[Federal Register Volume 79, Number 95 (Friday, May 16, 2014)]
[Notices]
[Pages 28568-28571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11293]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72150; File No. SR-NASDAQ-2014-049]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ Rule 7018 Fees and Establish Fee Tiers for the Execution
of Market-on-Close and Limit-on-Close Orders Executed in the NASDAQ
Closing Cross and Eliminate the High Volume Market Participant
Identifier Program
May 12, 2014.
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 April 30, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a 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 the
Substance of the Proposed Rule Change
NASDAQ is proposing to modify NASDAQ Rule 7018 fees assessed for
execution and routing [sic] securities listed on the New York Stock
Exchange (``NYSE'') and on exchanges other than NASDAQ and NYSE, as
well as establishing fee tiers for the execution of Market-on-Close and
Limit-on-Close orders executed in the NASDAQ Closing Cross and
eliminating the high volume Market Participant Identifier program.
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on May 1,
2014.
The text of the proposed rule change is available at
nasdaq.cchwallstreet.com at NASDAQ's principal office, 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, NASDAQ 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 those 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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ is proposing to amend NASDAQ Rule 7018 to modify NASDAQ Rule
7018 [sic] fees assessed for execution and routing [sic] securities
listed on NYSE (``Tape A'') and on exchanges other than NASDAQ and the
NYSE (``Tape B''), as well as establishing fee tiers for the execution
of Market-on-Close and Limit-on-Close (``MOC/LOC'') orders executed in
the NASDAQ Closing Cross.
Specifically, NASDAQ is proposing to offer reduced access fees for
firms that execute against resting midpoint liquidity for both Tape A
and Tape B securities. The standard access fees are currently $0.0030
per executed share, but the Exchange proposes to reduce this fee for
Tape A and Tape B securities to $0.0027 per executed share. The
Exchange believes that the proposed discounted executions for taking
[[Page 28569]]
midpoint liquidity will encourage firms that are interested in
accessing more of the NASDAQ's price improving liquidity access [sic]
more resting midpoint liquidity before routing to other destinations.
Additionally, the Exchange is proposing to establish new fee tiers
for the execution of MOC/LOC orders executed in the NASDAQ Closing
Cross. The new tiers are designed to reasonably raise revenue, benefit
market participants that provide liquidity during market hours and the
opportunity to lower the proposed price changes by executing more
volume via the NASDAQ Closing Cross. The Exchange proposes to begin
offering tiers for the execution of MOC/LOC orders as follows:
Tier A: Shares of liquidity provided in all securities through
one or more of its Nasdaq Market Center MPIDs that represent above
1.40% of Consolidated Volume or MOC/LOC volume above 0.50% of
Consolidated Volume: $0.00065 per executed share
Tier B: Shares of liquidity provided in all securities through
one or more of its Nasdaq Market Center MPIDs that represent above
0.80% to 1.40% of Consolidated Volume or MOC/LOC volume above 0.30% to
0.50% of Consolidated Volume: $0.0011 per executed share
Tier C: Shares of liquidity provided in all securities through
one or more of its Nasdaq Market Center MPIDs that represent above
0.50% to 0.80% of Consolidated Volume or MOC/LOC volume above 0.10% to
0.30% of Consolidated Volume: $0.0012 per executed share
Tier D: Shares of liquidity provided in all securities through
one or more of its Nasdaq Market Center MPIDs that represent above
0.30% to 0.50% of Consolidated Volume: $0.0013 per executed share
Tier E: Shares of liquidity provided in all securities through
one or more of its Nasdaq Market Center MPIDs that represent above
0.015% to 0.30% of Consolidated Volume: $0.00135 per executed share
Tier F: Shares of liquidity provided in all securities through
one or more of its Nasdaq Market Center MPIDs that represent 0.00% to
0.015% of Consolidated Volume: $0.0014 per executed share
Tier G: Member adds Nasdaq Options Market Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 0.80% or more of national customer volume in multiply-listed
equity and ETF options classes in a month: $0.0010 per executed share.
The new fee tiers for participation in the closing auctions
essentially replace the high volume Market Participant Identifier
(``High Volume MPID'') program that allowed a member that trades
through a qualified High Volume MPID to pay a discounted fee per share
executed with respect to executions of MOC/LOC orders when the same
High Volume MPID is on both sides of the trade. Since this incentive
program has been in place, the Exchange has observed that the High
Volume MPID program is not widely-used and so it now proposes the new
fee tiers discussed above. The proposed new fee tiers will result in
higher fees for most firms, however, the Exchange is offering liquidity
adding incentives and MOC/LOC incentives to materially reduce the
proposed fees to be assessed for MOC/LOC executions in the NASDAQ
Closing Cross. Finally, if a member qualifies for two tiers, the lower
tier rate will apply.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\3\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\4\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility or system which NASDAQ operates or controls, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. This proposal is reasonable, equitable and not
unfairly discriminatory for the reasons noted below.
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\3\ 15 U.S.C. 78f.
\4\ 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes are reflective of NASDAQ's ongoing efforts to
use reduced access fees and better targeted discount [sic] to attract
orders that NASDAQ believes will improve market quality. Generally,
NASDAQ seeks to provide customers with discounts that they deem
helpful, and to eliminate those that they do not. By offering reduced
access fees for firms that execute against resting midpoint liquidity
and by replacing the High Volume MPID program with the new fee tiers
for participation in the closing auction, NASDAQ believes it will be
able to further promote these goals by providing better targeted
incentives for market participants.
