82 FR 11376 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 7014 and 7018
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 34 (February 22, 2017)
Federal Register Volume 82, Issue 34 (February 22, 2017)
| Page Range | 11376-11379 | |
| FR Document | 2017-03460 |
[Federal Register Volume 82, Number 34 (Wednesday, February 22, 2017)] [Notices] [Pages 11376-11379] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-03460] [[Page 11376]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80051; File No. SR-NASDAQ-2017-016] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 7014 and 7018 February 16, 2017. 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 9, 2017, 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 the Substance of the Proposed Rule Change The Exchange proposes to (1) amend Rule 7014(j) to modify the conditions for qualifying for the Nasdaq Growth Program; and (2) amend Rule 7018(a) to modify the volume requirements needed to qualify for a credit of $0.0030 per share for members that add liquidity on both Nasdaq and the Nasdaq Options Market (``NOM''). 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 the Exchange's transaction fees at Rule 7014(j) and Rule 7018(a) to make two changes.\3\ Specifically, the Exchange proposes to (1) add another way through which members may qualify for the Nasdaq Growth Program (``Program''); and (2) lower one of the volume requirements needed to qualify for a $0.0030 credit when adding liquidity on Nasdaq and NOM. These changes are described below. --------------------------------------------------------------------------- \3\ The Exchange initially filed the proposed changes on February 1, 2017 (SR-NASDAQ-2017-011). On February 9, 2017, the Exchange withdrew that filing and submitted this filing. --------------------------------------------------------------------------- Nasdaq Growth Program Nasdaq introduced the Program in 2016.\4\ The purpose of the Program is to provide a credit per share executed for members that meet certain growth criteria. The credit is designed to provide an incentive to members that do not qualify for other credits under Rule 7018 in excess of the Program credit to increase their participation on the Exchange. The Program provides a member a $0.0025 per share executed credit in securities priced $1 or more per share if the member meets certain criteria. The credit is 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. --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 78977 (September 29, 2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132). --------------------------------------------------------------------------- Rule 7014(j) currently provides two ways in which a member may qualify for the Program in a given month. First, the member may qualify for the Program by (i) adding greater than 750,000 shares a day on average during the month through one or more of its Nasdaq Market Center MPIDs; and (ii) increasing its shares of liquidity provided through one or more of its Nasdaq Market Center MPIDs as a percent of Consolidated Volume by 20% versus the member's Growth Baseline.\5\ Alternatively, the member may qualify for the Program by (i) adding greater than 750,000 shares a day on average during the month through one or more of its Nasdaq Market Center MPIDs; and (ii) meeting the criteria set forth above (increasing its shares of liquidity provided through one or more of its Nasdaq Market Center MPIDs as a percent of Consolidated Volume by 20% versus the member's Growth Baseline) in the preceding month, and maintaining or increasing its shares of liquidity provided through one or more of its Nasdaq Market Center MPIDs as a percent of Consolidated Volume as compared to the preceding month. --------------------------------------------------------------------------- \5\ The Growth Baseline is 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 under Rule 7014(j)(ii)(A) (increasing its volume by 20% versus its Growth Baseline). If a member has not yet 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. --------------------------------------------------------------------------- Nasdaq now proposes a third way in which a member may qualify for the Program in a given month. Specifically, the member may qualify for the Program by (i) adding greater than 750,000 shares a day on average during the month through one or more of its Nasdaq Market Center MPIDs in three separate months; (ii) increasing its shares of liquidity provided through one or more of its Nasdaq Market Center MPIDs as a percent of Consolidated Volume by 20% versus the member's Growth Baseline in three separate months; and (iii) maintaining or increasing its shares of liquidity provided through one or more of its Nasdaq Market Center MPIDs as a percent of Consolidated Volume compared to the growth baseline established when the member met the criteria for the third month. The following example illustrates the application of this new provision:In September 2016, the firm's shares of liquidity as a percentage of Consolidated Volume is 0.03%. This is the firm's Growth Baseline. In October 2016, the firm added more than 750,000 shares a day on average through one or more of its Nasdaq Market Center MPIDs. The firm's shares of liquidity as a percentage of Consolidated Volume rose to 0.036%, an increase of 20% over its Growth Baseline. The member qualifies for the credit, since it has met the criteria of Rule 7014(j)(i) and 7014(j)(ii)(A). The member's Growth Baseline is updated to 0.036% (its October 2016 volume). In