Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq's Fees and Credits at Rules 7014 and 7018, 69140-69145 [2016-23999]
Download as PDF
<![CDATA[
69140
Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
PHLX–2016–93 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–PHLX–2016–93. 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–PHLX–
2016–93 and should be submitted on or
before October 26, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.43
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–24000 Filed 10–4–16; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78977; File No. SR–
NASDAQ–2016–132]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Nasdaq’s Fees and Credits at Rules
7014 and 7018
September 29, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 28, 2016, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s fees and credits at Rules
7014 and 7018.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on September 1, 2016.3
The text of the proposed rule change
is available on the Exchange’s Web site
at https://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, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
BILLING CODE 8011–01–P
asabaliauskas on DSK3SPTVN1PROD with NOTICES
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The proposed fees were initially filed with the
Commission as an immediately effective and
operative rule change on September 1, 2016. See
SR–NASDAQ–2016–125. On September 16, 2016
the Exchange withdrew SR–NASDAQ–2016–125
and replaced it with SR–NASDAQ–2016–128. To
correct a technical issue with the filing, on
September 16, 2016 the Exchange replaced SR–
NASDAQ–2016–128 with SR–NASDAQ–2016–129.
This filing replaces SR–NASDAQ–2016–129.
2 17
43 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:15 Oct 04, 2016
Jkt 241001
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend Rule 7014 to: (i)
Add a new charge of $0.0029 assessed
Qualified Market Makers (‘‘QMMs’’) for
orders in securities listed on exchanges
other than Nasdaq priced at $1 or more;
(ii) amend the requirement to qualify for
a rebate under the NBBO program; and
(iii) add the new Nasdaq Growth
Program. The Exchange is also
proposing to amend Rule 7018 to: (i)
Replace an existing $0.0001 per share
executed credit tier with two new credit
tiers providing $0.0001 and $0.0002 per
share executed, respectively; (ii) amend
the criteria and fees assessed for
transactions in the Closing Cross; and
(iii) amend the criteria and fees assessed
for transactions in the opening cross,
and make a clarifying change to the
opening cross rules.
First Change
The purpose of the first change is to
increase incentives provided by the
Exchange under Rule 7014(e) by
providing a new $0.0029 per share
executed fee to QMMs that, in addition
to meeting the Tier 2 eligibility criteria
also have a combined Consolidated
Volume of at least 3.5%. A QMM is a
member that makes a significant
contribution to market quality by
providing certain levels of Consolidated
Volume through one or more of its
Nasdaq Market Center MPIDs. In return,
a QMM receives rebates with respect to
all other displayed orders (other than
Designated Retail Orders, as defined in
Rule 7018) in securities priced at $1 or
more per share that provide liquidity
and were for securities listed on NYSE
(‘‘Tape A’’), securities listed on
exchanges other than NYSE or Nasdaq
(‘‘Tape B’’), or securities listed on
Nasdaq (‘‘Tape C’’). There are currently
two Tiers of rebates provided, which are
based on the amount of shares of
liquidity provided a QMM executes in
all securities through one or more of its
Nasdaq Market Center MPIDs that
represent certain levels of Consolidated
Volume.4
4 Tier 1 requires a QMM to provide above 0.70%
up to and including 0.90% of Consolidated Volume
during the month, and Tier 2 requires above 0.90%
of Consolidated Volume.
E:\FR\FM\05OCN1.SGM
05OCN1
Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
The Exchange further provides
reduced charges to QMMs for removing
liquidity from the Exchange in
securities priced at $1 or more if the
QMM’s volume of liquidity added
through one or more of its Nasdaq
Market Center MPIDs during the month
(as a percentage of Consolidated
Volume) is no less than 0.80%. The
Exchange is proposing to assess a new
$0.0029 per share executed fee, assessed
on a QMM that meets the Tier 2 criteria,
for orders in Tape A and B securities
priced at $1 or more per share that
access liquidity on the Nasdaq Market
Center, if the QMM also has a combined
Consolidated Volume (adding and
removing liquidity) of at least 3.5%.
Thus, in addition to providing at least
the minimum level of Consolidated
Volume in adding liquidity as required
by Tier 2, the QMM must also have a
significant level of combined
Consolidated Volume, i.e., both adding
and removing liquidity.
Second Change
The purpose of the second change is
to amend the requirement to qualify for
a rebate under the NBBO program. The
NBBO Program provides members with
per share executed rebates with respect
to all other displayed orders (other than
Designated Retail Orders) in securities
priced at $1 or more per share that
provide liquidity and establish the
NBBO. First, the Exchange is proposing
to limit eligibility for the credit
provided by the program to executions
from orders originating on ports that
have a ratio of at least 25% NBBO
liquidity provided to liquidity provided
during the month. As described in the
rule, NBBO liquidity provided means
liquidity provided from orders (other
than Designated Retail Orders, as
defined in Rule 7018), that establish the
NBBO, and displayed a quantity of at
least one round lot at the time of
execution. Under the NBBO program,
the Exchange provides a $0.0004 per
share executed rebate in Tape A and B
securities if a member executes shares of
liquidity provided in all securities
through one or more Nasdaq Market
Center MPIDs that represents 1.0% or
more of Consolidated Volume during
the month. The Exchange also provides
an additional $0.0002 per share
executed rebate for displayed quotes/
orders (other than Supplemental Orders
or Designated Retail Orders) that
provide liquidity priced at $1 or more,
if the member meets certain criteria,
including having a ratio of at least 25%
NBBO liquidity provided to liquidity
provided during the month. The
Exchange is now proposing to extend
the 25% NBBO liquidity provided
VerDate Sep<11>2014
18:15 Oct 04, 2016
Jkt 241001
requirement to the ports used by the
member to qualify for the $0.0004 per
share executed rebate, in addition to
applying the current Consolidated
Volume eligibility requirement that the
member must execute shares of liquidity
provided in all securities through one or
more of its Nasdaq Market Center MPIDs
that represents 1% or more of
Consolidated Volume during the month.
Third Change
The Exchange is proposing to adopt
the new Nasdaq Growth Program under
Rule 7014(j). The Nasdaq Growth
Program will provide a member a
$0.0025 per share executed credit in
securities priced $1 or more per share if
it meets certain criteria. The proposed
credit will be provided in lieu of other
credits provided to the member for
displayed quotes/orders (other than
Supplemental Orders or Designated
Retail Orders) that provide liquidity
under Rule 7018, if the credit under the
Nasdaq Growth Program is greater than
the credit attained under Rule 7018. To
be eligible for the credit a member must:
(i) Add greater than 750,000 shares a
day on average during the month
through one or more of its Nasdaq
Market Center MPIDs; and (ii) increase
its shares of liquidity provided through
one or more of its Nasdaq Market Center
MPIDs as a percent of Consolidated
Volume by 25% versus the member’s
Growth Baseline. The Exchange is
defining Growth Baseline as the
member’s shares of liquidity provided
in all securities through one or more of
its Nasdaq Market Center MPIDs as a
percentage of Consolidated Volume
during the last month a member
qualified for the Nasdaq Growth
Program. If a member has not qualified
for a credit under this program, its
August 2016 share of liquidity provided
in all securities through one or more of
its Nasdaq Market Center MPIDs as a
percent of Consolidated Volume will be
used to establish a baseline. Thus, the
purpose of the credit is to provide an
incentive to members that do not qualify
for other credits under Rule 7018 in
excess of the Nasdaq Growth Program
credit to increase their participation on
the Exchange.
