Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend its Schedule of Credits at Equity 7, Section 118(a), 64123-64125 [2022-22839]
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Federal Register / Vol. 87, No. 203 / Friday, October 21, 2022 / Notices
The Commission estimates that
approximately 48 entities fit within the
definition of SBS dealer, and zero
entities fit within the definition of major
SBS participant. Thus, we expect that
approximately 48 entities will be
required to register with the
Commission as SBS Entities and will be
subject to the trade acknowledgment
provision and verification requirements
of Rule 15Fi–2. The total estimated
annual time burden of Rule 15Fi–2 is
22,848 hours.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
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Please direct your written comments
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Pezzullo, 100 F Street NE, Washington,
DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: October 17, 2022.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–22854 Filed 10–20–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
jspears on DSK121TN23PROD with NOTICES
[Release No. 34–96091; File No. SR–
NASDAQ–2022–053]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend its
Schedule of Credits at Equity 7,
Section 118(a)
October 17, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
VerDate Sep<11>2014
19:08 Oct 20, 2022
Jkt 259001
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
3, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s schedule of credits, at
Equity 7, Section 118(a), as described
further below. The text of the proposed
rule change is available on the
Exchange’s website at https://
listingcenter.nasdaq.com/rulebook/
nasdaq/rules, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
schedule of credits, at Equity 7, Section
118(a). Specifically, with respect to its
schedule of credits for displayed quotes/
orders (other than Supplemental Orders
or Designated Retail Orders) that
provide liquidity, the Exchange
proposes to amend the criteria for an
existing credit of $0.0029 per share
executed.
The Exchange proposes to amend its
existing credit of $0.0029 per share
executed to a member: (i) with shares of
liquidity provided in all securities
through one or more of its Nasdaq
Market Center MPIDs that represent
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00124
Fmt 4703
more than 0.60% of Consolidated
Volume during the month, including
shares of liquidity provided with
respect to securities that are listed on
exchanges other than Nasdaq or NYSE
that represent more than 0.10% of
Consolidated Volume, and (ii) that adds
at least 0.175% of Consolidated Volume
during the month in non-displayed
orders (excluding midpoint orders) for
securities in any tape during the month.
The Exchange proposes to amend this
credit by lowering the threshold
percentage of Consolidated Volume
added during the month in nondisplayed orders (excluding midpoint
orders) for securities in any tape during
the month. Specifically, the Exchange
proposes lowering this threshold
percentage from 0.175% to 0.15%.
The Exchange proposes to amend the
existing criteria because it proved too
difficult for members to meet in
combination with the other criterion set
forth in the credit, and has hindered the
credit in achieving its intended effect.
The Exchange has limited resources at
its disposal to devote to incentives and
it periodically reassesses the allocation
of those resources when they prove to
be ineffective. The lower threshold
proposed will be more readily attainable
for members and will continue to incent
members to add substantial volumes of
non-displayed liquidity to the
Exchange. From time to time, the
Exchange believes it is reasonable to
recalibrate the criteria for credits such
as this one to ensure that the credits
remain relevant to current levels of
liquidity providing activity on the
Exchange.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,3 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,4 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 Exchange’s proposed change to
its schedule of credits 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.
3 15
4 15
Sfmt 4703
64123
E:\FR\FM\21OCN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
21OCN1
jspears on DSK121TN23PROD with NOTICES
64124
Federal Register / Vol. 87, No. 203 / Friday, October 21, 2022 / Notices
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’. . . .’’ 5
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.’’ 6
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for equity
security transaction services. The
Exchange is only one of several equity
venues to which market participants
may direct their order flow. Competing
equity exchanges offer similar tiered
pricing structures to that of the
Exchange, including schedules of
rebates and fees that apply based upon
members achieving certain volume
thresholds.
Within this environment, market
participants can freely and often do shift
their order flow among the Exchange
and competing venues in response to
changes in their respective pricing
schedules. As such, the proposal
represents a reasonable attempt by the
Exchange to increase its liquidity and
market share relative to its competitors.
