81 FR 69140 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq's Fees and Credits at Rules 7014 and 7018

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 193 (October 5, 2016)

Page Range		69140-69145
FR Document		2016-23999
Federal Register, Volume 81 Issue 193 (Wednesday, October 5, 2016)
[Federal Register Volume 81, Number 193 (Wednesday, October 5, 2016)]
[Notices]
[Pages 69140-69145]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-23999]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78977; File No. SR-NASDAQ-2016-132]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Nasdaq's Fees and Credits at Rules 7014 and 7018

September 29, 2016.
    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 September 28, 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.
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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 the Exchange's fees and credits at 
Rules 7014 and 7018.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on September 1, 
2016.\3\
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    \3\ The proposed fees were initially filed with the Commission 
as an immediately effective and operative rule change on September 
1, 2016. See SR-NASDAQ-2016-125. On September 16, 2016 the Exchange 
withdrew SR-NASDAQ-2016-125 and replaced it with SR-NASDAQ-2016-128. 
To correct a technical issue with the filing, on September 16, 2016 
the Exchange replaced SR-NASDAQ-2016-128 with SR-NASDAQ-2016-129. 
This filing replaces SR-NASDAQ-2016-129.
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    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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend Rule 7014 to: 
(i) Add a new charge of $0.0029 assessed Qualified Market Makers 
(``QMMs'') for orders in securities listed on exchanges other than 
Nasdaq priced at $1 or more; (ii) amend the requirement to qualify for 
a rebate under the NBBO program; and (iii) add the new Nasdaq Growth 
Program. The Exchange is also proposing to amend Rule 7018 to: (i) 
Replace an existing $0.0001 per share executed credit tier with two new 
credit tiers providing $0.0001 and $0.0002 per share executed, 
respectively; (ii) amend the criteria and fees assessed for 
transactions in the Closing Cross; and (iii) amend the criteria and 
fees assessed for transactions in the opening cross, and make a 
clarifying change to the opening cross rules.
First Change
    The purpose of the first change is to increase incentives provided 
by the Exchange under Rule 7014(e) by providing a new $0.0029 per share 
executed fee to QMMs that, in addition to meeting the Tier 2 
eligibility criteria also have a combined Consolidated Volume of at 
least 3.5%. A QMM is a member that makes a significant contribution to 
market quality by providing certain levels of Consolidated Volume 
through one or more of its Nasdaq Market Center MPIDs. In return, a QMM 
receives rebates with respect to all other displayed orders (other than 
Designated Retail Orders, as defined in Rule 7018) in securities priced 
at $1 or more per share that provide liquidity and were for securities 
listed on NYSE (``Tape A''), securities listed on exchanges other than 
NYSE or Nasdaq (``Tape B''), or securities listed on Nasdaq (``Tape 
C''). There are currently two Tiers of rebates provided, which are 
based on the amount of shares of liquidity provided a QMM executes in 
all securities through one or more of its Nasdaq Market Center MPIDs 
that represent certain levels of Consolidated Volume.\4\
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    \4\ Tier 1 requires a QMM to provide above 0.70% up to and 
including 0.90% of Consolidated Volume during the month, and Tier 2 
requires above 0.90% of Consolidated Volume.

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[[Page 69141]]

