[Federal Register Volume 86, Number 179 (Monday, September 20, 2021)]
[Notices]
[Pages 52273-52278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20214]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92974; File No. SR-NASDAQ-2021-069]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend The Nasdaq Options Market's Pricing Schedule at Options 7, 
Section 2(1)

September 14, 2021.
    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 1, 2021, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend The Nasdaq Options Market's 
(``NOM'') Pricing Schedule at Options 7, Section 2(1).
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 NOM's Pricing 
Schedule at Options 7, Section 2(1) to amend the (i) Customer \3\ and 
Professional \4\ Rebates to Add Liquidity in Penny Symbols, and (ii) 
Tier 3 Market Maker \5\ Rebate to Add Liquidity in Penny Symbols.
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    \3\ The term ``Customer'' or (``C'') 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 that term is defined in Options 1, Section 
1(a)(47)).
    \4\ The term ``Professional'' or (``P'') means 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) pursuant 
to Options 1, Section 1(a)(47). All Professional orders shall be 
appropriately marked by Participants.
    \5\ The term ``NOM Market Maker'' or (``M'') is a Participant 
that has registered as a Market Maker on NOM pursuant to Options 2, 
Section 1, and must also remain in good standing pursuant to Options 
2, Section 9. In order to receive NOM Market Maker pricing in all 
securities, the Participant must be registered as a NOM Market Maker 
in at least one security.
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Customer and Professional Rebate To Add Liquidity in Penny Symbols
    Today, the Exchange pays tiered Customer and Professional Rebates 
to Add Liquidity in Penny Symbols that are $0.20 (Tier 1), $0.25 (Tier 
2), $0.42 (Tier 3), $0.43 (Tier 4), $0.45 (Tier 5), and $0.48 (Tier 6). 
These rebates are paid per the highest tier achieved below.

------------------------------------------------------------------------
        Monthly volume
------------------------------------------------------------------------
Tier 1.......................  Participant adds Customer, Professional,
                                Firm, Non-NOM Market Maker and/or Broker-
                                Dealer liquidity in Penny Symbols and/or
                                Non-Penny Symbols of up to 0.10% of
                                total industry customer equity and ETF
                                option average daily volume (``ADV'')
                                contracts per day in a month.
Tier 2.......................  Participant adds Customer, Professional,
                                Firm, Non-NOM Market Maker and/or Broker-
                                Dealer liquidity in Penny Symbols and/or
                                Non-Penny Symbols above 0.10% to 0.20%
                                of total industry customer equity and
                                ETF option ADV contracts per day in a
                                month.
Tier 3.......................  Participant adds Customer, Professional,
                                Firm, Non-NOM Market Maker and/or Broker-
                                Dealer liquidity in Penny Symbols and/or
                                Non-Penny Symbols above 0.20% to 0.30%
                                of total industry customer equity and
                                ETF option ADV contracts per day in a
                                month.
Tier 4.......................  Participant adds Customer, Professional,
                                Firm, Non-NOM Market Maker and/or Broker-
                                Dealer liquidity in Penny Symbols and/or
                                Non-Penny Symbols above 0.30% to 0.40%
                                of total industry customer equity and
                                ETF option ADV contracts per day in a
                                month.
Tier 5.......................  Participant adds Customer, Professional,
                                Firm, Non-NOM Market Maker and/or Broker-
                                Dealer liquidity in Penny Symbols and/or
                                Non-Penny Symbols above 0.40% to 0.80%
                                of total industry customer equity and
                                ETF option ADV contracts per day in a
                                month.

