Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Make Changes to NASDAQ's Pricing Incentive Programs and Schedule of Fees and Credits, 36801-36805 [2013-14608]
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Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Notices
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Regulatory Contract, however, the
Exchange retains ultimate responsibility
for enforcing its rules with respect to
NOS.
• Second, FINRA will monitor NOS
for compliance with NASDAQ’s trading
rules, and will collect and maintain
certain related information.19
• Third, FINRA will provide a report
to the Exchange’s chief regulatory
officer (‘‘CRO’’), on a quarterly basis,
that: (i) quantifies all alerts (of which
the Exchange or FINRA is aware) that
identify NOS as a participant that has
potentially violated Commission or
Exchange rules, and (ii) lists all
investigations that identify NOS as a
participant that has potentially violated
Commission or NASDAQ rules.
• Fourth, the Exchange has in place
NASDAQ Rule 2160(c), which requires
NASDAQ OMX, as the holding
company owning both the Exchange and
NOS, to establish and maintain
procedures and internal controls
reasonably designed to ensure that NOS
does not develop or implement changes
to its system, based on non-public
information obtained regarding planned
changes to the Exchange’s systems as a
result of its affiliation with the
Exchange, until such information is
available generally to similarly situated
Exchange members, in connection with
the provision of inbound order routing
to the Exchange.
The Exchange stated that it has met
all the above-listed conditions. By
meeting such conditions, the Exchange
believes that it has set up mechanisms
that protect the independence of the
Exchange’s regulatory responsibility
with respect to NOS, and has
demonstrated that NOS cannot use any
information advantage it may have
because of its affiliation with the
Exchange.20 In the past, the Commission
has expressed concern that the
affiliation of an exchange with one of its
members raises potential conflicts of
interest, and the potential for unfair
competitive advantage.21 Although the
19 Pursuant to the Regulatory Contract, both
FINRA and the Exchange will collect and maintain
all alerts, complaints, investigations and
enforcement actions in which NOS (in its capacity
as a facility of BX routing orders to NOM) is
identified as a participant that has potentially
violated applicable Commission or Exchange rules.
The exchange and FINRA will retain these records
in an easily accessible manner in order to facilitate
any potential review conducted by the
Commission’s Office of Compliance Inspections and
Examinations. See Notice, 78 FR at 26820 n.12.
20 See Notice, 78 FR at 26821.
21 See, e.g., Securities Exchange Act Release Nos.
54170 (July 18, 2006), 71 FR 42149 (July 25, 2006)
(SR–NASDAQ–2006–006) (order approving
NASDAQ’s proposal to adopt NASDAQ Rule 2140,
restricting affiliations between NASDAQ and its
members); 53382 (February 27, 2006), 71 FR 11251
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Commission continues to be concerned
about potential unfair competition and
conflicts of interest between an
exchange’s self-regulatory obligations
and its commercial interest when the
exchange is affiliated with one of its
members, for the reasons discussed
below, the Commission believes that it
is consistent with the Act to permit
NOS, in its capacity as a facility of BX,
to route orders inbound to NOM on a
permanent basis instead of a pilot basis,
subject to the limitations and conditions
described above.22
The Exchange has proposed four
ongoing conditions applicable to NOS’s
routing activities, which are enumerated
above. The Commission believes that
these conditions will mitigate its
concerns about potential conflicts of
interest and unfair competitive
advantage. In particular, the
Commission believes that FINRA’s
oversight of NOS,23 combined with
FINRA’s monitoring of NOS’s
compliance with the Exchange’s rules
and quarterly reporting to the Exchange,
will help to protect the independence of
the Exchange’s regulatory
responsibilities with respect to NOS.
The Commission also believes that the
Exchange’s Rule 2160(c) is designed to
ensure that NOS cannot use any
information advantage it may have
(March 6, 2006) (SR–NYSE–2005–77) (order
approving the combination of the New York Stock
Exchange, Inc. and Archipelago Holdings, Inc.);
58673 (September 29, 2008), 73 FR 57707 (October
3, 2008) (SR-Amex-2008–62 and SR–NYSE–2008–
60) (order approving the combination of NYSE
Euronext and the American Stock Exchange LLC);
59135 (December 22, 2008), 73 FR 79954 (December
30, 2008) (SR–ISE–2009–85) (order approving the
purchase by ISE Holdings of an ownership interest
in Direct Edge Holdings LLC); 59281 (January 22,
2009), 74 FR 5014 (January 28, 2009) (SR–NYSE–
2008–120) (order approving a joint venture between
NYSE and BIDS Holdings L.P.); 58375 (August 18,
2008), 73 FR 49498 (August 21, 2008) (File No. 10–
182) (order granting the exchange registration of
BATS Exchange, Inc.); 61698 (March 12, 2010), 75
FR 13151 (March 18, 2010) (File Nos. 10–194 and
10–196) (order granting the exchange registration of
EDGX Exchange, Inc. and EDGA Exchange, Inc.);
and 62716 (August 13, 2010), 75 FR 51295 (August
19, 2010) (File No. 10–198) (order granting the
exchange registration of BATS–Y Exchange, Inc.).
22 The Commission notes that these limitations
and conditions are consistent with those previously
approved by the Commission for other exchanges.
See, e.g., Securities Exchange Act Release Nos.
