Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Modifications to Fees and Rebates Under Rules 7014 and 7018, 69512-69516 [2013-27626]

Download as PDF 69512 Federal Register / Vol. 78, No. 223 / Tuesday, November 19, 2013 / Notices forth in sections A, B, and C below, of the most significant parts of such statements. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70860; File No. SR– NASDAQ–2013–138] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Modifications to Fees and Rebates Under Rules 7014 and 7018 November 13, 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 November 1, 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. TKELLEY on DSK3SPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NASDAQ proposes to make modifications to its Qualified Market Maker (‘‘QMM’’) and NBBO Setter Incentive pricing incentive programs under Rule 7014 and the pricing for its Retail Price Improvement (‘‘RPI’’) program under Rule 7018(g), and to make other changes to NASDAQ’s schedule of fees and credits applicable to execution and routing of orders in securities priced at $1 or more per share. NASDAQ proposes to implement the proposed rule change on November 1, 2013. The text of the proposed rule change is available on the Exchange’s Web site at http:// nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, 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 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 17:21 Nov 18, 2013 Jkt 232001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose QMM and NBBO Setter Incentive Programs Under NASDAQ’s QMM Program, 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; 3 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 4 in an average of at least 1,000 securities per day during the month.5 A member that is a QMM with respect to a particular MPID (a ‘‘QMM MPID’’) is eligible to receive certain financial benefits, as fully described in Rule 7014. One of these benefits pertains to the credits available under NASDAQ’s NBBO Setter Incentive Program. Under that 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. The NBBO Setter Incentive credit is paid on a monthly basis, and the amount is determined by multiplying 3 Rule 7018(m). In 2012, 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 (other than a Designated Retail Order, as defined in Rule 7018) 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. PO 00000 Frm 00151 Fmt 4703 Sfmt 4703 the applicable rate by the number of shares of displayed liquidity provided to which a particular rate applies.6 Currently, a member receives an NBBO Setter Incentive credit at a $0.0005 rate 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) and that are entered through a QMM MPID; provided that the QMM also has a volume of liquidity provided through the QMM MPID (as a percentage of Consolidated Volume 7) 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.8 If a QMM does not satisfy these volume requirements, it receives an NBBO Setter Incentive credit of $0.0002 per share executed with respect to orders that qualify for the NBBO Setter Incentive Program. NASDAQ is proposing to modify the program to eliminate the $0.0005 credit, such that a credit of $0.0002 per share executed would be paid with respect to all orders entered through a QMM MPID that displayed a quantity of at least one round lot at the time of execution and either established the NBBO or was the first order posted on NASDAQ that had the same price as an order posted at another trading center with a protected quotation that established the NBBO. The change reflects ongoing efforts to reduce costs in a period of persistent low trading volumes. Retail Price Improvement Program Pricing Under the RPI Program, a member (or a division thereof) approved by the Exchange to participate in the program (a ‘‘Retail Member Organization’’ or ‘‘RMO’’) may submit designated ‘‘Retail Orders’’ 9 for the purpose of seeking 6 The credit is in addition to any other credit for which the member may qualify; provided, however, that if a QMM is eligible to receive both an NBBO Setter Incentive credit and a credit under NASDAQ’s Investor Support Program, it will receive the larger of these two credits but not both. In addition, a member is not eligible to receive an NBBO Setter Incentive credit with respect to a Designated Retail Order. 7 ‘‘Consolidated Volume’’ means the consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month. 8 QMMs have also received the $0.0005 per share rate during the first month in which an MPID becomes a QMM MPID. 9 A Retail Order is defined in NASDAQ Rule 4780(a)(2) as an agency or riskless principal order that originates from a natural person and is submitted to Nasdaq by a Retail Member E:\FR\FM\19NON1.SGM 19NON1 Federal Register / Vol. 78, No. 223 / Tuesday, November 19, 2013 / Notices price improvement. All NASDAQ members may enter retail price improvement orders (‘‘RPI Orders’’),10 a form of non-displayed orders that are priced more aggressively than the Protected NBBO by at least $0.001 per share, for the purpose of offering such price improvement. RMOs may use two types of Retail Order. A Type 1 Retail Order is eligible to execute only against RPI Orders and other orders (such as midpoint pegged orders) that will provide price improvement. Type 2 Retail Orders interact first with available RPI Orders and other price improving orders, and then are eligible to access non-price improving liquidity on the NASDAQ book and to route to other trading venues if so designated. NASDAQ currently offers a rebate of $0.0025 per share executed to RMOs for Retail Orders that execute against RPI Orders or other orders providing price improvement with respect to the NBBO. NASDAQ is proposing to reduce this rebate to $0.0005 per share executed. For RPI Orders that provide liquidity, NASDAQ currently charges a fee of $0.0020 per share executed, which NASDAQ proposes to reduce to $0.0010 per share executed. Other charges with respect to the program remain unchanged. The change is designed to eliminate ‘‘inverted’’ pricing that was introduced at the commencement of the program, under which Retail Orders were paid a credit that exceeded the charge assessed against RPI Orders. TKELLEY on DSK3SPTVN1PROD with NOTICES Other Fee Changes Currently, NASDAQ provides a credit of $0.0029 per share executed for displayed orders that provide liquidity if a member (i) has shares of liquidity provided in all securities during the month representing more than 0.15% of Consolidated Volume during the month, through one or more of its Nasdaq Market Center MPIDs, and (ii) Total Volume, as defined in Chapter XV, Section 2 of the Nasdaq Options Market (‘‘NOM’’) rules,11 of 100,000 or more Organization, provided that no change is made to the terms of the order with respect to price (except in the case that a market order is changed to a marketable limit order) or side of market and the order does not originate from a trading algorithm or any other computerized methodology. 