Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees and Credits at Equity 7, Sections 114 and 118 March 17, 2022, 16521-16525 [2022-06092]
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
requesting and conducting such
hearings between paragraphs (A) and (B)
could lead to confusion. Therefore, the
Commission believes that providing the
same procedures for requesting and
conducting a hearing under Rules
5815(d)(4)(A) and (B) and consolidating
these procedures into proposed
paragraph (C) provides transparency
and clarity to such hearings, and thus
may help ensure that the Exchange’s
rules do not permit unfair
discrimination between issuers, and
provides a fair procedure for review of
a Staff Delisting Determination,
consistent with the Act.
As the Commission has previously
noted, the development and
enforcement of meaningful listing
standards 26 for an exchange is of
substantial importance to financial
markets and the investing public.
Among other things, listing standards
provide the means for an exchange to
screen issuers that seek to become
listed, and to provide listed status only
to those that are bona fide companies
that have or will have sufficient public
float, investor base, and trading interest
likely to generate depth and liquidity
sufficient to promote fair and orderly
markets.27 Meaningful listing standards
also are important given investor
expectations regarding the nature of
securities that have achieved an
exchange listing, and the role of an
exchange in overseeing its market and
assuring compliance with its listing
standards.28 Therefore it is important for
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26 The
Commission notes that this is referring to
both initial and continued listing standards.
27 In addition, once a security has been approved
for initial listing, maintenance criteria allow an
exchange to monitor the status and trading
characteristics of that issue to ensure that it
continues to meet the exchange’s standards for
market depth and liquidity so that fair and orderly
markets can be maintained. See, e.g., Securities
Exchange Act Release Nos. 82627 (Feb. 2, 2018), 3
FR 5650, 5653, n.53 (Feb. 8, 2018) (SR–NYSE–
2017–30); 81856 (Oct. 11, 2017), 82 FR 48296,
48298 (Oct. 17, 2017) (SR–NYSE–2017–31); 81079
(July 5, 2017), 82 FR 32022, 32023 (July 11, 2017)
(SR–NYSE–2017–11). The Commission has stated
that adequate listing standards, by promoting fair
and orderly markets, are consistent with Section
6(b)(5) of the Act, in that they are, among other
things, designed to prevent fraudulent and
manipulative acts and practices, promote just and
equitable principles of trade, and protect investors
and the public interest. See, e.g., Securities
Exchange Act Release Nos. 82627 (Feb. 2, 2018), 3
FR 5650, 5653, n.53 (Feb. 8, 2018) (SR–NYSE–
2017–30); 87648 (Dec. 3, 2019), 84 FR 67308, 67314,
n.42 (Dec. 9, 2019) (SR–NASDAQ–2019–059);
88716 (Apr. 21, 2020), 85 FR 23393, 23395, n.22
(Apr. 27, 2020) (SR–NASDAQ–2020–001).
28 See, e.g., Securities Exchange Act Release Nos.
65708 (Nov. 8, 2011), 76 FR 70799 (Nov. 15, 2011)
(SR–NASDAQ–2011–073) (order approving a
proposal to adopt additional listing requirements
for companies applying to list after consummation
of a ‘‘reverse merger’’ with a shell company), and
57785 (May 6, 2008), 73 FR 27597 (May 13, 2008)
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exchanges to prevent companies that are
deficient in their listing standards or
that do not meet initial listing standards
from remaining or becoming listed on
an exchange. Clarifying the rules and
procedures for appeal where a listed
Company has recurrent deficiencies so
is under a Hearings Panel Monitor and
cannot avail itself of additional time to
demonstrate compliance, should further
investor protection under Section
6(b)(5) of the Act by helping to
eliminate potential confusion about the
application of Rule 5815(d)(4), while at
the same time ensuring such Companies
have a fair procedure for review
consistent with Section 6(b)(7) of the
Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,29 that the
proposed rule change (SR–NASDAQ–
2021–099) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–06091 Filed 3–22–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94451; File No. SR–
NASDAQ–2022–025]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange’s Transaction Fees and
Credits at Equity 7, Sections 114 and
118 March 17, 2022
March 17, 2022.
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 March 9,
2022, 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
(SR–NYSE–2018–17) (order approving a proposal to
adopt new initial and continued listing standards
to list securities of special purpose acquisition
companies).
29 15 U.S.C. 78s(b)(2).
30 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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16521
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 at Equity
7, Section 118, 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 fees and credits, at Equity
7, Sections 114 and 118 to establish
pricing for orders executed in the new
Extended Trading Close or ‘‘ETC,’’
which the Commission approved earlier
this year.3 The proposed fee will be
effective coincident with the
commencement of the ETC, which the
Exchange intends to occur on March 7,
2022.