[[Page 52274]]

 
Tier 6.......................  Participant adds Customer, Professional,
                                Firm, Non-NOM Market Maker and/or Broker-
                                Dealer liquidity in Penny Symbols and/or
                                Non-Penny Symbols above 0.80% or more of
                                total industry customer equity and ETF
                                option ADV contracts per day in a month,
                                or Participant adds: (1) Customer and/or
                                Professional liquidity in Penny Symbols
                                and/or Non-Penny Symbols of 0.20% or
                                more of total industry customer equity
                                and ETF option ADV contracts per day in
                                a month, and (2) has added liquidity in
                                all securities through one or more of
                                its Nasdaq Market Center MPIDs that
                                represent 1.00% or more of Consolidated
                                Volume in a month or qualifies for MARS
                                (defined below).
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    In addition, the Exchange currently ties the tiered Penny Symbol 
add liquidity rebate program described above to its Market Access and 
Routing Subsidy (``MARS'') program in Section 2(4) as a means to 
attract additional liquidity to the Exchange from market participants. 
Under MARS, the Exchange pays qualifying Participants to subsidize 
their costs of providing routing services to route orders to NOM. To 
qualify for MARS, Participants must have System Eligibility.\6\ In 
addition, Participants that have System Eligibility, and have routed 
and executed the requisite number of Eligible Contracts \7\ daily in a 
month (``Average Daily Volume'' or ``ADV'') that add liquidity on NOM 
are entitled to tiered MARS Payments, which are currently paid per the 
highest tier achieved below.\8\
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    \6\ Specifically, to qualify for MARS, the Participant's routing 
system (``System'') would be required to: (1) Enable the electronic 
routing of orders to all of the U.S. options exchanges, including 
NOM; (2) provide current consolidated market data from the U.S. 
options exchanges; and (3) be capable of interfacing with NOM's API 
to access current NOM match engine functionality. Further, the 
Participant's System would also need to cause NOM to be the one of 
the top three default destination exchanges for (a) individually 
executed marketable orders if NOM is at the national best bid or 
offer (``NBBO''), regardless of size or time or (b) orders that 
establish a new NBBO on NOM's Order Book, but allow any user to 
manually override NOM as a default destination on an order-by-order 
basis. Any NOM Participant would be permitted to avail itself of 
this arrangement, provided that its order routing functionality 
incorporates the features described above and satisfies NOM that it 
appears to be robust and reliable. The Participant remains solely 
responsible for implementing and operating its System.
    \7\ For the purpose of qualifying for the MARS Payment, Eligible 
Contracts may include Firm, Non-NOM Market Maker, Broker-Dealer, or 
Joint Back Office or ``JBO'' equity option orders that add liquidity 
and are electronically delivered and executed. Eligible Contracts do 
not include Mini Option orders.
    \8\ The specified MARS Payment will be paid on all executed 
Eligible Contracts that add liquidity, which are routed to NOM 
through a participating NOM Participant's System and meet the 
requisite Eligible Contracts ADV. No payment will be made with 
respect to orders that are routed to NOM, but not executed. 
Furthermore, a Participant will not be entitled to receive any other 
revenue from the Exchange for the use of its System specifically 
with respect to orders routed to NOM.

------------------------------------------------------------------------
                                                           Average daily
                          Tiers                               volume
                                                             (``ADV'')
------------------------------------------------------------------------
1.......................................................           2,000
2.......................................................           5,000
3.......................................................          10,000
4.......................................................          20,000
5.......................................................          45,000
6.......................................................          75,000
7.......................................................         100,000
8.......................................................         125,000
9.......................................................         150,000
------------------------------------------------------------------------

