[Federal Register Volume 83, Number 73 (Monday, April 16, 2018)]
[Notices]
[Pages 16410-16411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07807]



[[Page 16410]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83025; File No. SR-NASDAQ-2018-025]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7018(a)

April 10, 2018.
    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 March 29, 2018, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

Self-Regulatory Organization's Statement of the Terms of Substance of 
the Proposed Rule Change

    The Exchange proposes to amend Rule 7018(a) to modify the system of 
credits it offers to members that add liquidity in securities that are 
listed on exchanges other than Nasdaq or the New York Stock Exchange 
(``NYSE''), as described further below. While these amendments are 
effective upon filing, the Exchange has designated the proposed 
amendments to be operative on April 2, 2018.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.cchwallstreet.com/, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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.

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 7018(a) to modify the current system of 
credits it provides to members that add liquidity in securities that 
are listed on exchanges other than Nasdaq or NYSE. These changes are 
described below.
    The Exchange proposes to modify one and eliminate another one of 
the volume-based credits that it currently offers for displayed quotes/
orders (other than Supplemental Orders or Designated Retail Orders) 
that provide liquidity on Nasdaq in Tape B Securities. Currently, in 
addition to other credits that the Exchange offers to members for 
providing liquidity, the Exchange offers a member a credit of $0.0001 
per share executed if the member provides liquidity in securities that 
are listed on exchanges other than Nasdaq or NYSE during the month 
representing at least 0.06% but less than 0.12% of Consolidated Volume 
during the month through one or more of the member's Nasdaq Market 
Center MPIDs. Nasdaq proposes to change the threshold for the first 
credit, so that a member will receive a credit of $0.0001 per share 
executed if it provides liquidity in securities that are listed on 
exchanges other than Nasdaq or NYSE during the month representing at 
least 0.10% of Consolidated Volume during the month through one or more 
of its Nasdaq Market Center MPIDs. The proposal will eliminate the 
upper 0.12% Consolidated Volume threshold for the credit.
    Second, Nasdaq proposes to eliminate the next credit tier for 
members that provide liquidity in securities that are listed on 
exchanges other than Nasdaq or NYSE. Currently, in addition to other 
credits that the Exchange offers to members for providing liquidity, 
the Exchange offers a member a credit of $0.0002 per share executed if 
the member provides liquidity in securities that are listed on 
exchanges other than Nasdaq or NYSE during the month representing at 
least 0.12% of Consolidated Volume during the month through one or more 
of the member's Nasdaq Market Center MPIDs. Again, Nasdaq proposes to 
eliminate this credit.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\3\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\4\ 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.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \5\
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Likewise, in NetCoalition v. Securities and Exchange Commission \6\ 
(``NetCoalition'') the D.C. Circuit upheld the Commission's use of a 
market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\7\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \8\
---------------------------------------------------------------------------

    \6\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \7\ See NetCoalition, at 534-535.
    \8\ Id. at 537.
---------------------------------------------------------------------------

    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \9\
---------------------------------------------------------------------------

    \9\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

    Nasdaq believes that the proposed changes to the current credits 
for transactions in Tape B Securities are

[[Page 16411]]

reasonable, equitable and not unfairly discriminatory. Nasdaq believes 
that its proposals to eliminate the $0.0002 per share credit and 
increase the volume threshold for the $0.0001 per share credit are 
reasonable because the current system of credits has not been effective 
in achieving its intended objective of incentivizing members to 
transact greater volume on Nasdaq in Tape B Securities. The Exchange's 
proposal will not eliminate this incentive program altogether, but it 
will instead adjust the incentive structure so that the cost of the 
program is more aligned with the benefit it brings to the market. The 
Exchange has limited resources available to it to devote to the 
operation of special pricing programs and as such, it is reasonable and 
equitable for the Exchange to allocate those resources to those 
programs that are effective and away from those programs that are 
ineffective. The proposals are also equitable and not unfairly 
discriminatory because the proposed changes to the credits will apply 
uniformly to all similarly situated members. Moreover, all similarly 
situated members are equally capable of qualifying for the modified 
credit if they choose to meet the volume requirements, and the same 
credit will be paid to all members that qualify for it.

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.
    The proposed changes to the existing credits for transactions in 
Tape B Securities do not impose a burden on competition because the 
Exchange's execution services are completely voluntary. All similarly 
situated members are equally capable of qualifying for modified credit 
if they choose to meet the volume requirements, and the same credit 
will be paid to all members that qualify for it.
    In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that the 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.\10\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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 [email protected]. Please include 
File Number SR-NASDAQ-2018-025 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-2018-025. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2018-025, and should be submitted 
on or before May 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07807 Filed 4-13-18; 8:45 am]
 BILLING CODE 8011-01-P