Fourth Change
The Exchange is proposing to amend
Rule 7018(a)(3), which provides the fees
and credits for execution and routing of
orders in Tape B securities priced $1 or
greater. Currently, the Exchange
provides a $0.0001 per share executed
credit to a member for displayed quotes
and orders (other than Supplemental
Orders or Designated Retail Orders) that
provide liquidity to a member with
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
69141
shares of liquidity provided in all
securities during the month
representing at least 0.2% of
Consolidated Volume during the month,
through one or more of its Nasdaq
Market Center MPIDs. The credit is
provided in addition to the credits
provided for displayed quotes and
orders (other than Supplemental Orders
or Designated Retail Orders) that
provide liquidity. The Exchange is
proposing to eliminate this credit tier
and replace it with two new credit tiers
that provide $0.0001 and $0.0002 per
share executed, respectively. First, the
Exchange is proposing to adopt a
$0.0001 per share executed credit
available to a member with shares of
liquidity provided in securities that are
listed on exchanges other than Nasdaq
or NYSE (i.e., Tape B) during the month
representing at least 0.045% but less
than 0.075% of Consolidated Volume
during the month through one or more
of its Nasdaq Market Center MPIDs. The
Exchange is also proposing to adopt a
$0.0002 per share executed credit to a
member with shares of liquidity
provided in securities that are listed on
exchanges other than Nasdaq or NYSE
(i.e., Tape B) during the month
representing at least 0.075% of
Consolidated Volume during the month
through one or more of its Nasdaq
Market Center MPIDs. Thus, the
Exchange is focusing the required shares
of liquidity required to qualify for the
credit on Tape B securities and reducing
the level of Consolidated Volume
required to qualify for either of the new
credits in contrast to the existing credit.
Like the current $0.0001 per share
executed credit that is being replaced,
the proposed new credits are provided
in addition to the credits provided for
displayed quotes and orders (other than
Supplemental Orders or Designated
Retail Orders) that provide liquidity.
Fifth Change
The Exchange is proposing to amend
the criteria and fees assessed for
transactions in the Closing Cross under
Rule 7018(d). First, the Exchange is
proposing to increase the fee assessed
members for all quotes and orders (other
than Market-on-Close and Limit-onClose orders) executed in the Nasdaq
Closing Cross from $0.0008 to $0.00085
per share executed. Second, the
Exchange is proposing to increase the
level of Consolidated Volume required
to qualify for the lowest fee assessed for
Market-on-Close (‘‘MOC’’) and Limit-onClose (‘‘LOC’’) orders under Tier A from
1.4% to 1.8%. As a consequence, the
Exchange is also proposing to amend
Tier B to reflect the increase range of
Consolidated Volume required to
E:\FR\FM\05OCN1.SGM
05OCN1
69142
Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices
qualify under the tier. Third, the
Exchange is proposing to increase the
Tier D fee from $0.0013 to $0.00135 per
share executed, the Tier E fee from
$0.00135 to $0.00145 per share
executed, and the Tier F fee from
$0.0015 to $0.0016 per share executed.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Sixth Change
The Exchange is proposing to amend
the criteria and fees assessed for
transactions in the Opening Cross, and
make a clarifying change to the opening
cross rules under Rule 7018(e). First, the
Exchange is proposing to increase the
fee assessed members under paragraph
(1) of the rule for all quotes and orders
(other than Market-on-Open, Limit-onOpen, Good-till-Cancelled, and
Immediate-or-Cancel orders) executed
in the Nasdaq Opening Cross from
$0.0008 to $0.00085 per share executed.
Second, the Exchange is proposing to
increase the monthly fee cap provided
under paragraph (2) of the rule from
$30,000 to $35,000. Last, the Exchange
is proposing to clarify the qualification
criteria of the fee cap under paragraph
(2) to make it clear that a member must
add at least one million shares of
liquidity, on average per day, per
month, which is how the criteria is
currently applied and how it was
announced to market participants when
it was adopted.5 As it is currently
written, the criteria is vague on the time
period over which a member must have
one million shares of liquidity.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,6 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,7 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest; and is not designed to
5 See Securities Exchange Act Release No. 71925
(April 10, 2014), 79 FR 21328 (April 15, 2014) (SR–
NASDAQ–2014–031); see also https://
www.nasdaqtrader.com/
TraderNews.aspx?id=ETA2014-28.
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
18:15 Oct 04, 2016
Jkt 241001
permit unfair discrimination between
customers, issuers, brokers, or dealers.
First Change
The Exchange believes that assessing
a new $0.0029 fee under the QMM
Program is reasonable because it is set
at a level that is lower than the standard
removal fee of $0.0030 per share
executed, thereby providing an
incentive to market participants, and it
is also based on the Exchange’s analysis
of the cost to the Exchange of offering
a lower fee, thereby decreasing the
revenue derived from transactions by
members that qualify for the new fee,
and the desired benefit to the market
provided by the members that meet the
new fee’s qualification criteria. In this
case, the criteria provides an incentive
to members to increase their
participation in the market as measured
by Consolidated Volume, which benefits
all market participants. Currently,
members may qualify for a $0.00295 per
share executed fee for removing
liquidity in Tape A or B securities
priced at $1 or more if the member’s
volume of liquidity added through one
or more of its Nasdaq Market Center
MPIDs during the month (as a
percentage of Consolidated Volume) is
not less than 0.80%. The Exchange is
proposing a similar fee for removing
liquidity in Tape A or B securities
priced at $1 or more if the member
qualifies under the Tier 2 criteria that
requires the member to execute shares
of liquidity provided in all securities
through one or more of its Nasdaq
Market Center MPIDs that represent
above 0.90% of Consolidated Volume
during the month, and the member must
also have a combined Consolidated
Volume (adding and removing liquidity)
of at least 3.5%. Thus, to qualify for a
lower transaction fee for removing
liquidity in Tape A or B securities under
the QMM Program, the member must
both provide greater Consolidated
Volume through adding liquidity during
the month (i.e., 0.90% versus 0.80%)
and provide a certain level of combined
Consolidated Volume, which accounts
for both adding liquidity and removing
liquidity. The Exchange believes that
the new fee is an equitable allocation
and is not unfairly discriminatory
because all members that participate on
the Exchange may qualify for the
proposed reduced Tape A and B
removal fee if they elect to provide the
Consolidated Volume required. The
Exchange uses Consolidated Volume as
a measure of the member’s activity in
comparison to that of the market as a
whole. Thus, the proposed fee and
criteria required to qualify for the fee
does not discriminate unfairly and is
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
equitably allocated, as eligibility for the
fee is tied to the member’s performance
in comparison to other participants in
aggregate.
Second Change
The Exchange believes that the
$0.0004 per share executed rebate of the
NBBO Program to executions from
orders originating on a port that has a
ratio of at least 25% NBBO liquidity
provided to liquidity provided is
reasonable because it is the same rebate
that the Exchange currently applies
under the program and is based on the
Exchange’s continued belief that it is the
appropriate level of rebate provided in
return for the market-improving
liquidity required to receive the rebate.
