81 FR 9061 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq Rule 7014 and Nasdaq Rule 7018
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 35 (February 23, 2016)
Federal Register Volume 81, Issue 35 (February 23, 2016)
| Page Range | 9061-9063 | |
| FR Document | 2016-03660 |
[Federal Register Volume 81, Number 35 (Tuesday, February 23, 2016)] [Notices] [Pages 9061-9063] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-03660] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77152; File No. SR-NASDAQ-2016-020] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq Rule 7014 and Nasdaq Rule 7018 February 17, 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 February 10, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or the ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') a proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. [sic] --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change Nasdaq is proposing changes to amend Nasdaq Rule 7014(g) concerning the national best bid or best offer (``NBBO'') Program and 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 purpose of the proposed rule change is to amend the NBBO Program in Nasdaq Rule 7014(g) and 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\ (``Tape B'') (collectively, the ``Tapes''). --------------------------------------------------------------------------- \3\ Nasdaq Rule 7018(a)(1). \4\ Nasdaq Rule 7018(a)(2). \5\ Nasdaq Rule 7018(a)(3). --------------------------------------------------------------------------- Specifically, Nasdaq Rule 7014(g) will be amended to add a new credit and to clarify the NBBO Program language to indicate that this new credit will be in addition to any rebate or credit payable under Nasdaq Rule 7018(a) or the Investor Support Program (``ISP''), Qualified Market Maker (``QMM'') Program and NBBO Program under Nasdaq Rule 7014. A member will qualify for the additional $0.0001 per share executed credit for displayed quotes/orders (other than supplemental orders or designated retail orders) that provide liquidity priced at $1 or more if the member qualifies for the (i) NBBO Program and (ii) has a ratio of at least 25% NBBO liquidity provided \6\ to liquidity provided during the month. --------------------------------------------------------------------------- \6\ NBBO liquidity provided means liquidity provided from orders (other than Designated Retail Orders, as defined in Nasdaq Rule 7018), that establish the NBBO, and displayed a quantity of at least one round lot at the time of execution. --------------------------------------------------------------------------- For example, if a member provided liquidity of 0.55% total consolidated volume (``TCV'') during the month and provided NBBO liquidity of 0.15% TCV during the month, the member's ratio would equal 27.27%. The member would meet the NBBO Program criteria (since it was greater than 0.5% TCV threshold set forth in Nasdaq Rule 7014(g)(1)) and because the ratio is greater than the proposed 25% threshold of NBBO liquidity provided to liquidity provided [sic] during the month. Therefore, the member would also qualify for the additional $0.0001 per share executed credit. This credit will be in addition to any rebate or credit payable under Rule 7018(a) and the ISP, QMM Program, and NBBO Program under Rule 7014. Nasdaq also proposes to amend across all three Tapes (Nasdaq Rules 7018(a)(1), (2) and (3)) one of the two criteria that a member must satisfy to qualify for the $0.0030 per share executed credit for adding displayed liquidity. The first prong of the criteria will remain the same and requires that a member must have shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.575% or more of consolidated volume (``Consolidated Volume'') during the month. The second prong of the criteria will be amended. Specifically, the second prong requires that 0.15% or more of Consolidated Volume during the month must include shares of liquidity provided with respect to securities that are listed on exchanges other than Nasdaq or NYSE. The percentage of shares of liquidity provided with respect to securities that are listed on exchanges other than Nasdaq or NYSE will be reduced from 0.15% to 0.10% or more of Consolidated Volume, thus reducing the required activity to achieve the credit. The amended criteria will read for all three Tapes as ``member with shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.575% or more of Consolidated Volume during the month, including shares of liquidity provided with respect to securities that are listed on exchanges other than NASDAQ or NYSE that represent 0.10% or more of Consolidated Volume''. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\7\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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 [[Page 9062]] discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 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.'' \9\ Likewise, in NetCoalition v. Securities and Exchange Commission \10\ (``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.