Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Credits and Charges at Equity 7, Section 118(a), 35839-35845 [2021-14388]
Download as PDF
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Notices
this collection of information, as
modified. No comments were received.
PBGC is requesting that OMB extend its
approval (with modifications) for three
years. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
PBGC estimates that it will receive
170,521 benefit application or
information forms annually. The total
annual burden associated with this
collection of information is estimated to
be 58,376 hours and an estimated
$58,682, which is the total average
maximum cost of notary services for
participants’ or participants’ spouses’
signatures on applicable forms.
Issued in Washington, DC, by
Stephanie Cibinic,
Deputy Assistant General Counsel for
Regulatory Affairs, Pension Benefit Guaranty
Corporation.
[FR Doc. 2021–14440 Filed 7–6–21; 8:45 am]
BILLING CODE 7709–02–P
POSTAL REGULATORY COMMISSION
[Docket Nos. MC2021–106 and CP2021–108]
New Postal Products
Postal Regulatory Commission.
ACTION: Notice.
AGENCY:
The Commission is noticing a
recent Postal Service filing for the
Commission’s consideration concerning
a negotiated service agreement. This
notice informs the public of the filing,
invites public comment, and takes other
administrative steps.
DATES: Comments are due: July 8, 2021.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
khammond on DSKJM1Z7X2PROD with NOTICES
Table of Contents
I. Introduction
II. Docketed Proceeding(s)
I. Introduction
The Commission gives notice that the
Postal Service filed request(s) for the
Commission to consider matters related
to negotiated service agreement(s). The
VerDate Sep<11>2014
17:44 Jul 06, 2021
Jkt 253001
35839
request(s) may propose the addition or
removal of a negotiated service
agreement from the market dominant or
the competitive product list, or the
modification of an existing product
currently appearing on the market
dominant or the competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3011.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
This Notice will be published in the
Federal Register.
II. Docketed Proceeding(s)
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange’s Transaction Credits and
Charges at Equity 7, Section 118(a)
1. Docket No(s).: MC2021–106 and
CP2021–108; Filing Title: USPS Request
to Add Priority Mail Contract 709 to
Competitive Product List and Notice of
Filing Materials Under Seal; Filing
Acceptance Date: June 30, 2021; Filing
Authority: 39 U.S.C. 3642, 39 CFR
3040.130 through 3040.135, and 39 CFR
3035.105; Public Representative:
Kenneth R. Moeller; Comments Due:
July 8, 2021.
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
Erica A. Barker,
Secretary.
[FR Doc. 2021–14414 Filed 7–6–21; 8:45 am]
BILLING CODE 7710–FW–P
RAILROAD RETIREMENT BOARD
Sunshine Act Meetings
10:00 a.m., July 21, 2021.
Members of the public wishing
to attend the open portion of the
meeting must submit a written request
at least 24 hours prior to the meeting to
receive dial-in information. All requests
must be sent to SecretarytotheBoard@
rrb.gov.
STATUS: The initial part of this meeting
will be open to the public. The rest of
the meeting will be closed to the public.
TIME AND DATE:
PLACE:
Portions Open to the Public
(1) Budget Briefing
(2) Enterprise Risk Management
(3) Legislative Briefing
(4) Status of Appeals
(5) Agency Operations
Portions Closed to the Public
(1) Personnel Matter
CONTACT PERSON FOR MORE INFORMATION:
Stephanie Hillyard, Secretary to the
Board, (312) 751–4920.
Authority: 5 U.S.C. 552b
Dated: July 2, 2021.
Stephanie Hillyard,
Secretary to the Board.
[FR Doc. 2021–14595 Filed 7–2–21; 4:15 pm]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92300; File No. SR–
NASDAQ–2021–053]
June 30, 2021.
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 June 22,
2021, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
1 15
2 17
E:\FR\FM\07JYN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
07JYN1
35840
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Notices
(‘‘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 Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s transaction credits and
charges at Equity 7, Section 118(a), as
described further below. The text of the
proposed rule change is available on the
Exchange’s website at https://
listingcenter.nasdaq.com/rulebook/
nasdaq/rules, 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.
khammond on DSKJM1Z7X2PROD with NOTICES
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 the Exchange’s
schedule of credits and charges, at
Equity 7, Section 118(a). Specifically,
the Exchange proposes to: (1) Add a
new credit of $0.0028 per share
executed for members that add at least
a certain threshold volume of liquidity
in securities in Tape B; (2) add a new
credit of $0.0030 per share executed for
members that add and remove liquidity,
including adding at least a certain
threshold volume of liquidity in
securities in midpoint orders or
Midpoint Extended Life Orders (‘‘M–
ELOs’’) 3 for securities in any Tape; (3)
raise the qualifying threshold for an
existing credit of $0.00305 per share
3 Pursuant to Equity 4, Rule 4702(b)(14), a
‘‘Midpoint Extended Life Order’’ is an Order Type
with a Non-Display Order Attribute that is priced
at the midpoint between the NBBO and that will
not be eligible to execute until a minimum period
of 10 milliseconds has passed after acceptance of
the Order by the System.
VerDate Sep<11>2014
17:44 Jul 06, 2021
Jkt 253001
executed for members that add and
remove liquidity, including a certain
volume of liquidity in midpoint orders
or M–ELOs in securities in any Tape; (4)
add new $0.0026 and $0.0027 per share
executed credits for members that
provide liquidity, grow their liquidity
adding activity relative to a benchmark
month, and achieve certain ratios of
NBBO liquidity 4 to displayed liquidity
provided; (5) add two new
supplemental credits for certain
midpoint orders of $0.0001 or $0.0002
per share executed for members that
provide at least certain thresholds of
midpoint liquidity and grow their
midpoint adding liquidity relative to a
benchmark month; and (6) amend the
applicability of two existing charges for
members with orders that execute upon
utilizing the ‘‘RTFY’’ routing option.5
New Credit for Adding Liquidity in
Tape B Securities
The Exchange proposes to add a new
credit of $0.0028 per share executed to
a member with shares of liquidity
provided in all securities through one or
more of its Nasdaq Market Center MPIDs
that represent 0.45% or more of
Consolidated Volume 6 during the
month, which includes shares of
liquidity provided with respect to
securities that are listed on exchanges
other than Nasdaq or NYSE (‘‘Tape B
Securities’’) that represent 0.10% or
more of Consolidated Volume.
The Exchange notes that it presently
offers three similarly structured credits,
ranging from $0.0029 to $0.0030 per
share executed, to members with orders
4 As defined in Equity 7, Section 114(g), ‘‘NBBO
liquidity provided’’ means liquidity provided from
orders (other than Designated Retail Orders, as that
term is defined in Equity 7, Section 118), that
establish the NBBO, and display a quantity of at
least one round lot at the time of execution.
5 Pursuant to Equity 4, Section
4758(a)(1)(A)(v)(b), ‘‘RTFY’’ is a routing option
available for an order that qualifies as a Designated
Retail Order under which orders check the System
for available shares only if so instructed by the
entering firm and are thereafter routed to
destinations on the System routing table. If shares
remain unexecuted after routing, they are posted to
the Nasdaq Book. Once on the Nasdaq Book, should
the order subsequently be locked or crossed by
another market center, the Nasdaq System will not
route the order to the locking or crossing market
center. RTFY is designed to allow orders to
participate in the opening, reopening and closing
process of the primary listing market for a security.
6 Equity 7, Section 118(a) defines ‘‘Consolidated
Volume’’ to mean 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 is excluded from both
total Consolidated Volume and the member’s
trading activity.
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
that add liquidity to the Exchange
representing more than certain
threshold percentages of Consolidated
Volumes (0.625% to 1.25%), including
shares of liquidity provided with
respect to securities in Tape B that
represent at least certain threshold
percentages of Consolidated Volume
(0.15% to 0.40%).
