Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to the Qualified Market Maker Program Under Rule 7014, the Fees Assessed Under Rule 7015(g), and the Schedule of Fees and Rebates Under Rule 7018(a), 56962-56967 [2013-22401]
Download as PDF
<![CDATA[
56962
Federal Register / Vol. 78, No. 179 / Monday, September 16, 2013 / Notices
Section b(b)(6) 19 of the Act to
appropriately discipline Members of the
Exchange’s Rules, and Section 6(b)(7) 20
of the Act to provide a fair procedure of
disciplining Members as the proposal
will strengthen its ability to carry out its
oversight responsibilities as a selfregulatory organization and reinforce its
surveillance and enforcement functions.
Additionally, this proposed rule change
will promote consistency with rules of
other exchanges.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The proposal
relates to the Exchange’s role and
responsibilities as a self-regulatory
organization and the manner in which
it disciplines its Members and
associated persons for violations of its
Rules. In the unlikely event that
Members will determine where to send
options orders based on the type of
disciplinary program in place at an
options exchange, the expansion of
Exchange Rule 1014 will lessen the
impact on competition by making
Exchange Rule 1014 more consistent
with rules at the other options
exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 21 and Rule 19b–4(f)(6) 22
thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
mstockstill on DSK4VPTVN1PROD with NOTICES
19 15
U.S.C. 78f(b)(6).
U.S.C. 78f(b)(7).
21 15 U.S.C. 78s(b)(3)(A).
22 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
20 15
VerDate Mar<15>2010
17:46 Sep 13, 2013
Jkt 229001
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 rule-comments@
sec.gov. Please include File Number SR–
MIAX–2013–42 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–MIAX–2013–42. 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
offices 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
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MIAX–
2013–42, and should be submitted on or
before October 7, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–22398 Filed 9–13–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70361; File No. SR–
NASDAQ–2013–114]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change to the Qualified
Market Maker Program Under Rule
7014, the Fees Assessed Under Rule
7015(g), and the Schedule of Fees and
Rebates Under Rule 7018(a)
September 10, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
29, 2013 The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ is proposing to the
Qualified Market Maker Program under
Rule 7014, the fees assessed under Rule
7015(g), and the its schedule of fees and
rebates for execution and routing of
orders for securities priced at $1 or more
under Rule 7018(a). NASDAQ will begin
assessing the fees effective September 1,
2013.
The text of the proposed rule change
is available at https://
nasdaq.cchwallstreet.com, at
NASDAQ’s principal office, and at the
Commission’s Public Reference Room.
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\16SEN1.SGM
16SEN1
Federal Register / Vol. 78, No. 179 / Monday, September 16, 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,
NASDAQ included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of those
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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
mstockstill on DSK4VPTVN1PROD with NOTICES
QMM Incentive Program
In November 2012,3 NASDAQ
introduced a market quality incentive
program under which a member may be
designated as a QMM with respect to
one or more of its market participant
identifiers (‘‘MPIDs’’) if:
• the member is not assessed any
‘‘Excess Order Fee’’ under Rule 7018
during the month; 4 and
• through such MPID the member
quotes at the national best bid or best
offer (‘‘NBBO’’) at least 25% of the time
during regular market hours 5 in an
average of at least 1,000 securities
during the month.6
3 Securities Exchange Act Release No. 68209
(November 9, 2012), 77 FR 69519 (November 19,
2012) (SR–NASDAQ–2012–126).
4 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.
5 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).
6 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.
VerDate Mar<15>2010
17:46 Sep 13, 2013
Jkt 229001
Thus, to be a QMM, a member must
make a significant contribution to
market quality by providing liquidity at
the NBBO in a large number of stocks
for a significant portion of the day. In
addition, the member must avoid
imposing the burdens on NASDAQ and
its market participants that may be
associated with excessive rates of entry
of orders away from the inside and/or
order cancellation. A QMM may be, but
is not required to be, a registered market
maker in any security; thus, the QMM
designation does not by itself impose a
two-sided quotation obligation or
convey any of the benefits associated
with being a registered market maker.
The designation does, however, reflect
the QMM’s commitment to provide
meaningful and consistent support to
market quality and price discovery by
extensive quoting at the NBBO in a large
number of securities. Thus, the program
is designed to attract liquidity both from
traditional market makers and from
other firms that are willing to commit
capital to support liquidity at the NBBO.
By providing incentives under the
program, NASDAQ hopes to provide
improved trading conditions for all
market participants through narrower
bid-ask spreads and increased depth of
liquidity available at the inside market.
In addition, the program reflects an
effort to use financial incentives to
encourage a wider variety of members,
including members that may be
characterized as high-frequency trading
firms, to make positive commitments to
promote market quality.
Currently, a member that is a QMM
with respect to a particular MPID (a
‘‘QMM MPID’’) is eligible to receive
certain financial benefits. These benefits
are described below:
• The QMM may receive an NBBO
Setter Incentive credit of $0.0005 with
respect to orders that qualify for the
NBBO Setter Incentive Program (i.e.,
displayed orders with a size of at least
one round lot that set the NBBO or join
another trading center at the NBBO) 7
and that are entered through the QMM
MPID. In order to receive an NBBO
Setter Incentive credit at the $0.0005
rate, the QMM must also have a volume
of liquidity provided through the QMM
MPID (as a percentage of Consolidated
Volume) 8 that exceeds the lesser of the
volume of liquidity provided through
such QMM MPID during the first month
in which the MPID qualified as a QMM
MPID (as a percentage of Consolidated
7 See
Rule 7014(f) and (g).
Volume’’ is the total consolidated
volume reported to all consolidated transaction
reporting plans by all exchanges and trade reporting
facilities.
8 ‘‘Consolidated
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
56963
Volume) or 1.0% of Consolidated
Volume.9 If a QMM does not satisfy
these volume requirements, it will
receive an NBBO Setter Incentive credit
of $0.0002 per share executed with
respect to orders that qualify for the
NBBO Setter Incentive Program.10
• The QMM receives a credit of
$0.0001 per share executed with respect
to all other displayed orders in
securities priced at $1 or more per share
that provide liquidity and that are
entered through a QMM MPID (in
addition to any credit payable under
Rule 7018).11 Designated Retail Orders
are not eligible to receive this additional
credit.
