
[Federal Register Volume 82, Number 34 (Wednesday, February 22, 2017)]
[Notices]
[Pages 11376-11379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03460]



[[Page 11376]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80051; File No. SR-NASDAQ-2017-016]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rules 7014 and 7018

February 16, 2017.
    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 February 9, 2017, 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 (1) amend Rule 7014(j) to modify the 
conditions for qualifying for the Nasdaq Growth Program; and (2) amend 
Rule 7018(a) to modify the volume requirements needed to qualify for a 
credit of $0.0030 per share for members that add liquidity on both 
Nasdaq and the Nasdaq Options Market (``NOM'').
    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
    The purpose of the proposed rule change is to amend the Exchange's 
transaction fees at Rule 7014(j) and Rule 7018(a) to make two 
changes.\3\ Specifically, the Exchange proposes to (1) add another way 
through which members may qualify for the Nasdaq Growth Program 
(``Program''); and (2) lower one of the volume requirements needed to 
qualify for a $0.0030 credit when adding liquidity on Nasdaq and NOM. 
These changes are described below.
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    \3\ The Exchange initially filed the proposed changes on 
February 1, 2017 (SR-NASDAQ-2017-011). On February 9, 2017, the 
Exchange withdrew that filing and submitted this filing.
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Nasdaq Growth Program
    Nasdaq introduced the Program in 2016.\4\ The purpose of the 
Program is to provide a credit per share executed for members that meet 
certain growth criteria. The credit is designed to provide an incentive 
to members that do not qualify for other credits under Rule 7018 in 
excess of the Program credit to increase their participation on the 
Exchange. The Program provides a member a $0.0025 per share executed 
credit in securities priced $1 or more per share if the member meets 
certain criteria. The credit is provided in lieu of other credits 
provided to the member for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) that provide liquidity 
under Rule 7018, if the credit under the Nasdaq Growth Program is 
greater than the credit attained under Rule 7018.
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    \4\ See Securities Exchange Act Release No. 78977 (September 29, 
2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132).
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    Rule 7014(j) currently provides two ways in which a member may 
qualify for the Program in a given month. First, the member may qualify 
for the Program by (i) adding greater than 750,000 shares a day on 
average during the month through one or more of its Nasdaq Market 
Center MPIDs; and (ii) increasing its shares of liquidity provided 
through one or more of its Nasdaq Market Center MPIDs as a percent of 
Consolidated Volume by 20% versus the member's Growth Baseline.\5\ 
Alternatively, the member may qualify for the Program by (i) adding 
greater than 750,000 shares a day on average during the month through 
one or more of its Nasdaq Market Center MPIDs; and (ii) meeting the 
criteria set forth above (increasing its shares of liquidity provided 
through one or more of its Nasdaq Market Center MPIDs as a percent of 
Consolidated Volume by 20% versus the member's Growth Baseline) in the 
preceding month, and maintaining or increasing its shares of liquidity 
provided through one or more of its Nasdaq Market Center MPIDs as a 
percent of Consolidated Volume as compared to the preceding month.
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    \5\ The Growth Baseline is defined as the member's shares of 
liquidity provided in all securities through one or more of its 
Nasdaq Market Center MPIDs as a percent of Consolidated Volume 
during the last month a member qualified for the Nasdaq Growth 
Program under Rule 7014(j)(ii)(A) (increasing its volume by 20% 
versus its Growth Baseline). If a member has not yet qualified for a 
credit under this program, its August 2016 share of liquidity 
provided in all securities through one or more of its Nasdaq Market 
Center MPIDs as a percent of Consolidated Volume will be used to 
establish a baseline.
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    Nasdaq now proposes a third way in which a member may qualify for 
the Program in a given month. Specifically, the member may qualify for 
the Program by (i) adding greater than 750,000 shares a day on average 
during the month through one or more of its Nasdaq Market Center MPIDs 
in three separate months; (ii) increasing its shares of liquidity 
provided through one or more of its Nasdaq Market Center MPIDs as a 
percent of Consolidated Volume by 20% versus the member's Growth 
Baseline in three separate months; and (iii) maintaining or increasing 
its shares of liquidity provided through one or more of its Nasdaq 
Market Center MPIDs as a percent of Consolidated Volume compared to the 
growth baseline established when the member met the criteria for the 
third month.
    The following example illustrates the application of this new 
provision:
     In September 2016, the firm's shares of liquidity as a 
percentage of Consolidated Volume is 0.03%. This is the firm's Growth 
Baseline.
     In October 2016, the firm added more than 750,000 shares a 
day on average through one or more of its Nasdaq Market Center MPIDs. 
The firm's shares of liquidity as a percentage of Consolidated Volume 
rose to 0.036%, an increase of 20% over its Growth Baseline. The member 
qualifies for the credit, since it has met the criteria of Rule 
7014(j)(i) and 7014(j)(ii)(A). The member's Growth Baseline is updated 
to 0.036% (its October 2016 volume).
     In November 2016, the firm added more than 750,000 shares 
a day on average through one or more of its Nasdaq Market Center MPIDs. 
The firm's shares of liquidity as a percentage of Consolidated Volume 
was 0.041%. The firm qualifies for the credit under Rule 7014(j)(ii)(B) 
since it met the