    The Exchange further provides reduced charges to QMMs for removing 
liquidity from the Exchange in securities priced at $1 or more if the 
QMM's volume of liquidity added through one or more of its Nasdaq 
Market Center MPIDs during the month (as a percentage of Consolidated 
Volume) is no less than 0.80%. The Exchange is proposing to assess a 
new $0.0029 per share executed fee, assessed on a QMM that meets the 
Tier 2 criteria, for orders in Tape A and B securities priced at $1 or 
more per share that access liquidity on the Nasdaq Market Center, if 
the QMM also has a combined Consolidated Volume (adding and removing 
liquidity) of at least 3.5%. Thus, in addition to providing at least 
the minimum level of Consolidated Volume in adding liquidity as 
required by Tier 2, the QMM must also have a significant level of 
combined Consolidated Volume, i.e., both adding and removing liquidity.
Second Change
    The purpose of the second change is to amend the requirement to 
qualify for a rebate under the NBBO program. The NBBO Program provides 
members with per share executed rebates with respect to all other 
displayed orders (other than Designated Retail Orders) in securities 
priced at $1 or more per share that provide liquidity and establish the 
NBBO. First, the Exchange is proposing to limit eligibility for the 
credit provided by the program to executions from orders originating on 
ports that have a ratio of at least 25% NBBO liquidity provided to 
liquidity provided during the month. As described in the rule, NBBO 
liquidity provided means liquidity provided from orders (other than 
Designated Retail Orders, as defined in Rule 7018), that establish the 
NBBO, and displayed a quantity of at least one round lot at the time of 
execution. Under the NBBO program, the Exchange provides a $0.0004 per 
share executed rebate in Tape A and B securities if a member executes 
shares of liquidity provided in all securities through one or more 
Nasdaq Market Center MPIDs that represents 1.0% or more of Consolidated 
Volume during the month. The Exchange also provides an additional 
$0.0002 per share executed rebate for displayed quotes/orders (other 
than Supplemental Orders or Designated Retail Orders) that provide 
liquidity priced at $1 or more, if the member meets certain criteria, 
including having a ratio of at least 25% NBBO liquidity provided to 
liquidity provided during the month. The Exchange is now proposing to 
extend the 25% NBBO liquidity provided requirement to the ports used by 
the member to qualify for the $0.0004 per share executed rebate, in 
addition to applying the current Consolidated Volume eligibility 
requirement that the member must execute shares of liquidity provided 
in all securities through one or more of its Nasdaq Market Center MPIDs 
that represents 1% or more of Consolidated Volume during the month.
Third Change
    The Exchange is proposing to adopt the new Nasdaq Growth Program 
under Rule 7014(j). The Nasdaq Growth Program will provide a member a 
$0.0025 per share executed credit in securities priced $1 or more per 
share if it meets certain criteria. The proposed credit will be 
provided in lieu of other credits provided to the member for displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) that provide liquidity under Rule 7018, if the credit under the 
Nasdaq Growth Program is greater than the credit attained under Rule 
7018. To be eligible for the credit a member must: (i) Add greater than 
750,000 shares a day on average during the month through one or more of 
its Nasdaq Market Center MPIDs; and (ii) increase its shares of 
liquidity provided through one or more of its Nasdaq Market Center 