The Exchange believes that tying
eligibility for the $0.0004 per share
executed rebate of the NBBO Program to
executions from orders originating on a
port that has a ratio of at least 25%
NBBO liquidity provided to liquidity
provided is an equitable allocation and
is not unfairly discriminatory because
the measurement criteria is identical to
the criteria used to qualify for the
$0.0002 per share executed rebate,
although the $0.0002 rebate is measured
across one or more of a members Nasdaq
Market Center MPIDs. NBBO liquidity
provided to liquidity provided is a ratio
of the member’s liquidity provided that
establishes the NBBO and displayed at
a quantity of at least one round lot as
compared to all liquidity provided by
the member. Thus, the Exchange is
making a member provide more marketimproving activity (in addition to the
Consolidated Volume requirement) to
receive the rebate. The Exchange
believes that limiting the NBBO
liquidity provided to executions from
orders on that port is an equitable
allocation and is not unfairly
discriminatory because it directly ties
the member’s beneficial activity to the
ports through which the rebate is
applied. The Exchange believes this will
create greater incentive for firms to
establish the NBBO while more closely
tying the credit to the market improving
behavior the Exchange is trying to
incentivize.
Thus, any member may choose to
participate in the market in a manner to
meet the NBBO liquidity criteria.
Third Change
The Exchange believes that the
$0.0025 per share executed credit
provided by the Nasdaq Growth
Program is reasonable because it is set
at a level that the Exchange believes will
provide adequate incentive to market
participants to improve their
participation on the Exchange. The
E:\FR\FM\05OCN1.SGM
05OCN1
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices
credit is also based on the Exchange’s
analysis of the cost to the Exchange of
providing credits to members that
qualify for the new credit and the
desired benefit to the market provided
by the members that meet the new fee’s
qualification criteria and thereby
increase liquidity on the Exchange. The
Exchange believes that the Nasdaq
Growth Program is an equitable
allocation and is not unfairly
discriminatory because it is designed to
improve the market for all market
participants on the Exchange, even
though not all members will be eligible
for the new credit. The Exchange is
targeting members that may not have
adequate participation to qualify for
certain credits under Rule 7018(a), and
who may be significantly far from
reaching a level of participation to
qualify for such credits. The Exchange
believes it is important to provide such
members incentive to incrementally
increase their participation in the
market, which will benefit all market
participants. The Exchange is proposing
to achieve this by requiring a member to
both add greater than 750,000 shares a
day on average during the month
through one or more of its Nasdaq
Market Center MPIDs and increase its
share of liquidity provided through on
or more of its Nasdaq Market Center
MPIDs as a percent of Consolidated
Volume by 25% versus the member’s
Growth Baseline. The Exchange believes
that this criteria is an equitable
allocation and is not unfairly
discriminatory because it requires a
minimum level of participation in the
market and it ensures that members
meaningfully remain in the market.
There are tiers under Rule 7018 that
afford members a $0.0025 per share
executed credit, for example, member
with shares of liquidity provided in all
securities through one or more of its
Nasdaq Market Center MPIDs that
represent more than 0.10% of
Consolidated Volume during the month,
and the growth program aims to provide
a path for firms to hit the Rule 7018
thresholds by receiving benefits as they
continue to grow. The Exchange is also
proposing to require a member to
increase its shares of liquidity provided
through one or more of its Nasdaq
Market Center MPIDs as a percent of
Consolidated Volume by 25% versus the
member’s Growth Baseline. The Growth
Baseline will be defined as the
member’s shares of liquidity provided
in all securities through one or more of
its Nasdaq Market Center MPIDs as a
percent of Consolidated Volume during
the last month a member qualified for
the Nasdaq Growth Program. As a
VerDate Sep<11>2014
18:15 Oct 04, 2016
Jkt 241001
consequence, although any member may
qualify under the program if it meets the
criteria, members that currently qualify
for higher credits under Rule 7018(a)
will not receive the proposed credit.
The Exchange believes that this is an
equitable allocation and is not unfairly
discriminatory because such members
are receiving higher credits in lieu of the
lower proposed credit, and the
increased liquidity provided by the
members that qualify under the new
program benefit all market participants.
Moreover, the program is designed to
provide incentive to members to
continue to increase their participation
until such time that they qualify for
other, higher credits under Rule 7018(a).
If a member has not qualified for a
credit under this program, its August
2016 share of liquidity provided in all
securities through one or more of its
Nasdaq Market Center MPIDs as a
percent of Consolidated Volume will be
used to establish a baseline. Thus, the
second criteria requires a certain level of
increased participation in the market.
The Exchange believes that the program
is an equitable allocation and is not
unfairly discriminatory because
members must continue to improve
their participation in the market month
over month in order to continue
receiving the credit until such a time
that it qualifies for a higher credit under
Rule 7018(a). As a consequence, a
member that qualifies for the new credit
will eventually become ineligible for the
credit by either failing to grow its shares
of liquidity or graduating to a higher
credit in lieu of proposed new credit.
The Exchange chose to use August 2016
as the initial baseline since it was the
last month of activity prior to the start
of the program and there were no
market holidays in the month.
Fourth Change
The Exchange believes that
eliminating the $0.0001 per share
executed credit under Rule 7018(a)(3)
provided to a member with shares of
liquidity provided in all securities of at
least 0.2% of Consolidated Volume
during the month in the securities of
any Tape, and replacing it with two new
credits of $0.0001 and $0.0002 per share
executed that are based on certain levels
of Consolidated Volume in Tape B
securities during the month is
reasonable because the level of credit
provided is identical to, or very close to,
the current credit provided. The
Exchange believes that the two credits
are sufficient to provide incentive to
members to meet the criteria. Moreover,
the credit is based on the Exchange’s
analysis of the cost to the Exchange of
providing credits to members that
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
69143
qualify for the new credit and the
desired benefit to the market provided
by the members that meet the new fee’s
qualification criteria and thereby
increase liquidity on the Exchange.
The Exchange believes that
eliminating the $0.0001 per share
executed credit under Rule 7018(a)(3)
provided to a member with shares of
liquidity provided in all securities of at
least 0.2% of Consolidated Volume
during the month in the securities of
any Tape, and replacing it with two new
credits that are based on certain levels
of Consolidated Volume in Tape B
securities during the month is an
equitable allocation and is not unfairly
discriminatory because it more closely
ties the criteria to improving the market
on the Exchange in Tape B securities.
Currently, members are provided the
$0.0001 per share executed credit for
displayed quotes and orders (other than
Supplemental Orders or Designated
Retail Orders) in Tape B securities if the
member provides the required
Consolidated Volume. In lieu of the
current criteria, the Exchange is
requiring a member provide at least
0.045% but less than 0.075% of
Consolidated Volume in Tape B
securities to receive a $0.0001 per share
executed credit, and is requiring a
member provide at least 0.075% of
Consolidated Volume in Tape B
securities during the month to receive a
$0.0002 per share executed credit. Thus,
the Exchange is reducing the level of
Consolidated Volume required to
receive either of the proposed credits in
comparison to the current credit, which
is reflective of limiting the Consolidated
Volume considered for the credits to
Tape B securities. The Exchange
believes that the proposed $0.0002 per
share credit is an equitable allocation
and is not unfairly discriminatory
because it requires significantly greater
Consolidated Volume in Tape B
securities during the month than the
proposed $0.0001 eligibility criteria.