• For a number of shares not to
exceed the lower of the number of
shares of liquidity provided through a
QMM MPID or 20 million shares per
trading day (the ‘‘Numerical Cap’’),
NASDAQ has charged a fee of $0.0028
per share executed for orders in
securities priced at $1 or more per share
that access liquidity on the NASDAQ
Market Center and that are entered
through the same QMM MPID;
provided, however, that orders that
would otherwise be charged $0.0028 per
share executed under Rule 7018 have
not counted toward the Numerical Cap;
and provided further that after the first
month in which an MPID becomes a
QMM MPID, the QMM’s volume of
liquidity added, provided, and/or
routed through the QMM MPID during
the month (as a percentage of
Consolidated Volume) is not less than
0.05% lower than the volume of
liquidity added, provided, and/or
routed through such QMM MPID during
the first month in which the MPID
qualified as a QMM MPID (as a
percentage of Consolidated Volume).
For shares above the Numerical Cap,
NASDAQ has charged the rate otherwise
applicable under Rule 7018.
With regard to the $0.0028 per share
executed access fee paid by QMMs, as
described above, NASDAQ is proposing
to eliminate the Numerical Cap and
increase the charge for removing
liquidity from NASDAQ from $0.0028 to
$0.0029 per share executed for orders in
securities priced at $1 or more per share
that access liquidity on the NASDAQ
9 The QMM will also receive the $0.0005 per
share rate during the first month in which an MPID
becomes a QMM MPID.
10 Designated Retail Orders (as defined in Rule
7018) are not be eligible to receive an NBBO Setter
Incentive credit.
11 If the QMM also participates in NASDAQ
Investor Support Program (the ‘‘ISP’’) NASDAQ will
pay the greater of any applicable credit under the
ISP or the QMM program, but not a credit under
both programs.
E:\FR\FM\16SEN1.SGM
16SEN1
56964
Federal Register / Vol. 78, No. 179 / Monday, September 16, 2013 / Notices
Market Center and that are entered
through a QMM MPID.
mstockstill on DSK4VPTVN1PROD with NOTICES
NASDAQ adopted the $0.0028 access
fee in March 2013.12 The change
reduced the rate QMMs were paying
prior to the change from $0.0030 or
$0.0029 per share executed but limited
the number of shares on which the fee
was calculated to a number of shares not
to exceed the number of shares of
liquidity provided through a QMM
MPID.13 In adopting the lower rate
together with other new incentives,
NASDAQ noted that the proposed
changes to the program were intended
to encourage members to promote price
discovery and market quality by quoting
at the NBBO for a significant portion of
each day in a large number of securities,
thereby benefitting NASDAQ and other
investors by committing capital to
support the execution of orders.
NASDAQ subsequently limited the
number of shares eligible for the
incentive program’s access fee rate to
the lower of a number of shares not to
exceed the number of shares of liquidity
provided through a QMM MPID or 20
million shares per trading day.14
NASDAQ is now proposing to
increase the fee assessed to members,
but no longer restrict the number of
shares eligible for the lower rate.
NASDAQ believes that eliminating the
Numerical Cap will further incent
members to participate in the program
by eliminating any restriction on the
total number of shares eligible for the
program’s lower fee. NASDAQ notes
that the increase in the charge to
$0.0029 continues to represent a
reduction in the access fees that most
market participants are assessed under
Rule 7018. NASDAQ will continue to
require QMMs seeking to qualify for the
$0.0029 rate to have, after the first
month in which an MPID becomes a
QMM MPID, volume of liquidity added,
provided, and/or routed through the
QMM MPID during the month (as a
percentage of Consolidated Volume)
that is not less than 0.05% lower than
the volume of liquidity added,
provided, and/or routed through such
QMM MPID during the first month in
which the MPID qualified as a QMM
MPID (as a percentage of Consolidated
Volume).
12 Securities Exchange Act Release No. 68905
(February 12, 2013), 78 FR 11716 (February 19,
2013) (SR–NASDAQ–2013–023).
13 See Rules 7018(a)(1)–(3), which assess a fee of
$0.0030 or $0.0029 per share executed for orders
that access liquidity on the NASDAQ Market
Center.
14 Securities Exchange Act Release No. 69376
(April 15, 2013), 78 FR 23611 (April 19, 2013) (SR–
NASDAQ–2013–063).
VerDate Mar<15>2010
17:46 Sep 13, 2013
Jkt 229001
Amended Fees for TCP ITCH Data Feed
Pairs
The Exchange is proposing to increase
the fee assessed for use of TCP ITCH
data feed pairs to connect to the
NASDAQ System. TCP ITCH data feed
pairs are a type of port pair 15 to which
firms may subscribe to receive market
data through a private (i.e., not shared)
connection to NASDAQ. By contrast, a
firm may subscribe to a Multicast ITCH
data feed pair,16 which provides access
to a shared distribution of market data,
which is distributed to all subscribers
simultaneously. NASDAQ assesses a fee
of $500 per month for each port pair
used to connect to NASDAQ using
protocols other than Multicast ITCH.
Currently, subscription to a TCP ITCH
data feed pair is covered by this fee.
Unlike Multicast ITCH data, TCP ITCH
data requires substantially greater
hardware infrastructure to support
subscribers because NASDAQ must
support each individual TCP ITCH
connection, including the transmission
of the large volume of market data
through each port. By contrast,
NASDAQ transmits market data for
Multicast ITCH through a single point,
which is accessed by all subscribers. In
light of increased costs resulting from a
need to support the hardware and
support demands of the service, the
Exchange is proposing to increase the
fees for subscription to a TCP ITCH data
port from $500 per month, per port pair
to $750 per month, per port pair.
Changes to NASDAQ Market Center
Tiers
NASDAQ is proposing to modify
several tiers under which members may
receive credits with respect to orders
that provide liquidity. First, under Rule
7018(a)(1), NASDAQ provides credits to
member firms for their displayed
quotes/orders that provide liquidity in
securities listed on NASDAQ. The tiers
are based on various measurements of
providing liquidity. Currently, the
lowest credit NASDAQ provides is
$0.0020 per share executed. This tier is
the default if a member firm does not
fall within any of the other tiers of the
rule. NASDAQ is proposing to adopt a
new default tier under which members
would receive $0.0015 per share
executed, while imposing modest
volume requirements with respect to the
$0.0020 tier. Specifically, to qualify for
that tier, a member must have shares of
15 NASDAQ uses the term ‘‘data feed pair’’ herein
and in the rule as a more precise description of the
intended use and functionality of the port pair.
