requirements for
participation in the program would not be affected by the extent to
which, during pre- and post-market hours, routable orders execute at
NASDAQ or at another venue to which they are routed prior to posting to
the NASDAQ book. The change reflects the fact that wider spreads during
pre- and post-market hours make it more likely that orders will be
marketable against quotes posted at other markets and therefore will
route rather than posting to the NASDAQ book. The pricing associated
with SCAN and LIST orders entered by ROP participants through a
qualifying MPID is not being altered.\15\
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\13\ Securities Exchange Act Release No. 68905 (February 12,
2013), 78 FR 11716 (February 19, 2013) (SR-NASDAQ-2013-023).
\14\ SCAN is a basic routing strategy that is widely used by
firms that represent retail customers. SCAN orders check the Nasdaq
Market Center System for available shares, while remaining shares
are simultaneously routed to destinations on the applicable routing
table. If shares remain un-executed after routing, they are posted
on the book. Once on the book, if the order is subsequently locked
or crossed by another market center, the System will not route the
order to the locking or crossing market center. LIST is a routing
strategy that is used by firms that wish for their orders to
participate in the opening and closing processes of each security's
primary listing exchange, to access liquidity on all exchanges if
marketable, and otherwise to post to the NASDAQ book. Members,
including those that represent retail customers, use the LIST
strategy to offload on the Exchange and its routing broker the
technical complexity associated with routing orders to participate
in the market open and/or close.
\15\ For orders in securities priced at $1 per share or more,
NASDAQ charges a fee of $0.0029 per share executed with respect to
such orders when they access liquidity in the Nasdaq Market Center,
and provides a credit of $0.0037 per share executed with respect to
such orders when they provide liquidity on NASDAQ. For orders in
securities priced less than $1 per share, NASDAQ charges a fee of
0.30% of the total transaction cost with respect to such orders when
they access liquidity in the Nasdaq Market Center, and provides a
credit of $0.00003 per share executed if they are designated for
display and provide liquidity after posting to the book.
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[[Page 17275]]
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\16\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\17\ 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 or system which NASDAQ operates or controls, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\16\ 15 U.S.C. 78f.
\17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The proposed changes with respect to the ROP and the tiers for
Designated Retail Orders are reflective of NASDAQ's ongoing efforts to
use pricing incentive programs to attract orders of retail customers to
NASDAQ and improve market quality. As NASDAQ noted in its filing to
introduce the ROP, the goal of that program is to provide meaningful
incentives for members that represent significant numbers of retail
customers to increase their participation in NASDAQ. The proposed
change to the program is reasonable because it will broaden the
availability of the significant fee reductions available through the
program, thereby reducing the costs of members that represent retail
customers and that take advantage of the program, and potentially also
reducing costs to the customers themselves. The change is consistent
with an equitable allocation of fees because it will make it easier for
more members to qualify for the program. NASDAQ further believes that
the proposed change is not unreasonably discriminatory because it will
ensure that eligibility to participate in the program is not affected
by the extent to which orders that are entered during pre- and post-
market hours route to quotes of other trading venues against which they
are marketable rather than posting to the NASDAQ book.
