Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend The Nasdaq Options Market's Pricing Schedule at Options 7, Section 2(1), 52273-52278 [2021-20214]
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Federal Register / Vol. 86, No. 179 / Monday, September 20, 2021 / Notices
Fund(s) or Affiliated Fund(s) and its
Adviser.
15. Independence. If the Holders own
in the aggregate more than 25 percent of
the Shares of a Regulated Fund, then the
Holders will vote such Shares in the
same percentages as the Regulated
Fund’s other shareholders (not
including the Holders) when voting on
(1) the election of directors; (2) the
removal of one or more directors; or (3)
any other matter under either the Act or
applicable State law affecting the
Board’s composition, size or manner of
election.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 1, 2021, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III, below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend The
Nasdaq Options Market’s (‘‘NOM’’)
Pricing Schedule at Options 7, Section
2(1).
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.
[FR Doc. 2021–20207 Filed 9–17–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92974; File No. SR–
NASDAQ–2021–069]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend The
Nasdaq Options Market’s Pricing
Schedule at Options 7, Section 2(1)
September 14, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
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
52273
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 NOM’s Pricing
Schedule at Options 7, Section 2(1) to
amend the (i) Customer 3 and
Professional 4 Rebates to Add Liquidity
in Penny Symbols, and (ii) Tier 3
Market Maker 5 Rebate to Add Liquidity
in Penny Symbols.
Customer and Professional Rebate To
Add Liquidity in Penny Symbols
Today, the Exchange pays tiered
Customer and Professional Rebates to
Add Liquidity in Penny Symbols that
are $0.20 (Tier 1), $0.25 (Tier 2), $0.42
(Tier 3), $0.43 (Tier 4), $0.45 (Tier 5),
and $0.48 (Tier 6). These rebates are
paid per the highest tier achieved
below.
Monthly volume
Tier 1 ....................................
Tier 2 ....................................
Tier 3 ....................................
Tier 4 ....................................
Tier 5 ....................................
Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols of up to 0.10% of total industry customer equity and ETF option average
daily volume (‘‘ADV’’) contracts per day in a month.
Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 0.10% to 0.20% of total industry customer equity and ETF option
ADV contracts per day in a month.
Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 0.20% to 0.30% of total industry customer equity and ETF option
ADV contracts per day in a month.
Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 0.30% to 0.40% of total industry customer equity and ETF option
ADV contracts per day in a month.
Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 0.40% to 0.80% of total industry customer equity and ETF option
ADV contracts per day in a month.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The term ‘‘Customer’’ or (‘‘C’’) applies to any
transaction that is identified by a Participant for
clearing in the Customer range at The Options
Clearing Corporation (‘‘OCC’’) which is not for the
account of broker or dealer or for the account of a
2 17
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‘‘Professional’’ (as that term is defined in Options
1, Section 1(a)(47)).
4 The term ‘‘Professional’’ or (‘‘P’’) means any
person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar
month for its own beneficial account(s) pursuant to
Options 1, Section 1(a)(47). All Professional orders
shall be appropriately marked by Participants.
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5 The term ‘‘NOM Market Maker’’ or (‘‘M’’) is a
Participant that has registered as a Market Maker on
NOM pursuant to Options 2, Section 1, and must
also remain in good standing pursuant to Options
2, Section 9. In order to receive NOM Market Maker
pricing in all securities, the Participant must be
registered as a NOM Market Maker in at least one
security.
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Monthly volume
Tier 6 ....................................
Participant adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 0.80% or more of total industry customer equity and ETF option
ADV contracts per day in a month, or Participant adds: (1) Customer and/or Professional liquidity in Penny
Symbols and/or Non-Penny Symbols of 0.20% or more of total industry customer equity and ETF option ADV
contracts per day in a month, and (2) has added liquidity in all securities through one or more of its Nasdaq
Market Center MPIDs that represent 1.00% or more of Consolidated Volume in a month or qualifies for MARS
(defined below).
In addition, the Exchange currently
ties the tiered Penny Symbol add
liquidity rebate program described
above to its Market Access and Routing
Subsidy (‘‘MARS’’) program in Section
2(4) as a means to attract additional
liquidity to the Exchange from market
participants. Under MARS, the
Exchange pays qualifying Participants to
subsidize their costs of providing
routing services to route orders to NOM.
To qualify for MARS, Participants must
have System Eligibility.6 In addition,
Participants that have System
Eligibility, and have routed and
executed the requisite number of
Eligible Contracts 7 daily in a month
(‘‘Average Daily Volume’’ or ‘‘ADV’’)
that add liquidity on NOM are entitled
to tiered MARS Payments, which are
currently paid per the highest tier
achieved below.8
6 Specifically, to qualify for MARS, the
Participant’s routing system (‘‘System’’) would be
required to: (1) Enable the electronic routing of
orders to all of the U.S. options exchanges,
including NOM; (2) provide current consolidated
market data from the U.S. options exchanges; and
(3) be capable of interfacing with NOM’s API to
access current NOM match engine functionality.
Further, the Participant’s System would also need
to cause NOM to be the one of the top three default
destination exchanges for (a) individually executed
marketable orders if NOM is at the national best bid
or offer (‘‘NBBO’’), regardless of size or time or (b)
orders that establish a new NBBO on NOM’s Order
Book, but allow any user to manually override
NOM as a default destination on an order-by-order
basis. Any NOM Participant would be permitted to
avail itself of this arrangement, provided that its
order routing functionality incorporates the features
described above and satisfies NOM that it appears
to be robust and reliable. The Participant remains
solely responsible for implementing and operating
its System.
7 For the purpose of qualifying for the MARS
Payment, Eligible Contracts may include Firm, NonNOM Market Maker, Broker-Dealer, or Joint Back
Office or ‘‘JBO’’ equity option orders that add
liquidity and are electronically delivered and
executed. Eligible Contracts do not include Mini
Option orders.
8 The specified MARS Payment will be paid on
all executed Eligible Contracts that add liquidity,
which are routed to NOM through a participating
NOM Participant’s System and meet the requisite
Eligible Contracts ADV. No payment will be made
with respect to orders that are routed to NOM, but
not executed. Furthermore, a Participant will not be
entitled to receive any other revenue from the
Exchange for the use of its System specifically with
respect to orders routed to NOM.