10 A Retail Price Improvement Order is defined in NASDAQ Rule 4780(a)(3) as consisting of nondisplayed liquidity on NASDAQ that is priced better than the Protected NBBO by at least $0.001 and that is identified as such. 11 ‘‘Total Volume’’ is defined as Customer, Professional, Firm, Broker-Dealer, Non-NOM Market Maker and NOM Market Maker volume in Penny Pilot Options and Non-Penny Pilot Options that either adds or removes liquidity on NOM. The term ‘‘Customer’’ applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing VerDate Mar<15>2010 17:21 Nov 18, 2013 Jkt 232001 contracts per day executed during the month through one or more of its NOM MPIDs. NASDAQ is proposing a new tier under which it will also provide a credit of $0.0029 per share executed for displayed orders that provide liquidity if a member (i) has shares of liquidity provided in all securities during the month representing more than 0.10% of Consolidated Volume during the month, through one or more of its Nasdaq Market Center MPIDs, and (ii) adds Total NOM Market Maker Volume, as defined in Chapter XV, Section 2 of the NOM rules, of 90,000 or more contracts per day executed during the month through one or more of its NOM MPIDs. Thus, as compared with the current tier, the new tier would be available to members that are NOM Market Makers and would require a lower Consolidated Volume, but would require volume on NOM that adds liquidity. Similarly, NASDAQ is amending an existing tier, under which NASDAQ provides a credit of $0.0030 per share executed for displayed orders that provide liquidity if a member (i) has shares of liquidity provided in all securities during the month representing at least 0.45% of Consolidated Volume during the month, through one or more of its Nasdaq Market Center MPIDs, and (ii) qualifies for the Penny Pilot Tier 8 Customer and Professional Rebate to Add Liquidity under Chapter XV, Section 2 of the NOM rules during the month through one or more of its NOM MPIDs. A NOM Participant may qualify for the Tier 8 Customer and Professional Rebate if it (i) has Total Volume of 200,000 or more contracts per day in a month, of which 70,000 or more contracts per day in a month are Customer and/or Professional liquidity, or (ii) adds Customer and/or Professional liquidity of 1.00% or more of national customer volume in multiply-listed equity and ETF options Corporation (‘‘OCC’’) that is not for the account of broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Chapter I, Section 1(a)(48) of the NOM Rules). The term ‘‘Professional’’ means any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s) pursuant to Chapter I, Section 1(a)(48). The term ‘‘Non-NOM Market Maker’’ means a registered market maker on another options exchange that is not a NOM Market Maker. The term ‘‘NOM Market Maker’’ means a Participant that has registered as a Market Maker on NOM pursuant to Chapter VII, Section 2 of the NOM Rules, and must also remain in good standing pursuant to Chapter VII, Section 4 of the NOM Rules. The term ‘‘Firm’’ applies to any transaction that is identified by a Participant for clearing in the Firm range at OCC. The term ‘‘Broker-Dealer’’ applies to any transaction that is not subject to any of the other transaction fees applicable within a particular category. PO 00000 Frm 00152 Fmt 4703 Sfmt 4703 69513 classes in a month.12 NASDAQ is proposing to modify the criterion for this tier pertaining to Consolidated Volume by reducing the required percentage from 0.45% to 0.40%. As with existing tiers that require participation in both the Nasdaq Market Center and NOM, these tiers recognize the prevalence of trading in which members simultaneously trade different asset classes within the same strategy. Because cash equities and options markets are linked, with liquidity and trading patterns on one market affecting those on the other, NASDAQ believes that pricing incentives that encourage market participant activity in NOM also support price discovery and liquidity provision in the Nasdaq Market Center. The changes enhance these incentives by creating a new tier and reducing the requirement for participation in another existing tier. For members trading securities listed on NASDAQ, NASDAQ currently pays a rebate of $0.0020 per share executed for a member with shares of liquidity provided in all securities during the month representing less than 0.10% of Consolidated Volume, provided that the member provides a daily average of at least 250,000 shares of liquidity in securities listed on an exchange other than NASDAQ. Without modifying the existing criteria, NASDAQ is proposing to make this tier also available to any member that routes a daily average volume of at least 10,000 shares during the month using the QDRK routing strategy. The modified tier will also apply only to trading of securities listed on NASDAQ. QDRK is a routing option under which orders check the System for available shares and simultaneously route the remaining shares to destinations on the System routing table that are not posting Protected Quotations within the meaning of Regulation NMS.13 Thus, the strategy is generally used to route to dark pools. Through the proposed change, NASDAQ hopes to (i) encourage greater use of its router and (ii) allow the smaller firms that generally use exchange-provided routing to receive a higher rebate than would otherwise by the case as a means of encouraging them to provide greater liquidity in securities listed on NASDAQ. 12 Effective November 1, 2013, NOM eliminated an additional prong, under which a NOM Participant could qualify for Tier 8 if it had Total Volume of 325,000 or more contracts per day in a month. SR–NASDAQ–2013–136 (October 30, 2013). 13 If shares remain un-executed after routing, they are posted on the book. Once on the book, should the order subsequently be locked or crossed by another market center, the System will not route the order to the locking or crossing market center. E:\FR\FM\19NON1.SGM 19NON1 69514 Federal Register / Vol. 78, No. 223 / Tuesday, November 19, 2013 / Notices Finally, NASDAQ is proposing to eliminate an existing pricing tier for Designated Retail Orders. A Designated Retail Order is defined as an agency or riskless principal 14 order that originates from a natural person and is submitted to NASDAQ by a member that designates it pursuant to Rule 7018, provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. Currently, if a member enters Designated Retail Orders through an MPID through which (i) at least 90% of the shares of liquidity provided during the month are provided through Designated Retail Orders, and (ii) the member accesses, provides, or routes shares of liquidity that represent at least 0.10% of Consolidated Volume during the month, the member receives a credit of $0.0034 per share executed for Designated Retail Orders that provide liquidity if they are displayed orders. For all other Designated Retail Orders that are displayed orders and that provide liquidity, the credit is $0.0033 per share executed. Under the proposed change, the $0.0034 per share executed tier will be eliminated, so that the credit will be $0.0033 per share executed with respect to all Designated Retail Orders. In recent months, no market participants have qualified for this tier, so NASDAQ believes that it can be eliminated with no impact on member fees and credits. TKELLEY on DSK3SPTVN1PROD with NOTICES 2. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,15 in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,16 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 change with respect to the NBBO Setter Incentive credit paid to QMMs is reasonable because it merely serves to limit the extent of the incentives 14 To qualify as a Designated Retail Order, a riskless principal order must satisfy the criteria set forth in FINRA Rule 5320.03. These criteria include that that the member maintain supervisory systems to reconstruct, in a time-sequenced manner, all orders that are entered on a riskless principal basis; and the member submits a report, contemporaneously with the execution of the facilitated order, that identifies the trade as riskless principal. 