The Exchange also believes that the
proposed change is an equitable
allocation and is not unfairly
discriminatory because a member is free
to choose which securities it transacts in
and may choose to increase its level of
activity in Tape B securities to qualify
for the proposed credits. The Exchange
notes that some members may continue
to qualify for the credit because the
Exchange has proposed reduced levels
of Consolidated Volume, which
members may already provide. To the
extent that a member qualified for the
current credit based largely on its
activity in Tape A and C securities, it
may have to increase its activity in Tape
E:\FR\FM\05OCN1.SGM
05OCN1
69144
Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
B securities to receive one of the new
credits. The Exchange is not proposing
similar credits for transactions in Tape
C and A securities under Rules
7018(a)(1) and (2), respectively, because
it must balance its desire to provide
incentives to market participants to
improve the market where it deems it is
most needed against the cost to the
Exchange in providing such incentives.
Thus, the Exchange believes that
focusing the changes on activity in Tape
B securities is an equitable allocation
and is not unfairly discriminatory
because it will provide further incentive
to members to participate in Tape B
securities, the market in which the
Exchange is seeking to further improve.
Fifth Change
The Exchange believes that increasing
the fees under Rule 7018(d), including
the changes to the criteria for certain
fees that make it more difficult to
qualify for a lower fee, are reasonable
because the Exchange notes that the fees
assessed for participation in the Closing
Cross are significantly less than the fees
assessed for participation in regular
market hours trading. From time to time
the Exchange must assess the level of
fees collected in comparison to the costs
associated with offering services, such
as the Closing Cross. In this case, the
Exchange has determined that raising
the fees for use of the Closing Cross is
appropriate. The Exchange believes that
the proposed changes to fees assessed
under Rule 7018(d) for participation in
the Closing Cross is an equitable
allocation and is not unfairly
discriminatory because it is increasing
the fees and criteria to qualify for the
lowest fee to better align the fees
collected for participation in the Closing
Cross with the costs associated with
operating the Closing Cross. As noted,
the fees assessed for participation in the
Closing Cross are significantly less than
the fees assessed for participation in
regular market hours trading. Also as
noted, from time to time the Exchange
must assess the level of fees collected in
comparison to the costs associated with
offering services, such as the Closing
Cross. In this case, the Exchange is
proposing the increased fees and more
stringent criteria to increase revenue
provided by the Closing Cross to cover
the costs associated with offering the
service. The Exchange does not believe
that the proposed changes will affect
participation in the Closing Cross, but to
the extent the Exchange realizes less
participation in the Closing Cross as a
result of the fee increases and change to
the Tier A criteria, it may realize a
reduction in revenue. The Exchange
notes that, in addition to increasing the
VerDate Sep<11>2014
18:15 Oct 04, 2016
Jkt 241001
fee assessed for quotes and orders (other
than Market-on-Close and Limit-onClose orders) executed in the Closing
Cross, it is increasing fees for MOC and
LOC orders under Tiers D, E and F,
which may provide incentive to market
participants in these tiers to increase
their shares of liquidity provided to
qualify for a Tier with a lower fee. In
this regard, the Exchange has observed
that most members qualify under Tiers
D, E and F, and consequently increasing
the fee may incentivize members to
increase the level of shares of liquidity
provided to qualify for a lower fee. The
Exchange is increasing the level of
Consolidated Volume required to
qualify for the lowest fee under Tier A,
which will make qualifying for the
credit more difficult to the extent a
member does not qualify under the
alternative MOC/LOC volume standard.
In lieu of increasing the fee, the
Exchange has determined to increase
the level of Consolidated Volume in all
securities to make the tier more
meaningful.
Thus, the Exchange believes that
increasing the criteria required to
qualify for Tier A and increasing the
fees assessed for Tiers D, E and F is an
equitable allocation and is not unfairly
discriminatory because the Exchange
has observed the most members
qualifying under these tiers.
Accordingly, the Exchange believes that
the changes to these tiers, and not the
remaining tiers is appropriate.
Sixth Change
The Exchange believes that increasing
the fee assessed for transactions in the
Opening Cross and the fee cap thereon
is reasonable because it better aligns the
fees collected for participation in the
Opening Cross with the costs associated
with operating the Opening Cross. The
Exchange notes that the fee assessed for
participation in the Opening Cross is
significantly less that the fees assessed
for participation in regular market hours
trading. From time to time the Exchange
must assess the level of fees collected in
comparison to the costs associated with
offering services, such as the Opening
Cross. In this case, the Exchange is
proposing the increased fee and
increased fee cap to increase revenue
provided by the Opening Cross to cover
the costs associated with offering the
service. The Exchange does not believe
that the proposed changes will affect
participation in the Opening Cross, but
to the extent the Exchange realizes less
participation in the Opening Cross as a
result of the fee increase and increased
fee cap, it may realize a reduction in
revenue.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
The Exchange believes that the
increased fee assessed for all quotes and
orders executed in the Nasdaq Opening
Cross, other than Market-on-Open,
Limit-on-Open, Good-till-Cancelled, and
Immediate-or-Cancel orders, is an
equitable allocation and is not unfairly
discriminatory because even with the
increase this fee is lower than the other
opening cross fees assessed under Rule
7018(e)(1), and thus continues to
promote entry of orders covered by the
fee. The Exchange believes that
increasing the fee cap is an equitable
allocation and is not unfairly
discriminatory because those members
that are most impacted by the fee cap
increase are also the heaviest users of
the cross and receive the most benefit
from its use.
Last, the Exchange believes that the
new clarifying language it is proposing
to add to the fee cap eligibility criteria
under Rule 7018(e)(2) removes
impediments to and perfects the
mechanism of a free and open market
and a national market system, and, in
general, protects investors and the
public interest because it clarifies the
level of shares of liquidity added that a
member must have to qualify for the fee
cap, which is currently unclear in the
current rule text.
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. In terms of
inter-market competition, the Exchange
notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues if they deem fee levels at a
particular venue to be excessive, or
rebate opportunities available at other
venues to be more favorable. In such an
environment, the Exchange must
continually adjust its 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, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
In this instance, the proposed changes
to the charges assessed and credits
available to member firms for execution
of securities in securities of all three
Tapes do not impose a burden on
E:\FR\FM\05OCN1.SGM
05OCN1
Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
competition because the Exchange’s
execution services are completely
voluntary and subject to extensive
competition both from other exchanges
and from off-exchange venues. In this
instance, changes to the incentive fees
and rebates provided under Rule 7014
are reflective of the Exchange’s need to
balance the incentives provided and the
resulting beneficial market behavior
with the cost of such incentives to the
Exchange and their effectiveness. The
Exchange is both offering new
incentives and strengthening criteria for
other incentives. Similarly, the changes
to the credits and fees assessed for the
use of the order execution and routing
services of the Nasdaq Market Center by
members for all securities priced at $1
or more that it trades are reflective of
the same analysis of the benefits versus
costs incurred by the Exchange in
offering execution and routing services.
In this present case, the Exchange is
modifying and adding new credits while
also increasing fees assessed for use of
the Nasdaq Opening and Closing
Crosses. All of the proposed changes are
subject to intense competition among
trading venues, which are free to make
changes to their fees and credits that
they provide as a competitive response
to the Exchange’s proposed changes.