November 2016, the firm added more than 750,000 shares a day on average through one or more of its Nasdaq Market Center MPIDs. The firm's shares of liquidity as a percentage of Consolidated Volume was 0.041%. The firm qualifies for the credit under Rule 7014(j)(ii)(B) since it met the [[Page 11377]] criteria under Rule 7014(j)(ii)(A) in October and added volume in November as compared to October. The firm does not, however, qualify for the credit under Rule 7014(j)(ii)(A). Accordingly, its Growth Baseline remains 0.036% (its October 2016 volume). In December 2016, the firm added more than 750,000 shares a day on average through one or more of its Nasdaq Market Center MPIDs. The firm's shares of liquidity as a percentage of Consolidated Volume rose to 0.044%, an increase of over 20% over its Growth Baseline. The member qualifies for the credit, since it has met the criteria of Rule 7014(j)(i) and 7014(j)(ii)(A). The member's Growth Baseline is updated to 0.044% (its December 2016 volume). In January 2017, the firm added more than 750,000 shares a day on average through one or more of its Nasdaq Market Center MPIDs. The firm's shares of liquidity as a percentage of Consolidated Volume rose to 0.053%, an increase of over 20% over its Growth Baseline. The member qualifies for the credit, since it has met the criteria of Rule 7014(j)(i) and 7014(j)(ii)(A). The member's Growth Baseline is updated to 0.053% (its January 2017 volume). In February 2017, the firm added more than 750,000 shares a day on average through one or more of its Nasdaq Market Center MPIDs. The firm's shares of liquidity as a percentage of Consolidated Volume remained at 0.053%. The firm would still qualify for the credit, since it satisfied the criteria under Rule 7014(j)(i) (adding more than 750,000 shares a day on average) and Rule 7014(j)(ii)(A) (increasing its volume by 20% over its Growth Baseline) in three separate months. Going forward, the firm would continue to qualify for the credit, as long as it continues to satisfy, on a monthly basis, the criteria under Rule 7014(j)(i) (adding more than 750,000 shares a day on average) and Rule 7014(j)(ii)(C) (maintaining or adding volume in comparison to the Growth Baseline that was established in the third month in which the firm qualified for the Program under Rule 7014(j)(ii)(A)). The Exchange is adding this provision to provide firms with another way of qualifying for the Program. Currently, a firm may qualify for the Program in a given month if it met the criteria of Rule 7014(j)(ii)(A) in the preceding month (increasing its volume by 20% over its Growth Baseline), and maintained or increased its volume compared to that previous month. The new provision is similar in that it allows a firm to continue to qualify for the Program if it maintains or increases its volume in a given month. The new provision differs, however, in that the firm must have qualified for the Program pursuant to Rule 7014(j)(ii)(A) (increasing its volume by 20% over its Growth Baseline) in three separate months. Nasdaq believes that this provision provides firms with additional flexibility in qualifying for the Program, and furthers the Program's goal of incentivizing participation on the Exchange. Credit for Adding Liquidity on Nasdaq and NOM In the second change, Nasdaq proposes to amend one of the requirements in order to qualify for a credit for adding liquidity. Currently, a member will receive a credit if it meets a specified volume threshold on Nasdaq for displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that add liquidity, and also meets a specified volume threshold on NOM when adding liquidity. Specifically, a member will receive a credit of $0.0030 per share executed if the member (1) adds liquidity through one or more of its Nasdaq Market Center MPIDs during the month that, in all securities, represents at least 0.125% of Consolidated Volume during the month, and (2) adds Customer,\6\ Professional,\7\ Firm,\8\ Non-NOM Market Maker \9\ and/or Broker-Dealer \10\ liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.15% or more of total industry ADV in the customer clearing range for Equity and ETF option contracts per day during the month on NOM. --------------------------------------------------------------------------- \6\ The term ``Customer'' applies to any transaction that is identified by a participant for clearing in the Customer range at The Options Clearing Corporation (``OCC'') which is not for the account of broker or dealer or for the account of a ``Professional,'' as defined in Chapter I, Section 1 of the NOM rules. \7\ A ``Professional'' is defined in Chapter I, Section 1 of the NOM rules as ``any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s).'' \8\ The term ``Firm'' or (``F'') applies to any transaction that is identified by a Participant for clearing in the Firm range at OCC. \9\ The term ``Non-NOM Market Maker'' or (``O'') is a registered market maker on another options exchange that is not a NOM Market Maker. A Non-NOM Market Maker must append the proper Non-NOM Market Maker designation to orders routed to NOM. \10\ The term ``Broker-Dealer'' or (``B'') applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. --------------------------------------------------------------------------- Nasdaq proposes to reduce the volume threshold for providing liquidity on Nasdaq from 0.125% to 0.12%. Nasdaq notes that members will continue to receive the same credit as they currently receive if they meet the volume requirements. Nasdaq believes that this change more closely aligns the volume requirement for activity on Nasdaq with the current volume requirement for activity on NOM, and with the amount of the credit itself. The change to the volume threshold will be applied to transactions in securities of all three Tapes.