Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees at Rule 7014, 48476-48479 [2018-20770]

Download as PDF 48476 Federal Register / Vol. 83, No. 186 / Tuesday, September 25, 2018 / Notices B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change does not address competitive issues but relates to the administration and functioning of the Exchange by allowing the Exchange greater flexibility in attracting and retaining well qualified officers to the role of CRO that are not designated as an Executive Vice President or Senior Vice President. 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 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 12 and subparagraph (f)(6) of Rule 19b–4 thereunder.13 A proposed rule change filed under Rule 19b–4(f)(6) 14 normally does not become operative prior to 30 days after the date of the filing. However, Rule 19b–4(f)(6)(iii) 15 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. The Exchange notes that waiver of the operative delay will allow it to amend its By-Laws by September 26, 2018. The Exchange states that the boards of the Affiliated Exchanges will collectively meet on that 12 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 14 17 CFR 240.19b–4(f)(6). 15 17 CFR 240.19b–4(f)(6)(iii). daltland on DSKBBV9HB2PROD with NOTICES 13 17 VerDate Sep<11>2014 17:40 Sep 24, 2018 Jkt 244001 date to address, among other matters, certain annual corporate ‘‘housekeeping items,’’ which the Exchange states has historically included Exchange officer appointments. As such, the Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change as operative upon filing.16 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– BX–2018–044 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–BX–2018–044. 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 website (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 16 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX–2018–044 and should be submitted on or before October 16, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Brent J. Fields, Secretary. [FR Doc. 2018–20762 Filed 9–24–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84200; File No. SR– NASDAQ–2018–076] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees at Rule 7014 September 19, 2018. 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 13, 2018, 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. 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\25SEN1.SGM 25SEN1 Federal Register / Vol. 83, No. 186 / Tuesday, September 25, 2018 / Notices I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the its fees at Rule 7014 to: (i) Eliminate the requirement that a member be a market maker to participate in the Qualified Market Maker (‘‘QMM’’) Program; and (ii) eliminate the additional $0.0002 per share executed credit under the NBBO Program. The text of the proposed rule change is available on the Exchange’s website 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 daltland on DSKBBV9HB2PROD with NOTICES 1. Purpose Rule 7014 provides various Market Quality Incentive Programs available to members. The purpose of the proposed rule change is to amend Rule 7014 to: (i) Eliminate the requirement that a member be a market maker to participate in the QMM Program; and (ii) eliminate the additional $0.0002 per share executed credit under the NBBO Program. The Exchange initially filed the proposed pricing changes on September 4, 2018 (SR–NASDAQ–2018–071). On September 13, 2018, the Exchange withdrew that filing and submitted this filing, which makes a technical change to the proposed rule text. First Change The purpose of the first proposed rule [sic] change is to eliminate the requirement that a member be a market maker to participate in the QMM Program. A QMM is a member that makes a significant contribution to market quality by providing liquidity at the national best bid and offer (‘‘NBBO’’) in a large number of stocks VerDate Sep<11>2014 17:40 Sep 24, 2018 Jkt 244001 for a significant portion of the day. In addition, the member must avoid imposing the burdens on Nasdaq and its market participants that may be associated with excessive rates of entry of orders away from the inside and/or order cancellation. The designation reflects the QMM’s commitment to provide meaningful and consistent support to market quality and price discovery by extensive quoting at the NBBO in a large number of securities. In return for its contributions, certain financial benefits are provided to a QMM with respect to its order activity, as described under Rule 7014(e). These benefits include a lower rate charged for executions of orders in securities priced at $1 or more per share that access liquidity on the Nasdaq Market Center. Rule 7014(d) provides the qualification criteria a member must meet to be eligible for the QMM Program. Specifically, to be designated a QMM, a member must meet the following criteria: (1) The member is not assessed any ‘‘Excess Order Fee’’ under Rule 7018 during the month; (2) the member quotes at the NBBO at least 25% of the time during regular market hours in an average of at least 1,000 securities per day during the month; and (3) the member is a registered Nasdaq market maker.3 The Exchange is proposing to eliminate the requirement that a member be a Nasdaq market maker to be designated as a QMM. As a consequence, any member may participate in the program if it meets the other