The proposal will add to this series of
credits a new lower credit for members
that add corresponding lower threshold
volumes of liquidity to the Exchange,
and lower threshold volumes in
securities in Tape B. In doing so, the
Exchange intends to expand
opportunities for participants to receive
a credit if they add significant liquidity
to the Exchange, including significant
liquidity in Tape B. For those members
that engage in significant liquidity
adding activity on the Exchange, but do
not have sufficient activity to qualify for
the existing credits, the new credit may
be more readily attainable. If so, then
such members may seek to qualify for
the new credit by increasing their
liquidity adding activity on the
Exchange. To the extent that they do so,
the quality of the market will improve,
to the benefit of all participants.
New and Amended Credits for Adding
and Removing Liquidity and Executing
Midpoint and M–ELO Orders
The Exchange proposes to add a new
credit of $0.0030 per share executed to
a member: (i) With shares of liquidity
provided in all securities through one or
more of its Nasdaq Market Center MPIDs
that represent 0.875% or more of
Consolidated Volume during the month;
(ii) that executes 0.25% or more of
Consolidated Volume during the month
through providing midpoint orders and
through MELO; and (iii) that removes at
least 1.35% of Consolidated Volume
during the month.
The proposed new credit will be
situated between two similarlystructured credits that the Exchange
presently provides to its members: (1) A
$0.00295 per share executed credit to a
member that adds liquidity representing
0.70% or more of Consolidated Volume
during the month, executes 0.20% or
more of Consolidated Volume in
midpoint and M–ELO Orders, and
removes at least 1.10% of Consolidated
Volume during the month; and (2) a
$0.00305 per share executed credit to a
member that adds liquidity representing
1.20% or more of Consolidated Volume
during the month, executes 0.40% or
more of Consolidated Volume in
midpoint and M–ELO Orders, and
removes at least 1.10% of Consolidated
Volume during the month. As to the
$0.00305 credit, the Exchange proposes
E:\FR\FM\07JYN1.SGM
07JYN1
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
to raise the liquidity removal threshold
from 1.10% to 1.45% of Consolidated
Volume.
The Exchange intends for the new
proposed credit to be more challenging
for members to achieve than the existing
$.00295 credit, but not quite as
challenging to achieve as the $0.00305
credit. If members that currently qualify
for $0.00295 credit assess that the new
$0.0030 credit is readily attainable,
whereas the $0.00305 is not so, then
they may increase their liquidity adding
and removing activities on the Exchange
to qualify for it, and the quality of the
market will improve, to the benefit of all
participants.
Meanwhile, the proposal to increase
the liquidity removal requirement for
the $0.00305 credit from 1.10% to
1.45% of Consolidated Volume will
encourage those participants that
already qualify for the credit to increase
the extent of their liquidity removal
activity on the Exchange in order to
continue to qualify for it. From time to
time, the Exchange believes it is
reasonable to recalibrate the criteria for
credits such as this one to ensure that
the credits remain appropriately
challenging for participants to attain in
light of changes to their levels of activity
on the Exchange.
New Growth Tiers for Adding Displayed
Liquidity
The Exchange proposes to add two
new credits that will encourage its
members to add and grow the extent to
which they add significant volumes on
liquidity to the Exchange, including
liquidity that establishes the NBBO.
First, the Exchange proposes to provide
a $0.0026 per share executed credit to
a member that, through one or more of
its Nasdaq Market Center MPIDs: (i)
Provides shares of liquidity in all
securities that represent equal to or
greater than 0.15% of Consolidated
Volume during the month; (ii) increases
the extent to which it provides liquidity
in all securities by 20% or more as a
percentage of Consolidated Volume
during the month relative to the month
of May 2021; and (iii) has a ratio of at
least 50% NBBO liquidity provided to
liquidity provided by displayed quotes/
orders (other than Supplemental Orders
or Designated Retail Orders) during the
month. Second, the Exchange proposes
to provide a higher credit to a member
that engages in higher levels of this
same activity. Namely, the Exchange
proposes to provide a $0.0027 per share
executed credit to a member that,
through one or more of its Nasdaq
Market Center MPIDs: (i) Provides
shares of liquidity in all securities that
represent equal to or greater than 0.20%
VerDate Sep<11>2014
17:44 Jul 06, 2021
Jkt 253001
of Consolidated Volume during the
month; (ii) increases the extent to which
it provides liquidity in all securities by
35% or more as a percentage of
Consolidated Volume during the month
relative to the month of May 2021; and
(iii) has a ratio of at least 60% NBBO
liquidity provided to liquidity provided
by displayed quotes/orders (other than
Supplemental Orders or Designated
Retail Orders) during the month.
Again, the Exchange intends for these
new credits to improve market quality
by encouraging members to add
significant volumes of liquidity during
the month, by growing such activity
over time, and by providing liquidity
that is valued by participants because it
sets the NBBO.
Supplemental Credits for Midpoint
Orders
The Exchange proposes to provide
two new supplemental credits for
midpoint orders (excluding buy (sell)
orders with Midpoint pegging that
receive an execution price that is lower
(higher) than the midpoint of the NBBO)
that provide liquidity to the Exchange.
These credits will be in addition to
other credits otherwise available to
members for adding non-displayed
liquidity to the Exchange, but a
member’s activity will qualify it to
receive only one of the two new
supplemental credits at a time, meaning
that they are not cumulative.
Additionally, members that receive a
supplemental credit will be entitled to
a combined credit (regular and
supplemental) up to a maximum of
$0.0027 per share executed, meaning
that if a member is entitled to a regular
credit of $0.0026 per share executed as
well as the $0.002 [sic] per share
executed supplemental credit, the total
combined credit provided to the
member will be $0.0027 per share
executed, rather than the full $0.0028
per share executed.
Specifically, the Exchange proposes to
provide supplemental credits for
midpoint orders (excluding buy (sell)
orders with Midpoint pegging that
receive an execution price that is lower
(higher) than the midpoint of the NBBO)
as follows: (1) $0.0001 per share
executed if the member, during the
month (i) provides at least 15 million
shares of midpoint liquidity per day
during the month; and (ii) increases
providing liquidity through midpoint
orders by 10% or more relative to the
member’s May 2021 average daily
volume provided through midpoint
orders; or (2) $0.0002 per share executed
if the member, during the month (i)
provides at least 15 million shares of
midpoint liquidity per day during the
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
35841
month; and (ii) increases providing
liquidity through midpoint orders by
30% or more relative to the member’s
May 2021 average daily volume
provided through midpoint orders.
The purpose of these new credits is to
provide extra incentives to members
that provide non-displayed liquidity to
the Exchange to do so through midpoint
orders, as well as to grow substantially
the extent to which they provide
midpoint orders to the Exchange
relative to a recent benchmark month.
The Exchange believes that if such
incentives are effective, then any
ensuing increase in midpoint liquidity
to the Exchange will once again improve
market quality, to the benefit of all
participants.
The Exchange notes that it proposes
to cap combined regular and
supplemental credits at $0.0027 per
share executed to manage the costs to
the Exchange of providing these
incentives. The Exchange has only
limited resources available to it for
incentive programs, and it must ensure
that it allocates such resources
appropriately to optimize their intended
impacts.
Amend Applicability of Existing
Charges for Routed Orders Using RTFY
Additionally, the Exchange proposes
to amend the applicability of two of its
existing transaction fees. First, it
proposes to amend the existing $0.0030
per share executed fee that it assesses to
members that use the RTFY order
routing option to execute orders which
remove more than 4 million shares of
liquidity from the Exchange or execute
in a venue with a protected quotation
under Regulation NMS other than
Nasdaq. Second, it proposes to amend
the $0.00 per share executed fee that it
applies to members that use the RTFY
order routing option to execute orders
which remove up to 4 million shares of
liquidity from the Exchange or execute
in a venue with a protected quotation
under Regulation NMS other than
Nasdaq. The Exchange proposes to
amend these charges by stating that it
will not count RTFY-routed shares that
execute in so-called ‘‘taker-maker’’
venues when it calculates whether a
member has exceeded the 4 million
share threshold that applies to both
charges. The Exchange also proposes to
exclude taker-maker RTFY executions
from any fees that a member incurs for
RTFY executions to the extent that the
member exceeds the 4 million share
threshold through executions at nontaker-maker venues.