[[Page 11377]]

criteria under Rule 7014(j)(ii)(A) in October and added volume in 
November as compared to October. The firm does not, however, qualify 
for the credit under Rule 7014(j)(ii)(A). Accordingly, its Growth 
Baseline remains 0.036% (its October 2016 volume).
     In December 2016, the firm added more than 750,000 shares 
a day on average through one or more of its Nasdaq Market Center MPIDs. 
The firm's shares of liquidity as a percentage of Consolidated Volume 
rose to 0.044%, an increase of over 20% over its Growth Baseline. The 
member qualifies for the credit, since it has met the criteria of Rule 
7014(j)(i) and 7014(j)(ii)(A). The member's Growth Baseline is updated 
to 0.044% (its December 2016 volume).
     In January 2017, the firm added more than 750,000 shares a 
day on average through one or more of its Nasdaq Market Center MPIDs. 
The firm's shares of liquidity as a percentage of Consolidated Volume 
rose to 0.053%, an increase of over 20% over its Growth Baseline. The 
member qualifies for the credit, since it has met the criteria of Rule 
7014(j)(i) and 7014(j)(ii)(A). The member's Growth Baseline is updated 
to 0.053% (its January 2017 volume).
     In February 2017, the firm added more than 750,000 shares 
a day on average through one or more of its Nasdaq Market Center MPIDs. 
The firm's shares of liquidity as a percentage of Consolidated Volume 
remained at 0.053%. The firm would still qualify for the credit, since 
it satisfied the criteria under Rule 7014(j)(i) (adding more than 
750,000 shares a day on average) and Rule 7014(j)(ii)(A) (increasing 
its volume by 20% over its Growth Baseline) in three separate months.
     Going forward, the firm would continue to qualify for the 
credit, as long as it continues to satisfy, on a monthly basis, the 
criteria under Rule 7014(j)(i) (adding more than 750,000 shares a day 
on average) and Rule 7014(j)(ii)(C) (maintaining or adding volume in 
comparison to the Growth Baseline that was established in the third 
month in which the firm qualified for the Program under Rule 
7014(j)(ii)(A)).
    The Exchange is adding this provision to provide firms with another 
way of qualifying for the Program. Currently, a firm may qualify for 
the Program in a given month if it met the criteria of Rule 
7014(j)(ii)(A) in the preceding month (increasing its volume by 20% 
over its Growth Baseline), and maintained or increased its volume 
compared to that previous month. The new provision is similar in that 
it allows a firm to continue to qualify for the Program if it maintains 
or increases its volume in a given month. The new provision differs, 
however, in that the firm must have qualified for the Program pursuant 
to Rule 7014(j)(ii)(A) (increasing its volume by 20% over its Growth 
Baseline) in three separate months. Nasdaq believes that this provision 
provides firms with additional flexibility in qualifying for the 
Program, and furthers the Program's goal of incentivizing participation 
on the Exchange.
Credit for Adding Liquidity on Nasdaq and NOM
    In the second change, Nasdaq proposes to amend one of the 
requirements in order to qualify for a credit for adding liquidity. 
Currently, a member will receive a credit if it meets a specified 
volume threshold on Nasdaq for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) that add liquidity, 
and also meets a specified volume threshold on NOM when adding 
liquidity. Specifically, a member will receive a credit of $0.0030 per 
share executed if the member (1) adds liquidity through one or more of 
its Nasdaq Market Center MPIDs during the month that, in all 
securities, represents at least 0.125% of Consolidated Volume during 
the month, and (2) adds Customer,\6\ Professional,\7\ Firm,\8\ Non-NOM 
Market Maker \9\ and/or Broker-Dealer \10\ liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options of 1.15% or more of total 
industry ADV in the customer clearing range for Equity and ETF option 
contracts per day during the month on NOM.
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    \6\ The term ``Customer'' 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 defined in Chapter I, Section 1 of the NOM 
rules.
    \7\ A ``Professional'' is defined in Chapter I, Section 1 of the 
NOM rules as ``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).''
    \8\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
    \9\ 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.
    \10\ 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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    Nasdaq proposes to reduce the volume threshold for providing 
liquidity on Nasdaq from 0.125% to 0.12%. Nasdaq notes that members 
will continue to receive the same credit as they currently receive if 
they meet the volume requirements. Nasdaq believes that this change 
more closely aligns the volume requirement for activity on Nasdaq with 
the current volume requirement for activity on NOM, and with the amount 
of the credit itself.
    The change to the volume threshold will be applied to transactions 
in securities of all three Tapes.\11\ The volume threshold is therefore 
being amended in Rules 7018(a)(1), (2), and (3), which provide the fees 
and credits for execution and routing of orders in Nasdaq-listed 
securities, NYSE-listed securities, and securities not listed on Nasdaq 
or NYSE, respectively.
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    \11\ Tape C securities are those that are listed on the 
Exchange, Tape A securities are those that are listed on the New 
York Stock Exchange (``NYSE''), and Tape B securities are those that 
are listed on exchanges other than Nasdaq or NYSE.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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Nasdaq Growth Program
    The Exchange believes that the proposed change to the Nasdaq Growth 
Program is reasonable, and notes that the amount of the credits 
provided under the Program is unchanged.\14\ Nasdaq believes that the 
proposed change is equitably allocated among members, and is not 
designed to permit unfair discrimination. Nasdaq notes that 
participation in the Program is voluntary, and that the proposed change 
applies to all members that otherwise qualify for the Program, e.g., 
members that add greater than 750,000 shares a day on average during 
the month through one or more of its [sic] Nasdaq Market Center MPIDs.
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    \14\ See Securities Exchange Act Release No. 78977 (September 
29, 2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132) 
(establishing the Nasdaq Growth Program and its credit structure).
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    In adopting Rule 7014(j)(ii)(C), Nasdaq is providing all members 
that otherwise qualify for the Program with an alternate way in which 
they may qualify for the Program by permitting members to either 
maintain or increase their volume in comparison to the last of three 
months in which they