Moreover, the proposed changes do not
impose a burden on competition
because Exchange membership and
participation is optional and is also the
subject of competition from other
trading venues. A member may elect to
participate on another exchange to
extent it believes that fees assessed by
Nasdaq are too high, or credits and
rebates provided are too low. For these
reasons, the Exchange does not believe
that any of the proposed changes will
impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets. Last, because
there are numerous competitive
alternatives to the use of the Exchange,
it is likely that the Exchange will lose
market share as a result of the changes
if they are unattractive to market
participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.8
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2016–132, and should be
submitted on or before October 26,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–23999 Filed 10–4–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78979; File No. SR–
NASDAQ–2016–127]
• 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–2016–132 on the subject line.
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Amend the By-Laws of Nasdaq, Inc. To
Implement Proxy Access
Paper Comments
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 15, 2016, The NASDAQ
Stock Market LLC (‘‘NASDAQ’’) or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2016–132. 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.,
September 29, 2016.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing this proposed
rule change with respect to amendments
of the By-Laws (the ‘‘By-Laws’’) of its
parent corporation, Nasdaq, Inc.
(‘‘Nasdaq’’ or the ‘‘Company’’), to
implement proxy access. The proposed
amendments will be implemented on a
date designated by the Company
following approval by the Commission.
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
8 15
VerDate Sep<11>2014
18:15 Oct 04, 2016
Jkt 241001
69145
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00110
Fmt 4703
Sfmt 4703
E:\FR\FM\05OCN1.SGM
05OCN1
]]>Agencies
[Federal Register Volume 81, Number 193 (Wednesday, October 5, 2016)]
[Notices]
[Pages 69140-69145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23999]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78977; File No. SR-NASDAQ-2016-132]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Nasdaq's Fees and Credits at Rules 7014 and 7018
September 29, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 28, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend the Exchange's fees and credits at
Rules 7014 and 7018.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on September 1,
2016.\3\
---------------------------------------------------------------------------
\3\ The proposed fees were initially filed with the Commission
as an immediately effective and operative rule change on September
1, 2016. See SR-NASDAQ-2016-125. On September 16, 2016 the Exchange
withdrew SR-NASDAQ-2016-125 and replaced it with SR-NASDAQ-2016-128.
To correct a technical issue with the filing, on September 16, 2016
the Exchange replaced SR-NASDAQ-2016-128 with SR-NASDAQ-2016-129.
This filing replaces SR-NASDAQ-2016-129.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at https://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, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Rule 7014 to:
(i) Add a new charge of $0.0029 assessed Qualified Market Makers
(``QMMs'') for orders in securities listed on exchanges other than
Nasdaq priced at $1 or more; (ii) amend the requirement to qualify for
a rebate under the NBBO program; and (iii) add the new Nasdaq Growth
Program. The Exchange is also proposing to amend Rule 7018 to: (i)
Replace an existing $0.0001 per share executed credit tier with two new
credit tiers providing $0.0001 and $0.0002 per share executed,
respectively; (ii) amend the criteria and fees assessed for
transactions in the Closing Cross; and (iii) amend the criteria and
fees assessed for transactions in the opening cross, and make a
clarifying change to the opening cross rules.
First Change
The purpose of the first change is to increase incentives provided
by the Exchange under Rule 7014(e) by providing a new $0.0029 per share
executed fee to QMMs that, in addition to meeting the Tier 2
eligibility criteria also have a combined Consolidated Volume of at
least 3.5%. A QMM is a member that makes a significant contribution to
market quality by providing certain levels of Consolidated Volume
through one or more of its Nasdaq Market Center MPIDs. In return, a QMM
receives rebates with respect to all other displayed orders (other than
Designated Retail Orders, as defined in Rule 7018) in securities priced
at $1 or more per share that provide liquidity and were for securities
listed on NYSE (``Tape A''), securities listed on exchanges other than
NYSE or Nasdaq (``Tape B''), or securities listed on Nasdaq (``Tape
C''). There are currently two Tiers of rebates provided, which are
based on the amount of shares of liquidity provided a QMM executes in
all securities through one or more of its Nasdaq Market Center MPIDs
that represent certain levels of Consolidated Volume.\4\
---------------------------------------------------------------------------
\4\ Tier 1 requires a QMM to provide above 0.70% up to and
including 0.90% of Consolidated Volume during the month, and Tier 2
requires above 0.90% of Consolidated Volume.
---------------------------------------------------------------------------
[[Page 69141]]
The Exchange further provides reduced charges to QMMs for removing
liquidity from the Exchange in securities priced at $1 or more if the
QMM's volume of liquidity added through one or more of its Nasdaq
Market Center MPIDs during the month (as a percentage of Consolidated
Volume) is no less than 0.80%. The Exchange is proposing to assess a
new $0.0029 per share executed fee, assessed on a QMM that meets the
Tier 2 criteria, for orders in Tape A and B securities priced at $1 or
more per share that access liquidity on the Nasdaq Market Center, if
the QMM also has a combined Consolidated Volume (adding and removing
liquidity) of at least 3.5%. Thus, in addition to providing at least
the minimum level of Consolidated Volume in adding liquidity as
required by Tier 2, the QMM must also have a significant level of
combined Consolidated Volume, i.e., both adding and removing liquidity.
Second Change
The purpose of the second change is to amend the requirement to
qualify for a rebate under the NBBO program. The NBBO Program provides
members with per share executed rebates with respect to all other
displayed orders (other than Designated Retail Orders) in securities
priced at $1 or more per share that provide liquidity and establish the
NBBO. First, the Exchange is proposing to limit eligibility for the
credit provided by the program to executions from orders originating on
ports that have a ratio of at least 25% NBBO liquidity provided to
liquidity provided during the month. As described in the rule, NBBO
liquidity provided means liquidity provided from orders (other than
Designated Retail Orders, as defined in Rule 7018), that establish the
NBBO, and displayed a quantity of at least one round lot at the time of
execution. Under the NBBO program, the Exchange provides a $0.0004 per
share executed rebate in Tape A and B securities if a member executes
shares of liquidity provided in all securities through one or more
Nasdaq Market Center MPIDs that represents 1.0% or more of Consolidated
Volume during the month. The Exchange also provides an additional
$0.0002 per share executed rebate for displayed quotes/orders (other
than Supplemental Orders or Designated Retail Orders) that provide
liquidity priced at $1 or more, if the member meets certain criteria,
including having a ratio of at least 25% NBBO liquidity provided to
liquidity provided during the month. The Exchange is now proposing to
extend the 25% NBBO liquidity provided requirement to the ports used by
the member to qualify for the $0.0004 per share executed rebate, in
addition to applying the current Consolidated Volume eligibility
requirement that the member must execute shares of liquidity provided
in all securities through one or more of its Nasdaq Market Center MPIDs
that represents 1% or more of Consolidated Volume during the month.