\11\ The volume threshold is therefore being amended in Rules 7018(a)(1), (2), and (3), which provide the fees and credits for execution and routing of orders in Nasdaq-listed securities, NYSE-listed securities, and securities not listed on Nasdaq or NYSE, respectively. --------------------------------------------------------------------------- \11\ Tape C securities are those that are listed on the Exchange, Tape A securities are those that are listed on the New York Stock Exchange (``NYSE''), and Tape B securities are those that are listed on exchanges other than Nasdaq or NYSE. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\12\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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 not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78f(b). \13\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- Nasdaq Growth Program The Exchange believes that the proposed change to the Nasdaq Growth Program is reasonable, and notes that the amount of the credits provided under the Program is unchanged.\14\ Nasdaq believes that the proposed change is equitably allocated among members, and is not designed to permit unfair discrimination. Nasdaq notes that participation in the Program is voluntary, and that the proposed change applies to all members that otherwise qualify for the Program, e.g., members that add greater than 750,000 shares a day on average during the month through one or more of its [sic] Nasdaq Market Center MPIDs. --------------------------------------------------------------------------- \14\ See Securities Exchange Act Release No. 78977 (September 29, 2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132) (establishing the Nasdaq Growth Program and its credit structure). --------------------------------------------------------------------------- In adopting Rule 7014(j)(ii)(C), Nasdaq is providing all members that otherwise qualify for the Program with an alternate way in which they may qualify for the Program by permitting members to either maintain or increase their volume in comparison to the last of three months in which they [[Page 11378]] previously qualified for the Program under Rule 7014(j)(ii)(A). At the same time, the purpose of the Program is to increase members' participation on the Exchange by offering a credit to members that meet the volume requirements. Nasdaq therefore believes that it is equitable and not unfairly discriminatory to only permit members to qualify for the credit in this manner if they have qualified for the credit in three separate months under Rule 7014(j)(ii)(A) (increasing their volume by 20% or more in comparison to the Growth Baseline) and maintain or increase their volume in the current month. Nasdaq notes that, if a member qualifies for the credit under Rule 7014(j)(ii)(C), it would continue to qualify for the credit under this provision going forward, as long as it continues to meet the criteria under Rule 7014(j)(i) (adding more than 750,000 shares a day on average) and Rule 7014(j)(ii)(C) (maintaining or adding volume in comparison to the Growth Baseline that was established in the third month in which the firm qualified for the Program under Rule 7014(j)(ii)(A)). Nasdaq believes this aspect of the proposal is equitable and not unfairly discriminatory, as this way to receive an ongoing credit is open to any member that elects to meet the requirements under Rule 7014(j)(ii)(C). In sum, Nasdaq believes that this proposed change strikes an appropriate and equitable balance by expanding the number of members that may be eligible for the Program while continuing to incentivize other members that may not currently qualify for the Program to transact greater volume in order to become eligible for the Program. Credit for Adding Liquidity on Nasdaq and NOM The Exchange believes that the proposed change to one of the volume requirements that is needed to qualify for the credit for adding liquidity on Nasdaq and NOM is reasonable, and notes that the amount of the credit provided under this provision is unchanged.\15\ Nasdaq believes that the proposed change is equitably allocated among members, and is not designed to permit unfair discrimination. By reducing the Nasdaq volume requirement, Nasdaq is potentially expanding the number of members that may qualify for the credit. Moreover, all similarly situated members are equally capable of qualifying for the credit if they choose to meet the new volume requirement, and the same credit will be paid to all members that meet the new and existing volume requirements. --------------------------------------------------------------------------- \15\ See Securities Exchange Act Release No. 79791 (January 13, 2017), 82 FR 7907 (January 23, 2017) (SR-NASDAQ-2017-002) (establishing the $0.0030 per share credit for adding liquidity on Nasdaq and NOM). --------------------------------------------------------------------------- As with other credits that the Exchange provides, this credit is designed to encourage increased activity on Nasdaq and NOM. Nasdaq believes that the proposed Nasdaq volume requirement that is needed to qualify for the credit is equitable because it is more closely aligned with the current NOM volume requirement that is also needed to qualify for the credit, and is also more