\11\ 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.'' \12\ --------------------------------------------------------------------------- \9\ Securities Exchange Act Release No. 34-51808 (June 9, 2005) (``Regulation NMS Adopting Release''). \10\ NetCoalition v. SEC 615 F.3d 525 (D.C. Cir. 2010). \11\ Id. at 534-535. \12\ 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'. . . .'' \13\ --------------------------------------------------------------------------- \13\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783). --------------------------------------------------------------------------- The NBBO Program is intended to encourage members to add liquidity at prices that benefit all Nasdaq market participants and the Nasdaq market itself, and to enhance price discovery, by establishing a new NBBO.\14\ Specifically, Nasdaq believes that the proposed rule change to Nasdaq Rule 7014(g) that provides for an additional $0.0001 per share executed credit \15\ for displayed quotes/orders (other than supplemental orders or designated retail orders) that provide liquidity priced at $1 or more is reasonable because it is in line with other credits provided on Nasdaq, as well as on other exchanges. For example, both the QMM Program \16\ and the ISP \17\ have credits of $0.0001 per share executed. The Exchange also believes that the proposed additional credit will serve as an effective incentive to members to provide more liquidity provided from orders (other than Designated Retail Orders, as defined in Nasdaq Rule 7018), that establish the NBBO, and displayed a quantity of at least one round lot at the time of execution. Increasing such liquidity is reflective of the Exchange's desire to improve liquidity and strengthen the NBBO Program. --------------------------------------------------------------------------- \14\ See Securities Exchange Act Release No. 68209 (November 9, 2012), 77 FR 69519 (November 19, 2012) (SR-NASDAQ-2012-126). \15\ The member will receive this additional credit if the member qualifies for the (i) NBBO Program and (ii) has a ratio of at least 25% NBBO liquidity provided of the liquidity provided during the month. \16\ See Nasdaq Rule 7014(e) Tier 1. \17\ See Nasdaq Rule 7014(c)(2). --------------------------------------------------------------------------- The Exchange also believes that choosing the ratio of at least 25% NBBO liquidity provided of the liquidity provided during the month will incentivize participants to more aggressively pursue adding liquidity at the NBBO while still offering an attainable goal. This may focus participants on meeting the criteria in a way that relying on solely NBBO specific rebates has not. This proposed change is similar to other market incentive programs that require a certain level of activity in order to be eligible to receive a particular credit. For example, to receive an ISP credit a member is already required to provide a 40% of their [sic] liquidity through ISP designated ports (among other criteria).\18\ --------------------------------------------------------------------------- \18\ See Nasdaq Rule 7014(c)(2)(C). --------------------------------------------------------------------------- Additionally, minimum standards of specific activity (e.g., non- display activity and other performance requirements) are also sometimes required to be eligible to receive a particular credit. One example of this is in Nasdaq Rule 7018(a)(1), which states that a member seeking to receive the particular available credit must provide shares of liquidity in all securities through one or more of its Nasdaq Market Center MPIDs of more than 0.75% of Consolidated Volume during the month, as well as provide a daily average of at least 5 million shares of non-displayed liquidity. Also, the clarifying language added to the NBBO Program under Nasdaq Rule 7014(g) regarding the applicability of this new credit is reasonable because it will lessen participant confusion as to how these additional rebates/credits apply. The Exchange believes that the proposed changes to the NBBO Program overall will improve market quality and thus benefits all members. Nasdaq believes that the proposed rule change is equitable and not unfairly discriminatory because the additional $0.0001 per share executed credit for displayed quotes/orders that provide liquidity priced at $1 or more under the NBBO Program is available to all members on an equal basis and provides an additional credit for activity that improves the Exchange's market quality through increased activity at 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, this new credit will be in addition to any rebate or credit payable under Nasdaq Rule 7018(a) or the ISP, QMM Program, and NBBO Program under Nasdaq Rule 7014. Nasdaq believes that the proposed rule change to Nasdaq Rule 7018(a)(1), (2) and (3) is reasonable because it will further encourage market participant activity and will also support liquidity provision across all three Tapes by making it easier for members to satisfy one of the two criteria to qualify for the $0.0030 per share executed credit for