82 FR 13884 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7018(a) To Adopt Two Credits

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 49 (March 15, 2017)

Page Range		13884-13887
FR Document		2017-05081
Federal Register, Volume 82 Issue 49 (Wednesday, March 15, 2017)
[Federal Register Volume 82, Number 49 (Wednesday, March 15, 2017)]
[Notices]
[Pages 13884-13887]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-05081]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80192; File No. SR-NASDAQ-2017-026]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7018(a) To Adopt Two Credits

March 9, 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 March 1,

[[Page 13885]]

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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Rule 7018(a) to adopt two new credits provided to a member for 
displayed quotes/orders that provide liquidity.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend Rule 7018(a), 
concerning the fees and credits provided for the use of the order 
execution and routing services of the Nasdaq Market Center by members 
for all securities priced at $1 or more that it [sic] trades. The 
Exchange is proposing to adopt two new credits provided to a member for 
displayed quotes/orders that provide liquidity. Currently under Rules 
7018(a)(1)-(3), the Exchange provides credits ranging from $0.0015 per 
share executed to $0.00305 per share executed to members for displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) if they qualify by meeting the requirements of the various 
credit tiers under the rules.\3\ As described below, the Exchange is 
providing two new credits of $0.0026 and $0.0027 per share executed.
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    \3\ Under Rule 7018(a)(2), the Exchange also provides a credit 
of $0.0001 per share executed to members for displayed quotes/orders 
(other than Supplemental Orders or Designated Retail Orders), and 
under Rule 7018(a)(3), the Exchange provides credits of $0.0001 and 
$0.0002 per share executed to members for displayed quotes/orders 
(other than Supplemental Orders or Designated Retail Orders). These 
credits are provided in addition to the credits provided for 
displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) that provide liquidity.
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First Credit
    The Exchange is proposing to provide a new credit to members for 
displayed quotes/orders (other than Supplemental Orders or Designated 
Retail Orders) under Rule 7018(a), which will apply to securities of 
all three Tapes \4\ under Rule 7018(a)(1)-(3). Specifically, the 
Exchange is adopting [sic] to provide a $0.0027 per share executed 
credit to a member for displayed quotes/orders (other than Supplemental 
Orders or Designated Retail Orders) that provide liquidity if the 
member: (i) Has shares of liquidity accessed in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent more than 
0.40% of Consolidated Volume \5\ during the month, and (ii) has shares 
of liquidity provided in all securities through one or more of its 
Nasdaq Market Center MPIDs that represent more than 0.15% of 
Consolidated Volume during the month, and (iii) provides a daily 
average of at least 800,000 shares of non-displayed liquidity through 
one or more of its Nasdaq Market Center MPIDs through one or more of 
its Nasdaq Market Center MPIDs [sic] during the month.
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    \4\ Tape C securities are those that are listed on the Exchange, 
Tape A securities are those that are listed on NYSE, and Tape B 
securities are those that are listed on exchanges other than Nasdaq 
or NYSE.
    \5\ Rule 7018(a) defines ``Consolidated Volume'' as the total 
consolidated volume reported to all consolidated transaction 
reporting plans by all exchanges and trade reporting facilities 
during a month in equity securities, excluding executed orders with 
a size of less than one round lot. For purposes of calculating 
Consolidated Volume and the extent of a member's trading activity 
the date of the annual reconstitution of the Russell Investments 
Indexes shall be excluded from both total Consolidated Volume and 
the member's trading activity.
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Second Credit
    The Exchange is proposing to provide a new credit to members for 
displayed quotes/orders (other than Supplemental Orders or Designated 
Retail Orders) under Rule 7018(a), which will apply to securities of 
all three Tapes under Rule 7018(a)(1)-(3). Specifically, the Exchange 
is proposing to provide a $0.0026 per share executed to a member for 
displayed quotes/orders (other than Supplemental Orders or Designated 
Retail Orders) that provide liquidity if the member: (i) Has shares of 
liquidity provided in securities that are listed on exchanges other 
than NASDAQ or NYSE through one or more of its Nasdaq Market Center 
MPIDs that represents [sic] at least 800,000 shares a day on average 
during the month, and (ii) doubles the daily average share volume 
provided in securities that are listed on exchanges other than NASDAQ 
or NYSE through one or more of its Nasdaq Market Center MPIDs during 
the month versus the member's daily average share volume provided in 
securities that are listed on exchanges other than NASDAQ or NYSE in 
January 2017.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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First Credit
    The Exchange believes that the $0.0027 per share executed credit of 
the proposed credit tier is reasonable because it is consistent with 
other credits that the Exchange provides to members for displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) that provide liquidity. As a general principle, the Exchange 
chooses to offer credits to members in return for market improving 
behavior. As noted above, the Exchange provides credits ranging from 
$0.0015 per share executed to $0.00305 per share executed to members 
for displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders), and the Exchange applies progressively more 
stringent requirements in return for higher per share executed credits. 
Accordingly, the $0.0027 per share executed credit is reasonable.
    The proposed $0.0027 per share executed credit tier is an equitable 
allocation and is not unfairly discriminatory because it is similar to 
other credit tiers provided under Rule 7018(a). The proposed credit 
will be provided to members that not only