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previously qualified for the Program under Rule 7014(j)(ii)(A). At the 
same time, the purpose of the Program is to increase members' 
participation on the Exchange by offering a credit to members that meet 
the volume requirements. Nasdaq therefore believes that it is equitable 
and not unfairly discriminatory to only permit members to qualify for 
the credit in this manner if they have qualified for the credit in 
three separate months under Rule 7014(j)(ii)(A) (increasing their 
volume by 20% or more in comparison to the Growth Baseline) and 
maintain or increase their volume in the current month.
    Nasdaq notes that, if a member qualifies for the credit under Rule 
7014(j)(ii)(C), it would continue to qualify for the credit under this 
provision going forward, as long as it continues to meet the criteria 
under Rule 7014(j)(i) (adding more than 750,000 shares a day on 
average) and Rule 7014(j)(ii)(C) (maintaining or adding volume in 
comparison to the Growth Baseline that was established in the third 
month in which the firm qualified for the Program under Rule 
7014(j)(ii)(A)). Nasdaq believes this aspect of the proposal is 
equitable and not unfairly discriminatory, as this way to receive an 
ongoing credit is open to any member that elects to meet the 
requirements under Rule 7014(j)(ii)(C).
    In sum, Nasdaq believes that this proposed change strikes an 
appropriate and equitable balance by expanding the number of members 
that may be eligible for the Program while continuing to incentivize 
other members that may not currently qualify for the Program to 
transact greater volume in order to become eligible for the Program.
Credit for Adding Liquidity on Nasdaq and NOM
    The Exchange believes that the proposed change to one of the volume 
requirements that is needed to qualify for the credit for adding 
liquidity on Nasdaq and NOM is reasonable, and notes that the amount of 
the credit provided under this provision is unchanged.\15\ Nasdaq 
believes that the proposed change is equitably allocated among members, 
and is not designed to permit unfair discrimination. By reducing the 
Nasdaq volume requirement, Nasdaq is potentially expanding the number 
of members that may qualify for the credit. Moreover, all similarly 
situated members are equally capable of qualifying for the credit if 
they choose to meet the new volume requirement, and the same credit 
will be paid to all members that meet the new and existing volume 
requirements.
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    \15\ See Securities Exchange Act Release No. 79791 (January 13, 
2017), 82 FR 7907 (January 23, 2017) (SR-NASDAQ-2017-002) 
(establishing the $0.0030 per share credit for adding liquidity on 
Nasdaq and NOM).
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    As with other credits that the Exchange provides, this credit is 
designed to encourage increased activity on Nasdaq and NOM. Nasdaq 
believes that the proposed Nasdaq volume requirement that is needed to 
qualify for the credit is equitable because it is more closely aligned 
with the current NOM volume requirement that is also needed to qualify 
for the credit, and is also more closely aligned with the amount of the 
credit itself. Nasdaq believes that the proposed requirement for 
qualifying for the credit is proportionate to the amount of the credit 
and equitably reflects the purpose of the credit, which is to 
incentivize members to transact greater volume on Nasdaq and NOM.
    Finally, the Exchange notes that the proposed volume threshold is 
consistent with other volume-based credits that the Exchange offers to 
members for displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) that provide liquidity. Nasdaq currently 
offers a variety of credits for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) that add liquidity, 
some of which are linked to activity on NOM and some of which relate to 
activity on Nasdaq only, which range from $0.0015 per share executed to 
$0.00305 per share executed, and which apply progressively more 
stringent requirements in return for higher per share executed credits.
    Here, the member would receive a $0.0030 per share credit for 
adding liquidity of at least 0.12% of Consolidated Volume on Nasdaq, 
and adding Customer, Professional, Firm, Non-NOM Market Maker and/or 
Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of 1.15% or more of total industry ADV in the customer clearing 
range for Equity and ETF option contracts per day during the month on 
NOM. In comparison, the Exchange currently offers a credit of $0.0027 
per share executed if the member added liquidity during the month 
representing more than 0.10% of Consolidated Volume through one or more 
of its Nasdaq Market Center MPIDs, and added Customer, Professional, 
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Non-Penny 
Pilot Options of 0.40% or more of total industry ADV in the customer 
clearing range for Equity and ETF option contracts per day in a month 
on NOM.