MPIDs as a percent of Consolidated Volume by 25% versus the member's 
Growth Baseline. The Exchange is defining Growth Baseline as the 
member's shares of liquidity provided in all securities through one or 
more of its Nasdaq Market Center MPIDs as a percentage of Consolidated 
Volume during the last month a member qualified for the Nasdaq Growth 
Program. If a member has not qualified for a credit under this program, 
its August 2016 share of liquidity provided in all securities through 
one or more of its Nasdaq Market Center MPIDs as a percent of 
Consolidated Volume will be used to establish a baseline. Thus, the 
purpose of the credit is to provide an incentive to members that do not 
qualify for other credits under Rule 7018 in excess of the Nasdaq 
Growth Program credit to increase their participation on the Exchange.
Fourth Change
    The Exchange is proposing to amend Rule 7018(a)(3), which provides 
the fees and credits for execution and routing of orders in Tape B 
securities priced $1 or greater. Currently, the Exchange provides a 
$0.0001 per share executed credit to a member for displayed quotes and 
orders (other than Supplemental Orders or Designated Retail Orders) 
that provide liquidity to a member with shares of liquidity provided in 
all securities during the month representing at least 0.2% of 
Consolidated Volume during the month, through one or more of its Nasdaq 
Market Center MPIDs. The credit is provided in addition to the credits 
provided for displayed quotes and orders (other than Supplemental 
Orders or Designated Retail Orders) that provide liquidity. The 
Exchange is proposing to eliminate this credit tier and replace it with 
two new credit tiers that provide $0.0001 and $0.0002 per share 
executed, respectively. First, the Exchange is proposing to adopt a 
$0.0001 per share executed credit available to a member with shares of 
liquidity provided in securities that are listed on exchanges other 
than Nasdaq or NYSE (i.e., Tape B) during the month representing at 
least 0.045% but less than 0.075% of Consolidated Volume during the 
month through one or more of its Nasdaq Market Center MPIDs. The 
Exchange is also proposing to adopt a $0.0002 per share executed credit 
to a member with shares of liquidity provided in securities that are 
listed on exchanges other than Nasdaq or NYSE (i.e., Tape B) during the 
month representing at least 0.075% of Consolidated Volume during the 
month through one or more of its Nasdaq Market Center MPIDs. Thus, the 
Exchange is focusing the required shares of liquidity required to 
qualify for the credit on Tape B securities and reducing the level of 
Consolidated Volume required to qualify for either of the new credits 
in contrast to the existing credit. Like the current $0.0001 per share 
executed credit that is being replaced, the proposed new credits are 
provided in addition to the credits provided for displayed quotes and 
orders (other than Supplemental Orders or Designated Retail Orders) 
that provide liquidity.
Fifth Change
    The Exchange is proposing to amend the criteria and fees assessed 
for transactions in the Closing Cross under Rule 7018(d). First, the 
Exchange is proposing to increase the fee assessed members for all 
quotes and orders (other than Market-on-Close and Limit-on-Close 
orders) executed in the Nasdaq Closing Cross from $0.0008 to $0.00085 
per share executed. Second, the Exchange is proposing to increase the 
level of Consolidated Volume required to qualify for the lowest fee 
assessed for Market-on-Close (``MOC'') and Limit-on-Close (``LOC'') 
orders under Tier A from 1.4% to 1.8%. As a consequence, the Exchange 
is also proposing to amend Tier B to reflect the increase range of 
Consolidated Volume required to

