
[Federal Register Volume 80, Number 145 (Wednesday, July 29, 2015)]
[Notices]
[Pages 45250-45252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18539]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75514; File No. SR-NASDAQ-2015-084]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7014(g) Concerning Rebates Available Under the NBBO 
Program

July 23, 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 July 16, 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 amend NASDAQ Rule 7014(g) concerning 
rebates available under the NBBO Program. The Exchange will implement 
the new rebate on July 17, 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.

[[Page 45251]]

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

1. Purpose
    NASDAQ is proposing to add a new $0.0004 per share executed credit 
in securities listed on NYSE, which would be available to any member 
that provides shares of liquidity in all securities through one or more 
of its Nasdaq Market Center MPIDs (``MPIDs'') that represent 0.50% or 
more of Consolidated Volume \3\ during the month. The NBBO Program 
provides a per share executed rebate \4\ with respect to all other 
displayed orders (other than Designated Retail Orders, as defined in 
NASDAQ Rule 7018) in securities priced at $1 or more per share that 
provide liquidity and establish the NBBO. Currently, NASDAQ offers a 
$0.0002 per share executed credit to a member that either: (1) Executes 
shares of liquidity provided in all securities through one or more of 
its MPIDs that represents 0.475% or more of Consolidated Volume during 
the month; or (2) add [sic] NOM Market Maker liquidity, as defined in 
Chapter XV, Section 2 of the Nasdaq Options Market rules, in Penny 
Pilot Options and/or Non-Penny Pilot Options above 0.90% of total 
industry customer equity and ETF option ADV contracts per day in a 
month. Thus, the NBBO program provides an incentive to members to 
improve the quality of the market by rewarding members that provide 
significant market-improving order flow with a credit.
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    \3\ Consolidated Volume is the total consolidated volume 
reported to all consolidated transaction reporting plans by all 
exchanges and trade reporting facilities during a month in equity 
securities, excluding executed orders with a size of less than one 
round lot. For purposes of calculating Consolidated Volume and the 
extent of a member's trading activity, expressed as a percentage of 
or ratio to Consolidated Volume, the date of the annual 
reconstitution of the Rusell Investments Indexes shall be excluded 
from both total Consolidated Volume and the member's trading 
activity. See Rule 7018. For purposes of the proposed tier, the 
Exchange will calculate Consolidated Volume during the first month 
that it is implemented based on only the day during that month that 
the rebate is available.
    \4\ The rebate is provided in addition to any rebate or credit 
payable under NASDAQ Rule 7018(a) and the Investor Support Program 
(``ISP'') and Qualified Market Maker (``QMM'') Program under NASDAQ 
Rule 7014.
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    The proposed new rebate, which is provided in lieu of the current 
rebate, is designed to further improve the market by providing members 
with a higher credit as incentive to provide a greater level of 
Consolidated Volume to NASDAQ and to quote aggressively in Tape A 
securities. In this regard, the proposed new credit will apply to all 
other displayed orders (other than Designated Retail Orders, as defined 
in NASDAQ Rule 7018) in securities listed on NYSE (``Tape A'') priced 
at $1 or more per share that provide liquidity and establish the NBBO.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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 the Exchange operates or controls, and is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest; and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change to amend Rule 
7014(g) is reasonable because it provides an opportunity for members 
that qualify to receive a rebate of $0.0004 per share executed for all 
other displayed orders (other than Designated Retail Orders, as defined 
in Rule 7018) in Tape A securities priced at $1 or more per share that 
provide liquidity and establish the NBBO.\7\ Thus the rebate provides 
incentive to members to provide aggressively priced orders in Tape A 
securities that improve the market by setting the NBBO. Requiring a 
higher level of Consolidated Volume than the lower $0.0002 per share 
executed tier is consistent with incentivizing member to provide 
greater market improving activity in the form of Consolidated Volume in 
return for eligibility for a higher credit. The Exchange believes that 
it is reasonable to limit the higher credit to Tape A securities 
because it desires to improve the market on NASDAQ in Tape A securities 
in terms of setting the NBBO, which is currently not as robust as price 
setting in non-Tape A securities.
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    \7\This is similar to other programs originating from BATS 
Global Markets 2011 filing. See Securities Exchange Act Release No. 
73967 (January 3, 2011), 80 FR 594 (January 7, 2011) (SR-BATS-2010-
038.
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    NASDAQ believes the proposed change is equitable and not unfairly 
discriminatory because the $0.0004 per share executed rebate under the 
NBBO Program is available to all members on an equal basis and provides 
a rebate for activity that improves the Exchange's market quality 
through increased activity and by encouraging the setting of the NBBO. 
In this regard, the NBBO Program encourages higher levels of liquidity 
provision into the price discovery process and is consistent with the 
overall goals of enhancing market quality. Also, the Exchange believes 
that the qualification requirement for the new tier is equitable and 
not unfairly discriminatory because it represents an increased yet 
attainable level for members to achieve and to qualify for this higher 
rebate. In addition, the Exchange notes that the new eligibility 
standard for the tier, which requires a member to execute shares of 
liquidity provided in all securities through one or more of its MPIDs 
that represents 0.50% or more of Consolidated Volume during the month, 
represents a lower Consolidated Volume requirement than the QMM 
Program, which requires at least 0.70% of Consolidated Volume to 
qualify under the lowest credit tier.\8\ The Exchange believes the 
proposed qualification standard is equitable and not unfairly 
discriminatory because the NBBO Program rebates do not apply to all 
shares of liquidity provided, and thus the Consolidated Volume 
threshold is set lower.
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    \8\See Rule 7014(e).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule changes [sic] will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.\9\ 
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

[[Page 45252]]

order routing practices, NASDAQ believes that the degree to which fee 
changes in this market may impose any burden on competition is 
extremely limited. In this instance, NASDAQ is proposing to enhance the 
NBBO Program with an additional and higher rebate opportunity in Tape A 
securities in return for market improving participation. Consequently, 
the proposed changes do not impose a burden on competition because the 
proposed rebate, and incentive programs generally, are reflective of 
the need for exchanges to offer financial incentives to attract order 
flow and to let such financial incentives evolve in response to 
competition. Accordingly, while the Exchange does not believe that the 
proposed change will result in any burden on competition, if the change 
proposed herein are unattractive to market participants it is likely 
that NASDAQ will lose market share as a result.
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    \9\U.S.C. 78f(b)(8)
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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.\10\
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    \10\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-2015-084 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-2015-084. 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 o File Number SR-NASDAQ-2015-
084, and should be submitted on or before August 19, 2015.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18539 Filed 7-28-15; 8:45 am]
BILLING CODE 8011-01-P


