
[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81166-81171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25656]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98934; File No. SR-NASDAQ-2023-044]


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

November 15, 2023.
    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 November 1, 2023, 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 LLC 
(``NOM'') Pricing Schedule at Options 7, Section 2.
    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.

[[Page 81167]]

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) (setting forth fees and rebates for 
execution of contract on NOM) and Section 2(3) (setting forth fees for 
routing contracts to markets other than NOM). Each change will be 
described below.
Options 7, Section 2(1)
Fees To Remove Liquidity in Non-Penny Symbols
    As set forth in Options 7, Section 2(1), the Exchange currently 
charges NOM Market Makers,\3\ Non-NOM Market Makers,\4\ Firms,\5\ and 
Broker-Dealers \6\ a $1.10 per contract fee for removing liquidity in 
Non-Penny Symbols. The Exchange now proposes to increase this fee to 
$1.25 per contract.
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    \3\ 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.
    \4\ The term ``Non-NOM Market Maker'' or (``O'') is a registered 
market maker on another options exchange that is not a NOM Market 
Maker. A Non-NOM Market Maker must append the proper Non-NOM Market 
Maker designation to orders routed to NOM.
    \5\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
    \6\ The term ``Broker-Dealer'' or (``B'') applies to any 
transaction which is not subject to any of the other transaction 
fees applicable within a particular category.
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Note 8 Incentive
    Today, the Exchange provides Customers \7\ with tiered rebates for 
adding liquidity in Penny Symbols that are $0.20 (Tier 1), $0.25 (Tier 
2), $0.43 (Tier 3), $0.44 (Tier 4), $0.45 (Tier 5), and $0.48 (Tier 6). 
These rebates are paid based on the highest volume tier that the 
Customer achieves in a given month.\8\
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    \7\ 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)).
    \8\ See Options 7, Section 2(1), note 1.
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    Today, the Exchange also links the tiered Penny Symbol Customer 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 NOM Participants to subsidize 
their costs of providing routing services to route orders to NOM. To 
qualify for MARS, NOM Participants must have System Eligibility.\9\ In 
addition, NOM Participants that have System Eligibility, and have 
routed and executed the requisite number of Eligible Contracts \10\ 
daily in a month (``Average Daily Volume'' or ``ADV'') that add 
liquidity on NOM are entitled to the tiered MARS Payments set forth in 
Section 2(4), depending on the highest ADV tier achieved.\11\
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    \9\ 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.
    \10\ 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.
    \11\ 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.
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    In particular, the Exchange currently links the tiered Penny Symbol 
Customer rebate to add liquidity program in Penny Symbols and MARS, 
each as described above, through note 8 of Options 7, Section 2(1) 
where NOM Participants that qualify for any MARS Payment Tier in 
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 1-5, 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 
Tier 6 (``Note 8 Incentive''). As such, NOM Participants may earn 
Customer Rebates to Add Liquidity in Penny Symbols up to $0.25 in Tier 
1, $0.30 in Tier 2, $0.48 in Tier 3, $0.49 in Tier 4, $0.50 in Tier 5, 
and $0.52 in Tier 6, provided they meet the qualifications in note 8.
    The Note 8 Incentive was intended to attract additional order flow 
to NOM by way of encouraging participation in both the tiered Customer 
add liquidity rebate program and in MARS. The Exchange, however, has 
observed that this rebate program has not accomplished its objective 
and therefore proposes to eliminate this program in note 8 of Options 
7, Section 2(1).
Note 9 Incentive
    Today, pursuant to note 9 of Options 7, Section 2(1), NOM 
Participants that transact in all securities through one or more of its 
Nasdaq Market Center MPIDs that represent 3.00% or more of Consolidated 
Volume in the same month on The Nasdaq Stock Market receive a $0.50 per 
contract Rebate to Add Liquidity in Penny Symbols as Customer, a $0.48 
per contract rebate as Professional,\12\ a $1.00 per contract Rebate to 
Add Liquidity in Non-Penny Symbols as Customer, and a $0.90 per 
contract Rebate to Add liquidity in Non-Penny Symbols as Professional 
(``Note 9 Incentive''). Participants that qualify for the Note 9 
Incentive are not be eligible for any other rebates in Tiers 1-6 or 
other rebate incentives on NOM for Customer and Professional order flow 
in Options 7, Section 2(1).
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    \12\ 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.
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    The Exchange now proposes to increase $1.00 Customer Rebate to Add 
Liquidity in Non-Penny Symbols to $1.10. The Exchange is increasing the 
rebate amount without changing the

