81 FR 10946 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq Rule 7018
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 41 (March 2, 2016)
Federal Register Volume 81, Issue 41 (March 2, 2016)
| Page Range | 10946-10949 | |
| FR Document | 2016-04507 |
[Federal Register Volume 81, Number 41 (Wednesday, March 2, 2016)] [Notices] [Pages 10946-10949] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-04507] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77239; File No. SR-NASDAQ-2016-027] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq Rule 7018 February 25, 2016. 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 February 22, 2016, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq is proposing changes to amend Nasdaq Rule 7018(a), governing fees and credits assessed for execution and routing of securities. 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 The Exchange proposes to amend Nasdaq Rule 7018(a), governing fees and credits assessed for execution and routing of securities listed on Nasdaq,\3\ listed on the New York Stock Exchange (``NYSE'') \4\ and listed on exchanges other than Nasdaq and NYSE \5\ (collectively, the ``Tapes''). --------------------------------------------------------------------------- \3\ Nasdaq Rule 7018(a)(1). \4\ Nasdaq Rule 7018(a)(2). \5\ Nasdaq Rule 7018(a)(3). --------------------------------------------------------------------------- Specifically, the purpose of the proposed rule change is to indicate that Nasdaq will not charge a fee for the use of its recently approved routing option, the Retail Order Process (``RTFY''),\6\ regardless of where the execution occurs.\7\ The RTFY order routing option [[Page 10947]] is designed to enhance execution quality and benefit retail investors by providing price improvement opportunities to retail order flow. --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release No. 76335 (Nov. 3, 2015), 80 FR 69256 (Nov. 9, 2015) (SR-NASDAQ-2015-112). \7\ The Exchange proposed RTFY because retail order firms often send non-marketable order flow (i.e., orders that are not executable against the best prices available in the market place based on their limit price) to post and display on exchanges. Some of the orders that have been deemed to be non-marketable by the entering firm become marketable by the time the exchange receives them and ultimately remove liquidity from the exchange order book. --------------------------------------------------------------------------- Members entering RTFY orders, regardless of where the orders execute will not incur a fee if they use this optional routing strategy. Currently, unless the member is eligible for a lower charge to enter orders that execute in the Nasdaq Market Center (``remove liquidity fee'' or ``remove rate''),\8\ all routing strategies that execute on Nasdaq are charged $0.0030 per share executed. Therefore, the proposed $0.0000 per share executed for orders electing to use RTFY is a reduction from the standard remove rate of $0.0030 per share executed that orders with routing instructions currently face. --------------------------------------------------------------------------- \8\ See Nasdaq Rule 7014(d). --------------------------------------------------------------------------- The Exchange does not expect an order using RTFY to execute on the Exchange, but Nasdaq will cover this atypical scenario by specifically stating that no fee will be assessed if the order ultimately executes on the Exchange. Currently, if an order removes liquidity from the Exchange, unless specifically exempted in a Nasdaq rule, the standard remove rate applies. In sum, this proposed rule change reduces the remove rate from $0.0030 to $0.0000 per share executed for orders electing to use RTFY and establishes routing fees for RFTY as $0.0000 per share executed. Members using TFTY, in contrast to RTFY, which is a comparable routing strategy, incurs [sic] fees for routing. Members using TFTY are assessed a charge of $0.0030 per share executed for orders that execute at NASDAQ OMX PSX and are assessed a charge of $0.0007 per share executed for orders that execute on venues other than BX or NASDAQ OMX PSX. Orders using TFTY on the Exchange also incur remove liquidity fees. In the case of RTFY, the Exchange intends to provide the RFTY routing option at no charge as an incentive for members to use this new routing strategy. No member that uses this new routing strategy to seek price improvement opportunities for the retail orders that it routes will incur a routing fee. A member that elects not to use this new routing strategy will be assessed the routing fee applicable to the strategy it selected and will be charged the remove rate the member otherwise qualifies for on Nasdaq. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\9\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\10\ 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 its facilities which the Exchange operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78f(b). \10\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- 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.'' \11\ Likewise, in NetCoalition v. Securities and Exchange Commission \12\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\13\ As the court emphasized, the Commission ``intended in Regulation NMS that `market forces, rather than regulatory requirements' play a role in determining the market data . . . to be made available to investors and at what cost.'' \14\ --------------------------------------------------------------------------- \11\ Securities Exchange Act Release No. 34-51808 (June 9, 2005) (``Regulation NMS Adopting Release''). \12\ NetCoalition v. SEC. 615 F.3d 525 (D.C. Cir. 2010). \13\ Id. at 534-535. \14\ Id. at 