15 15 U.S.C. 78f. 16 15 U.S.C. 78f(b)(4) and (5). VerDate Mar<15>2010 17:21 Nov 18, 2013 Jkt 232001 associated with the programs, thereby causing the credits received by program participants to become more consistent with credits received by members that are not participants, while maintaining an incentive structure designed to benefit all market participants by encouraging quoting at or near the NBBO in a wide range of securities. NASDAQ hopes thereby to maintain the benefits associated with the programs while reducing their costs and making the programs sustainable in the longer term. The change is also reasonable because it does not alter the fact that QMMs continue to be provided a discount as compared with other members, thereby resulting in lower overall fees for QMMs. The change is consistent with an equitable allocation of fees because it maintains, but reduces the cost of, an incentive designed to benefit all market participants by encouraging members to quote at the NBBO in a significant number of securities and to allow NASDAQ to set or join the NBBO. The change is not unfairly discriminatory because it will make the credits received by QMMs more consistent with the credits provided to other members, while continuing to recognize the beneficial contributions of market participants that quote at the NBBO. The changes with respect to the RPI program are reasonable because they are intended to eliminate an instance of inverted pricing. While it may be reasonable for exchanges to invert pricing in limited circumstances as a promotional incentive to use a new service, NASDAQ does not believe that the Act could be construed to require inverted pricing to be maintained indefinitely, since it results in a loss to the Exchange on each transaction to which it applies. The proposed credit of $0.0005 per share executed with respect to Retail Orders that access liquidity offering price improvement is reasonable because it will continue to result in a reduction of fees with respect to such orders, as compared with the fees that would be charged in the absence of the program, thereby reducing the costs of members that represent retail customers and that take advantage of the program, and potentially also reducing costs to the customers themselves.17 The change is consistent with an equitable allocation of fees because it will make the credit provided less disparate from the fees charged to other market participants to 17 The credit is comparable to the credit paid by the New York Stock Exchange under its Retail Liquidity Program. See http://usequities.nyx.com/ markets/nyse-equities/trading-fees. PO 00000 Frm 00153 Fmt 4703 Sfmt 4703 access liquidity, while still serving to encourage greater retail participation in NASDAQ. Because retail orders are likely to reflect long-term investment intentions, they promote price discovery and dampen volatility, and their presence in the NASDAQ market has the potential to benefit all market participants. NASDAQ further believes that the proposed credit is not unreasonably discriminatory because it is offered to firms representing retail customers without regard to the firm’s trading volumes. The proposed fee with respect to an RPI Order that provides liquidity is reasonable because, as previously recognized by the Commission, it reflects the fact that markets often seek to distinguish between orders of individual retail investors and orders of professional traders.18 In this instance, the RPI seeks to balance the consideration that ‘‘retail investors may on average be less informed about shortterm price movements . . . [than] professional traders’’ 19 with a fee charged to liquidity providers and a program designed to provide retail investors with price improvement and favorable execution prices. The reduction in the fee charged is reasonable because it will reduce charges to liquidity providers and thereby may encourage greater use of RPI Orders to provide liquidity. NASDAQ further believes that the fee change is equitable and not unreasonably discriminatory because even though these orders are charged a fee, while other liquidity providing orders are provided a credit, the use of such orders by liquidity providers is voluntary. Firms that believe that potential advantages of interacting with Retail Orders outweigh the costs of price improvement and the fee charged by NASDAQ will employ this order type. Those that do not are free to forego involvement in the program and receive a rebate under NASDAQ’s standard price schedule when providing liquidity. Finally, however, the change serves to reduce the disparity between the fee charged and the credit otherwise provided, consistent with the overall goal of eliminating inverted pricing under the RPI program. The new tier for members active in both the NASDAQ Market Center and NOM, as well as the modification of one of the criteria for an existing tier, are reasonable because they reflect the 18 Securities Exchange Act Release No. 67347 (July 3, 2012), 77 FR 40763, 40769–40680 (July 10, 2012) (SR–NYSE–2011–55; SR–NYSEAmex–2011– 84). 19 Id. E:\FR\FM\19NON1.SGM 19NON1 TKELLEY on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 223 / Tuesday, November 19, 2013 / Notices availability of a significant price reduction for members that support liquidity on both markets. The changes are consistent with an equitable allocation of fees because the pricing tiers require significant levels of liquidity provision, which benefits all market participants, and because activity in NOM also supports price discovery and liquidity provision in the NASDAQ Market Center due to the increasing propensity of market participants to be active in both markets and the influence of each market on the pricing of securities in the other. Moreover, the changes have the potential to make the applicable credits available to a wider range of market participants by introducing an additional means of qualification, in the case of the new tier, and reducing the threshold for qualification, in the case of the existing tier. The changes are not unreasonably discriminatory because market participants may qualify for a comparable or a higher rebate through alternative means that do not require participation in NOM, including through existing volume-based NASDAQ Market Center tiers, the use of Designated Retail Orders, or through a combination of qualification for volumebased tiers and participation in the ISP. The change with respect to the existing tier providing a credit of $0.0020 per share executed is reasonable because it will increase the liquidity provider credit for an additional group of members without restricting availability to those currently qualifying. Specifically, the credit is currently available to members without an overall volume requirement (i.e., those providing less than 0.10% of Consolidated Volume), as long as they provide a daily average of at least 250,000 shares of liquidity in securities listed on an exchange other than NASDAQ; the change would broaden availability to those that route a daily average volume of at least 10,000 shares per day using