    One of the present ways that the Exchange ties the tiered Penny 
Symbol add liquidity rebate program and MARS, each as described above, 
is through note ``8'' of Options 7, Section 2(1) where Participants 
that qualify for any MARS Payment Tier in Options 7, Section 2(4) 
receive: (1) An additional $0.05 per contract Penny Symbol Customer 
Rebate to Add Liquidity for each transaction which adds liquidity in 
Penny Symbols in that month, in addition to qualifying Customer Rebate 
to Add Liquidity Tiers 1, or (2) an additional $0.04 per contract Penny 
Symbol Customer Rebate to Add Liquidity for each transaction which adds 
liquidity in Penny Symbols in that month, in addition to qualifying 
Penny Symbol Customer Rebate to Add Liquidity Tiers 2-6.\9\ The purpose 
of the note ``8'' incentive is to attract additional order flow to NOM 
by way of encouraging participation in both the tiered Penny Symbol add 
liquidity Customer rebate program and in MARS.
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    \9\ Accordingly, a Participant that qualifies for the additional 
incentives in note ``8'' by executing the requisite MARS volume and 
qualifying for a Customer Rebate to Add Liquidity Tiers 1-6 in Penny 
Symbols can earn up to $0.25 in Tier 1, $0.29 in Tier 2, $0.46 in 
Tier 3, $0.47 in Tier 4, $0.49 in Tier 5, and $0.52 in Tier 6.
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    The Exchange now proposes a number of changes to the current tiered 
Penny Symbol add liquidity rebate program described above. The Exchange 
first proposes to increase the Tier 3 and Tier 4 Customer and 
Professional rebates from $0.42 to $0.43 per contract and from $0.43 to 
$0.44 per contract, respectively. The Exchange believes that the higher 
Tier 3 and Tier 4 rebates, together with the proposed changes described 
below, will further encourage Participants to reach for the higher 
Customer and Professional rebate tiers by bringing additional order 
flow that adds liquidity on the Exchange, which will be ultimately 
beneficial to all market participants.
    The Exchange also proposes to add an alternative route to achieve 
the proposed $0.43 per contract Tier 3 Customer and Professional Rebate 
to Add Liquidity in Penny Symbols that will be tied to MARS. 
Specifically, the Exchange proposes that Participants will also be 
eligible to receive the proposed $0.43 per contract Tier 3 Customer and 
Professional Rebate to Add Liquidity in Penny Symbols if the 
Participant adds Customer and/or Professional liquidity in Penny 
Symbols and/or Non-Penny Symbols of 0.15% to less than 0.20% of total 
industry customer equity and ETF option ADV contracts per day in a 
month and qualifies for MARS. The Exchange also proposes to make 
related changes by renumbering the existing method to qualify for the 
Tier 3 Customer and Professional rebate as paragraph (a) and the 
proposed alternative method as paragraph (b).\10\ By adding an 
alternative route to achieve the Tier 3 Customer and Professional 
rebate that is tied to MARS, the Exchange is seeking to incentivize 
Participants to increase their liquidity adding activity on NOM to 
improve the quality of the market.
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    \10\ As described above, the existing Tier 3 rebate 
qualification requires the Participant to add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer 
liquidity in Penny Symbols and/or Non-Penny Symbols above 0.20% to 
0.30% of total industry customer equity and ETF option ADV contracts 
per day in a month.
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    Lastly, the Exchange proposes to amend note 8 of Options 7, Section 
2(1) to increase the additional $0.04 per contract rebate currently 
offered to Participants that qualify for any MARS Payment Tier in 
addition qualifying for Penny Symbol Customer Rebates to Add Liquidity 
Tiers 2-5 to $0.05 per contract. As proposed, Participants may earn 
Customer Rebates to Add Liquidity in Penny Symbols up to $0.30 in Tier 
2, $0.48 in Tier 3, $0.49 in Tier 4, and $0.50 in Tier 5, provided they 
meet the note 8 qualifications.\11\ Participants that

[[Page 52275]]

qualify for the note 8 incentives will continue to be eligible to earn 
up to $0.25 for the Penny Symbol Customer Rebate to Add Liquidity in 
Tier 1 and $0.52 for the Penny Symbol Customer Rebate to Add Liquidity 
in Tier 6 as these incentives will not be amended under this proposal. 
The purpose of the proposed changes to the Penny Symbol Customer 
Rebates to Add Liquidity Tiers 2-5 is to further encourage Participants 
to bring additional Customer liquidity to the Exchange by reaching for 
the higher Customer tiers, and further fortify participation in MARS by 
encouraging Participants to route/execute the requisite number of 
Eligible Contracts that add liquidity in order to qualify for any of 
the MARS Payment Tier 1-9 describe above.
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    \11\ As proposed above, the Tier 3 and Tier 4 Customer Rebates 
to Add Liquidity in Penny Symbols will also be increased to $0.43 
and $0.44, respectively.
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Market Maker Rebate To Add Liquidity in Penny Symbols
    Today, the Exchange pays tiered Market Maker Rebates to Add 
Liquidity in Penny Symbols that are $0.20 (Tier 1), $0.25 (Tier 2), 
$0.30 (Tier 3),\12\ $0.32 (Tier 4),\13\ $0.44 (Tier 5), and $0.48 (Tier 
6). These rebates are paid per the highest tier achieved below.
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    \12\ This rebate is $0.40 per contract in the following symbols: 
AAPL, SPY, QQQ, IWM, and VXX. See Options 7, Section 2(1), note 4.
    \13\ Id.