closely aligned with the amount of the credit itself. Nasdaq believes that the proposed requirement for qualifying for the credit is proportionate to the amount of the credit and equitably reflects the purpose of the credit, which is to incentivize members to transact greater volume on Nasdaq and NOM. Finally, the Exchange notes that the proposed volume threshold is consistent with other volume-based credits that the Exchange offers to members for displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that provide liquidity. Nasdaq currently offers a variety of credits for displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that add liquidity, some of which are linked to activity on NOM and some of which relate to activity on Nasdaq only, which range from $0.0015 per share executed to $0.00305 per share executed, and which apply progressively more stringent requirements in return for higher per share executed credits. Here, the member would receive a $0.0030 per share credit for adding liquidity of at least 0.12% of Consolidated Volume on Nasdaq, and adding Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.15% or more of total industry ADV in the customer clearing range for Equity and ETF option contracts per day during the month on NOM. In comparison, the Exchange currently offers a credit of $0.0027 per share executed if the member added liquidity during the month representing more than 0.10% of Consolidated Volume through one or more of its Nasdaq Market Center MPIDs, and added Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Non-Penny Pilot Options of 0.40% or more of total industry ADV in the customer clearing range for Equity and ETF option contracts per day in a month on NOM. 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. With respect to the proposed change to the Nasdaq Growth Program, participation in the Program is voluntary. The proposed change will provide members with another way in which they may qualify for the Program, and will apply equally to all members who otherwise qualify for the Program and that elect to meet the requirements under Rule 7014(j)(ii)(C). With respect to the proposed change to the volume requirement for the credit for adding liquidity on Nasdaq and NOM, the Exchange's execution services are completely voluntary and are subject to extensive competition both from other exchanges and from off-exchange venues. The new volume requirement applies equally to all members, and all similarly situated members are equally capable of qualifying for the credit if they choose to meet the new volume and current volume requirements. Moreover, the same credit will be paid to all members that qualify for the proposed and current volume requirements. Finally, the proposed change is designed to reward market-improving behavior by more closely aligning a requirement necessary to qualify for the credit with the actual credit. Thus, the Exchange does not believe that this proposed change will impose any burden on competition, but may rather promote competition. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the [[Page 11379]] Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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.\16\ --------------------------------------------------------------------------- \16\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- 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-2017-016 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-2017-016. 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-2017-016, and should be submitted on or before March 15, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\17\ --------------------------------------------------------------------------- \17\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-03460 Filed 2-21-17; 8:45 am] BILLING CODE 8011-01-P
![11376 Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices
SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s Alternatively, the member may qualify
COMMISSION Statement of the Purpose of, and for the Program by (i) adding greater
Statutory Basis for, the Proposed Rule than 750,000 shares a day on average
[Release No. 34–80051; File No. SR– Change during the month through one or more
NASDAQ–2017–016] 1. Purpose of its Nasdaq Market Center MPIDs; and
(ii) meeting the criteria set forth above
Self-Regulatory Organizations; The The purpose of the proposed rule (increasing its shares of liquidity
NASDAQ Stock Market LLC; Notice of change is to amend the Exchange’s provided through one or more of its
transaction fees at Rule 7014(j) and Rule Nasdaq Market Center MPIDs as a
Filing and Immediate Effectiveness of
7018(a) to make two changes.3 percent of Consolidated Volume by 20%
Proposed Rule Change To Amend
Specifically, the Exchange proposes to versus the member’s Growth Baseline)
Rules 7014 and 7018
(1) add another way through which in the preceding month, and
February 16, 2017. members may qualify for the Nasdaq maintaining or increasing its shares of
Growth Program (‘‘Program’’); and (2) liquidity provided through one or more
Pursuant to Section 19(b)(1) of the lower one of the volume requirements
Securities Exchange Act of 1934 of its Nasdaq Market Center MPIDs as a
needed to qualify for a $0.0030 credit percent of Consolidated Volume as
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 when adding liquidity on Nasdaq and
notice is hereby given that on February compared to the preceding month.
NOM. These changes are described Nasdaq now proposes a third way in
9, 2017, The NASDAQ Stock Market below.