The Exchange proposes to exclude
RTFY-routed shares executed at takermaker venues from the fee qualification
E:\FR\FM\07JYN1.SGM
07JYN1
35842
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Notices
calculations and from the fees
themselves because taker-maker venues
typically do not charge fees to Nasdaq
for RTFY to access their liquidity,
whereas maker-taker venues do so. In
other words, the Exchange charges a fee
to participants that use RTFY to execute
large volumes of shares at venues other
than Nasdaq to help Nasdaq to recover
the costs it incurs for when such shares
access liquidity at maker-taker venues.
Because taker-maker venues do not
contribute substantially to Nasdaq’s
RTFY routing costs, Nasdaq believes
that it is reasonable to exclude RTFY
shares that execute on taker-maker
venues from Nasdaq’s determination as
to whether a participant’s RTFY activity
during a month meets the 4 million
share threshold to incur the $0.0030 per
share executed fee. For the same reason,
it is also reasonable to exclude RTFY
shares executed on taker-maker venues
from any RTFY execution fees otherwise
incurred.
khammond on DSKJM1Z7X2PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposals are consistent with Section
6(b) of the Act,7 in general, and further
the objectives of Sections 6(b)(4) and
6(b)(5) of the Act,8 in particular, in that
they provide for the equitable allocation
of reasonable dues, fees and other
charges among members and issuers and
other persons using any facility, and are
not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers. The
proposals are also consistent with
Section 11A of the Act relating to the
establishment of the national market
system for securities.
The Proposals Are Reasonable
The Exchange’s proposals are
reasonable in several respects. As a
threshold matter, the Exchange is
subject to significant competitive forces
in the market for equity securities
transaction services that constrain its
pricing determinations in that market.
The fact that this market is competitive
has long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[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’
7 15
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
17:44 Jul 06, 2021
Jkt 253001
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 9
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.’’ 10
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for equity
security transaction services. The
Exchange is only one of several equity
venues to which market participants
may direct their order flow. Competing
equity exchanges offer similar tiered
pricing structures to that of the
Exchange, including schedules of
rebates and fees that apply based upon
members achieving certain volume
thresholds.
Within this environment, market
participants can freely and often do shift
their order flow among the Exchange
and competing venues in response to
changes in their respective pricing
schedules. Within the foregoing context,
the proposals represent reasonable
attempts by the Exchange to increase its
liquidity and market share relative to its
competitors.
The Exchange believes that it is
reasonable to establish new transaction
credits, at Equity 7, Section 118(a),
because each of these new credits will
encourage the addition of and/or growth
in the addition of various types of
displayed and non-displayed liquidity
to the Exchange, including M–ELO,
midpoint, Tape B securities, and NBBOsetting liquidity, as well as the removal
of liquidity in one instance.
First, the proposed new credit of
$0.0028 per share executed—which will
apply to members that add liquidity
representing 0.45% or more of
Consolidated Volume during the month,
and add shares of liquidity in Tape B
Securities of 0.10% or more of
9 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca–2006–21)).
10 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
Consolidated Volume—will provide a
new opportunity to members to earn a
credit for providing significant volumes
of liquidity to the Exchange without
having to meet the more stringent
qualifying criteria that apply to existing
similarly-structured $0.00295 and
$0.0030 per share credits. Similarly, the
proposed new credit of $0.0030 per
share executed—which will apply to
members that (i) add liquidity to the
Exchange representing 0.875% or more
of Consolidated Volume during the
month, (ii) execute 0.25% or more of
Consolidated Volume during the month
in providing midpoint or M–ELO
Orders, and (iii) remove from the
Exchange liquidity representing at least
1.35% of Consolidated Volume during
the month—will encourage members
that currently qualify for an existing
$0.00295 per share executed credit for
providing a significant amount of
liquidity to the Exchange, including
midpoint and M–ELO orders, and for
removing a significant amount of
liquidity from the Exchange, to further
increase the extent of these activities on
the Exchange to earn a higher $0.0030
credit, particularly if they deem the
criteria for the new credit to be more
readily achievable than are the criteria
to qualify for the existing $0.00305 per
share executed credit.
Meanwhile, the proposal to increase
the liquidity removal requirement for
the $0.00305 credit from 1.10% to
1.45% of Consolidated Volume will
encourage those participants that
already qualify for the credit to increase
the extent of their liquidity removal
activity on the Exchange in order to
continue to qualify for it. From time to
time, the Exchange believes it is
reasonable to recalibrate the criteria for
credits such as this one to ensure that
the credits remain appropriately
challenging for participants to attain in
light of changes to their levels of activity
on the Exchange.
It is also reasonable for the Exchange
to establish $0.0026 and $0.0027 per
share executed credits to members that:
(i) Provide liquidity greater than certain
threshold percentages of Consolidated
Volume during the month; (ii) increase
their liquidity providing activity in all
securities by specified percentages of
Consolidated Volume during the month
relative to the month of May 2021; and
(iii) achieve specified ratios of NBBO
liquidity provided to liquidity provided
by displayed quotes/orders (other than
Supplemental Orders or Designated
Retail Orders) during the month. These
two new credits will encourage its
members to add and grow the extent to
which they add significant volumes of
E:\FR\FM\07JYN1.SGM
07JYN1
khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Notices
liquidity to the Exchange, including
liquidity that establishes the NBBO.
Next, the Exchange believes it is
reasonable to establish two new
supplemental credits for midpoint
orders (other than buy (sell) orders with
Midpoint Pegging that receive execution
prices that are lower (higher) than the
midpoint of the NBBO) as follows: (1)
$0.0001 per share executed if the
member, during the month (i) provides
at least 15 million shares of midpoint
liquidity per day during the month; and
(ii) increases providing liquidity
through midpoint orders by 10% or
more relative to the member’s May 2021
average daily volume provided through
midpoint orders; or (2) $0.0002 per
share executed if the member, during
the month (i) provides at least 15
million shares of midpoint liquidity per
day during the month; and (ii) increases
providing liquidity through midpoint
orders by 30% or more relative to the
member’s May 2021 average daily
volume provided through midpoint
orders. These proposals are reasonable
because they will provide extra
incentives to members that provide nondisplayed liquidity to the Exchange to
do so through midpoint orders, as well
as to grow substantially the extent to
which they provide midpoint orders to
the Exchange relative to a recent
benchmark month. The Exchange
believes that if such incentives are
effective, then any ensuing increase in
midpoint liquidity to the Exchange will
once again improve market quality, to
the benefit of all participants.
The Exchange believes that it is
reasonable to exclude from the
supplemental credits orders with
Midpoint Pegging which execute at
prices less aggressive than the midpoint
of the NBBO because such orders
already receive price improvements,
such that members do not require
additional inducements to enter these
orders on the Exchange.
Furthermore, the Exchange believes
that it is reasonable to cap the amount
of combined regular and supplemental
credits it proposes to offer members
under this program to $0.0027 per share
executed. This cap will allow the
Exchange to manage its costs of
providing these incentives. The
Exchange has only limited resources
available to it for incentive programs,
and it must ensure that it allocates such
resources appropriately to optimize
their intended impacts.