Specifically, the proposed changes are consistent with statutory
requirements. The proposal to reduce access fees for firms that execute
against resting midpoint liquidity from the standard access fee of
$0.0030 per executed share to $0.0027 per executed share for Tape A and
Tape B securities is consistent with a fair allocation of reasonable
fees and not unfairly discriminatory because it is a price cut that
applies uniformly to all NASDAQ members. NASDAQ believes that the fee
reduction will incentivize firms to execute against midpoint liquidity
and this, in turn, will lead to an increase in price improvement
liquidity and price improvement generally benefits the investing
public.
The impact of the change in adding new tiers for participation in
the NASDAQ Closing Cross will be a price increase for many market
participants, but those that provide greater liquidity during market
hours or increase their usage of the NASDAQ Closing Cross will receive
a greater discount. Generally speaking, the base rate will increase
from $0.0010 to $0.0014 per executed share as discussed more fully
below, but the Exchange is providing various incentives to all market
participants to lower the fees to be assessed for MOC/LOC executions.
The Exchange's proposal to establish Tier A in which shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs that represent above 1.40% of Consolidated Volume
or MOC/LOC volume above 0.50% of Consolidated Volume will be executed
at $0.00065 per share is equitable and not unfairly discriminatory
because all market participants have the opportunity to achieve this
tier if they choose to increase added [sic] liquidity or MOC/LOC
volume. The fee is reasonable because it represents a price reduction
when compared to the current rate of $0.0010 per executed share and is
approximately the average rate paid by those market participants that
chose to avail themselves of the High Volume MPID discount.
The Exchange's proposal to establish Tier B in which shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs that represent above 0.80% to 1.40% of Consolidated
Volume or MOC/LOC volume above 0.30% to 0.50% of Consolidated Volume
will be executed at $0.0011 per share is equitable and not unfairly
discriminatory. While this is a price increase, the Exchange is still
providing opportunities for all market participants to reduce the per
share rate by adding additional liquidity or executing a greater number
of MOC/LOC shares.
The Exchange's proposal to establish Tier C in which shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs
[[Page 28570]]
that represent above 0.50% to 0.80% of Consolidated Volume or MOC/LOC
volume above 0.10% to 0.30% of Consolidated Volume will be executed at
$0.0012 per share is equitable and not unfairly discriminatory because
this tier provides additional opportunities for members to reduce the
fees to be paid for MOC/LOC executions.
The Exchange's proposal to establish Tier D in which shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs that represent above 0.30% to 0.50% of Consolidated
Volume will be executed at $0.0013 per share is equitable and not
unfairly discriminatory because this tier provides additional
opportunities for members to reduce the fees to be paid for MOC/LOC
executions.
The Exchange's proposal to establish Tier E in which shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs that represent above 0.015% to 0.30% of
Consolidated Volume will be executed at $0.00135 per share is equitable
and not unfairly discriminatory because this tier provides additional
opportunities for members to reduce the fees to be paid for MOC/LOC
executions.
The Exchange's proposal to establish Tier F in which shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs that represent 0.00% to 0.015% of Consolidated
Volume will be executed at $0.0014 per share is equitable and not
unfairly discriminatory because the Exchange believes this represents
the base rate for utilizing the NASDAQ Closing Cross. The Exchange
spends significant testing and regulatory resources, among other
resources, to ensure that the NASDAQ Closing cross [sic] is the
industry standard. The Exchange believes that this proposed rate
properly reflects that ongoing investment. Further, the Exchange is
offering a variety of incentives that are discussed above and below for
market participants to reduce their costs [sic] adding additional
liquidity or increasing volume in the NASDAQ Closing Cross.
The Exchange's proposal to establish Tier G in which a member adds
Nasdaq Options Market Customer and/or Professional liquidity in Penny
Pilot Options and/or Non-Penny Pilot Options of 0.80% or more of
national customer volume in multiply-listed equity and ETF options
classes in a month will be executed at $0.0010 per share is equitable
and not unfairly discriminatory because this provides an additional
means for members to reduce their fees assessed for executions in the
NASDAQ Closing Cross. Like the other tiers offered, this tier enhances
market participants' choices to earn price cuts. They can add more
liquidity on the Exchange or its options platform or they can use the
NASDAQ Closing Cross instead of potential off-exchange alternatives.
Volume-based discounts such as the fees associated with the new
tiers for participation in the Closing Cross proposed here have been
widely adopted in the cash equities markets, and are equitable because
they are open to all members on an equal basis and provide discounts
that are reasonably related to the value to an exchange's market
quality associated with higher levels of market activity, such as
higher levels of liquidity provision and introduction of higher volumes
of orders into the price and volume discovery processes of the Closing
Cross. NASDAQ further notes that it operates in a highly competitive
market in which market participants can readily favor competing venues,
or in this case, internalize orders rather than exposing them to the
broader market, if they deem fee levels at a particular venue to be
excessive. NASDAQ believes that the new fee tiers will help ensure that
its Closing Cross continues to attract high levels of participation.
Additionally, the elimination of High Volume MPID program is
consistent with a fair allocation of reasonable fees and not unfairly
discriminatory since the removal of the rule language pertaining to the
incentives impacts all firms equally.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule changes will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.\5\ 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, discounted executions for taking
midpoint liquidity, as well as the replacement of the High Volume MPID
program with the establishment of new fee tiers for the execution of
MOC/LOC orders executed in the NASDAQ Closing Cross reflect this.
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\5\ 15 U.S.C. 78f(b)(8).
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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 change has become effective pursuant to Section
19(b)(3)(A) of the Act,\6\ and paragraph (f) \7\ of Rule 19b-4,
thereunder. 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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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 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-2014-049 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-2014-049. This
file number should be included on the subject line if email is used.
[[Page 28571]]
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 such filing also will be
available for inspection and copying at the principal offices 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-2014-049, and
should be submitted on or before June 6, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11293 Filed 5-15-14; 8:45 am]
BILLING CODE 8011-01-P