[[Page 13886]]

contribute to the Exchange by removing liquidity in all securities 
through one or more of its [sic] Nasdaq Market Center MPIDs that 
represent more than 0.40% of Consolidated Volume during the month, but 
also provide liquidity in all securities through one or more of its 
[sic] Nasdaq Market Center MPIDs that represent more than 0.15% of 
Consolidated Volume during the month, and maintain a daily average of 
at least 800,000 shares of non-displayed liquidity through one or more 
of its [sic] Nasdaq Market Center MPIDs during the month. Thus, the 
proposed criteria requires a significant level of market participation, 
by being both a remover and provider of liquidity, both displayed and 
non-displayed.
    The Exchange currently provides a $0.0027 per share executed credit 
to a member with shares of liquidity accessed in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent more than 
0.65% of Consolidated Volume during the month, and (ii) with shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent more than 0.10% of Consolidated 
Volume during the month. The proposed credit tier requires the member 
to access less liquidity and provide more liquidity, as measured by 
Consolidated Volume, but also requires the member to additionally 
maintain a significant level of non-displayed liquidity. Moreover, 
since a member achieving this credit tier will be both accessing and 
providing liquidity, the proposed credit tier will benefit other 
members by encouraging more liquidity on the Exchange, as well as 
increasing the likelihood that members [sic] resting limit orders may 
be accessed by members seeking to attain this credit tier. The Exchange 
seeks to encourage such behavior. As a consequence, the Exchange 
believes that the proposed credit tier is comparable to the existing 
credit and therefore an equitable allocation and is not unfairly 
discriminatory. Last, the Exchange believes the new credit is an 
equitable allocation and is not unfairly discriminatory because it is 
one of many possible means by which a member may qualify for a credit 
for displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) under Rule 7018(a).
Second Credit
    The Exchange believes that the $0.0026 per share executed credit of 
the proposed credit tier is reasonable because it is consistent with 
other credits that the Exchange provides to members for displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) that provide liquidity. As noted above, the Exchange provides 
credits ranging from $0.0015 per share executed to $0.00305 per share 
executed to members for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders), and the Exchange 
applies progressively more stringent requirements in return for higher 
per share executed credits. Accordingly, the $0.0026 per share executed 
credit is reasonable.
    The proposed $0.0026 per share executed credit tier is an equitable 
allocation and is not unfairly discriminatory because it is consistent 
with other credits provided under Rule 7018(a). The proposed credit 
will be provided to members that have shares of liquidity provided in 
securities that are listed on exchanges other than NASDAQ or NYSE 
through one or more of its [sic] Nasdaq Market Center MPIDs that 
represents at least 800,000 shares a day on average during the month 
and also doubles the daily average share volume provided in securities 
that are listed on exchanges other than NASDAQ or NYSE through one or 
more of its [sic] Nasdaq Market Center MPIDs during the month versus 
the member's daily average share volume provided in securities that are 
listed on exchanges other than NASDAQ or NYSE in January 2017. The 
Exchange notes that requiring a member to increase its participation in 
Tape B securities as measured by its daily average share volume 
compared to its daily average share volume in the month of January 2017 
will ensure that the member [sic] increasing its participation in the 
market in securities that are listed on exchanges other than NASDAQ or 
NYSE. The Exchange is also requiring the member provide a significant 
level of liquidity [sic] provided in securities that are listed on 
exchanges other than NASDAQ or NYSE through one or more of its Nasdaq 
Market Center MPIDs that represents at least 800,000 shares a day on 
average. The Exchange does not currently have a credit under Rule 
7018(a) that measures a member's eligibility for a credit based on 
activity compared to a prior month's activity; however, the Exchange 
does use a benchmark date against which performance is measured under 
the Nasdaq Growth Program.\8\ Last, the Exchange believes the new 
credit is an equitable allocation and is not unfairly discriminatory 
because it is one of many possible means by which a member may qualify 
for a credit for displayed quotes/orders (other than Supplemental 
Orders or Designated Retail Orders) under Rule 7018(a).
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    \8\ See the ``Growth Baseline'' of Rule 7014(j). The Exchange 
notes that other markets also apply similar benchmarking concepts. 
For example, Bats BZX Exchange, provides a credit of $0.0030 per 
share if the member increases its Total Consolidated Volume for 
adding liquidity by 0.15% or more in comparison to its volume in 
April 2016, and assesses a fee of $0.00295 per share if the member 
increases its Total Consolidated Volume for removing liquidity by 
0.05% or more in comparison to its July 2016 volume. Similarly, Bats 
EDGX Exchange pays a credit of $0.0032 per share if the member 
increases its Total Consolidated Volume for adding liquidity by 
0.10% or more in comparison to its volume in January 2017.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable.
    In such an environment, the Exchange must continually adjust its 
fees to remain competitive with other exchanges and with alternative 
trading systems that have been exempted from compliance with the 
statutory standards applicable to exchanges. Because competitors are 
free to modify their own fees in response, and because market 
participants may readily adjust their order routing practices, the 
Exchange believes that the degree to which fee changes in this market 
may impose any burden on competition is extremely limited.
    In this instance, the proposed new credits provided to a member for 
execution of securities of each of the three Tapes do not impose a 
burden on competition because the Exchange's execution services are 
completely voluntary and subject to extensive competition both from 
other exchanges and from off-exchange venues. The proposed changes are 
designed to reward market-improving behavior by providing two new 
credit tiers based on various measures of such behavior, which may 
encourage other market venues to provide similar credits to improve 
their market quality. Thus, the Exchange does not believe that the 
proposed changes 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 13887]]