adding displayed liquidity. Specifically, by amending one prong of the criteria to reduce the percentage requirement from 0.15% to 0.10% of shares of liquidity provided with respect to securities that are listed on exchanges other than Nasdaq or NYSE [sic]. The Exchange believes this will allow more members to receive this credit and thereby incentivize the enhancement of liquidity with regard to displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) on Nasdaq. This, in turn, should positively impact market quality and benefit other Nasdaq members. The Exchange also believes that the proposed rule change is an equitable allocation and is not unfairly discriminatory because it is reducing across all three Tapes one of the two criteria that a member must satisfy to qualify for the $0.0030 per share executed credit for adding displayed liquidity. Additionally, members who currently qualify for the credit will continue to do so. B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in a burden on competition that is not necessary or appropriate in furtherance [[Page 9063]] of the purposes of the Act, as amended.\19\ 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. 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. --------------------------------------------------------------------------- \19\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- In this instance, the proposed additional $0.0001 per share executed credit for displayed quotes/orders that provide liquidity priced at $1 or more in connection with the NBBO Program under Nasdaq Rule 7014(g), as well as the easing of the criteria under Nasdaq Rule 7018(a) to receive a $0.0030 executed rebate for displayed quotes/ orders (other than Supplemental Orders or Designated Retail Orders) that provide liquidity, 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 investors. In sum, if the rule 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.\20\ 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. --------------------------------------------------------------------------- \20\ 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, 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-2016-020 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-2016-020. 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 to File Number SR-NASDAQ-2016- 020, and should be submitted on or before March 15, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\21\ --------------------------------------------------------------------------- \21\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-03660 Filed 2-22-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 35 / Tuesday, February 23, 2016 / Notices 9061
office of the Exchange. All comments II. Self-Regulatory Organization’s 7014(g)(1)) and because the ratio is
received will be posted without change; Statement of the Purpose of, and greater than the proposed 25%
the Commission does not edit personal Statutory Basis for, the Proposed Rule threshold of NBBO liquidity provided to
identifying information from Change liquidity provided [sic] during the
submissions. You should submit only In its filing with the Commission, month. Therefore, the member would
information that you wish to make Nasdaq included statements concerning also qualify for the additional $0.0001
available publicly. All submissions the purpose of, and basis for, the per share executed credit. This credit
should refer to File Number SR–BYX– proposed rule change and discussed any will be in addition to any rebate or
2016–02 and should be submitted on or comments it received on the proposed credit payable under Rule 7018(a) and
before March 15, 2016. rule change. The text of those the ISP, QMM Program, and NBBO
For the Commission, by the Division of statements may be examined at the Program under Rule 7014.
Trading and Markets, pursuant to delegated places specified in Item IV below. The Nasdaq also proposes to amend across
authority.24 Exchange has prepared summaries, set all three Tapes (Nasdaq Rules
Robert W. Errett, forth in sections A, B, and C below, of 7018(a)(1), (2) and (3)) one of the two
Deputy Secretary. the most significant parts of such criteria that a member must satisfy to
[FR Doc. 2016–03664 Filed 2–22–16; 8:45 am] statements. qualify for the $0.0030 per share
BILLING CODE 8011–01–P A. Self-Regulatory Organization’s executed credit for adding displayed
Statement of the Purpose of, and liquidity. The first prong of the criteria
Statutory Basis for, the Proposed Rule will remain the same and requires that
SECURITIES AND EXCHANGE Change a member must have shares of liquidity
COMMISSION provided in all securities through one or
1. Purpose more of its Nasdaq Market Center MPIDs
[Release No. 34–77152; File No. SR– The purpose of the proposed rule that represent 0.575% or more of
NASDAQ–2016–020] change is to amend the NBBO Program consolidated volume (‘‘Consolidated
in Nasdaq Rule 7014(g) and to amend Volume’’) during the month. The second
Self-Regulatory Organizations; The Nasdaq Rule 7018(a), governing fees and prong of the criteria will be amended.