As set forth in Rule 4755, the
Extended Trading Close will allow
Participants an additional opportunity
to access liquidity in Nasdaq-listed
securities at the Nasdaq Official Closing
Price for a five minute period of time
after the Nasdaq Closing Cross 4 or the
LULD Closing Cross,5 (collectively, the
3 See Securities Exchange Act Release No. 34–
94038 (January 24, 2022), 87 FR 4683 (January 28,
2022) (order approving SR–Nasdaq–2021–40, as
amended).
4 The ‘‘Nasdaq Closing Cross’’ refers to Nasdaq’s
process for determining the price at which it will
execute orders at the close and for executing those
orders, as set forth in Rule 4754.
5 The ‘‘LULD Closing Cross’’ refers to Nasdaq’s
modified process for determining the price at which
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
‘‘Closing Cross’’) concludes. During this
five minute period, the System will
continuously match and execute ‘‘ETC
Eligible Orders’’—which include ‘‘ETC
Orders’’ and ‘‘ETC Eligible LOC Orders’’
(discussed below)—at the Nasdaq
Official Closing Price, as determined by
the Closing Cross, unless the System
suspends executions in two scenarios.
First, the System will suspend
executions of matched orders in a
Nasdaq-listed security in the ETC if and
when it detects an order in the security
resting on the Nasdaq Continuous Book
in After Hours Trading 6 with an After
Hours Trading bid (offer) price that is
higher (lower) than the Nasdaq Official
Closing Price. Second, the System will
suspend executions of matched orders
in a Nasdaq-listed security in the ETC
if and when the last sale price during
After Hours Trading, or the best After
Hours Trading bid (offer) price, of the
security, other than on the Nasdaq
Continuous Book, is higher (lower) than
and remain unexecuted, in whole or
part, in the Closing Cross. An ETC
Order, meanwhile, is an order in a
Nasdaq-listed security that that is
eligible for entry and execution
exclusively during the ETC, at the
Nasdaq Official Closing Price, as
determined by the Closing Cross.
The Exchange now proposes to amend
Equity 7, Section 118 to adopt fees for
ETC Eligible LOC Orders and ETC
Orders that execute in the ETC. In short,
the Exchange proposes to charge the
same fees to execute ETC Eligible
Orders as it does to execute ordinary
LOC Orders (and Market on Close
(‘‘MOC’’) Orders) in the Closing Cross.
Equity 7, Section 118(d) governs
pricing for orders executed in the
Nasdaq Closing Cross. It provides for a
system of tiered fees for MOC and LOC
Orders executed in the Closing Cross.
These tiers are as follows:
Tiers
Volume
Tier A ................
Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 1.75% of Consolidated Volume 8 or MOC/LOC volume
above 0.50% of Consolidated Volume.
Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.80% to 1.75% of Consolidated Volume or MOC/LOC
volume above 0.30% to 0.50% of Consolidated Volume.
Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.50% to 0.80% of Consolidated Volume or MOC/LOC
volume above 0.10% to 0.30% of Consolidated Volume.
Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.30% to 0.50% of Consolidated Volume.
Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.015% to 0.30% of Consolidated Volume.
Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.00% to 0.015% of Consolidated Volume.
member adds Nasdaq Options Market Customer and/or Professional liquidity in Penny Pilot
Options and/or Non-Penny Pilot Options of 0.80% or more of national customer volume in
multiply-listed equity and ETF options classes in a month.
Tier B ................
Tier C ................
Tier D ................
Tier E ................
Tier F .................
Tier G ................
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the Nasdaq Official Closing Price by the
greater of 0.5% or $0.01. The Exchange
will cancel any portion of an ETC
Eligible Order that remains unexecuted
at the conclusion of the ETC, or for
which the System has suspended
execution, where that suspension
remains active as of the conclusion of
the ETC. The ETC will not occur for a
security on any day when insufficient
interest exists in the System to conduct
the Closing Cross for that security or
when the Exchange invokes contingency
procedures due to a disruption that
prevents execution of the Closing Cross.
As noted above, two types of orders
may participate in the ETC: (1) ETC
Eligible Limit-on-Close (‘‘LOC’’) Orders;
and (2) Extended Trading Close (‘‘ETC’’)
Orders. As set forth in Rule 4702(b)(12),
ETC Eligible LOC Orders are LOC
Orders that are eligible to, and by
default are designated to participate in
the ETC 7 to the extent that such LOC
Orders are entered through RASH or FIX
Price per executed share
$0.0008 per executed share.
$0.0011 per executed share.
$0.0012 per executed share.
$0.00135 per executed share.
$0.00145 per executed share.
$0.0016 per executed share.
$0.0010 per executed share.
The Exchange proposes to amend this
tier schedule so that its fees also apply
to executions of ETC Eligible LOC
Orders and ETC Orders in the ETC. For
example, if at the end of a month, a
member provides liquidity on Nasdaq
that represents 1.20% of Consolidated
Volume and/or provides MOC or LOC
volume in the Nasdaq Closing Cross
amounting to 0.40% of Consolidated
Volume, then the member would qualify
for Tier B pricing of $0.0011 per share
executed for both its LOC and MOC
Orders executed in the Nasdaq Closing
Cross and its ETC Eligible LOC Orders
and ETC Orders executed in the ETC.
