Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, Section 118, 80358-80360 [2023-25382]
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80358
Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Notices
participants to transact in the index and
ETF options listed pursuant to the
proposed rule change based on their
timing as needed and allow them to
tailor their investment and hedging
needs more effectively.17 Further, the
Exchange notes the proposed terms of
Monthly Options Series, including the
limitation to five index and ETF option
classes, are substantively the same as
the current terms of Quarterly Options
Series.18 The Exchange states that it
currently lists Quarterly Options Series
in certain index 19 and ETF classes,
which expire at the close of business at
the end of each calendar quarter, and
has not experienced any market
disruptions nor issues with capacity.20
The Exchange believes limiting Monthly
Options Series to five classes will
ensure the addition of these new series
will have a negligible impact on the
Exchange’s and Options Price Reporting
Authority’s quoting capacity.21 The
Exchange represents it has the necessary
systems capacity to support new options
series that will result from the
introduction of Monthly Options
Series.22
The Exchange represents its current
surveillance programs will apply to
Monthly Options Series and will
properly monitor trading in the
proposed Monthly Options Series.23
The Exchange’s surveillance programs
currently in place to support and
properly monitor trading in Quarterly
Options Series, as well as Short Term
Option Series and standard expiration
series, will apply to the proposed
Monthly Options Series.24 The
Exchange believes its surveillances
continue to be designed to deter and
detect violations of its Rules, including
position and exercise limits and
possible manipulative behavior, and
these surveillances will apply to
Monthly Options Series.25 Further, the
Exchange does not believe the proposed
rule change raises any unique regulatory
concerns because existing safeguards—
such as position and exercise limits
(and the aggregation of options
overlying the same index or ETF) and
17 See
Notice, supra note 3 at 68835.
proposed Rules 4.5(g) and
4.13(a)(2)(C) to Rules 4.5(e) and 4.13(a)(2)(B),
respectively. See Notice, supra note 3 at 68835.
19 The Exchange notes it currently lists quarterly
expirations on index options pursuant to Rule
4.13(c) (regarding quarterly index expirations).
20 See Notice, supra note 3 at 68835.
21 See id.
22 See id.
23 See id.
24 See id.
25 See id.
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18 Compare
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reporting requirements—would
continue to apply.26
As noted above, the Exchange
currently has Quarterly Options Series
for up to five ETF or index classes. In
addition, the Commission recently
approved a proposal by the Exchange to
permanently establish a Nonstandard
Expiration Program, which permits,
among other things, the listing and
trading of broad-based index options
with end of month expirations.27 The
Commission believes that the proposed
Monthly Options Series, which the
Exchange proposes to limit to a total of
five ETF or index classes, strikes a
reasonable balance between the
Exchange’s desire to offer a wider array
of investment opportunities and the
need to avoid unnecessary proliferation
of options series and the corresponding
increase in quotes. Further, the
Exchange has represented that it has an
adequate surveillance program in place
to detect manipulative trading in the
Monthly Options Series and has the
necessary systems capacity to support
the new options series.28 The
Commission expects the Exchange,
consistent with its Monthly Options
Series delisting policy, to continue to
monitor for option series with little or
no open interest and trading activity
and to act promptly to delist such
options in order to mitigate the number
of options series with no open interest.
Accordingly, the Commission finds
that the proposed rule change is
consistent with Section 6(b)(5) of the
Act 29 and the rules and regulations
thereunder applicable to a national
securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,30 that the
proposed rule change (SR–CBOE–2023–
049) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–25384 Filed 11–16–23; 8:45 am]
BILLING CODE 8011–01–P
26 See
id.
Securities Exchange Act Release No. 98456
(September 20, 2023), 88 FR 66091 at 66092
(September 26, 2023) (SR–CBOE–2023–020).
28 See supra notes 23–25 and accompanying text.
29 15 U.S.C. 78f(b)(5).
30 15 U.S.C. 78s(b)(2).
31 17 CFR 200.30–3(a)(12).
27 See
PO 00000
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98912; File No. SR–
NASDAQ–2023–043]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Equity 7, Section 118
November 13, 2023.
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 November
1, 2023, 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 and fees
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://listing
center.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 (i) eliminate a credit to
members for displayed quotes/orders
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Notices
(other than Supplemental Orders or
Designated Retail Orders) that provide
liquidity and (ii) eliminate a fee for
routing orders at Equity 7, Section
118(a).