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Average
daily
volume
(‘‘ADV’’)
Tiers
1
2
3
4
5
6
7
8
9
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
2,000
5,000
10,000
20,000
45,000
75,000
100,000
125,000
150,000
One of the present ways that the
Exchange ties the tiered Penny Symbol
add liquidity rebate program and
MARS, each as described above, is
through note ‘‘8’’ of Options 7, Section
2(1) where Participants that qualify for
any MARS Payment Tier in Options 7,
Section 2(4) receive: (1) An additional
$0.05 per contract Penny Symbol
Customer Rebate to Add Liquidity for
each transaction which adds liquidity in
Penny Symbols in that month, in
addition to qualifying Customer Rebate
to Add Liquidity Tiers 1, or (2) an
additional $0.04 per contract Penny
Symbol Customer Rebate to Add
Liquidity for each transaction which
adds liquidity in Penny Symbols in that
month, in addition to qualifying Penny
Symbol Customer Rebate to Add
Liquidity Tiers 2–6.9 The purpose of the
note ‘‘8’’ incentive is to attract
additional order flow to NOM by way of
encouraging participation in both the
tiered Penny Symbol add liquidity
Customer rebate program and in MARS.
The Exchange now proposes a
number of changes to the current tiered
Penny Symbol add liquidity rebate
program described above. The Exchange
first proposes to increase the Tier 3 and
Tier 4 Customer and Professional
rebates from $0.42 to $0.43 per contract
and from $0.43 to $0.44 per contract,
respectively. The Exchange believes that
the higher Tier 3 and Tier 4 rebates,
together with the proposed changes
described below, will further encourage
9 Accordingly, a Participant that qualifies for the
additional incentives in note ‘‘8’’ by executing the
requisite MARS volume and qualifying for a
Customer Rebate to Add Liquidity Tiers 1–6 in
Penny Symbols can earn up to $0.25 in Tier 1, $0.29
in Tier 2, $0.46 in Tier 3, $0.47 in Tier 4, $0.49 in
Tier 5, and $0.52 in Tier 6.
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Participants to reach for the higher
Customer and Professional rebate tiers
by bringing additional order flow that
adds liquidity on the Exchange, which
will be ultimately beneficial to all
market participants.
The Exchange also proposes to add an
alternative route to achieve the
proposed $0.43 per contract Tier 3
Customer and Professional Rebate to
Add Liquidity in Penny Symbols that
will be tied to MARS. Specifically, the
Exchange proposes that Participants
will also be eligible to receive the
proposed $0.43 per contract Tier 3
Customer and Professional Rebate to
Add Liquidity in Penny Symbols if the
Participant adds Customer and/or
Professional liquidity in Penny Symbols
and/or Non-Penny Symbols of 0.15% to
less than 0.20% of total industry
customer equity and ETF option ADV
contracts per day in a month and
qualifies for MARS. The Exchange also
proposes to make related changes by
renumbering the existing method to
qualify for the Tier 3 Customer and
Professional rebate as paragraph (a) and
the proposed alternative method as
paragraph (b).10 By adding an
alternative route to achieve the Tier 3
Customer and Professional rebate that is
tied to MARS, the Exchange is seeking
to incentivize Participants to increase
their liquidity adding activity on NOM
to improve the quality of the market.
Lastly, the Exchange proposes to
amend note 8 of Options 7, Section 2(1)
to increase the additional $0.04 per
contract rebate currently offered to
Participants that qualify for any MARS
Payment Tier in addition qualifying for
Penny Symbol Customer Rebates to Add
Liquidity Tiers 2–5 to $0.05 per
contract. As proposed, Participants may
earn Customer Rebates to Add Liquidity
in Penny Symbols up to $0.30 in Tier
2, $0.48 in Tier 3, $0.49 in Tier 4, and
$0.50 in Tier 5, provided they meet the
note 8 qualifications.11 Participants that
10 As described above, the existing Tier 3 rebate
qualification requires the Participant to add
Customer, Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 0.20%
to 0.30% of total industry customer equity and ETF
option ADV contracts per day in a month.
11 As proposed above, the Tier 3 and Tier 4
Customer Rebates to Add Liquidity in Penny
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qualify for the note 8 incentives will
continue to be eligible to earn up to
$0.25 for the Penny Symbol Customer
Rebate to Add Liquidity in Tier 1 and
$0.52 for the Penny Symbol Customer
Rebate to Add Liquidity in Tier 6 as
these incentives will not be amended
under this proposal. The purpose of the
proposed changes to the Penny Symbol
Customer Rebates to Add Liquidity
Tiers 2–5 is to further encourage
Participants to bring additional
Customer liquidity to the Exchange by
reaching for the higher Customer tiers,
and further fortify participation in
MARS by encouraging Participants to
route/execute the requisite number of
Eligible Contracts that add liquidity in
order to qualify for any of the MARS
Payment Tier 1–9 describe above.
52275
Market Maker Rebate To Add Liquidity
in Penny Symbols
Today, the Exchange pays tiered
Market Maker Rebates to Add Liquidity
in Penny Symbols that are $0.20 (Tier
1), $0.25 (Tier 2), $0.30 (Tier 3),12 $0.32
(Tier 4),13 $0.44 (Tier 5), and $0.48 (Tier
6). These rebates are paid per the
highest tier achieved below.
Monthly volume
Tier 1 ....................................
Tier 2 ....................................
Tier 3 ....................................
Tier 4 ....................................
Tier 5 ....................................
Tier 6 ....................................
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of up to 0.10% of
total industry customer equity and ETF option average daily volume (‘‘ADV’’) contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 0.10% to
0.20% of total industry customer equity and ETF option ADV contracts per day in a month.
Participant: (a) Adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 0.20% to
0.60% of total industry customer equity and ETF option ADV contracts per day in a month: or (b)(1) transacts
in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.80% or more of Consolidated Volume (‘‘CV’’) which adds liquidity in the same month on The Nasdaq Stock Market, (2) transacts in
Tape B securities through one or more of its Nasdaq Market Center MPIDs that represent 0.15% or more of
CV which adds liquidity in the same month on The Nasdaq Stock Market, and (3) executes greater than 0.01%
of CV via Market-on- Close/Limit-on-Close (‘‘MOC/LOC’’) volume within The Nasdaq Stock Market Closing
Cross in the same month.
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 0.60% of
total industry customer equity and ETF option ADV contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 0.40% of
total industry customer equity and ETF option ADV contracts per day in a month and transacts in all securities
through one or more of its Nasdaq Market Center MPIDs that represent 0.40% or more of Consolidated Volume (‘‘CV’’) which adds liquidity in the same month on The Nasdaq Stock Market.
Participant: (a)(1) Adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 0.95%
of total industry customer equity and ETF option ADV contracts per day in a month, (2) executes Total Volume
of 250,000 or more contracts per day in a month, of which 30,000 or more contracts per day in a month must
be removing liquidity, and (3) adds Firm, Broker-Dealer and Non-NOM Market Maker liquidity in Non-Penny
Symbols of 10,000 or more contracts per day in a month; or (b)(1) adds NOM Market Maker liquidity in Penny
Symbols and/or Non-Penny Symbols above 1.50% of total industry customer equity and ETF option ADV contracts per day in a month, and (2) executes Total Volume of 250,000 or more contracts per day in a month, of
which 15,000 or more contracts per day in a month must be removing liquidity.