16 For a fee of $1,000 per month for softwarebased TotalView-ITCH or $2,500 per month for
combined software- and hardware-based TotalViewITCH.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
liquidity provided in all securities
during the month less than 0.10% of
Consolidated Volume during the
month,17 through one or more of its
Nasdaq Market Center MPIDs, including
a daily average volume of shares of
liquidity provided in securities listed on
an exchange other than NASDAQ of at
least 250,000. NASDAQ believes that
the change to the $0.0020 tier will
provide an incentive for members that
trade NASDAQ-listed securities on
NASDAQ to also use NASDAQ to trade
securities listed on other exchanges. In
addition, the reduction in the level of
the default credit will allow NASDAQ
to reduce costs in a period of persistent
low trading volumes in the cash equities
markets.
NASDAQ is also eliminating several
tiers under Rules 7018(a)(1)–(3), which
are tied to activity on the NASDAQ
Options Market and which are not used
significantly by market participants.
Specifically, NASDAQ is removing from
each subparagraph of Rule 7018(a) the
following credit tiers, together with
associated credits:
• member with (i) shares of liquidity
provided in all securities during the
month representing more than 0.10% of
Consolidated Volume during the month,
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 Nasdaq Options
Market MPIDs.
• member with (i) shares of liquidity
provided in all securities during the
month representing more than 1.0% of
Consolidated Volume during the month,
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 Nasdaq Options
Market MPIDs.
• member (i) with shares of liquidity
provided in all securities during the
month representing at least 0.05% of
Consolidated Volume during the month,
through one or more of its Nasdaq
Market Center MPIDs, and (ii) that
qualifies for the Penny Pilot Tier 4 NOM
Market Maker Rebate to Add Liquidity
under Chapter XV, Section 2 of the
Nasdaq Options Market rules during the
month through one or more of its
Nasdaq Options Market MPIDs.
• member (i) with shares of liquidity
provided in all securities during the
17 If the member has at least 0.10% of
Consolidated Volume during the month through
one or more of its Nasdaq Market Center MPIDs, it
would qualify for a credit of $0.0025 under Rule
7018(a)(1).
E:\FR\FM\16SEN1.SGM
16SEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 179 / Monday, September 16, 2013 / Notices
month representing at least 0.10% of
Consolidated Volume during the month,
through one or more of its Nasdaq
Market Center MPIDs, and (ii) that
qualifies for the Penny Pilot Tier 4 NOM
Market Maker Rebate to Add Liquidity
under Chapter XV, Section 2 of the
Nasdaq Options Market rules during the
month through one or more of its
Nasdaq Options Market MPIDs.
NASDAQ is modifying the eligibility
requirements for a tier found under each
subparagraph of Rule 7018(a).
Specifically, each of the identical tiers
currently provides two means to qualify
for a credit, which are based on the
liquidity provided by a member’s
Designated Retail Orders. Currently, the
tiers provide a:
• credit for displayed Designated
Retail Orders, if entered through an
MPID through which (i) at least 90% of
the shares of liquidity provided during
the month are provided through
Designated Retail Orders, or (ii) the
member provides shares of liquidity
through Designated Retail Orders that
represent at least 0.30% of Consolidated
Volume during the month and the
member qualifies for the Penny Pilot
Tier 4 Customer and Professional Rebate
to Add Liquidity under Chapter XV,
Section 2 of the Nasdaq Options Market
rules during the month through one or
more of its Nasdaq Options Market
MPIDs.
NASDAQ is removing the second
criteria from each of the tiers, which ties
eligibility for a credit to the volume of
liquidity provided through Designated
Retail Orders and the member’s
qualification for the Penny Pilot Tier 4
during the month through one or more
of its Nasdaq Options Market MPIDs. A
member will continue to qualify for the
credit if it meets the remaining criteria
focused on the extent to which the
member uses an MPID for Designated
Retail Orders.
NASDAQ is also clarifying language
in two credit tiers under each
subparagraph of Rule 7018(a). The
language is designed to align the text of
the tier with terms and definitions used
in the NASDAQ Options Market rules,
which are also referenced in the tiers.
Specifically, NASDAQ is amending:
• the tier that provides a credit to
members (i) with shares of liquidity
provided in all securities during the
month representing more than 0.15% of
Consolidated Volume during the month,
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 Nasdaq Option
VerDate Mar<15>2010
17:46 Sep 13, 2013
Jkt 229001
Market MPIDs. NASDAQ is deleting
language concerning the volume
calculation and replacing it with more
precise language that references the
NASDAQ Option Market rules.
NASDAQ is not changing how
eligibility for the tier is calculated in
any way.
• The tier that provides a credit to
members (i) with 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) that
qualifies for the Penny Pilot Tier 8
Customer and Professional Rebate to
Add Liquidity under Chapter XV,
Section 2 of the Nasdaq Options Market
rules during the month through one or
more of its Nasdaq Options Market
MPIDs. NASDAQ is adding, deleting
and rearranging language in the rule to
use more precise terms in references to
rebates under the NASDAQ Options
Market rules. NASDAQ is not changing
how eligibility for the tier is calculated
in any way.
Amended Fees for Execution and
Routing of Securities Listed on NYSE
NASDAQ is proposing to amend fees
assessed for routing orders in New York
Stock Exchange, Inc. (‘‘NYSE’’) listed
securities that execute at NYSE.
Currently, NASDAQ assesses a charge of
$0.0025 per share executed for DOTI,
STGY, SCAN, SKNY, SKIP, TFTY,
SAVE or SOLV orders executed at
NYSE, as well as LIST orders executed
at NYSE outside of an opening, closing,
or reopening process. NASDAQ
generally assesses a charge of $0.0030
per share executed for such orders
executed elsewhere.18 NASDAQ is
proposing to increase the charge
assessed for DOTI, STGY, SCAN, SKNY,
SKIP, LIST, TFTY, SAVE and SOLV
orders executed at NYSE to $0.0030 so
that it is consistent with the fee
generally charged for such order
routing.
NASDAQ is also proposing to
increase the fee assessed for execution
of MOPB and MOPP orders executed at
NYSE. Currently, NASDAQ assesses a
charge of $0.0027 per share executed for
MOPB or MOPP orders executed at
18 Members are charged $0.0005 per share
executed for TFTY orders that execute at venues
other than NYSE, NASDAQ OMX BX or NASDAQ
OMX PSX. This rate reflects the fact that the routing
table for TFTY orders is generally focused on lowcost execution venues. In addition, orders that
execute at NASDAQ OMX BX or NASDAQ OMX
PSX are generally assessed different fees than
orders executed at other venues. NASDAQ also
provides a credit of $0.0015 per share executed for
orders that add liquidity at the NYSE after routing.
See Rule 7018(a)(2).