------------------------------------------------------------------------
        Monthly volume
------------------------------------------------------------------------
Tier 1.......................  Participant adds NOM Market Maker
                                liquidity in Penny Symbols and/or Non-
                                Penny Symbols of up to 0.10% of total
                                industry customer equity and ETF option
                                average daily volume (``ADV'') contracts
                                per day in a month.
Tier 2.......................  Participant adds NOM Market Maker
                                liquidity in Penny Symbols and/or Non-
                                Penny Symbols above 0.10% to 0.20% of
                                total industry customer equity and ETF
                                option ADV contracts per day in a month.
Tier 3.......................  Participant: (a) Adds NOM Market Maker
                                liquidity in Penny Symbols and/or Non-
                                Penny Symbols above 0.20% to 0.60% of
                                total industry customer equity and ETF
                                option ADV contracts per day in a month:
                                or (b)(1) transacts in all securities
                                through one or more of its Nasdaq Market
                                Center MPIDs that represent 0.80% or
                                more of Consolidated Volume (``CV'')
                                which adds liquidity in the same month
                                on The Nasdaq Stock Market, (2)
                                transacts in Tape B securities through
                                one or more of its Nasdaq Market Center
                                MPIDs that represent 0.15% or more of CV
                                which adds liquidity in the same month
                                on The Nasdaq Stock Market, and (3)
                                executes greater than 0.01% of CV via
                                Market-on- Close/Limit-on-Close (``MOC/
                                LOC'') volume within The Nasdaq Stock
                                Market Closing Cross in the same month.
Tier 4.......................  Participant adds NOM Market Maker
                                liquidity in Penny Symbols and/or Non-
                                Penny Symbols of above 0.60% of total
                                industry customer equity and ETF option
                                ADV contracts per day in a month.
Tier 5.......................  Participant adds NOM Market Maker
                                liquidity in Penny Symbols and/or Non-
                                Penny Symbols of above 0.40% of total
                                industry customer equity and ETF option
                                ADV contracts per day in a month and
                                transacts in all securities through one
                                or more of its Nasdaq Market Center
                                MPIDs that represent 0.40% or more of
                                Consolidated Volume (``CV'') which adds
                                liquidity in the same month on The
                                Nasdaq Stock Market.
Tier 6.......................  Participant: (a)(1) Adds NOM Market Maker
                                liquidity in Penny Symbols and/or Non-
                                Penny Symbols above 0.95% of total
                                industry customer equity and ETF option
                                ADV contracts per day in a month, (2)
                                executes Total Volume of 250,000 or more
                                contracts per day in a month, of which
                                30,000 or more contracts per day in a
                                month must be removing liquidity, and
                                (3) adds Firm, Broker-Dealer and Non-NOM
                                Market Maker liquidity in Non-Penny
                                Symbols of 10,000 or more contracts per
                                day in a month; or (b)(1) adds NOM
                                Market Maker liquidity in Penny Symbols
                                and/or Non-Penny Symbols above 1.50% of
                                total industry customer equity and ETF
                                option ADV contracts per day in a month,
                                and (2) executes Total Volume of 250,000
                                or more contracts per day in a month, of
                                which 15,000 or more contracts per day
                                in a month must be removing liquidity.
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    As set forth above, the Exchange currently offers two different 
paths in (a) and (b) for Participants to achieve the Tier 3 Market 
Maker rebate. The Exchange now proposes to amend the Tier 3 
qualifications in (b) as follows: \14\
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    \14\ The Exchange will also correct a punctuation error in Tier 
3.

