
[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28757-28759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12015]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74946; File No. SR-NASDAQ-2015-052]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7018 Governing Fees and Credits Assessed For 
Execution and Routing

May 13, 2015.
    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 May 7, 2015, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to modify NASDAQ Rule 7018(a)(1), (2), and 
(3), governing fees and credits assessed for execution and routing 
securities listed on NASDAQ (subsection 1), the New York Stock Exchange 
(``NYSE'') (subsection 2) and on exchanges other than NASDAQ and NYSE 
(subsection 3). NASDAQ will implement the proposed fees on May 1, 2015.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the 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
    NASDAQ is proposing to amend NASDAQ Rule 7018(1), (2) and (3) to 
modify fees assessed for execution and routing securities listed on 
NASDAQ (``Tape C''), NYSE (``Tape A'') and on exchanges other than 
NASDAQ and the NYSE (``Tape B''), respectively, (together, the 
``Tapes''). The Exchange is proposing two categories of changes to 
credits paid regarding midpoint liquidity: (1) Changes to the 
calculation of Equity and Options-linked volume when the Exchange pays 
rebates to members that provide liquidity via midpoint orders that are 
executed; and (2) adding a tier of credits for midpoint liquidity 
provided via non-displayed orders that are executed. These changes are 
described in greater detail below.
    Equity and Options-Linked Volume. With respect to credits paid for 
members adding liquidity via midpoint orders, the Exchange currently 
pays a credit of $0.0030 per share executed for members (i) with shares 
of liquidity provided in all securities during the month representing 
at least 0.40% of Consolidated Volume during the month, through one or 
more of its Nasdaq Market Center MPIDs, and (ii) that qualifies for the 
Nasdaq Options Market Customer and Professional Rebate to add Liquidity 
in Penny Pilot Options Tier 8 under Chapter XV, Section 2 of the Nasdaq 
Options Market rules during the month through one or more of its Nasdaq 
Options Market MPIDs. The Tier 8 program requires that a ``Participant 
adds Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-
Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options 
of 0.75% or more of total industry customer equity and ETF option ADV 
contracts per day in a month.'' The Tier 8 credit is designed to reward 
members that add liquidity broadly across NASDAQ's equity and options 
trading platform whether for trading NASDAQ, NYSE or Amex or other 
exchange-listed securities.
    NASDAQ is proposing to retain the credit rate of $0.0030 for this 
activity tier and to modify the volume calculations for both equity and 
options volume for securities on all three Tapes. First, the Exchange 
is increasing the required percentage of Consolidated Volume of 
equities executed from 0.40 percent to 0.60 percent per member for one 
or more of that member's MPIDs. Second, NASDAQ is retaining the 
existing link between equities and options trading, but it is modifying 
the measure of options volume. Specifically, the Exchange is modifying 
the rule to incorporate language from the Liquidity in Penny Pilot 
Options Tier 8 under Chapter XV, Section 2 of the Nasdaq Options 
Market. Additionally, the Exchange plans to credit members that add 
liquidity of 1.25 percent or more of average daily volume (``ADV'') for 
the industry in the customer clearing range \3\ in Equity and ETF 
Options \4\ based upon volume added by that member in the Customer,\5\ 
Professional,\6\ Firm,\7\ Non-NOM Market Maker \8\ and Broker-Dealer 
\9\ classifications as those classifications are defined in NOM rules.
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    \3\ The term ``customer clearing range'' refers to a clearing 
designation determined by the Options Clearing Corporation that 
applies throughout the options industry.
    \4\ This proposed rule change applies to the same categories of 
options (Penny Pilot, Non-Penny Pilot, Equity and ETF options) and 
the same participant liquidity (Customer, Professional, Firm, Non-
NOM Market Maker and Broker-Dealer) that are identified in Chapter 
XV, Section 2 of the Nasdaq Options Market Rules, Tier 8.
    \5\ As defined in Chapter XV of the Nasdaq Options Market Rules, 
the term ``Customer'' or (``C'') applies to any transaction that is 
identified by a Participant for clearing in the Customer range at 
The Options Clearing Corporation (``OCC'') which is not for the 
account of broker or dealer or for the account of a ``Professional'' 
(as that term is defined in Chapter I, Section 1(a)(48)).
    \6\ As defined in Chapter XV of the Nasdaq Options Market Rules, 
the term ``Professional'' or (``P'') means any person or entity that 
(i) is not a broker or dealer in securities, and (ii) places more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s) pursuant to Chapter 
I, Section 1(a)(48). All Professional orders shall be appropriately 
marked by Participants.
    \7\ As defined in Chapter XV of the Nasdaq Options Market Rules, 
the term ``Firm'' or (``F'') applies to any transaction that is 
identified by a Participant for clearing in the Firm range at OCC.
    \8\ As defined in Chapter XV of the Nasdaq Options Market Rules, 
the term ``Non-NOM Market Maker'' or (``O'') is a registered market 
maker on another options exchange that is not a NOM Market Maker. A 
Non-NOM Market Maker must append the proper Non-NOM Market Maker 
designation to orders routed to NOM.
    \9\ As defined in Chapter XV of the Nasdaq Options Market Rules, 
the term ``Broker-Dealer'' or (``B'') applies to any transaction 
which is not subject to any of the other transaction fees applicable 
within a particular category.
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    Non-Displayed Volume. Currently, NASDAQ Rule 7018 provides for 
credits for the execution of non-displayed liquidity (other than via 
Supplemental