the QDRK routing strategy. The change is consistent with an equitable allocation of fees because it will result in a higher credit being paid to the smaller firms that generally use exchange-provided routing services, in exchange for modest usage of those services. The change is not unfairly discriminatory, because it is available to any member able to route a volume of 10,000 shares per day, a volume level achievable by almost any market participant. The change with respect to pricing for Designated Retail Orders is reasonable because although it will eliminate the availability of a rebate tier, NASDAQ still provides a very high rebate of VerDate Mar<15>2010 17:21 Nov 18, 2013 Jkt 232001 $0.0033 per share executed for Designated Retail Orders, which is higher than the highest rebate tier available for other orders that provide liquidity (of $0.00305 per share executed). Moreover, the change is consistent with an equitable allocation of fees and not unfairly discriminatory because in recent months, no market participants have qualified for the tier. Accordingly, the change will not have an actual impact on the credits paid to members that submit Designated Retail Orders. 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.20 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 and rebates 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 and rebates in response, and because market participants may readily adjust their order routing practices, NASDAQ believes that the degree to which fee or rebate changes in this market may impose any burden on competition is extremely limited. In this instance, several of the changes—specifically, the changes to tiers with respect to members active in NASDAQ and NOM, the broadening of the $0.0020 per share credit to members using QDRK, and the fee reduction for RPI orders—will serve to decrease members’ costs, thereby enhancing NASDAQ’s competitiveness. Moreover, although the modifications to Designated Retail Orders, Retail Orders under the RPI program, and the QMM and NBBO Setter Incentive programs all serve to limit the availability of certain favorable credits, the associated programs all remain in place and are themselves reflective of the need for exchanges to offer significant financial incentives to attract order flow. If any of the changes are unattractive to market participants, it is likely that NASDAQ will lose market share as a result. Thus, 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. 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 21 and paragraph (f) of Rule 19b–4 22 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: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2013–138 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–2013–138. 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 (http://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 21 15 20 15 PO 00000 U.S.C. 78f(b)(8). Frm 00154 Fmt 4703 22 17 Sfmt 4703 69515 E:\FR\FM\19NON1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 19NON1 69516 Federal Register / Vol. 78, No. 223 / Tuesday, November 19, 2013 / Notices 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–2013–138 and should be submitted on or before December 10, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27626 Filed 11–18–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [File No. 500–1] In The Matter of: Sovereign Lithium, Inc.; Order of Suspension of Trading TKELLEY on DSK3SPTVN1PROD with NOTICES November 15, 2013. It appears to the Securities and Exchange Commission that the public interest and the protection of investors require a suspension of trading in the securities of Sovereign Lithium, Inc. (‘‘Sovereign Lithium’’) because of concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in Sovereign Lithium’s common stock. Sovereign Lithium is a Delaware corporation based in Denver, Colorado. It is quoted on OTC Link under the symbol SLCO. The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed company is 23 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 17:21 Nov 18, 2013 Jkt 232001 suspended for the period from 9:30 a.m. EST on November 15, 2013 through 11:59 p.m. EST on November 29, 2013. By the Commission. Elizabeth M. Murphy, Secretary. [FR Doc. 2013–27807 Filed 11–15–13; 4:15 pm] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION DeltaPoint Capital IV, L.P.; License No. 02/02–0662; Notice Seeking Exemption Under the Small Business Investment Act, Conflicts of Interest Notice is hereby given that DeltaPoint Capital IV, L.P., 45 East Avenue, 6th Floor, Rochester, NY 14604, Federal Licensee under the Small Business Investment Act of 1958, as amended (‘‘the Act’’), in connection with the financing of a small concern, has sought an exemption under Section 312 of the Act and Section 107.730, Financings which constitute conflicts of interest of the Small Business Administration (‘‘SBA’’) Rules and Regulations (13 CFR 107.730). DeltaPoint Capital IV, L.P. provided financing to BioMaxx, Inc., 1 Fishers Road, Suite 160, Pittsford, NY 14534. The financing was contemplated for working capital purposes. The financing is brought within the purview of § 107.730(a)(1) of the Regulations because DeltaPoint Capital IV (New York), L.P., an Associate of DeltaPoint Capital IV, L.P., owns more than ten percent of BioMaxx, Inc. Therefore, this transaction is considered a financing of an Associate requiring an exemption. Notice is hereby given that any interested person may submit written comments on the transaction within fifteen days of the date of this publication to the Associate Administrator for Investment and Innovation, U.S. Small Business Administration, 409 Third Street SW., Washington, DC 20416. Javier E. Saade, Associate Administrator for Investment & Innovation. [FR Doc. 2013–27646 Filed 11–18–13; 8:45 am] BILLING CODE P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #13768 and #13769] Colorado Disaster Number CO–00065 U.S. Small Business Administration. ACTION: Amendment 5. AGENCY: PO 00000 Frm 00155 Fmt 4703 Sfmt 4703 This is an amendment of the Presidential declaration of a major disaster for the State of Colorado (FEMA–4145–DR), dated 09/14/2013. Incident: Severe Storms, Flooding, Landslides, and Mudslides. Incident Period: 09/11/2013 through 09/30/2013. Effective Date: 11/05/2013. Physical Loan Application Deadline Date: 12/02/2013. EIDL Loan Application Deadline Date: 06/16/2014. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President’s major disaster declaration for the State of Colorado, dated 09/14/2013 is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 12/02/2013. All other information in the original declaration remains unchanged. SUMMARY: (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) James E. Rivera, Associate Administrator for Disaster Assistance. [FR Doc. 2013–27642 Filed 11–18–13; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #13814 and #13815] North Dakota Disaster #ND–00040 U.S. Small Business Administration. ACTION: Notice. AGENCY: This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of North Dakota (FEMA–4154– DR), dated 10/31/2013. Incident: Severe Winter Storm Incident Period: 10/04/2013 through 10/05/2013. Effective Date: 10/31/2013. Physical Loan Application Deadline Date: 12/30/2013. Economic injury (EIDL) loan application deadline date: 07/31/2014. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. SUMMARY: E:\FR\FM\19NON1.SGM 19NON1