[[Page 69142]]

qualify under the tier. Third, the Exchange is proposing to increase 
the Tier D fee from $0.0013 to $0.00135 per share executed, the Tier E 
fee from $0.00135 to $0.00145 per share executed, and the Tier F fee 
from $0.0015 to $0.0016 per share executed.
Sixth Change
    The Exchange is proposing to amend the criteria and fees assessed 
for transactions in the Opening Cross, and make a clarifying change to 
the opening cross rules under Rule 7018(e). First, the Exchange is 
proposing to increase the fee assessed members under paragraph (1) of 
the rule for all quotes and orders (other than Market-on-Open, Limit-
on-Open, Good-till-Cancelled, and Immediate-or-Cancel orders) executed 
in the Nasdaq Opening Cross from $0.0008 to $0.00085 per share 
executed. Second, the Exchange is proposing to increase the monthly fee 
cap provided under paragraph (2) of the rule from $30,000 to $35,000. 
Last, the Exchange is proposing to clarify the qualification criteria 
of the fee cap under paragraph (2) to make it clear that a member must 
add at least one million shares of liquidity, on average per day, per 
month, which is how the criteria is currently applied and how it was 
announced to market participants when it was adopted.\5\ As it is 
currently written, the criteria is vague on the time period over which 
a member must have one million shares of liquidity.
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    \5\ See Securities Exchange Act Release No. 71925 (April 10, 
2014), 79 FR 21328 (April 15, 2014) (SR-NASDAQ-2014-031); see also 
http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2014-28.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ 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, 
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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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First Change
    The Exchange believes that assessing a new $0.0029 fee under the 
QMM Program is reasonable because it is set at a level that is lower 
than the standard removal fee of $0.0030 per share executed, thereby 
providing an incentive to market participants, and it is also based on 
the Exchange's analysis of the cost to the Exchange of offering a lower 
fee, thereby decreasing the revenue derived from transactions by 
members that qualify for the new fee, and the desired benefit to the 
market provided by the members that meet the new fee's qualification 
criteria. In this case, the criteria provides an incentive to members 
to increase their participation in the market as measured by 
Consolidated Volume, which benefits all market participants. Currently, 
members may qualify for a $0.00295 per share executed fee for removing 
liquidity in Tape A or B securities priced at $1 or more if the 
member's volume of liquidity added through one or more of its Nasdaq 
Market Center MPIDs during the month (as a percentage of Consolidated 
Volume) is not less than 0.80%. The Exchange is proposing a similar fee 
for removing liquidity in Tape A or B securities priced at $1 or more 
if the member qualifies under the Tier 2 criteria that requires the 
member to execute shares of liquidity provided in all securities 
through one or more of its Nasdaq Market Center MPIDs that represent 
above 0.90% of Consolidated Volume during the month, and the member 
must also have a combined Consolidated Volume (adding and removing 
liquidity) of at least 3.5%. Thus, to qualify for a lower transaction 
fee for removing liquidity in Tape A or B securities under the QMM 
Program, the member must both provide greater Consolidated Volume 
through adding liquidity during the month (i.e., 0.90% versus 0.80%) 
and provide a certain level of combined Consolidated Volume, which 
accounts for both adding liquidity and removing liquidity. The Exchange 
believes that the new fee is an equitable allocation and is not 
unfairly discriminatory because all members that participate on the 
Exchange may qualify for the proposed reduced Tape A and B removal fee 
if they elect to provide the Consolidated Volume required. The Exchange 
uses Consolidated Volume as a measure of the member's activity in 
comparison to that of the market as a whole. Thus, the proposed fee and 
criteria required to qualify for the fee does not discriminate unfairly 
and is equitably allocated, as eligibility for the fee is tied to the 
member's performance in comparison to other participants in aggregate.
Second Change
    The Exchange believes that the $0.0004 per share executed rebate of 
the NBBO Program to executions from orders originating on a port that 
has a ratio of at least 25% NBBO liquidity provided to liquidity 
provided is reasonable because it is the same rebate that the Exchange 
currently applies under the program and is based on the Exchange's 
continued belief that it is the appropriate level of rebate provided in 
return for the market-improving liquidity required to receive the 
rebate. The Exchange believes that tying eligibility for the $0.0004 
per share executed rebate of the NBBO Program to executions from orders 
originating on a port that has a ratio of at least 25% NBBO liquidity 
provided to liquidity provided is an equitable allocation and is not 
unfairly discriminatory because the measurement criteria is identical 
to the criteria used to qualify for the $0.0002 per share executed 
rebate, although the $0.0002 rebate is measured across one or more of a 
members Nasdaq Market Center MPIDs. NBBO liquidity provided to 
liquidity provided is a ratio of the member's liquidity provided that 
establishes the NBBO and displayed at a quantity of at least one round 
lot as compared to all liquidity provided by the member. Thus, the 
Exchange is making a member provide more market-improving activity (in 
addition to the Consolidated Volume requirement) to receive the rebate. 
The Exchange believes that limiting the NBBO liquidity provided to 
executions from orders on that port is an equitable allocation and is 
not unfairly discriminatory because it directly ties the member's 
beneficial activity to the ports through which the rebate is applied. 
The Exchange believes this will create greater incentive for firms to 
establish the NBBO while more closely tying the credit to the market 
improving behavior the Exchange is trying to incentivize.
    Thus, any member may choose to participate in the market in a 
manner to meet the NBBO liquidity criteria.
Third Change
    The Exchange believes that the $0.0025 per share executed credit 
provided by the Nasdaq Growth Program is reasonable because it is set 
at a level that the Exchange believes will provide adequate incentive 
to market participants to improve their participation on the Exchange. 
The

[[Page 69143]]