    Participant . . . (b)(1) adds NOM Market Maker liquidity in 
Penny Symbols and/or Non-Penny Symbols above 0.07% to 0.20% of total 
industry customer equity and ETF option ADV contracts per day in a 
month, (2) transacts in all securities through one or more of its 
Nasdaq Market Center MPIDs that represent 0.70% or more of 
Consolidated Volume (``CV'') which adds liquidity in the same month 
on The Nasdaq Stock Market, (3) transacts in Tape B securities 
through one or more of its Nasdaq Market Center MPIDs that represent 
0.10% or more of CV which adds liquidity in the same month on The 
Nasdaq Stock Market, and (4) executes greater than 0.01% of CV via 
Market-on- Close/Limit-on-Close (``MOC/LOC'') volume within The 
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Nasdaq Stock Market Closing Cross in the same month.

The proposal adds an options component and lowers two of the existing 
equity components, namely by decreasing the percentage requirement that 
Market Makers transact in all securities through one or more of its 
Nasdaq Market Center MPIDs from 0.80% to 0.70% and decreasing the 
percentage requirement that Market Makers transact in Tape B securities 
through one or more of its Nasdaq Market Center MPIDs from 0.15% to 
0.10%.\15\ By lowering the percentage thresholds, the Exchange intends 
to render the Tier 3 rebate more readily accessible to Market Makers. 
If more Market Makers find that this rebate is accessible to them, then 
more will seek to qualify for it by adding liquidity on The Nasdaq 
Stock Market. Together with the proposed options component, which is 
designed to incentivize Market Makers to add liquidity on NOM, the 
Exchange believes that its proposal will improve the quality of the 
Exchange's equity and options markets, to the benefit of all market 
participants.
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    \15\ All NOM Participants are required to be members of The 
Nasdaq Stock Market pursuant to General 3 (Membership and Access).
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Technical Amendments
    The Exchange proposes to correct two rule citations to the MARS 
Payment Tiers in Section (6).\16\ The Exchange recently renumbered this 
section to Section 2(4) and did not update these citations.\17\
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    \16\ Specifically, notes 6 and 8 in Options 7, Section 2(1).
    \17\ See Securities Exchange Act Release No. 91677 (April 26, 
2021), 86 FR 22989 (April 30, 2021) (SR-NASDAQ-2021-021).
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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

[[Page 52276]]