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed which a member may qualify for the
with the Securities and Exchange Nasdaq Growth Program Program in a given month. Specifically,
Commission (‘‘SEC’’ or ‘‘Commission’’) the member may qualify for the Program
Nasdaq introduced the Program in
the proposed rule change as described by (i) adding greater than 750,000 shares
2016.4 The purpose of the Program is to
in Items I, II, and III below, which Items a day on average during the month
provide a credit per share executed for
have been prepared by the Exchange. through one or more of its Nasdaq
members that meet certain growth
The Commission is publishing this criteria. The credit is designed to Market Center MPIDs in three separate
notice to solicit comments on the provide an incentive to members that do months; (ii) increasing its shares of
proposed rule change from interested not qualify for other credits under Rule liquidity provided through one or more
persons. 7018 in excess of the Program credit to of its Nasdaq Market Center MPIDs as a
increase their participation on the percent of Consolidated Volume by 20%
I. Self-Regulatory Organization’s versus the member’s Growth Baseline in
Exchange. The Program provides a
Statement of the Terms of the Substance three separate months; and (iii)
member a $0.0025 per share executed
of the Proposed Rule Change maintaining or increasing its shares of
credit in securities priced $1 or more
per share if the member meets certain liquidity provided through one or more
The Exchange proposes to (1) amend of its Nasdaq Market Center MPIDs as a
Rule 7014(j) to modify the conditions criteria. The credit is provided in lieu of
other credits provided to the member for percent of Consolidated Volume
for qualifying for the Nasdaq Growth compared to the growth baseline
Program; and (2) amend Rule 7018(a) to displayed quotes/orders (other than
Supplemental Orders or Designated established when the member met the
modify the volume requirements needed criteria for the third month.
to qualify for a credit of $0.0030 per Retail Orders) that provide liquidity
under Rule 7018, if the credit under the The following example illustrates the
share for members that add liquidity on application of this new provision:
both Nasdaq and the Nasdaq Options Nasdaq Growth Program is greater than
the credit attained under Rule 7018. • In September 2016, the firm’s
Market (‘‘NOM’’). shares of liquidity as a percentage of
Rule 7014(j) currently provides two
The text of the proposed rule change ways in which a member may qualify Consolidated Volume is 0.03%. This is
is available on the Exchange’s Web site for the Program in a given month. First, the firm’s Growth Baseline.
at http://nasdaq.cchwallstreet.com, at the member may qualify for the Program • In October 2016, the firm added
the principal office of the Exchange, and by (i) adding greater than 750,000 shares more than 750,000 shares a day on
at the Commission’s Public Reference a day on average during the month average through one or more of its
Room. through one or more of its Nasdaq Nasdaq Market Center MPIDs. The
Market Center MPIDs; and (ii) firm’s shares of liquidity as a percentage
II. Self-Regulatory Organization’s of Consolidated Volume rose to 0.036%,
Statement of the Purpose of, and increasing its shares of liquidity
provided through one or more of its an increase of 20% over its Growth
Statutory Basis for, the Proposed Rule Baseline. The member qualifies for the
Change Nasdaq Market Center MPIDs as a
percent of Consolidated Volume by 20% credit, since it has met the criteria of
In its filing with the Commission, the versus the member’s Growth Baseline.5 Rule 7014(j)(i) and 7014(j)(ii)(A). The
Exchange included statements member’s Growth Baseline is updated to
concerning the purpose of and basis for 3 The Exchange initially filed the proposed 0.036% (its October 2016 volume).
the proposed rule change and discussed changes on February 1, 2017 (SR–NASDAQ–2017– • In November 2016, the firm added
011). On February 9, 2017, the Exchange withdrew more than 750,000 shares a day on
any comments it received on the that filing and submitted this filing.
proposed rule change. The text of these 4 See Securities Exchange Act Release No. 78977
average through one or more of its
statements may be examined at the (September 29, 2016), 81 FR 69140 (October 5, Nasdaq Market Center MPIDs. The
places specified in Item IV below. The 2016) (SR–NASDAQ–2016–132). firm’s shares of liquidity as a percentage
sradovich on DSK3GMQ082PROD with NOTICES
Exchange has prepared summaries, set
5 The Growth Baseline is defined as the member’s
of Consolidated Volume was 0.041%.
shares of liquidity provided in all securities through The firm qualifies for the credit under
forth in sections A, B, and C below, of one or more of its Nasdaq Market Center MPIDs as
the most significant aspects of such a percent of Consolidated Volume during the last Rule 7014(j)(ii)(B) since it met the
statements. month a member qualified for the Nasdaq Growth
Program under Rule 7014(j)(ii)(A) (increasing its provided in all securities through one or more of
volume by 20% versus its Growth Baseline). If a its Nasdaq Market Center MPIDs as a percent of
1 15 U.S.C. 78s(b)(1). member has not yet qualified for a credit under this Consolidated Volume will be used to establish a
2 17 CFR 240.19b–4. program, its August 2016 share of liquidity baseline.