537. --------------------------------------------------------------------------- Further, ``[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' . . . .'' \15\ --------------------------------------------------------------------------- \15\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783). --------------------------------------------------------------------------- Nasdaq believes that the proposed rule change to Nasdaq Rule 7018(a)(1), (2) and (3) is reasonable because it is an incentive for members to select RTFY and a price reduction versus other order types, routing strategies and services offered by the Exchange and other away venues. Additionally, the new fees of $0.0000 per share executed will apply equally to all members entering RTFY orders that execute in the Nasdaq Market Center, as well as in a venue other than the Nasdaq Market Center. A member that elects not to use this new routing strategy will be assessed charges the member otherwise qualifies for, often $0.0030 per share executed when executing on Nasdaq and ranging from a rebate to a fee when routing to venues other than Nasdaq. The new fees are being proposed in connection with the recently approved RTFY order routing option under Nasdaq Rule 4758(a)(1)(A)(v) for Designated Retail Orders (``DROs'').\16\ If a DRO electing the RTFY routing option is not marketable, it will rest on the Exchange book and other Nasdaq members will have the opportunity to interact with the order at its limit price.\17\ The RTFY order routing option is designed to enhance execution quality and benefit retail investors by providing price improvement opportunities to retail order flows. The Exchange believes that this new Exchange functionality will enhance coordination and cooperation with market participants and produce a more efficient market because the Exchange believes more retail investor orders will be sent to the Exchange to add liquidity or to obtain price improvement. Increasing retail activity on the Exchange, in turn, benefits all participants through more robust price discover opportunities on Nasdaq. --------------------------------------------------------------------------- \16\ Supra note 6. \17\ Supra note 7. --------------------------------------------------------------------------- The lower cost ($0.0000 per share executed) of this routing strategy as compared with other existing routing strategies is reasonable because of the lower costs that Nasdaq is charged by the venues to which the RTFY orders are routed. For the majority of orders routed, Nasdaq believes it will not be charged a fee for the orders that become marketable and route to other market centers using this routing strategy. Equally important, the $0.0000 per share executed is a fee reduction versus an assessed a charge of $0.0030 per share executed for a member who elects not to use this new routing strategy, as well as a fee reduction versus other choices currently available on Nasdaq. The Exchange believes that the lower [[Page 10948]] cost of this routing strategy is reasonable since it is designed to act as an incentive to encourage members to try this new routing strategy. Members have a wide range of options of where to send their orders and the proposed pricing is influenced by these factors. While Nasdaq believes that this new functionality is novel and desired by market participants, Nasdaq equally believes that the proposed rate of $0.0000 per share executed is the appropriate incentive to encourage market participants to use this innovative order routing strategy in lieu of other choices in the market place. The practice of exchanges offering lower rates for new services or those geared toward investors or customers is not novel. For example, there are a variety of programs that exist today that offer incentives and execution opportunities for retail orders, as long as they use specific programs or functionality. One such program is the retail price improvement (``RPI'') programs that exist on the New York Stock Exchange LLC, NYSE ARCA, Inc., BATS Y- Exchange, Inc., and NASDAQ OMX BX, Inc. (``BX''). For example, on BX a retail order in the RPI program receives higher rebates than an otherwise situated order because of its use of the program's specific order types. Similar to how members currently take advantage of other price reductions, discounts or rebates via volume discounts and tiers, members may elect to use the RTFY routing strategy to receive a reduced fee, just as members may use RPI programs and various order types to receive enhanced rebates or reduced fees. Further, Chicago Board Options Exchange, Incorporated (``CBOE'') and NASDAQ PHLX LLC (``Phlx'') all offer inventive programs designed to attract customer orders.\18\ While not identical to the CBOE and Phlx programs, the proposed rate is an incentive designed to attract member's that act as agent for retail orders to choose RTFY over all other alternatives in the market place in the same manner as the CBOE and Phlx supplemental rebates encourage members that rout customer order flow to choose their respective exchanges for execution. The Exchange believes that offering lower fees, even if for a new routing strategy, is consistent with the Exchange Act. --------------------------------------------------------------------------- \18\ See CBOE Fee Schedule, Volume Incentive Program; see also Section B of the Phlx Pricing Schedule, Customer Rebate Program. --------------------------------------------------------------------------- The Exchange also believes that the proposed rule change is an equitable allocation and is not unfairly discriminatory because the new fees will be applied uniformly across all members that are willing to use Nasdaq's routing services and opt to use the RTFY routing strategy.