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
56965
NYSE, and a charge of $0.0035 per share
executed for MOPB or MOPP orders
executed at venues other than NYSE.
NASDAQ is proposing to increase the
charge assessed for execution of MOPB
and MOPP orders executed at NYSE to
$0.0035 per share executed, so that it is
consistent with the fee assessed for such
orders executed at venues other than
NYSE.
2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,19 in
general, and with Sections 6(b)(4) and
6(b)(5) of the Act,20 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 changes to the QMM Program are
reasonable because they serve to
maintain an incentive structure
designed to benefit all market
participants by encouraging quoting at
or near the NBBO in a wide range of
securities. The QMM program is
intended to encourage members to
promote price discovery and market
quality by quoting at the NBBO for a
significant portion of each day in a large
number of securities, thereby benefitting
NASDAQ and other investors by
committing capital to support the
execution of orders. The proposed
changes to the program are intended to
further promote these goals by
eliminating the Numerical Cap, which
limited the number of shares eligible for
the reduced fee, while increasing the fee
a modest amount to offset the now
unlimited number of shares eligible for
the lower fee of the program.
Accordingly, NASDAQ hopes thereby to
maintain the benefits associated with
the QMM program while reducing its
cost, thereby making the program
sustainable in the longer term. In
addition, the elimination of the
Numerical Cap and the rate change are
consistent with an equitable allocation
of fees and not unfairly discriminatory
because they do not alter the eligibility
of QMMs to participate in the program
and receive associated benefits.
The proposed fee increase to TCP
ITCH data feed pairs under Rule 7015(g)
is reasonable because it reflects the
increased costs associated with offering
the connectivity option. NASDAQ notes
that it not raising the fee assessed for
19 15
20 15
E:\FR\FM\16SEN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
16SEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
56966
Federal Register / Vol. 78, No. 179 / Monday, September 16, 2013 / Notices
subscription to TCP ITCH to a level that
equals or exceeds the subscription fee
assessed for Multicast ITCH data
subscription, which requires less
hardware infrastructure and support
than TCP ITCH. NASDAQ is taking a
measured approach to increasing the fee
and may further increase the fee in the
future to more closely align the fee with
costs. The proposed fee is equitable and
not unfairly discriminatory because the
Exchange is assessing the fee equally
among subscribers to the service.
Moreover, the proposed fee is not
unfairly discriminatory as it enables the
Exchange to allocate the increased costs
of the connectivity option to those who
subscribe to the service. The Exchange
believes that the proposed fee for TCP
ITCH data port connectivity access
services will enable it to cover its costs
and earn an appropriate return on its
investment in market technology and
services.
The modified criteria for the $0.0020
credit tier for members active in
NASDAQ-listed securities is reasonable
because it imposes a modest
requirement to attain the credit. The
change is also reasonable because it
requires members that provide liquidity
in securities listed on NASDAQ to also
use NASDAQ for trading other
securities, thereby promoting greater use
of NASDAQ as a trading venue for such
securities and potentially enhancing the
level of liquidity provided in nonNASDAQ securities. The change is
consistent with an equitable allocation
of fees because the standards for the
$0.0020 credit tier requires a level of
liquidity provision that is less rigorous
than tiers that provide larger credits, yet
provides incentive for members to
provide liquidity sufficient to achieve a
larger credit than is available under the
new default $0.0015 credit tier. The new
criteria are not unreasonably
discriminatory because NASDAQ
believes that it will not be difficult for
members currently receiving the
$0.0020 credit to continue to qualify for
it if they wish to do so.
The new default tier of $0.0015 per
share executed is reasonable because
although it will result in a reduction of
credits for members not achieving other
tiers, it will provide a means of reducing
costs in a period of persistently low
trading volumes. In addition, the new
tier is consistent with an equitable
allocation of fees and not unreasonably
discriminatory because numerous tiers
remain in effect through which
members that support NASDAQ through
more extensive levels of liquidity
provision may receive higher credits.
Accordingly, the lower tier is paid with
respect to members whose participation
VerDate Mar<15>2010
17:46 Sep 13, 2013
Jkt 229001
in NASDAQ as liquidity providers is
limited. To the extent that such
members have opted to be more active
on other trading venues, it is likely that
they are receiving higher credits from
such venues and will therefore not be
significantly affected by the change on
NASDAQ.
The proposed deletions of the credit
tiers under the subparagraphs of Rule
7018(a) are reasonable because they
have not been significantly used by
market participants, and therefore have
not had the intended effect of attracting
order flow to NASDAQ. Elimination of
unused tiers is consistent with an
equitable allocation of fees and is not
unfairly discriminatory because no
members will be impacted by the
change.
Similarly, the elimination of the
optional criteria of tiers under each of
the subparagraphs Rule 7018(a), which
are tied to providing a certain level of
shares of liquidity through Designated
Retail Orders and qualifying for the
Penny Pilot Tier 4 during a given month
through one or more of its Nasdaq
Options Market MPIDs, is reasonable
because the optional criteria are not
significantly used by market
participants to qualify under the tiers.
As a consequence, the criteria have not
had the intended effect of attracting
order flow to NASDAQ. Therefore,
elimination of the unused criteria is
consistent with an equitable allocation
of fees and is not unfairly
discriminatory because no members will
be impacted by the change.
The change with respect to the
charges assessed for routing NYSE-listed
securities executed at NYSE is
reasonable because it harmonizes these
fees with the fees generally assessed for
routing to venues other than NYSE.
NASDAQ does not believe at this
juncture that fees assessed members for
routing NYSE-listed securities to the
NYSE should be lower than the fees
assessed members for routing such
securities to other markets other than
NYSE. The change is consistent with an
equitable allocation of fees because it is
allocated solely to members that use
NASDAQ’s routing services and opt to
use the specified routing strategies for
accessing NYSE. The change is not
unfairly discriminatory because it will
make the economics applicable to
executions on NYSE less disparate from
the fees applicable to executions on
other venues. Moreover, the change is
not discriminatory because it applies
equally to all members using the
specified routing strategies.
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
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.21 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 the
change to the QMM program may limit
the benefits of the program, the
incentive program in question remain in
place and is itself reflective of the need
for exchanges to offer significant
financial incentives to attract order
flow. The changes to routing fees do not
impose a burden on competition
because NASDAQ’s routing services are
optional and are the subject of
competition from other exchanges and
broker-dealers that offer routing
services, as well as the ability of
members to develop their own routing
capabilities. Finally, the changes to fee
tiers and access services fees, although
constituting fee increases, are being
made with respect to basic trading
services for which numerous substitutes
exist. Accordingly, if the changes are
unattractive to market participants, it is
likely that NASDAQ will lose market
share as a result. Accordingly, 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
Written comments were neither
solicited nor received.