qualification criteria of the rule. Second Change The purpose of the second proposed rule [sic] change is to eliminate the additional $0.0002 per share executed credit under the NBBO Program at Rule 7014(g). The NBBO Program provides two rebates per share executed. The Exchange is proposing to eliminate the $0.0002 per share executed credit, which is provided to a member for displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that provide liquidity priced at $1 or more. Under Rule 7014(g), to qualify for the additional $0.0002 per share executed credit for 3 In 2015, the Exchange adopted the requirement under Rule 7014(d) that a member must be a market maker to be designated a QMM. See Securities Exchange Act Release No. 74725 (April 14, 2015), 80 FR 21778 (April 20, 2015) (SR–NASDAQ–2015– 032). Prior to the change, a QMM need not have been a Nasdaq market maker. Thus, the QMM designation does not by itself impose a two-sided quotation obligation or convey any of the benefits associated with being a registered market maker. This is currently the case and it will continue to be the case with the elimination of the market maker requirement. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 48477 displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that provide liquidity priced at $1 or more, a member must (i) execute shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represents 0.5% or more of Consolidated Volume 4 during the month, and (ii) has a ratio of at least 25% NBBO liquidity provided 5 to liquidity provided during the month. The Exchange has observed that no members have qualified for this credit and is consequently proposing to eliminate it. 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 not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 8 Likewise, in NetCoalition v. Securities and Exchange Commission 9 4 Consolidated Volume is defined as the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of a member’s trading activity the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity. See Rule 7018(a). 5 NBBO liquidity provided means liquidity provided from orders (other than Designated Retail Orders, as defined in Nasdaq Rule 7018), that establish the NBBO, and displayed a quantity of at least one round lot at the time of execution. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(4) and (5). 8 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). 9 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). E:\FR\FM\25SEN1.SGM 25SEN1 48478 Federal Register / Vol. 83, No. 186 / Tuesday, September 25, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES (‘‘NetCoalition’’) the D.C. Circuit upheld the Commission’s use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a costbased approach.10 As the court emphasized, the Commission ‘‘intended in Regulation NMS that ‘market forces, rather than regulatory requirements’ play a role in determining the market data . . . to be made available to investors and at what cost.’’ 11 Further, ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’ . . . .’’ 12 First Change The Exchange believes that the fees and credits of the QMM Program remain reasonable because the Exchange is not proposing to amend them. Thus, the basis set forth when the fees were adopted remain [sic] valid. The proposed elimination of the market maker requirement is reasonable, an equitable allocation and is not unfairly discriminatory because the Exchange seeks to broaden participation in the program. When the Exchange limited the QMM Program to market makers, it noted that market makers had provided the vast majority of participation in the program and were the only market participant [sic] utilizing the program at the time.13 The Exchange now seeks broader participation in the program by allowing any Nasdaq member to participate in the QMM Program that qualifies under the remaining criteria. The Exchange believes that circumstances have changed over the three years since it last allowed nonNasdaq market makers to participate in the program, such that non-market makers may have interest in meeting the criteria required to receive the fees and credits under the QMM Program. Allowing broader participation in the QMM Program may increase the marketimproving participation in the QMM Program, to the extent the number of 10 See NetCoalition, at 534–535. at 537. 12 Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782–83 (December 9, 2008) (SR– NYSEArca–2006–21)). 13 Supra note 3. 11 Id. VerDate Sep<11>2014 17:40 Sep 24, 2018 Jkt 244001 members participating in the program increase [sic]. As a consequence, the proposed change is reasonable, an equitable allocation and will not discriminate in any way. Second Change The Exchange believes that elimination of the $0.0002 per share executed NBBO credit is reasonable because it eliminates a credit that the Exchange has determined to be unnecessary. In particular, the credit has not provided adequate incentive to members to meet the related qualifying requirements. The Exchange notes that the $0.0004 per share executed NBBO Program rebate will remain, thus members will continue to have the opportunity to qualify for significant rebates under the NBBO Program. The Exchange believes that elimination of the $0.0002 per share executed NBBO credit is an equitable allocation and is not unfairly discriminatory because no member currently qualifies for the credit. Thus, eliminating the credit will not discriminate in any manner and the proposed change will be applied equitably among all members. Moreover, elimination of the credit from rule book will allow the Exchange to consider new incentives. 