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's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[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'. . . .'' \20\
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    \20\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    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.'' \21\
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    \21\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow. Within this environment, market participants can freely and 
often do shift their order flow among the Exchange and competing venues 
in response to changes in their respective pricing schedules. As such, 
the proposal represents a reasonable attempt by the Exchange to 
increase its liquidity and market share relative to its competitors.
Customer and Professional Rebate To Add Liquidity in Penny Symbols
    The Exchange believes that the proposed changes to the Customer and 
Professional Rebates to Add Liquidity in Penny Symbols described above 
are reasonably designed to attract additional liquidity to the 
Exchange. The Exchange believes it is reasonable to increase the Tier 3 
and Tier 4 Customer and Professional rebates because Participants will 
be encouraged to submit additional order flow to reach for the higher 
rebates.\22\ The Exchange believes that the proposed higher rebates 
will incentivize substantial liquidity adding activity on the Exchange, 
and that any increased activity and growth that may result from this 
proposal will improve the overall quality of the market, to the benefit 
of all market participants.
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    \22\ Participants are required to add Customer, Professional, 
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny 
Symbols and/or Non-Penny Symbols above 0.20% to 0.30% of total 
industry customer equity and ETF option ADV contracts per day in a 
month to earn the proposed Tier 3 Customer and Professional rebate, 
and above 0.30% to 0.40% of total industry customer equity and ETF 
option ADV contracts per day in a month to earn the proposed Tier 4 
Customer and Professional rebate. These qualifications are not being 
amended with this proposal, although the Exchange will add an 
alternative route to earn the proposed Tier 3 rebate, as discussed 
above.
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    The Exchange believes that the proposed alternative method to 
qualify for the higher Tier 3 Customer and Professional Rebate to Add 
Liquidity in Penny Symbols is reasonable because it will create an 
additional opportunity for Participants to earn the Tier 3 rebate by 
incentivizing Participants to add greater liquidity on NOM. 
Specifically, the Exchange is proposing to require that the Participant 
add Customer and/or Professional liquidity in Penny and/or Non-Penny 
Symbols of 0.15% to less than 0.20% of total industry customer and ETF 
option ADV contracts per day in a month and qualify for MARS in order 
to receive the proposed $0.43 per contract Tier 3 rebate. The Exchange 
believes that this will encourage liquidity adding activity in Customer 
and Professional orders to earn the Tier 3 rebate. The proposal will 
also incentivize Participants to qualify for the MARS program, which is 
designed to attract higher volumes of electronic equity and ETF options 
volume to the Exchange. As discussed above, to qualify for MARS, 
Participants must have System Eligibility, which has various 
requirements for Participants to maintain their routing systems, 
including the requirement that NOM be one of the top three default 
destination exchanges on the Participant's routing system for 
execution. If more Participants seek to qualify for MARS, the proposal 
will bring higher volumes of orders to NOM, which will enhance market 
quality by offering greater price discovery and increased opportunities 
to trade, to the benefit of all Participants. The Exchange also notes 
that the proposed alternative route to achieve the Tier 3 Customer and 
Professional rebate is similar to an existing method for achieving the 
Tier 6 Customer and Professional rebate except the proposal will have 
lower volume requirements, which will be commensurate with the lower 
Tier 3 rebate provided. In particular, one of the ways to earn the Tier 
6 rebate ($0.48 per contract) currently requires the Participant to add 
(1) Customer and/or Professional liquidity in Penny Symbols and/or Non-
Penny Symbols of 0.20% or more of total industry customer equity and 
ETF option ADV contracts per day in a month, and (2) add liquidity in 
all securities through one or more of its Nasdaq Market Center MPIDs 
that represent 1.00% or more of Consolidated Volume in a month or 
qualify for MARS. As discussed above, the proposed alternative route to 
earn the Tier 3 rebate ($0.43 with the proposed changes) will require 
the Participant to add (1) Customer and/or Professional liquidity in 
Penny Symbols and/or Non-Penny Symbols of 0.15% to less than 0.20% of 
total industry customer equity and ETF option ADV contracts per day in 
a month, and (2) qualify for MARS.
    The Exchange also believes that the proposed changes in note 8 to 
increase the supplemental rebates offered to Participants that qualify 
for any MARS Payment Tier in Section 2(4) in addition to qualifying for 
Penny Symbol Customer Rebates to Add Liquidity in Tiers 2-5 from $0.04 
to $0.05 per contract will further encourage Participants to send 
higher volumes of electronic equity and ETF options to NOM for 
execution to receive this additional incentive. In particular, to 
receive the increased supplemental rebates, Participants will need to 
have System Eligibility and execute the requisite number of Eligible 
Contracts ADV to qualify for any of the MARS Payment Tiers in Section 
2(4). If more Participants seek to qualify for MARS Payments Tiers by 
sending and executing more Eligible Contracts on NOM to earn the 
increased supplemental rebates for Penny Symbol Customer rebate tiers 
2-5, then market