69233 (March 25, 2013), 78 FR 19352 (March 29,
2013) (SR–NASDAQ–2013–028); 69232 (March 25,
2013), 78 FR 19342 (March 29, 2013) (SR–BX–
2013–013); 69229 (March 25, 2013), 78 FR 19337
(March 29, 2013) (SR-Phlx-2013–15); 67256 (June
26, 2012) 77 FR 39277 (July 2, 2012) (SR–BX–2012–
030); and 64090 (March 17, 2011), 76 FR 16462
(March 23, 2011) (SR–BX–2011–007).
23 This oversight will be accomplished through
the 17d–2 Agreement between FINRA and the
Exchange and the Regulatory Contract. See Notice,
78 FR at 26820 n.10 and accompanying text.
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36801
because of its affiliation with the
Exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,24 that the
proposed rule change (SR–NASDAQ–
2013–070) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–14536 Filed 6–18–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69758; File No. SR–
NASDAQ–2013–081]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Make
Changes to NASDAQ’s Pricing
Incentive Programs and Schedule of
Fees and Credits
June 13, 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 June 3,
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 the Substance
of the Proposed Rule Change
NASDAQ is proposing to make minor
modifications to pricing incentive
programs under Rule 7014 and
NASDAQ’s schedule of fees and credits
applicable to execution and routing of
orders in securities priced at $1 or more
per share under Rule 7018, and to make
a conforming change to the fee schedule
under Rule 7015. The changes pursuant
to this proposal are effective upon filing,
and the Exchange will implement the
proposed rule changes on June 3, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
24 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
25 17
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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. 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
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1. Purpose
NASDAQ Rule 7014 contains a
number of pricing incentive programs
that are designed to encourage
participation in NASDAQ by members
representing retail investors and to
increase the extent to which members
offer to provide liquidity at the national
best bid and/or national best offer
(‘‘NBBO’’). NASDAQ is proposing to
make a minor modification to reduce
the costs of the programs in a period of
persistent low trading volumes without
materially diminishing the incentives
offered by these programs.
Under the NBBO Setter Incentive
program, NASDAQ provides an
enhanced liquidity provider rebate with
respect to displayed liquidity-providing
orders that set the NBBO or cause
NASDAQ to join another trading center
with a protected quotation at the NBBO.
Under the Qualified Market Maker
(‘‘QMM’’) Program, a member may be
designated as a QMM with respect to
one or more of its market participant
identifiers (‘‘MPIDs’’) if (i) the member
is not assessed any ‘‘Excess Order Fee’’
under Rule 7018 during the month; 3
and (ii) through such MPID the member
quotes at the NBBO at least 25% of the
time during regular market hours 4 in an
3 Rule 7018(m). Last year, NASDAQ introduced
an Excess Order Fee, aimed at reducing inefficient
order entry practices of certain market participants
that place excessive burdens on the systems of
NASDAQ and its members and that may negatively
impact the usefulness and life cycle cost of market
data. In general, the determination of whether to
impose the fee on a particular MPID is made by
calculating the ratio between (i) entered orders,
weighted by the distance of the order from the
NBBO, and (ii) orders that execute in whole or in
part. The fee is imposed on MPIDs that have an
‘‘Order Entry Ratio’’ of more than 100.
4 Defined as 9:30 a.m. through 4:00 p.m., or such
shorter period as may be designated by NASDAQ
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average of at least 1,000 securities per
day during the month.5 The financial
incentives received by a QMM include
an NBBO Setter Incentive credit that
may be higher than the NBBO Setter
Incentive paid to members that do not
qualify for the QMM program. Finally,
under the Investor Support Program (the
‘‘ISP’’), NASDAQ pays an enhanced
liquidity provider credit to members for
providing additional liquidity to
NASDAQ and increasing the NASDAQtraded volume of what are generally
considered to be retail and institutional
investor orders in exchange-traded
securities. Participants in the ISP are
required to designate specific NASDAQ
order entry ports for use under the ISP
and to meet specified criteria focused on
market participation, liquidity
provision, and high rates of order
execution.
At present, if a member is a
participant in both the QMM program
and the ISP, it may receive a
supplemental credit of $0.00005,
$0.0001, or $0.0002 per share executed
for displayed liquidity-providing orders
that qualify for the ISP, and an NBBO
Setter Incentive credit or $0.0002 or
$0.0005 per share executed for
displayed liquidity-providing orders
that set the NBBO or allow NASDAQ to
join another market at the NBBO.6
Under the proposed change, NASDAQ
will pay the greater of the applicable
credit under the ISP or the NBBO Setter
Incentive Program, but not a credit
under both programs. At present, this
means that the applicable credit would
be paid under the NBBO Setter
Incentive program, since the credits
under that program equal or exceed ISP
credits, but NASDAQ is adopting
language to provide for the greater credit
under either program, to cover the
possibility that ISP credits may be
increased at some point in the future.
Orders receiving the NBBO Setter
Incentive credit would continue to be
included in calculations to determine a
on a day when the securities markets close early
(such as the day after Thanksgiving).
5 A member MPID is considered to be quoting at
the NBBO if it has a displayed order at either the
national best bid or the national best offer or both
the national best bid and offer. On a daily basis,
NASDAQ will determine the number of securities
in which the member satisfied the 25% NBBO
requirement. To qualify for QMM designation, the
MPID must meet the requirement for an average of
1,000 securities per day over the course of the
month. Thus, if a member MPID satisfied the 25%
NBBO requirement in 900 securities for half the
days in the month, and satisfied the requirement for
1,100 securities for the other days in the month, it
would meet the requirement for an average of 1,000
securities.