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 incentive programs under Rule 7014 do not impose a burden on competition because the Exchange’s PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. Elimination of the market maker qualification requirement from the QMM Program may promote competition among trading venues to the extent that allowing broader participation in the program makes the Exchange a more attractive venue on which to participate. The proposed elimination of the $0.0002 per share executed NBBO credit will not place any burden on competition because no members currently qualify for the credit. As noted above, the credit has not served its purpose of incentivizing members to provide the marketimproving participation required by the credit’s qualification criteria. Consequently, removal of the credit should not affect competition among market participants or market venues whatsoever. 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.14 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 14 15 E:\FR\FM\25SEN1.SGM U.S.C. 78s(b)(3)(A)(ii). 25SEN1 Federal Register / Vol. 83, No. 186 / Tuesday, September 25, 2018 / Notices • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2018–076 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments [Release No. 34–84203; File No. SR–ISE– 2018–79] • 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–2018–076. 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2018–076, and should be submitted on or before October 16, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–20770 Filed 9–24–18; 8:45 am] daltland on DSKBBV9HB2PROD with NOTICES BILLING CODE 8011–01–P Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Conform By-Law’s CRO Provisions to Those of an Affiliate Exchange September 19, 2018. 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 6, 2018, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to conform the Exchange’s By-Law provisions regarding the Chief Regulatory Officer to those of its affiliate, Nasdaq PHLX LLC (‘‘Phlx’’). The text of the proposed rule change is available on the Exchange’s website at https://ise.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. 1 15 15 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:40 Sep 24, 2018 2 17 Jkt 244001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00071 Fmt 4703 Sfmt 4703 48479 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its By-Laws at Article IV, Section 7 to conform its provisions regarding the Exchange’s Chief Regulatory Officer (‘‘CRO’’) to those of its affiliate, Nasdaq PHLX LLC (‘‘Phlx’’).3 By-Law Article IV, Section 7 presently requires that an officer of the Exchange 4 with the position of Executive Vice President or Senior Vice President be designated as the CRO of the Exchange. The Exchange now proposes to remove the requirement that the CRO be an Executive Vice President or Senior Vice President of the Exchange. The Exchange believes that this requirement is unnecessary and notes that there may be officers of the Exchange who are well qualified to serve in the CRO role, but who may not hold the position of an Executive Vice President or Senior Vice President.5 The Exchange does not seek to amend any of the current responsibilities of the CRO as set forth in Section 7; 6 rather, the proposed changes are intended to give the Exchange more flexibility to attract and retain well qualified officers to the role of CRO that are not designated as an Executive Vice President or Senior Vice President of the Exchange. As noted above, the Exchange desires to conform the requirements to become CRO in its By-Laws to those in the By-Laws of Phlx, which do not contain a similar restriction in Article IV, Section 4–7 of its By-Laws that its CRO be an Executive Vice President or Senior Vice President of Phlx.7 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) 3 See Phlx By-Law Article IV, Section 4–7 (Chief Regulatory Officer). 4 In Exhibit 5, the references to ‘‘Company’’ mean the Exchange. 5 The Exchange notes that Phlx’s CRO currently holds the position of Vice President. 6 The CRO’s responsibilities include general supervision of the regulatory operations of the Exchange, including responsibility for overseeing the Exchange’s surveillance, examination, and enforcement functions and for administering any regulatory services agreements with another SRO to which the Exchange is a party. In addition, the CRO shall meet with the Regulatory Oversight Committee of the Exchange in executive session at regularly scheduled meetings of such committee, and at any time upon request of the CRO or any member of the Regulatory Oversight Committee. Unlike Phlx, the Exchange’s By-Laws provide that the CRO may also serve as the General Counsel of the Exchange. See By-Law Article IV, Section 7. 7 See note 5 above. E:\FR\FM\25SEN1.SGM 25SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 186 (Tuesday, September 25, 2018)]
[Notices]
[Pages 48476-48479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20770]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84200; File No. SR-NASDAQ-2018-076]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Fees at Rule 7014