NASDAQ Stock Market LLC; Notice of credits assessed for execution and Specifically, the second prong requires
Filing and Immediate Effectiveness of routing of securities listed on Nasdaq,3 that 0.15% or more of Consolidated
Proposed Rule Change To Amend listed on the New York Stock Exchange Volume during the month must include
Nasdaq Rule 7014 and Nasdaq Rule (‘‘NYSE’’) 4 and listed on exchanges shares of liquidity provided with
7018 other than Nasdaq and NYSE 5 (‘‘Tape respect to securities that are listed on
February 17, 2016. B’’) (collectively, the ‘‘Tapes’’). exchanges other than Nasdaq or NYSE.
Specifically, Nasdaq Rule 7014(g) will The percentage of shares of liquidity
Pursuant to Section 19(b)(1) of the be amended to add a new credit and to provided with respect to securities that
Securities Exchange Act of 1934 clarify the NBBO Program language to are listed on exchanges other than
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 indicate that this new credit will be in Nasdaq or NYSE will be reduced from
notice is hereby given that on February addition to any rebate or credit payable 0.15% to 0.10% or more of Consolidated
10, 2016, The NASDAQ Stock Market under Nasdaq Rule 7018(a) or the
LLC (‘‘Nasdaq’’ or the ‘‘Exchange’’) filed Volume, thus reducing the required
Investor Support Program (‘‘ISP’’), activity to achieve the credit. The
with the Securities and Exchange Qualified Market Maker (‘‘QMM’’)
Commission (‘‘SEC’’ or ‘‘Commission’’) amended criteria will read for all three
Program and NBBO Program under Tapes as ‘‘member with shares of
a proposed rule change as described in Nasdaq Rule 7014. A member will
Items I, II and III below, which Items liquidity provided in all securities
qualify for the additional $0.0001 per through one or more of its Nasdaq
have been prepared by the Exchange. share executed credit for displayed
The Commission is publishing this Market Center MPIDs that represent
quotes/orders (other than supplemental 0.575% or more of Consolidated
notice to solicit comments on the orders or designated retail orders) that
proposed rule change from interested Volume during the month, including
provide liquidity priced at $1 or more shares of liquidity provided with
persons. if the member qualifies for the (i) NBBO respect to securities that are listed on
I. Self-Regulatory Organization’s Program and (ii) has a ratio of at least exchanges other than NASDAQ or NYSE
Statement of the Terms of the Substance 25% NBBO liquidity provided 6 to that represent 0.10% or more of
of the Proposed Rule Change liquidity provided during the month. Consolidated Volume’’.
For example, if a member provided
Nasdaq is proposing changes to liquidity of 0.55% total consolidated 2. Statutory Basis
amend Nasdaq Rule 7014(g) concerning volume (‘‘TCV’’) during the month and
the national best bid or best offer provided NBBO liquidity of 0.15% TCV The Exchange believes that its
(‘‘NBBO’’) Program and Nasdaq Rule during the month, the member’s ratio proposal is consistent with Section 6(b)
7018(a), governing fees and credits would equal 27.27%. The member of the Act,7 in general, and furthers the
assessed for execution and routing of would meet the NBBO Program criteria objectives of Sections 6(b)(4) and 6(b)(5)
securities. (since it was greater than 0.5% TCV of the Act,8 in particular, in that it
The text of the proposed rule change threshold set forth in Nasdaq Rule provides for the equitable allocation of
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is available at reasonable dues, fees and other charges
nasdaq.cchwallstreet.com, at Nasdaq’s 3 Nasdaq Rule 7018(a)(1). among members and issuers and other
principal office, and at the 4 Nasdaq Rule 7018(a)(2). persons using its facilities which the
Commission’s Public Reference Room. 5 Nasdaq Rule 7018(a)(3).
Exchange operates or controls, and is
6 NBBO liquidity provided means liquidity
not designed to permit unfair
provided from orders (other than Designated Retail
24 17 CFR 200.30–3(a)(12). Orders, as defined in Nasdaq Rule 7018), that
1 15 U.S.C. 78s(b)(1). 7 15 U.S.C. 78f(b).
establish the NBBO, and displayed a quantity of at
2 17 CFR 240.19b–4. least one round lot at the time of execution. 8 15 U.S.C. 78f(b)(4) and (5).