21 15
E:\FR\FM\16SEN1.SGM
U.S.C. 78f(b)(8).
16SEN1
Federal Register / Vol. 78, No. 179 / Monday, September 16, 2013 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing change has become
effective pursuant to Section 19(b)(3)(A)
of the Act,22 and paragraph (f) 23 of Rule
19b–4, thereunder. 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:
mstockstill on DSK4VPTVN1PROD with NOTICES
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–2013–114 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–2013–114. 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
22 15
23 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
VerDate Mar<15>2010
17:46 Sep 13, 2013
Jkt 229001
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–2013–114 and should be
submitted on or before October 7, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–22401 Filed 9–13–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70358; File No. SR–FINRA–
2013–031]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Designation
of a Longer Period for Commission
Action on Proposed Rule Change
Relating to Participation on the
Alternative Display Facility
56967
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is September 15, 2013. The Commission
is extending this 45-day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider this proposed rule change,
comments received, and any response to
comments submitted by FINRA.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the Act,6
designates October 30, 2013 as the date
by which the Commission should either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–FINRA–2013–031).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–22399 Filed 9–13–13; 8:45 am]
BILLING CODE 8011–01–P
September 10, 2013.
On July 18, 2013, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend FINRA Rules 6271 and
6272 regarding the requirements for
members seeking registration as FINRA
Alternative Display Facility (‘‘ADF’’)
Market Participants. The proposed rule
change was published for comment in
the Federal Register on August 1, 2013.3
The Commission received one comment
letter in response to the proposed rule
change.4
Section 19(b)(2) of the Act 5 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 70048
(July 26, 2013), 78 FR 46652.
4 See Letter to Elizabeth M. Murphy, Secretary,
Commission, from David Harris, Chairman and
CEO, National Stock Exchange, Inc., dated
September 9, 2013.
5 15 U.S.C. 78s(b)(2).
1 15
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
Release No. 34–70364; File No. SR–EDGA–
2013–26]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Amendments
to the EDGA Exchange, Inc. Fee
Schedule
September 10, 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 August
30, 2013, EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
6 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
7 17
E:\FR\FM\16SEN1.SGM
16SEN1
]]>Agencies
[Federal Register Volume 78, Number 179 (Monday, September 16, 2013)]
[Notices]
[Pages 56962-56967]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22401]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70361; File No. SR-NASDAQ-2013-114]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
the Qualified Market Maker Program Under Rule 7014, the Fees Assessed
Under Rule 7015(g), and the Schedule of Fees and Rebates Under Rule
7018(a)
September 10, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 29, 2013 The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a 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.
---------------------------------------------------------------------------
\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 to the Qualified Market Maker Program under
Rule 7014, the fees assessed under Rule 7015(g), and the its schedule
of fees and rebates for execution and routing of orders for securities
priced at $1 or more under Rule 7018(a). NASDAQ will begin assessing
the fees effective September 1, 2013.
The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com, at NASDAQ's principal office, and at the
Commission's Public Reference Room.
[[Page 56963]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDAQ included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of those 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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
QMM Incentive Program
In November 2012,\3\ NASDAQ introduced a market quality incentive
program under which a member may be designated as a QMM with respect to
one or more of its market participant identifiers (``MPIDs'') if:
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release No. 68209 (November 9,
2012), 77 FR 69519 (November 19, 2012) (SR-NASDAQ-2012-126).
---------------------------------------------------------------------------
the member is not assessed any ``Excess Order Fee'' under
Rule 7018 during the month; \4\ and
---------------------------------------------------------------------------
\4\ 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.
---------------------------------------------------------------------------
through such MPID the member quotes at the national best
bid or best offer (``NBBO'') at least 25% of the time during regular
market hours \5\ in an average of at least 1,000 securities during the
month.\6\
---------------------------------------------------------------------------
\5\ 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).
\6\ 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.
---------------------------------------------------------------------------
Thus, to be a QMM, a member must make a significant contribution to
market quality by providing liquidity at the NBBO in a large number of
stocks for a significant portion of the day. In addition, the member
must avoid imposing the burdens on NASDAQ and its market participants
that may be associated with excessive rates of entry of orders away
from the inside and/or order cancellation. A QMM may be, but is not
required to be, a registered market maker in any security; thus, the
QMM designation does not by itself impose a two-sided quotation
obligation or convey any of the benefits associated with being a
registered market maker. The designation does, however, reflect the
QMM's commitment to provide meaningful and consistent support to market
quality and price discovery by extensive quoting at the NBBO in a large
number of securities. Thus, the program is designed to attract
liquidity both from traditional market makers and from other firms that
are willing to commit capital to support liquidity at the NBBO. By
providing incentives under the program, NASDAQ hopes to provide
improved trading conditions for all market participants through
narrower bid-ask spreads and increased depth of liquidity available at
the inside market. In addition, the program reflects an effort to use
financial incentives to encourage a wider variety of members, including
members that may be characterized as high-frequency trading firms, to
make positive commitments to promote market quality.
Currently, a member that is a QMM with respect to a particular MPID
(a ``QMM MPID'') is eligible to receive certain financial benefits.
These benefits are described below:
The QMM may receive an NBBO Setter Incentive credit of
$0.0005 with respect to orders that qualify for the NBBO Setter
Incentive Program (i.e., displayed orders with a size of at least one
round lot that set the NBBO or join another trading center at the NBBO)
\7\ and that are entered through the QMM MPID. In order to receive an
NBBO Setter Incentive credit at the $0.0005 rate, the QMM must also
have a volume of liquidity provided through the QMM MPID (as a
percentage of Consolidated Volume) \8\ that exceeds the lesser of the
volume of liquidity provided through such QMM MPID during the first
month in which the MPID qualified as a QMM MPID (as a percentage of
Consolidated Volume) or 1.0% of Consolidated Volume.\9\ If a QMM does
not satisfy these volume requirements, it will receive an NBBO Setter
Incentive credit of $0.0002 per share executed with respect to orders
that qualify for the NBBO Setter Incentive Program.\10\
---------------------------------------------------------------------------
\7\ See Rule 7014(f) and (g).
\8\ ``Consolidated Volume'' is the total consolidated volume
reported to all consolidated transaction reporting plans by all
exchanges and trade reporting facilities.
\9\ The QMM will also receive the $0.0005 per share rate during
the first month in which an MPID becomes a QMM MPID.