Third Change
The Exchange is proposing to adopt the new Nasdaq Growth Program
under Rule 7014(j). The Nasdaq Growth Program will provide a member a
$0.0025 per share executed credit in securities priced $1 or more per
share if it meets certain criteria. The proposed credit will be
provided in lieu of other credits provided to the member for displayed
quotes/orders (other than Supplemental Orders or Designated Retail
Orders) that provide liquidity under Rule 7018, if the credit under the
Nasdaq Growth Program is greater than the credit attained under Rule
7018. To be eligible for the credit a member must: (i) Add greater than
750,000 shares a day on average during the month through one or more of
its Nasdaq Market Center MPIDs; and (ii) increase its shares of
liquidity provided through one or more of its Nasdaq Market Center
MPIDs as a percent of Consolidated Volume by 25% versus the member's
Growth Baseline. The Exchange is defining Growth Baseline as the
member's shares of liquidity provided in all securities through one or
more of its Nasdaq Market Center MPIDs as a percentage of Consolidated
Volume during the last month a member qualified for the Nasdaq Growth
Program. If a member has not qualified for a credit under this program,
its August 2016 share of liquidity provided in all securities through
one or more of its Nasdaq Market Center MPIDs as a percent of
Consolidated Volume will be used to establish a baseline. Thus, the
purpose of the credit is to provide an incentive to members that do not
qualify for other credits under Rule 7018 in excess of the Nasdaq
Growth Program credit to increase their participation on the Exchange.
Fourth Change
The Exchange is proposing to amend Rule 7018(a)(3), which provides
the fees and credits for execution and routing of orders in Tape B
securities priced $1 or greater. Currently, the Exchange provides a
$0.0001 per share executed credit to a member for displayed quotes and
orders (other than Supplemental Orders or Designated Retail Orders)
that provide liquidity to a member with shares of liquidity provided in
all securities during the month representing at least 0.2% of
Consolidated Volume during the month, through one or more of its Nasdaq
Market Center MPIDs. The credit is provided in addition to the credits
provided for displayed quotes and orders (other than Supplemental
Orders or Designated Retail Orders) that provide liquidity. The
Exchange is proposing to eliminate this credit tier and replace it with
two new credit tiers that provide $0.0001 and $0.0002 per share
executed, respectively. First, the Exchange is proposing to adopt a
$0.0001 per share executed credit available to a member with shares of
liquidity provided in securities that are listed on exchanges other
than Nasdaq or NYSE (i.e., Tape B) during the month representing at
least 0.045% but less than 0.075% of Consolidated Volume during the
month through one or more of its Nasdaq Market Center MPIDs. The
Exchange is also proposing to adopt a $0.0002 per share executed credit
to a member with shares of liquidity provided in securities that are
listed on exchanges other than Nasdaq or NYSE (i.e., Tape B) during the
month representing at least 0.075% of Consolidated Volume during the
month through one or more of its Nasdaq Market Center MPIDs. Thus, the
Exchange is focusing the required shares of liquidity required to
qualify for the credit on Tape B securities and reducing the level of
Consolidated Volume required to qualify for either of the new credits
in contrast to the existing credit. Like the current $0.0001 per share
executed credit that is being replaced, the proposed new credits are
provided in addition to the credits provided for displayed quotes and
orders (other than Supplemental Orders or Designated Retail Orders)
that provide liquidity.
Fifth Change
The Exchange is proposing to amend the criteria and fees assessed
for transactions in the Closing Cross under Rule 7018(d). First, the
Exchange is proposing to increase the fee assessed members for all
quotes and orders (other than Market-on-Close and Limit-on-Close
orders) executed in the Nasdaq Closing Cross from $0.0008 to $0.00085
per share executed. Second, the Exchange is proposing to increase the
level of Consolidated Volume required to qualify for the lowest fee
assessed for Market-on-Close (``MOC'') and Limit-on-Close (``LOC'')
orders under Tier A from 1.4% to 1.8%. As a consequence, the Exchange
is also proposing to amend Tier B to reflect the increase range of
Consolidated Volume required to
[[Page 69142]]
qualify under the tier. Third, the Exchange is proposing to increase
the Tier D fee from $0.0013 to $0.00135 per share executed, the Tier E
fee from $0.00135 to $0.00145 per share executed, and the Tier F fee
from $0.0015 to $0.0016 per share executed.
Sixth Change
The Exchange is proposing to amend the criteria and fees assessed
for transactions in the Opening Cross, and make a clarifying change to
the opening cross rules under Rule 7018(e). First, the Exchange is
proposing to increase the fee assessed members under paragraph (1) of
the rule for all quotes and orders (other than Market-on-Open, Limit-
on-Open, Good-till-Cancelled, and Immediate-or-Cancel orders) executed
in the Nasdaq Opening Cross from $0.0008 to $0.00085 per share
executed. Second, the Exchange is proposing to increase the monthly fee
cap provided under paragraph (2) of the rule from $30,000 to $35,000.
Last, the Exchange is proposing to clarify the qualification criteria
of the fee cap under paragraph (2) to make it clear that a member must
add at least one million shares of liquidity, on average per day, per
month, which is how the criteria is currently applied and how it was
announced to market participants when it was adopted.\5\ As it is
currently written, the criteria is vague on the time period over which
a member must have one million shares of liquidity.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 71925 (April 10,
2014), 79 FR 21328 (April 15, 2014) (SR-NASDAQ-2014-031); see also
https://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2014-28.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among members and issuers and other persons using any facility,
and is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest;
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
First Change
The Exchange believes that assessing a new $0.0029 fee under the
QMM Program is reasonable because it is set at a level that is lower
than the standard removal fee of $0.0030 per share executed, thereby
providing an incentive to market participants, and it is also based on
the Exchange's analysis of the cost to the Exchange of offering a lower
fee, thereby decreasing the revenue derived from transactions by
members that qualify for the new fee, and the desired benefit to the
market provided by the members that meet the new fee's qualification
criteria. In this case, the criteria provides an incentive to members
to increase their participation in the market as measured by
Consolidated Volume, which benefits all market participants. Currently,
members may qualify for a $0.00295 per share executed fee for removing
liquidity in Tape A or B securities priced at $1 or more if the
member's volume of liquidity added through one or more of its Nasdaq
Market Center MPIDs during the month (as a percentage of Consolidated
Volume) is not less than 0.80%. The Exchange is proposing a similar fee
for removing liquidity in Tape A or B securities priced at $1 or more
if the member qualifies under the Tier 2 criteria that requires the
member to execute shares of liquidity provided in all securities
through one or more of its Nasdaq Market Center MPIDs that represent
above 0.90% of Consolidated Volume during the month, and the member
must also have a combined Consolidated Volume (adding and removing
liquidity) of at least 3.5%. Thus, to qualify for a lower transaction
fee for removing liquidity in Tape A or B securities under the QMM
Program, the member must both provide greater Consolidated Volume
through adding liquidity during the month (i.e., 0.90% versus 0.80%)
and provide a certain level of combined Consolidated Volume, which
accounts for both adding liquidity and removing liquidity. The Exchange
believes that the new fee is an equitable allocation and is not
unfairly discriminatory because all members that participate on the
Exchange may qualify for the proposed reduced Tape A and B removal fee
if they elect to provide the Consolidated Volume required. The Exchange
uses Consolidated Volume as a measure of the member's activity in
comparison to that of the market as a whole. Thus, the proposed fee and
criteria required to qualify for the fee does not discriminate unfairly
and is equitably allocated, as eligibility for the fee is tied to the
member's performance in comparison to other participants in aggregate.