As set forth above, the Exchange
currently offers two different paths in
(a) and (b) for Participants to achieve the
Tier 3 Market Maker rebate. The
Exchange now proposes to amend the
Tier 3 qualifications in (b) as follows: 14
Participant . . . (b)(1) adds NOM Market
Maker liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.07% to 0.20%
of total industry customer equity and ETF
option ADV contracts per day in a month, (2)
transacts in all securities through one or
more of its Nasdaq Market Center MPIDs that
represent 0.70% or more of Consolidated
Volume (‘‘CV’’) which adds liquidity in the
same month on The Nasdaq Stock Market, (3)
transacts in Tape B securities through one or
more of its Nasdaq Market Center MPIDs that
represent 0.10% or more of CV which adds
liquidity in the same month on The Nasdaq
Stock Market, and (4) executes greater than
0.01% of CV via Market-on- Close/Limit-onClose (‘‘MOC/LOC’’) volume within The
Symbols will also be increased to $0.43 and $0.44,
respectively.
12 This rebate is $0.40 per contract in the
following symbols: AAPL, SPY, QQQ, IWM, and
VXX. See Options 7, Section 2(1), note 4.
13 Id.
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Nasdaq Stock Market Closing Cross in the
same month.
The proposal adds an options
component and lowers two of the
existing equity components, namely by
decreasing the percentage requirement
that Market Makers transact in all
securities through one or more of its
Nasdaq Market Center MPIDs from
0.80% to 0.70% and decreasing the
percentage requirement that Market
Makers transact in Tape B securities
through one or more of its Nasdaq
Market Center MPIDs from 0.15% to
0.10%.15 By lowering the percentage
thresholds, the Exchange intends to
render the Tier 3 rebate more readily
accessible to Market Makers. If more
Market Makers find that this rebate is
accessible to them, then more will seek
to qualify for it by adding liquidity on
The Nasdaq Stock Market. Together
with the proposed options component,
14 The Exchange will also correct a punctuation
error in Tier 3.
15 All NOM Participants are required to be
members of The Nasdaq Stock Market pursuant to
General 3 (Membership and Access).
16 Specifically, notes 6 and 8 in Options 7,
Section 2(1).
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which is designed to incentivize Market
Makers to add liquidity on NOM, the
Exchange believes that its proposal will
improve the quality of the Exchange’s
equity and options markets, to the
benefit of all market participants.
Technical Amendments
The Exchange proposes to correct two
rule citations to the MARS Payment
Tiers in Section (6).16 The Exchange
recently renumbered this section to
Section 2(4) and did not update these
citations.17
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,18 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,19 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
17 See Securities Exchange Act Release No. 91677
(April 26, 2021), 86 FR 22989 (April 30, 2021) (SR–
NASDAQ–2021–021).
18 15 U.S.C. 78f(b).
19 15 U.S.C. 78f(b)(4) and (5).
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among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s proposed changes to
its Pricing Schedule are reasonable in
several respects. As a threshold matter,
the Exchange is subject to significant
competitive forces in the market for
options 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’. . . .’’ 20
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.’’ 21
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of sixteen options
exchanges to which market participants
may direct their order flow. 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. As such,
the proposal represents a reasonable
attempt by the Exchange to increase its
20 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)).
21 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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liquidity and market share relative to its
competitors.
Customer and Professional Rebate To
Add Liquidity in Penny Symbols
The Exchange believes that the
proposed changes to the Customer and
Professional Rebates to Add Liquidity in
Penny Symbols described above are
reasonably designed to attract additional
liquidity to the Exchange. The Exchange
believes it is reasonable to increase the
Tier 3 and Tier 4 Customer and
Professional rebates because
Participants will be encouraged to
submit additional order flow to reach
for the higher rebates.22 The Exchange
believes that the proposed higher
rebates will incentivize substantial
liquidity adding activity on the
Exchange, and that any increased
activity and growth that may result from
this proposal will improve the overall
quality of the market, to the benefit of
all market participants.
The Exchange believes that the
proposed alternative method to qualify
for the higher Tier 3 Customer and
Professional Rebate to Add Liquidity in
Penny Symbols is reasonable because it
will create an additional opportunity for
Participants to earn the Tier 3 rebate by
incentivizing Participants to add greater
liquidity on NOM. Specifically, the
Exchange is proposing to require that
the Participant add Customer and/or
Professional liquidity in Penny and/or
Non-Penny Symbols of 0.15% to less
than 0.20% of total industry customer
and ETF option ADV contracts per day
in a month and qualify for MARS in
order to receive the proposed $0.43 per
contract Tier 3 rebate. The Exchange
believes that this will encourage
liquidity adding activity in Customer
and Professional orders to earn the Tier
3 rebate. The proposal will also
incentivize Participants to qualify for
the MARS program, which is designed
to attract higher volumes of electronic
equity and ETF options volume to the
Exchange. As discussed above, to
qualify for MARS, Participants must
have System Eligibility, which has
various requirements for Participants to
maintain their routing systems,
22 Participants are required to add Customer,
Professional, Firm, Non-NOM Market Maker and/or
Broker-Dealer liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.20% to 0.30% of total
industry customer equity and ETF option ADV
contracts per day in a month to earn the proposed
Tier 3 Customer and Professional rebate, and above
0.30% to 0.40% of total industry customer equity
and ETF option ADV contracts per day in a month
to earn the proposed Tier 4 Customer and
Professional rebate. These qualifications are not
being amended with this proposal, although the
Exchange will add an alternative route to earn the
proposed Tier 3 rebate, as discussed above.
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including the requirement that NOM be
one of the top three default destination
exchanges on the Participant’s routing
system for execution. If more
Participants seek to qualify for MARS,
the proposal will bring higher volumes
of orders to NOM, which will enhance
market quality by offering greater price
discovery and increased opportunities
to trade, to the benefit of all
Participants. The Exchange also notes
that the proposed alternative route to
achieve the Tier 3 Customer and
Professional rebate is similar to an
existing method for achieving the Tier 6
Customer and Professional rebate except
the proposal will have lower volume
requirements, which will be
commensurate with the lower Tier 3
rebate provided. In particular, one of the
ways to earn the Tier 6 rebate ($0.48 per
contract) currently requires the
Participant to add (1) Customer and/or
Professional liquidity in Penny Symbols
and/or Non-Penny Symbols of 0.20% or
more of total industry customer equity
and ETF option ADV contracts per day
in a month, and (2) add liquidity in all
securities through one or more of its
Nasdaq Market Center MPIDs that
represent 1.00% or more of
Consolidated Volume in a month or
qualify for MARS. As discussed above,
the proposed alternative route to earn
the Tier 3 rebate ($0.43 with the
proposed changes) will require the
Participant to add (1) Customer and/or
Professional liquidity in Penny Symbols
and/or Non-Penny Symbols of 0.15% to
less than 0.20% of total industry
customer equity and ETF option ADV
contracts per day in a month, and (2)
qualify for MARS.