Under the proposal, shares in ETC
Eligible LOC Orders and ETC Orders
will not count towards determining a
participant’s qualification for any of the
fee or credit tiers in Section 118(a) or
118(d). Likewise, the Exchange proposes
to amend Equity 7, Section 114(a) to
it will execute orders at the close, following a
Trading Pause, as set forth in Rule 4120(a), which
exists at or after 3:50 p.m. and before 4:00 p.m., as
well as the process for executing those orders, as
set forth in Rule 4754(b)(6).
6 For purposes of the ETC, the term ‘‘After Hours
Trading’’ refers to trading in a Nasdaq-listed
security that commences immediately following the
conclusion of the Nasdaq Closing Cross or the
LULD Closing Cross, during Post-Market Hours, as
that term is defined in Equity 1, Section 1(a)(9).
7 By default, all LOC Orders in Nasdaq-listed
securities will be set to participate in the Extended
Trading Close in the event that the LOC Orders are
not fully executed during the Closing Cross.
However, a Participant may opt to exclude its LOC
Orders from participating in the Extended Trading
Close. When ETC eligibility is disabled, the System
will simply cancel LOC Orders in Nasdaq-listed
securities that remain unexecuted after the Closing
Cross occurs. Also, if Participants select a time-inforce for their LOC Orders in Nasdaq-listed
securities that continues after the Closing Cross
occurs, then if such LOC Orders remain unexecuted
after the Closing Cross, the Exchange will cause the
remaining unexecuted shares to bypass the
Extended Trading Close and participate in After
Hours Trading.
8 Pursuant to Equity 7, Section 118(a), the term
‘‘Consolidated Volume’’ means 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. For the purposes of calculating the
extent of a member’s trading activity during the
month on Nasdaq and determining the charges and
credits applicable to such member’s activity, all M–
ELO Orders that a member executes on Nasdaq
during the month will count as liquidity-adding
activity on Nasdaq.
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
specify that, to the extent that any of the
market quality incentive programs
described in Section 114 9 prescribe
pricing tiers for which eligibility
depends upon a participant achieving
certain threshold volumes in LOC or
MOC shares, then ETC Eligible LOC
Orders and ETC Orders will not count
towards such eligibility determinations.
The Exchange’s proposal is reasonable
to adopt the same execution fees for
ETC Eligible LOC Orders and ETC
Orders that execute in the ETC as it
charges for ordinary LOC and MOC
Orders that execute in the Nasdaq
Closing Cross because the ETC will act
as an extension of the Closing Cross.
That is, ordinary LOC Orders which do
not execute fully in the Nasdaq Closing
Cross will become eligible automatically
for participation in the ETC as an ETC
Eligible LOC Order (unless a member
opts out of such participation), and if
such ETC Eligible LOC Orders execute
in the ETC, then they will do so at the
Nasdaq Official Closing Price, as
determined by the Nasdaq Closing
Cross. Given the close relationship
between LOC Orders that execute in the
Nasdaq Closing Cross, and those that
execute in the ETC, the Exchange
believes that it is logical for the same fee
structure to apply to each of them. The
Exchange also believes that this same
price structure is appropriate for ETC
Orders that execute in the ETC because
this structure is simple for participants
and properly calibrates incentives to
participate in the ETC so that they are
neither too high nor too low. The
Exchange does not wish for ETC Order
execution fees to be too high, lest it will
discourage participation in the ETC in
favor of competing on- and off-exchange
mechanisms that also allow for
participants to execute orders at the
Nasdaq Closing Cross price. The
Exchange also does not wish for the fees
to be too low, lest it may discourage
participation in the Nasdaq Closing
Cross.
Similarly, the Exchange believes it is
reasonable to exclude ETC Eligible LOC
and ETC Orders from determining a
participant’s qualification for any of the
MOC or LOC based fee tiers in Equity
7, Sections 114, 118(a), and 118(d).
Again, the Exchange does not wish to
provide undue incentives to participate
in the ETC that might occur at the
expense of participation in the Nasdaq
Closing Cross.
The Exchange notes that those
participants that are dissatisfied with
the proposed fees are free to shift their
order flow to competing on- and offexchange venues that also enable
participants to execute their orders at
the Nasdaq Closing Cross price or to
simply opt against participating in the
ETC.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,11 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers. The
proposal is also consistent with Section
11A of the Act relating to the
establishment of the national market
system for securities.
The Proposal Is Reasonable
The Exchange’s proposal is 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’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 12
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
10 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
12 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)).
11 15
9 These market quality incentive programs are the
Qualified Market Maker Program, the NBBO
Program, the Designated Liquidity Provider
Program, and the Nasdaq Growth Program.