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![Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices 11377
criteria under Rule 7014(j)(ii)(A) in given month. The new provision differs, continue to receive the same credit as
October and added volume in November however, in that the firm must have they currently receive if they meet the
as compared to October. The firm does qualified for the Program pursuant to volume requirements. Nasdaq believes
not, however, qualify for the credit Rule 7014(j)(ii)(A) (increasing its that this change more closely aligns the
under Rule 7014(j)(ii)(A). Accordingly, volume by 20% over its Growth volume requirement for activity on
its Growth Baseline remains 0.036% (its Baseline) in three separate months. Nasdaq with the current volume
October 2016 volume). Nasdaq believes that this provision requirement for activity on NOM, and
• In December 2016, the firm added provides firms with additional with the amount of the credit itself.
more than 750,000 shares a day on flexibility in qualifying for the Program, The change to the volume threshold
average through one or more of its and furthers the Program’s goal of will be applied to transactions in
Nasdaq Market Center MPIDs. The incentivizing participation on the securities of all three Tapes.11 The
firm’s shares of liquidity as a percentage Exchange. volume threshold is therefore being
of Consolidated Volume rose to 0.044%, amended in Rules 7018(a)(1), (2), and
an increase of over 20% over its Growth Credit for Adding Liquidity on Nasdaq (3), which provide the fees and credits
Baseline. The member qualifies for the and NOM for execution and routing of orders in
credit, since it has met the criteria of In the second change, Nasdaq Nasdaq-listed securities, NYSE-listed
Rule 7014(j)(i) and 7014(j)(ii)(A). The proposes to amend one of the securities, and securities not listed on
member’s Growth Baseline is updated to requirements in order to qualify for a Nasdaq or NYSE, respectively.
0.044% (its December 2016 volume). credit for adding liquidity. Currently, a
• In January 2017, the firm added 2. Statutory Basis
member will receive a credit if it meets
more than 750,000 shares a day on a specified volume threshold on Nasdaq The Exchange believes that its
average through one or more of its for displayed quotes/orders (other than proposal is consistent with Section 6(b)
Nasdaq Market Center MPIDs. The Supplemental Orders or Designated of the Act,12 in general, and furthers the
firm’s shares of liquidity as a percentage Retail Orders) that add liquidity, and objectives of Sections 6(b)(4) and 6(b)(5)
of Consolidated Volume rose to 0.053%, also meets a specified volume threshold of the Act,13 in particular, in that it
an increase of over 20% over its Growth on NOM when adding liquidity. provides for the equitable allocation of
Baseline. The member qualifies for the Specifically, a member will receive a reasonable dues, fees and other charges
credit, since it has met the criteria of credit of $0.0030 per share executed if among members and issuers and other
Rule 7014(j)(i) and 7014(j)(ii)(A). The the member (1) adds liquidity through persons using any facility, and is not
member’s Growth Baseline is updated to one or more of its Nasdaq Market Center designed to permit unfair
0.053% (its January 2017 volume). MPIDs during the month that, in all discrimination between customers,
• In February 2017, the firm added securities, represents at least 0.125% of issuers, brokers, or dealers.
more than 750,000 shares a day on Consolidated Volume during the month, Nasdaq Growth Program
average through one or more of its and (2) adds Customer,6 Professional,7
Nasdaq Market Center MPIDs. The The Exchange believes that the
Firm,8 Non-NOM Market Maker 9 and/or proposed change to the Nasdaq Growth
firm’s shares of liquidity as a percentage
Broker-Dealer 10 liquidity in Penny Pilot Program is reasonable, and notes that
of Consolidated Volume remained at
Options and/or Non-Penny Pilot the amount of the credits provided
0.053%. The firm would still qualify for
Options of 1.15% or more of total under the Program is unchanged.14
the credit, since it satisfied the criteria
industry ADV in the customer clearing Nasdaq believes that the proposed
under Rule 7014(j)(i) (adding more than
range for Equity and ETF option change is equitably allocated among
750,000 shares a day on average) and
contracts per day during the month on members, and is not designed to permit
Rule 7014(j)(ii)(A) (increasing its
NOM. unfair discrimination. Nasdaq notes that
volume by 20% over its Growth
Nasdaq proposes to reduce the participation in the Program is
Baseline) in three separate months.
