[Federal Register Volume 80, Number 145 (Wednesday, July 29, 2015)]
[Notices]
[Pages 45250-45252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18539]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75514; File No. SR-NASDAQ-2015-084]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ Rule 7014(g) Concerning Rebates Available Under the NBBO
Program
July 23, 2015.
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 July 16, 2015, 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend NASDAQ Rule 7014(g) concerning
rebates available under the NBBO Program. The Exchange will implement
the new rebate on July 17, 2015.
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 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.
[[Page 45251]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ is proposing to add a new $0.0004 per share executed credit
in securities listed on NYSE, which would be available to any member
that provides shares of liquidity in all securities through one or more
of its Nasdaq Market Center MPIDs (``MPIDs'') that represent 0.50% or
more of Consolidated Volume \3\ during the month. The NBBO Program
provides a per share executed rebate \4\ with respect to all other
displayed orders (other than Designated Retail Orders, as defined in
NASDAQ Rule 7018) in securities priced at $1 or more per share that
provide liquidity and establish the NBBO. Currently, NASDAQ offers a
$0.0002 per share executed credit to a member that either: (1) Executes
shares of liquidity provided in all securities through one or more of
its MPIDs that represents 0.475% or more of Consolidated Volume during
the month; or (2) add [sic] NOM Market Maker liquidity, as defined in
Chapter XV, Section 2 of the Nasdaq Options Market rules, in Penny
Pilot Options and/or Non-Penny Pilot Options above 0.90% of total
industry customer equity and ETF option ADV contracts per day in a
month. Thus, the NBBO program provides an incentive to members to
improve the quality of the market by rewarding members that provide
significant market-improving order flow with a credit.
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\3\ Consolidated Volume is the total consolidated volume
reported to all consolidated transaction reporting plans by all
exchanges and trade reporting facilities during a month in equity
securities, excluding executed orders with a size of less than one
round lot. For purposes of calculating Consolidated Volume and the
extent of a member's trading activity, expressed as a percentage of
or ratio to Consolidated Volume, the date of the annual
reconstitution of the Rusell Investments Indexes shall be excluded
from both total Consolidated Volume and the member's trading
activity. See Rule 7018. For purposes of the proposed tier, the
Exchange will calculate Consolidated Volume during the first month
that it is implemented based on only the day during that month that
the rebate is available.
\4\ The rebate is provided in addition to any rebate or credit
payable under NASDAQ Rule 7018(a) and the Investor Support Program
(``ISP'') and Qualified Market Maker (``QMM'') Program under NASDAQ
Rule 7014.
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The proposed new rebate, which is provided in lieu of the current
rebate, is designed to further improve the market by providing members
with a higher credit as incentive to provide a greater level of
Consolidated Volume to NASDAQ and to quote aggressively in Tape A
securities. In this regard, the proposed new credit will apply to all
other displayed orders (other than Designated Retail Orders, as defined
in NASDAQ Rule 7018) in securities listed on NYSE (``Tape A'') priced
at $1 or more per share that provide liquidity and establish the NBBO.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\5\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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 the Exchange operates or controls, and is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest; and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed change to amend Rule
7014(g) is reasonable because it provides an opportunity for members
that qualify to receive a rebate of $0.0004 per share executed for all
other displayed orders (other than Designated Retail Orders, as defined
in Rule 7018) in Tape A securities priced at $1 or more per share that
provide liquidity and establish the NBBO.\7\ Thus the rebate provides
incentive to members to provide aggressively priced orders in Tape A
securities that improve the market by setting the NBBO. Requiring a
higher level of Consolidated Volume than the lower $0.0002 per share
executed tier is consistent with incentivizing member to provide
greater market improving activity in the form of Consolidated Volume in
return for eligibility for a higher credit. The Exchange believes that
it is reasonable to limit the higher credit to Tape A securities
because it desires to improve the market on NASDAQ in Tape A securities
in terms of setting the NBBO, which is currently not as robust as price
setting in non-Tape A securities.
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\7\This is similar to other programs originating from BATS
Global Markets 2011 filing. See Securities Exchange Act Release No.
73967 (January 3, 2011), 80 FR 594 (January 7, 2011) (SR-BATS-2010-
038.
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NASDAQ believes the proposed change is equitable and not unfairly
discriminatory because the $0.0004 per share executed rebate under the
NBBO Program is available to all members on an equal basis and provides
a rebate for activity that improves the Exchange's market quality
through increased activity and by encouraging the setting of the NBBO.
In this regard, the NBBO Program encourages higher levels of liquidity
provision into the price discovery process and is consistent with the
overall goals of enhancing market quality. Also, the Exchange believes
that the qualification requirement for the new tier is equitable and
not unfairly discriminatory because it represents an increased yet
attainable level for members to achieve and to qualify for this higher
rebate. In addition, the Exchange notes that the new eligibility
standard for the tier, which requires a member to execute shares of
liquidity provided in all securities through one or more of its MPIDs
that represents 0.50% or more of Consolidated Volume during the month,
represents a lower Consolidated Volume requirement than the QMM
Program, which requires at least 0.70% of Consolidated Volume to
qualify under the lowest credit tier.\8\ The Exchange believes the
proposed qualification standard is equitable and not unfairly
discriminatory because the NBBO Program rebates do not apply to all
shares of liquidity provided, and thus the Consolidated Volume
threshold is set lower.
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\8\See Rule 7014(e).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule changes [sic] will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.\9\
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
[[Page 45252]]
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, NASDAQ is proposing to enhance the
NBBO Program with an additional and higher rebate opportunity in Tape A
securities in return for market improving participation. Consequently,
the proposed changes do not impose a burden on competition because the
proposed rebate, and incentive programs generally, are reflective of
the need for exchanges to offer financial incentives to attract order
flow and to let such financial incentives evolve in response to
competition. Accordingly, while the Exchange does not believe that the
proposed change will result in any burden on competition, if the change
proposed herein are unattractive to market participants it is likely
that NASDAQ will lose market share as a result.
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\9\U.S.C. 78f(b)(8)
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\10\
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\10\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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2015-084 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-2015-084. 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 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 o File Number SR-NASDAQ-2015-
084, and should be submitted on or before August 19, 2015.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18539 Filed 7-28-15; 8:45 am]
BILLING CODE 8011-01-P