Agencies

[Federal Register Volume 78, Number 223 (Tuesday, November 19, 2013)]
[Notices]
[Pages 69512-69516]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27626]



[[Page 69512]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70860; File No. SR-NASDAQ-2013-138]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Make Modifications to Fees and Rebates Under Rules 7014 and 7018

November 13, 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 November 1, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to make modifications to its Qualified Market Maker 
(``QMM'') and NBBO Setter Incentive pricing incentive programs under 
Rule 7014 and the pricing for its Retail Price Improvement (``RPI'') 
program under Rule 7018(g), and to make other changes to NASDAQ's 
schedule of fees and credits applicable to execution and routing of 
orders in securities priced at $1 or more per share. NASDAQ proposes to 
implement the proposed rule change on November 1, 2013. The text of the 
proposed rule change is available on the Exchange's Web site at http://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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 and NBBO Setter Incentive Programs

    Under NASDAQ's QMM Program, 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; \3\ and
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    \3\ Rule 7018(m). In 2012, 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.
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     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 \4\ in an average of at least 1,000 securities per day 
during the month.\5\
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    \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 (other than a Designated Retail Order, as 
defined in Rule 7018) 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.
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    A member that is a QMM with respect to a particular MPID (a ``QMM 
MPID'') is eligible to receive certain financial benefits, as fully 
described in Rule 7014. One of these benefits pertains to the credits 
available under NASDAQ's NBBO Setter Incentive Program. Under that 
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. The NBBO Setter Incentive credit is paid on a monthly 
basis, and the amount is determined by multiplying the applicable rate 
by the number of shares of displayed liquidity provided to which a 
particular rate applies.\6\ Currently, a member receives an NBBO Setter 
Incentive credit at a $0.0005 rate 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) and that are entered through a QMM MPID; 
provided that the QMM also has a volume of liquidity provided through 
the QMM MPID (as a percentage of Consolidated Volume \7\) 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.\8\ 
If a QMM does not satisfy these volume requirements, it receives an 
NBBO Setter Incentive credit of $0.0002 per share executed with respect 
to orders that qualify for the NBBO Setter Incentive Program.
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    \6\ The credit is in addition to any other credit for which the 
member may qualify; provided, however, that if a QMM is eligible to 
receive both an NBBO Setter Incentive credit and a credit under 
NASDAQ's Investor Support Program, it will receive the larger of 
these two credits but not both. In addition, a member is not 
eligible to receive an NBBO Setter Incentive credit with respect to 
a Designated Retail Order.
    \7\ ``Consolidated Volume'' means the consolidated volume 
reported to all consolidated transaction reporting plans by all 
exchanges and trade reporting facilities during a month.
    \8\ QMMs have also received the $0.0005 per share rate during 
the first month in which an MPID becomes a QMM MPID.
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    NASDAQ is proposing to modify the program to eliminate the $0.0005 
credit, such that a credit of $0.0002 per share executed would be paid 
with respect to all orders entered through a QMM MPID that displayed a 
quantity of at least one round lot at the time of execution and either 
established the NBBO or was the first order posted on NASDAQ that had 
the same price as an order posted at another trading center with a 
protected quotation that established the NBBO. The change reflects 
ongoing efforts to reduce costs in a period of persistent low trading 
volumes.

Retail Price Improvement Program Pricing

    Under the RPI Program, a member (or a division thereof) approved by 
the Exchange to participate in the program (a ``Retail Member 
Organization'' or ``RMO'') may submit designated ``Retail Orders'' \9\ 
for the purpose of seeking

[[Page 69513]]

price improvement. All NASDAQ members may enter retail price 
improvement orders (``RPI Orders''),\10\ a form of non-displayed orders 
that are priced more aggressively than the Protected NBBO by at least 
$0.001 per share, for the purpose of offering such price improvement. 
RMOs may use two types of Retail Order. A Type 1 Retail Order is 
eligible to execute only against RPI Orders and other orders (such as 
midpoint pegged orders) that will provide price improvement. Type 2 
Retail Orders interact first with available RPI Orders and other price 
improving orders, and then are eligible to access non-price improving 
liquidity on the NASDAQ book and to route to other trading venues if so 
designated.
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    \9\ A Retail Order is defined in NASDAQ Rule 4780(a)(2) as an 
agency or riskless principal order that originates from a natural 
person and is submitted to Nasdaq by a Retail Member Organization, 
provided that no change is made to the terms of the order with 
respect to price (except in the case that a market order is changed 
to a marketable limit order) or side of market and the order does 
not originate from a trading algorithm or any other computerized 
methodology.
    \10\ A Retail Price Improvement Order is defined in NASDAQ Rule 
4780(a)(3) as consisting of non-displayed liquidity on NASDAQ that 
is priced better than the Protected NBBO by at least $0.001 and that 
is identified as such.
---------------------------------------------------------------------------

