
[Federal Register Volume 77, Number 90 (Wednesday, May 9, 2012)]
[Notices]
[Pages 27256-27260]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11136]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66915; File No. SR-NASDAQ-2012-053]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Investor Support Program Under Rule 7014 and To Amend 
NASDAQ's Schedule of Execution and Routing Fees and Rebates Under Rule 
7018

May 3, 2012.
    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 April 25, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 the 
Substance of the Proposed Rule Change

    NASDAQ proposes to modify the Investor Support Program under Rule 
7014, and to amend NASDAQ's schedule of execution and routing fees and 
rebates under Rule 7018. NASDAQ will implement the proposed change on 
May 1, 2012. The text of the proposed rule change is available at 
nasdaq.cchwallstreet.com, at NASDAQ's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

[[Page 27257]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing to modify the ISP under Rule 7014, and to amend 
NASDAQ's schedule of execution and routing fees and rebates under Rule 
7018. As a general matter, the changes will result in fee increases and 
rebate reductions that reflect the persistent reduction in trading 
volumes in the U.S. capital markets.

Investor Support Program

    The ISP enables NASDAQ members to earn a monthly fee credit for 
providing additional liquidity to NASDAQ and increasing the NASDAQ-
traded volume of what are generally considered to be retail and 
institutional investor orders in exchange-traded securities (``targeted 
liquidity''). The goal of the ISP is to incentivize members to provide 
such targeted liquidity to the NASDAQ Market Center.\3\ The Exchange 
noted in its original filing to institute the ISP \4\ that maintaining 
and increasing the proportion of orders in exchange-listed securities 
executed on a registered exchange (rather than relying on any of the 
available off-exchange execution methods) would help raise investors' 
confidence in the fairness of their transactions and would benefit all 
investors by deepening NASDAQ's liquidity pool, supporting the quality 
of price discovery, promoting market transparency and improving 
investor protection.
---------------------------------------------------------------------------

    \3\ The Commission has recently expressed its concern that a 
significant percentage of the orders of individual investors are 
executed at over the counter (``OTC'') markets, that is, at off-
exchange markets; and that a significant percentage of the orders of 
institutional investors are executed in dark pools. Securities 
Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594 
(January 21, 2010) (Concept Release on Equity Market Structure, 
``Concept Release''). In the Concept Release, the Commission has 
recognized the strong policy preference under the Act in favor of 
price transparency and displayed markets. The Commission published 
the Concept Release to invite public comment on a wide range of 
market structure issues, including high frequency trading and un-
displayed, or ``dark,'' liquidity. See also Mary L. Schapiro, 
Strengthening Our Equity Market Structure (Speech at the Economic 
Club of New York, Sept. 7, 2010) (``Schapiro Speech,'' available on 
the Commission Web site) (comments of Commission Chairman on what 
she viewed as a troubling trend of reduced participation in the 
equity markets by individual investors, and that nearly 30 percent 
of volume in U.S.-listed equities is executed in venues that do not 
display their liquidity or make it generally available to the 
public).
    \4\ Securities Exchange Act Release No. 63270 (November 8, 
2010), 75 FR 69489 (November 12, 2010) (NASDAQ-2010-141) (notice of 
filing and immediate effectiveness).
---------------------------------------------------------------------------

    Participants in the ISP are required to designate specific NASDAQ 
order entry ports for use under the ISP and to meet specified criteria 
focused on market participation, liquidity provision, and high rates of 
order execution. Currently, a member that participates in the ISP 
receives a credit of $0.0001, $0.0003, or $0.0004 per share with 
respect to the number of shares of displayed liquidity provided by the 
member that execute at $1 or more per share.\5\ The precise credit rate 
is determined by factors designed to measure the degree of the member's 
participation in the Nasdaq Market Center and the percentage of orders 
that it enters that execute--its ``ISP Execution Ratio''--which is seen 
as indicative of retail or institutional participation. While making 
only minimal changes to the existing criteria for participation in the 
ISP, NASDAQ will reduce the credits paid under the program to $0.00005, 
$0.000275, and $0.000375 respectively. In addition, in one of existing 
tiers for the ISP, the percentage of liquidity that a member is 
required to provide through ISP-designated ports will increase from 25% 
to 30%. With these changes, the requirements for existing ISP tiers, 
and the associated credits, will be as follows:
---------------------------------------------------------------------------