Finally, the Exchange believes that it
is reasonable to exclude RTFY-routed
shares that are executed at taker-maker
venues from its calculations for
determining whether RTFY participants
will incur a $0.0030 per share executed
VerDate Sep<11>2014
17:44 Jul 06, 2021
Jkt 253001
fee when their shares execute at away
venues as well as from the fee itself, to
the extent it is otherwise applicable to
a member. Taker-maker venues typically
do not charge fees to Nasdaq for RTFY
to access their liquidity, whereas makertaker venues do so. The Exchange
charges a fee to participants that use
RTFY to execute large volumes of shares
at venues other than Nasdaq to help
Nasdaq to recover the costs it incurs for
such shares to access liquidity at makertaker venues. Because taker-maker
venues do not contribute substantially
to Nasdaq’s RTFY routing costs, Nasdaq
believes that it is reasonable to exclude
RTFY shares that execute on takermaker venues from Nasdaq’s
determination as to whether a
participant’s RTFY activity during a
month meets the 4 million share
threshold to incur the $0.0030 per share
executed fee. For the same reason, it is
also reasonable to exclude RTFY shares
executed on taker-maker venues from
any RTFY execution fees otherwise
incurred.
The Exchange notes that those market
participants that are dissatisfied with
the proposals are free to shift their order
flow to competing venues that offer
more generous pricing or less stringent
qualifying criteria.
The Proposals Are Equitable Allocations
of Credits
The Exchange believes that it is an
equitable allocation to establish new
transaction credits and otherwise
modify the eligibility requirements for
its transaction credits because the
proposals will encourage members to
increase the extent to which they add
liquidity to or remove liquidity from the
Exchange. To the extent that the
Exchange succeeds in increasing the
levels of liquidity addition or removal
activity on the Exchange, including in
categories of liquidity for which there is
an observed need or demand, such as
midpoint, M–ELO, and Tape B
securities, and NBBO-setting liquidity,
then the Exchange will experience
improvements in its market quality,
which stands to benefit all market
participants. The Exchange also believes
it is equitable to recalibrate existing
criteria for its credits to ensure that the
credits remain appropriately
challenging for participants to attain in
light of changes to their levels of activity
on the Exchange.
Finally, the Exchange believes that it
is equitable to exclude RTFY-routed
shares that are executed at taker-maker
venues from the Exchange’s
determinations as to whether RTFY
participants will incur a $0.0030 per
share executed fee when their shares
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
35843
execute at away venues, as well as from
the fee itself, to the extent that it is
otherwise applicable to a member.
Taker-maker venues typically do not
charge fees to Nasdaq for RTFY to
access their liquidity, whereas makertaker venues do so. Because taker-maker
venues do not contribute substantially
to Nasdaq’s RTFY routing costs, which
the $0.0030 fee exists to defray, Nasdaq
believes that it is equitable to exclude
shares that execute on taker-maker
venues from Nasdaq’s determination as
to whether a participant’s RTFY activity
during a month meets the 4 million
share threshold to incur the $0.0030 per
share executed fee. For the same reason,
it is also equitable to exclude RTFY
shares executed on taker-maker venues
from any RTFY execution fees otherwise
incurred.
Any participant that is dissatisfied
with the proposals is free to shift their
order flow to competing venues that
provide more generous pricing or less
stringent qualifying criteria.
The Proposals Are Not Unfairly
Discriminatory
The Exchange believes that its
proposals are not unfairly
discriminatory. As an initial matter, the
Exchange believes that nothing about its
volume-based tiered pricing model is
inherently unfair; instead, it is a rational
pricing model that is well-established
and ubiquitous in today’s economy
among firms in various industries—from
co-branded credit cards to grocery stores
to cellular telephone data plans—that
use it to reward the loyalty of their best
customers that provide high levels of
business activity and incent other
customers to increase the extent of their
business activity. It is also a pricing
model that the Exchange and its
competitors have long employed with
the assent of the Commission. It is fair
because it incentivizes customer activity
that increases liquidity, enhances price
discovery, and improves the overall
quality of the equity markets.
The Exchange believes that its
proposals to adopt new credits or
otherwise amend the qualifying criteria
for its transaction credits are not
unfairly discriminatory because these
credits are available to all members.
Moreover, these proposals stand to
improve the overall market quality of
the Exchange, to the benefit of all
market participants, by incentivizing
members to increase the extent of their
liquidity adding or removal activity on
the Exchange, including in categories of
liquidity for which there is an observed
need or demand, such as midpoint, M–
ELO, and Tape B securities, and NBBOsetting liquidity. The Exchange also
E:\FR\FM\07JYN1.SGM
07JYN1
35844
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Notices
believes it is not unfairly discriminatory
to recalibrate existing criteria for its
credits to ensure that the credits remain
appropriately challenging for
participants to attain in light of changes
to their levels of activity on the
Exchange.
Meanwhile, the Exchange’s proposal
is not unfairly discriminatory to exclude
RTFY-routed shares that are executed at
taker-maker venues from the Exchange’s
determination as to whether RTFY
participants will incur a $0.0030 per
share executed fee when their shares
execute at away venues, as well as from
the fee itself, to the extent it is otherwise
applicable to a member. Although the
proposal stands to benefit RTFY
participants that execute large volumes
of shares at taker-maker venues, insofar
as such participants will no longer stand
to pay a routing fee because of such
execution activity, the Exchange
believes it is fair to provide this benefit
because taker-maker venues typically do
not charge fees to Nasdaq for RTFY to
access their liquidity, whereas makertaker venues do so. Because taker-maker
venues do not contribute substantially
to Nasdaq’s RTFY routing costs, which
the $0.0030 fee exists to defray, Nasdaq
believes that it is fair to exclude shares
that execute on taker-maker venues from
Nasdaq’s determination as to whether a
participant’s RTFY activity during a
month meets the 4 million share
threshold to incur the $0.0030 per share
executed fee. For the same reason, it is
also not unfairly discriminatory to
exclude RTFY shares executed on takermaker venues from any RTFY execution
fees otherwise incurred.
Any participant that is dissatisfied
with the proposals is free to shift their
order flow to competing venues that
provide more generous pricing or less
stringent qualifying criteria.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
khammond on DSKJM1Z7X2PROD with NOTICES
Intramarket Competition
The Exchange does not believe that its
proposals will place any category of
Exchange participant at a competitive
disadvantage.
As noted above, Nasdaq’s proposals to
add and amend its transaction credits
are intended to have market-improving
effects, to the benefit of all members.
Any member may elect to achieve the
levels of liquidity required in order to
qualify for the new or amended credits.
VerDate Sep<11>2014
17:44 Jul 06, 2021
Jkt 253001
Likewise, the Exchange’s proposal
will not duly burden competition to
exclude RTFY-routed shares that are
executed at taker-maker venues from the
Exchange’s determinations as to
whether RTFY participants will incur a
$0.0030 per share executed routing fee,
and from the fee itself, to the extent that
it is otherwise applicable to a member.
Although the proposal stands to benefit
RTFY participants that execute large
volumes of shares at taker-maker
venues, insofar as such participants will
no longer stand to pay a routing fee
because of such execution activity, the
Exchange believes it is fair to provide
this benefit because taker-maker venues
typically do not charge fees to Nasdaq
for RTFY to access their liquidity,
whereas maker-taker venues do so.
Because taker-maker venues do not
substantially contribute to Nasdaq’s
RTFY routing costs, which the $0.0030
fee exists to defray, Nasdaq believes that
it is fair to exclude shares that execute
on taker-maker venues from Nasdaq’s
determination as to whether a
participant’s RTFY activity during a
month meets the 4 million share
threshold to incur the $0.0030 per share
executed fee. For the same reason, it is
also fair to exclude RTFY shares
executed on taker-maker venues from
any RTFY execution fees otherwise
incurred.
The Exchange notes that its members
are free to trade on other venues to the
extent they believe that the proposed
qualification criteria for or amounts of
these credits or fees are not attractive.
As one can observe by looking at any
market share chart, price competition
between exchanges is fierce, with
liquidity and market share moving
freely between exchanges in reaction to
fee and credit changes. The Exchange
notes that its pricing tier structure is
consistent with broker-dealer fee
practices as well as the other industries,
as described above.
Intermarket Competition
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
credits and 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 credits and fees in
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which credit
or fee changes in this market may
impose any burden on competition is
extremely limited.