    NASDAQ currently offers a rebate of $0.0025 per share executed to 
RMOs for Retail Orders that execute against RPI Orders or other orders 
providing price improvement with respect to the NBBO. NASDAQ is 
proposing to reduce this rebate to $0.0005 per share executed. For RPI 
Orders that provide liquidity, NASDAQ currently charges a fee of 
$0.0020 per share executed, which NASDAQ proposes to reduce to $0.0010 
per share executed. Other charges with respect to the program remain 
unchanged. The change is designed to eliminate ``inverted'' pricing 
that was introduced at the commencement of the program, under which 
Retail Orders were paid a credit that exceeded the charge assessed 
against RPI Orders.

Other Fee Changes

    Currently, NASDAQ provides a credit of $0.0029 per share executed 
for displayed orders that provide liquidity if a member (i) has shares 
of liquidity provided in all securities during the month representing 
more than 0.15% of Consolidated Volume during the month, through one or 
more of its Nasdaq Market Center MPIDs, and (ii) Total Volume, as 
defined in Chapter XV, Section 2 of the Nasdaq Options Market (``NOM'') 
rules,\11\ of 100,000 or more contracts per day executed during the 
month through one or more of its NOM MPIDs. NASDAQ is proposing a new 
tier under which it will also provide a credit of $0.0029 per share 
executed for displayed orders that provide liquidity if a member (i) 
has shares of liquidity provided in all securities during the month 
representing more than 0.10% of Consolidated Volume during the month, 
through one or more of its Nasdaq Market Center MPIDs, and (ii) adds 
Total NOM Market Maker Volume, as defined in Chapter XV, Section 2 of 
the NOM rules, of 90,000 or more contracts per day executed during the 
month through one or more of its NOM MPIDs. Thus, as compared with the 
current tier, the new tier would be available to members that are NOM 
Market Makers and would require a lower Consolidated Volume, but would 
require volume on NOM that adds liquidity.
---------------------------------------------------------------------------

    \11\ ``Total Volume'' is defined as Customer, Professional, 
Firm, Broker-Dealer, Non-NOM Market Maker and NOM Market Maker 
volume in Penny Pilot Options and Non-Penny Pilot Options that 
either adds or removes liquidity on NOM. The term ``Customer'' 
applies to any transaction that is identified by a Participant for 
clearing in the Customer range at The Options Clearing Corporation 
(``OCC'') that is not for the account of broker or dealer or for the 
account of a ``Professional'' (as that term is defined in Chapter I, 
Section 1(a)(48) of the NOM Rules). The term ``Professional'' means 
any person or entity that (i) is not a broker or dealer in 
securities, and (ii) places more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s) pursuant to Chapter I, Section 1(a)(48). The term ``Non-
NOM Market Maker'' means a registered market maker on another 
options exchange that is not a NOM Market Maker. The term ``NOM 
Market Maker'' means a Participant that has registered as a Market 
Maker on NOM pursuant to Chapter VII, Section 2 of the NOM Rules, 
and must also remain in good standing pursuant to Chapter VII, 
Section 4 of the NOM Rules. The term ``Firm'' applies to any 
transaction that is identified by a Participant for clearing in the 
Firm range at OCC. The term ``Broker-Dealer'' applies to any 
transaction that is not subject to any of the other transaction fees 
applicable within a particular category.
---------------------------------------------------------------------------

    Similarly, NASDAQ is amending an existing tier, under which NASDAQ 
provides a credit of $0.0030 per share executed for displayed orders 
that provide liquidity if a member (i) has shares of liquidity provided 
in all securities during the month representing at least 0.45% of 
Consolidated Volume during the month, through one or more of its Nasdaq 
Market Center MPIDs, and (ii) qualifies for the Penny Pilot Tier 8 
Customer and Professional Rebate to Add Liquidity under Chapter XV, 
Section 2 of the NOM rules during the month through one or more of its 
NOM MPIDs. A NOM Participant may qualify for the Tier 8 Customer and 
Professional Rebate if it (i) has Total Volume of 200,000 or more 
contracts per day in a month, of which 70,000 or more contracts per day 
in a month are Customer and/or Professional liquidity, or (ii) adds 
Customer and/or Professional liquidity of 1.00% or more of national 
customer volume in multiply-listed equity and ETF options classes in a 
month.\12\ NASDAQ is proposing to modify the criterion for this tier 
pertaining to Consolidated Volume by reducing the required percentage 
from 0.45% to 0.40%.
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    \12\ Effective November 1, 2013, NOM eliminated an additional 
prong, under which a NOM Participant could qualify for Tier 8 if it 
had Total Volume of 325,000 or more contracts per day in a month. 
SR-NASDAQ-2013-136 (October 30, 2013).
---------------------------------------------------------------------------