    \5\ A participant in the ISP must designate specific order-entry 
ports for use in tabulating certain requirements under the program.
---------------------------------------------------------------------------

    As provided in Rule 7014(c)(1), NASDAQ will pay a credit of 
$0.00005 per share \6\ with respect to all of a member's displayed 
liquidity-providing orders that execute at a price of $1 or more per 
share during the month if the following conditions are met:
---------------------------------------------------------------------------

    \6\ A reduction from $0.0001 per share.
---------------------------------------------------------------------------

    (1) The member's Participation Ratio \7\ for the month is equal to 
or greater than its Baseline Participation Ratio.\8\ The requirement 
reflects the expectation that a member participating in the program 
must maintain or increase its participation in NASDAQ as compared with 
an historical baseline.
---------------------------------------------------------------------------

    \7\ ``Participation Ratio'' is defined as follows: ``[F]or a 
given member in a given month, the ratio of (A) the number of shares 
of liquidity provided in orders entered by the member through any of 
its Nasdaq ports and executed in the Nasdaq Market Center during 
such month to (B) the Consolidated Volume.'' ``Consolidated Volume'' 
is defined as follows: ``[F]or a given member in a given month, the 
consolidated volume of shares of System Securities in executed 
orders reported to all consolidated transaction reporting plans by 
all exchanges and trade reporting facilities during such month.'' 
``System Securities'' means all securities listed on NASDAQ and all 
securities subject to the Consolidated Tape Association Plan and the 
Consolidated Quotation Plan.
    \8\ ``Baseline Participation Ratio'' is defined as follows: 
``[W]ith respect to a member, the lower of such member's 
Participation Ratio for the month of August 2010 or the month of 
August 2011, provided that in calculating such Participation Ratios, 
the numerator shall be increased by the amount (if any) of the 
member's Indirect Order Flow for such month, and provided further 
that if the result is zero for either month, the Baseline 
Participation Ratio shall be deemed to be 0.485% (when rounded to 
three decimal places).'' ``Indirect Order Flow'' is defined as 
follows: ``[F]or a given member in a given month, the number of 
shares of liquidity provided in orders entered into the Nasdaq 
Market Center at the member's direction by another member with 
minimal substantive intermediation by such other member and executed 
in the Nasdaq Market Center during such month.''
---------------------------------------------------------------------------

    (2) The member's ``ISP Execution Ratio'' for the month must be less 
than 10. The ISP Execution Ratio is defined as ``the ratio of (A) the 
total number of liquidity-providing orders entered by a member through 
its ISP-designated ports during the specified time period to (B) the 
number of liquidity-providing orders entered by such member through its 
ISP-designated ports and executed (in full or partially) in the Nasdaq 
Market Center during such time period; provided that: (i) No order 
shall be counted as executed more than once; and (ii) no Pegged Orders, 
odd-lot orders, or MIOC or SIOC orders shall be included in the 
tabulation.'' \9\ Thus, the definition requires a ratio between the 
total number of orders that post to the NASDAQ book and the number of 
such orders that actually execute that is low, a characteristic that 
NASDAQ believes to be reflective of retail and institutional order 
flow.
---------------------------------------------------------------------------

    \9\ These terms have the meanings assigned to them in Rule 4751. 
MIOC and SIOC orders are forms of ``immediate or cancel'' orders and 
therefore cannot be liquidity-providing orders.
---------------------------------------------------------------------------

    (3) The shares of liquidity provided through ISP-designated ports 
during the month are equal to or greater than 0.2% of Consolidated 
Volume during the month, reflecting the ISP's goals of encouraging 
higher levels of liquidity provision.
    (4) At least 30% \10\ of the liquidity provided by the member 
during the month is provided through ISP-designated ports. This 
requirement is designed to mitigate ``gaming'' of the program by firms 
that do not generally represent retail or institutional order flow but 
that nevertheless are able to channel a portion of their orders that 
they intend to execute through ISP-designated ports and thereby receive 
a credit with respect to those orders. NASDAQ is raising the required 
percentage from 25% to 30% to provide added assurance that program 
participants represent retail or institutional order flow.
---------------------------------------------------------------------------