• Going forward, the firm would volume threshold for providing voluntary, and that the proposed change
continue to qualify for the credit, as liquidity on Nasdaq from 0.125% to applies to all members that otherwise
long as it continues to satisfy, on a 0.12%. Nasdaq notes that members will qualify for the Program, e.g., members
monthly basis, the criteria under Rule that add greater than 750,000 shares a
6 The term ‘‘Customer’’ applies to any transaction
7014(j)(i) (adding more than 750,000 day on average during the month
that is identified by a participant for clearing in the
shares a day on average) and Rule Customer range at The Options Clearing through one or more of its [sic] Nasdaq
7014(j)(ii)(C) (maintaining or adding Corporation (‘‘OCC’’) which is not for the account Market Center MPIDs.
volume in comparison to the Growth of broker or dealer or for the account of a In adopting Rule 7014(j)(ii)(C),
‘‘Professional,’’ as defined in Chapter I, Section 1 Nasdaq is providing all members that
Baseline that was established in the of the NOM rules.
third month in which the firm qualified 7 A ‘‘Professional’’ is defined in Chapter I, Section
otherwise qualify for the Program with
for the Program under Rule 1 of the NOM rules as ‘‘any person or entity that an alternate way in which they may
7014(j)(ii)(A)). (i) is not a broker or dealer in securities, and (ii) qualify for the Program by permitting
The Exchange is adding this provision places more than 390 orders in listed options per members to either maintain or increase
day on average during a calendar month for its own their volume in comparison to the last
to provide firms with another way of beneficial account(s).’’
qualifying for the Program. Currently, a 8 The term ‘‘Firm’’ or (‘‘F’’) applies to any
of three months in which they
firm may qualify for the Program in a transaction that is identified by a Participant for
11 Tape C securities are those that are listed on
given month if it met the criteria of Rule clearing in the Firm range at OCC.
9 The term ‘‘Non-NOM Market Maker’’ or (‘‘O’’) is the Exchange, Tape A securities are those that are
7014(j)(ii)(A) in the preceding month
sradovich on DSK3GMQ082PROD with NOTICES
a registered market maker on another options listed on the New York Stock Exchange (‘‘NYSE’’),
(increasing its volume by 20% over its exchange that is not a NOM Market Maker. A Non- and Tape B securities are those that are listed on
Growth Baseline), and maintained or NOM Market Maker must append the proper Non- exchanges other than Nasdaq or NYSE.
12 15 U.S.C. 78f(b).
increased its volume compared to that NOM Market Maker designation to orders routed to
previous month. The new provision is NOM. 13 15 U.S.C. 78f(b)(4) and (5).
10 The term ‘‘Broker-Dealer’’ or (‘‘B’’) applies to 14 See Securities Exchange Act Release No. 78977
similar in that it allows a firm to any transaction which is not subject to any of the (September 29, 2016), 81 FR 69140 (October 5,
continue to qualify for the Program if it other transaction fees applicable within a particular 2016) (SR–NASDAQ–2016–132) (establishing the
maintains or increases its volume in a category. Nasdaq Growth Program and its credit structure).
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![Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices 11379
Exchange will lose market share as a rules/sro.shtml). Copies of the 19b–4 thereunder,2 a proposed rule
result. Accordingly, the Exchange does submission, all subsequent change amending Rule 104—Equities to
not believe that the proposed changes amendments, all written statements delete subsection (g)(i)(A)(III), which
will impair the ability of members or with respect to the proposed rule prohibits Designated Market Makers
competing order execution venues to change that are filed with the (‘‘DMMs’’) from establishing, during the
maintain their competitive standing in Commission, and all written last ten minutes of trading before the
the financial markets. communications relating to the close, a new high (low) price for the day
proposed rule change between the on the Exchange in a security in which
C. Self-Regulatory Organization’s Commission and any person, other than the DMM has a long (short) position
Statement on Comments on the those that may be withheld from the (‘‘Rule 104(g)(i)(A)(III) Prohibition’’).
Proposed Rule Change Received From public in accordance with the The proposed rule change was
Members, Participants, or Others provisions of 5 U.S.C. 552, will be published for comment in the Federal
No written comments were either available for Web site viewing and Register on November 17, 2016.3
solicited or received. printing in the Commission’s Public On December, 20, 2016, the
Reference Room, 100 F Street NE., Commission extended to February 15,
III. Date of Effectiveness of the
Washington, DC 20549 on official 2017, the time period in which to
Proposed Rule Change and Timing for
business days between the hours of approve the proposal, disapprove the
Commission Action
10:00 a.m. and 3:00 p.m. Copies of the proposal, or institute proceedings to
The foregoing rule change has become filing also will be available for determine whether to approve or
effective pursuant to Section inspection and copying at the principal disapprove the proposal.4 The
19(b)(3)(A)(ii) of the Act.16 office of the Exchange. All comments Commission has received no comments
At any time within 60 days of the received will be posted without change; on the proposal. This order institutes
filing of the proposed rule change, the the Commission does not edit personal proceedings under Section 19(b)(2)(B) of
Commission summarily may identifying information from the Act to determine whether to approve
temporarily suspend such rule change if submissions. You should submit only or disapprove the proposal.