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discrimination between customers, displayed quotes/orders (other than how these additional rebates/credits
issuers, brokers, or dealers. supplemental orders or designated retail apply. The Exchange believes that the
The Commission and the courts have orders) that provide liquidity priced at proposed changes to the NBBO Program
repeatedly expressed their preference $1 or more is reasonable because it is in overall will improve market quality and
for competition over regulatory line with other credits provided on thus benefits all members.
intervention in determining prices, Nasdaq, as well as on other exchanges. Nasdaq believes that the proposed
products, and services in the securities For example, both the QMM Program 16 rule change is equitable and not unfairly
markets. In Regulation NMS, while and the ISP 17 have credits of $0.0001 discriminatory because the additional
adopting a series of steps to improve the per share executed. The Exchange also $0.0001 per share executed credit for
current market model, the Commission believes that the proposed additional displayed quotes/orders that provide
highlighted the importance of market credit will serve as an effective liquidity priced at $1 or more under the
forces in determining prices and SRO incentive to members to provide more NBBO Program is available to all
revenues and, also, recognized that liquidity provided from orders (other members on an equal basis and provides
current regulation of the market system than Designated Retail Orders, as an additional credit for activity that
‘‘has been remarkably successful in defined in Nasdaq Rule 7018), that improves the Exchange’s market quality
promoting market competition in its establish the NBBO, and displayed a through increased activity at the NBBO.
broader forms that are most important to quantity of at least one round lot at the In this regard, the NBBO Program
investors and listed companies.’’ 9 time of execution. Increasing such encourages higher levels of liquidity
Likewise, in NetCoalition v. Securities liquidity is reflective of the Exchange’s provision into the price discovery
and Exchange Commission 10 desire to improve liquidity and process and is consistent with the
(‘‘NetCoalition’’) the D.C. Circuit upheld strengthen the NBBO Program. overall goals of enhancing market
the Commission’s use of a market-based The Exchange also believes that quality. Also, this new credit will be in
approach in evaluating the fairness of choosing the ratio of at least 25% NBBO addition to any rebate or credit payable
market data fees against a challenge liquidity provided of the liquidity under Nasdaq Rule 7018(a) or the ISP,
claiming that Congress mandated a cost- provided during the month will QMM Program, and NBBO Program
based approach.11 As the court incentivize participants to more under Nasdaq Rule 7014.
emphasized, the Commission ‘‘intended aggressively pursue adding liquidity at Nasdaq believes that the proposed
in Regulation NMS that ‘market forces, the NBBO while still offering an rule change to Nasdaq Rule 7018(a)(1),
rather than regulatory requirements’ attainable goal. This may focus (2) and (3) is reasonable because it will
play a role in determining the market participants on meeting the criteria in a further encourage market participant
data . . . to be made available to way that relying on solely NBBO activity and will also support liquidity
investors and at what cost.’’ 12 provision across all three Tapes by
specific rebates has not. This proposed
Further, ‘‘[n]o one disputes that making it easier for members to satisfy
change is similar to other market
competition for order flow is ‘fierce.’ one of the two criteria to qualify for the
incentive programs that require a certain
. . . As the SEC explained, ‘[i]n the U.S. $0.0030 per share executed credit for
level of activity in order to be eligible
national market system, buyers and adding displayed liquidity. Specifically,
to receive a particular credit. For
sellers of securities, and the broker- by amending one prong of the criteria to
example, to receive an ISP credit a
dealers that act as their order-routing reduce the percentage requirement from
member is already required to provide
agents, have a wide range of choices of 0.15% to 0.10% of shares of liquidity
a 40% of their [sic] liquidity through
where to route orders for execution’; provided with respect to securities that
ISP designated ports (among other
[and] ‘no exchange can afford to take its are listed on exchanges other than
criteria).18
market share percentages for granted’ Nasdaq or NYSE [sic]. The Exchange
because ‘no exchange possesses a Additionally, minimum standards of
believes this will allow more members
monopoly, regulatory or otherwise, in specific activity (e.g., non-display
to receive this credit and thereby
the execution of order flow from broker activity and other performance
incentivize the enhancement of
dealers’. . . .’’ 13 requirements) are also sometimes
liquidity with regard to displayed
The NBBO Program is intended to required to be eligible to receive a
quotes/orders (other than Supplemental
encourage members to add liquidity at particular credit. One example of this is
Orders or Designated Retail Orders) on
prices that benefit all Nasdaq market in Nasdaq Rule 7018(a)(1), which states
Nasdaq. This, in turn, should positively
participants and the Nasdaq market that a member seeking to receive the
impact market quality and benefit other
itself, and to enhance price discovery, particular available credit must provide
Nasdaq members.