    \10\ Previously, 25%.
---------------------------------------------------------------------------

    As provided in Rule 7014(c)(2), NASDAQ will pay a credit of 
$0.000275

[[Page 27258]]

per share \11\ with respect to shares of displayed liquidity executed 
at a price of $1 or more and entered through ISP-designated ports, and 
$0.00005 per share \12\ with respect to all other shares of displayed 
liquidity executed at a price of $1 or more, if the following 
conditions are met:
---------------------------------------------------------------------------

    \11\ A reduction from $0.0003 per share.
    \12\ A reduction from $0.0001 per share.
---------------------------------------------------------------------------

    (1) The member's Participation Ratio for the month exceeds its 
Baseline Participation Ratio by at least 0.43%.
    (2) The member's ``ISP Execution Ratio'' for the month is less than 
10.
    (3) The shares of liquidity provided through ISP-designated ports 
during the month are equal to or greater than 0.2% of Consolidated 
Volume during the month.
    (4) At least 40% of the liquidity provided by the member during the 
month is provided through ISP-designated ports.
    Alternatively, as provided in Rule 7014(c)(3), NASDAQ will pay a 
credit of $0.000275 per share \13\ with respect to shares of displayed 
liquidity executed at a price of $1 or more and entered through ISP-
designated ports, and $0.00005 per share \14\ with respect to all other 
shares of displayed liquidity executed at a price of $1 or more, if the 
following conditions are met:
---------------------------------------------------------------------------

    \13\ A reduction from $0.0003 per share.
    \14\ A reduction from $0.0001 per share.
---------------------------------------------------------------------------

    (1) The member's Participation Ratio for the month exceeds its 
Baseline Participation Ratio by at least 0.30%.
    (2) The member's ``ISP Execution Ratio'' for the month is less than 
10.
    (3) The shares of liquidity provided through ISP-designated ports 
during the month are equal to or greater than 0.2% of Consolidated 
Volume during the month.
    (4) At least 80% of the liquidity provided by the member during the 
month is provided through ISP-designated ports.
    (5) The member has an average daily volume during the month of more 
than 100,000 contracts of liquidity provided through one or more of its 
Nasdaq Options Market market participant identifiers (``MPIDs''), 
provided that such liquidity is provided through Public Customer 
Orders, as defined in Chapter I, Section 1 of the Nasdaq Options Market 
Rules; and
    (6) The ratio between shares of liquidity provided through ISP-
designated ports and total shares accessed, provided, or routed through 
ISP-designated ports during the month is at least 0.70.
    As provided in Rule 7014(c)(4), NASDAQ will pay a credit of 
$0.000375 per share \15\ with respect to shares of displayed liquidity 
executed at a price of $1 or more and entered through ISP-designated 
ports, and $0.00005 per share \16\ with respect to all other shares of 
displayed liquidity executed at a price of $1 or more, if the following 
conditions are met:
---------------------------------------------------------------------------

    \15\ A reduction from $0.0004 per share.
    \16\ A reduction from $0.0001 per share.
---------------------------------------------------------------------------

    (1) The member's Participation Ratio for the month exceeds its 
Baseline Participation Ratio by at least 0.86%.
    (2) The member's ``ISP Execution Ratio'' for the month is less than 
10.
    (3) The shares of liquidity provided through ISP-designated ports 
during the month are equal to or greater than 0.2% of Consolidated 
Volume during the month.
    (4) At least 40% of the liquidity provided by the member during the 
month is provided through ISP-designated ports.
    NASDAQ is also deleting Rule 7014(i), which contains obsolete 
language describing a rule for calculating the ISP during the month of 
December 2011.