September 19, 2018.
    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 13, 2018, 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.

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[[Page 48477]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the its fees at Rule 7014 to: (i) 
Eliminate the requirement that a member be a market maker to 
participate in the Qualified Market Maker (``QMM'') Program; and (ii) 
eliminate the additional $0.0002 per share executed credit under the 
NBBO Program.
    The text of the proposed rule change is available on the Exchange's 
website 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
    Rule 7014 provides various Market Quality Incentive Programs 
available to members. The purpose of the proposed rule change is to 
amend Rule 7014 to: (i) Eliminate the requirement that a member be a 
market maker to participate in the QMM Program; and (ii) eliminate the 
additional $0.0002 per share executed credit under the NBBO Program.
    The Exchange initially filed the proposed pricing changes on 
September 4, 2018 (SR-NASDAQ-2018-071). On September 13, 2018, the 
Exchange withdrew that filing and submitted this filing, which makes a 
technical change to the proposed rule text.
First Change
    The purpose of the first proposed rule [sic] change is to eliminate 
the requirement that a member be a market maker to participate in the 
QMM Program. A QMM is a member that makes a significant contribution to 
market quality by providing liquidity at the national best bid and 
offer (``NBBO'') in a large number of stocks for a significant portion 
of the day. In addition, the member must avoid imposing the burdens on 
Nasdaq and its market participants that may be associated with 
excessive rates of entry of orders away from the inside and/or order 
cancellation. The designation reflects the QMM's commitment to provide 
meaningful and consistent support to market quality and price discovery 
by extensive quoting at the NBBO in a large number of securities. In 
return for its contributions, certain financial benefits are provided 
to a QMM with respect to its order activity, as described under Rule 
7014(e). These benefits include a lower rate charged for executions of 
orders in securities priced at $1 or more per share that access 
liquidity on the Nasdaq Market Center.
    Rule 7014(d) provides the qualification criteria a member must meet 
to be eligible for the QMM Program. Specifically, to be designated a 
QMM, a member must meet the following criteria: (1) The member is not 
assessed any ``Excess Order Fee'' under Rule 7018 during the month; (2) 
the member quotes at the NBBO at least 25% of the time during regular 
market hours in an average of at least 1,000 securities per day during 
the month; and (3) the member is a registered Nasdaq market maker.\3\ 
The Exchange is proposing to eliminate the requirement that a member be 
a Nasdaq market maker to be designated as a QMM. As a consequence, any 
member may participate in the program if it meets the other 
qualification criteria of the rule.
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    \3\ In 2015, the Exchange adopted the requirement under Rule 
7014(d) that a member must be a market maker to be designated a QMM. 
See Securities Exchange Act Release No. 74725 (April 14, 2015), 80 
FR 21778 (April 20, 2015) (SR-NASDAQ-2015-032). Prior to the change, 
a QMM need not have been a Nasdaq market maker. Thus, the QMM 
designation does not by itself impose a two-sided quotation 
obligation or convey any of the benefits associated with being a 
registered market maker. This is currently the case and it will 
continue to be the case with the elimination of the market maker 
requirement.
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Second Change
    The purpose of the second proposed rule [sic] change is to 
eliminate the additional $0.0002 per share executed credit under the 
NBBO Program at Rule 7014(g). The NBBO Program provides two rebates per 
share executed. The Exchange is proposing to eliminate the $0.0002 per 
share executed credit, which is provided to a member for displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) that provide liquidity priced at $1 or more. Under Rule 
7014(g), to qualify for the additional $0.0002 per share executed 
credit for displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) that provide liquidity priced at $1 or more, 
a member must (i) execute shares of liquidity provided in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represents 0.5% or more of Consolidated Volume \4\ during the month, 
and (ii) has a ratio of at least 25% NBBO liquidity provided \5\ to 
liquidity provided during the month. The Exchange has observed that no 
members have qualified for this credit and is consequently proposing to 
eliminate it.
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    \4\ Consolidated Volume is defined as the total consolidated 
volume reported to all consolidated transaction reporting plans by 
all exchanges and trade reporting facilities during a month in 
equity securities, excluding executed orders with a size of less 
than one round lot. For purposes of calculating Consolidated Volume 
and the extent of a member's trading activity the date of the annual 
reconstitution of the Russell Investments Indexes shall be excluded 
from both total Consolidated Volume and the member's trading 
activity. See Rule 7018(a).
    \5\ NBBO liquidity provided means liquidity provided from orders 
(other than Designated Retail Orders, as defined in Nasdaq Rule 
7018), that establish the NBBO, and displayed a quantity of at least 
one round lot at the time of execution.
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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 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \8\
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    \8\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission \9\