    As with existing tiers that require participation in both the 
Nasdaq Market Center and NOM, these tiers recognize the prevalence of 
trading in which members simultaneously trade different asset classes 
within the same strategy. Because cash equities and options markets are 
linked, with liquidity and trading patterns on one market affecting 
those on the other, NASDAQ believes that pricing incentives that 
encourage market participant activity in NOM also support price 
discovery and liquidity provision in the Nasdaq Market Center. The 
changes enhance these incentives by creating a new tier and reducing 
the requirement for participation in another existing tier.
    For members trading securities listed on NASDAQ, NASDAQ currently 
pays a rebate of $0.0020 per share executed for a member with shares of 
liquidity provided in all securities during the month representing less 
than 0.10% of Consolidated Volume, provided that the member provides a 
daily average of at least 250,000 shares of liquidity in securities 
listed on an exchange other than NASDAQ. Without modifying the existing 
criteria, NASDAQ is proposing to make this tier also available to any 
member that routes a daily average volume of at least 10,000 shares 
during the month using the QDRK routing strategy. The modified tier 
will also apply only to trading of securities listed on NASDAQ. QDRK is 
a routing option under which orders check the System for available 
shares and simultaneously route the remaining shares to destinations on 
the System routing table that are not posting Protected Quotations 
within the meaning of Regulation NMS.\13\ Thus, the strategy is 
generally used to route to dark pools. Through the proposed change, 
NASDAQ hopes to (i) encourage greater use of its router and (ii) allow 
the smaller firms that generally use exchange-provided routing to 
receive a higher rebate than would otherwise by the case as a means of 
encouraging them to provide greater liquidity in securities listed on 
NASDAQ.
---------------------------------------------------------------------------

    \13\ If shares remain un-executed after routing, they are posted 
on the book. Once on the book, should the order subsequently be 
locked or crossed by another market center, the System will not 
route the order to the locking or crossing market center.

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[[Page 69514]]

    Finally, NASDAQ is proposing to eliminate an existing pricing tier 
for Designated Retail Orders. A Designated Retail Order is defined as 
an agency or riskless principal \14\ order that originates from a 
natural person and is submitted to NASDAQ by a member that designates 
it pursuant to Rule 7018, provided that no change is made to the terms 
of the order with respect to price or side of market and the order does 
not originate from a trading algorithm or any other computerized 
methodology. Currently, if a member enters Designated Retail Orders 
through an MPID through which (i) at least 90% of the shares of 
liquidity provided during the month are provided through Designated 
Retail Orders, and (ii) the member accesses, provides, or routes shares 
of liquidity that represent at least 0.10% of Consolidated Volume 
during the month, the member receives a credit of $0.0034 per share 
executed for Designated Retail Orders that provide liquidity if they 
are displayed orders. For all other Designated Retail Orders that are 
displayed orders and that provide liquidity, the credit is $0.0033 per 
share executed. Under the proposed change, the $0.0034 per share 
executed tier will be eliminated, so that the credit will be $0.0033 
per share executed with respect to all Designated Retail Orders. In 
recent months, no market participants have qualified for this tier, so 
NASDAQ believes that it can be eliminated with no impact on member fees 
and credits.
---------------------------------------------------------------------------

    \14\ To qualify as a Designated Retail Order, a riskless 
principal order must satisfy the criteria set forth in FINRA Rule 
5320.03. These criteria include that that the member maintain 
supervisory systems to reconstruct, in a time-sequenced manner, all 
orders that are entered on a riskless principal basis; and the 
member submits a report, contemporaneously with the execution of the 
facilitated order, that identifies the trade as riskless principal.
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\15\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\16\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system which NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The change with respect to the NBBO Setter Incentive credit paid to 
QMMs is reasonable because it merely serves to limit the extent of the 
incentives associated with the programs, thereby causing the credits 
received by program participants to become more consistent with credits 
received by members that are not participants, while maintaining an 
incentive structure designed to benefit all market participants by 
encouraging quoting at or near the NBBO in a wide range of securities. 
NASDAQ hopes thereby to maintain the benefits associated with the 
programs while reducing their costs and making the programs sustainable 
in the longer term. The change is also reasonable because it does not 
alter the fact that QMMs continue to be provided a discount as compared 
with other members, thereby resulting in lower overall fees for QMMs. 
The change is consistent with an equitable allocation of fees because 
it maintains, but reduces the cost of, an incentive designed to benefit 
all market participants by encouraging members to quote at the NBBO in 
a significant number of securities and to allow NASDAQ to set or join 
the NBBO. The change is not unfairly discriminatory because it will 
make the credits received by QMMs more consistent with the credits 
provided to other members, while continuing to recognize the beneficial 
contributions of market participants that quote at the NBBO.
    The changes with respect to the RPI program are reasonable because 
they are intended to eliminate an instance of inverted pricing. While 
it may be reasonable for exchanges to invert pricing in limited 
circumstances as a promotional incentive to use a new service, NASDAQ 
does not believe that the Act could be construed to require inverted 
pricing to be maintained indefinitely, since it results in a loss to 
the Exchange on each transaction to which it applies. The proposed 
credit of $0.0005 per share executed with respect to Retail Orders that 
access liquidity offering price improvement is reasonable because it 
will continue to result in a reduction of fees with respect to such 
orders, as compared with the fees that would be charged in the absence 
of the program, thereby reducing the costs of members that represent 
retail customers and that take advantage of the program, and 
potentially also reducing costs to the customers themselves.\17\ The 
change is consistent with an equitable allocation of fees because it 
will make the credit provided less disparate from the fees charged to 
other market participants to access liquidity, while still serving to 
encourage greater retail participation in NASDAQ. Because retail orders 
are likely to reflect long-term investment intentions, they promote 
price discovery and dampen volatility, and their presence in the NASDAQ 
market has the potential to benefit all market participants. NASDAQ 
further believes that the proposed credit is not unreasonably 
discriminatory because it is offered to firms representing retail 
customers without regard to the firm's trading volumes.
---------------------------------------------------------------------------