\10\ Designated Retail Orders (as defined in Rule 7018) are not
be eligible to receive an NBBO Setter Incentive credit.
---------------------------------------------------------------------------
The QMM receives a credit of $0.0001 per share executed
with respect to all other displayed orders in securities priced at $1
or more per share that provide liquidity and that are entered through a
QMM MPID (in addition to any credit payable under Rule 7018).\11\
Designated Retail Orders are not eligible to receive this additional
credit.
---------------------------------------------------------------------------
\11\ If the QMM also participates in NASDAQ Investor Support
Program (the ``ISP'') NASDAQ will pay the greater of any applicable
credit under the ISP or the QMM program, but not a credit under both
programs.
---------------------------------------------------------------------------
For a number of shares not to exceed the lower of the
number of shares of liquidity provided through a QMM MPID or 20 million
shares per trading day (the ``Numerical Cap''), NASDAQ has charged a
fee of $0.0028 per share executed for orders in securities priced at $1
or more per share that access liquidity on the NASDAQ Market Center and
that are entered through the same QMM MPID; provided, however, that
orders that would otherwise be charged $0.0028 per share executed under
Rule 7018 have not counted toward the Numerical Cap; and provided
further that after the first month in which an MPID becomes a QMM MPID,
the QMM's volume of liquidity added, provided, and/or routed through
the QMM MPID during the month (as a percentage of Consolidated Volume)
is not less than 0.05% lower than the volume of liquidity added,
provided, and/or routed through such QMM MPID during the first month in
which the MPID qualified as a QMM MPID (as a percentage of Consolidated
Volume). For shares above the Numerical Cap, NASDAQ has charged the
rate otherwise applicable under Rule 7018.
With regard to the $0.0028 per share executed access fee paid by QMMs,
as described above, NASDAQ is proposing to eliminate the Numerical Cap
and increase the charge for removing liquidity from NASDAQ from $0.0028
to $0.0029 per share executed for orders in securities priced at $1 or
more per share that access liquidity on the NASDAQ
[[Page 56964]]
Market Center and that are entered through a QMM MPID.
NASDAQ adopted the $0.0028 access fee in March 2013.\12\ The change
reduced the rate QMMs were paying prior to the change from $0.0030 or
$0.0029 per share executed but limited the number of shares on which
the fee was calculated to a number of shares not to exceed the number
of shares of liquidity provided through a QMM MPID.\13\ In adopting the
lower rate together with other new incentives, NASDAQ noted that the
proposed changes to the program were intended to encourage members to
promote price discovery and market quality by quoting at the NBBO for a
significant portion of each day in a large number of securities,
thereby benefitting NASDAQ and other investors by committing capital to
support the execution of orders. NASDAQ subsequently limited the number
of shares eligible for the incentive program's access fee rate to the
lower of a number of shares not to exceed the number of shares of
liquidity provided through a QMM MPID or 20 million shares per trading
day.\14\
---------------------------------------------------------------------------
\12\ Securities Exchange Act Release No. 68905 (February 12,
2013), 78 FR 11716 (February 19, 2013) (SR-NASDAQ-2013-023).
\13\ See Rules 7018(a)(1)-(3), which assess a fee of $0.0030 or
$0.0029 per share executed for orders that access liquidity on the
NASDAQ Market Center.
\14\ Securities Exchange Act Release No. 69376 (April 15, 2013),
78 FR 23611 (April 19, 2013) (SR-NASDAQ-2013-063).
---------------------------------------------------------------------------
NASDAQ is now proposing to increase the fee assessed to members,
but no longer restrict the number of shares eligible for the lower
rate. NASDAQ believes that eliminating the Numerical Cap will further
incent members to participate in the program by eliminating any
restriction on the total number of shares eligible for the program's
lower fee. NASDAQ notes that the increase in the charge to $0.0029
continues to represent a reduction in the access fees that most market
participants are assessed under Rule 7018. NASDAQ will continue to
require QMMs seeking to qualify for the $0.0029 rate to have, after the
first month in which an MPID becomes a QMM MPID, volume of liquidity
added, provided, and/or routed through the QMM MPID during the month
(as a percentage of Consolidated Volume) that is not less than 0.05%
lower than the volume of liquidity added, provided, and/or routed
through such QMM MPID during the first month in which the MPID
qualified as a QMM MPID (as a percentage of Consolidated Volume).
Amended Fees for TCP ITCH Data Feed Pairs
The Exchange is proposing to increase the fee assessed for use of
TCP ITCH data feed pairs to connect to the NASDAQ System. TCP ITCH data
feed pairs are a type of port pair \15\ to which firms may subscribe to
receive market data through a private (i.e., not shared) connection to
NASDAQ. By contrast, a firm may subscribe to a Multicast ITCH data feed
pair,\16\ which provides access to a shared distribution of market
data, which is distributed to all subscribers simultaneously. NASDAQ
assesses a fee of $500 per month for each port pair used to connect to
NASDAQ using protocols other than Multicast ITCH. Currently,
subscription to a TCP ITCH data feed pair is covered by this fee.
Unlike Multicast ITCH data, TCP ITCH data requires substantially
greater hardware infrastructure to support subscribers because NASDAQ
must support each individual TCP ITCH connection, including the
transmission of the large volume of market data through each port. By
contrast, NASDAQ transmits market data for Multicast ITCH through a
single point, which is accessed by all subscribers. In light of
increased costs resulting from a need to support the hardware and
support demands of the service, the Exchange is proposing to increase
the fees for subscription to a TCP ITCH data port from $500 per month,
per port pair to $750 per month, per port pair.
---------------------------------------------------------------------------
\15\ NASDAQ uses the term ``data feed pair'' herein and in the
rule as a more precise description of the intended use and
functionality of the port pair.
\16\ For a fee of $1,000 per month for software-based TotalView-
ITCH or $2,500 per month for combined software- and hardware-based
TotalView-ITCH.
---------------------------------------------------------------------------
Changes to NASDAQ Market Center Tiers
NASDAQ is proposing to modify several tiers under which members may
receive credits with respect to orders that provide liquidity. First,
under Rule 7018(a)(1), NASDAQ provides credits to member firms for
their displayed quotes/orders that provide liquidity in securities
listed on NASDAQ. The tiers are based on various measurements of
providing liquidity. Currently, the lowest credit NASDAQ provides is
$0.0020 per share executed. This tier is the default if a member firm
does not fall within any of the other tiers of the rule. NASDAQ is
proposing to adopt a new default tier under which members would receive
$0.0015 per share executed, while imposing modest volume requirements
with respect to the $0.0020 tier. Specifically, to qualify for that
tier, a member must have shares of liquidity provided in all securities
during the month less than 0.10% of Consolidated Volume during the
month,\17\ through one or more of its Nasdaq Market Center MPIDs,
including a daily average volume of shares of liquidity provided in
securities listed on an exchange other than NASDAQ of at least 250,000.