\19\ All members sending DROs may elect to use the RTFY routing strategy when sending orders. Moreover, assessing different rates when a member elects to use a routing strategy but executes on the venue where the order was originally entered in not novel. BX provided a higher rebate to remove liquidity for members if they elected to use specific routing strategies (the ``BX filing'').\20\ In the BX filing, a member using the BDRK or BCST routing strategy was able to receive a $0.0014 rebate for removing liquidity in the BX Equities System rather than the standard $0.0004 rebate for removing liquidity on the BX Equities System. Thus, the same order (apart from the routing strategy used) was eligible for a different rebate when removing liquidity on BX solely because of its routing strategy. This is similar to the proposed $0.0000 fee for RTFY orders that execute on the Nasdaq Market Center in that the member receives a different rate for an otherwise similar order, but by using a specific routing strategy. --------------------------------------------------------------------------- \19\ See Securities Exchange Act Release No. 66763 (April 6, 2012), 77 FR 22008 (April 12, 2012) (SR-EDGA-2012-13) (an example of another exchange using a proposed rate of $0.0000 per share executed that is an equitable allocation of reasonable dues, fees, and other charges). \20\ See Securities Exchange Act Release No. 69053 (March 7, 2013), 78 FR 15999 (March 13, 2013) (SR-BX-2013-019). --------------------------------------------------------------------------- Additionally, the proposed rule change also is not unfairly discriminatory because all members sending DROs to Nasdaq for execution are eligible to use RTFY. Each member may elect to use the RTFY routing strategy as they see fit. B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change will not result in a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended.\21\ 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 credit opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and credits to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. --------------------------------------------------------------------------- \21\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- Because competitors are free to modify their own fees and credits 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 this instance, the proposed new fees applicable across the Tapes apply to member firms entering RTFY orders that execute in the Nasdaq Market Center, as well as in a venue other than the Nasdaq Market Center (although the proposed new fees are $0.0000 per share executed) do not impose a burden on competition because the Exchange's execution services are voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. The Exchange believes that the competition among exchanges and other venues will help to drive price improvement and overall execution quality higher for end retail investors. In sum, if the change proposed herein is 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 change 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.\22\ 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. --------------------------------------------------------------------------- \22\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, [[Page 10949]] including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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-2016-027 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-2016-027. 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-2016-027 and should be submitted on or before March 23, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-04507 Filed 3-1-16; 8:45 am] BILLING CODE 8011-01-P
![10946 Federal Register / Vol. 81, No. 41 / Wednesday, March 2, 2016 / Notices
of the Act and Rule 19b–4(f)(6)(iii) subject line if email is used. To help the the proposed rule change as described
thereunder. Commission process and review your in Items I, II, and III below, which Items
A proposed rule change filed under comments more efficiently, please use have been prepared by the Exchange.
Rule 19b–4(f)(6) 7 normally does not only one method. The Commission will The Commission is publishing this
become operative prior to 30 days after post all comments on the Commission’s notice to solicit comments on the
the date of the filing. However, pursuant Internet Web site (http://www.sec.gov/ proposed rule change from interested
to Rule 19b–4(f)(6)(iii),8 the Commission rules/sro.shtml). Copies of the persons.
may designate a shorter time if such submission, all subsequent
action is consistent with the protection amendments, all written statements I. Self-Regulatory Organization’s
of investors and the public interest. The with respect to the proposed rule Statement of the Terms of Substance of
Exchange has asked the Commission to change that are filed with the the Proposed Rule Change
waive the 30-day operative delay to Commission, and all written Nasdaq is proposing changes to
allow the Exchange to immediately communications relating to the amend Nasdaq Rule 7018(a), governing
reflect changes to the Exchange’s rules proposed rule change between the fees and credits assessed for execution
which will eliminate any potential for Commission and any person, other than and routing of securities.
confusion and provide clarity on how those that may be withheld from the The text of the proposed rule change
the rules apply. The Commission public in accordance with the is available at nasdaq.cchwallstreet
believes that waiving the 30-day provisions of 5 U.S.C. 552, will be .com, at Nasdaq’s principal office, and
operative delay is consistent with the available for Web site viewing and at the Commission’s Public Reference
protection of investors and the public printing in the Commission’s Public Room.