The Exchange proposes to eliminate
the $0.0026 per share executed credit
for securities in Tapes A, B, and C
offered to a member that, through one or
more of its Nasdaq Market Center
MPIDs: (i) provides shares of liquidity
in all securities that represent equal to
or greater than 0.15% of Consolidated
Volume; (ii) increases the extent to
which it provides liquidity in all
securities as a percentage of
Consolidated Volume by 20% or more
during the month relative to the month
of May 2021; and (iii) has a ratio of at
least 50% NBBO liquidity provided (as
defined in Equity 7, Section 114(g)) to
liquidity provided by displayed quotes/
orders (other than Supplemental Orders
or Designated Retail Orders) during the
month. The Exchange proposes to
eliminate this credit because it is not
heavily utilized and includes a baseline
month of May 2021 for the growth
element of the credit, which is no longer
a relevant benchmark. As such, this
credit no longer provides a growth
incentive that is aligned with the
Exchange’s needs. The Exchange also
seeks to simplify its schedule of credits.
The Exchange has limited resources to
allocate to incentives and it must, from
time to time, reallocate those resources
to maximize their net impact on the
Exchange, market quality, and
participants.
Additionally, the Exchange proposes
to eliminate the $0.01 per order charge
for round lot or mixed lot DOTI Orders,
incurred when, during the month: (i) a
market participant sends an average of
more than 10,000 DOTI Orders per day
through one or more of its MPIDs; and
(ii) the ratio of DOTI Orders to
executions exceeds 300 to 1.3 The
Exchange seeks to simplify its charges
for routed orders by eliminating such
fee. The Exchange has limited resources
to devote to incentive programs, and it
is appropriate for the Exchange to
reallocate these incentives periodically
in a manner that best achieves the
Exchange’s overall mix of objectives.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,4 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
3 The fee applies to each DOTI Order that exceeds
the 300 to 1 ratio. In calculating daily average DOTI
Orders, the Exchange excludes the day with the
highest ratio of DOTI Orders to executions.
4 15 U.S.C. 78f(b).
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18:57 Nov 16, 2023
Jkt 262001
of the Act,5 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 changes to
its schedule of credits and fees are
reasonable in several respects. As a
threshold matter, the Exchange is
subject to significant competitive forces
in the market for equity securities
transaction services that constrain its
pricing determinations in that market.
The fact that this market is competitive
has long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 6
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.’’ 7
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
5 15
U.S.C. 78f(b)(4) and (5).
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)).
7 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
6 NetCoalition
PO 00000
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80359
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 it is
reasonable, equitable, and not unfairly
discriminatory to eliminate the
Exchange’s $0.0026 per share executed
transaction credit and the Exchange’s
$0.01 fee for routing orders. The
Exchange seeks to simplify and
streamline its schedule of credits by
eliminating the $0.0026 per share
executed credit that is not heavily
utilized and is no longer based on a
relevant benchmark, as described above.
The Exchange also seeks to eliminate
the $0.01 charge for round lot or mixed
lot DOTI Orders described above in an
effort to simplify and streamline its fees
for routing orders. Together, the
proposed changes are designed to better
align with the Exchange’s needs. The
Exchange has limited resources to
devote to incentive programs, and it is
appropriate for the Exchange to
reallocate these incentives periodically
in a manner that best achieves the
Exchange’s overall mix of objectives.
Those participants that are
dissatisfied with the eliminations from
the Exchange’s schedule of credits and
fees are free to shift their order flow to
competing venues that provide
incentives or qualifying criteria more in
line with participants’ objectives.
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
proposals will place any category of
Exchange participant at a competitive
disadvantage.
The Exchange intends for the
proposed changes to simplify its credit
and fee schedule, remove a credit with
an outdated benchmark month, preserve
its limited resources for optimized
effect, and better align the schedule of
credits and fees with the Exchange’s
overall mix of objectives. The Exchange
notes that its members are free to trade
on other venues to the extent they
believe that these proposals are not
E:\FR\FM\17NON1.SGM
17NON1
80360
Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Notices
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.
khammond on DSKJM1Z7X2PROD with NOTICES
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 proposals are
reflective of this competition.
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 40% 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.
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.
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18:57 Nov 16, 2023
Jkt 262001
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.8
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NASDAQ–2023–043 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–2023–043. 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,
8
PO 00000
15 U.S.C. 78s(b)(3)(A)(ii).
Frm 00092
Fmt 4703
Sfmt 4703
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NASDAQ–2023–043 and should be
submitted on or before December 8,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–25382 Filed 11–16–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–182, OMB Control No.
3235–0237]
Proposed Collection; Comment
Request; Extension: Form N–54A
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget a
request for extension of the previously
approved collection of information
discussed below.
Under the Investment Company Act
of 1940 (15 U.S.C. 80a-1 et seq.) (the
‘‘Investment Company Act’’), certain
investment companies can elect to be
regulated as business development
companies, as defined in Section
2(a)(48) of the Investment Company Act
(15 U.S.C. 80a-2(a)(48)). Under Section
54(a) of the Investment Company Act
(15 U.S.C. 80a-53(a)), any company
defined in Section 2(a)(48)(A) and (B)
may elect to be subject to the provisions
of Sections 55 through 65 of the
Investment Company Act (15 U.S.C.