6 The ISP credit and the NBBO Setter Incentive
credit are both in addition to the rebate otherwise
applicable under NASDAQ’s main schedule of fees
and credits under Rule 7018.
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member’s eligibility for the ISP. Thus,
under the change, the ISP would
continue to incentivize members
representing retail and institutional
investors to bring orders to NASDAQ.
Moreover, to the extent that such orders
enhance NASDAQ’s market quality by
allowing it to set or join the NBBO, the
NBBO Setter Incentive credit would be
paid. However, NASDAQ believes that
paying both rebates would be
unwarranted under these circumstances,
since members representing retail or
institutional orders are not in a position
to influence the pricing of such orders.
In addition to the NBBO Setter
Incentive credit described above, QMMs
are also eligible to receive a discount on
fees for ports used by the QMM for
entering orders under the program.
Effective April 1, 2013, NASDAQ
reduced the applicable discount from (i)
25%, up to a total discount of $10,000
per MPID per month, to (ii) the lesser of
the QMM’s total fees for such ports or
$5,000.7 The change is reflected in the
text of Rule 7014. However, NASDAQ
did not make a conforming change to
the text of Rule 7015, and is proposing
to do so now.
Currently, NASDAQ pays a credit of
$0.0020 per share executed for midpoint
pegged and midpoint post-only orders
(‘‘midpoint orders’’) if a member
provides an average daily volume of
more than 5 million shares through
midpoint orders during the month and
the member’s average daily volume of
liquidity provided through midpoint
orders during the month is at least 2
million shares more than in April 2013.
NASDAQ pays a credit of $0.0017 per
share executed for midpoint orders if
the member provides an average daily
volume of 3 million or more shares
through midpoint orders during the
month (but does not qualify for the
$0.0020 tier), and a credit of $0.0015 per
share executed for midpoint orders if
the member provides an average daily
volume of less than 3 million shares
through midpoint orders during the
month. NASDAQ is proposing to
increase the requirement for the $0.0017
per share executed tier to an average
daily volume of 5 million or more
shares through midpoint orders (but
without the requirement for an increase
in volume over April 2013 applicable to
the $0.0020 per share rebate). In
addition, NASDAQ proposes to reduce
the midpoint order rebate for members
not reaching these tiers (i.e., with an
average daily volume of less than 5
million shares provided through
7 Securities Exchange Act Release No. 69376
(April 15, 2013), 78 FR 23611 (April 19, 2013) (SR–
NASDAQ–2013–063).
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midpoint orders during the month) from
$0.0015 to $0.0014 per share executed.
The changes are intended to reduce
costs during a period of persistent low
trading volumes. In addition, the
changes maintain NASDAQ’s
established policy of encouraging use of
displayed orders through rebates that
are higher than those paid for nondisplayed orders, but paying higher
rebates for midpoint orders, which offer
price improvement, than for other forms
of non-displayed orders.
Finally, under both Rule 7014 and
Rule 7018, various pricing tiers depend
upon the extent of a member’s trading
activity, expressed as a percentage of, or
a ratio to, Consolidated Volume.8 For
example, NASDAQ pays a rebate of
$0.00295 per share executed with
respect to displayed orders that provide
liquidity if a member has shares of
liquidity provided in all securities
through one of its Nasdaq Market Center
MPIDs that represent more than 0.90%
of Consolidated Volume during the
month. NASDAQ has determined that it
would be beneficial to members to
exclude the date of the annual
reconstitution of the Russell
Investments Indexes (the ‘‘Russell
Reconstitution’’) (in 2013, June 28) from
calculations of Consolidated Volume.
Trades occurring on that date would be
excluded from the calculation of total
Consolidated Volume and from the
calculation of the member’s trading
activity (i.e., they would be excluded
from both the numerator and the
denominator of the calculation of a
member’s percentage or ratio).9
Trading volumes on the date of the
Russell Reconstitution are generally far
in excess of volumes on other days
during the month, and members that are
not otherwise active on NASDAQ to a
great extent often participate in the
NASDAQ Closing Cross on that date. As
a result, the trading activity of members
that are regular daily participants in
NASDAQ, expressed as a percentage of
Consolidated Volume, is likely to be
lower than their percentage of
Consolidated Volume on other days
during the month. Including the date of
the Russell Reconstitution in
calculations of Consolidated Volume is
therefore likely to make it more difficult
for members to achieve particular
pricing tiers during the month.
Accordingly, excluding the date of the
Russell Reconstitution from these
calculations will diminish the
8 ‘‘Consolidated Volume’’ is the consolidated
volume of shares reported to all consolidated
transaction reporting plans by all exchanges and
trade reporting facilities during a month.
9 NASDAQ is also moving the location of the
definition of Consolidated Volume in Rule 7018.
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likelihood of a de facto price increase
occurring because a member is not able
to reach a volume percentage on that
date that it reaches on other trading
days during the month. Moreover,
excluding the date is very unlikely to
result in a price increase for any
members, since a member that was not,
on other days during the month, trading
in NASDAQ at volume levels that
would allow it qualify for a particular
pricing tier would be unlikely to
achieve percentage volume levels on the
date of the Russell Reconstitution that
would increase its overall monthly
percentage to the required levels, even
if it was very active on that date.