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16523
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.’’ 13
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.
The Exchange believes it reasonable
to adopt the same execution fees for
ETC Eligible LOC Orders and ETC
Orders that execute in the ETC as it
charges for ordinary LOC and MOC
Orders that execute in the Nasdaq
Closing Cross because the ETC will act
as an extension of the Closing Cross.
That is, ordinary LOC Orders which do
not execute fully in the Nasdaq Closing
Cross will become eligible automatically
for participation in the ETC as an ETC
Eligible LOC Order (unless a member
opts out of such participation), and if
such ETC Eligible LOC Orders execute
in the ETC, then they will do so at the
Nasdaq Official Closing Price, as
determined by the Nasdaq Closing
Cross. Given the close relationship
between LOC Orders that execute in the
Nasdaq Closing Cross, and those that
execute in the ETC, the Exchange
believes that it is logical for the same fee
structure to apply to each of them. The
Exchange also believes that this same
price structure is appropriate for ETC
Orders that execute in the ETC because
this structure is simple for participants
and properly calibrates incentives to
participate in the ETC so that they are
neither too high nor too low. The
Exchange does not wish for ETC Order
execution fees to be too high, lest it will
discourage participation in the ETC in
favor of competing on- and off-exchange
mechanisms that also allow for
participants to execute orders at the
Nasdaq Closing Cross price. The
Exchange also does not wish for the fees
to be too low, lest it may discourage
participation in the Nasdaq Closing
Cross.
Similarly, the Exchange believes it is
reasonable to exclude ETC Eligible LOC
and ETC Orders from determining a
participant’s qualification for any of the
13 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
MOC or LOC based fee tiers in Equity
7, Sections 114, 118(a), and 118(d).
Again, the Exchange does not wish to
provide undue incentives to participate
in the ETC that might occur at the
expense of participation in the Nasdaq
Closing Cross.
The Exchange notes that those
participants that are dissatisfied with
the proposed fees are free to shift their
order flow to competing on- and offexchange venues that also enable
participants to execute their orders at
the Nasdaq Closing Cross price or to
simply opt against participating in the
ETC.
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The Proposal Is an Equitable Allocation
of Fees
The Exchange believes its proposal
will allocate its charges and credits
fairly among its market participants.
The Exchange believes that its
proposed fees for ETC executions is an
equitable allocation. The proposed fees
are consistent with those it presently
charges for MOC and LOC Orders that
execute in the Nasdaq Closing Cross.
Given the close relationship between
LOC Orders that execute in the Nasdaq
Closing Cross, and those that execute in
the ETC, the Exchange believes that it is
logical for the same fee structure to
apply to each of them. The Exchange
also believes that this same price
structure is appropriate for ETC Orders
that execute in the ETC because this
structure is simple for participants and
properly calibrates incentives to
participate in the ETC so that they are
neither too high nor too low. The
Exchange does not wish for ETC Order
execution fees to be too high, lest it will
discourage participation in the ETC. The
Exchange also does not wish for the fees
to be too low, lest it may discourage
participation in the Nasdaq Closing
Cross.
For similar reasons, it is equitable to
exclude ETC Eligible LOC and ETC
Orders from determining a participant’s
qualification for any of the MOC or LOC
based fee tiers in Equity 7, Sections 114,
118(a), and 118(d). Again, the Exchange
does not wish to provide undue
incentives to participate in the ETC that
might occur at the expense of
participation in the Nasdaq Closing
Cross.
The Exchange notes that those
participants that are dissatisfied with
the proposed fees are free to shift their
order flow to competing on- and offexchange venues that also enable
participants to execute their orders at
the Nasdaq Closing Cross price or to
simply opt against participating in the
ETC.
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The Proposal Is Not Unfairly
Discriminatory
The Exchange believes that its
proposal is not unfairly discriminatory.
As an initial matter, the Exchange
believes that nothing about its volumebased 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 cobranded 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 enhances price discovery and
improves the overall quality of the
equity markets.
The Exchange also believes that its
proposal is not unfairly discriminatory
because the proposed tiered ETC
execution fees already apply to
members that execute MOC and LOC
Orders in the Nasdaq Closing Cross, and
thus are familiar and understood.
Moreover, the fee tiers are accessible to
any Nasdaq member that engages in
qualifying activity on Nasdaq or that
chooses to grow the extent of that
activity to qualify for a more favorable
tier.
Again, any participants that are
dissatisfied with the proposed fees are
free to shift their order flow to
competing on- and off-exchange venues
that also enable participants to execute
their orders at the Nasdaq Closing Cross
price or to simply opt against
participating in the ETC.
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.
Intramarket Competition
The Exchange does not believe that its
proposal will place any category of
Exchange participant at a competitive
disadvantage.