[[Page 52277]]

quality will improve and the Exchange will become more attractive to 
existing and prospective market participants. The Exchange also 
believes that the proposed changes in note 8 will improve market 
quality by incentivizing Participants to submit additional qualifying 
volume that adds liquidity to earn the Penny Symbol Customer Rebates to 
Add Liquidity in Tiers 2-5, and therefore become eligible for the 
additional note 8 incentives, provided that they also qualify for any 
MARS Payment Tier.
    The Exchange also believes that the proposed changes to the 
Customer and Professional Rebates to Add Liquidity in Penny Symbols 
discussed above are equitable and not unfairly discriminatory because 
the Exchange will uniformly apply the changes to all qualifying 
Participants. All Participants may qualify for MARS provided they have 
requisite System Eligibility. Furthermore, the Exchange believes it is 
equitable and not unfairly discriminatory to pay the proposed rebates 
to eligible Customer and Professional liquidity adding orders (i.e., 
the proposed Tier 3 and Tier 4 rebates, and the proposed Tier 3 
alternative route) or to eligible Customer liquidity adding orders 
(i.e., the proposed note 8 incentive changes). Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attracts market makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. The Exchange believes that 
incentivizing Professional liquidity is similarly beneficial, as the 
proposed changes may cause market participants to select NOM as a venue 
to send Professional order flow, increasing competition among the 
exchanges. As with Customer liquidity, the Exchange believes that 
increased Professional order flow should benefit other market 
participants.
Market Maker Rebate To Add Liquidity in Penny Symbols
    The Exchange believes that its proposal to amend the qualifications 
for the Tier 3 Market Maker Rebate to Add Liquidity in Penny Symbols is 
reasonably designed to incentivize Market Makers to increase their 
liquidity adding activity on the Exchange's equity and options markets. 
By lowering the percentage thresholds for the equity components in the 
manner described above, the Exchange intends to render the Tier 3 
rebate more readily accessible to Market Makers. If more Market Makers 
find that this rebate is accessible to them, then more will seek to 
qualify for it by adding liquidity on The Nasdaq Stock Market. Together 
with the proposed options component, which is designed to encourage 
Market Makers to add liquidity on NOM, the Exchange believes that its 
proposal will improve the quality of the Exchange's equity and options 
markets, to the benefit of all market participants.
    The Exchange also believes that the proposed changes to the 
qualifications for the Tier 3 Market Maker Rebate to Add Liquidity in 
Penny Symbols is equitable and not unfairly discriminatory because the 
Exchange will pay the Tier 3 rebate uniformly to any qualifying Market 
Maker. Market Makers add value through continuous quoting and the 
commitment of capital.\23\ Because Market Makers have these obligations 
to the market and regulatory requirements that normally do not apply to 
other market participants, the Exchange believes that offering the 
rebate to only Market Makers is equitable and not unfairly 
discriminatory in light of their obligations. Finally, encouraging 
Market Makers to add greater liquidity benefits all market 
participants, both on NOM and The Nasdaq Stock Market, in the quality 
of order interaction.
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    \23\ See Options 2, Sections 4 and 5.
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Technical Amendments
    The Exchange believes that the proposed updates to the rule 
citations for MARS Payment Tiers are reasonable, equitable, and not 
unfairly discriminatory as these amendments will bring greater clarity 
to the Rulebook.

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 intra-market competition, the Exchange does not that 
its proposals will place any category of market participant at a 
competitive disadvantage. As discussed above, while the Exchange's 
proposals provide incentives for certain order flow and activity on the 
Exchange (i.e., Customer and Professional liquidity adding activity in 
Penny Symbols and Market Maker Rebate liquidity adding activity in 
Penny Symbols), the proposed changes are ultimately aimed at attracting 
greater liquidity to the Exchange, which benefits all market 
participants in the quality of order interaction.
    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. 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 Exchange's proposed changes to the Customer and Professional 
Rebates to Add Liquidity in Penny Symbols and the Tier 3 Market Maker 
Rebate to Add Liquidity in Penny Symbols are pro-competitive in that 
the Exchange intends for the changes to increase liquidity addition and 
activity on the Exchange, thereby rendering the Exchange a more 
attractive and vibrant venue to existing and prospective market 
participants.
    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 Participants or competing exchanges 
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.\24\
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    \24\ 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

[[Page 52278]]

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-2021-069 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-2021-069. 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-2021-069 and should be submitted 
on or before October 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-20214 Filed 9-17-21; 8:45 am]
BILLING CODE 8011-01-P