The Exchange also believes that the
proposed changes in note 8 to increase
the supplemental rebates offered to
Participants that qualify for any MARS
Payment Tier in Section 2(4) in addition
to qualifying for Penny Symbol
Customer Rebates to Add Liquidity in
Tiers 2–5 from $0.04 to $0.05 per
contract will further encourage
Participants to send higher volumes of
electronic equity and ETF options to
NOM for execution to receive this
additional incentive. In particular, to
receive the increased supplemental
rebates, Participants will need to have
System Eligibility and execute the
requisite number of Eligible Contracts
ADV to qualify for any of the MARS
Payment Tiers in Section 2(4). If more
Participants seek to qualify for MARS
Payments Tiers by sending and
executing more Eligible Contracts on
NOM to earn the increased
supplemental rebates for Penny Symbol
Customer rebate tiers 2–5, then market
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quality will improve and the Exchange
will become more attractive to existing
and prospective market participants.
The Exchange also believes that the
proposed changes in note 8 will
improve market quality by incentivizing
Participants to submit additional
qualifying volume that adds liquidity to
earn the Penny Symbol Customer
Rebates to Add Liquidity in Tiers 2–5,
and therefore become eligible for the
additional note 8 incentives, provided
that they also qualify for any MARS
Payment Tier.
The Exchange also believes that the
proposed changes to the Customer and
Professional Rebates to Add Liquidity in
Penny Symbols discussed above are
equitable and not unfairly
discriminatory because the Exchange
will uniformly apply the changes to all
qualifying Participants. All Participants
may qualify for MARS provided they
have requisite System Eligibility.
Furthermore, the Exchange believes it is
equitable and not unfairly
discriminatory to pay the proposed
rebates to eligible Customer and
Professional liquidity adding orders
(i.e., the proposed Tier 3 and Tier 4
rebates, and the proposed Tier 3
alternative route) or to eligible Customer
liquidity adding orders (i.e., the
proposed note 8 incentive changes).
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts market
makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. The Exchange believes that
incentivizing Professional liquidity is
similarly beneficial, as the proposed
changes may cause market participants
to select NOM as a venue to send
Professional order flow, increasing
competition among the exchanges. As
with Customer liquidity, the Exchange
believes that increased Professional
order flow should benefit other market
participants.
Market Maker Rebate To Add Liquidity
in Penny Symbols
The Exchange believes that its
proposal to amend the qualifications for
the Tier 3 Market Maker Rebate to Add
Liquidity in Penny Symbols is
reasonably designed to incentivize
Market Makers to increase their
liquidity adding activity on the
Exchange’s equity and options markets.
By lowering the percentage thresholds
for the equity components in the
manner described above, the Exchange
intends to render the Tier 3 rebate more
readily accessible to Market Makers. If
VerDate Sep<11>2014
16:49 Sep 17, 2021
Jkt 253001
more Market Makers find that this
rebate is accessible to them, then more
will seek to qualify for it by adding
liquidity on The Nasdaq Stock Market.
Together with the proposed options
component, which is designed to
encourage Market Makers to add
liquidity on NOM, the Exchange
believes that its proposal will improve
the quality of the Exchange’s equity and
options markets, to the benefit of all
market participants.
The Exchange also believes that the
proposed changes to the qualifications
for the Tier 3 Market Maker Rebate to
Add Liquidity in Penny Symbols is
equitable and not unfairly
discriminatory because the Exchange
will pay the Tier 3 rebate uniformly to
any qualifying Market Maker. Market
Makers add value through continuous
quoting and the commitment of
capital.23 Because Market Makers have
these obligations to the market and
regulatory requirements that normally
do not apply to other market
participants, the Exchange believes that
offering the rebate to only Market
Makers is equitable and not unfairly
discriminatory in light of their
obligations. Finally, encouraging Market
Makers to add greater liquidity benefits
all market participants, both on NOM
and The Nasdaq Stock Market, in the
quality of order interaction.
Technical Amendments
The Exchange believes that the
proposed updates to the rule citations
for MARS Payment Tiers are reasonable,
equitable, and not unfairly
discriminatory as these amendments
will bring greater clarity to the
Rulebook.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
In terms of intra-market competition,
the Exchange does not that its proposals
will place any category of market
participant at a competitive
disadvantage. As discussed above, while
the Exchange’s proposals provide
incentives for certain order flow and
activity on the Exchange (i.e., Customer
and Professional liquidity adding
activity in Penny Symbols and Market
Maker Rebate liquidity adding activity
in Penny Symbols), the proposed
changes are ultimately aimed at
attracting greater liquidity to the
Exchange, which benefits all market
23 See
PO 00000
Options 2, Sections 4 and 5.
Frm 00155
Fmt 4703
Sfmt 4703
52277
participants in the quality of order
interaction.
In terms of inter-market competition,
the Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges. Because competitors are free
to modify their own fees in response,
and because market participants may
readily adjust their order routing
practices, the Exchange believes that the
degree to which fee changes in this
market may impose any burden on
competition is extremely limited.
The Exchange’s proposed changes to
the Customer and Professional Rebates
to Add Liquidity in Penny Symbols and
the Tier 3 Market Maker Rebate to Add
Liquidity in Penny Symbols are procompetitive in that the Exchange
intends for the changes to increase
liquidity addition and activity on the
Exchange, thereby rendering the
Exchange a more attractive and vibrant
venue to existing and prospective
market 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 Participants or
competing exchanges 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.24
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
24 15
E:\FR\FM\20SEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
20SEN1
52278
Federal Register / Vol. 86, No. 179 / Monday, September 20, 2021 / Notices
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
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–20214 Filed 9–17–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92981; File No. SR–
NYSEAMER–2021–38]
• 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–2021–069 on the subject line.
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Delete the Order Audit
Trail System Rules in the Rule 7400
Series
Paper Comments
September 14, 2021.
• 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–2021–069. 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–2021–069 and
should be submitted on or before
October 12, 2021.
VerDate Sep<11>2014
16:49 Sep 17, 2021
Jkt 253001
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 7, 2021, NYSE American
LLC (‘‘NYSE American’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II,
below, which Items have been prepared
by the self-regulatory organization. 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 delete the
Order Audit Trail System (‘‘OATS’’)
rules in the Rule 7400 Series as these
Rules provide for the collection of
information that is duplicative of the
data collection requirements of the CAT.
Further, the Financial Industry
Regulatory Authority (‘‘FINRA’’) has
determined to eliminate its OATS rules.
The proposed rule change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00156
Fmt 4703
Sfmt 4703
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Rule 613 of Regulation NMS requires
national securities exchanges and
FINRA to create, implement, and
maintain a consolidated audit trail to
capture customer and order event
information for orders in NMS
Securities and OTC Equity Securities,
across all markets, from the time of
order inception through routing,
cancellation, modification, or execution
in a single consolidated data source.