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.\9\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2017-026 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-2017-026. 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-2017-026, and should 
be submitted on or before April 5, 2017.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05081 Filed 3-14-17; 8:45 am]
 BILLING CODE 8011-01-P
13884 Federal Register / Vol. 82, No. 49 / Wednesday, March 15, 2017 / Notices

plausible market conditions.30 FICC invoking a CCLF Event and pursuant to Commission, 100 F Street NE.,
believes that the proposal would be GSD Rule 3 Section 6, Netting Members Washington, DC 20549.
consistent with Commission Rule would be required to participate in such All submissions should refer to File
17Ad–22(e)(7)(i) because CCLF would tests. As a result, FICC believes that its Number SR–FICC–2017–802. This file
be sized based on the peak liquidity testing of its capability to invoke a CCLF number should be included on the
need that would be generated by the MRA would be consistent with subject line if email is used. To help the
default of its largest participant family Commission Rule 17Ad–22(e)(7)(v). Commission process and review your
(its Historical Cover 1 Liquidity comments more efficiently, please use
Requirement), plus an additional III. Date of Effectiveness of the Advance
Notice and Timing for Commission only one method. The Commission will
Liquidity Buffer, which would help post all comments on the Commission’s
FICC maintain sufficient liquid Action
Internet Web site (http://www.sec.gov/
resources to settle the cash obligations The proposed change may be rules/sro.shtml). Copies of the
of an Affiliated Family that would implemented if the Commission does submission, all subsequent
generate the largest aggregate payment not object to the proposed change amendments, all written statements
obligation for FICC in extreme but within 60 days of the later of (i) the date with respect to the Advance Notice that
plausible market conditions. the proposed change was filed with the are filed with the Commission, and all
Commission Rule 17Ad–22(e)(7)(ii) Commission or (ii) the date that any written communications relating to the
will require FICC to hold qualifying additional information requested by the Advance Notice between the
liquid resources sufficient to satisfy Commission is received. The clearing Commission and any person, other than
payment obligations owed to clearing agency shall not implement the those that may be withheld from the
members.31 FICC believes that the proposed change if the Commission has public in accordance with the
proposed rule change would be any objection to the proposed change. provisions of 5 U.S.C. 552, will be
consistent with Commission Rule The Commission may extend the available for Web site viewing and
17Ad–22(e)(7)(ii) because the CCLF period for review by an additional 60 printing in the Commission’s Public
MRA would be a committed days if the proposed change raises novel Reference Room, 100 F Street NE.,
arrangement and all CCLF Transactions or complex issues, subject to the Washington, DC 20549, on official
entered into pursuant the CCLF MRA Commission providing the clearing business days between the hours of
