
[Federal Register Volume 82, Number 142 (Wednesday, July 26, 2017)]
[Notices]
[Pages 34721-34723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15637]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81182; File No. SR-NASDAQ-2017-070]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Qualification Criteria Under the Qualified Market Maker Program 
at Rule 7014

July 20, 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 July 10, 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 amend qualification criteria under the 
Qualified Market Maker Program at Rule 7014. While these amendments are 
effective upon filing, the Exchange has designated the proposed 
amendments to be operative on July 1, 2017.\3\
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    \3\ The Exchange initially filed the proposed pricing changes on 
June 28, 2017 (SR-NASDAQ-2017-066). On July 10, 2017, the Exchange 
withdrew that filing and submitted this filing. This filing corrects 
a marking error to the Exhibit 5 and clarifies the statutory basis 
discussion.
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    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 
fees at Rule 7014 to raise the combined Consolidated Volume (adding and 
removing liquidity) criteria from the current requirement that a QMM 
have at least 3.5% to now require at least 3.7%, which a QMM must have 
to be eligible for a $0.0029 per share executed charge for orders in 
securities listed on exchanges other than Nasdaq priced at $1 or more 
per share that access liquidity on the Nasdaq Market Center.
    A QMM is a member that makes a significant contribution to market 
quality by providing liquidity at the national best bid and offer 
(``NBBO'') in a large number of stocks for a significant portion of the 
day.\4\ In addition, the

[[Page 34722]]