The proposed pricing tiers for Designated Retail Orders are
reasonable because they reflect the availability of a significant fee
reduction for members that represent retail customers. NASDAQ believes
that it is reasonable to use fee reductions as a means to encourage
greater retail participation in NASDAQ. Because retail orders are
likely to reflect long-term investment intentions, they promote price
discovery and dampen volatility. Accordingly, their presence in the
NASDAQ market has the potential to benefit all market participants. For
this reason, NASDAQ believes that it is equitable to provide
significant financial incentives to encourage greater retail
participation in the market. NASDAQ further believes that the proposal
is equitable and not unreasonably discriminatory because it will
significantly broaden the retail pricing incentives already provided
through the ROP and the ISP by offering a meaningful pricing incentive
($0.0033 per share executed) that is available to all members that are
able to attest that orders designated by them for participation in the
program meet the definition of a Designated Retail Order. Moreover, the
higher rebate of $0.0034 per share executed for members that trade
higher volumes (at least 0.1% of Consolidated Volume) and that are able
to focus the Designated Retail Orders they introduce through a
particular MPID is consistent with existing NASDAQ pricing policies
that offer higher rebates and/or lower fees for members based on volume
but that require concentration of activity through particular MPIDs as
a means of encouraging members to manage their trading activity in a
unified manner rather than merely serving as an aggregator of orders
from sponsored participants. NASDAQ believes that these requirements
are consistent with an equitable allocation of fees and not
unreasonably discriminatory because they provide the most favorable
pricing to the market participants that are most active on NASDAQ and
that thereby promote price discovery and market stability. These
requirements also avoid providing excessive encouragement to members
aggregating the activity of several firms (some of whom may not
themselves by members of the Exchange) for the sole purpose of earning
a higher rebate.\18\
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\18\ See Securities Exchange Act Release No. 64003 (March 2,
2011), 76 FR 12784 (March 8, 2011) (SR-NASDAQ-2011-028) (discussing
introduction of fees designed to discourage aggregation for purposes
of earning a rebate).
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The change with respect to Designated Securities is reasonable:
Although it eliminates a pricing incentive that was in effect for a
short period of time, the change causes NASDAQ's fees to access
liquidity in Designated Securities to revert to the same levels as in
effect for other securities. These fees are, in turn, consistent with
the requirements imposed by SEC Rule 610 with respect to access
fees.\19\ The change is also consistent with an equitable allocation of
fees and not unreasonably discriminatory because all members will pay
the same access fees with respect to Designated Securities as they
currently pay with respect to all other securities.
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\19\ 17 CFR 242.610.
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The new tier for members active in both the NASDAQ Market Center
and NOM is reasonable because it reflects the availability of a
significant price reduction for members that support liquidity on both
markets. The change is consistent with an equitable allocation of fees
because the pricing tier requires significant levels of liquidity
provision, which benefits all market participants, and because activity
in NOM also supports price discovery and liquidity provision in the
NASDAQ Market Center due to the increasing propensity of market
participants to be active in both markets and the influence of each
market on the pricing of securities in the other. The new tier is not
unreasonably discriminatory because market participants may qualify for
a comparable or a higher rebate through alternative means that do not
require participation in NOM, including through the new program for
Designated Retail Orders introduced through this proposed rule change,
through the ROP, and through a combination of qualification for volume-
based tiers and participation in the ISP.
Finally, NASDAQ 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, NASDAQ 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. NASDAQ believes that all aspects of the
proposed rule change reflect this competitive environment because the
changes reflect significant price reductions, offset only to a small
extent by the elimination of the program for Designated Securities.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. Specifically,
NASDAQ believes that these changes reflect significant price
reductions, offset only to a small extent by the elimination of the
program for Designated Securities. Such reductions reflect the high
degree of competition in the cash equities markets and will further
enhance that competition by lowering fees and possibly encouraging
NASDAQ's competitors to make
[[Page 17276]]
competitive responses. The market for order execution is extremely
competitive and members may readily opt to disfavor NASDAQ's execution
services if they believe that alternatives offer them better value.
Accordingly, NASDAQ believes that the degree to which fee changes in
this market may impose any burden on competition is extremely limited.
Because competitors are free to modify their own fees in response, and
because market participants may readily adjust their order routing
practices, NASDAQ does not believe that the proposed changes will
impair the ability of members or competing order execution venues to
maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \20\ and paragraph (f) of Rule 19b-4
thereunder.\21\ 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
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f).
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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 rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2013-042 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-042. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2013-042 and should
be submitted on or before April 10, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06319 Filed 3-19-13; 8:45 am]
BILLING CODE 8011-01-P