credit is also based on the Exchange's analysis of the cost to the 
Exchange of providing credits to members that qualify for the new 
credit and the desired benefit to the market provided by the members 
that meet the new fee's qualification criteria and thereby increase 
liquidity on the Exchange. The Exchange believes that the Nasdaq Growth 
Program is an equitable allocation and is not unfairly discriminatory 
because it is designed to improve the market for all market 
participants on the Exchange, even though not all members will be 
eligible for the new credit. The Exchange is targeting members that may 
not have adequate participation to qualify for certain credits under 
Rule 7018(a), and who may be significantly far from reaching a level of 
participation to qualify for such credits. The Exchange believes it is 
important to provide such members incentive to incrementally increase 
their participation in the market, which will benefit all market 
participants. The Exchange is proposing to achieve this by requiring a 
member to both add greater than 750,000 shares a day on average during 
the month through one or more of its Nasdaq Market Center MPIDs and 
increase its share of liquidity provided through on or more of its 
Nasdaq Market Center MPIDs as a percent of Consolidated Volume by 25% 
versus the member's Growth Baseline. The Exchange believes that this 
criteria is an equitable allocation and is not unfairly discriminatory 
because it requires a minimum level of participation in the market and 
it ensures that members meaningfully remain in the market. There are 
tiers under Rule 7018 that afford members a $0.0025 per share executed 
credit, for example, 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, and 
the growth program aims to provide a path for firms to hit the Rule 
7018 thresholds by receiving benefits as they continue to grow. The 
Exchange is also proposing to require a member to increase its shares 
of liquidity provided through one or more of its Nasdaq Market Center 
MPIDs as a percent of Consolidated Volume by 25% versus the member's 
Growth Baseline. The Growth Baseline will be defined as the member's 
shares of liquidity provided in all securities through one or more of 
its Nasdaq Market Center MPIDs as a percent of Consolidated Volume 
during the last month a member qualified for the Nasdaq Growth Program. 
As a consequence, although any member may qualify under the program if 
it meets the criteria, members that currently qualify for higher 
credits under Rule 7018(a) will not receive the proposed credit. The 
Exchange believes that this is an equitable allocation and is not 
unfairly discriminatory because such members are receiving higher 
credits in lieu of the lower proposed credit, and the increased 
liquidity provided by the members that qualify under the new program 
benefit all market participants. Moreover, the program is designed to 
provide incentive to members to continue to increase their 
participation until such time that they qualify for other, higher 
credits under Rule 7018(a). If a member has not qualified for a credit 
under this program, its August 2016 share of liquidity provided in all 
securities through one or more of its Nasdaq Market Center MPIDs as a 
percent of Consolidated Volume will be used to establish a baseline. 
Thus, the second criteria requires a certain level of increased 
participation in the market. The Exchange believes that the program is 
an equitable allocation and is not unfairly discriminatory because 
members must continue to improve their participation in the market 
month over month in order to continue receiving the credit until such a 
time that it qualifies for a higher credit under Rule 7018(a). As a 
consequence, a member that qualifies for the new credit will eventually 
become ineligible for the credit by either failing to grow its shares 
of liquidity or graduating to a higher credit in lieu of proposed new 
credit. The Exchange chose to use August 2016 as the initial baseline 
since it was the last month of activity prior to the start of the 
program and there were no market holidays in the month.
Fourth Change
    The Exchange believes that eliminating the $0.0001 per share 
executed credit under Rule 7018(a)(3) provided to a member with shares 
of liquidity provided in all securities of at least 0.2% of 
Consolidated Volume during the month in the securities of any Tape, and 
replacing it with two new credits of $0.0001 and $0.0002 per share 
executed that are based on certain levels of Consolidated Volume in 
Tape B securities during the month is reasonable because the level of 
credit provided is identical to, or very close to, the current credit 
provided. The Exchange believes that the two credits are sufficient to 
provide incentive to members to meet the criteria. Moreover, the credit 
is based on the Exchange's analysis of the cost to the Exchange of 
providing credits to members that qualify for the new credit and the 
desired benefit to the market provided by the members that meet the new 
fee's qualification criteria and thereby increase liquidity on the 
Exchange.
    The Exchange believes that eliminating the $0.0001 per share 
executed credit under Rule 7018(a)(3) provided to a member with shares 
of liquidity provided in all securities of at least 0.2% of 
Consolidated Volume during the month in the securities of any Tape, and 
replacing it with two new credits that are based on certain levels of 
Consolidated Volume in Tape B securities during the month is an 
equitable allocation and is not unfairly discriminatory because it more 
closely ties the criteria to improving the market on the Exchange in 
Tape B securities. Currently, members are provided the $0.0001 per 
share executed credit for displayed quotes and orders (other than 
Supplemental Orders or Designated Retail Orders) in Tape B securities 
if the member provides the required Consolidated Volume. In lieu of the 
current criteria, the Exchange is requiring a member provide at least 
0.045% but less than 0.075% of Consolidated Volume in Tape B securities 
to receive a $0.0001 per share executed credit, and is requiring a 
member provide at least 0.075% of Consolidated Volume in Tape B 
securities during the month to receive a $0.0002 per share executed 
credit. Thus, the Exchange is reducing the level of Consolidated Volume 
required to receive either of the proposed credits in comparison to the 
current credit, which is reflective of limiting the Consolidated Volume 
considered for the credits to Tape B securities. The Exchange believes 
that the proposed $0.0002 per share credit is an equitable allocation 
and is not unfairly discriminatory because it requires significantly 
greater Consolidated Volume in Tape B securities during the month than 
the proposed $0.0001 eligibility criteria. The Exchange also believes 
that the proposed change is an equitable allocation and is not unfairly 
discriminatory because a member is free to choose which securities it 
transacts in and may choose to increase its level of activity in Tape B 
securities to qualify for the proposed credits. The Exchange notes that 
some members may continue to qualify for the credit because the 
Exchange has proposed reduced levels of Consolidated Volume, which 
members may already provide. To the extent that a member qualified for 
the current credit based largely on its activity in Tape A and C 
securities, it may have to increase its activity in Tape