member must avoid imposing the burdens on Nasdaq and its market 
participants that may be associated with excessive rates of entry of 
orders away from the inside and/or order cancellation.\5\ The 
designation reflects the QMM's commitment to provide meaningful and 
consistent support to market quality and price discovery by extensive 
quoting at the NBBO in a large number of securities. In return for its 
contributions, certain financial benefits are provided to a QMM with 
respect to its order activity, as described under Rule 7014(e). These 
benefits include a lower rate charged for executions of orders in 
securities priced at $1 or more per share that access liquidity on the 
Nasdaq Market Center.\6\
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    \4\ See Rule 7014(d).
    \5\ Id.
    \6\ See Rule 7014(e).
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    Under Rule 7014(e), the Exchange charges a QMM $0.0030 per share 
executed for removing liquidity in Nasdaq-listed securities priced at 
$1 or more, and $0.00295 per share executed for removing liquidity in 
securities priced at $1 or more per share listed on exchanges other 
than Nasdaq, if the QMM's volume of liquidity added through one or more 
of its Nasdaq Market Center MPIDs during the month (as a percentage of 
Consolidated Volume) is not less than 0.80%. The Exchange assesses a 
charge of $0.0029 per share executed for removing liquidity in 
securities priced at $1 or more per share listed on exchanges other 
than Nasdaq if the QMM has a combined Consolidated Volume (adding and 
removing liquidity) of at least 3.5%, and the QMM also meets the QMM 
Tier 2 qualification criteria. The QMM Tier 2 qualification criteria 
requires a QMM to execute shares of liquidity provided in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represent above 0.90% of Consolidated Volume during the month.
    The Exchange is proposing to increase the combined Consolidated 
Volume (adding and removing liquidity) requirement to at least 3.7%. 
This increase is reflective of the Exchange's desire to provide 
incentives to attract order flow to the Exchange in securities listed 
on exchanges other than Nasdaq in return for significant market-
improving behavior. The modest increase in the qualification criteria 
will help ensure that QMMs are providing significant market-improving 
behavior.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the $0.0029 per share executed charge 
for removing liquidity in securities priced at $1 or more per share 
listed on exchanges other than Nasdaq will continue to be reasonable 
because the fee will remain unchanged. When the Exchange adopted the 
fee,\9\ it believed that assessing the fee was reasonable because it 
was set at a level that is lower than the standard removal fee of 
$0.0030 per share executed, thereby providing an incentive to market 
participants, and it was also based on the Exchange's analysis of the 
cost to the Exchange of offering a lower fee, thereby decreasing the 
revenue derived from transactions by members that qualify for the fee, 
and the desired benefit to the market provided by the members that meet 
the fee's qualification criteria. The Exchange noted that the fee's 
qualification criteria provided an incentive to members to increase 
their participation in the market as measured by Consolidated Volume, 
which benefits all market participants. The Exchange also noted that 
members may qualify for a $0.00295 per share executed fee for removing 
liquidity in Tape A or B securities priced at $1 or more if the 
member's volume of liquidity added through one or more of its Nasdaq 
Market Center MPIDs during the month (as a percentage of Consolidated 
Volume) is not less than 0.80%. The Exchange explained that the 
proposed fee would continue to require a member to both qualify under 
the Tier 2 criteria that requires the member to execute shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent above 0.90% of Consolidated Volume 
during the month, and also provide an increased combined Consolidated 
Volume (adding and removing liquidity) requirement (which the Exchange 
is proposing to increase from at least 3.5% to 3.7%). Consequently, the 
Exchange noted that to qualify for a lower transaction fee for removing 
liquidity in Tape A or B securities under the QMM Program, the member 
must both provide greater Consolidated Volume through adding liquidity 
during the month (i.e., 0.90% versus 0.80%) and provide a certain level 
of combined Consolidated Volume, which accounts for both adding 
liquidity and removing liquidity. As noted above, the Exchange is not 
proposing to change the fee and the analysis described above remains 
valid. Accordingly, the Exchange believes that the fee remains 
reasonable.
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    \9\ See Securities Exchange Act Release No. 78977 (September 29, 
2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-032).
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    The Exchange believes that the increase to the combined 
Consolidated Volume qualification criteria is an equitable allocation 
and is not unfairly discriminatory because it is reflective of the 
success that the lower charge tier has had in promoting beneficial 
market participation, as measured by combined Consolidated Volume 
(adding and removing liquidity). The Exchange believes that the level 
of combined Consolidated Volume may be increased without resulting in a 
significant reduction in the number of QMMs that will likely qualify 
for the lower transaction fee. Consequently, the beneficial market 
participation should remain the same, and possibly increase. Moreover, 
the Exchange is not limiting which QMMs may qualify for the reduced 
charge. As noted, the QMM Program is intended to encourage members to 
promote price discovery and market quality by quoting at the NBBO for a 
significant portion of each day in a large number of securities, 
thereby benefitting Nasdaq and other investors by committing capital to 
support the execution of orders. To receive the $0.0029 per share 
executed charge, a member must meet the Tier 2 criteria, which requires 
the QMM to execute shares of liquidity provided in all securities 
through one or more of its Nasdaq Market Center MPIDs that represent 
above 0.90% of Consolidated Volume during the month. In addition, the 
QMM must provide a certain level of combined Consolidated Volume, which 
accounts for both adding liquidity and removing liquidity. The Exchange 
is proposing to increase the required combined Consolidated Volume 
requirement to make the qualification criteria required to receive the 
incentive more meaningful to QMMs in terms of the beneficial market 
activity required to receive the reduced charge, which is reflective of 
the Exchange's belief that QMMs may continue to qualify for the reduced 
charge while also providing more beneficial market participation. The 
Exchange uses Consolidated Volume as a measure of the QMM's activity in 
comparison to that of the market as a whole. Thus, the

[[Page 34723]]

modestly increased combined Consolidated Volume criteria required to 
qualify for the fee does not discriminate unfairly and is equitably 
allocated, as eligibility for the fee is tied to the QMM's performance 
in comparison to other participants in aggregate.

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.
    In this instance, although the change to the QMM program may limit 
the benefits of the program in non-Nasdaq-listed securities to the 
extent QMMs that currently qualify for the $0.0029 per share executed 
charge are unable to meet the more stringent combined Consolidated 
Volume requirement, the incentive in question will remain in place and 
is itself reflective of the need for exchanges to offer significant 
financial incentives to attract order flow in return for meaningful 
market-improving behavior. The Exchange believes that the proposed 
qualification criteria will not negatively impact who will qualify for 
the $0.0029 per share executed charge but will rather have a positive 
impact on overall market quality as QMMs increase their participation 
in the market to qualify for the lower charge. If, however, the 
Exchange is incorrect and the changes proposed herein are unattractive 
to QMMs, 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 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.\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-2017-070 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-2017-070. 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-2017-070, and should 
be submitted on or before August 16, 2017.
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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\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15637 Filed 7-25-17; 8:45 am]
 BILLING CODE 8011-01-P