The Exchange believes that it is
reasonable to require a member to (i)
provide shares of liquidity provided in
all securities through one or more of its
Nasdaq Market Center MPIDs that
represent more than 0.60% of
Consolidated Volume during the month,
5 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)).
6 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
VerDate Sep<11>2014
19:08 Oct 20, 2022
Jkt 259001
including shares of liquidity provided
with respect to securities that are listed
on exchanges other than Nasdaq or
NYSE that represent more than 0.10% of
Consolidated Volume, and (ii) add at
least 0.15% (instead of 0.175%) of
Consolidated Volume during the month
in non-displayed orders (excluding
midpoint orders) for securities in any
tape during the month in order to
qualify for the existing $0.0029 per
share executed credit. The Exchange
believes that it is reasonable to lower
the threshold percentage of
Consolidated Volume in non-displayed
orders (excluding midpoint orders) for
securities in any tape in order to qualify
for the credit to ensure that this credit
remains relevant to current levels of
liquidity providing activity on the
Exchange.
The Exchange believes it is reasonable
to establish a lower threshold because it
proved too difficult for members to meet
in combination with the other criterion
set forth in the credit, and has hindered
the credit in achieving its intended
effect. The Exchange has limited
resources at its disposal to devote to
incentives and it periodically reassesses
the allocation of those resources when
they prove to be ineffective. The
proposal to lower the requirement that
a member add at least 0.175% of
Consolidated Volume to 0.15% of
Consolidated Volume (during the month
in non-displayed orders (excluding
midpoint orders)) is reasonable because
the proposed amendment will be more
readily attainable for members and will
still incent members to add substantial
volumes of non-displayed liquidity to
the Exchange.
The Exchange believes its proposal
will allocate its charges and credits
fairly among its market participants.
The Exchange also believes it is
equitable to recalibrate or revise existing
criteria for its credits to ensure that the
credits remain appropriate for
participants to attain.
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
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
the assent of the Commission. It is fair
because it enhances price discovery and
improves the overall quality of the
equity markets.
The Exchange believes that its
proposal to decrease the non-displayed
volume threshold percentage to qualify
for an existing $0.0029 transaction
credit is not unfairly discriminatory
because the credit is available to all
members. The Exchange also believes it
is not unfairly discriminatory to
recalibrate or revise existing criteria for
its credits to ensure that the credits are
effective and readily attainable.
Any Participant that is dissatisfied
with the proposal is free to shift their
order flow to competing venues that
provide more generous pricing or less
stringent qualifying criteria.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule 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. Any member may elect to
achieve the levels of liquidity required
in order to qualify for the credit. The
Exchange notes that its members are free
to trade on other venues to the extent
they believe that the Exchange’s credits
are not attractive. As one can observe by
looking at any market share chart, price
competition between exchanges is
fierce, with liquidity and market share
moving freely between exchanges in
reaction to fee and credit changes.
Intermarket Competition
The Exchange believes that the
proposed change to its schedule of
credits to amend the criteria to qualify
for an existing $0.0029 transaction
credit as noted above will not impose a
burden on competition because the
Exchange’s execution services are
completely voluntary and subject to
extensive competition both from the
other live exchanges and from offexchange venues, which include
alternative trading systems that trade
national market system stock. 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
E:\FR\FM\21OCN1.SGM
21OCN1
Federal Register / Vol. 87, No. 203 / Friday, October 21, 2022 / Notices
fees to remain competitive with other
exchanges and with alternative trading
systems that have been exempted from
compliance with the statutory standards
applicable to exchanges. Because
competitors are free to modify their own
fees in response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
The proposed change to the qualifying
criteria for an existing credit is reflective
of this competition because, as a
threshold issue, the Exchange is a
relatively small market so its ability to
burden intermarket competition is
limited. In this regard, even the largest
U.S. equities exchange by volume only
has 17–18% 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 more than 40% of industry
volume in recent months.
If the changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
jspears on DSK121TN23PROD with 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)
of the Act 7 and paragraph (f) of Rule
19b–4 8 thereunder.