it appears to the Commission that such information that you wish to make
action is: (i) Necessary or appropriate in available publicly. All submissions II. Description of the Proposal
the public interest; (ii) for the protection should refer to File Number SR– Currently, under Exchange Rule 104—
of investors; or (iii) otherwise in NASDAQ–2017–016, and should be Equities (g)(i)(A)(III), a DMM with a long
furtherance of the purposes of the Act. submitted on or before March 15, 2017. (short) position in a security cannot,
If the Commission takes such action, the For the Commission, by the Division of during the last ten minutes before the
Commission shall institute proceedings Trading and Markets, pursuant to delegated close of trading, make a purchase (sale)
to determine whether the proposed rule authority.17 in that security that results in a new
should be approved or disapproved. Eduardo A. Aleman, high (low) price on the Exchange for
IV. Solicitation of Comments Assistant Secretary. that day.5 The Exchange proposes to
[FR Doc. 2017–03460 Filed 2–21–17; 8:45 am] remove this prohibition from its
Interested persons are invited to rulebook.
BILLING CODE 8011–01–P
submit written data, views, and The Exchange asserts that, in light of
arguments concerning the foregoing, developments in the equity markets and
including whether the proposed rule SECURITIES AND EXCHANGE in the Exchange’s own trading model,
change is consistent with the Act. COMMISSION Rule 104(g)(i)(A)(III) has lost its original
Comments may be submitted by any of purpose and utility.6 Specifically, the
the following methods: [Release No. 34–80043; File No. SR–
NYSEMKT–2016–99]
Exchange asserts that, in today’s
Electronic Comments electronic marketplace, where DMMs
Self-Regulatory Organizations; NYSE have replaced specialists, and control of
• Use the Commission’s Internet
MKT LLC; Order Instituting pricing decisions has moved away from
comment form (http://www.sec.gov/
Proceedings To Determine Whether To market participants on the Exchange
rules/sro.shtml); or
Approve or Disapprove a Proposed trading floor, the purpose behind the
• Send an email to rule-
Rule Change Amending Rule 104— Rule 104(g)(i)(A)(III) Prohibition is no
comments@sec.gov. Please include File
Equities To Delete Subsection longer necessary, and eliminating the
Number SR–NASDAQ–2017–016 on the
(g)(i)(A)(III) Prohibiting Designated prohibition would not eliminate other
subject line.
Market Makers From Establishing a existing safeguards that prevent DMMs
Paper Comments New High (Low) Price on the Exchange from inappropriately influencing or
• Send paper comments in triplicate in a Security the DMM Has a Long manipulating the close.7
to Secretary, Securities and Exchange (Short) Position During the Last Ten The Exchange argues that the
Commission, 100 F Street NE., Minutes Prior to the Close of Trading rationale behind preventing specialists
Washington, DC 20549–1090. from setting the price of a security on
February 15, 2017. the Exchange in the final ten minutes of
All submissions should refer to File
Number SR–NASDAQ–2017–016. This I. Introduction
2 17 CFR 240.19b–4.
file number should be included on the On October 27, 2016, NYSE MKT LLC 3 See Securities Exchange Act Release No. 79283
sradovich on DSK3GMQ082PROD with NOTICES
subject line if email is used. To help the (‘‘Exchange’’ or ‘‘NYSE MKT’’) filed (Nov. 10, 2016), 81 FR 81210 (Nov. 17, 2016)
Commission process and review your with the Securities and Exchange (‘‘Notice’’).
4 See Securities Exchange Act Release No. 79611
comments more efficiently, please use Commission (‘‘Commission’’) pursuant
(Dec. 20, 2016), 81 FR 95205 (Dec. 27, 2016).
only one method. The Commission will to Section 19(b)(1) of the Securities 5 See Exchange Rule 104—Equities (g)(i)(A)(III).
post all comments on the Commission’s Exchange Act of 1934 (‘‘Act’’) 1 and Rule Exchange Rule 104—Equities (g)(i)(A)(III)(2)
Internet Web site (http://www.sec.gov/ provides two exceptions to this general prohibition.
17 17 CFR 200.30–3(a)(12). 6 See Notice, 81 FR at 81211.
16 15 U.S.C. 78s(b)(3)(A)(ii). 1 15 U.S.C. 78s(b)(1). 7 See id. at 81211–81212.
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Document Created: 2017-02-22 00:08:51
Document Modified: 2017-02-22 00:08:51
| 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 | 82 FR 11376 |
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