The proposed new and amended
credits and fees are reflective of this
competition because, even as one of the
largest U.S. equities exchanges by
volume, the Exchange has less than 20%
market share, which in most markets
could hardly be categorized as having
enough market power to burden
competition. Moreover, as noted above,
price competition between exchanges is
fierce, with liquidity and market share
moving freely between exchanges in
reaction to fee and credit changes. This
is in addition to free flow of order flow
to and among off-exchange venues
which comprises upwards of 44% of
industry volume.
The Exchange’s proposals to add new
and amend its transaction credits are
pro-competitive in that the Exchange
intends for them to increase liquidity
addition or removal activity on the
Exchange, thereby rendering the
Exchange a more attractive and vibrant
venue to market participants.
Meanwhile, the Exchange’s proposal to
exclude from the RTFY routing fees and
fee calculation shares executed in takermaker venues is pro-competitive in that
it will render the Exchange’s RTFY
routing option more attractive to
participants.
In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.11
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
11 15
E:\FR\FM\07JYN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
07JYN1
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
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.
submissions should refer to File
Number SR–NASDAQ–2021–053 and
should be submitted on or before July
28, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
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:
[FR Doc. 2021–14388 Filed 7–6–21; 8:45 am]
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–2021–053 on the subject line.
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Content of the Cboe One Feed Under
Rule 11.22(i) To Identify the Current
Day Consolidated High and Low Prices
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–2021–053. 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
June 30, 2021.
VerDate Sep<11>2014
17:44 Jul 06, 2021
Jkt 253001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92301; File No. SRCboeBYX–2021–014]
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on June 17,
2021, Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 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
Cboe BYX Exchange, Inc. (‘‘BYX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to amend the content of the Cboe
One Feed under Rule 11.22(i) to identify
the current day consolidated high and
low prices. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/byx/), at
the Exchange’s Office of the Secretary,
PO 00000
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
Frm 00117
Fmt 4703
Sfmt 4703
35845
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 Exchange proposes to enhance
the content of the Cboe One Feed under
Rule 11.22(i) to identify the current day
consolidated high and low price for all
listed equity securities.
The Cboe One Feed is a data feed that
disseminates, on a real-time basis, the
aggregate best bid and offer (‘‘BBO’’) of
all displayed orders for securities traded
on BYX and its affiliated exchanges.5
Among other things, the Cboe One Feed
also includes consolidated volume for
all listed equity securities regardless of
where the transaction was executed, the
Cboe One Opening Price and the Cboe
One Closing Price,6 and the primary
listing market’s official opening and
closing price.
Now, in addition to the information
currently provided in the Cboe One
Feed, the Exchange is proposing to
5 BYX’s affiliated exchanges are the Cboe BZX
Exchange, Inc. (‘‘BZX’’), Cboe EDGA Exchange, Inc.
(‘‘EDGA’’), and Cboe EDGX Exchange, Inc.
(‘‘EDGX’’, and together with BZX, BYX, and EDGA,
the ‘‘Cboe Equity Exchanges’’). See Securities
Exchange Act Release No. 73918 (December 23,
2014), 79 FR 78920 (December 31, 2014) (File Nos.
SR–EDGX–2014–25; SR–EDGA–2014–25; SR–
BATS–2014–055; SR–BYX–2014–030) (Notice of
Amendments No. 2 and Order Granting Accelerated
Approval to Proposed Rule Changes, as Modified by
Amendments Nos. 1 and 2, to Establish a New
Market Data Product called the Cboe (formerly Bats)
One Feed) (‘‘Cboe One Approval Order’’).
6 For securities listed on Cboe BZX Exchange, Inc.
(‘‘BZX’’), the Cboe One Opening Price shall be the
BZX Official Opening Price as defined in BZX Rule
11.23(a)(5) and the Cboe One Closing Price shall be
the BZX Official Closing Price as defined in BZX
Rule 11.23(a)(3). For securities not listed on BZX,
the Cboe One Opening Price shall be the first last
sale eligible trade that occurred on the Exchange or
any of its affiliates after 9:30 a.m. Eastern Time, and
the Cboe One Closing Price shall be the final last
sale eligible trade to occur on the Exchange or any
of its affiliates prior to 4:00 p.m. Eastern Time. See
Exchange Rule 11.22(i).
E:\FR\FM\07JYN1.SGM
07JYN1
Agencies
[Federal Register Volume 86, Number 127 (Wednesday, July 7, 2021)]
[Notices]
[Pages 35839-35845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14388]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92300; File No. SR-NASDAQ-2021-053]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Exchange's Transaction Credits and Charges at Equity 7,
Section 118(a)
June 30, 2021.
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 June 22, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
[[Page 35840]]
(``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 Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's transaction credits
and charges at Equity 7, Section 118(a), as described further below.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 the Exchange's
schedule of credits and charges, at Equity 7, Section 118(a).
Specifically, the Exchange proposes to: (1) Add a new credit of $0.0028
per share executed for members that add at least a certain threshold
volume of liquidity in securities in Tape B; (2) add a new credit of
$0.0030 per share executed for members that add and remove liquidity,
including adding at least a certain threshold volume of liquidity in
securities in midpoint orders or Midpoint Extended Life Orders (``M-
ELOs'') \3\ for securities in any Tape; (3) raise the qualifying
threshold for an existing credit of $0.00305 per share executed for
members that add and remove liquidity, including a certain volume of
liquidity in midpoint orders or M-ELOs in securities in any Tape; (4)
add new $0.0026 and $0.0027 per share executed credits for members that
provide liquidity, grow their liquidity adding activity relative to a
benchmark month, and achieve certain ratios of NBBO liquidity \4\ to
displayed liquidity provided; (5) add two new supplemental credits for
certain midpoint orders of $0.0001 or $0.0002 per share executed for
members that provide at least certain thresholds of midpoint liquidity
and grow their midpoint adding liquidity relative to a benchmark month;
and (6) amend the applicability of two existing charges for members
with orders that execute upon utilizing the ``RTFY'' routing option.\5\
---------------------------------------------------------------------------
\3\ Pursuant to Equity 4, Rule 4702(b)(14), a ``Midpoint
Extended Life Order'' is an Order Type with a Non-Display Order
Attribute that is priced at the midpoint between the NBBO and that
will not be eligible to execute until a minimum period of 10
milliseconds has passed after acceptance of the Order by the System.
\4\ As defined in Equity 7, Section 114(g), ``NBBO liquidity
provided'' means liquidity provided from orders (other than
Designated Retail Orders, as that term is defined in Equity 7,
Section 118), that establish the NBBO, and display a quantity of at
least one round lot at the time of execution.
\5\ Pursuant to Equity 4, Section 4758(a)(1)(A)(v)(b), ``RTFY''
is a routing option available for an order that qualifies as a
Designated Retail Order under which orders check the System for
available shares only if so instructed by the entering firm and are
thereafter routed to destinations on the System routing table. If
shares remain unexecuted after routing, they are posted to the
Nasdaq Book. Once on the Nasdaq Book, should the order subsequently
be locked or crossed by another market center, the Nasdaq System
will not route the order to the locking or crossing market center.
RTFY is designed to allow orders to participate in the opening,
reopening and closing process of the primary listing market for a
security.
---------------------------------------------------------------------------
New Credit for Adding Liquidity in Tape B Securities
The Exchange proposes to add a new credit of $0.0028 per share
executed to a member with shares of liquidity provided in all
securities through one or more of its Nasdaq Market Center MPIDs that
represent 0.45% or more of Consolidated Volume \6\ during the month,
which includes shares of liquidity provided with respect to securities
that are listed on exchanges other than Nasdaq or NYSE (``Tape B
Securities'') that represent 0.10% or more of Consolidated Volume.
---------------------------------------------------------------------------
\6\ Equity 7, Section 118(a) defines ``Consolidated Volume'' to
mean 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 is excluded from both total Consolidated Volume
and the member's trading activity.