[[Page 81168]]

qualifications in the Note 9 Incentive so that NOM Participants can 
bring the same amount of volume as they do today on The Nasdaq Stock 
Market to receive larger rebate in Customer Add Liquidity volume in 
Non-Penny Symbols.\13\ Overall, the Exchange believes that the 
increased rebate will bring greater volume to both The Nasdaq Stock 
Market and NOM, to the benefit of all market participants.
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    \13\ Any NOM Participant may trade equities on The Nasdaq Stock 
Market because they are already approved members. Although a NOM 
Participant may potentially incur additional labor and/or costs to 
establish connectivity to The Nasdaq Stock Market, there are no 
additional membership fees for NOM Participants that want to 
transact on The Nasdaq Stock Market.
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Note 10 Incentive
    Today, pursuant to note 10 of Options 7, Section 2(1), NOM 
Participants that (a) add Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny 
Symbols above 1.20% of total industry customer equity and ETF option 
ADV contracts per day in a month, (b) execute greater than 0.04% of 
Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close (``MOC/
LOC'') volume within The Nasdaq Stock Market Closing Cross within a 
month, and (c) add greater than 1.5 million shares per day of non-
displayed volume within The Nasdaq Stock Market within a month receive 
a $0.55 per contract Rebate to Add Liquidity in Penny Symbols as 
Customer, a $0.48 per contract Rebate to Add Liquidity in Penny Symbols 
as Professional, and a $1.05 per contract Rebate to Add Liquidity in 
Non-Penny Symbols as Customer, and a $0.90 per contract Rebate to Add 
Liquidity in Non-Penny Symbols as Professional (``Note 10 Incentive''). 
Participants that qualify for the Note 10 Incentive are not be eligible 
for any other rebates in Tiers 1-6 or other rebate incentives on NOM 
for Customer and Professional order flow in Options 7, Section 2(1).
    The Exchange now proposes to amend the NOM volume threshold in part 
(a) of the Note 10 Incentive by increasing 1.20% to 1.50% of total 
industry customer equity and ETF option ADV contracts per day in a 
month. The Exchange also proposes to increase the $1.05 Customer Rebate 
to Add Liquidity in Non-Penny Symbols to $1.15. No other changes are 
being proposed to the rebates and qualifications in the Note 10 
Incentive. As amended, the Note 10 Incentive will provide: ``NOM 
Participants that (a) add Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer 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, (b) execute greater than 0.04% of 
Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close (``MOC/
LOC'') volume within The Nasdaq Stock Market Closing Cross within a 
month, and (c) add greater than 1.5 million shares per day of non-
displayed volume within The Nasdaq Stock Market within a month will 
receive a $0.55 per contract Rebate to Add Liquidity in Penny Symbols 
as Customer, a $0.48 per contract Rebate to Add Liquidity in Penny 
Symbols as Professional, and a $1.15 per contract Rebate to Add 
Liquidity in Non-Penny Symbols as Customer, and a $0.90 per contract 
Rebate to Add Liquidity in Non-Penny Symbols as Professional. 
Participants that qualify for this rebate would not be eligible for any 
other rebates in Tiers 1-6 or other rebate incentives on NOM for 
Customer and Professional order flow in Options 7, Section 2(1).''
Options 7, Section 2(3)
    As set forth in Options 7, Section 2(3), the Exchange currently 
assesses a Non-Customer routing fee of $0.99 per contract to any 
options exchange. The Exchange also assesses a Customer routing fee of 