2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,10 in
general, and with Sections 6(b)(4) and
6(b)(5) of the Act,11 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.
NASDAQ believes that the proposed
change to provide that members
participating in both the QMM program
and the ISP may not receive both an ISP
credit and an NBBO Setter Incentive
credit with respect to the same order
(but rather would receive the higher of
the two credits), is reasonable because
such members will continue to receive
an enhanced rebate of $0.0002 or
$0.0005 per share executed with respect
to such orders. NASDAQ does not
believe, however, that it is reasonable to
pay an added credit with respect to ISPqualified orders that set or join the
NBBO, since a member entering retail or
institutional orders is not in a position
to influence their pricing. NASDAQ
further believes that the change is
consistent with an equitable allocation
of fees because NASDAQ will continue
to pay the higher of the two credits to
reflect the fact that such orders improve
NASDAQ’s market quality by setting or
allowing NASDAQ to join the NBBO.
NASDAQ further believes that the
change is not unfairly discriminatory
because the change will eliminate an
instance in which members may receive
credits that are high in relation to those
paid to other members while still paying
credits that reflect the value of
applicable orders as both retail or
institutional orders and orders that set
10 15
11 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
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36803
or join the NBBO. Finally, the change
does not unfairly burden competition
because it does not disadvantage
affected members in a manner that
would impair their ability to compete,
in that they will continue to receive
enhanced rebates. The change with
respect to the text of Rule 7015 is
reasonable, consistent with an equitable
allocation, not unfairly discriminatory,
and does not burden competition, in
that is designed merely to ensure that
the fee language of Rule 7015 reflects a
change that was made to Rule 7014 in
April 2013. As such, it is not a
substantive change.
The changes to increase the required
threshold for a rebate of $0.0017 per
share executed for midpoint orders and
to reduce the rebate for midpoint orders
for members not reaching this tier from
$0.0015 to $0.0014 per share executed
are reasonable, consistent with an
equitable allocation, not unfairly
discriminatory, and do not burden
competition. Specifically, the change in
the threshold is reasonable because it
provides an incentive for members that
wish to receive a higher rebate to
increase their levels of liquidity
provision, while continuing to provide
a rebate for midpoint orders, whether or
not a member reaches the tier threshold,
that is higher than the rebate for other
non-displayed orders. The change to the
threshold is consistent with an equitable
allocation of fees and not unfairly
discriminatory because although it will
affect only a small number of market
participants, it is designed to
incentivize all market participants that
use midpoint orders to increase their
volumes of liquidity provision in order
to achieve a higher rebate for such
orders, or, in the alternative, to increase
use of displayed orders to receive a still
higher rebate. Thus, the change is
consistent with NASDAQ’s
longstanding policy of encouraging the
use of displayed orders, which promote
price discovery, while nevertheless
favoring midpoint orders over other
non-displayed orders due to the price
improvement they offer. The change
does not burden competition since
affected members may readily adjust
trading behavior to maintain or increase
their rebates, and will therefore not be
disadvantaged in their ability to
compete.
The change in the applicable rebate
for midpoint orders to which a pricing
tier does not apply is reasonable
because it reflects a reduction of only
$0.0001 to the applicable rebate. The
change is consistent with an equitable
allocation of fees and not unfairly
discriminatory because it provides
further incentives for members to
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increase their volume of liquidity
provision through midpoint orders and/
or increase their use of displayed orders
in order to earn a higher rebate. As such,
the change is consistent with
NASDAQ’s policy of encouraging the
use of displayed orders, while
nevertheless favoring midpoint orders
over other non-displayed orders.
Moreover, the impact of the change will
be spread across a large number of firms
that use midpoint orders. Finally, the
change does not burden competition
since affected members may readily
adjust trading behavior to increase
rebates, or alternatively, will see only a
small reduction in rebates with respect
to continued use of the midpoint orders.
Accordingly, affected members will not
be disadvantaged in their ability to
compete.
NASDAQ believes that the proposed
change to exclude the date of the
Russell Reconstitution from calculations
of Consolidated Volume under Rules
7014 and 7018 is reasonable because it
will diminish the likelihood of a de
facto price increase occurring because a
member is not able to reach a volume
percentage on that date that it reaches
on other trading days during the month.
NASDAQ further believes that the
change is consistent with an equitable
allocation of fees and is not unfairly
discriminatory. Specifically, because
trading activity on the date of the
Russell Reconstitution will be excluded
from determinations of a member’s
percentage of Consolidated Volume,
NASDAQ believes it will be easier for
members to determine the volume
required to meet a certain percentage of
participation than would otherwise be
the case. To the extent that a member
has been active in NASDAQ at a
significant level throughout the month,
excluding the date of the Russell
Reconstitution, on which its percentage
of Consolidated Volume is likely to be
lower than on other days, will increase
its overall percentage for the month.
Conversely, even if a member was more
active on the date of Russell
Reconstitution than on other dates, it is
unlikely that its activity on one day
would be able to increase its overall
monthly percentage to a meaningful
extent. Thus, NASDAQ believes that the
change will benefit members that are in
a position to achieve volume levels
required by the NASDAQ pricing
schedule but without harming the
ability of any members to reach such
levels. Finally, NASDAQ believes that
the change does not unfairly burden
competition because it will help to
preserve or improve the pricing status
that would apply to members’ trading
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activity in the absence of the Russell
Reconstitution, and therefore will not
impact the ability of such members to
compete.