---------------------------------------------------------------------------
The Exchange notes that it presently offers three similarly
structured credits, ranging from $0.0029 to $0.0030 per share executed,
to members with orders that add liquidity to the Exchange representing
more than certain threshold percentages of Consolidated Volumes (0.625%
to 1.25%), including shares of liquidity provided with respect to
securities in Tape B that represent at least certain threshold
percentages of Consolidated Volume (0.15% to 0.40%).
The proposal will add to this series of credits a new lower credit
for members that add corresponding lower threshold volumes of liquidity
to the Exchange, and lower threshold volumes in securities in Tape B.
In doing so, the Exchange intends to expand opportunities for
participants to receive a credit if they add significant liquidity to
the Exchange, including significant liquidity in Tape B. For those
members that engage in significant liquidity adding activity on the
Exchange, but do not have sufficient activity to qualify for the
existing credits, the new credit may be more readily attainable. If so,
then such members may seek to qualify for the new credit by increasing
their liquidity adding activity on the Exchange. To the extent that
they do so, the quality of the market will improve, to the benefit of
all participants.
New and Amended Credits for Adding and Removing Liquidity and Executing
Midpoint and M-ELO Orders
The Exchange proposes to add a new credit of $0.0030 per share
executed to a member: (i) With shares of liquidity provided in all
securities through one or more of its Nasdaq Market Center MPIDs that
represent 0.875% or more of Consolidated Volume during the month; (ii)
that executes 0.25% or more of Consolidated Volume during the month
through providing midpoint orders and through MELO; and (iii) that
removes at least 1.35% of Consolidated Volume during the month.
The proposed new credit will be situated between two similarly-
structured credits that the Exchange presently provides to its members:
(1) A $0.00295 per share executed credit to a member that adds
liquidity representing 0.70% or more of Consolidated Volume during the
month, executes 0.20% or more of Consolidated Volume in midpoint and M-
ELO Orders, and removes at least 1.10% of Consolidated Volume during
the month; and (2) a $0.00305 per share executed credit to a member
that adds liquidity representing 1.20% or more of Consolidated Volume
during the month, executes 0.40% or more of Consolidated Volume in
midpoint and M-ELO Orders, and removes at least 1.10% of Consolidated
Volume during the month. As to the $0.00305 credit, the Exchange
proposes
[[Page 35841]]
to raise the liquidity removal threshold from 1.10% to 1.45% of
Consolidated Volume.
The Exchange intends for the new proposed credit to be more
challenging for members to achieve than the existing $.00295 credit,
but not quite as challenging to achieve as the $0.00305 credit. If
members that currently qualify for $0.00295 credit assess that the new
$0.0030 credit is readily attainable, whereas the $0.00305 is not so,
then they may increase their liquidity adding and removing activities
on the Exchange to qualify for it, and the quality of the market will
improve, to the benefit of all participants.
Meanwhile, the proposal to increase the liquidity removal
requirement for the $0.00305 credit from 1.10% to 1.45% of Consolidated
Volume will encourage those participants that already qualify for the
credit to increase the extent of their liquidity removal activity on
the Exchange in order to continue to qualify for it. From time to time,
the Exchange believes it is reasonable to recalibrate the criteria for
credits such as this one to ensure that the credits remain
appropriately challenging for participants to attain in light of
changes to their levels of activity on the Exchange.
New Growth Tiers for Adding Displayed Liquidity
The Exchange proposes to add two new credits that will encourage
its members to add and grow the extent to which they add significant
volumes on liquidity to the Exchange, including liquidity that
establishes the NBBO. First, the Exchange proposes to provide a $0.0026
per share executed credit to a member that, through one or more of its
Nasdaq Market Center MPIDs: (i) Provides shares of liquidity in all
securities that represent equal to or greater than 0.15% of
Consolidated Volume during the month; (ii) increases the extent to
which it provides liquidity in all securities by 20% or more as a
percentage of Consolidated Volume during the month relative to the
month of May 2021; and (iii) has a ratio of at least 50% NBBO liquidity
provided to liquidity provided by displayed quotes/orders (other than
Supplemental Orders or Designated Retail Orders) during the month.
Second, the Exchange proposes to provide a higher credit to a member
that engages in higher levels of this same activity. Namely, the
Exchange proposes to provide a $0.0027 per share executed credit to a
member that, through one or more of its Nasdaq Market Center MPIDs: (i)
Provides shares of liquidity in all securities that represent equal to
or greater than 0.20% of Consolidated Volume during the month; (ii)
increases the extent to which it provides liquidity in all securities
by 35% or more as a percentage of Consolidated Volume during the month
relative to the month of May 2021; and (iii) has a ratio of at least
60% NBBO liquidity provided to liquidity provided by displayed quotes/
orders (other than Supplemental Orders or Designated Retail Orders)
during the month.
Again, the Exchange intends for these new credits to improve market
quality by encouraging members to add significant volumes of liquidity
during the month, by growing such activity over time, and by providing
liquidity that is valued by participants because it sets the NBBO.
Supplemental Credits for Midpoint Orders
The Exchange proposes to provide two new supplemental credits for
midpoint orders (excluding buy (sell) orders with Midpoint pegging that
receive an execution price that is lower (higher) than the midpoint of
the NBBO) that provide liquidity to the Exchange. These credits will be
in addition to other credits otherwise available to members for adding
non-displayed liquidity to the Exchange, but a member's activity will
qualify it to receive only one of the two new supplemental credits at a
time, meaning that they are not cumulative. Additionally, members that
receive a supplemental credit will be entitled to a combined credit
(regular and supplemental) up to a maximum of $0.0027 per share
executed, meaning that if a member is entitled to a regular credit of
$0.0026 per share executed as well as the $0.002 [sic] per share
executed supplemental credit, the total combined credit provided to the
member will be $0.0027 per share executed, rather than the full $0.0028
per share executed.
Specifically, the Exchange proposes to provide supplemental credits
for midpoint orders (excluding buy (sell) orders with Midpoint pegging
that receive an execution price that is lower (higher) than the
midpoint of the NBBO) as follows: (1) $0.0001 per share executed if the
member, during the month (i) provides at least 15 million shares of
midpoint liquidity per day during the month; and (ii) increases
providing liquidity through midpoint orders by 10% or more relative to
the member's May 2021 average daily volume provided through midpoint
orders; or (2) $0.0002 per share executed if the member, during the
month (i) provides at least 15 million shares of midpoint liquidity per
day during the month; and (ii) increases providing liquidity through
midpoint orders by 30% or more relative to the member's May 2021
average daily volume provided through midpoint orders.
The purpose of these new credits is to provide extra incentives to
members that provide non-displayed liquidity to the Exchange to do so
through midpoint orders, as well as to grow substantially the extent to
which they provide midpoint orders to the Exchange relative to a recent
benchmark month. The Exchange believes that if such incentives are
effective, then any ensuing increase in midpoint liquidity to the
Exchange will once again improve market quality, to the benefit of all
participants.
The Exchange notes that it proposes to cap combined regular and
supplemental credits at $0.0027 per share executed to manage the costs
to the Exchange of providing these incentives. The Exchange has only
limited resources available to it for incentive programs, and it must
ensure that it allocates such resources appropriately to optimize their
intended impacts.
Amend Applicability of Existing Charges for Routed Orders Using RTFY
Additionally, the Exchange proposes to amend the applicability of
two of its existing transaction fees. First, it proposes to amend the
existing $0.0030 per share executed fee that it assesses to members
that use the RTFY order routing option to execute orders which remove
more than 4 million shares of liquidity from the Exchange or execute in
a venue with a protected quotation under Regulation NMS other than
Nasdaq. Second, it proposes to amend the $0.00 per share executed fee
that it applies to members that use the RTFY order routing option to
execute orders which remove up to 4 million shares of liquidity from
the Exchange or execute in a venue with a protected quotation under
Regulation NMS other than Nasdaq. The Exchange proposes to amend these
charges by stating that it will not count RTFY-routed shares that
execute in so-called ``taker-maker'' venues when it calculates whether
a member has exceeded the 4 million share threshold that applies to
both charges. The Exchange also proposes to exclude taker-maker RTFY
executions from any fees that a member incurs for RTFY executions to
the extent that the member exceeds the 4 million share threshold
through executions at non-taker-maker venues.