As noted above, the Exchange’s
proposed pricing for ETC executions is
intended to be consistent with its
pricing for LOC and MOC Closing Cross
executions due to similarities in the two
mechanisms and the desire to properly
calibrate incentives to spur member
participation in each of them. The
Exchange notes that its members are free
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
to trade on other venues, or to not
participate in the ETC, to the extent they
believe that the proposed fees are not
attractive.
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 proposal is
reflective of this competition. Any
participant that is dissatisfied with the
proposal is free to shift their order flow
to competing on- and off-exchange
venues that also enable participants to
execute their orders at the Nasdaq
Closing Cross price or to simply opt
against participating in the ETC.
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 50% of
industry volume.
In sum, if the change proposed herein
is 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 change will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
E:\FR\FM\23MRN1.SGM
23MRN1
Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
jspears on DSK121TN23PROD with NOTICES1
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–2022–025 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–2022–025. 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–2022–025 and
should be submitted on or before April
13, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–06092 Filed 3–22–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94444; File No. SR–GEMX–
2022–05]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Harmonize Various
Processes Under Options 3, Section 20
Across the Affiliated Nasdaq Options
Exchanges
March 17, 2022.
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 March 8,
2022, Nasdaq GEMX, LLC (‘‘GEMX’’ 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.
15 17
CFR 200.30–3(a)(12).
15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1
14 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
20:07 Mar 22, 2022
Jkt 256001
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
16525
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to Harmonize
various processes under Options 3,
Section 20 across the affiliated Nasdaq
options exchanges.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/gemx/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 Exchange proposes to harmonize
its existing processes with those of its
affiliate Nasdaq Phlx LLC (‘‘Phlx’’)
concerning the review of decisions on
appeal under Options 3, Section 20. The
Exchange also proposes a number of
non-substantive changes. Each change is
discussed in detail below.
Appeal
Today, Options 3, Section 20(k)
governs the appeal process for
determinations by Exchange staff made
under this Rule, including obvious error
determinations. Specifically, if a
Member affected by a determination
under this Rule so requests within the
permitted time period, an Exchange
Review Council panel will review
decisions made by the Official under
Options 3, Section 20, including
whether an obvious error occurred and
whether the correct determination was
made. A request for review on appeal
must be made in writing via email or
other electronic means specified from
time to time by the Exchange in an
Options Trader Alert distributed to
Members within thirty (30) minutes
after the party making the appeal is
given notification of the initial
determination being appealed. The
E:\FR\FM\23MRN1.SGM
23MRN1
]]>Agencies
[Federal Register Volume 87, Number 56 (Wednesday, March 23, 2022)]
[Notices]
[Pages 16521-16525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06092]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94451; File No. SR-NASDAQ-2022-025]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Exchange's Transaction Fees and Credits at Equity 7, Sections
114 and 118 March 17, 2022
March 17, 2022.
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 March 9, 2022, 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 Exchange's transaction credits
at Equity 7, Section 118, 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 fees and credits, at Equity 7, Sections 114 and 118 to
establish pricing for orders executed in the new Extended Trading Close
or ``ETC,'' which the Commission approved earlier this year.\3\ The
proposed fee will be effective coincident with the commencement of the
ETC, which the Exchange intends to occur on March 7, 2022.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 34-94038 (January
24, 2022), 87 FR 4683 (January 28, 2022) (order approving SR-Nasdaq-
2021-40, as amended).
---------------------------------------------------------------------------
As set forth in Rule 4755, the Extended Trading Close will allow
Participants an additional opportunity to access liquidity in Nasdaq-
listed securities at the Nasdaq Official Closing Price for a five
minute period of time after the Nasdaq Closing Cross \4\ or the LULD
Closing Cross,\5\ (collectively, the
[[Page 16522]]
``Closing Cross'') concludes. During this five minute period, the
System will continuously match and execute ``ETC Eligible Orders''--
which include ``ETC Orders'' and ``ETC Eligible LOC Orders'' (discussed
below)--at the Nasdaq Official Closing Price, as determined by the
Closing Cross, unless the System suspends executions in two scenarios.
First, the System will suspend executions of matched orders in a
Nasdaq-listed security in the ETC if and when it detects an order in
the security resting on the Nasdaq Continuous Book in After Hours
Trading \6\ with an After Hours Trading bid (offer) price that is
higher (lower) than the Nasdaq Official Closing Price. Second, the
System will suspend executions of matched orders in a Nasdaq-listed
security in the ETC if and when the last sale price during After Hours
Trading, or the best After Hours Trading bid (offer) price, of the
security, other than on the Nasdaq Continuous Book, is higher (lower)
than the Nasdaq Official Closing Price by the greater of 0.5% or $0.01.