Execution and Routing Fees and Credits

    NASDAQ is making a number of changes to its fee and credit schedule 
for order execution and routing. Overall, the changes are designed to 
(i) raise additional revenue to offset reductions caused by a sustained 
decrease in trading volumes in the U.S. capital markets, and (ii) 
encourage members that provide liquidity through non-displayed orders 
to do so, to a greater extent, through orders that offer price 
improvement. Specifically, NASDAQ is proposing to make the following 
changes to Rule 7018(a), which governs execution and routing of order 
for securities priced at $1 or more per share:
     Currently, NASDAQ pays credits that range from $0.0010 to 
$0.0015 per share executed with respect to liquidity provided through 
non-displayed orders. NASDAQ proposes to replace these credits with a 
credit of $0.0017 or $0.0015 per share for liquidity provided through 
midpoint pegged \17\ or midpoint peg post-only orders \18\ 
(collectively, ``midpoint orders''), and a credit of $0.0010 per share 
executed for all other non-displayed orders. With respect to midpoint 
orders, the $0.0017 rate will apply if a member provides an average 
daily volume of more than 3 million shares through midpoint orders 
during the month, and the $0.0015 rate will apply if the member 
provides an average daily volume of 3 million or fewer shares through 
midpoint orders during the month. NASDAQ's pricing structure is 
generally designed to encourage the provision of liquidity through 
displayed orders, since the credits paid with respect to such orders 
are consistently higher than those for non-displayed orders. However, 
the change reflects a concomitant goal of encouraging members that use 
non-displayed orders to also offer price improvement through the use of 
orders that are designed to execute at the midpoint of the national 
best bid and offer. In a related change, NASDAQ is also eliminating a 
liquidity provider rebate tier under which a member earns a credit of 
$0.0015 per share executed for non-displayed orders, and a credit of 
$0.0020 per share for displayed orders if the member provides 3 million 
or more shares of liquidity through non-displayed orders.\19\ This 
change is being made because the tier is inconsistent with the goal of 
paying a higher non-displayed order rebate with respect to midpoint 
orders.
---------------------------------------------------------------------------

    \17\ As provided in Rule 4751, ``Pegged Orders'' are orders 
that, after entry, have their price automatically adjusted by the 
System in response to changes in either the Nasdaq Market Center 
inside bid or offer or bids or offers in the national market system, 
as appropriate. A Pegged Order can specify that its price will equal 
the inside quote on the same side of the market (``Primary Peg''), 
the opposite side of the market (``Market Peg''), or the midpoint of 
the national best bid and offer (``Midpoint Peg''). A Midpoint Peg 
Order is priced based upon the national best bid and offer, 
excluding the effect that the Midpoint Peg Order itself has on the 
inside bid or inside offer. Midpoint Pegged Orders will never be 
displayed. A Midpoint Pegged Order may be executed in sub-pennies if 
necessary to obtain a midpoint price. A new timestamp is created for 
the order each time it is automatically adjusted.
    \18\ ``Midpoint Peg Post-Only Orders'' are orders that are 
priced in the same manner as Midpoint Peg Orders. Upon entry, a 
Midpoint Peg Post-Only Order will always post to the book unless it 
is a buy (sell) order that is priced higher than (lower than) a 
resting sell (buy) order, in which case it will execute at the price 
of the resting order. Midpoint Peg Post-Only Orders must always have 
a price of more than $1 per share. A Midpoint Peg Post-Only Order 
that would be assigned a price of $1 or less per share will be 
rejected or cancelled, as applicable. While a Midpoint Peg Post-Only 
Order that posts to the book is locking a preexisting non-displayed 
order, the Midpoint Peg Post-Only Order will execute against an 
incoming order only if the price of the incoming buy (sell) order is 
higher (lower) than the price of the pre-existing order.
    \19\ NASDAQ is also making a conforming change to the language 
that describes the credits payable with respect to displayed orders, 
but is not making any changes to the applicable rates.
---------------------------------------------------------------------------

     NASDAQ is eliminating a favorable charge of $0.0027 per 
share executed for orders that employ the SAVE \20\ or

[[Page 27259]]

