[Federal Register Volume 84, Number 194 (Monday, October 7, 2019)]
[Notices]
[Pages 53504-53506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21732]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87186; File No. SR-NASDAQ-2019-080]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt Fees for the MIDP Routing Option

October 1, 2019.
    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 September 18, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt fees for the MIDP order routing 
option.
    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.

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 Exchange is proposing \3\ to adopt fees for the MIDP order 
routing option.\4\ MIDP is an order routing \5\ option under Rule 
4758(a)(1)(A), which will allow members to seek midpoint liquidity on 
Nasdaq and other markets on the System routing table.\6\ Specifically, 
the MIDP order routing option may be assigned only to a Non-Displayed 
Order Type \7\ with a Midpoint Pegging Order Attribute.\8\ An Order 
with MIDP to buy (sell) will check the System for available shares and 
then the remaining shares are routed to destinations on the System 
routing table \9\ that support midpoint eligible orders with a limit 
price that is at the lesser (greater) of: (1) The current NBO (NBB); or 
(2) the Order's entered limit price (if applicable).\10\ If shares 
remain unexecuted after routing, the Order returns to Nasdaq and will 
check the System for available shares, with remaining shares posted on 
the Nasdaq Book \11\ as a Non-Displayed Order with a Midpoint Pegging 
Order Attribute (unless an IOC).\12\
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    \3\ The Exchange initially filed the proposed pricing changes on 
August 27, 2019 (SR-NASDAQ-2019-068). On September 9, 2019, the 
Exchange withdrew that filing and submitted a replacement filing 
(SR-NASDAQ-2019-076). On September 18, 2019, the exchange withdrew 
that filing and submitted this filing.
    \4\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2019-60; see also Securities Exchange Act Release No. 86087 (June 11, 
2019), 84 FR 28117 (June 17, 2019) (SR-NASDAQ-2019-050).
    \5\ Routing is an Order Attribute that allows a Participant to 
designate an Order to employ one of several Routing Strategies (also 
called ``routing options'') offered by Nasdaq, as described in Rule 
4758; such an Order may be referred to as a ``Routable Order.'' Upon 
receipt of an Order with the Routing Order Attribute, the System 
will process the Order in accordance with the applicable Routing 
Strategy. In the case of a limited number of Routing Strategies, the 
Order will be sent directly to other market centers for potential 
execution. For most other Routing Strategies, including MIDP, the 
Order will attempt to access liquidity available on Nasdaq in the 
manner specified for the underlying Order Type and will then be 
routed in accordance with the applicable Routing Strategy. Shares of 
the Order that cannot be executed are then returned to Nasdaq, where 
they will (i) again attempt to access liquidity available on Nasdaq 
and (ii) post to the Nasdaq Book or be cancelled, depending on the 
Time-in-Force of the Order. See Rule 4703(f).
    \6\ The term ``System routing table'' refers to the proprietary 
process for determining the specific trading venues to which the 
System routes orders and the order in which it routes them. Nasdaq 
reserves the right to maintain a different System routing table for 
different routing options and to modify the System routing table at 
any time without notice. See Rule 4758(a)(1)(A).
    \7\ See Rule 4702(b)(3).
    \8\ Midpoint Pegging means Pegging with reference to the 
midpoint between the Inside Bid and the Inside Offer (the 
``Midpoint''). See Rule 4703(d).
    \9\ The Order is routed sequentially to the various venues on 
the System routing table in the full amount. An Order with MIDP and 
a Minimum Quantity Order Attribute will similarly route to the 
venues sequentially.
    \10\ If the entered limit price of a buy (sell) Order entered 
with MIDP is less (greater) than the current Midpoint price, the 
Order will not be routed but will instead be posted on the Nasdaq 
Book as a Midpoint Peg Order (if not an IOC). Once on the Nasdaq 
Book, if the NBBO moves and the Order's limit price is equal to the 
midpoint of the NBBO, the Order would not subsequently route. If the 
NBBO updates so that a resting Order with MIDP should be updated to 
a new midpoint price, it will be routed again and if shares remain 
unexecuted after routing, the Order will check the System for 
available shares with remaining shares reposted to the Nasdaq Book.
    \11\ See Rule 4701(a).