Second Change
The Exchange believes that the $0.0004 per share executed rebate of
the NBBO Program to executions from orders originating on a port that
has a ratio of at least 25% NBBO liquidity provided to liquidity
provided is reasonable because it is the same rebate that the Exchange
currently applies under the program and is based on the Exchange's
continued belief that it is the appropriate level of rebate provided in
return for the market-improving liquidity required to receive the
rebate. The Exchange believes that tying eligibility for the $0.0004
per share executed rebate of the NBBO Program to executions from orders
originating on a port that has a ratio of at least 25% NBBO liquidity
provided to liquidity provided is an equitable allocation and is not
unfairly discriminatory because the measurement criteria is identical
to the criteria used to qualify for the $0.0002 per share executed
rebate, although the $0.0002 rebate is measured across one or more of a
members Nasdaq Market Center MPIDs. NBBO liquidity provided to
liquidity provided is a ratio of the member's liquidity provided that
establishes the NBBO and displayed at a quantity of at least one round
lot as compared to all liquidity provided by the member. Thus, the
Exchange is making a member provide more market-improving activity (in
addition to the Consolidated Volume requirement) to receive the rebate.
The Exchange believes that limiting the NBBO liquidity provided to
executions from orders on that port is an equitable allocation and is
not unfairly discriminatory because it directly ties the member's
beneficial activity to the ports through which the rebate is applied.
The Exchange believes this will create greater incentive for firms to
establish the NBBO while more closely tying the credit to the market
improving behavior the Exchange is trying to incentivize.
Thus, any member may choose to participate in the market in a
manner to meet the NBBO liquidity criteria.
Third Change
The Exchange believes that the $0.0025 per share executed credit
provided by the Nasdaq Growth Program is reasonable because it is set
at a level that the Exchange believes will provide adequate incentive
to market participants to improve their participation on the Exchange.
The
[[Page 69143]]
credit is also based on the Exchange's analysis of the cost to the
Exchange of providing credits to members that qualify for the new
credit and the desired benefit to the market provided by the members
that meet the new fee's qualification criteria and thereby increase
liquidity on the Exchange. The Exchange believes that the Nasdaq Growth
Program is an equitable allocation and is not unfairly discriminatory
because it is designed to improve the market for all market
participants on the Exchange, even though not all members will be
eligible for the new credit. The Exchange is targeting members that may
not have adequate participation to qualify for certain credits under
Rule 7018(a), and who may be significantly far from reaching a level of
participation to qualify for such credits. The Exchange believes it is
important to provide such members incentive to incrementally increase
their participation in the market, which will benefit all market
participants. The Exchange is proposing to achieve this by requiring a
member to both add greater than 750,000 shares a day on average during
the month through one or more of its Nasdaq Market Center MPIDs and
increase its share of liquidity provided through on or more of its
Nasdaq Market Center MPIDs as a percent of Consolidated Volume by 25%
versus the member's Growth Baseline. The Exchange believes that this
criteria is an equitable allocation and is not unfairly discriminatory
because it requires a minimum level of participation in the market and
it ensures that members meaningfully remain in the market. There are
tiers under Rule 7018 that afford members a $0.0025 per share executed
credit, for example, member with shares of liquidity provided in all
securities through one or more of its Nasdaq Market Center MPIDs that
represent more than 0.10% of Consolidated Volume during the month, and
the growth program aims to provide a path for firms to hit the Rule
7018 thresholds by receiving benefits as they continue to grow. The
Exchange is also proposing to require a member to increase its shares
of liquidity provided through one or more of its Nasdaq Market Center
MPIDs as a percent of Consolidated Volume by 25% versus the member's
Growth Baseline. The Growth Baseline will be defined as the member's
shares of liquidity provided in all securities through one or more of
its Nasdaq Market Center MPIDs as a percent of Consolidated Volume
during the last month a member qualified for the Nasdaq Growth Program.
As a consequence, although any member may qualify under the program if
it meets the criteria, members that currently qualify for higher
credits under Rule 7018(a) will not receive the proposed credit. The
Exchange believes that this is an equitable allocation and is not
unfairly discriminatory because such members are receiving higher
credits in lieu of the lower proposed credit, and the increased
liquidity provided by the members that qualify under the new program
benefit all market participants. Moreover, the program is designed to
provide incentive to members to continue to increase their
participation until such time that they qualify for other, higher
credits under Rule 7018(a). If a member has not qualified for a credit
under this program, its August 2016 share of liquidity provided in all
securities through one or more of its Nasdaq Market Center MPIDs as a
percent of Consolidated Volume will be used to establish a baseline.
Thus, the second criteria requires a certain level of increased
participation in the market. The Exchange believes that the program is
an equitable allocation and is not unfairly discriminatory because
members must continue to improve their participation in the market
month over month in order to continue receiving the credit until such a
time that it qualifies for a higher credit under Rule 7018(a). As a
consequence, a member that qualifies for the new credit will eventually
become ineligible for the credit by either failing to grow its shares
of liquidity or graduating to a higher credit in lieu of proposed new
credit. The Exchange chose to use August 2016 as the initial baseline
since it was the last month of activity prior to the start of the
program and there were no market holidays in the month.
Fourth Change
The Exchange believes that eliminating the $0.0001 per share
executed credit under Rule 7018(a)(3) provided to a member with shares
of liquidity provided in all securities of at least 0.2% of
Consolidated Volume during the month in the securities of any Tape, and
replacing it with two new credits of $0.0001 and $0.0002 per share
executed that are based on certain levels of Consolidated Volume in
Tape B securities during the month is reasonable because the level of
credit provided is identical to, or very close to, the current credit
provided. The Exchange believes that the two credits are sufficient to
provide incentive to members to meet the criteria. Moreover, the credit
is based on the Exchange's analysis of the cost to the Exchange of
providing credits to members that qualify for the new credit and the
desired benefit to the market provided by the members that meet the new
fee's qualification criteria and thereby increase liquidity on the
Exchange.
The Exchange believes that eliminating the $0.0001 per share
executed credit under Rule 7018(a)(3) provided to a member with shares
of liquidity provided in all securities of at least 0.2% of
Consolidated Volume during the month in the securities of any Tape, and
replacing it with two new credits that are based on certain levels of
Consolidated Volume in Tape B securities during the month is an
equitable allocation and is not unfairly discriminatory because it more
closely ties the criteria to improving the market on the Exchange in
Tape B securities. Currently, members are provided the $0.0001 per
share executed credit for displayed quotes and orders (other than
Supplemental Orders or Designated Retail Orders) in Tape B securities
if the member provides the required Consolidated Volume. In lieu of the
current criteria, the Exchange is requiring a member provide at least
0.045% but less than 0.075% of Consolidated Volume in Tape B securities
to receive a $0.0001 per share executed credit, and is requiring a
member provide at least 0.075% of Consolidated Volume in Tape B
securities during the month to receive a $0.0002 per share executed
credit. Thus, the Exchange is reducing the level of Consolidated Volume
required to receive either of the proposed credits in comparison to the
current credit, which is reflective of limiting the Consolidated Volume
considered for the credits to Tape B securities. The Exchange believes
that the proposed $0.0002 per share credit is an equitable allocation
and is not unfairly discriminatory because it requires significantly
greater Consolidated Volume in Tape B securities during the month than
the proposed $0.0001 eligibility criteria. The Exchange also believes
that the proposed change is an equitable allocation and is not unfairly
discriminatory because a member is free to choose which securities it
transacts in and may choose to increase its level of activity in Tape B
securities to qualify for the proposed credits. The Exchange notes that
some members may continue to qualify for the credit because the
Exchange has proposed reduced levels of Consolidated Volume, which
members may already provide. To the extent that a member qualified for
the current credit based largely on its activity in Tape A and C
securities, it may have to increase its activity in Tape
[[Page 69144]]
B securities to receive one of the new credits. The Exchange is not
proposing similar credits for transactions in Tape C and A securities
under Rules 7018(a)(1) and (2), respectively, because it must balance
its desire to provide incentives to market participants to improve the
market where it deems it is most needed against the cost to the
Exchange in providing such incentives. Thus, the Exchange believes that
focusing the changes on activity in Tape B securities is an equitable
allocation and is not unfairly discriminatory because it will provide
further incentive to members to participate in Tape B securities, the
market in which the Exchange is seeking to further improve.