$0.23 per contract, in addition to the actual transaction fee assessed 
by the away market, for routing contracts to any options exchange other 
than the Exchange's affiliates, Nasdaq BX, Inc. (``BX'') and Nasdaq 
Phlx LLC (``Phlx''). If the away market (other than BX and Phlx) pays a 
rebate, this Customer routing fee is $0.13 per contract instead. When 
routing to BX and Phlx, the Exchange currently assesses a Customer 
routing fee of $0.13 per contract in addition to the actual transaction 
fee assessed.
    At this time, the Exchange proposes to assess a Non-Customer an 
increased routing fee to route to any options exchange of $1.20 per 
contract. The Exchange also proposes to assess a Customer a routing fee 
of $0.23 per contract, in addition to the actual transaction fee 
assessed by the away market, for routing contracts to any options 
exchange. With this change, the Exchange would no longer assess the 
lower routing of $0.13 per contract, in addition to the actual 
transaction fee assessed, when routing to BX and Phlx. The Exchange 
would continue to assess a $0.13 per contract routing fee if the away 
market pays a rebate, including BX and Phlx. The purpose of the 
proposed routing fees is to recoup costs incurred by the Exchange when 
routing orders to other options exchanges on behalf of NOM 
Participants. In determining its proposed routing fees, the Exchange 
took into account transaction fees assessed by other options exchanges, 
the Exchange's projected clearing costs, and the projected 
administrative, regulatory, and technical costs associated with routing 
orders to other options exchanges. The Exchange will continue to use 
its affiliated broker-dealer, Nasdaq Execution Services, to route 
orders to other options exchanges. Routing services offered by the 
Exchange are completely optional and market participants can readily 
select between various providers of routing services, including other 
exchanges and broker-dealers. Also, the Exchange notes that NOM 
Participants may elect to mark their orders as ``Do-Not-Route'' to 
avoid any routing fees.\14\ The Exchange believes that the proposed 
routing fees would enable the Exchange to recover the costs it incurs 
to route orders to away markets after taking into account the other 
costs associated with routing orders to other options exchanges. Also, 
the Exchange's proposal would uniformly assess the same Customer 
routing fees, regardless of the away venue, of $0.23 per contract, in 
addition to the actual transaction fee assessed, or $0.13 per contract 
of the away market pays a rebate.
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    \14\ See Options 3, Section 7(c).
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Technical Amendment
    The Exchange proposes a technical amendment in note 11 of Options 
7, Section 2(1). Note 11 currently provides that NOM Participants that 
qualify for the Tier 5 NOM Market Maker Rebate to Add Liquidity in 
Penny Symbols and add NOM Market Maker liquidity in Penny Symbols and/
or Non-Penny Symbols of above 0.50% of total industry customer equity 
and ETF option ADV contracts per day in a month, will receive a $0.46 
contract rebate to add liquidity in Penny Symbols as Market Maker in 
lieu of the Tier 5 rebate (``Note 11 Incentive''). The Tier 5 NOM 
Market Maker Rebate to Add Liquidity in Penny Symbol currently has two 
alternative routes in ``a'' and ``b'' to qualify for the Tier 5 rebate, 
but when the Exchange adopted the Note 11 Incentive, the intent was to 
provide the Note 11 Incentive for NOM participants that qualified 
pursuant to route ``b'' in Tier 5.\15\ The Exchange subsequently 
adopted an alternative