interest. Therefore, the Commission Reference Room, on official business
hereby waives the operative delay and II. Self-Regulatory Organization’s
days between the hours of 10:00 a.m.
designates the proposed rule change Statement of the Purpose of, and
and 3:00 p.m., located at 100 F Street
operative upon filing.9 Statutory Basis for, the Proposed Rule
NE., Washington, DC 20549. Copies of
At any time within 60 days of the Change
such filing also will be available for
filing of the proposed rule change, the inspection and copying at the principal In its filing with the Commission,
Commission summarily may office of the Exchange. All comments Nasdaq included statements concerning
temporarily suspend such rule change if received will be posted without change; the purpose of, and basis for, the
it appears to the Commission that such the Commission does not edit personal proposed rule change and discussed any
action is necessary or appropriate in the identifying information from comments it received on the proposed
public interest, for the protection of submissions. You should submit only rule change. The text of those
investors, or otherwise in furtherance of information that you wish to make statements may be examined at the
the purposes of the Act. If the available publicly. All submissions places specified in Item IV below. The
Commission takes such action, the should refer to File Number SR–BOX– Exchange has prepared summaries, set
Commission shall institute proceedings 2016–10 and should be submitted on or forth in sections A, B, and C below, of
to determine whether the proposed rule before March 23, 2016. the most significant parts of such
should be approved or disapproved. For the Commission, by the Division of statements.
IV. Solicitation of Comments Trading and Markets, pursuant to delegated A. Self-Regulatory Organization’s
authority.10
Interested persons are invited to Statement of the Purpose of, and
Robert W. Errett, Statutory Basis for, the Proposed Rule
submit written data, views and Deputy Secretary.
arguments concerning the foregoing, Change
[FR Doc. 2016–04500 Filed 3–1–16; 8:45 am]
including whether the proposed rule 1. Purpose
BILLING CODE 8011–01–P
change is consistent with the Act.
The Exchange proposes to amend
Comments may be submitted by any of
Nasdaq Rule 7018(a), governing fees and
the following methods: SECURITIES AND EXCHANGE credits assessed for execution and
Electronic Comments COMMISSION routing of securities listed on Nasdaq,3
• Use the Commission’s Internet [Release No. 34–77239; File No. SR– listed on the New York Stock Exchange
comment form (http://www.sec.gov/ NASDAQ–2016–027] (‘‘NYSE’’) 4 and listed on exchanges
rules/sro.shtml); or other than Nasdaq and NYSE 5
• Send an email to rule-comments@ Self-Regulatory Organizations; The (collectively, the ‘‘Tapes’’).
sec.gov. Please include File Number SR– NASDAQ Stock Market LLC; Notice of Specifically, the purpose of the
BOX–2016–10 on the subject line. Filing and Immediate Effectiveness of proposed rule change is to indicate that
Proposed Rule Change To Amend Nasdaq will not charge a fee for the use
Paper Comments Nasdaq Rule 7018 of its recently approved routing option,
• Send paper comments in triplicate the Retail Order Process (‘‘RTFY’’),6
February 25, 2016.
to Secretary, Securities and Exchange regardless of where the execution
Commission, 100 F Street NE., Pursuant to Section 19(b)(1) of the occurs.7 The RTFY order routing option
Washington, DC 20549–1090. Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 3 Nasdaq Rule 7018(a)(1).
All submissions should refer to File notice is hereby given that, on February 4 Nasdaq Rule 7018(a)(2).
Number SR–BOX–2016–10. This file
mstockstill on DSK4VPTVN1PROD with NOTICES
22, 2016, The NASDAQ Stock Market 5 Nasdaq Rule 7018(a)(3).
number should be included on the LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed 6 See Securities Exchange Act Release No. 76335
with the Securities and Exchange (Nov. 3, 2015), 80 FR 69256 (Nov. 9, 2015) (SR–
7 17 CFR 240.19b–4(f)(6). NASDAQ–2015–112).
8 17 CFR 240.19b–4(f)(6)(iii).