    \17\ The credit is comparable to the credit paid by the New York 
Stock Exchange under its Retail Liquidity Program. See http://usequities.nyx.com/markets/nyse-equities/trading-fees.
---------------------------------------------------------------------------

    The proposed fee with respect to an RPI Order that provides 
liquidity is reasonable because, as previously recognized by the 
Commission, it reflects the fact that markets often seek to distinguish 
between orders of individual retail investors and orders of 
professional traders.\18\ In this instance, the RPI seeks to balance 
the consideration that ``retail investors may on average be less 
informed about short-term price movements . . . [than] professional 
traders'' \19\ with a fee charged to liquidity providers and a program 
designed to provide retail investors with price improvement and 
favorable execution prices. The reduction in the fee charged is 
reasonable because it will reduce charges to liquidity providers and 
thereby may encourage greater use of RPI Orders to provide liquidity. 
NASDAQ further believes that the fee change is equitable and not 
unreasonably discriminatory because even though these orders are 
charged a fee, while other liquidity providing orders are provided a 
credit, the use of such orders by liquidity providers is voluntary. 
Firms that believe that potential advantages of interacting with Retail 
Orders outweigh the costs of price improvement and the fee charged by 
NASDAQ will employ this order type. Those that do not are free to 
forego involvement in the program and receive a rebate under NASDAQ's 
standard price schedule when providing liquidity. Finally, however, the 
change serves to reduce the disparity between the fee charged and the 
credit otherwise provided, consistent with the overall goal of 
eliminating inverted pricing under the RPI program.
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    \18\ Securities Exchange Act Release No. 67347 (July 3, 2012), 
77 FR 40763, 40769-40680 (July 10, 2012) (SR-NYSE-2011-55; SR-
NYSEAmex-2011-84).
    \19\ Id.
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    The new tier for members active in both the NASDAQ Market Center 
and NOM, as well as the modification of one of the criteria for an 
existing tier, are reasonable because they reflect the

[[Page 69515]]

availability of a significant price reduction for members that support 
liquidity on both markets. The changes are consistent with an equitable 
allocation of fees because the pricing tiers require significant levels 
of liquidity provision, which benefits all market participants, and 
because activity in NOM also supports price discovery and liquidity 
provision in the NASDAQ Market Center due to the increasing propensity 
of market participants to be active in both markets and the influence 
of each market on the pricing of securities in the other. Moreover, the 
changes have the potential to make the applicable credits available to 
a wider range of market participants by introducing an additional means 
of qualification, in the case of the new tier, and reducing the 
threshold for qualification, in the case of the existing tier. The 
changes are not unreasonably discriminatory because market participants 
may qualify for a comparable or a higher rebate through alternative 
means that do not require participation in NOM, including through 
existing volume-based NASDAQ Market Center tiers, the use of Designated 
Retail Orders, or through a combination of qualification for volume-
based tiers and participation in the ISP.
    The change with respect to the existing tier providing a credit of 
$0.0020 per share executed is reasonable because it will increase the 
liquidity provider credit for an additional group of members without 
restricting availability to those currently qualifying. Specifically, 
the credit is currently available to members without an overall volume 
requirement (i.e., those providing less than 0.10% of Consolidated 
Volume), as long as they provide a daily average of at least 250,000 
shares of liquidity in securities listed on an exchange other than 
NASDAQ; the change would broaden availability to those that route a 
daily average volume of at least 10,000 shares per day using the QDRK 
routing strategy. The change is consistent with an equitable allocation 
of fees because it will result in a higher credit being paid to the 
smaller firms that generally use exchange-provided routing services, in 
exchange for modest usage of those services. The change is not unfairly 
discriminatory, because it is available to any member able to route a 
volume of 10,000 shares per day, a volume level achievable by almost 
any market participant.
    The change with respect to pricing for Designated Retail Orders is 
reasonable because although it will eliminate the availability of a 
rebate tier, NASDAQ still provides a very high rebate of $0.0033 per 
share executed for Designated Retail Orders, which is higher than the 
highest rebate tier available for other orders that provide liquidity 
(of $0.00305 per share executed). Moreover, the change is consistent 
with an equitable allocation of fees and not unfairly discriminatory 
because in recent months, no market participants have qualified for the 
tier. Accordingly, the change will not have an actual impact on the 
credits paid to members that submit Designated Retail Orders.

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.\20\ 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 and rebates 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 and rebates in response, and because market participants may 
readily adjust their order routing practices, NASDAQ believes that the 
degree to which fee or rebate changes in this market may impose any 
burden on competition is extremely limited. In this instance, several 
of the changes--specifically, the changes to tiers with respect to 
members active in NASDAQ and NOM, the broadening of the $0.0020 per 
share credit to members using QDRK, and the fee reduction for RPI 
orders--will serve to decrease members' costs, thereby enhancing 
NASDAQ's competitiveness. Moreover, although the modifications to 
Designated Retail Orders, Retail Orders under the RPI program, and the 
QMM and NBBO Setter Incentive programs all serve to limit the 
availability of certain favorable credits, the associated programs all 
remain in place and are themselves reflective of the need for exchanges 
to offer significant financial incentives to attract order flow. If any 
of the changes are unattractive to market participants, it is likely 
that NASDAQ will lose market share as a result. Thus, 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.
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    \20\ 15 U.S.C. 78f(b)(8).
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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

    The foregoing change has become effective pursuant to Section 
19(b)(3)(A) of the Act \21\ and paragraph (f) of Rule 19b-4 \22\ 
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.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please 
include File Number SR-NASDAQ-2013-138 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-2013-138. 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 (http://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

[[Page 69516]]

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-2013-138 and should 
be submitted on or before December 10, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27626 Filed 11-18-13; 8:45 am]
BILLING CODE 8011-01-P