Fifth Change
The Exchange believes that increasing the fees under Rule 7018(d),
including the changes to the criteria for certain fees that make it
more difficult to qualify for a lower fee, are reasonable because the
Exchange notes that the fees assessed for participation in the Closing
Cross are significantly less than the fees assessed for participation
in regular market hours trading. From time to time the Exchange must
assess the level of fees collected in comparison to the costs
associated with offering services, such as the Closing Cross. In this
case, the Exchange has determined that raising the fees for use of the
Closing Cross is appropriate. The Exchange believes that the proposed
changes to fees assessed under Rule 7018(d) for participation in the
Closing Cross is an equitable allocation and is not unfairly
discriminatory because it is increasing the fees and criteria to
qualify for the lowest fee to better align the fees collected for
participation in the Closing Cross with the costs associated with
operating the Closing Cross. As noted, the fees assessed for
participation in the Closing Cross are significantly less than the fees
assessed for participation in regular market hours trading. Also as
noted, from time to time the Exchange must assess the level of fees
collected in comparison to the costs associated with offering services,
such as the Closing Cross. In this case, the Exchange is proposing the
increased fees and more stringent criteria to increase revenue provided
by the Closing Cross to cover the costs associated with offering the
service. The Exchange does not believe that the proposed changes will
affect participation in the Closing Cross, but to the extent the
Exchange realizes less participation in the Closing Cross as a result
of the fee increases and change to the Tier A criteria, it may realize
a reduction in revenue. The Exchange notes that, in addition to
increasing the fee assessed for quotes and orders (other than Market-
on-Close and Limit-on-Close orders) executed in the Closing Cross, it
is increasing fees for MOC and LOC orders under Tiers D, E and F, which
may provide incentive to market participants in these tiers to increase
their shares of liquidity provided to qualify for a Tier with a lower
fee. In this regard, the Exchange has observed that most members
qualify under Tiers D, E and F, and consequently increasing the fee may
incentivize members to increase the level of shares of liquidity
provided to qualify for a lower fee. The Exchange is increasing the
level of Consolidated Volume required to qualify for the lowest fee
under Tier A, which will make qualifying for the credit more difficult
to the extent a member does not qualify under the alternative MOC/LOC
volume standard. In lieu of increasing the fee, the Exchange has
determined to increase the level of Consolidated Volume in all
securities to make the tier more meaningful.
Thus, the Exchange believes that increasing the criteria required
to qualify for Tier A and increasing the fees assessed for Tiers D, E
and F is an equitable allocation and is not unfairly discriminatory
because the Exchange has observed the most members qualifying under
these tiers. Accordingly, the Exchange believes that the changes to
these tiers, and not the remaining tiers is appropriate.
Sixth Change
The Exchange believes that increasing the fee assessed for
transactions in the Opening Cross and the fee cap thereon is reasonable
because it better aligns the fees collected for participation in the
Opening Cross with the costs associated with operating the Opening
Cross. The Exchange notes that the fee assessed for participation in
the Opening Cross is significantly less that the fees assessed for
participation in regular market hours trading. From time to time the
Exchange must assess the level of fees collected in comparison to the
costs associated with offering services, such as the Opening Cross. In
this case, the Exchange is proposing the increased fee and increased
fee cap to increase revenue provided by the Opening Cross to cover the
costs associated with offering the service. The Exchange does not
believe that the proposed changes will affect participation in the
Opening Cross, but to the extent the Exchange realizes less
participation in the Opening Cross as a result of the fee increase and
increased fee cap, it may realize a reduction in revenue.
The Exchange believes that the increased fee assessed for all
quotes and orders executed in the Nasdaq Opening Cross, other than
Market-on-Open, Limit-on-Open, Good-till-Cancelled, and Immediate-or-
Cancel orders, is an equitable allocation and is not unfairly
discriminatory because even with the increase this fee is lower than
the other opening cross fees assessed under Rule 7018(e)(1), and thus
continues to promote entry of orders covered by the fee. The Exchange
believes that increasing the fee cap is an equitable allocation and is
not unfairly discriminatory because those members that are most
impacted by the fee cap increase are also the heaviest users of the
cross and receive the most benefit from its use.
Last, the Exchange believes that the new clarifying language it is
proposing to add to the fee cap eligibility criteria under Rule
7018(e)(2) removes impediments to and perfects the mechanism of a free
and open market and a national market system, and, in general, protects
investors and the public interest because it clarifies the level of
shares of liquidity added that a member must have to qualify for the
fee cap, which is currently unclear in the current rule text.
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. In terms of inter-market
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its 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,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In this instance, the proposed changes to the charges assessed and
credits available to member firms for execution of securities in
securities of all three Tapes do not impose a burden on
[[Page 69145]]
competition because the Exchange's execution services are completely
voluntary and subject to extensive competition both from other
exchanges and from off-exchange venues. In this instance, changes to
the incentive fees and rebates provided under Rule 7014 are reflective
of the Exchange's need to balance the incentives provided and the
resulting beneficial market behavior with the cost of such incentives
to the Exchange and their effectiveness. The Exchange is both offering
new incentives and strengthening criteria for other incentives.
Similarly, the changes to the credits and fees assessed for the use of
the order execution and routing services of the Nasdaq Market Center by
members for all securities priced at $1 or more that it trades are
reflective of the same analysis of the benefits versus costs incurred
by the Exchange in offering execution and routing services. In this
present case, the Exchange is modifying and adding new credits while
also increasing fees assessed for use of the Nasdaq Opening and Closing
Crosses. All of the proposed changes are subject to intense competition
among trading venues, which are free to make changes to their fees and
credits that they provide as a competitive response to the Exchange's
proposed changes. Moreover, the proposed changes do not impose a burden
on competition because Exchange membership and participation is
optional and is also the subject of competition from other trading
venues. A member may elect to participate on another exchange to extent
it believes that fees assessed by Nasdaq are too high, or credits and
rebates provided are too low. For these reasons, the Exchange does not
believe that any of the proposed changes will impair the ability of
members or competing order execution venues to maintain their
competitive standing in the financial markets. Last, because there are
numerous competitive alternatives to the use of the Exchange, it is
likely that the Exchange will lose market share as a result of the
changes if they are unattractive to market participants.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\8\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-2016-132 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2016-132. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2016-132, and should
be submitted on or before October 26, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-23999 Filed 10-4-16; 8:45 am]
BILLING CODE 8011-01-P