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.
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. Because
competitors are free to modify their own
fees in response, and because market
participants may readily adjust their
order routing practices, NASDAQ
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited. In this instance, although
certain of the proposed changes have
the effect of reducing certain rebates or
limiting their availability, the rebates in
question remain in place and are
themselves reflective of the need for
exchanges to offer significant financial
incentives to attract order flow.
Moreover, if the changes are
unattractive to market participants, it is
likely that NASDAQ will lose market
share as a result. In addition, the change
with respect to the Russell
Reconstitution is designed to protect
members from the possibility of a de
facto price increase. As a result of all of
these considerations, 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)
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
of the Act 12 and paragraph (f) of Rule
19b–4 thereunder.13 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:
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–NASDAQ–2013–081 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–2013–081. 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 20549–1090, 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
offices of NASDAQ. All comments
received will be posted without change;
12 15
13 17
E:\FR\FM\19JNN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
19JNN1
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Notices
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–2013–081, and should be
submitted on or before July 10, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–14608 Filed 6–18–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69760; File No. SR–CBOE–
2013–058]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
June 13, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 6,
2013, Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘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.
mstockstill on DSK4VPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Fees Schedule. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
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
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
17:13 Jun 18, 2013
Jkt 229001
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fees Schedule. In 2002, the Exchange
added to its Fees Schedule a rebate for
duplicate fees related to manual data
entry (‘‘keypunch’’) errors.3 This change
was made due to the possibility that an
options trade could be matched and
cleared inappropriately as a result of a
keypunch error. Indeed, the example
given in SR–CBOE–2002–013 describes
a situation involving a member’s clerk,
or other similar personnel, inputting the
wrong clearing firm code into the
appropriate form or program. As a
result, the trade is cleared through the
wrong clearing firm and, in order to
correct the situation, corrective
transactions are entered to reverse the
error trades and then new trades are
submitted to reflect the original
intentions of the parties. Without the
keypunch error rebate program, the
clearing firm whose code was
erroneously entered would have to pay
Exchange transaction fees for any
transactions necessary to reverse the
initial trade (despite not having been a
party to such trade).
In a recent overall review of the Fees
Schedule, the Exchange reviewed the
‘‘Keypunch Error’’ rebate program and
has determined to modify the rebate.
3 See Securities Exchange Act Release No. 45675
(March 29, 2002), 67 FR 16480 (April 5, 2002) (SR–
CBOE–2002–013). The Section of the Fees Schedule
describing the keypunch error rebate program
currently states:
On occasion, options transactions are matched
and cleared as a result of certain keypunch errors
and Trading Permit Holders are forced to execute
subsequent transactions to achieve the originally
intended results. A qualifying error is any error that
is inadvertent and creates a duplicate fee or fees to
be charged in the matching and clearing of
corrective options trades. Only those transactions
that require a minimum of 500 contracts to correct
the error or errors shall be eligible for this rebate.
The CBOE shall have the discretion to rebate any
duplicate transaction fees incurred in the course of
correcting such errors. A written request with all
supporting documentation (trade date, options
class, executing firm and broker, opposite firm and
broker, premium, and quantity) and a summary of
the reasons for the error must be submitted within
60 days after the last day of the month in which
the error occurred.
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
36805
The term ‘‘keypunch’’ is open to
interpretation and could be read to
include a variety of types of errors that
involve the erroneous entry of any type
of trade information (beyond just the
wrong clearing firm). As such, the
Exchange proposes to delete the current
language associated with the keypunch
error rebate program, re-title it ‘‘Clearing
Trading Permit Holder Position ReAssignment’’ and add the following
language: CBOE will rebate assessed
transaction fees to a Clearing Trading
Permit Holder who, as a result of a trade
adjustment on any business day
following the original trade, re-assigns a
position established by the initial trade
to a different Clearing Trading Permit
Holder. In such a circumstance, the
Exchange will rebate, for the party for
whom the position is being re-assigned,
that party’s transaction fees from the
original transaction as well as the
transaction in which the position is reassigned. In all other circumstances,
including corrective transactions, in
which a transaction is adjusted on any
day after the original trade date, regular
Exchange fees will be assessed.
If a market participant makes an error
that requires a corrective transaction,
the Exchange believes that the market
participant should be responsible for the
fees involved in correcting that
transaction (as the Exchange must
expend resources in order to process
such transactions). However, when a
Clearing Trading Permit Holder is
required to re-assign a position, that
Clearing Trading Permit Holder may
have been assigned that position by
another market participant and therefore
the Exchange does not wish to assess
fees for such re-assignment to the
Clearing Trading Permit Holder. The
reason that the rebate is limited to a
business day following the original
trade is because if an error is discovered
on the day it occurs, it can be corrected
prior to clearing and accurate fees will
be assessed. The Exchange determined
to eliminate the stipulation that, in
order to qualify for the rebate, a
transaction be of a minimum of 500
contracts because the Exchange believes
that any transaction, regardless of size,
should be eligible for the rebate, and a
de minimis requirement is not
necessary.
