[Federal Register Volume 79, Number 227 (Tuesday, November 25, 2014)]
[Notices]
[Pages 70253-70256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27845]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73648; File No. SR-NASDAQ-2014-108]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ Rule 7018 Fees
November 19, 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 November 12, 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 Substance
of the Proposed Rule Change
NASDAQ is proposing to modify NASDAQ Rule 7018 fees assessed for
execution and routing securities listed on NASDAQ, the New York Stock
Exchange (``NYSE'') and on exchanges other than NASDAQ and NYSE.
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(1), (2) and (3) to
modify fees assessed for execution and routing securities listed on
NASDAQ (``Tape C''), NYSE (``Tape A'') and on exchanges other than
NASDAQ and the NYSE (``Tape B''), respectively, (together, the
``Tapes'') as well as the opening and closing crosses (``Opening and
Closing Crosses'') in NASDAQ Rule 7018(d) and (e).
The Exchange is proposing across all of the tapes (the ``Tapes'')
an increase to the fee for a firm that executes against resting
midpoint liquidity from $0.0027 per share executed to $0.0030 per share
executed. NASDAQ is seeking to harmonize the remove rate for orders
whether or not they execute against the midpoint so that the remove
rate for orders is certain before the order is entered. Therefore, the
Exchange is proposing to increase the charge from $0.0027 to $0.0030
per share executed across all the tapes.
NASDAQ is also proposing to eliminate across all of the tapes the
current $0.00293 per share executed rebate for a member with shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs that represent more than 0.10% of Consolidated
Volume during the month, with shares executed in the Opening and
Closing Cross that represent more than 0.20% of Consolidated Volume and
orders entered through a single Nasdaq Market Center MPID that
represent more than 0.50% of Consolidated Volume during the month.
NASDAQ believes that the elimination of this rebate is warranted since
it has failed to increase liquidity in Tape A, B or C securities or to
provide members with additional incentive to improve market quality.
The Exchange is also proposing to modify and add new rebates across
all of the tapes. Specifically, NASDAQ is proposing to expand and
modify the credit for non-displayed orders (other than Supplemental
Orders) that provide liquidity. The rebate will now include a $0.0025
per share executed for midpoint orders. It will be offered provided
that
[[Page 70254]]
the member adds an average daily volume of 5 million or more shares
through midpoint orders during the month and either adds Customer and/
or Professional liquidity in Penny Pilot Options and/or Non- Penny
Pilot Options of 1.40% or more of national customer volume in multiply-
listed equity and exchange-traded fund (``ETF'') options classes in a
month as pursuant to Chapter XV, Section 2 of the Nasdaq Options Market
(``NOM'') rules or adds 8 million shares of non-displayed liquidity
(excluding retail price improvement orders). NASDAQ believes that this
proposed credit will incentivize members to post more liquidity at the
midpoint, which should improve price discovery for the benefit of
investors.
NASDAQ also proposes to also modify this rebate for Tape C
securities only. Specifically, the credit of $0.0014 per share executed
tier for midpoint orders if the member provides an average daily volume
of less than 5 million shares through midpoint orders during the month
is proposed to be modified by decreasing it to $0.0010 per share
executed. The Exchange believes that is no longer necessary to pay a
higher rebate for adding liquidity in Tape C.
The Exchange is also proposing to modify across all of the tapes
the existing credit for displayed Designated Retail Orders. The
existing rebate of $0.0033 per share will remain, but the rebate will
increase slightly to $0.0034 per share executed if the member adds
Customer and/or Professional liquidity in Penny Pilot Options and/or
Non- Penny Pilot Options of 1.40% or more of national customer volume
in multiply-listed equity and ETF options classes in a month as
pursuant to Chapter XV, Section 2 of the NOM rules. The Exchange
believes that increasing the rebate will attract additional retail
order flow.
NASDAQ also is proposing to modify an existing fee for Tape A and
Tape B securities. The proposed fee cap of $5,000 per month pertains to
both a DOT or LIST Order that executes in the NYSE opening or re-
opening process combined with a LIST Order that executes in the
NYSEArca and NYSEAmex opening or re-opening process if a member adds
Customer and/or Professional liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options of 1.40% or more of national customer volume in
multiply-listed equity and ETF options classes in a month as pursuant
to Chapter XV, Section 2 of the NOM Rules. The Exchange believes that
this will encourage firms that route options customer order flow and
equity order flow that would qualify as retail to send more order flow
to both NOM and NASDAQ. Additionally, NASDAQ is proposing to combine
for Tape B securities the LIST order that executes in an exchange's re-
opening process with the language noted above regarding the LIST order
that executes in an exchange's opening process. Aside from simplifying
the rule language by combining it for a LIST order that executes in the
opening or re-opening process, this also serves to reduce and harmonize
the fee for a LIST order that executes in an exchange's re-opening
process from $0.001 to $0.0005 per share executed in the NYSEArca re-
opening process.