Commission (‘‘SEC’’ or ‘‘Commission’’) 7 The Exchange proposed RTFY because retail
9 For purposes only of waiving the operative date order firms often send non-marketable order flow
10 17 CFR 200.30–3(a)(12).
of this proposal, the Commission has considered (i.e., orders that are not executable against the best
1 15 U.S.C. 78s(b)(1).
the proposed rule’s impact on efficiency, prices available in the market place based on their
competition, and capital formation. 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4. limit price) to post and display on exchanges. Some
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is designed to enhance execution 2. Statutory Basis Nasdaq believes that the proposed
quality and benefit retail investors by The Exchange believes that its rule change to Nasdaq Rule 7018(a)(1),
providing price improvement proposal is consistent with Section 6(b) (2) and (3) is reasonable because it is an
opportunities to retail order flow. of the Act,9 in general, and furthers the incentive for members to select RTFY
Members entering RTFY orders, objectives of Sections 6(b)(4) and 6(b)(5) and a price reduction versus other order
regardless of where the orders execute of the Act,10 in particular, in that it types, routing strategies and services
provides for the equitable allocation of offered by the Exchange and other away
will not incur a fee if they use this
reasonable dues, fees and other charges venues. Additionally, the new fees of
optional routing strategy. Currently,
among members and issuers and other $0.0000 per share executed will apply
unless the member is eligible for a lower
persons using its facilities which the equally to all members entering RTFY
charge to enter orders that execute in orders that execute in the Nasdaq
the Nasdaq Market Center (‘‘remove Exchange operates or controls, and is
not designed to permit unfair Market Center, as well as in a venue
liquidity fee’’ or ‘‘remove rate’’),8 all other than the Nasdaq Market Center. A
routing strategies that execute on discrimination between customers,
issuers, brokers, or dealers. member that elects not to use this new
Nasdaq are charged $0.0030 per share routing strategy will be assessed charges
The Commission and the courts have
executed. Therefore, the proposed the member otherwise qualifies for,
repeatedly expressed their preference
$0.0000 per share executed for orders often $0.0030 per share executed when
for competition over regulatory
electing to use RTFY is a reduction from executing on Nasdaq and ranging from
intervention in determining prices,
the standard remove rate of $0.0030 per products, and services in the securities a rebate to a fee when routing to venues
share executed that orders with routing markets. In Regulation NMS, while other than Nasdaq.
instructions currently face. adopting a series of steps to improve the The new fees are being proposed in
The Exchange does not expect an current market model, the Commission connection with the recently approved
order using RTFY to execute on the highlighted the importance of market RTFY order routing option under
Exchange, but Nasdaq will cover this forces in determining prices and SRO Nasdaq Rule 4758(a)(1)(A)(v) for
atypical scenario by specifically stating revenues and, also, recognized that Designated Retail Orders (‘‘DROs’’).16 If
that no fee will be assessed if the order current regulation of the market system a DRO electing the RTFY routing option
ultimately executes on the Exchange. ‘‘has been remarkably successful in is not marketable, it will rest on the
promoting market competition in its Exchange book and other Nasdaq
Currently, if an order removes liquidity
broader forms that are most important to members will have the opportunity to
from the Exchange, unless specifically
investors and listed companies.’’ 11 interact with the order at its limit
exempted in a Nasdaq rule, the standard
Likewise, in NetCoalition v. Securities price.17 The RTFY order routing option
remove rate applies. In sum, this is designed to enhance execution
proposed rule change reduces the and Exchange Commission 12
(‘‘NetCoalition’’) the D.C. Circuit upheld quality and benefit retail investors by
remove rate from $0.0030 to $0.0000 per providing price improvement
share executed for orders electing to use the Commission’s use of a market-based
approach in evaluating the fairness of opportunities to retail order flows. The
RTFY and establishes routing fees for Exchange believes that this new
RFTY as $0.0000 per share executed. market data fees against a challenge
claiming that Congress mandated a cost- Exchange functionality will enhance
Members using TFTY, in contrast to based approach.13 As the court coordination and cooperation with
RTFY, which is a comparable routing emphasized, the Commission ‘‘intended market participants and produce a more
strategy, incurs [sic] fees for routing. in Regulation NMS that ‘market forces, efficient market because the Exchange
Members using TFTY are assessed a rather than regulatory requirements’ believes more retail investor orders will
charge of $0.0030 per share executed for play a role in determining the market be sent to the Exchange to add liquidity
orders that execute at NASDAQ OMX data . . . to be made available to or to obtain price improvement.