SOLV \21\ routing strategy but that execute in the Nasdaq Market 
Center. Accordingly, such orders will be charged the otherwise 
applicable fee of $0.0030 per share executed. Similarly, the fee for 
SAVE, SOLV, or TFTY \22\ orders that execute at the New York Stock 
Exchange (``NYSE'') will increase from $0.0022 per share executed to 
$0.0023 per share executed, and the fee for SAVE or SOLV orders that 
execute at venues other than NASDAQ, NYSE, BX, or PSX will increase 
from $0.0026 per share executed to $0.0029 per share executed.
---------------------------------------------------------------------------

    \20\ SAVE is a routing option under which orders may either (i) 
route to the NASDAQ OMX BX Equities Market (``BX'') and NASDAQ OMX 
PSX (``PSX''), check the System, and then route to other 
destinations on the System routing table, or (ii) may check the 
System first and then route to destinations on the System routing 
table. If shares remain un-executed after routing, they are posted 
to the book. Once on the book, should the order subsequently be 
locked or crossed by another market center, the System will not 
route the order to the locking or crossing market center.
    \21\ SOLV is a routing option under which orders may either (i) 
route to BX and PSX, check the System, and then route to other 
destinations on the System routing table, or (ii) may check the 
System first and then route to destinations on the System routing 
table. If shares remain un-executed after routing, they are posted 
to the book. Once on the book, should the order subsequently be 
locked or crossed by another accessible market center, the System 
shall route the order to the locking or crossing market center.
    \22\ TFTY is a routing option under which orders check the 
System for available shares only if so instructed by the entering 
firm and are thereafter routed to destinations on the System routing 
table. If shares remain un-executed after routing, they are posted 
to the book. Once on the book, should the order subsequently be 
locked or crossed by another market center, the System will not 
route the order to the locking or crossing market center.
---------------------------------------------------------------------------

    With respect to Rule 7018(b), NASDAQ is proposing to eliminate the 
liquidity provider rebate of $0.00009 per share executed with respect 
to securities priced at more than $0.05 but less than $1 per share. As 
a result, NASDAQ will pay no liquidity provider rebate for securities 
priced under $1 per share.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\23\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\24\ 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 or system which NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f.
    \24\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

Changes to the ISP

    The ISP encourages members to add targeted liquidity that is 
executed in the Nasdaq Market Center. NASDAQ believes that the 
reduction in the rebates paid under the ISP from $0.0001, $0.0003, and 
$0.0004 to $0.00005, $0.000275, and $0.000375 is reasonable, because it 
provides a means for NASDAQ to reduce costs during a period of 
persistently low trading volumes, while maintaining the overall 
structure of the ISP for the purpose of providing incentives for retail 
and institutional investors to provide targeted liquidity at NASDAQ. 
The change is consistent with an equitable allocation of fees: Although 
the change maintains the ISP's purpose of paying higher rebates to 
certain market participants in order to encourage them to benefit all 
NASDAQ members through the submission of targeted liquidity, the change 
reduces the disparity between rebates paid to ISP participants and 
other members for providing liquidity. Accordingly, it results in a fee 
structure in which available rebates are allocated more equitably among 
market participants. Similarly, although NASDAQ believes that the price 
differentiation inherent in the ISP is fair, because it is designed to 
benefit all market participants by drawing targeted liquidity to the 
Exchange, the change reduces the level of discrimination between the 
rebates paid to ISP participants and those paid to other liquidity 
providers.
    Finally, NASDAQ believes that the change to increase the percentage 
of liquidity provided through ISP-designated ports needed for a member 
to qualify for the lowest ISP tier is reasonable because it will reduce 
the likelihood that members that do not represent retail or 
institutional customers will be able to ``game'' the program by 
channeling a portion of their orders that they intend to execute 
through ISP-designated ports and thereby receive a credit with respect 
to those orders. The change is equitable because the ISP is designed to 
attract and benefit targeted liquidity, and therefore it is equitable 
to take measures to reduce the likelihood that ISP incentives will be 
paid to members that do not provide targeted liquidity. Finally, the 
change is not unfairly discriminatory because excluding members that do 
not represent retail or institutional customers is consistent with the 
established purposes of the ISP.

