[Federal Register Volume 78, Number 130 (Monday, July 8, 2013)]
[Notices]
[Pages 40815-40816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16225]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69898; File No. SR-NASDAQ-2013-093]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify the Fees Under the QMM Pricing Incentive Program Under Rules
7014 and 7015
July 1, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on June 26, 2013, 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 NASDAQ.
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
NASDAQ is proposing changes to fees under its Qualified Market
Maker (``QMM'') pricing incentive program under Rules 7014 and 7015.
NASDAQ proposes to implement the proposed rule change on July 1, 2013.
The text of the proposed rule change is available on the Exchange's Web
site at http://nasdaq.cchwallstreet.com/, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Under NASDAQ's QMM Program, a member may be designated as a QMM
with respect to one or more of its market participant identifiers
(``MPIDs'') if:
the member is not assessed any ``Excess Order Fee'' under
Rule 7018 during the month; \3\ and
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\3\ Rule 7018(m). Last year, NASDAQ introduced an Excess Order
Fee, aimed at reducing inefficient order entry practices of certain
market participants that place excessive burdens on the systems of
NASDAQ and its members and that may negatively impact the usefulness
and life cycle cost of market data. In general, the determination of
whether to impose the fee on a particular MPID is made by
calculating the ratio between (i) entered orders, weighted by the
distance of the order from the NBBO, and (ii) orders that execute in
whole or in part. The fee is imposed on MPIDs that have an ``Order
Entry Ratio'' of more than 100.
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through such MPID the member quotes at the national best
bid or best offer (``NBBO'') at least 25% of the time during regular
market hours \4\ in an average of at least 1,000 securities during the
month.\5\
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\4\ Defined as 9:30 a.m. through 4:00 p.m., or such shorter
period as may be designated by NASDAQ on a day when the securities
markets close early (such as the day after Thanksgiving).
\5\ A member MPID is considered to be quoting at the NBBO if it
has a displayed order at either the national best bid or the
national best offer or both the national best bid and offer. On a
daily basis, NASDAQ will determine the number of securities in which
the member satisfied the 25% NBBO requirement. To qualify for QMM
designation, the MPID must meet the requirement for an average of
1,000 securities per day over the course of the month. Thus, if a
member MPID satisfied the 25% NBBO requirement in 900 securities for
half the days in the month, and satisfied the requirement for 1,100
securities for the other days in the month, it would meet the
requirement for an average of 1,000 securities.
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A member that is a QMM with respect to a particular MPID (a ``QMM
MPID'') is eligible to receive certain discounts and credits. NASDAQ is
now proposing to eliminate one of these discounts. At present, a QMM
receives a discount on fees for ports used for entering orders for a
QMM MPID, up to a total discount equal to the lesser of the QMM's total
fees for such ports or $5,000.\6\ As provided in Rule 7015, the
specific fees subject to this discount are: (i) All ports using the
NASDAQ Information Exchange (``QIX'') protocol,\7\ (ii) Financial
Information Exchange (``FIX'') trading ports,\8\ and (iii) ports using
other trading telecommunications protocols.\9\ Beginning July 1, 2013,
the port discount will be eliminated. All other discounts and credits
associated with the QMM program will remain in effect.
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\6\ The ports subject to the discount are not used for receipt
of market data.
\7\ The applicable undiscounted fees are $1,200 per month for a
port pair or ECN direct connection port pair, and $1,000 per month
for an unsolicited message port. See Rule 7015(a).
\8\ The applicable undiscounted fee is $500 per port per month.
See Rule 7015(b).
\9\ The applicable undiscounted fee is $500 per port pair per
month. See Rule 7015(g).
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2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\10\ in general, and with
Sections 6(b)(4), 6(b)(5), and 6(b)(8) of the Act,\11\ 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 or system which NASDAQ operates or controls, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers, and does not impose any burden on competition not
necessary or
[[Page 40816]]
appropriate in furtherance of the purposes of the Act.
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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4), (5) and (8).
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The proposed change with respect to the QMM Program is reasonable
because even with the change, QMMs will still continue to receive
meaningful financial incentives consistent with the commitment to
enhancing market quality that is reflected in their achievement of the
program's quoting requirements. The proposed change is consistent with
an equitable allocation of fees and is not unfairly discriminatory
because it will cause the fees paid by QMMs with respect to order entry
ports to be equivalent to the fees paid by other market participants
for comparable access. Finally, the change does not impose any burden
on competition that is not necessary or appropriate because although it
will result in a fee increase for QMMs currently qualifying for the
discount, it will also serve to return the applicable fees to the level
in place before the introduction of the QMM program and make them
equivalent to fees paid by other market participants for comparable
access.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. NASDAQ 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, NASDAQ 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, NASDAQ believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited. In
this instance, although the proposed change eliminates one of the
discounts provided through a previously introduced pricing incentive
program, the incentive program in question remain in place and is
itself reflective of the need for exchanges to offer significant
financial incentives to attract order flow in a highly competitive
environment. Moreover, if the changes are unattractive to market
participants, it is likely that NASDAQ will lose market share as a
result. Accordingly, NASDAQ does not believe that the proposed changes
will impair the ability of members or competing order execution venues
to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor 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) of the Act \12\ and paragraph (f) of Rule 19b-4
thereunder.\13\ 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
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please
include File Number SR-NASDAQ-2013-093 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-093. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2013-093 and should
be submitted on or before July 29, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-16225 Filed 7-5-13; 8:45 am]
BILLING CODE 8011-01-P