The Exchange will cancel any portion of an ETC Eligible Order that
remains unexecuted at the conclusion of the ETC, or for which the
System has suspended execution, where that suspension remains active as
of the conclusion of the ETC. The ETC will not occur for a security on
any day when insufficient interest exists in the System to conduct the
Closing Cross for that security or when the Exchange invokes
contingency procedures due to a disruption that prevents execution of
the Closing Cross.
---------------------------------------------------------------------------
\4\ The ``Nasdaq Closing Cross'' refers to Nasdaq's process for
determining the price at which it will execute orders at the close
and for executing those orders, as set forth in Rule 4754.
\5\ The ``LULD Closing Cross'' refers to Nasdaq's modified
process for determining the price at which it will execute orders at
the close, following a Trading Pause, as set forth in Rule 4120(a),
which exists at or after 3:50 p.m. and before 4:00 p.m., as well as
the process for executing those orders, as set forth in Rule
4754(b)(6).
\6\ For purposes of the ETC, the term ``After Hours Trading''
refers to trading in a Nasdaq-listed security that commences
immediately following the conclusion of the Nasdaq Closing Cross or
the LULD Closing Cross, during Post-Market Hours, as that term is
defined in Equity 1, Section 1(a)(9).
---------------------------------------------------------------------------
As noted above, two types of orders may participate in the ETC: (1)
ETC Eligible Limit-on-Close (``LOC'') Orders; and (2) Extended Trading
Close (``ETC'') Orders. As set forth in Rule 4702(b)(12), ETC Eligible
LOC Orders are LOC Orders that are eligible to, and by default are
designated to participate in the ETC \7\ to the extent that such LOC
Orders are entered through RASH or FIX and remain unexecuted, in whole
or part, in the Closing Cross. An ETC Order, meanwhile, is an order in
a Nasdaq-listed security that that is eligible for entry and execution
exclusively during the ETC, at the Nasdaq Official Closing Price, as
determined by the Closing Cross.
---------------------------------------------------------------------------
\7\ By default, all LOC Orders in Nasdaq-listed securities will
be set to participate in the Extended Trading Close in the event
that the LOC Orders are not fully executed during the Closing Cross.
However, a Participant may opt to exclude its LOC Orders from
participating in the Extended Trading Close. When ETC eligibility is
disabled, the System will simply cancel LOC Orders in Nasdaq-listed
securities that remain unexecuted after the Closing Cross occurs.
Also, if Participants select a time-in-force for their LOC Orders in
Nasdaq-listed securities that continues after the Closing Cross
occurs, then if such LOC Orders remain unexecuted after the Closing
Cross, the Exchange will cause the remaining unexecuted shares to
bypass the Extended Trading Close and participate in After Hours
Trading.
---------------------------------------------------------------------------
The Exchange now proposes to amend Equity 7, Section 118 to adopt
fees for ETC Eligible LOC Orders and ETC Orders that execute in the
ETC. In short, the Exchange proposes to charge the same fees to execute
ETC Eligible Orders as it does to execute ordinary LOC Orders (and
Market on Close (``MOC'') Orders) in the Closing Cross.
Equity 7, Section 118(d) governs pricing for orders executed in the
Nasdaq Closing Cross. It provides for a system of tiered fees for MOC
and LOC Orders executed in the Closing Cross. These tiers are as
follows:
----------------------------------------------------------------------------------------------------------------
Tiers Volume Price per executed share
----------------------------------------------------------------------------------------------------------------
Tier A......................... Shares of liquidity provided in $0.0008 per executed share.
all securities through one or
more of its Nasdaq Market
Center MPIDs that represent
above 1.75% of Consolidated
Volume \8\ or MOC/LOC volume
above 0.50% of Consolidated
Volume.
Tier B......................... Shares of liquidity provided in $0.0011 per executed share.
all securities through one or
more of its Nasdaq Market
Center MPIDs that represent
above 0.80% to 1.75% of
Consolidated Volume or MOC/LOC
volume above 0.30% to 0.50% of
Consolidated Volume.
Tier C......................... Shares of liquidity provided in $0.0012 per executed share.
all securities through one or
more of its Nasdaq Market
Center MPIDs that represent
above 0.50% to 0.80% of
Consolidated Volume or MOC/LOC
volume above 0.10% to 0.30% of
Consolidated Volume.
Tier D......................... Shares of liquidity provided in $0.00135 per executed share.
all securities through one or
more of its Nasdaq Market
Center MPIDs that represent
above 0.30% to 0.50% of
Consolidated Volume.
Tier E......................... Shares of liquidity provided in $0.00145 per executed share.
all securities through one or
more of its Nasdaq Market
Center MPIDs that represent
above 0.015% to 0.30% of
Consolidated Volume.
Tier F......................... Shares of liquidity provided in $0.0016 per executed share.
all securities through one or
more of its Nasdaq Market
Center MPIDs that represent
0.00% to 0.015% of
Consolidated Volume.
Tier G......................... member adds Nasdaq Options $0.0010 per executed share.