    \12\ An Order with the MIDP routing option will only be accepted 
with a Time-in-Force of Market Hours DAY or IOC and may not be 
flagged to participate in any of the Nasdaq Crosses. Unexecuted 
shares of an order with the MIDP routing option will check the 
System for available shares with remaining shares posted on the 
Nasdaq Book (unless an IOC Order) as a Non-Displayed Order with a 
Midpoint Pegging Order Attribute.
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    The Exchange is proposing to adopt fees under Equity 7, Section 
118(a) for use of the MIDP order routing option. First, the Exchange is 
proposing to adopt a fee of $0.0030 per share executed in securities of 
all three Tapes,\13\ charged to a member entering an MIDP Order that 
routes and executes at venues with a protected quotation under 
Regulation NMS other than BX, or Nasdaq. Rule 600(b)(62) of Regulation 
NMS defines a protected quotation as a protected bid or a protected 
offer, which are defined as a quotation in an NMS stock that: (i) Is 
displayed by an automated trading center; \14\ (ii) is disseminated 
pursuant to an effective national market system plan; and (iii) is

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an automated quotation that is the best bid or best offer of a national 
securities exchange, the best bid or best offer of The Nasdaq Stock 
Market, Inc., or the best bid or best offer of a national securities 
association other than the best bid or best offer of The Nasdaq Stock 
Market, Inc.\15\ The Exchange is proposing to adopt a $0.0012 per share 
executed fee in securities of all three Tapes, charged to a member 
entering an MIDP Order that routes and executes at venues ineligible 
for a protected quotation under Regulation NMS. The Exchange is 
proposing to not charge members for entering an MIDP Order that routes 
and executes at BX.
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    \13\ Securities listed on Nasdaq are Tape C securities, 
securities listed on NYSE are Tape A securities, and securities 
listed on exchanges other than Nasdaq and NYSE are Tape B securities 
(collectively, the ``Tapes'').
    \14\ Trading center is defined as a national securities exchange 
or national securities association that operates an SRO trading 
facility, an alternative trading system, an exchange market maker, 
an OTC market maker, or any other broker or dealer that executes 
orders internally by trading as principal or crossing orders as 
agent. See Rule 600(b)(82) of Regulation NMS. An automated trading 
center is a trading center that: (i) Has implemented such systems, 
procedures, and rules as are necessary to render it capable of 
displaying quotations that meet the requirements for an automated 
quotation set forth in Rule 600(b)(4) of Regulation NMS; (ii) 
identifies all quotations other than automated quotations as manual 
quotations; (iii) immediately identifies its quotations as manual 
quotations whenever it has reason to believe that it is not capable 
of displaying automated quotations; and (iv) has adopted reasonable 
standards limiting when its quotations change from automated 
quotations to manual quotations, and vice versa, to specifically 
defined circumstances that promote fair and efficient access to its 
automated quotations and are consistent with the maintenance of fair 
and orderly markets. See Rule 600(b)(5) of Regulation NMS.
    \15\ See Rule 600(b)(61) of Regulation NMS.
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    The Exchange is also proposing to assess the applicable charges and 
credits under Equity 7, Sections 114 \16\ and 118(a) to a member 
entering an MIDP Order that routes and executes at Nasdaq. Thus, a 
liquidity-removing MIDP Order on Nasdaq would be charged a fee based on 
the tier that the member qualifies for under the fee schedule of each 
of the Tapes for removing liquidity, and a liquidity-adding MIDP Order 
on Nasdaq would be provided a credit, depending on the tier that the 
member qualifies for under the fee schedule of each of the Tapes for 
providing liquidity. Last, the Exchange is proposing to assess the 
existing fee of 0.3% of the total transaction cost to a member with a 
MIDP Order in a security priced at less than $1 that receives an 
execution.\17\
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    \16\ Equity 7, Section 114 provides the Exchange's market 
quality incentive programs, which provide beneficial pricing in lieu 
of, or in addition to, the fees and credits provided under Equity 7, 
Section 118(a).