Routing Fee Changes

    The changes to fees for use of the SAVE, SOLV, and TFTY routing 
strategies are reasonable because the current fees for these routing 
strategies reflect promotional pricing incentives originally designed 
to encourage greater use of these routing strategies. Recognizing that 
NASDAQ is not required to maintain promotional pricing differentials 
indefinitely, NASDAQ believes that it is reasonable to remove these 
incentives for the following reasons: (i) The fee for SAVE and SOLV 
orders that execute at NASDAQ will be the same as the fee for most 
other order executions at NASDAQ, (ii) the fee for SAVE, SOLV, and TFTY 
orders that execute at NYSE will be same as the fee that NYSE charges 
to NASDAQ to execute such orders, and (iii) the fee for SAVE and SOLV 
orders that execute at venues other than NASDAQ, BX, PSX, and NYSE will 
be less than the fee for executing orders at NASDAQ, and less than the 
charge for certain other routing strategies, such as MOPP and directed 
orders, that execute at these venues. NASDAQ believes that these 
changes promote an equitable allocation of fees among market 
participants, because they allow NASDAQ to charge fees for these 
execution and routing services that are more similar to the fees 
otherwise charged for execution and routing. Finally, NASDAQ believes 
that the change is not unfairly discriminatory because it reduces the 
differentiation in NASDAQ's fee schedule with respect to the fees 
charged for different routing strategies.

Rebates for Non-Displayed Liquidity

    The changes to the rebates payable with respect to liquidity 
provided through non-displayed orders are reasonable because, 
consistent with NASDAQ's goal of reducing expenses, they direct the 
focus of rebates away from non-displayed liquidity in general and 
toward non-displayed liquidity provided through midpoint orders. 
Because such orders provide price improvement, NASDAQ believes that it 
is reasonable to use rebates to encourage their use, while still 
maintaining a rebate structure that places even greater emphasis on the 
value of displayed liquidity in advancing transparency and price 
discovery. As a result of the change, the rebate paid for non-displayed 
liquidity, other than liquidity provided through midpoint orders, will 
decrease for some market participants, but the rebate paid with respect 
to midpoint orders will remain constant or increase for all market 
participants. The change is consistent with an equitable allocation of 
fees because it is designed to encourage members that provide liquidity 
through non-displayed orders to benefit other market participants 
through price improvement. Finally, the change is not unfairly 
discriminatory: the elements of differentiation between displayed and 
non-displayed liquidity and midpoint orders and other non-displayed 
orders are fair because they promote the goals of price discovery and

[[Page 27260]]

encouraging market participants to provide price improvement.

Rebates for Stocks Priced Under $1

    NASDAQ believes that the elimination of the rebate for liquidity 
provided in stocks priced under $1 is reasonable because the amount of 
this rebate is extremely small and therefore of minimal value to market 
participants. For example, the rebate on a 1000 share trade is just 
$0.09. NASDAQ believes that the change is consistent with an equitable 
allocation of fees, since the rebate is not being replaced by a fee, so 
there is no charge for liquidity providers to execute trades in these 
stocks. Finally, NASDAQ believes that the change is not unfairly 
discriminatory because the per-trade revenues associated with 
executions of these stocks are also very small. Accordingly, NASDAQ 
believes that it is not unfair to pay a rebate with respect to higher 
priced stocks, while declining to pay a rebate with respect to these 
stocks.
    Finally, NASDAQ 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, NASDAQ must continually adjust its 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. These competitive forces help to ensure that 
NASDAQ's fees are reasonable, equitably allocated, and not unfairly 
discriminatory since market participants can largely avoid fees to 
which they object by changing their trading behavior.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Because the market 
for order execution is extremely competitive, members may readily opt 
to disfavor NASDAQ's execution services if they believe that 
alternatives offer them better value. For this reason and the reasons 
discussed in connection with the statutory basis for the proposed rule 
change, NASDAQ 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

    Written comments were neither solicited nor 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.\25\ 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 necessary or appropriate in the public interest, 
for the protection of investors, or 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(a)(ii).
---------------------------------------------------------------------------

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-053 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2012-053. 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 Web site (http://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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-NASDAQ-2012-053 and should be 
submitted on or before May 30, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11136 Filed 5-8-12; 8:45 am]
BILLING CODE 8011-01-P