PSX and are assessed a charge of investors and at what cost.’’ 14 Increasing retail activity on the
$0.0007 per share executed for orders Further, ‘‘[n]o one disputes that Exchange, in turn, benefits all
that execute on venues other than BX or competition for order flow is ‘fierce.’ participants through more robust price
NASDAQ OMX PSX. Orders using . . . As the SEC explained, ‘[i]n the U.S. discover opportunities on Nasdaq.
TFTY on the Exchange also incur national market system, buyers and The lower cost ($0.0000 per share
remove liquidity fees. In the case of sellers of securities, and the broker- executed) of this routing strategy as
RTFY, the Exchange intends to provide dealers that act as their order-routing compared with other existing routing
the RFTY routing option at no charge as agents, have a wide range of choices of strategies is reasonable because of the
an incentive for members to use this where to route orders for execution’; lower costs that Nasdaq is charged by
[and] ‘no exchange can afford to take its the venues to which the RTFY orders
new routing strategy. No member that
market share percentages for granted’ are routed. For the majority of orders
uses this new routing strategy to seek
because ‘no exchange possesses a routed, Nasdaq believes it will not be
price improvement opportunities for the
monopoly, regulatory or otherwise, in charged a fee for the orders that become
retail orders that it routes will incur a
the execution of order flow from broker marketable and route to other market
routing fee. A member that elects not to
dealers’ . . . .’’ 15 centers using this routing strategy.
use this new routing strategy will be Equally important, the $0.0000 per
assessed the routing fee applicable to share executed is a fee reduction versus
9 15 U.S.C. 78f(b).
the strategy it selected and will be 10 15 an assessed a charge of $0.0030 per
U.S.C. 78f(b)(4) and (5).
charged the remove rate the member
mstockstill on DSK4VPTVN1PROD with NOTICES
11 Securities Exchange Act Release No. 34–51808 share executed for a member who elects
otherwise qualifies for on Nasdaq. (June 9, 2005) (‘‘Regulation NMS Adopting not to use this new routing strategy, as
Release’’).
12 NetCoalition v. SEC. 615 F.3d 525 (D.C. Cir.
well as a fee reduction versus other
of the orders that have been deemed to be non- choices currently available on Nasdaq.
marketable by the entering firm become marketable 2010).
by the time the exchange receives them and 13 Id. at 534–535. The Exchange believes that the lower
ultimately remove liquidity from the exchange 14 Id. at 537.
order book. 15 Id. at 539 (quoting ArcaBook Order, 73 FR at 16 Supra note 6.
8 See Nasdaq Rule 7014(d). 74782–74783). 17 Supra note 7.
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![Federal Register / Vol. 81, No. 41 / Wednesday, March 2, 2016 / Notices 10949
including whether the proposed rule SECURITIES AND EXCHANGE ICE Clear Europe to satisfy certain
change is consistent with the Act. COMMISSION margin requirements.
Comments may be submitted by any of Specifically, the Additional Permitted
the following methods: [Release No. 34–77234; File No. SR–ICEEU– Cover will include the following types
2016–004] of government securities: (i) U.S.
Electronic Comments Treasury floating-rate notes (‘‘UST
Self-Regulatory Organizations; ICE
• Use the Commission’s Internet FRNs’’), (ii) Canadian government
Clear Europe Limited; Notice of Filing
comment form (http://www.sec.gov/ treasury bills and Canadian government
of a Proposed Rule Change Relating to real return bonds,3 (iii) Spanish
rules/sro.shtml); or Additions to Permitted Cover government treasury bills (Letras del
• Send an email to rule-comments@ February 25, 2016. Tesoro), (iv) Swedish government
sec.gov. Please include File Number SR– treasury bills, (v) German government
Pursuant to Section 19(b)(1) of the
NASDAQ–2016–027 on the subject line. inflation-linked bonds (of two types:
Securities Exchange Act of 1934
Paper Comments (‘‘Act’’),1 and Rule 19b–4 thereunder,2 Deutsche Bundesrepublik Inflation-
notice is hereby given that on February Linked Bonds and Bundesobligationen
• Send paper comments in triplicate 10, 2016, ICE Clear Europe Limited I/L), (vi) Japanese government CPI-
to Secretary, Securities and Exchange (‘‘ICE Clear Europe’’ or the ‘‘Clearing linked bonds, and (vii) Swedish
Commission, 100 F Street NE., House’’) filed with the Securities and government inflation index-linked
Washington, DC 20549–1090. Exchange Commission (‘‘Commission’’) bonds.