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
7 15
8 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
VerDate Sep<11>2014
19:08 Oct 20, 2022
Jkt 259001
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2022–053 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2022–053. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2022–053 and
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
64125
should be submitted on or before
November 14, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–22839 Filed 10–20–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, that the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday, October
26, 2022 at 10:00 a.m.
PLACE: The meeting will be webcast on
the Commission’s website at
www.sec.gov.
STATUS: This meeting will begin at 10:00
a.m. (ET) and will be open to the public
via webcast on the Commission’s
website at www.sec.gov.
MATTERS TO BE CONSIDERED:
1. The Commission will consider
whether to adopt final rules to
implement of Section 10D of the
Securities Exchange Act of 1934, as
added by Section 954 of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act.
2. The Commission will consider
whether to adopt rule and form
amendments that would require openend management investment companies
to transmit concise and visually
engaging annual and semi-annual
reports directly to shareholders that
highlight key information for investors.
The Commission also will consider
whether to amend the advertising rules
for registered investment companies and
business development companies.
3. The Commission will consider
whether to propose a new rule under
the Investment Advisers Act of 1940 to
establish minimum and consistent
oversight requirements for registered
investment advisers that outsource
certain services or functions to service
providers, and whether to propose
amendments to related recordkeeping
and Form ADV reporting requirements.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
TIME AND DATE:
9 17
E:\FR\FM\21OCN1.SGM
CFR 200.30–3(a)(12).
21OCN1
]]>Agencies
[Federal Register Volume 87, Number 203 (Friday, October 21, 2022)]
[Notices]
[Pages 64123-64125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22839]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96091; File No. SR-NASDAQ-2022-053]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend its Schedule of Credits at Equity 7, Section 118(a)
October 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 October 3, 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 schedule of credits,
at Equity 7, Section 118(a), as described further below. The text of
the proposed rule change is available on the Exchange's website at
https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
schedule of credits, at Equity 7, Section 118(a). Specifically, with
respect to its schedule of credits for displayed quotes/orders (other
than Supplemental Orders or Designated Retail Orders) that provide
liquidity, the Exchange proposes to amend the criteria for an existing
credit of $0.0029 per share executed.
The Exchange proposes to amend its existing credit of $0.0029 per
share executed to a member: (i) with shares of liquidity provided in
all securities through one or more of its Nasdaq Market Center MPIDs
that represent more than 0.60% of Consolidated Volume during the month,
including shares of liquidity provided with respect to securities that
are listed on exchanges other than Nasdaq or NYSE that represent more
than 0.10% of Consolidated Volume, and (ii) that adds at least 0.175%
of Consolidated Volume during the month in non-displayed orders
(excluding midpoint orders) for securities in any tape during the
month. The Exchange proposes to amend this credit by lowering the
threshold percentage of Consolidated Volume added during the month in
non-displayed orders (excluding midpoint orders) for securities in any
tape during the month. Specifically, the Exchange proposes lowering
this threshold percentage from 0.175% to 0.15%.
The Exchange proposes to amend the existing criteria because it
proved too difficult for members to meet in combination with the other
criterion set forth in the credit, and has hindered the credit in
achieving its intended effect. The Exchange has limited resources at
its disposal to devote to incentives and it periodically reassesses the
allocation of those resources when they prove to be ineffective. The
lower threshold proposed will be more readily attainable for members
and will continue to incent members to add substantial volumes of non-
displayed liquidity to the Exchange. From time to time, the Exchange
believes it is reasonable to recalibrate the criteria for credits such
as this one to ensure that the credits remain relevant to current
levels of liquidity providing activity on the Exchange.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\3\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\4\ 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.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposed change to its schedule of credits 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.
[[Page 64124]]
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'. . . .'' \5\
---------------------------------------------------------------------------
\5\ 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.'' \6\
---------------------------------------------------------------------------
\6\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
equity security transaction services. The Exchange is only one of
several equity venues to which market participants may direct their
order flow. Competing equity exchanges offer similar tiered pricing
structures to that of the Exchange, including schedules of rebates and
fees that apply based upon members achieving certain volume thresholds.
Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. As such, the
proposal represents a reasonable attempt by the Exchange to increase
its liquidity and market share relative to its competitors.
The Exchange believes that it is reasonable to require a member to
(i) provide shares of liquidity provided in all securities through one
or more of its Nasdaq Market Center MPIDs that represent more than
0.60% of Consolidated Volume during the month, including shares of
liquidity provided with respect to securities that are listed on
exchanges other than Nasdaq or NYSE that represent more than 0.10% of
Consolidated Volume, and (ii) add at least 0.15% (instead of 0.175%) of
Consolidated Volume during the month in non-displayed orders (excluding
midpoint orders) for securities in any tape during the month in order
to qualify for the existing $0.0029 per share executed credit. The
Exchange believes that it is reasonable to lower the threshold
percentage of Consolidated Volume in non-displayed orders (excluding
midpoint orders) for securities in any tape in order to qualify for the
credit to ensure that this credit remains relevant to current levels of
liquidity providing activity on the Exchange.
The Exchange believes it is reasonable to establish a lower
threshold because it proved too difficult for members to meet in
combination with the other criterion set forth in the credit, and has
hindered the credit in achieving its intended effect. The Exchange has
limited resources at its disposal to devote to incentives and it
periodically reassesses the allocation of those resources when they
prove to be ineffective. The proposal to lower the requirement that a
member add at least 0.175% of Consolidated Volume to 0.15% of
Consolidated Volume (during the month in non-displayed orders
(excluding midpoint orders)) is reasonable because the proposed
amendment will be more readily attainable for members and will still
incent members to add substantial volumes of non-displayed liquidity to
the Exchange.
The Exchange believes its proposal will allocate its charges and
credits fairly among its market participants. The Exchange also
believes it is equitable to recalibrate or revise existing criteria for
its credits to ensure that the credits remain appropriate for
participants to attain.
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 believes that its proposal to decrease the non-
displayed volume threshold percentage to qualify for an existing
$0.0029 transaction credit is not unfairly discriminatory because the
credit is available to all members. The Exchange also believes it is
not unfairly discriminatory to recalibrate or revise existing criteria
for its credits to ensure that the credits are effective and readily
attainable.
Any Participant that is dissatisfied with the proposal is free to
shift their order flow to competing venues that provide more generous
pricing or less stringent qualifying criteria.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule 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. Any
member may elect to achieve the levels of liquidity required in order
to qualify for the credit. The Exchange notes that its members are free
to trade on other venues to the extent they believe that the Exchange's
credits are not attractive. As one can observe by looking at any market
share chart, price competition between exchanges is fierce, with
liquidity and market share moving freely between exchanges in reaction
to fee and credit changes.
Intermarket Competition
The Exchange believes that the proposed change to its schedule of
credits to amend the criteria to qualify for an existing $0.0029
transaction credit as noted above will not impose a burden on
competition because the Exchange's execution services are completely
voluntary and subject to extensive competition both from the other live
exchanges and from off-exchange venues, which include alternative
trading systems that trade national market system stock. 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
[[Page 64125]]
fees to remain competitive with other exchanges and with alternative
trading systems that have been exempted from compliance with the
statutory standards applicable to exchanges. Because competitors are
free to modify their own fees in response, and because market
participants may readily adjust their order routing practices, the
Exchange believes that the degree to which fee changes in this market
may impose any burden on competition is extremely limited.
The proposed change to the qualifying criteria for an existing
credit is reflective of this competition because, as a threshold issue,
the Exchange is a relatively small market so its ability to burden
intermarket competition is limited. In this regard, even the largest
U.S. equities exchange by volume only has 17-18% 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 more than 40% of industry volume in recent months.
If the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\
thereunder.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f).
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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-2022-053 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2022-053. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2022-053 and should be submitted
on or before November 14, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22839 Filed 10-20-22; 8:45 am]
BILLING CODE 8011-01-P