[[Page 69144]]

B securities to receive one of the new credits. The Exchange is not 
proposing similar credits for transactions in Tape C and A securities 
under Rules 7018(a)(1) and (2), respectively, because it must balance 
its desire to provide incentives to market participants to improve the 
market where it deems it is most needed against the cost to the 
Exchange in providing such incentives. Thus, the Exchange believes that 
focusing the changes on activity in Tape B securities is an equitable 
allocation and is not unfairly discriminatory because it will provide 
further incentive to members to participate in Tape B securities, the 
market in which the Exchange is seeking to further improve.
Fifth Change
    The Exchange believes that increasing the fees under Rule 7018(d), 
including the changes to the criteria for certain fees that make it 
more difficult to qualify for a lower fee, are reasonable because the 
Exchange notes that the fees assessed for participation in the Closing 
Cross are significantly less than the fees assessed for participation 
in regular market hours trading. From time to time the Exchange must 
assess the level of fees collected in comparison to the costs 
associated with offering services, such as the Closing Cross. In this 
case, the Exchange has determined that raising the fees for use of the 
Closing Cross is appropriate. The Exchange believes that the proposed 
changes to fees assessed under Rule 7018(d) for participation in the 
Closing Cross is an equitable allocation and is not unfairly 
discriminatory because it is increasing the fees and criteria to 
qualify for the lowest fee to better align the fees collected for 
participation in the Closing Cross with the costs associated with 
operating the Closing Cross. As noted, the fees assessed for 
participation in the Closing Cross are significantly less than the fees 
assessed for participation in regular market hours trading. Also as 
noted, from time to time the Exchange must assess the level of fees 
collected in comparison to the costs associated with offering services, 
such as the Closing Cross. In this case, the Exchange is proposing the 
increased fees and more stringent criteria to increase revenue provided 
by the Closing Cross to cover the costs associated with offering the 
service. The Exchange does not believe that the proposed changes will 
affect participation in the Closing Cross, but to the extent the 
Exchange realizes less participation in the Closing Cross as a result 
of the fee increases and change to the Tier A criteria, it may realize 
a reduction in revenue. The Exchange notes that, in addition to 
increasing the fee assessed for quotes and orders (other than Market-
on-Close and Limit-on-Close orders) executed in the Closing Cross, it 
is increasing fees for MOC and LOC orders under Tiers D, E and F, which 
may provide incentive to market participants in these tiers to increase 
their shares of liquidity provided to qualify for a Tier with a lower 
fee. In this regard, the Exchange has observed that most members 
qualify under Tiers D, E and F, and consequently increasing the fee may 
incentivize members to increase the level of shares of liquidity 
provided to qualify for a lower fee. The Exchange is increasing the 
level of Consolidated Volume required to qualify for the lowest fee 
under Tier A, which will make qualifying for the credit more difficult 
to the extent a member does not qualify under the alternative MOC/LOC 
volume standard. In lieu of increasing the fee, the Exchange has 
determined to increase the level of Consolidated Volume in all 
securities to make the tier more meaningful.
    Thus, the Exchange believes that increasing the criteria required 
to qualify for Tier A and increasing the fees assessed for Tiers D, E 
and F is an equitable allocation and is not unfairly discriminatory 
because the Exchange has observed the most members qualifying under 
these tiers. Accordingly, the Exchange believes that the changes to 
these tiers, and not the remaining tiers is appropriate.
Sixth Change
    The Exchange believes that increasing the fee assessed for 
transactions in the Opening Cross and the fee cap thereon is reasonable 
because it better aligns the fees collected for participation in the 
Opening Cross with the costs associated with operating the Opening 
Cross. The Exchange notes that the fee assessed for participation in 
the Opening Cross is significantly less that the fees assessed for 
participation in regular market hours trading. From time to time the 
Exchange must assess the level of fees collected in comparison to the 
costs associated with offering services, such as the Opening Cross. In 
this case, the Exchange is proposing the increased fee and increased 
fee cap to increase revenue provided by the Opening Cross to cover the 
costs associated with offering the service. The Exchange does not 
believe that the proposed changes will affect participation in the 
Opening Cross, but to the extent the Exchange realizes less 
participation in the Opening Cross as a result of the fee increase and 
increased fee cap, it may realize a reduction in revenue.
    The Exchange believes that the increased fee assessed for all 
quotes and orders executed in the Nasdaq Opening Cross, other than 
Market-on-Open, Limit-on-Open, Good-till-Cancelled, and Immediate-or-
Cancel orders, is an equitable allocation and is not unfairly 
discriminatory because even with the increase this fee is lower than 
the other opening cross fees assessed under Rule 7018(e)(1), and thus 
continues to promote entry of orders covered by the fee. The Exchange 
believes that increasing the fee cap is an equitable allocation and is 
not unfairly discriminatory because those members that are most 
impacted by the fee cap increase are also the heaviest users of the 
cross and receive the most benefit from its use.
    Last, the Exchange believes that the new clarifying language it is 
proposing to add to the fee cap eligibility criteria under Rule 
7018(e)(2) removes impediments to and perfects the mechanism of a free 
and open market and a national market system, and, in general, protects 
investors and the public interest because it clarifies the level of 
shares of liquidity added that a member must have to qualify for the 
fee cap, which is currently unclear in the current rule text.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. 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 rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange 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, 
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 changes to the charges assessed and 
credits available to member firms for execution of securities in 
securities of all three Tapes do not impose a burden on