Market Customer and/or
Professional liquidity in
Penny Pilot Options and/or Non-
Penny Pilot Options of 0.80%
or more of national customer
volume in multiply-listed
equity and ETF options classes
in a month.
----------------------------------------------------------------------------------------------------------------
The Exchange proposes to amend this tier schedule so that its fees
also apply to executions of ETC Eligible LOC Orders and ETC Orders in
the ETC. For example, if at the end of a month, a member provides
liquidity on Nasdaq that represents 1.20% of Consolidated Volume and/or
provides MOC or LOC volume in the Nasdaq Closing Cross amounting to
0.40% of Consolidated Volume, then the member would qualify for Tier B
pricing of $0.0011 per share executed for both its LOC and MOC Orders
executed in the Nasdaq Closing Cross and its ETC Eligible LOC Orders
and ETC Orders executed in the ETC.
---------------------------------------------------------------------------
\8\ Pursuant to Equity 7, Section 118(a), the term
``Consolidated Volume'' means 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. For the
purposes of calculating the extent of a member's trading activity
during the month on Nasdaq and determining the charges and credits
applicable to such member's activity, all M-ELO Orders that a member
executes on Nasdaq during the month will count as liquidity-adding
activity on Nasdaq.
---------------------------------------------------------------------------
Under the proposal, shares in ETC Eligible LOC Orders and ETC
Orders will not count towards determining a participant's qualification
for any of the fee or credit tiers in Section 118(a) or 118(d).
Likewise, the Exchange proposes to amend Equity 7, Section 114(a) to
[[Page 16523]]
specify that, to the extent that any of the market quality incentive
programs described in Section 114 \9\ prescribe pricing tiers for which
eligibility depends upon a participant achieving certain threshold
volumes in LOC or MOC shares, then ETC Eligible LOC Orders and ETC
Orders will not count towards such eligibility determinations.
---------------------------------------------------------------------------
\9\ These market quality incentive programs are the Qualified
Market Maker Program, the NBBO Program, the Designated Liquidity
Provider Program, and the Nasdaq Growth Program.
---------------------------------------------------------------------------
The Exchange's proposal is reasonable to adopt the same execution
fees for ETC Eligible LOC Orders and ETC Orders that execute in the ETC
as it charges for ordinary LOC and MOC Orders that execute in the
Nasdaq Closing Cross because the ETC will act as an extension of the
Closing Cross. That is, ordinary LOC Orders which do not execute fully
in the Nasdaq Closing Cross will become eligible automatically for
participation in the ETC as an ETC Eligible LOC Order (unless a member
opts out of such participation), and if such ETC Eligible LOC Orders
execute in the ETC, then they will do so at the Nasdaq Official Closing
Price, as determined by the Nasdaq Closing Cross. Given the close
relationship between LOC Orders that execute in the Nasdaq Closing
Cross, and those that execute in the ETC, the Exchange believes that it
is logical for the same fee structure to apply to each of them. The
Exchange also believes that this same price structure is appropriate
for ETC Orders that execute in the ETC because this structure is simple
for participants and properly calibrates incentives to participate in
the ETC so that they are neither too high nor too low. The Exchange
does not wish for ETC Order execution fees to be too high, lest it will
discourage participation in the ETC in favor of competing on- and off-
exchange mechanisms that also allow for participants to execute orders
at the Nasdaq Closing Cross price. The Exchange also does not wish for
the fees to be too low, lest it may discourage participation in the
Nasdaq Closing Cross.
Similarly, the Exchange believes it is reasonable to exclude ETC
Eligible LOC and ETC Orders from determining a participant's
qualification for any of the MOC or LOC based fee tiers in Equity 7,
Sections 114, 118(a), and 118(d). Again, the Exchange does not wish to
provide undue incentives to participate in the ETC that might occur at
the expense of participation in the Nasdaq Closing Cross.
The Exchange notes that those participants that are dissatisfied
with the proposed fees are free to shift their order flow to competing
on- and off-exchange venues that also enable participants to execute
their orders at the Nasdaq Closing Cross price or to simply opt against
participating in the ETC.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The proposal is also
consistent with Section 11A of the Act relating to the establishment of
the national market system for securities.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Proposal Is Reasonable
The Exchange's proposal is 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'. . . .'' \12\
---------------------------------------------------------------------------
\12\ 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.'' \13\
---------------------------------------------------------------------------
\13\ 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.