Because the Exchange may not always
be able to automatically identify these
situations, in order to receive a rebate,
a written request with all supporting
documentation (trade detail regarding
both the original and re-assigning
E:\FR\FM\19JNN1.SGM
19JNN1
]]>Agencies
[Federal Register Volume 78, Number 118 (Wednesday, June 19, 2013)]
[Notices]
[Pages 36801-36805]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-14608]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69758; File No. SR-NASDAQ-2013-081]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Make Changes to NASDAQ's Pricing Incentive Programs and Schedule of
Fees and Credits
June 13, 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 June 3, 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 the
Substance of the Proposed Rule Change
NASDAQ is proposing to make minor modifications to pricing
incentive programs under Rule 7014 and NASDAQ's schedule of fees and
credits applicable to execution and routing of orders in securities
priced at $1 or more per share under Rule 7018, and to make a
conforming change to the fee schedule under Rule 7015. The changes
pursuant to this proposal are effective upon filing, and the Exchange
will implement the proposed rule changes on June 3, 2013.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaq.cchwallstreet.com, at
[[Page 36802]]
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. 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
NASDAQ Rule 7014 contains a number of pricing incentive programs
that are designed to encourage participation in NASDAQ by members
representing retail investors and to increase the extent to which
members offer to provide liquidity at the national best bid and/or
national best offer (``NBBO''). NASDAQ is proposing to make a minor
modification to reduce the costs of the programs in a period of
persistent low trading volumes without materially diminishing the
incentives offered by these programs.
Under the NBBO Setter Incentive program, NASDAQ provides an
enhanced liquidity provider rebate with respect to displayed liquidity-
providing orders that set the NBBO or cause NASDAQ to join another
trading center with a protected quotation at the NBBO. Under the
Qualified Market Maker (``QMM'') Program, a member may be designated as
a QMM with respect to one or more of its market participant identifiers
(``MPIDs'') if (i) the member is not assessed any ``Excess Order Fee''
under Rule 7018 during the month; \3\ and (ii) through such MPID the
member quotes at the NBBO at least 25% of the time during regular
market hours \4\ in an average of at least 1,000 securities per day
during the month.\5\ The financial incentives received by a QMM include
an NBBO Setter Incentive credit that may be higher than the NBBO Setter
Incentive paid to members that do not qualify for the QMM program.
Finally, under the Investor Support Program (the ``ISP''), NASDAQ pays
an enhanced liquidity provider credit to members for providing
additional liquidity to NASDAQ and increasing the NASDAQ-traded volume
of what are generally considered to be retail and institutional
investor orders in exchange-traded securities. Participants in the ISP
are required to designate specific NASDAQ order entry ports for use
under the ISP and to meet specified criteria focused on market
participation, liquidity provision, and high rates of order execution.
---------------------------------------------------------------------------
\3\ Rule 7018(m). Last year, NASDAQ introduced an Excess Order
Fee, aimed at reducing inefficient order entry practices of certain
market participants that place excessive burdens on the systems of
NASDAQ and its members and that may negatively impact the usefulness
and life cycle cost of market data. In general, the determination of
whether to impose the fee on a particular MPID is made by
calculating the ratio between (i) entered orders, weighted by the
distance of the order from the NBBO, and (ii) orders that execute in
whole or in part. The fee is imposed on MPIDs that have an ``Order
Entry Ratio'' of more than 100.
\4\ Defined as 9:30 a.m. through 4:00 p.m., or such shorter
period as may be designated by NASDAQ on a day when the securities
markets close early (such as the day after Thanksgiving).
\5\ A member MPID is considered to be quoting at the NBBO if it
has a displayed order at either the national best bid or the
national best offer or both the national best bid and offer. On a
daily basis, NASDAQ will determine the number of securities in which
the member satisfied the 25% NBBO requirement. To qualify for QMM
designation, the MPID must meet the requirement for an average of
1,000 securities per day over the course of the month. Thus, if a
member MPID satisfied the 25% NBBO requirement in 900 securities for
half the days in the month, and satisfied the requirement for 1,100
securities for the other days in the month, it would meet the
requirement for an average of 1,000 securities.
---------------------------------------------------------------------------
At present, if a member is a participant in both the QMM program
and the ISP, it may receive a supplemental credit of $0.00005, $0.0001,
or $0.0002 per share executed for displayed liquidity-providing orders
that qualify for the ISP, and an NBBO Setter Incentive credit or
$0.0002 or $0.0005 per share executed for displayed liquidity-providing
orders that set the NBBO or allow NASDAQ to join another market at the
NBBO.\6\ Under the proposed change, NASDAQ will pay the greater of the
applicable credit under the ISP or the NBBO Setter Incentive Program,
but not a credit under both programs. At present, this means that the
applicable credit would be paid under the NBBO Setter Incentive
program, since the credits under that program equal or exceed ISP
credits, but NASDAQ is adopting language to provide for the greater
credit under either program, to cover the possibility that ISP credits
may be increased at some point in the future. Orders receiving the NBBO
Setter Incentive credit would continue to be included in calculations
to determine a member's eligibility for the ISP. Thus, under the
change, the ISP would continue to incentivize members representing
retail and institutional investors to bring orders to NASDAQ. Moreover,
to the extent that such orders enhance NASDAQ's market quality by
allowing it to set or join the NBBO, the NBBO Setter Incentive credit
would be paid. However, NASDAQ believes that paying both rebates would
be unwarranted under these circumstances, since members representing
retail or institutional orders are not in a position to influence the
pricing of such orders.
---------------------------------------------------------------------------
\6\ The ISP credit and the NBBO Setter Incentive credit are both
in addition to the rebate otherwise applicable under NASDAQ's main
schedule of fees and credits under Rule 7018.