[[Page 81169]]

route ``a'' to qualify for the Tier 5 NOM Market Maker Rebate to Add 
Liquidity in Penny Symbols, but did not update the Note 11 Incentive to 
specify which route applied.\16\ The Exchange therefore proposes to 
clarify that the Note 11 Incentive is available for NOM Participants 
that qualify for the Tier 5(b) NOM Market Maker Rebate to Add Liquidity 
in Penny Symbols. The proposed change will align the rule text with the 
original intent of the incentive.
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    \15\ See Securities Exchange Act Release No. 87276 (October 10, 
2019), 84 FR 55644 (October 17, 2019) (SR-NASDAQ-2019-084). At the 
time of adopting the Note 11 Incentive, only route ``b'' was 
available to qualify for Tier 5.
    \16\ See Securities Exchange Act Release No. 98721 (October 11, 
2023), 88 FR 71616 (October 17, 2023) (SR-NASDAQ-2023-040).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\18\ 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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    \17\ 15 U.S.C. 78f(b).
    \18\ 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'. . . .'' \19\
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    \19\ 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.'' \20\
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    \20\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    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 
seventeen options venues 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.
Options 7, Section 2(1)
    The Exchange believes that the proposed changes to the fees and 
rebates in Options 7, Section 2(1) are reasonable in several ways. The 
Exchange believes that it is reasonable to increase the Fees to Remove 
Liquidity in Non-Penny Symbols for NOM Market Makers, Non-NOM Market 
Makers, Firms, and Broker-Dealers from $1.10 to $1.25 because the 
proposed Non-Penny Symbol fee increases will be balanced by the Non-
Penny Symbol rebate increases for Customers, which are intended to 
improve overall market quality on the Exchange by incentivizing market 
participants to bring additional order flow and, in turn, provide more 
trading opportunities to the benefit of all market participants. As 
discussed above, the Exchange is proposing to increase the Non-Penny 
Symbol Customer Rebate to Add Liquidity in the Note 9 Incentive from 
$1.00 to $1.10 per contract without amending the current volume 
qualifications in note 9 so that NOM Participants can bring the same 
amount of volume as they do today on The Nasdaq Stock Market to receive 
larger rebate in Customer Add Liquidity volume in Non-Penny 
Symbols.\21\ The Exchange believes that the increased rebate as set 
forth in the Note 9 Incentive will incentivize market participants to 
send additional order flow to both The Nasdaq Stock Market and NOM, 
which will in turn benefit all market participants on the equities and 
options markets from the opportunity to interact with such order flow.
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    \21\ See supra note 13.
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    As discussed above, the Exchange is also proposing to increase the 
Non-Penny Symbol Customer Rebate to Add Liquidity in the Note 10 
Incentive from $1.05 to $1.15 per contract if the NOM Participant meets 
the qualifications in note 10, including the increased NOM volume 
threshold that requires NOM Participants to add Customer, Professional, 
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny 
Symbols and/or Non-Penny Symbols above 1.50% (increased from above 
1.20%) of total industry customer equity and ETF option ADV contracts 
per day in a month.\22\ While the NOM volume threshold in the Note 10 
Incentive will be increased under this proposal, the Exchange believes 
that the proposed increase is commensurate with the corresponding 
increase in the Non-Penny Symbol Customer Rebate to Add Liquidity in 
the Note 10 Incentive as described above. To the extent NOM 
Participants add greater liquidity on NOM to meet the proposed volume 
threshold to receive the larger rebate, the Exchange believes that its 
proposal will benefit all market participants who will be able to 
interact with the additional liquidity. The proposed changes to the 
Note 10 Incentive are designed as a means to improve overall market 
quality by providing NOM Participants with a larger incentive to 
increase their provision of liquidity on the Exchange's equity and 
options markets.\23\ The Exchange believes that its proposal will 
continue to encourage NOM Participants to send order flow to both the 
options and equity markets to receive the Note 10 Incentive.
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    \22\ The NOM Participant will also continue to be required to 
meet the following volume qualifications (in addition to the 
proposed NOM volume threshold) to receive the $1.15 Non-Penny Symbol 
Customer Rebate to Add Liquidity in the Note 10 Incentive: execute 
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within The Nasdaq Stock 
Market Closing Cross within a month, AND add greater than 1.5 
million shares per day of non-displayed volume within The Nasdaq 
Stock Market within a month.
    \23\ See supra note 22.
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    The Exchange also believes that the proposed changes to the fees 
and rebates in Options 7, Section 2(1) as described above are equitable 
and not unfairly discriminatory because they will apply uniformly to 
all similarly situated participants. As it relates to the Non-Penny 
Symbol fee increases, the Exchange will apply the increase to NOM 
Market Makers, Non-NOM Market Makers, Firms, and Broker-Dealers while 
Customers and Professionals will

[[Page 81170]]