NASDAQ believes that the change to the $0.0020 tier will provide an
incentive for members that trade NASDAQ-listed securities on NASDAQ to
also use NASDAQ to trade securities listed on other exchanges. In
addition, the reduction in the level of the default credit will allow
NASDAQ to reduce costs in a period of persistent low trading volumes in
the cash equities markets.
---------------------------------------------------------------------------
\17\ If the member has at least 0.10% of Consolidated Volume
during the month through one or more of its Nasdaq Market Center
MPIDs, it would qualify for a credit of $0.0025 under Rule
7018(a)(1).
---------------------------------------------------------------------------
NASDAQ is also eliminating several tiers under Rules 7018(a)(1)-
(3), which are tied to activity on the NASDAQ Options Market and which
are not used significantly by market participants. Specifically, NASDAQ
is removing from each subparagraph of Rule 7018(a) the following credit
tiers, together with associated credits:
member with (i) shares of liquidity provided in all
securities during the month representing more than 0.10% of
Consolidated Volume during the month, 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 Nasdaq Options Market MPIDs.
member with (i) shares of liquidity provided in all
securities during the month representing more than 1.0% of Consolidated
Volume during the month, 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 Nasdaq Options Market MPIDs.
member (i) with shares of liquidity provided in all
securities during the month representing at least 0.05% of Consolidated
Volume during the month, through one or more of its Nasdaq Market
Center MPIDs, and (ii) that qualifies for the Penny Pilot Tier 4 NOM
Market Maker Rebate to Add Liquidity under Chapter XV, Section 2 of the
Nasdaq Options Market rules during the month through one or more of its
Nasdaq Options Market MPIDs.
member (i) with shares of liquidity provided in all
securities during the
[[Page 56965]]
month representing at least 0.10% of Consolidated Volume during the
month, through one or more of its Nasdaq Market Center MPIDs, and (ii)
that qualifies for the Penny Pilot Tier 4 NOM Market Maker Rebate to
Add Liquidity under Chapter XV, Section 2 of the Nasdaq Options Market
rules during the month through one or more of its Nasdaq Options Market
MPIDs.
NASDAQ is modifying the eligibility requirements for a tier found
under each subparagraph of Rule 7018(a). Specifically, each of the
identical tiers currently provides two means to qualify for a credit,
which are based on the liquidity provided by a member's Designated
Retail Orders. Currently, the tiers provide a:
credit for displayed Designated Retail Orders, if entered
through an MPID through which (i) at least 90% of the shares of
liquidity provided during the month are provided through Designated
Retail Orders, or (ii) the member provides shares of liquidity through
Designated Retail Orders that represent at least 0.30% of Consolidated
Volume during the month and the member qualifies for the Penny Pilot
Tier 4 Customer and Professional Rebate to Add Liquidity under Chapter
XV, Section 2 of the Nasdaq Options Market rules during the month
through one or more of its Nasdaq Options Market MPIDs.
NASDAQ is removing the second criteria from each of the tiers, which
ties eligibility for a credit to the volume of liquidity provided
through Designated Retail Orders and the member's qualification for the
Penny Pilot Tier 4 during the month through one or more of its Nasdaq
Options Market MPIDs. A member will continue to qualify for the credit
if it meets the remaining criteria focused on the extent to which the
member uses an MPID for Designated Retail Orders.
NASDAQ is also clarifying language in two credit tiers under each
subparagraph of Rule 7018(a). The language is designed to align the
text of the tier with terms and definitions used in the NASDAQ Options
Market rules, which are also referenced in the tiers. Specifically,
NASDAQ is amending:
the tier that provides a credit to members (i) with shares
of liquidity provided in all securities during the month representing
more than 0.15% of Consolidated Volume during the month, 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 Nasdaq Option Market
MPIDs. NASDAQ is deleting language concerning the volume calculation
and replacing it with more precise language that references the NASDAQ
Option Market rules. NASDAQ is not changing how eligibility for the
tier is calculated in any way.
The tier that provides a credit to members (i) with 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) that qualifies for the
Penny Pilot Tier 8 Customer and Professional Rebate to Add Liquidity
under Chapter XV, Section 2 of the Nasdaq Options Market rules during
the month through one or more of its Nasdaq Options Market MPIDs.
NASDAQ is adding, deleting and rearranging language in the rule to use
more precise terms in references to rebates under the NASDAQ Options
Market rules. NASDAQ is not changing how eligibility for the tier is
calculated in any way.
Amended Fees for Execution and Routing of Securities Listed on NYSE
NASDAQ is proposing to amend fees assessed for routing orders in
New York Stock Exchange, Inc. (``NYSE'') listed securities that execute
at NYSE. Currently, NASDAQ assesses a charge of $0.0025 per share
executed for DOTI, STGY, SCAN, SKNY, SKIP, TFTY, SAVE or SOLV orders
executed at NYSE, as well as LIST orders executed at NYSE outside of an
opening, closing, or reopening process. NASDAQ generally assesses a
charge of $0.0030 per share executed for such orders executed
elsewhere.\18\ NASDAQ is proposing to increase the charge assessed for
DOTI, STGY, SCAN, SKNY, SKIP, LIST, TFTY, SAVE and SOLV orders executed
at NYSE to $0.0030 so that it is consistent with the fee generally
charged for such order routing.
---------------------------------------------------------------------------
\18\ Members are charged $0.0005 per share executed for TFTY
orders that execute at venues other than NYSE, NASDAQ OMX BX or
NASDAQ OMX PSX. This rate reflects the fact that the routing table
for TFTY orders is generally focused on low-cost execution venues.
In addition, orders that execute at NASDAQ OMX BX or NASDAQ OMX PSX
are generally assessed different fees than orders executed at other
venues. NASDAQ also provides a credit of $0.0015 per share executed
for orders that add liquidity at the NYSE after routing. See Rule
7018(a)(2).