by establishing a new NBBO.14 shares of liquidity in all securities The Exchange also believes that the
Specifically, Nasdaq believes that the through one or more of its Nasdaq proposed rule change is an equitable
proposed rule change to Nasdaq Rule Market Center MPIDs of more than allocation and is not unfairly
7014(g) that provides for an additional 0.75% of Consolidated Volume during discriminatory because it is reducing
$0.0001 per share executed credit 15 for the month, as well as provide a daily across all three Tapes one of the two
average of at least 5 million shares of criteria that a member must satisfy to
9 Securities Exchange Act Release No. 34–51808 non-displayed liquidity. qualify for the $0.0030 per share
(June 9, 2005) (‘‘Regulation NMS Adopting Also, the clarifying language added to executed credit for adding displayed
Release’’). the NBBO Program under Nasdaq Rule
10 NetCoalition v. SEC 615 F.3d 525 (D.C. Cir. liquidity. Additionally, members who
7014(g) regarding the applicability of currently qualify for the credit will
2010).
this new credit is reasonable because it
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11 Id. at 534–535. continue to do so.
12 Id. at 537. will lessen participant confusion as to
13 Id. at 539 (quoting ArcaBook Order, 73 FR at B. Self-Regulatory Organization’s
74782–74783). and (ii) has a ratio of at least 25% NBBO liquidity Statement on Burden on Competition
14 See Securities Exchange Act Release No. 68209 provided of the liquidity provided during the
month. Nasdaq does not believe that the
(November 9, 2012), 77 FR 69519 (November 19,
2012) (SR–NASDAQ–2012–126). 16 See Nasdaq Rule 7014(e) Tier 1. proposed rule change will result in a
15 The member will receive this additional credit 17 See Nasdaq Rule 7014(c)(2). burden on competition that is not
if the member qualifies for the (i) NBBO Program 18 See Nasdaq Rule 7014(c)(2)(C). necessary or appropriate in furtherance
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![Federal Register / Vol. 81, No. 35 / Tuesday, February 23, 2016 / Notices 9063
of the purposes of the Act, as III. Date of Effectiveness of the inspection and copying at the principal
amended.19 In terms of inter-market Proposed Rule Change and Timing for offices of the Exchange. All comments
competition, the Exchange notes that it Commission Action received will be posted without change;
operates in a highly competitive market The foregoing change has become the Commission does not edit personal
in which market participants can effective pursuant to Section identifying information from
readily favor competing venues if they 19(b)(3)(A)(ii) of the Act.20 At any time submissions. You should submit only
deem fee levels at a particular venue to within 60 days of the filing of the information that you wish to make
be excessive, or credit opportunities proposed rule change, the Commission available publicly. All submissions
available at other venues to be more summarily may temporarily suspend should refer to File Number SR–
favorable. In such an environment, the such rule change if it appears to the NASDAQ–2016–020, and should be
Exchange must continually adjust its Commission that such action is submitted on or before March 15, 2016.
fees and credits to remain competitive necessary or appropriate in the public For the Commission, by the Division of
with other exchanges and with interest, for the protection of investors, Trading and Markets, pursuant to delegated
alternative trading systems that have or otherwise in furtherance of the authority.21
been exempted from compliance with purposes of the Act. Robert W. Errett,
the statutory standards applicable to
exchanges. Because competitors are free IV. Solicitation of Comments Deputy Secretary.