---------------------------------------------------------------------------
In addition to the NBBO Setter Incentive credit described above,
QMMs are also eligible to receive a discount on fees for ports used by
the QMM for entering orders under the program. Effective April 1, 2013,
NASDAQ reduced the applicable discount from (i) 25%, up to a total
discount of $10,000 per MPID per month, to (ii) the lesser of the QMM's
total fees for such ports or $5,000.\7\ The change is reflected in the
text of Rule 7014. However, NASDAQ did not make a conforming change to
the text of Rule 7015, and is proposing to do so now.
---------------------------------------------------------------------------
\7\ Securities Exchange Act Release No. 69376 (April 15, 2013),
78 FR 23611 (April 19, 2013) (SR-NASDAQ-2013-063).
---------------------------------------------------------------------------
Currently, NASDAQ pays a credit of $0.0020 per share executed for
midpoint pegged and midpoint post-only orders (``midpoint orders'') if
a member provides an average daily volume of more than 5 million shares
through midpoint orders during the month and the member's average daily
volume of liquidity provided through midpoint orders during the month
is at least 2 million shares more than in April 2013. NASDAQ pays a
credit of $0.0017 per share executed for midpoint orders if the member
provides an average daily volume of 3 million or more shares through
midpoint orders during the month (but does not qualify for the $0.0020
tier), and a credit of $0.0015 per share executed for midpoint orders
if the member provides an average daily volume of less than 3 million
shares through midpoint orders during the month. NASDAQ is proposing to
increase the requirement for the $0.0017 per share executed tier to an
average daily volume of 5 million or more shares through midpoint
orders (but without the requirement for an increase in volume over
April 2013 applicable to the $0.0020 per share rebate). In addition,
NASDAQ proposes to reduce the midpoint order rebate for members not
reaching these tiers (i.e., with an average daily volume of less than 5
million shares provided through
[[Page 36803]]
midpoint orders during the month) from $0.0015 to $0.0014 per share
executed. The changes are intended to reduce costs during a period of
persistent low trading volumes. In addition, the changes maintain
NASDAQ's established policy of encouraging use of displayed orders
through rebates that are higher than those paid for non-displayed
orders, but paying higher rebates for midpoint orders, which offer
price improvement, than for other forms of non-displayed orders.
Finally, under both Rule 7014 and Rule 7018, various pricing tiers
depend upon the extent of a member's trading activity, expressed as a
percentage of, or a ratio to, Consolidated Volume.\8\ For example,
NASDAQ pays a rebate of $0.00295 per share executed with respect to
displayed orders that provide liquidity if a member has shares of
liquidity provided in all securities through one of its Nasdaq Market
Center MPIDs that represent more than 0.90% of Consolidated Volume
during the month. NASDAQ has determined that it would be beneficial to
members to exclude the date of the annual reconstitution of the Russell
Investments Indexes (the ``Russell Reconstitution'') (in 2013, June 28)
from calculations of Consolidated Volume. Trades occurring on that date
would be excluded from the calculation of total Consolidated Volume and
from the calculation of the member's trading activity (i.e., they would
be excluded from both the numerator and the denominator of the
calculation of a member's percentage or ratio).\9\
---------------------------------------------------------------------------
\8\ ``Consolidated Volume'' is the consolidated volume of shares
reported to all consolidated transaction reporting plans by all
exchanges and trade reporting facilities during a month.
\9\ NASDAQ is also moving the location of the definition of
Consolidated Volume in Rule 7018.
---------------------------------------------------------------------------
Trading volumes on the date of the Russell Reconstitution are
generally far in excess of volumes on other days during the month, and
members that are not otherwise active on NASDAQ to a great extent often
participate in the NASDAQ Closing Cross on that date. As a result, the
trading activity of members that are regular daily participants in
NASDAQ, expressed as a percentage of Consolidated Volume, is likely to
be lower than their percentage of Consolidated Volume on other days
during the month. Including the date of the Russell Reconstitution in
calculations of Consolidated Volume is therefore likely to make it more
difficult for members to achieve particular pricing tiers during the
month. Accordingly, excluding the date of the Russell Reconstitution
from these calculations will diminish the likelihood of a de facto
price increase occurring because a member is not able to reach a volume
percentage on that date that it reaches on other trading days during
the month. Moreover, excluding the date is very unlikely to result in a
price increase for any members, since a member that was not, on other
days during the month, trading in NASDAQ at volume levels that would
allow it qualify for a particular pricing tier would be unlikely to
achieve percentage volume levels on the date of the Russell
Reconstitution that would increase its overall monthly percentage to
the required levels, even if it was very active on that date.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\10\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
NASDAQ believes that the proposed change to provide that members
participating in both the QMM program and the ISP may not receive both
an ISP credit and an NBBO Setter Incentive credit with respect to the
same order (but rather would receive the higher of the two credits), is
reasonable because such members will continue to receive an enhanced
rebate of $0.0002 or $0.0005 per share executed with respect to such
orders. NASDAQ does not believe, however, that it is reasonable to pay
an added credit with respect to ISP-qualified orders that set or join
the NBBO, since a member entering retail or institutional orders is not
in a position to influence their pricing. NASDAQ further believes that
the change is consistent with an equitable allocation of fees because
NASDAQ will continue to pay the higher of the two credits to reflect
the fact that such orders improve NASDAQ's market quality by setting or
allowing NASDAQ to join the NBBO. NASDAQ further believes that the
change is not unfairly discriminatory because the change will eliminate
an instance in which members may receive credits that are high in
relation to those paid to other members while still paying credits that
reflect the value of applicable orders as both retail or institutional
orders and orders that set or join the NBBO. Finally, the change does
not unfairly burden competition because it does not disadvantage
affected members in a manner that would impair their ability to
compete, in that they will continue to receive enhanced rebates. The
change with respect to the text of Rule 7015 is reasonable, consistent
with an equitable allocation, not unfairly discriminatory, and does not
burden competition, in that is designed merely to ensure that the fee
language of Rule 7015 reflects a change that was made to Rule 7014 in
April 2013. As such, it is not a substantive change.