---------------------------------------------------------------------------
NASDAQ is also proposing to increase the fee assessed for execution
of MOPB and MOPP orders executed at NYSE. Currently, NASDAQ assesses a
charge of $0.0027 per share executed for MOPB or MOPP orders executed
at NYSE, and a charge of $0.0035 per share executed for MOPB or MOPP
orders executed at venues other than NYSE. NASDAQ is proposing to
increase the charge assessed for execution of MOPB and MOPP orders
executed at NYSE to $0.0035 per share executed, so that it is
consistent with the fee assessed for such orders executed at venues
other than NYSE.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\19\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\20\ 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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f.
\20\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The changes to the QMM Program are reasonable because they serve to
maintain an incentive structure designed to benefit all market
participants by encouraging quoting at or near the NBBO in a wide range
of securities. The QMM program is intended to encourage members to
promote price discovery and market quality by quoting at the NBBO for a
significant portion of each day in a large number of securities,
thereby benefitting NASDAQ and other investors by committing capital to
support the execution of orders. The proposed changes to the program
are intended to further promote these goals by eliminating the
Numerical Cap, which limited the number of shares eligible for the
reduced fee, while increasing the fee a modest amount to offset the now
unlimited number of shares eligible for the lower fee of the program.
Accordingly, NASDAQ hopes thereby to maintain the benefits associated
with the QMM program while reducing its cost, thereby making the
program sustainable in the longer term. In addition, the elimination of
the Numerical Cap and the rate change are consistent with an equitable
allocation of fees and not unfairly discriminatory because they do not
alter the eligibility of QMMs to participate in the program and receive
associated benefits.
The proposed fee increase to TCP ITCH data feed pairs under Rule
7015(g) is reasonable because it reflects the increased costs
associated with offering the connectivity option. NASDAQ notes that it
not raising the fee assessed for
[[Page 56966]]
subscription to TCP ITCH to a level that equals or exceeds the
subscription fee assessed for Multicast ITCH data subscription, which
requires less hardware infrastructure and support than TCP ITCH. NASDAQ
is taking a measured approach to increasing the fee and may further
increase the fee in the future to more closely align the fee with
costs. The proposed fee is equitable and not unfairly discriminatory
because the Exchange is assessing the fee equally among subscribers to
the service. Moreover, the proposed fee is not unfairly discriminatory
as it enables the Exchange to allocate the increased costs of the
connectivity option to those who subscribe to the service. The Exchange
believes that the proposed fee for TCP ITCH data port connectivity
access services will enable it to cover its costs and earn an
appropriate return on its investment in market technology and services.
The modified criteria for the $0.0020 credit tier for members
active in NASDAQ-listed securities is reasonable because it imposes a
modest requirement to attain the credit. The change is also reasonable
because it requires members that provide liquidity in securities listed
on NASDAQ to also use NASDAQ for trading other securities, thereby
promoting greater use of NASDAQ as a trading venue for such securities
and potentially enhancing the level of liquidity provided in non-NASDAQ
securities. The change is consistent with an equitable allocation of
fees because the standards for the $0.0020 credit tier requires a level
of liquidity provision that is less rigorous than tiers that provide
larger credits, yet provides incentive for members to provide liquidity
sufficient to achieve a larger credit than is available under the new
default $0.0015 credit tier. The new criteria are not unreasonably
discriminatory because NASDAQ believes that it will not be difficult
for members currently receiving the $0.0020 credit to continue to
qualify for it if they wish to do so.
The new default tier of $0.0015 per share executed is reasonable
because although it will result in a reduction of credits for members
not achieving other tiers, it will provide a means of reducing costs in
a period of persistently low trading volumes. In addition, the new tier
is consistent with an equitable allocation of fees and not unreasonably
discriminatory because numerous tiers remain in effect through which
members that support NASDAQ through more extensive levels of liquidity
provision may receive higher credits. Accordingly, the lower tier is
paid with respect to members whose participation in NASDAQ as liquidity
providers is limited. To the extent that such members have opted to be
more active on other trading venues, it is likely that they are
receiving higher credits from such venues and will therefore not be
significantly affected by the change on NASDAQ.
The proposed deletions of the credit tiers under the subparagraphs
of Rule 7018(a) are reasonable because they have not been significantly
used by market participants, and therefore have not had the intended
effect of attracting order flow to NASDAQ. Elimination of unused tiers
is consistent with an equitable allocation of fees and is not unfairly
discriminatory because no members will be impacted by the change.
Similarly, the elimination of the optional criteria of tiers under
each of the subparagraphs Rule 7018(a), which are tied to providing a
certain level of shares of liquidity through Designated Retail Orders
and qualifying for the Penny Pilot Tier 4 during a given month through
one or more of its Nasdaq Options Market MPIDs, is reasonable because
the optional criteria are not significantly used by market participants
to qualify under the tiers. As a consequence, the criteria have not had
the intended effect of attracting order flow to NASDAQ. Therefore,
elimination of the unused criteria is consistent with an equitable
allocation of fees and is not unfairly discriminatory because no
members will be impacted by the change.
The change with respect to the charges assessed for routing NYSE-
listed securities executed at NYSE is reasonable because it harmonizes
these fees with the fees generally assessed for routing to venues other
than NYSE. NASDAQ does not believe at this juncture that fees assessed
members for routing NYSE-listed securities to the NYSE should be lower
than the fees assessed members for routing such securities to other
markets other than NYSE. The change is consistent with an equitable
allocation of fees because it is allocated solely to members that use
NASDAQ's routing services and opt to use the specified routing
strategies for accessing NYSE. The change is not unfairly
discriminatory because it will make the economics applicable to
executions on NYSE less disparate from the fees applicable to
executions on other venues. Moreover, the change is not discriminatory
because it applies equally to all members using the specified routing
strategies.
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.\21\ 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 the change to the QMM
program may limit the benefits of the program, the incentive program in
question remain in place and is itself reflective of the need for
exchanges to offer significant financial incentives to attract order
flow. The changes to routing fees do not impose a burden on competition
because NASDAQ's routing services are optional and are the subject of
competition from other exchanges and broker-dealers that offer routing
services, as well as the ability of members to develop their own
routing capabilities. Finally, the changes to fee tiers and access
services fees, although constituting fee increases, are being made with
respect to basic trading services for which numerous substitutes exist.
Accordingly, if the changes are unattractive to market participants, it
is likely that NASDAQ will lose market share as a result. Accordingly,
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.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
[[Page 56967]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing change has become effective pursuant to Section
19(b)(3)(A) of the Act,\22\ and paragraph (f) \23\ of Rule 19b-4,
thereunder. 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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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-2013-114 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-2013-114. 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-2013-114 and should
be submitted on or before October 7, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22401 Filed 9-13-13; 8:45 am]
BILLING CODE 8011-01-P