The Participants filed the Plan to
comply with Rule 613 of Regulation
NMS under the Act. The Plan was
published for comment in the Federal
Register on May 17, 2016,4 and
approved by the Commission, as
modified, on November 15, 2016.5
On August 14, 2020, FINRA filed with
the Commission a proposed rule change
to delete the OATS rules once Industry
Members are effectively reporting to the
CAT (the ‘‘OATS Retirement Filing’’).6
On October 29, 2020, FINRA filed
Amendment No. 1 to the proposed rule
change (‘‘Amendment No. 1’’) and a
response to the comments that were
submitted on the original filing
(‘‘Response to Comments’’).7 On
November 30, 2020, the Commission
approved the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.8 On June 17, 2021,
FINRA filed a proposed rule change
setting forth the basis for its
determination that the accuracy and
reliability of the CAT meet the
standards approved by the Commission
4 See Securities Exchange Act Release No. 77724
(April 27, 2016), 81 FR 30614 (May 17, 2016).
5 See Securities Exchange Act Release No. 79318
(November 15, 2016), 81 FR 84696 (November 23,
2016) (‘‘Order Approving the National Market
System Plan Governing the Consolidated Audit
Trail) (‘‘Approval Order’’).
6 See Securities Exchange Act Release No. 89679
(August 26, 2020), 85 FR 54461 (September 1, 2020)
(Notice of Filing of File No. SR–FINRA–2020–024).
7 See Letter from Lisa C. Horrigan, Associate
General Counsel, FINRA, to Vanessa Countryman,
Secretary, Commission, dated October 29, 2020.
8 See Securities Exchange Act Release No. 90535
(November 30, 2020), 85 FR 78395 (December 4,
2020) (Notice of Filing of Amendment No. 1 and
Order Granting Accelerated Approval of SR–
FINRA–2020–024).
E:\FR\FM\20SEN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 179 (Monday, September 20, 2021)]
[Notices]
[Pages 52273-52278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20214]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92974; File No. SR-NASDAQ-2021-069]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend The Nasdaq Options Market's Pricing Schedule at Options 7,
Section 2(1)
September 14, 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 September 1, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend The Nasdaq Options Market's
(``NOM'') Pricing Schedule at Options 7, Section 2(1).
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 NOM's Pricing
Schedule at Options 7, Section 2(1) to amend the (i) Customer \3\ and
Professional \4\ Rebates to Add Liquidity in Penny Symbols, and (ii)
Tier 3 Market Maker \5\ Rebate to Add Liquidity in Penny Symbols.
---------------------------------------------------------------------------
\3\ The term ``Customer'' or (``C'') applies to any transaction
that is identified by a Participant for clearing in the Customer
range at The Options Clearing Corporation (``OCC'') which is not for
the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(a)(47)).
\4\ The term ``Professional'' or (``P'') means any person or
entity that (i) is not a broker or dealer in securities, and (ii)
places more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s) pursuant
to Options 1, Section 1(a)(47). All Professional orders shall be
appropriately marked by Participants.
\5\ The term ``NOM Market Maker'' or (``M'') is a Participant
that has registered as a Market Maker on NOM pursuant to Options 2,
Section 1, and must also remain in good standing pursuant to Options
2, Section 9. In order to receive NOM Market Maker pricing in all
securities, the Participant must be registered as a NOM Market Maker
in at least one security.
---------------------------------------------------------------------------
Customer and Professional Rebate To Add Liquidity in Penny Symbols
Today, the Exchange pays tiered Customer and Professional Rebates
to Add Liquidity in Penny Symbols that are $0.20 (Tier 1), $0.25 (Tier
2), $0.42 (Tier 3), $0.43 (Tier 4), $0.45 (Tier 5), and $0.48 (Tier 6).
These rebates are paid per the highest tier achieved below.
------------------------------------------------------------------------
Monthly volume
------------------------------------------------------------------------
Tier 1....................... Participant adds Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Symbols and/or
Non-Penny Symbols of up to 0.10% of
total industry customer equity and ETF
option average daily volume (``ADV'')
contracts per day in a month.
Tier 2....................... Participant adds Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.10% to 0.20%
of total industry customer equity and
ETF option ADV contracts per day in a
month.
Tier 3....................... Participant adds Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.20% to 0.30%
of total industry customer equity and
ETF option ADV contracts per day in a
month.
Tier 4....................... Participant adds Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.30% to 0.40%
of total industry customer equity and
ETF option ADV contracts per day in a
month.
Tier 5....................... Participant adds Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.40% to 0.80%
of total industry customer equity and
ETF option ADV contracts per day in a
month.
[[Page 52274]]
Tier 6....................... Participant adds Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.80% or more of
total industry customer equity and ETF
option ADV contracts per day in a month,
or Participant adds: (1) Customer and/or
Professional liquidity in Penny Symbols
and/or Non-Penny Symbols of 0.20% or
more of total industry customer equity
and ETF option ADV contracts per day in
a month, and (2) has added liquidity in
all securities through one or more of
its Nasdaq Market Center MPIDs that
represent 1.00% or more of Consolidated
Volume in a month or qualifies for MARS
(defined below).
------------------------------------------------------------------------
In addition, the Exchange currently ties the tiered Penny Symbol
add liquidity rebate program described above to its Market Access and
Routing Subsidy (``MARS'') program in Section 2(4) as a means to
attract additional liquidity to the Exchange from market participants.
Under MARS, the Exchange pays qualifying Participants to subsidize
their costs of providing routing services to route orders to NOM. To
qualify for MARS, Participants must have System Eligibility.\6\ In
addition, Participants that have System Eligibility, and have routed
and executed the requisite number of Eligible Contracts \7\ daily in a
month (``Average Daily Volume'' or ``ADV'') that add liquidity on NOM
are entitled to tiered MARS Payments, which are currently paid per the
highest tier achieved below.\8\
---------------------------------------------------------------------------
\6\ Specifically, to qualify for MARS, the Participant's routing
system (``System'') would be required to: (1) Enable the electronic
routing of orders to all of the U.S. options exchanges, including
NOM; (2) provide current consolidated market data from the U.S.
options exchanges; and (3) be capable of interfacing with NOM's API
to access current NOM match engine functionality. Further, the
Participant's System would also need to cause NOM to be the one of
the top three default destination exchanges for (a) individually
executed marketable orders if NOM is at the national best bid or
offer (``NBBO''), regardless of size or time or (b) orders that
establish a new NBBO on NOM's Order Book, but allow any user to
manually override NOM as a default destination on an order-by-order
basis. Any NOM Participant would be permitted to avail itself of
this arrangement, provided that its order routing functionality
incorporates the features described above and satisfies NOM that it
appears to be robust and reliable. The Participant remains solely
responsible for implementing and operating its System.