[[Page 28758]]

Orders) when the member provides certain levels of liquidity and also 
provides certain levels of options liquidity simultaneously. The 
credits currently range from $0.0025 to $0.0005 depending upon the 
orders types used and the amount of liquidity provided, where midpoint 
liquidity is highest valued.
    The Exchange is modifying three rebate tiers and adding a new 
rebate tier across Tapes A and B only; Tape C securities will remain 
unmodified. Specifically, the Exchange will raise the credit from 
$0.0020 to $0.0022 per share executed for midpoint orders if the member 
provides an average daily volume of 6 million or more shares through 
midpoint orders during the month, and from $0.0017 to $0.0020 per share 
executed for midpoint orders if the member provides an average daily 
volume between 5 million and less than 6 million shares through 
midpoint orders during the month. Additionally, the Exchange is adding 
a new rebate tier of $0.0018 per share executed for midpoint orders if 
the member provides an average daily volume between 1 million and less 
than 5 million shares through midpoint orders during the month Finally, 
the Exchange is retaining the rebate tier of $0.0014 per share executed 
for midpoint orders but lowering the volume requirement from 5 million 
to 1 million shares average daily volume of midpoint liquidity provided 
during the month.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\10\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system which NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that the changes across all tapes to the 
calculation of the Equity and Options-linked credit of $0.0030 for 
members that provide midpoint liquidity are reasonable, equitably 
allocated and not unfairly discriminatory. First, it is reasonable and 
equitable to increase the required percentage of Consolidated Volume of 
equities executed from 0.40 percent to 0.60 percent per member for one 
or more of that member's MPIDs. This change is designed to create 
incentives for members to add additional liquidity to the NASDAQ Market 
Center. Liquidity is critical to the trading efficiency and quality of 
the exchange, and changes to enhance liquidity should be viewed 
favorably by all participants. This change will be applied equally to 
all similarly situated members and therefore should not be considered 
discriminatory, much less unfairly discriminatory.
    NASDAQ also believes that it is reasonable, equitably allocated and 
not unfairly discriminatory to retain the existing link between 
equities and options trading, to modify the measure of options volume. 
As with the previous change, the Exchange is requiring members to add 
additional liquidity (1.25 versus 0.75 percent of ADV), and to apply 
the same numerator (volume added by that member in the Customer, 
Professional, Firm, Non-NOM Market Maker and Broker-Dealer 
classifications) and denominator (total volume in the customer clearing 
range in Equity and ETF Options) for that calculation. Again, it is 
important for the Exchange to encourage members to add liquidity to the 
platforms NASDAQ operates and fair to modify fees to accomplish that 
important goal.
    The Exchange also believes it is reasonable, equitably allocated 
and not unfairly discriminatory to adjust rebate tiers for non-
displayed liquidity for Tapes A and B. NASDAQ notes that each of the 
four changes results in higher rebates per executed share in the future 
for the same volume of shares previously executed. Three of the four 
changes are modifications to existing tiers and the fourth is the 
insertion of a new volume tier, each of which is designed to reward 
more generously the provision of midpoint liquidity on NASDAQ. Midpoint 
liquidity is valuable to the efficient operation and competitiveness of 
the Exchange, and particularly beneficial to investors matching at the 
midpoint.
    NASDAQ believes it is not unfairly discriminatory to apply these 
changes to Tapes A and B versus Tape C because they will be absolute 
rather than relative requirements. As an absolute standard, the 
liquidity requirements will apply uniformly to all Market Makers 
eligible to participate in the program. All members have incentives 
available and equal opportunity to earn the higher rebates for adding 
more liquidity in Tapes A and B securities. NASDAQ has determined that 
modifying the incentives is more necessary for Tape A and B securities 
than for Tape C securities due to differences in NASDAQ's share of 
trading and the total volume traded in the market. If NASDAQ's 
determination is incorrect, NASDAQ would expect its share of trading in 
Tape C securities to decline due to intense competition in the market.
    Further, all participants may qualify to be eligible for these 
rebates, provided they transact the requisite amount of liquidity. It 
is reasonable to emphasize customer liquidity in options trading 
because it offers unique benefits to the market, which benefits all 
market participants. Customer liquidity benefits all options market 
participants by providing more trading opportunities, which attracts 
market makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.

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

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\12\ 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. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, NASDAQ believes that the degree to which fee 
changes in this market may impose any burden on competition is 
extremely limited.
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    \12\ 15 U.S.C. 78f(b)(8).
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    In this instance, the changes to liquidity credits for midpoint 
liquidity and to equity and options-lined credits do not impose a 
burden on competition because NASDAQ's execution services are 
completely voluntary and subject to extensive competition both from 
other exchanges and from off-exchange venues. In sum, if the changes 
proposed herein are unattractive to market participants, it is likely 
that NASDAQ will lose market share as a result. Accordingly, NASDAQ 
does not believe that the proposed changes will impair the ability of 
members or competing order execution venues to maintain

[[Page 28759]]

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.\13\
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    \13\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-052 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-052. 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 offices 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 Number SR-NASDAQ-2015-
052, and should be submitted on or before June 9, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\

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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12015 Filed 5-18-15; 8:45 am]
 BILLING CODE 8011-01-P