[[Page 69145]]

competition because the Exchange's execution services are completely 
voluntary and subject to extensive competition both from other 
exchanges and from off-exchange venues. In this instance, changes to 
the incentive fees and rebates provided under Rule 7014 are reflective 
of the Exchange's need to balance the incentives provided and the 
resulting beneficial market behavior with the cost of such incentives 
to the Exchange and their effectiveness. The Exchange is both offering 
new incentives and strengthening criteria for other incentives. 
Similarly, the changes to the credits and fees assessed for the use of 
the order execution and routing services of the Nasdaq Market Center by 
members for all securities priced at $1 or more that it trades are 
reflective of the same analysis of the benefits versus costs incurred 
by the Exchange in offering execution and routing services. In this 
present case, the Exchange is modifying and adding new credits while 
also increasing fees assessed for use of the Nasdaq Opening and Closing 
Crosses. All of the proposed changes are subject to intense competition 
among trading venues, which are free to make changes to their fees and 
credits that they provide as a competitive response to the Exchange's 
proposed changes. Moreover, the proposed changes do not impose a burden 
on competition because Exchange membership and participation is 
optional and is also the subject of competition from other trading 
venues. A member may elect to participate on another exchange to extent 
it believes that fees assessed by Nasdaq are too high, or credits and 
rebates provided are too low. For these reasons, the Exchange does not 
believe that any of the proposed changes will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets. Last, because there are 
numerous competitive alternatives to the use of the Exchange, it is 
likely that the Exchange will lose market share as a result of the 
changes if they are unattractive to market participants.

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.\8\
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    \8\ 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-2016-132 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-2016-132. 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-2016-132, and should 
be submitted on or before October 26, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-23999 Filed 10-4-16; 8:45 am]
 BILLING CODE 8011-01-P
Document Created: 2016-10-05 03:28:42
Document Modified: 2016-10-05 03:28:42
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 69140