    \17\ See Equity 7, Section 118(b).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\18\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that its proposal is reasonable, equitable 
and not unfairly discriminatory because the pricing proposed above for 
MIDP Orders is generally set at levels that the Exchange is assessed 
for the execution of such orders at away venues. The Exchange believes 
that it is reasonable, equitable and not unfairly discriminatory to 
assess a $0.0030 per share executed fee for securities in all three 
Tapes priced at $1 or more per share to a member that enters an MIDP 
Order that routes and executes at venues with a protected quotation 
under Regulation NMS other than BX, or Nasdaq because, as an example, 
PHLX assesses a standard transaction charge of $0.0030 per share 
executed to a member organization that enters an order in a security 
that it trades priced at $1 or more per share that executes in Nasdaq 
PSX.\20\ Similarly, CBOE BZX assesses a standard fee of $0.0030 per 
share executed for orders that remove liquidity.\21\
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    \20\ See PHLX Equity 7, Section 3.
    \21\ See Cboe BZX U.S. Equities Exchange Fee Schedule, available 
at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to assess a fee of $0.0012 per share executed 
for securities in all three Tapes priced at $1 or more per share to a 
member that enters an MIDP Order that routes and executes at venues 
ineligible for a protected quotation under Regulation NMS because the 
Exchange is assessed various fees for the execution of such orders at 
away venues and the proposed fee is reflective of the value provided by 
the Exchange in providing this functionality and the overall fees 
assessed by such venues.
    The Exchange believes that assessing no charge for an MIDP Order 
that routes and executes at BX is reasonable, equitable and not 
unfairly discriminatory because it is reflective of the fee assessed 
the Exchange for the execution of such orders at BX, which currently 
assesses no fee for an Order with Midpoint pegging that removes 
liquidity.\22\ Similarly, the Exchange believes that it is reasonable, 
equitable and not unfairly discriminatory to apply the applicable 
charges as provided in Equity 7, Sections 114 and 118(a) to a member 
that enters an MIDP Order that routes and removes liquidity from Nasdaq 
because such fees are reflective of the fees that other similarly 
situated members would receive for execution of Orders on Nasdaq. For 
the same reason, the Exchange believes that it is reasonable, equitable 
and not unfairly discriminatory to apply the applicable credits as 
provided in Equity 7, Sections 114 and 118(a) to a member that enters 
an MIDP Order that routes and provides liquidity to Nasdaq.
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    \22\ See BX Equity 7, Section 118(a).
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    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to assess the proposed charge for MIDP Orders 
in any Tape securities priced below $1 per share because it is 
consistent with what it currently charges for all orders in securities 
priced at less than $1 per share that execute on Nasdaq or at an away 
venue.\23\ Last, the Exchange believes that the proposed pricing 
changes are equitable and not unfairly discriminatory because they will 
apply uniformly to all members.
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    \23\ See Equity 7, Section 118(b).
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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, the proposed pricing for MIDP Orders are intended 
to recoup the Exchange's costs associated with providing routing 
services, which are wholly optional. As discussed above, the Exchange 
believes that its proposed pricing remains competitive with other 
equity exchanges, as they are reflective of the costs incurred by the 
Exchange in receiving executions of routed midpoint orders to the 
various venues. In addition, because the Exchange's routing services 
are the subject of competition, including price competition, from other 
exchanges and broker-dealers that offer routing services, as well as 
the ability of members to use their own routing capabilities, it is 
likely that the Exchange will lose market share as a result of the 
proposed fees if they are unattractive to market participants. In this 
regard, the Exchange notes that the proposed fees are similar to the 
RMPT and RMPL routing strategies of BYX and

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EDGA,\24\ respectively, which may be used with a Mid-Point Peg Order to 
check the exchanges' respective Systems for available shares and any 
remaining shares are then sent to destinations on their routing tables 
that support midpoint eligible orders. 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.
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    \24\ See Cboe BYX U.S. Equities Exchange Fee Schedule (available 
at https://markets.cboe.com/us/equities/membership/fee_schedule/byx/
) and Cboe EDGA U.S. Equities Exchange Fee Schedule (available at 
https://markets.cboe.com/us/equities/membership/fee_schedule/edga/).
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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.\25\
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    \25\ 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-2019-080 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-2019-080. 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 such 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-2019-080, and should be submitted 
on or before October 28, 2019.
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    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21732 Filed 10-4-19; 8:45 am]
 BILLING CODE 8011-01-P