The Exchange proposes to exclude RTFY-routed shares executed at
taker-maker venues from the fee qualification
[[Page 35842]]
calculations and from the fees themselves because taker-maker venues
typically do not charge fees to Nasdaq for RTFY to access their
liquidity, whereas maker-taker venues do so. In other words, the
Exchange charges a fee to participants that use RTFY to execute large
volumes of shares at venues other than Nasdaq to help Nasdaq to recover
the costs it incurs for when such shares access liquidity at maker-
taker venues. Because taker-maker venues do not contribute
substantially to Nasdaq's RTFY routing costs, Nasdaq believes that it
is reasonable to exclude RTFY shares that execute on taker-maker venues
from Nasdaq's determination as to whether a participant's RTFY activity
during a month meets the 4 million share threshold to incur the $0.0030
per share executed fee. For the same reason, it is also reasonable to
exclude RTFY shares executed on taker-maker venues from any RTFY
execution fees otherwise incurred.
2. Statutory Basis
The Exchange believes that its proposals are consistent with
Section 6(b) of the Act,\7\ in general, and further the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that they
provide for the equitable allocation of reasonable dues, fees and other
charges among members and issuers and other persons using any facility,
and are not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers. The proposals are also consistent with
Section 11A of the Act relating to the establishment of the national
market system for securities.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Proposals Are Reasonable
The Exchange's proposals are reasonable in several respects. As a
threshold matter, the Exchange is subject to significant competitive
forces in the market for equity securities transaction services that
constrain its pricing determinations in that market. The fact that this
market is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[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'. . . .'' \9\
---------------------------------------------------------------------------
\9\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
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.'' \10\
---------------------------------------------------------------------------
\10\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
equity security transaction services. The Exchange is only one of
several equity venues to which market participants may direct their
order flow. Competing equity exchanges offer similar tiered pricing
structures to that of the Exchange, including schedules of rebates and
fees that apply based upon members achieving certain volume thresholds.
Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. Within the
foregoing context, the proposals represent reasonable attempts by the
Exchange to increase its liquidity and market share relative to its
competitors.
The Exchange believes that it is reasonable to establish new
transaction credits, at Equity 7, Section 118(a), because each of these
new credits will encourage the addition of and/or growth in the
addition of various types of displayed and non-displayed liquidity to
the Exchange, including M-ELO, midpoint, Tape B securities, and NBBO-
setting liquidity, as well as the removal of liquidity in one instance.
First, the proposed new credit of $0.0028 per share executed--which
will apply to members that add liquidity representing 0.45% or more of
Consolidated Volume during the month, and add shares of liquidity in
Tape B Securities of 0.10% or more of Consolidated Volume--will provide
a new opportunity to members to earn a credit for providing significant
volumes of liquidity to the Exchange without having to meet the more
stringent qualifying criteria that apply to existing similarly-
structured $0.00295 and $0.0030 per share credits. Similarly, the
proposed new credit of $0.0030 per share executed--which will apply to
members that (i) add liquidity to the Exchange representing 0.875% or
more of Consolidated Volume during the month, (ii) execute 0.25% or
more of Consolidated Volume during the month in providing midpoint or
M-ELO Orders, and (iii) remove from the Exchange liquidity representing
at least 1.35% of Consolidated Volume during the month--will encourage
members that currently qualify for an existing $0.00295 per share
executed credit for providing a significant amount of liquidity to the
Exchange, including midpoint and M-ELO orders, and for removing a
significant amount of liquidity from the Exchange, to further increase
the extent of these activities on the Exchange to earn a higher $0.0030
credit, particularly if they deem the criteria for the new credit to be
more readily achievable than are the criteria to qualify for the
existing $0.00305 per share executed credit.
Meanwhile, the proposal to increase the liquidity removal
requirement for the $0.00305 credit from 1.10% to 1.45% of Consolidated
Volume will encourage those participants that already qualify for the
credit to increase the extent of their liquidity removal activity on
the Exchange in order to continue to qualify for it. From time to time,
the Exchange believes it is reasonable to recalibrate the criteria for
credits such as this one to ensure that the credits remain
appropriately challenging for participants to attain in light of
changes to their levels of activity on the Exchange.
It is also reasonable for the Exchange to establish $0.0026 and
$0.0027 per share executed credits to members that: (i) Provide
liquidity greater than certain threshold percentages of Consolidated
Volume during the month; (ii) increase their liquidity providing
activity in all securities by specified percentages of Consolidated
Volume during the month relative to the month of May 2021; and (iii)
achieve specified ratios of NBBO liquidity provided to liquidity
provided by displayed quotes/orders (other than Supplemental Orders or
Designated Retail Orders) during the month. These two new credits will
encourage its members to add and grow the extent to which they add
significant volumes of
[[Page 35843]]
liquidity to the Exchange, including liquidity that establishes the
NBBO.
Next, the Exchange believes it is reasonable to establish two new
supplemental credits for midpoint orders (other than buy (sell) orders
with Midpoint Pegging that receive execution prices that are lower
(higher) than the midpoint of the NBBO) as follows: (1) $0.0001 per
share executed if the member, during the month (i) provides at least 15
million shares of midpoint liquidity per day during the month; and (ii)
increases providing liquidity through midpoint orders by 10% or more
relative to the member's May 2021 average daily volume provided through
midpoint orders; or (2) $0.0002 per share executed if the member,
during the month (i) provides at least 15 million shares of midpoint
liquidity per day during the month; and (ii) increases providing
liquidity through midpoint orders by 30% or more relative to the
member's May 2021 average daily volume provided through midpoint
orders. These proposals are reasonable because they will provide extra
incentives to members that provide non-displayed liquidity to the
Exchange to do so through midpoint orders, as well as to grow
substantially the extent to which they provide midpoint orders to the
Exchange relative to a recent benchmark month. The Exchange believes
that if such incentives are effective, then any ensuing increase in
midpoint liquidity to the Exchange will once again improve market
quality, to the benefit of all participants.
The Exchange believes that it is reasonable to exclude from the
supplemental credits orders with Midpoint Pegging which execute at
prices less aggressive than the midpoint of the NBBO because such
orders already receive price improvements, such that members do not
require additional inducements to enter these orders on the Exchange.
Furthermore, the Exchange believes that it is reasonable to cap the
amount of combined regular and supplemental credits it proposes to
offer members under this program to $0.0027 per share executed. This
cap will allow the Exchange to manage its costs of providing these
incentives. The Exchange has only limited resources available to it for
incentive programs, and it must ensure that it allocates such resources
appropriately to optimize their intended impacts.
Finally, the Exchange believes that it is reasonable to exclude
RTFY-routed shares that are executed at taker-maker venues from its
calculations for determining whether RTFY participants will incur a
$0.0030 per share executed fee when their shares execute at away venues
as well as from the fee itself, to the extent it is otherwise
applicable to a member. Taker-maker venues typically do not charge fees
to Nasdaq for RTFY to access their liquidity, whereas maker-taker
venues do so. The Exchange charges a fee to participants that use RTFY
to execute large volumes of shares at venues other than Nasdaq to help
Nasdaq to recover the costs it incurs for such shares to access
liquidity at maker-taker venues. Because taker-maker venues do not
contribute substantially to Nasdaq's RTFY routing costs, Nasdaq
believes that it is reasonable to exclude RTFY shares that execute on
taker-maker venues from Nasdaq's determination as to whether a
participant's RTFY activity during a month meets the 4 million share
threshold to incur the $0.0030 per share executed fee. For the same
reason, it is also reasonable to exclude RTFY shares executed on taker-
maker venues from any RTFY execution fees otherwise incurred.