to modify their own fees and credits in Interested persons are invited to [FR Doc. 2016–03660 Filed 2–22–16; 8:45 am]
response, and because market submit written data, views, and BILLING CODE 8011–01–P
participants may readily adjust their arguments concerning the foregoing,
order routing practices, the Exchange including whether the proposed rule
believes that the degree to which fee change is consistent with the Act. SECURITIES AND EXCHANGE
changes in this market may impose any Comments may be submitted by any of COMMISSION
burden on competition is extremely the following methods:
limited. Electronic Comments [Release No. 34–77154 ; File No. SR–BOX–
In this instance, the proposed 2016–08]
• Use the Commission’s Internet
additional $0.0001 per share executed comment form (http://www.sec.gov/ Self-Regulatory Organizations; BOX
credit for displayed quotes/orders that rules/sro.shtml); or Options Exchange LLC; Notice of
provide liquidity priced at $1 or more • Send an email to rule-comments@ Filing and Immediate Effectiveness of
in connection with the NBBO Program sec.gov. Please include File Number SR– a Proposed Rule Change To Reduce
under Nasdaq Rule 7014(g), as well as NASDAQ–2016–020 on the subject line. the Order Handling Period for Directed
the easing of the criteria under Nasdaq
Paper Comments Orders From Three Seconds to One
Rule 7018(a) to receive a $0.0030
Second
executed rebate for displayed quotes/ • Send paper comments in triplicate
orders (other than Supplemental Orders to Secretary, Securities and Exchange February 17, 2016.
or Designated Retail Orders) that Commission, 100 F Street NE., Pursuant to Section 19(b)(1) of the
provide liquidity, do not impose a Washington, DC 20549–1090.
Securities Exchange Act of 1934
burden on competition because the All submissions should refer to File (‘‘Act’’),1 and Rule 19b–4 thereunder,2
Exchange’s execution services are Number SR–NASDAQ–2016–020. This notice is hereby given that on February
voluntary and subject to extensive file number should be included on the 5, 2016, BOX Options Exchange LLC
competition both from other exchanges subject line if email is used. To help the (the ‘‘Exchange’’) filed with the
and from off-exchange venues. The Commission process and review your Securities and Exchange Commission
Exchange believes that the competition comments more efficiently, please use (‘‘Commission’’) the proposed rule
among exchanges and other venues will only one method. The Commission will change as described in Items I and II
help to drive price improvement and post all comments on the Commission’s below, which Items have been prepared
overall execution quality higher for Internet Web site (http://www.sec.gov/ by the self-regulatory organization. The
investors. rules/sro.shtml). Copies of the
Commission is publishing this notice to
In sum, if the rule change proposed submission, all subsequent
solicit comments on the proposed rule
herein is unattractive to market amendments, all written statements
from interested persons.
participants, it is likely that the with respect to the proposed rule
Exchange will lose market share as a change that are filed with the I. Self-Regulatory Organization’s
result. Accordingly, the Exchange does Commission, and all written Statement of the Terms of Substance of
not believe that the proposed change communications relating to the the Proposed Rule Change
will impair the ability of members or proposed rule change between the
Commission and any person, other than The Exchange proposes to reduce the
competing order execution venues to
those that may be withheld from the order handling period for Directed
maintain their competitive standing in
public in accordance with the Orders from three seconds to one
the financial markets.
provisions of 5 U.S.C. 552, will be second. The text of the proposed rule
C. Self-Regulatory Organization’s available for Web site viewing and change is available from the principal
mstockstill on DSK4VPTVN1PROD with NOTICES
Statement on Comments on the printing in the Commission’s Public office of the Exchange, at the
Proposed Rule Change Received From Reference Room, 100 F Street NE., Commission’s Public Reference Room
Members, Participants, or Others Washington, DC 20549 on official and also on the Exchange’s Internet Web
business days between the hours of site at http://boxexchange.com.
Written comments were neither 10:00 a.m. and 3:00 p.m. Copies of such
solicited nor received. filing also will be available for 21 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
19 15 U.S.C. 78f(b)(8). 20 15 U.S.C. 78s(b)(3)(A)(ii). 2 17 CFR 240.19b–4.
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Document Created: 2018-02-02 14:33:26
Document Modified: 2018-02-02 14:33:26
| 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 9061 |
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