\7\ For the purpose of qualifying for the MARS Payment, Eligible
Contracts may include Firm, Non-NOM Market Maker, Broker-Dealer, or
Joint Back Office or ``JBO'' equity option orders that add liquidity
and are electronically delivered and executed. Eligible Contracts do
not include Mini Option orders.
\8\ The specified MARS Payment will be paid on all executed
Eligible Contracts that add liquidity, which are routed to NOM
through a participating NOM Participant's System and meet the
requisite Eligible Contracts ADV. No payment will be made with
respect to orders that are routed to NOM, but not executed.
Furthermore, a Participant will not be entitled to receive any other
revenue from the Exchange for the use of its System specifically
with respect to orders routed to NOM.
------------------------------------------------------------------------
Average daily
Tiers volume
(``ADV'')
------------------------------------------------------------------------
1....................................................... 2,000
2....................................................... 5,000
3....................................................... 10,000
4....................................................... 20,000
5....................................................... 45,000
6....................................................... 75,000
7....................................................... 100,000
8....................................................... 125,000
9....................................................... 150,000
------------------------------------------------------------------------
One of the present ways that the Exchange ties the tiered Penny
Symbol add liquidity rebate program and MARS, each as described above,
is through note ``8'' of Options 7, Section 2(1) where Participants
that qualify for any MARS Payment Tier in Options 7, Section 2(4)
receive: (1) An additional $0.05 per contract Penny Symbol Customer
Rebate to Add Liquidity for each transaction which adds liquidity in
Penny Symbols in that month, in addition to qualifying Customer Rebate
to Add Liquidity Tiers 1, or (2) an additional $0.04 per contract Penny
Symbol Customer Rebate to Add Liquidity for each transaction which adds
liquidity in Penny Symbols in that month, in addition to qualifying
Penny Symbol Customer Rebate to Add Liquidity Tiers 2-6.\9\ The purpose
of the note ``8'' incentive is to attract additional order flow to NOM
by way of encouraging participation in both the tiered Penny Symbol add
liquidity Customer rebate program and in MARS.
---------------------------------------------------------------------------
\9\ Accordingly, a Participant that qualifies for the additional
incentives in note ``8'' by executing the requisite MARS volume and
qualifying for a Customer Rebate to Add Liquidity Tiers 1-6 in Penny
Symbols can earn up to $0.25 in Tier 1, $0.29 in Tier 2, $0.46 in
Tier 3, $0.47 in Tier 4, $0.49 in Tier 5, and $0.52 in Tier 6.
---------------------------------------------------------------------------
The Exchange now proposes a number of changes to the current tiered
Penny Symbol add liquidity rebate program described above. The Exchange
first proposes to increase the Tier 3 and Tier 4 Customer and
Professional rebates from $0.42 to $0.43 per contract and from $0.43 to
$0.44 per contract, respectively. The Exchange believes that the higher
Tier 3 and Tier 4 rebates, together with the proposed changes described
below, will further encourage Participants to reach for the higher
Customer and Professional rebate tiers by bringing additional order
flow that adds liquidity on the Exchange, which will be ultimately
beneficial to all market participants.
The Exchange also proposes to add an alternative route to achieve
the proposed $0.43 per contract Tier 3 Customer and Professional Rebate
to Add Liquidity in Penny Symbols that will be tied to MARS.
Specifically, the Exchange proposes that Participants will also be
eligible to receive the proposed $0.43 per contract Tier 3 Customer and
Professional Rebate to Add Liquidity in Penny Symbols if the
Participant adds Customer and/or Professional liquidity in Penny
Symbols and/or Non-Penny Symbols of 0.15% to less than 0.20% of total
industry customer equity and ETF option ADV contracts per day in a
month and qualifies for MARS. The Exchange also proposes to make
related changes by renumbering the existing method to qualify for the
Tier 3 Customer and Professional rebate as paragraph (a) and the
proposed alternative method as paragraph (b).\10\ By adding an
alternative route to achieve the Tier 3 Customer and Professional
rebate that is tied to MARS, the Exchange is seeking to incentivize
Participants to increase their liquidity adding activity on NOM to
improve the quality of the market.
---------------------------------------------------------------------------
\10\ As described above, the existing Tier 3 rebate
qualification requires the Participant to add Customer,
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer
liquidity in Penny Symbols and/or Non-Penny Symbols above 0.20% to
0.30% of total industry customer equity and ETF option ADV contracts
per day in a month.
---------------------------------------------------------------------------
Lastly, the Exchange proposes to amend note 8 of Options 7, Section
2(1) to increase the additional $0.04 per contract rebate currently
offered to Participants that qualify for any MARS Payment Tier in
addition qualifying for Penny Symbol Customer Rebates to Add Liquidity
Tiers 2-5 to $0.05 per contract. As proposed, Participants may earn
Customer Rebates to Add Liquidity in Penny Symbols up to $0.30 in Tier
2, $0.48 in Tier 3, $0.49 in Tier 4, and $0.50 in Tier 5, provided they
meet the note 8 qualifications.\11\ Participants that
[[Page 52275]]
qualify for the note 8 incentives will continue to be eligible to earn
up to $0.25 for the Penny Symbol Customer Rebate to Add Liquidity in
Tier 1 and $0.52 for the Penny Symbol Customer Rebate to Add Liquidity
in Tier 6 as these incentives will not be amended under this proposal.
The purpose of the proposed changes to the Penny Symbol Customer
Rebates to Add Liquidity Tiers 2-5 is to further encourage Participants
to bring additional Customer liquidity to the Exchange by reaching for
the higher Customer tiers, and further fortify participation in MARS by
encouraging Participants to route/execute the requisite number of
Eligible Contracts that add liquidity in order to qualify for any of
the MARS Payment Tier 1-9 describe above.
---------------------------------------------------------------------------
\11\ As proposed above, the Tier 3 and Tier 4 Customer Rebates
to Add Liquidity in Penny Symbols will also be increased to $0.43
and $0.44, respectively.
---------------------------------------------------------------------------
Market Maker Rebate To Add Liquidity in Penny Symbols
Today, the Exchange pays tiered Market Maker Rebates to Add
Liquidity in Penny Symbols that are $0.20 (Tier 1), $0.25 (Tier 2),
$0.30 (Tier 3),\12\ $0.32 (Tier 4),\13\ $0.44 (Tier 5), and $0.48 (Tier
6). These rebates are paid per the highest tier achieved below.
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\12\ This rebate is $0.40 per contract in the following symbols:
AAPL, SPY, QQQ, IWM, and VXX. See Options 7, Section 2(1), note 4.
\13\ Id.
------------------------------------------------------------------------
Monthly volume
------------------------------------------------------------------------
Tier 1....................... Participant adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols of up to 0.10% of total
industry customer equity and ETF option
average daily volume (``ADV'') contracts
per day in a month.