NASDAQ Rules 7018(d) and (e) set forth fees assessed for executions
received in the Opening and Closing Crosses. The rule provides a fee of
$0.0003 per share executed assessed for all other quotes and orders not
otherwise noted under the rules. The Exchange is proposing to increase
the fee from $0.0003 to $0.0004 per share executed in the Opening and
Closing Crosses. The proposed increases to the fees assessed for
executions in the Closing and Opening Crosses will help the Exchange
recapture some of the costs it incurs operating the cross system, while
maintaining very low fees for the execution of orders in these crosses.
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.
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\3\ 15 U.S.C. 78f.
\4\ 15 U.S.C. 78f(b)(4) and (5).
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NASDAQ believes that the increase across all of the tapes to the
fee for a member that executes against resting midpoint liquidity from
$0.0027 per share executed to $0.0030 per share executed is reasonable,
equitably allocated and not unfairly discriminatory and will harmonize
the remove rate for orders whether or not they execute against the
midpoint so that the remove rate for orders is certain before the order
is entered. The Exchange believes the increase is reasonable because
the rate is consistent with the standard remove rate and members
receive significant price improvement when accessing midpoint
liquidity. The fee increase is equitably allocated and not unfairly
discriminatory because the increase is being uniformly assessed across
all of the tapes on all members that execute against resting midpoint
liquidity. Further, the Exchange believes that the reduced remove rate
for receiving a midpoint execution is no longer necessary because the
reduction did not result in a meaningful change in midpoint activity.
The Exchange believes that the elimination across all of the tapes
of the current $0.00293 per share executed rebate for a member with
shares of liquidity provided in all securities through one or more of
its Nasdaq Market Center MPIDs that represent more than 0.10% of
Consolidated Volume during the month, with shares executed in the
Opening and Closing Cross that represent more than 0.20% of
Consolidated Volume and orders entered through a single Nasdaq Market
Center MPID that represent more than 0.50% of Consolidated Volume
during the month is consistent with an equitable allocation of a
reasonable fee and not unfairly discriminatory. Specifically, the
Exchange believes it is equitable and not unfairly discriminatory
because this tier is being eliminated for all members and across all
tapes so no members are being disadvantaged. Additionally, only one
member qualified for the rebate in October and removing the rebate will
impact their total rebates received by less than 1%.
NASDAQ believes that the change across all tapes to the credit for
non-displayed orders (other than Supplemental Orders) that provide
liquidity is reasonable, equitably allocated and not unfairly
discriminatory. The new tier for the rebate of $0.0025 per share
executed for midpoint orders when the member adds an average daily
volume of 5 million or more shares through midpoint orders during the
month and either adds Customer and/or Professional liquidity in Penny
Pilot Options and/or Non- Penny Pilot Options of 1.40% or more of
national customer volume in multiply-listed equity and ETF options
classes in a month as pursuant to Chapter XV, Section 2 of the NOM
rules or adds 8 million shares of non-displayed liquidity (excluding
retail price improvement orders) is equitably allocated and not
unfairly discriminatory because it treats all members uniformly since
it is available to all members and across all tapes. The
[[Page 70255]]
Exchange believes that the proposed change is reasonable because it
does not unfairly burden competition, but rather it will promote
competition among member organizations to provide more meaningful non-
displayed liquidity, specifically midpoint liquidity, on the Exchange
to the benefit of investors and other members.
NASDAQ also proposes to modify the credit for non-displayed orders
(other than Supplemental Orders) in one additional way for Tape C
securities only. Specifically, the credit of $0.0014 per share executed
tier for midpoint orders if the member provides an average daily volume
of less than 5 million shares through midpoint orders during the month
is proposed to be modified by decreasing it to $0.0010 per share
executed. The Exchange believes that this rebate modification
applicable to Tape C securities only is reasonable, equitably allocated
and not unfairly discriminatory. NASDAQ believes that the proposed
decrease to the rebate is reasonable because it remains a higher rebate
than the rebates provided to other non-displayed liquidity in Tape C
securities and, thus, still incentivizes members to add midpoint
liquidity over other forms of non-displayed liquidity in Tape C and
represents only a modest decrease from the current rebate level. NASDAQ
believes that the proposed credit is equitably allocated and not
unfairly discriminatory because the rebate for this tier is available
and applies uniformly to members that are eligible that provide such
liquidity with regard to Tape C securities. Additionally, all members
have incentives available and equal opportunity to earn higher rebates
for adding more liquidity.