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. 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 
fees to remain competitive with other exchanges and with alternative 
trading systems that have been exempted from compliance with the 
statutory standards applicable to exchanges. Because competitors are 
free to modify their own fees in response, and because market 
participants may readily adjust their order routing practices, the 
Exchange believes that the degree to which fee changes in this market 
may impose any burden on competition is extremely limited.
    With respect to the proposed change to the Nasdaq Growth Program, 
participation in the Program is voluntary. The proposed change will 
provide members with another way in which they may qualify for the 
Program, and will apply equally to all members who otherwise qualify 
for the Program and that elect to meet the requirements under Rule 
7014(j)(ii)(C).
    With respect to the proposed change to the volume requirement for 
the credit for adding liquidity on Nasdaq and NOM, the Exchange's 
execution services are completely voluntary and are subject to 
extensive competition both from other exchanges and from off-exchange 
venues. The new volume requirement applies equally to all members, and 
all similarly situated members are equally capable of qualifying for 
the credit if they choose to meet the new volume and current volume 
requirements. Moreover, the same credit will be paid to all members 
that qualify for the proposed and current volume requirements. Finally, 
the proposed change is designed to reward market-improving behavior by 
more closely aligning a requirement necessary to qualify for the credit 
with the actual credit. Thus, the Exchange does not believe that this 
proposed change will impose any burden on competition, but may rather 
promote competition.
    In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that the

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Exchange will lose market share as a result. Accordingly, the Exchange 
does not believe that the proposed changes will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\16\
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    \16\ 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-2017-016 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-2017-016. 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 the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; 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-2017-016, and should 
be submitted on or before March 15, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03460 Filed 2-21-17; 8:45 am]
 BILLING CODE 8011-01-P