continue to be uniformly assessed at a lower rate. The Exchange also 
notes that the Note 9 Incentive and the Note 10 Incentive, each as 
modified under this proposal, are available to only Customers and 
Professionals. The Exchange has historically provided more favorable 
pricing to both Customers and Professionals throughout its Pricing 
Schedule. Furthermore, both Customer and Professional liquidity offer 
benefits to the market that ultimately benefit all market participants. 
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. With respect to Professionals, the 
Exchange believes that continuing to encourage NOM Participants to 
bring Professional order flow to NOM creates competition among options 
exchanges because the more favorable pricing may cause market 
participants to select NOM as a venue to send Professional order flow.
    The Exchange believes that its proposal to eliminate the Note 8 
Incentive is reasonable because this rebate program has not been 
successful in accomplishing its objective of incentivizing NOM 
Participants to send order flow and add liquidity on the Exchange by 
fortifying participation in the MARs program and the tiered Penny 
Symbol Customer Rebate to Add Liquidity program. The proposed 
elimination of the Note 8 Incentive will streamline the Exchange's 
Pricing Schedule. The Exchange has limited resources to devote to 
incentive programs, and it is appropriate for the Exchange to 
reallocate these incentives periodically in a manner that best achieves 
the Exchange's overall objectives to increase order flow and liquidity 
on NOM. The Exchange also believes that eliminating the Note 8 
Incentive is equitable and not unfairly discriminatory because the 
incentive will be eliminated in its entirety and would no longer be 
available to any NOM Participants.
Options 7, Section 2(3)
    The Exchange's proposal to assess a Non-Customer an increased 
routing fee of $1.20 to route to another options exchange, and a 
Customer a routing fee of $0.23 per contract, in addition to the actual 
transaction fee assessed by the away market, for routing contracts to 
any options exchange \24\ is reasonable because the proposed routing 
fees would enable the Exchange to recover the costs it incurs to route 
orders to away markets after taking into account the other costs 
associated with routing orders to other options exchanges. In 
determining its proposed routing fees, the Exchange took into account 
transaction fees assessed by other options exchanges, the Exchange's 
projected clearing costs, and the projected administrative, regulatory, 
and technical costs associated with routing orders to other options 
exchanges. Routing services offered by the Exchange are completely 
optional and market participants can readily select between various 
providers of routing services, including other exchanges and broker-
dealers. Also, the Exchange notes that market participants may elect to 
mark their orders as ``Do-Not-Route'' to avoid any routing fees.\25\
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    \24\ With the proposed changes, the Exchange would no longer 
assess the lower routing fee of $0.13 per contract, in addition to 
the actual transaction fee assessed, when routing to BX and Phlx.
    \25\ See Options 3, Section 7(c).
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    The Exchange's proposal to assess a Non-Customer an increased 
routing fee of $1.20 to route to another options exchange is equitable 
and not unfairly discriminatory as all Non-Customers would be assessed 
a uniform routing fee. Additionally, the Exchange's proposal to assess 
a Customer a routing fee of $0.23 per contract, in addition to the 
actual transaction fee assessed by the away market, for routing 
contracts to any options exchange is equitable and not unfairly 
discriminatory as all Customers will be uniformly assessed the same 
routing fee, regardless of the destination market. Customers will 
continue to receive favorable pricing as compared to other market 
participants because Customer liquidity enhances market quality on the 
Exchange by providing more trading opportunities, which benefits all 
market participants. Finally, the Exchange notes that market 
participants may elect to market orders as Do-Not-Route to avoid any 
routing fees.
Technical Amendment
    The Exchange believes that its proposal to clarify that the Note 11 
Incentive is available for NOM Participants that qualify for the Tier 
5(b) NOM Market Maker Rebate to Add Liquidity in Penny Symbols is 
reasonable because the proposal will align the rule text with the 
original intent of the Note 11 Incentive and avoid any potential 
confusion about the application of the Exchange's Pricing Schedule. The 
Exchange also believes that its proposal is equitable and not unfairly 
discriminatory because it will apply uniformly to all similarly 
situated market participants. Continuing to apply the Note 11 Incentive 
to only NOM Market Makers is equitable and not unfairly discriminatory 
in light of their obligations on NOM (e.g., continuous quoting 
obligations).

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 believe that its proposal will place 
any category of market participant at a competitive disadvantage. While 
some aspects of the proposal apply directly to certain market 
participants as described above (e.g., increased Non-Penny Symbol 
Customer Rebates to Add Liquidity), Exchange believes that the changes, 
taken together, will ultimately fortify and encourage activity on the 
Exchange. As discussed above, all market participants will benefit from 
any increase in market activity that the proposal effectuates.
    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. 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.

[[Page 81171]]

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.\26\
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    \26\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2023-044 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-2023-044. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2023-044 and should 
be submitted on or before December 12, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25656 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P