NASDAQ believes that the modification of the existing rebate for
Designated Retail Orders is consistent with an equitable allocation of
a reasonable fee and not unfairly discriminatory. The existing rebate
of $0.0033 per share will remain, but the rebate will increase slightly
to $0.0034 per share executed if the member adds Customer and/or
Professional liquidity in Penny Pilot Options and/or Non- Penny Pilot
Options of 1.40% or more of national customer volume in multiply-listed
equity and ETF options classes in a month as pursuant to Chapter XV,
Section 2 of the NOM rules. The Exchange believes that the increase to
the rebate under certain circumstances is reasonable because it is
intended to incentivize liquidity for Designated Retail Orders and
thereby improve overall liquidity in the marketplace. The modified
rebate is equitably allocated and not unfairly discriminatory because
it is available to all members that satisfy the criteria, regardless of
the exchange upon which it is executed. The Exchange notes that rebates
linked to options volume is not novel and that the Exchange has other
tiers available for members based on options volume.\5\
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\5\ See Exchange Rule 7018.
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The Exchange also believes that the modification to another
existing fee that is for Tape A and Tape B securities is reasonable,
equitably allocated and not unfairly discriminatory. Specifically, the
fee is [sic] and relates to both a DOT or LIST Order that executes in
the NYSE opening or re-opening process, and is combined with a LIST
Order that executes in the NYSEArca and NYSEAmex opening or re-opening
process for purposes of a cap of $0.0005 per share executed not to
exceed $5,000 per month. This applies if a member adds Customer and/or
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 1.40% or more of national customer volume in multiply-listed
equity and ETF options classes in a month as pursuant to Chapter XV,
Section 2 of the NOM Rules. The Exchange believes that the cap on total
charges is reasonable because it provides additional incentives for
members to utilize the Exchange router to access liquidity at away
markets, as well as provide additional incentives to add options
liquidity to receive this routing benefit. This cap is also equitably
allocated and not unfairly discriminatory because all members have an
equal opportunity to receive this incentive should they choose to avail
themselves of this benefit. As noted above, incentives and benefits
that combine options and equities volume is [sic] not novel.
NASDAQ also believes that, in connection with the rebate above,
combining for Tape B securities the LIST order that executes in an
exchange's re-opening process with the LIST order that executes in an
exchange's opening process, as well as reducing the fee from $0.001 to
$0.0005 per share executed in the NYSEArca re-opening process is
reasonable, equitably allocated and not unfairly discriminatory.
Specifically, the Exchange believes that reducing the fee for the
NYSEArca re-opening process is reasonable because it incentivizes
members to utilize the Exchange router to access liquidity at away
markets. Additionally, this fee reduction is equitably allocated and
not unfairly discriminatory because the reduced fee harmonizes the fee
for a LIST order that executes in an exchange's re-opening process and
applies to all members.
Lastly, NASDAQ believes that the changes to the fees assessed for
participation the Opening and Closing Crosses are consistent with an
equitable allocation of a reasonable fee and not unfairly
discriminatory. Specifically, the Exchange is proposing to increase the
fee from $0.0003 to $0.0004 per share executed in the Opening and
Closing Crosses. The Exchange believes that the fees are reasonable
because supporting the crosses requires capital investment to maintain
a system that facilitates an orderly auction process, and the proposed
increases are designed to offset the costs the Exchange incurs in
operating the crosses. Moreover, the proposed fees are equitably
allocated because they apply a fee on all members that benefit from
participation in the Opening and Closing Crosses, and are based on the
type of order entered and contribution to market quality. Similarly,
the proposed fees are not unfairly discriminatory because they are
based on the type of order executed in the crosses and the benefit to
market quality that such orders provide. NASDAQ believes that the
proposal to increase the charges assessed for executions in the crosses
is reasonable, equitably allocated and not unfairly discriminatory
because the increased fees are identical in amount and apply to all
members that elect to participate in the crosses and receive an
execution. Moreover, NASDAQ does not believe that the increased fees
will negatively impact participation in the crosses as current rates
assessed for the open and closing cross continue to be materially less
than the standard fee for accessing liquidity.
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.\6\ 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
[[Page 70256]]
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, the changes to routing fees and credits do not impose a
burden on competition because NASDAQ's routing services are optional
and are the subject of competition from other exchanges and broker-
dealers that offer routing services, as well as the ability of members
to develop their own routing capabilities. The slightly increased fees
for execution in the NASDAQ crosses are reflective of a need to support
and improve NASDAQ systems, which in turn benefit market quality and
ultimately, competition. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that NASDAQ will lose
market share as a result.
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\6\ 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)(ii) of the Act.\7\ 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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\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2014-108 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File Number SR-NASDAQ-2014-108.
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 such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; 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-2014-108 and should be submitted on or before December 16, 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. 2014-27845 Filed 11-24-14; 8:45 am]
BILLING CODE 8011-01-P