80a-54 to 80a-64) by filing with the
Commission a notification of election, if
such company has: (1) a class of equity
securities registered under Section 12 of
9
17 CFR 200.30–3(a)(12).
E:\FR\FM\17NON1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 221 (Friday, November 17, 2023)]
[Notices]
[Pages 80358-80360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25382]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98912; File No. SR-NASDAQ-2023-043]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Equity 7, Section 118
November 13, 2023.
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 November 1, 2023, 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
and fees 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 (i) eliminate a
credit to members for displayed quotes/orders
[[Page 80359]]
(other than Supplemental Orders or Designated Retail Orders) that
provide liquidity and (ii) eliminate a fee for routing orders at Equity
7, Section 118(a).
The Exchange proposes to eliminate the $0.0026 per share executed
credit for securities in Tapes A, B, and C offered to a member that,
through one or more of its Nasdaq Market Center MPIDs: (i) provides
shares of liquidity in all securities that represent equal to or
greater than 0.15% of Consolidated Volume; (ii) increases the extent to
which it provides liquidity in all securities as a percentage of
Consolidated Volume by 20% or more during the month relative to the
month of May 2021; and (iii) has a ratio of at least 50% NBBO liquidity
provided (as defined in Equity 7, Section 114(g)) to liquidity provided
by displayed quotes/orders (other than Supplemental Orders or
Designated Retail Orders) during the month. The Exchange proposes to
eliminate this credit because it is not heavily utilized and includes a
baseline month of May 2021 for the growth element of the credit, which
is no longer a relevant benchmark. As such, this credit no longer
provides a growth incentive that is aligned with the Exchange's needs.
The Exchange also seeks to simplify its schedule of credits. The
Exchange has limited resources to allocate to incentives and it must,
from time to time, reallocate those resources to maximize their net
impact on the Exchange, market quality, and participants.
Additionally, the Exchange proposes to eliminate the $0.01 per
order charge for round lot or mixed lot DOTI Orders, incurred when,
during the month: (i) a market participant sends an average of more
than 10,000 DOTI Orders per day through one or more of its MPIDs; and
(ii) the ratio of DOTI Orders to executions exceeds 300 to 1.\3\ The
Exchange seeks to simplify its charges for routed orders by eliminating
such fee. The Exchange has limited resources to devote to incentive
programs, and it is appropriate for the Exchange to reallocate these
incentives periodically in a manner that best achieves the Exchange's
overall mix of objectives.
---------------------------------------------------------------------------
\3\ The fee applies to each DOTI Order that exceeds the 300 to 1
ratio. In calculating daily average DOTI Orders, the Exchange
excludes the day with the highest ratio of DOTI Orders to
executions.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\4\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\5\ 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.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposed changes to its schedule of credits and fees
are reasonable in several respects. As a threshold matter, the Exchange
is subject to significant competitive forces in the market for equity
securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \6\
---------------------------------------------------------------------------
\6\ 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.'' \7\
---------------------------------------------------------------------------
\7\ 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 it is reasonable, equitable, and not unfairly
discriminatory to eliminate the Exchange's $0.0026 per share executed
transaction credit and the Exchange's $0.01 fee for routing orders. The
Exchange seeks to simplify and streamline its schedule of credits by
eliminating the $0.0026 per share executed credit that is not heavily
utilized and is no longer based on a relevant benchmark, as described
above. The Exchange also seeks to eliminate the $0.01 charge for round
lot or mixed lot DOTI Orders described above in an effort to simplify
and streamline its fees for routing orders. Together, the proposed
changes are designed to better align with the Exchange's needs. The
Exchange has limited resources to devote to incentive programs, and it
is appropriate for the Exchange to reallocate these incentives
periodically in a manner that best achieves the Exchange's overall mix
of objectives.
Those participants that are dissatisfied with the eliminations from
the Exchange's schedule of credits and fees are free to shift their
order flow to competing venues that provide incentives or qualifying
criteria more in line with participants' objectives.
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 proposals will place any
category of Exchange participant at a competitive disadvantage.
The Exchange intends for the proposed changes to simplify its
credit and fee schedule, remove a credit with an outdated benchmark
month, preserve its limited resources for optimized effect, and better
align the schedule of credits and fees with the Exchange's overall mix
of objectives. The Exchange notes that its members are free to trade on
other venues to the extent they believe that these proposals are not
[[Page 80360]]
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
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 proposals are reflective of this
competition.
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 40% 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.
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.\8\
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\8\ 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-2023-043 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-2023-043. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NASDAQ-2023-043 and should
be submitted on or before December 8, 2023.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25382 Filed 11-16-23; 8:45 am]
BILLING CODE 8011-01-P