[[Page 48478]]

(``NetCoalition'') the D.C. Circuit upheld the Commission's use of a 
market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\10\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \11\
---------------------------------------------------------------------------

    \9\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \10\ See NetCoalition, at 534-535.
    \11\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers' . . . .'' \12\
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    \12\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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First Change
    The Exchange believes that the fees and credits of the QMM Program 
remain reasonable because the Exchange is not proposing to amend them. 
Thus, the basis set forth when the fees were adopted remain [sic] 
valid. The proposed elimination of the market maker requirement is 
reasonable, an equitable allocation and is not unfairly discriminatory 
because the Exchange seeks to broaden participation in the program. 
When the Exchange limited the QMM Program to market makers, it noted 
that market makers had provided the vast majority of participation in 
the program and were the only market participant [sic] utilizing the 
program at the time.\13\ The Exchange now seeks broader participation 
in the program by allowing any Nasdaq member to participate in the QMM 
Program that qualifies under the remaining criteria. The Exchange 
believes that circumstances have changed over the three years since it 
last allowed non-Nasdaq market makers to participate in the program, 
such that non-market makers may have interest in meeting the criteria 
required to receive the fees and credits under the QMM Program. 
Allowing broader participation in the QMM Program may increase the 
market-improving participation in the QMM Program, to the extent the 
number of members participating in the program increase [sic]. As a 
consequence, the proposed change is reasonable, an equitable allocation 
and will not discriminate in any way.
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    \13\ Supra note 3.
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Second Change
    The Exchange believes that elimination of the $0.0002 per share 
executed NBBO credit is reasonable because it eliminates a credit that 
the Exchange has determined to be unnecessary. In particular, the 
credit has not provided adequate incentive to members to meet the 
related qualifying requirements. The Exchange notes that the $0.0004 
per share executed NBBO Program rebate will remain, thus members will 
continue to have the opportunity to qualify for significant rebates 
under the NBBO Program.
    The Exchange believes that elimination of the $0.0002 per share 
executed NBBO credit is an equitable allocation and is not unfairly 
discriminatory because no member currently qualifies for the credit. 
Thus, eliminating the credit will not discriminate in any manner and 
the proposed change will be applied equitably among all members. 
Moreover, elimination of the credit from rule book will allow the 
Exchange to consider new incentives.

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 incentive programs 
under Rule 7014 do not impose a burden on competition because the 
Exchange's execution services are completely voluntary and subject to 
extensive competition both from other exchanges and from off-exchange 
venues. Elimination of the market maker qualification requirement from 
the QMM Program may promote competition among trading venues to the 
extent that allowing broader participation in the program makes the 
Exchange a more attractive venue on which to participate. The proposed 
elimination of the $0.0002 per share executed NBBO credit will not 
place any burden on competition because no members currently qualify 
for the credit. As noted above, the credit has not served its purpose 
of incentivizing members to provide the market-improving participation 
required by the credit's qualification criteria. Consequently, removal 
of the credit should not affect competition among market participants 
or market venues whatsoever.

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.\14\
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    \14\ 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

[[Page 48479]]

     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2018-076 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-2018-076. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2018-076, and should be submitted 
on or before October 16, 2018.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20770 Filed 9-24-18; 8:45 am]
 BILLING CODE 8011-01-P

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