the proposed rule changes described in ICE Clear Europe believes that the
All submissions should refer to File Additional Permitted Cover is of
Number SR–NASDAQ–2016–027. This Items I, II and III below, which Items
have been prepared primarily by ICE minimal credit risk, comparable to that
file number should be included on the of other sovereign debt currently
subject line if email is used. To help the Clear Europe. The Commission is
accepted by ICE Clear Europe as
Commission process and review your publishing this notice to solicit
Permitted Cover. Significantly, other
comments more efficiently, please use comments on the proposed rule change
debt obligations of the same
only one method. The Commission will from interested persons.
governments that issue the Additional
post all comments on the Commission’s I. Self-Regulatory Organization’s Permitted Cover are currently eligible as
Internet Web site (http://www.sec.gov/ Statement of the Terms of Substance of Permitted Cover. The Additional
rules/sro.shtml). Copies of the the Proposed Rule Change Permitted Cover consisting of treasury
submission, all subsequent bills is substantially similar to existing
amendments, all written statements The principal purpose of the changes
is to permit Clearing Members of ICE forms of treasury bill Permitted Cover
with respect to the proposed rule currently accepted by the Clearing
change that are filed with the Clear Europe to provide additional
House. In terms of the Additional
Commission, and all written categories of securities, including
Permitted Cover consisting of inflation-
communications relating to the treasury bills and floating and inflation-
linked government bonds, ICE Clear
proposed rule change between the linked government bonds (the
Europe currently accepts similar bonds
Commission and any person, other than ‘‘Additional Permitted Cover’’) to ICE
issued by other governments. As a
those that may be withheld from the Clear Europe to satisfy certain margin
result, ICE Clear Europe does not
public in accordance with the requirements.
believe that such bonds would pose any
provisions of 5 U.S.C. 552, will be II. Self-Regulatory Organization’s additional or novel risks for the Clearing
available for Web site viewing and Statement of the Purpose of, and House. ICE Clear Europe further
printing in the Commission’s Public Statutory Basis for, the Proposed Rule believes that the Additional Permitted
Reference Room, 100 F Street NE., Change Cover has demonstrated low volatility,
Washington, DC 20549, on official including in stressed market conditions.
In its filing with the Commission, ICE Based on its analysis of the
business days between the hours of
Clear Europe included statements Additional Permitted Cover and its
10:00 a.m. and 3:00 p.m. Copies of the
concerning the purpose of and basis for volatility and other characteristics, ICE
filing also will be available for
the proposed rule change. The text of Clear Europe will initially apply to the
inspection and copying at the principal
these statements may be examined at Additional Permitted Cover the same
office of the Exchange. All comments
the places specified in Item IV below. valuation haircuts as currently applied
received will be posted without change;
ICE Clear Europe has prepared to currently accepted bonds of the same
the Commission does not edit personal
summaries, set forth in sections A, B, issuer and within the same maturity
identifying information from
and C below, of the most significant bucket. The Clearing House will review
submissions. You should submit only
aspects of such statements. and modify such haircuts from time to
information that you wish to make
available publicly. All submissions A. Self-Regulatory Organization’s time, in accordance with Clearing
should refer to File Number SR– Statement of the Purpose of, and House’s Collateral and Haircut Policy.
NASDAQ–2016–027 and should be Statutory Basis for, the Proposed Rule In addition, ICE Clear Europe will
submitted on or before March 23, 2016. Change impose both absolute limits and relative
limits for each type of Additional
For the Commission, by the Division of 1. Purpose
Trading and Markets, pursuant to delegated Permitted Cover (other than U.S.
mstockstill on DSK4VPTVN1PROD with NOTICES
authority.23 The purpose of ICE Clear Europe Treasury obligations), consistent with
accepting the Additional Permitted the existing issuer limits for Permitted
Robert W. Errett,
Cover is to provide its Clearing
Deputy Secretary.
Members with a greater range of high- 3 Pursuant to confirmation via telephone and
[FR Doc. 2016–04507 Filed 3–1–16; 8:45 am] quality collateral that can be posted to email with ICE Clear Europe’s outside counsel on
BILLING CODE 8011–01–P
February 19 and 23, 2016, staff in the Division of
Trading and Markets modified this sentence to add
1 15 U.S.C. 78s(b)(1). the reference to Canadian government real return
23 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. bonds to conform to the proposed rule text.
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Document Created: 2018-02-02 15:04:05
Document Modified: 2018-02-02 15:04:05
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 10946 |
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