The changes to increase the required threshold for a rebate of
$0.0017 per share executed for midpoint orders and to reduce the rebate
for midpoint orders for members not reaching this tier from $0.0015 to
$0.0014 per share executed are reasonable, consistent with an equitable
allocation, not unfairly discriminatory, and do not burden competition.
Specifically, the change in the threshold is reasonable because it
provides an incentive for members that wish to receive a higher rebate
to increase their levels of liquidity provision, while continuing to
provide a rebate for midpoint orders, whether or not a member reaches
the tier threshold, that is higher than the rebate for other non-
displayed orders. The change to the threshold is consistent with an
equitable allocation of fees and not unfairly discriminatory because
although it will affect only a small number of market participants, it
is designed to incentivize all market participants that use midpoint
orders to increase their volumes of liquidity provision in order to
achieve a higher rebate for such orders, or, in the alternative, to
increase use of displayed orders to receive a still higher rebate.
Thus, the change is consistent with NASDAQ's longstanding policy of
encouraging the use of displayed orders, which promote price discovery,
while nevertheless favoring midpoint orders over other non-displayed
orders due to the price improvement they offer. The change does not
burden competition since affected members may readily adjust trading
behavior to maintain or increase their rebates, and will therefore not
be disadvantaged in their ability to compete.
The change in the applicable rebate for midpoint orders to which a
pricing tier does not apply is reasonable because it reflects a
reduction of only $0.0001 to the applicable rebate. The change is
consistent with an equitable allocation of fees and not unfairly
discriminatory because it provides further incentives for members to
[[Page 36804]]
increase their volume of liquidity provision through midpoint orders
and/or increase their use of displayed orders in order to earn a higher
rebate. As such, the change is consistent with NASDAQ's policy of
encouraging the use of displayed orders, while nevertheless favoring
midpoint orders over other non-displayed orders. Moreover, the impact
of the change will be spread across a large number of firms that use
midpoint orders. Finally, the change does not burden competition since
affected members may readily adjust trading behavior to increase
rebates, or alternatively, will see only a small reduction in rebates
with respect to continued use of the midpoint orders. Accordingly,
affected members will not be disadvantaged in their ability to compete.
NASDAQ believes that the proposed change to exclude the date of the
Russell Reconstitution from calculations of Consolidated Volume under
Rules 7014 and 7018 is reasonable because it will diminish the
likelihood of a de facto price increase occurring because a member is
not able to reach a volume percentage on that date that it reaches on
other trading days during the month. NASDAQ further believes that the
change is consistent with an equitable allocation of fees and is not
unfairly discriminatory. Specifically, because trading activity on the
date of the Russell Reconstitution will be excluded from determinations
of a member's percentage of Consolidated Volume, NASDAQ believes it
will be easier for members to determine the volume required to meet a
certain percentage of participation than would otherwise be the case.
To the extent that a member has been active in NASDAQ at a significant
level throughout the month, excluding the date of the Russell
Reconstitution, on which its percentage of Consolidated Volume is
likely to be lower than on other days, will increase its overall
percentage for the month. Conversely, even if a member was more active
on the date of Russell Reconstitution than on other dates, it is
unlikely that its activity on one day would be able to increase its
overall monthly percentage to a meaningful extent. Thus, NASDAQ
believes that the change will benefit members that are in a position to
achieve volume levels required by the NASDAQ pricing schedule but
without harming the ability of any members to reach such levels.
Finally, NASDAQ believes that the change does not unfairly burden
competition because it will help to preserve or improve the pricing
status that would apply to members' trading activity in the absence of
the Russell Reconstitution, and therefore will not impact the ability
of such members to compete.
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. 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.
Because competitors are free to modify their own fees in response, and
because market participants may readily adjust their order routing
practices, NASDAQ believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited. In
this instance, although certain of the proposed changes have the effect
of reducing certain rebates or limiting their availability, the rebates
in question remain in place and are themselves reflective of the need
for exchanges to offer significant financial incentives to attract
order flow. Moreover, if the changes are unattractive to market
participants, it is likely that NASDAQ will lose market share as a
result. In addition, the change with respect to the Russell
Reconstitution is designed to protect members from the possibility of a
de facto price increase. As a result of all of these considerations,
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 \12\ and paragraph (f) of Rule 19b-4
thereunder.\13\ 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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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-2013-081 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-2013-081. 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 20549-1090, 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
offices of NASDAQ. All comments received will be posted without change;
[[Page 36805]]
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-2013-081, and should be submitted on or before July 10, 2013.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-14608 Filed 6-18-13; 8:45 am]
BILLING CODE 8011-01-P