The Exchange notes that those market participants that are
dissatisfied with the proposals are free to shift their order flow to
competing venues that offer more generous pricing or less stringent
qualifying criteria.
The Proposals Are Equitable Allocations of Credits
The Exchange believes that it is an equitable allocation to
establish new transaction credits and otherwise modify the eligibility
requirements for its transaction credits because the proposals will
encourage members to increase the extent to which they add liquidity to
or remove liquidity from the Exchange. To the extent that the Exchange
succeeds in increasing the levels of liquidity addition or removal
activity on the Exchange, including in categories of liquidity for
which there is an observed need or demand, such as midpoint, M-ELO, and
Tape B securities, and NBBO-setting liquidity, then the Exchange will
experience improvements in its market quality, which stands to benefit
all market participants. The Exchange also believes it is equitable to
recalibrate existing criteria for its credits to ensure that the
credits remain appropriately challenging for participants to attain in
light of changes to their levels of activity on the Exchange.
Finally, the Exchange believes that it is equitable to exclude
RTFY-routed shares that are executed at taker-maker venues from the
Exchange's determinations as to whether RTFY participants will incur a
$0.0030 per share executed fee when their shares execute at away
venues, as well as from the fee itself, to the extent that it is
otherwise applicable to a member. Taker-maker venues typically do not
charge fees to Nasdaq for RTFY to access their liquidity, whereas
maker-taker venues do so. Because taker-maker venues do not contribute
substantially to Nasdaq's RTFY routing costs, which the $0.0030 fee
exists to defray, Nasdaq believes that it is equitable to exclude
shares that execute on taker-maker venues from Nasdaq's determination
as to whether a participant's RTFY activity during a month meets the 4
million share threshold to incur the $0.0030 per share executed fee.
For the same reason, it is also equitable to exclude RTFY shares
executed on taker-maker venues from any RTFY execution fees otherwise
incurred.
Any participant that is dissatisfied with the proposals is free to
shift their order flow to competing venues that provide more generous
pricing or less stringent qualifying criteria.
The Proposals Are Not Unfairly Discriminatory
The Exchange believes that its proposals are not unfairly
discriminatory. As an initial matter, the Exchange believes that
nothing about its volume-based tiered pricing model is inherently
unfair; instead, it is a rational pricing model that is well-
established and ubiquitous in today's economy among firms in various
industries--from co-branded credit cards to grocery stores to cellular
telephone data plans--that use it to reward the loyalty of their best
customers that provide high levels of business activity and incent
other customers to increase the extent of their business activity. It
is also a pricing model that the Exchange and its competitors have long
employed with the assent of the Commission. It is fair because it
incentivizes customer activity that increases liquidity, enhances price
discovery, and improves the overall quality of the equity markets.
The Exchange believes that its proposals to adopt new credits or
otherwise amend the qualifying criteria for its transaction credits are
not unfairly discriminatory because these credits are available to all
members. Moreover, these proposals stand to improve the overall market
quality of the Exchange, to the benefit of all market participants, by
incentivizing members to increase the extent of their liquidity adding
or removal activity on the Exchange, including in categories of
liquidity for which there is an observed need or demand, such as
midpoint, M-ELO, and Tape B securities, and NBBO-setting liquidity. The
Exchange also
[[Page 35844]]
believes it is not unfairly discriminatory to recalibrate existing
criteria for its credits to ensure that the credits remain
appropriately challenging for participants to attain in light of
changes to their levels of activity on the Exchange.
Meanwhile, the Exchange's proposal is not unfairly discriminatory
to exclude RTFY-routed shares that are executed at taker-maker venues
from the Exchange's determination as to whether RTFY participants will
incur a $0.0030 per share executed fee when their shares execute at
away venues, as well as from the fee itself, to the extent it is
otherwise applicable to a member. Although the proposal stands to
benefit RTFY participants that execute large volumes of shares at
taker-maker venues, insofar as such participants will no longer stand
to pay a routing fee because of such execution activity, the Exchange
believes it is fair to provide this benefit because taker-maker venues
typically do not charge fees to Nasdaq for RTFY to access their
liquidity, whereas maker-taker venues do so. Because taker-maker venues
do not contribute substantially to Nasdaq's RTFY routing costs, which
the $0.0030 fee exists to defray, Nasdaq believes that it is fair to
exclude shares that execute on taker-maker venues from Nasdaq's
determination as to whether a participant's RTFY activity during a
month meets the 4 million share threshold to incur the $0.0030 per
share executed fee. For the same reason, it is also not unfairly
discriminatory to exclude RTFY shares executed on taker-maker venues
from any RTFY execution fees otherwise incurred.
Any participant that is dissatisfied with the proposals is free to
shift their order flow to competing venues that provide more generous
pricing or less stringent qualifying criteria.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intramarket Competition
The Exchange does not believe that its proposals will place any
category of Exchange participant at a competitive disadvantage.
As noted above, Nasdaq's proposals to add and amend its transaction
credits are intended to have market-improving effects, to the benefit
of all members. Any member may elect to achieve the levels of liquidity
required in order to qualify for the new or amended credits.
Likewise, the Exchange's proposal will not duly burden competition
to exclude RTFY-routed shares that are executed at taker-maker venues
from the Exchange's determinations as to whether RTFY participants will
incur a $0.0030 per share executed routing fee, and from the fee
itself, to the extent that it is otherwise applicable to a member.
Although the proposal stands to benefit RTFY participants that execute
large volumes of shares at taker-maker venues, insofar as such
participants will no longer stand to pay a routing fee because of such
execution activity, the Exchange believes it is fair to provide this
benefit because taker-maker venues typically do not charge fees to
Nasdaq for RTFY to access their liquidity, whereas maker-taker venues
do so. Because taker-maker venues do not substantially contribute to
Nasdaq's RTFY routing costs, which the $0.0030 fee exists to defray,
Nasdaq believes that it is fair to exclude shares that execute on
taker-maker venues from Nasdaq's determination as to whether a
participant's RTFY activity during a month meets the 4 million share
threshold to incur the $0.0030 per share executed fee. For the same
reason, it is also fair to exclude RTFY shares executed on taker-maker
venues from any RTFY execution fees otherwise incurred.
The Exchange notes that its members are free to trade on other
venues to the extent they believe that the proposed qualification
criteria for or amounts of these credits or fees are not attractive. As
one can observe by looking at any market share chart, price competition
between exchanges is fierce, with liquidity and market share moving
freely between exchanges in reaction to fee and credit changes. The
Exchange notes that its pricing tier structure is consistent with
broker-dealer fee practices as well as the other industries, as
described above.
Intermarket Competition
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 credits and 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 credits and
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which credit or fee changes in this market may impose any burden on
competition is extremely limited.
The proposed new and amended credits and fees are reflective of
this competition because, even as one of the largest U.S. equities
exchanges by volume, the Exchange has less than 20% market share, which
in most markets could hardly be categorized as having enough market
power to burden competition. Moreover, as noted above, price
competition between exchanges is fierce, with liquidity and market
share moving freely between exchanges in reaction to fee and credit
changes. This is in addition to free flow of order flow to and among
off-exchange venues which comprises upwards of 44% of industry volume.
The Exchange's proposals to add new and amend its transaction
credits are pro-competitive in that the Exchange intends for them to
increase liquidity addition or removal activity on the Exchange,
thereby rendering the Exchange a more attractive and vibrant venue to
market participants. Meanwhile, the Exchange's proposal to exclude from
the RTFY routing fees and fee calculation shares executed in taker-
maker venues is pro-competitive in that it will render the Exchange's
RTFY routing option more attractive to participants.
In sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\11\
---------------------------------------------------------------------------
\11\ 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
[[Page 35845]]
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 [email protected]. Please include
File Number SR-NASDAQ-2021-053 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-2021-053. 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-2021-053 and should be submitted
on or before July 28, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-14388 Filed 7-6-21; 8:45 am]
BILLING CODE 8011-01-P