The Exchange believes it reasonable to adopt the same execution
fees for ETC Eligible LOC Orders and ETC Orders that execute in the ETC
as it charges for ordinary LOC and MOC Orders that execute in the
Nasdaq Closing Cross because the ETC will act as an extension of the
Closing Cross. That is, ordinary LOC Orders which do not execute fully
in the Nasdaq Closing Cross will become eligible automatically for
participation in the ETC as an ETC Eligible LOC Order (unless a member
opts out of such participation), and if such ETC Eligible LOC Orders
execute in the ETC, then they will do so at the Nasdaq Official Closing
Price, as determined by the Nasdaq Closing Cross. Given the close
relationship between LOC Orders that execute in the Nasdaq Closing
Cross, and those that execute in the ETC, the Exchange believes that it
is logical for the same fee structure to apply to each of them. The
Exchange also believes that this same price structure is appropriate
for ETC Orders that execute in the ETC because this structure is simple
for participants and properly calibrates incentives to participate in
the ETC so that they are neither too high nor too low. The Exchange
does not wish for ETC Order execution fees to be too high, lest it will
discourage participation in the ETC in favor of competing on- and off-
exchange mechanisms that also allow for participants to execute orders
at the Nasdaq Closing Cross price. The Exchange also does not wish for
the fees to be too low, lest it may discourage participation in the
Nasdaq Closing Cross.
Similarly, the Exchange believes it is reasonable to exclude ETC
Eligible LOC and ETC Orders from determining a participant's
qualification for any of the
[[Page 16524]]
MOC or LOC based fee tiers in Equity 7, Sections 114, 118(a), and
118(d). Again, the Exchange does not wish to provide undue incentives
to participate in the ETC that might occur at the expense of
participation in the Nasdaq Closing Cross.
The Exchange notes that those participants that are dissatisfied
with the proposed fees are free to shift their order flow to competing
on- and off-exchange venues that also enable participants to execute
their orders at the Nasdaq Closing Cross price or to simply opt against
participating in the ETC.
The Proposal Is an Equitable Allocation of Fees
The Exchange believes its proposal will allocate its charges and
credits fairly among its market participants.
The Exchange believes that its proposed fees for ETC executions is
an equitable allocation. The proposed fees are consistent with those it
presently charges for MOC and LOC Orders that execute in the Nasdaq
Closing Cross. Given the close relationship between LOC Orders that
execute in the Nasdaq Closing Cross, and those that execute in the ETC,
the Exchange believes that it is logical for the same fee structure to
apply to each of them. The Exchange also believes that this same price
structure is appropriate for ETC Orders that execute in the ETC because
this structure is simple for participants and properly calibrates
incentives to participate in the ETC so that they are neither too high
nor too low. The Exchange does not wish for ETC Order execution fees to
be too high, lest it will discourage participation in the ETC. The
Exchange also does not wish for the fees to be too low, lest it may
discourage participation in the Nasdaq Closing Cross.
For similar reasons, it is equitable to exclude ETC Eligible LOC
and ETC Orders from determining a participant's qualification for any
of the MOC or LOC based fee tiers in Equity 7, Sections 114, 118(a),
and 118(d). Again, the Exchange does not wish to provide undue
incentives to participate in the ETC that might occur at the expense of
participation in the Nasdaq Closing Cross.
The Exchange notes that those participants that are dissatisfied
with the proposed fees are free to shift their order flow to competing
on- and off-exchange venues that also enable participants to execute
their orders at the Nasdaq Closing Cross price or to simply opt against
participating in the ETC.
The Proposal Is Not Unfairly Discriminatory
The Exchange believes that its proposal is 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
enhances price discovery and improves the overall quality of the equity
markets.
The Exchange also believes that its proposal is not unfairly
discriminatory because the proposed tiered ETC execution fees already
apply to members that execute MOC and LOC Orders in the Nasdaq Closing
Cross, and thus are familiar and understood. Moreover, the fee tiers
are accessible to any Nasdaq member that engages in qualifying activity
on Nasdaq or that chooses to grow the extent of that activity to
qualify for a more favorable tier.
Again, any participants that are dissatisfied with the proposed
fees are free to shift their order flow to competing on- and off-
exchange venues that also enable participants to execute their orders
at the Nasdaq Closing Cross price or to simply opt against
participating in the ETC.
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.
Intramarket Competition
The Exchange does not believe that its proposal will place any
category of Exchange participant at a competitive disadvantage.
As noted above, the Exchange's proposed pricing for ETC executions
is intended to be consistent with its pricing for LOC and MOC Closing
Cross executions due to similarities in the two mechanisms and the
desire to properly calibrate incentives to spur member participation in
each of them. The Exchange notes that its members are free to trade on
other venues, or to not participate in the ETC, to the extent they
believe that the proposed fees are not attractive.
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 proposal is reflective of this
competition. Any participant that is dissatisfied with the proposal is
free to shift their order flow to competing on- and off-exchange venues
that also enable participants to execute their orders at the Nasdaq
Closing Cross price or to simply opt against participating in the ETC.
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 50% of industry volume.
In sum, if the change proposed herein is 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
change will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
[[Page 16525]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\14\
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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2022-025 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-2022-025. 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-2022-025 and should be submitted
on or before April 13, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06092 Filed 3-22-22; 8:45 am]
BILLING CODE 8011-01-P