Tier 2....................... Participant adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.10% to 0.20% of
total industry customer equity and ETF
option ADV contracts per day in a month.
Tier 3....................... Participant: (a) Adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.20% to 0.60% of
total industry customer equity and ETF
option ADV contracts per day in a month:
or (b)(1) transacts in all securities
through one or more of its Nasdaq Market
Center MPIDs that represent 0.80% or
more of Consolidated Volume (``CV'')
which adds liquidity in the same month
on The Nasdaq Stock Market, (2)
transacts in Tape B securities through
one or more of its Nasdaq Market Center
MPIDs that represent 0.15% or more of CV
which adds liquidity in the same month
on The Nasdaq Stock Market, and (3)
executes greater than 0.01% of CV via
Market-on- Close/Limit-on-Close (``MOC/
LOC'') volume within The Nasdaq Stock
Market Closing Cross in the same month.
Tier 4....................... Participant adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols of above 0.60% of total
industry customer equity and ETF option
ADV contracts per day in a month.
Tier 5....................... Participant adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols of above 0.40% of total
industry customer equity and ETF option
ADV contracts per day in a month and
transacts in all securities through one
or more of its Nasdaq Market Center
MPIDs that represent 0.40% or more of
Consolidated Volume (``CV'') which adds
liquidity in the same month on The
Nasdaq Stock Market.
Tier 6....................... Participant: (a)(1) Adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.95% of total
industry customer equity and ETF option
ADV contracts per day in a month, (2)
executes Total Volume of 250,000 or more
contracts per day in a month, of which
30,000 or more contracts per day in a
month must be removing liquidity, and
(3) adds Firm, Broker-Dealer and Non-NOM
Market Maker liquidity in Non-Penny
Symbols of 10,000 or more contracts per
day in a month; or (b)(1) adds NOM
Market Maker liquidity in Penny Symbols
and/or Non-Penny Symbols above 1.50% of
total industry customer equity and ETF
option ADV contracts per day in a month,
and (2) executes Total Volume of 250,000
or more contracts per day in a month, of
which 15,000 or more contracts per day
in a month must be removing liquidity.
------------------------------------------------------------------------
As set forth above, the Exchange currently offers two different
paths in (a) and (b) for Participants to achieve the Tier 3 Market
Maker rebate. The Exchange now proposes to amend the Tier 3
qualifications in (b) as follows: \14\
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\14\ The Exchange will also correct a punctuation error in Tier
3.
Participant . . . (b)(1) adds NOM Market Maker liquidity in
Penny Symbols and/or Non-Penny Symbols above 0.07% to 0.20% of total
industry customer equity and ETF option ADV contracts per day in a
month, (2) transacts in all securities through one or more of its
Nasdaq Market Center MPIDs that represent 0.70% or more of
Consolidated Volume (``CV'') which adds liquidity in the same month
on The Nasdaq Stock Market, (3) transacts in Tape B securities
through one or more of its Nasdaq Market Center MPIDs that represent
0.10% or more of CV which adds liquidity in the same month on The
Nasdaq Stock Market, and (4) executes greater than 0.01% of CV via
Market-on- Close/Limit-on-Close (``MOC/LOC'') volume within The
---------------------------------------------------------------------------
Nasdaq Stock Market Closing Cross in the same month.
The proposal adds an options component and lowers two of the existing
equity components, namely by decreasing the percentage requirement that
Market Makers transact in all securities through one or more of its
Nasdaq Market Center MPIDs from 0.80% to 0.70% and decreasing the
percentage requirement that Market Makers transact in Tape B securities
through one or more of its Nasdaq Market Center MPIDs from 0.15% to
0.10%.\15\ By lowering the percentage thresholds, the Exchange intends
to render the Tier 3 rebate more readily accessible to Market Makers.
If more Market Makers find that this rebate is accessible to them, then
more will seek to qualify for it by adding liquidity on The Nasdaq
Stock Market. Together with the proposed options component, which is
designed to incentivize Market Makers to add liquidity on NOM, the
Exchange believes that its proposal will improve the quality of the
Exchange's equity and options markets, to the benefit of all market
participants.
---------------------------------------------------------------------------
\15\ All NOM Participants are required to be members of The
Nasdaq Stock Market pursuant to General 3 (Membership and Access).
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Technical Amendments
The Exchange proposes to correct two rule citations to the MARS
Payment Tiers in Section (6).\16\ The Exchange recently renumbered this
section to Section 2(4) and did not update these citations.\17\
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\16\ Specifically, notes 6 and 8 in Options 7, Section 2(1).
\17\ See Securities Exchange Act Release No. 91677 (April 26,
2021), 86 FR 22989 (April 30, 2021) (SR-NASDAQ-2021-021).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges
[[Page 52276]]
among members and issuers and other persons using any facility, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its Pricing Schedule are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options
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'. . . .'' \20\
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\20\ 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)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \21\
---------------------------------------------------------------------------
\21\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. 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. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
Customer and Professional Rebate To Add Liquidity in Penny Symbols
The Exchange believes that the proposed changes to the Customer and
Professional Rebates to Add Liquidity in Penny Symbols described above
are reasonably designed to attract additional liquidity to the
Exchange. The Exchange believes it is reasonable to increase the Tier 3
and Tier 4 Customer and Professional rebates because Participants will
be encouraged to submit additional order flow to reach for the higher
rebates.\22\ The Exchange believes that the proposed higher rebates
will incentivize substantial liquidity adding activity on the Exchange,
and that any increased activity and growth that may result from this
proposal will improve the overall quality of the market, to the benefit
of all market participants.
---------------------------------------------------------------------------
\22\ Participants are required to add Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 0.20% to 0.30% of total
industry customer equity and ETF option ADV contracts per day in a
month to earn the proposed Tier 3 Customer and Professional rebate,
and above 0.30% to 0.40% of total industry customer equity and ETF
option ADV contracts per day in a month to earn the proposed Tier 4
Customer and Professional rebate. These qualifications are not being
amended with this proposal, although the Exchange will add an
alternative route to earn the proposed Tier 3 rebate, as discussed
above.
---------------------------------------------------------------------------
The Exchange believes that the proposed alternative method to
qualify for the higher Tier 3 Customer and Professional Rebate to Add
Liquidity in Penny Symbols is reasonable because it will create an
additional opportunity for Participants to earn the Tier 3 rebate by
incentivizing Participants to add greater liquidity on NOM.
Specifically, the Exchange is proposing to require that the Participant
add Customer and/or Professional liquidity in Penny and/or Non-Penny
Symbols of 0.15% to less than 0.20% of total industry customer and ETF
option ADV contracts per day in a month and qualify for MARS in order
to receive the proposed $0.43 per contract Tier 3 rebate. The Exchange
believes that this will encourage liquidity adding activity in Customer
and Professional orders to earn the Tier 3 rebate. The proposal will
also incentivize Participants to qualify for the MARS program, which is
designed to attract higher volumes of electronic equity and ETF options
volume to the Exchange. As discussed above, to qualify for MARS,
Participants must have System Eligibility, which has various
requirements for Participants to maintain their routing systems,
including the requirement that NOM be one of the top three default
destination exchanges on the Participant's routing system for
execution. If more Participants seek to qualify for MARS, the proposal
will bring higher volumes of orders to NOM, which will enhance market
quality by offering greater price discovery and increased opportunities
to trade, to the benefit of all Participants. The Exchange also notes
that the proposed alternative route to achieve the Tier 3 Customer and
Professional rebate is similar to an existing method for achieving the
Tier 6 Customer and Professional rebate except the proposal will have
lower volume requirements, which will be commensurate with the lower
Tier 3 rebate provided. In particular, one of the ways to earn the Tier
6 rebate ($0.48 per contract) currently requires the Participant to add
(1) Customer and/or Professional liquidity in Penny Symbols and/or Non-
Penny Symbols of 0.20% or more of total industry customer equity and
ETF option ADV contracts per day in a month, and (2) add liquidity in
all securities through one or more of its Nasdaq Market Center MPIDs
that represent 1.00% or more of Consolidated Volume in a month or
qualify for MARS. As discussed above, the proposed alternative route to
earn the Tier 3 rebate ($0.43 with the proposed changes) will require
the Participant to add (1) Customer and/or Professional liquidity in
Penny Symbols and/or Non-Penny Symbols of 0.15% to less than 0.20% of
total industry customer equity and ETF option ADV contracts per day in
a month, and (2) qualify for MARS.
The Exchange also believes that the proposed changes in note 8 to
increase the supplemental rebates offered to Participants that qualify
for any MARS Payment Tier in Section 2(4) in addition to qualifying for
Penny Symbol Customer Rebates to Add Liquidity in Tiers 2-5 from $0.04
to $0.05 per contract will further encourage Participants to send
higher volumes of electronic equity and ETF options to NOM for
execution to receive this additional incentive. In particular, to
receive the increased supplemental rebates, Participants will need to
have System Eligibility and execute the requisite number of Eligible
Contracts ADV to qualify for any of the MARS Payment Tiers in Section
2(4). If more Participants seek to qualify for MARS Payments Tiers by
sending and executing more Eligible Contracts on NOM to earn the
increased supplemental rebates for Penny Symbol Customer rebate tiers
2-5, then market
[[Page 52277]]
quality will improve and the Exchange will become more attractive to
existing and prospective market participants. The Exchange also
believes that the proposed changes in note 8 will improve market
quality by incentivizing Participants to submit additional qualifying
volume that adds liquidity to earn the Penny Symbol Customer Rebates to
Add Liquidity in Tiers 2-5, and therefore become eligible for the
additional note 8 incentives, provided that they also qualify for any
MARS Payment Tier.
The Exchange also believes that the proposed changes to the
Customer and Professional Rebates to Add Liquidity in Penny Symbols
discussed above are equitable and not unfairly discriminatory because
the Exchange will uniformly apply the changes to all qualifying
Participants. All Participants may qualify for MARS provided they have
requisite System Eligibility. Furthermore, the Exchange believes it is
equitable and not unfairly discriminatory to pay the proposed rebates
to eligible Customer and Professional liquidity adding orders (i.e.,
the proposed Tier 3 and Tier 4 rebates, and the proposed Tier 3
alternative route) or to eligible Customer liquidity adding orders
(i.e., the proposed note 8 incentive changes). Customer liquidity
benefits all market participants by providing more trading
opportunities, which attracts market makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. The Exchange believes that
incentivizing Professional liquidity is similarly beneficial, as the
proposed changes may cause market participants to select NOM as a venue
to send Professional order flow, increasing competition among the
exchanges. As with Customer liquidity, the Exchange believes that
increased Professional order flow should benefit other market
participants.
Market Maker Rebate To Add Liquidity in Penny Symbols
The Exchange believes that its proposal to amend the qualifications
for the Tier 3 Market Maker Rebate to Add Liquidity in Penny Symbols is
reasonably designed to incentivize Market Makers to increase their
liquidity adding activity on the Exchange's equity and options markets.
By lowering the percentage thresholds for the equity components in the
manner described above, the Exchange intends to render the Tier 3
rebate more readily accessible to Market Makers. If more Market Makers
find that this rebate is accessible to them, then more will seek to
qualify for it by adding liquidity on The Nasdaq Stock Market. Together
with the proposed options component, which is designed to encourage
Market Makers to add liquidity on NOM, the Exchange believes that its
proposal will improve the quality of the Exchange's equity and options
markets, to the benefit of all market participants.
The Exchange also believes that the proposed changes to the
qualifications for the Tier 3 Market Maker Rebate to Add Liquidity in
Penny Symbols is equitable and not unfairly discriminatory because the
Exchange will pay the Tier 3 rebate uniformly to any qualifying Market
Maker. Market Makers add value through continuous quoting and the
commitment of capital.\23\ Because Market Makers have these obligations
to the market and regulatory requirements that normally do not apply to
other market participants, the Exchange believes that offering the
rebate to only Market Makers is equitable and not unfairly
discriminatory in light of their obligations. Finally, encouraging
Market Makers to add greater liquidity benefits all market
participants, both on NOM and The Nasdaq Stock Market, in the quality
of order interaction.
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\23\ See Options 2, Sections 4 and 5.
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Technical Amendments
The Exchange believes that the proposed updates to the rule
citations for MARS Payment Tiers are reasonable, equitable, and not
unfairly discriminatory as these amendments will bring greater clarity
to the Rulebook.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not that
its proposals will place any category of market participant at a
competitive disadvantage. As discussed above, while the Exchange's
proposals provide incentives for certain order flow and activity on the
Exchange (i.e., Customer and Professional liquidity adding activity in
Penny Symbols and Market Maker Rebate liquidity adding activity in
Penny Symbols), the proposed changes are ultimately aimed at attracting
greater liquidity to the Exchange, which benefits all market
participants in the quality of order interaction.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited.
The Exchange's proposed changes to the Customer and Professional
Rebates to Add Liquidity in Penny Symbols and the Tier 3 Market Maker
Rebate to Add Liquidity in Penny Symbols are pro-competitive in that
the Exchange intends for the changes to increase liquidity addition and
activity on the Exchange, thereby rendering the Exchange a more
attractive and vibrant venue to existing and prospective market
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 Participants or competing exchanges
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.\24\
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\24\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
[[Page 52278]]
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-2021-069 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-2021-069. 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-2021-069 and should be submitted
on or before October 12, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-20214 Filed 9-17-21; 8:45 am]
BILLING CODE 8011-01-P