would be readily available and the agency with prompt written notice of 10:00 a.m. and 3:00 p.m. Copies of the
related assets would be convertible into the extension. A proposed change may filing also will be available for
cash in order to settle cash obligations be implemented in less than 60 days inspection and copying at the principal
owed to non-defaulting Netting from the date the Advance Notice is office of FICC and on DTCC’s Web site
Members. filed, or the date further information (http://dtcc.com/legal/sec-rule-
Commission Rule 17Ad–22(e)(7)(iv) requested by the Commission is filings.aspx). All comments received
will require FICC to undertake due received, if the Commission notifies the will be posted without change; the
diligence that confirms that it has a clearing agency in writing that it does Commission does not edit personal
reasonable basis to believe each of its not object to the proposed change and identifying information from
liquidity providers has: (a) Sufficient authorizes the clearing agency to submissions. You should submit only
information to understand and manage implement the proposed change on an information that you wish to make
the liquidity provider’s liquidity risks; earlier date, subject to any conditions available publicly. All submissions
and (b) the capacity to perform as imposed by the Commission. should refer to File Number SR–FICC–
required under its commitments to The clearing agency shall post notice 2017–802 and should be submitted on
provide liquidity.32 As described above, on its Web site of proposed changes that or before March 30, 2017.
on a quarterly basis, FICC would are implemented.
conduct due diligence to assess each The proposal shall not take effect By the Commission.
Netting Member’s ability to meet its until all regulatory actions required Eduardo A. Aleman,
Individual Total Amount. This due with respect to the proposal are Assistant Secretary.
diligence would include a review of all completed. [FR Doc. 2017–05092 Filed 3–14–17; 8:45 am]
information that the Netting Member BILLING CODE 8011–01–P
has provided FICC in connection with IV. Solicitation of Comments
its ongoing reporting requirements Interested persons are invited to
pursuant to the GSD Rules as well as a submit written data, views, and SECURITIES AND EXCHANGE
review of other publicly available arguments concerning the foregoing, COMMISSION
information. As a result, FICC believes including whether the Advance Notice
[Release No. 34–80192; File No. SR–
that its due diligence of Netting is consistent with the Clearing NASDAQ–2017–026]
Members would be consistent with Supervision Act. Comments may be
Commission Rule 17Ad–22(e)(7)(iv). submitted by any of the following Self-Regulatory Organizations; The
Additionally, Commission Rule methods: NASDAQ Stock Market LLC; Notice of
17Ad–22(e)(7)(v) will require FICC to Filing and Immediate Effectiveness of
Electronic Comments
maintain and test with each liquidity Proposed Rule Change To Amend Rule
provider, to the extent practicable, • Use the Commission’s Internet 7018(a) To Adopt Two Credits
asabaliauskas on DSK3SPTVN1PROD with NOTICES2

FICC’s procedures and operational comment form (http://www.sec.gov/
capacity for accessing its relevant liquid rules/sro.shtml); or March 9, 2017.
resources.33 As described above, FICC • Send an email to rule-comments@ Pursuant to Section 19(b)(1) of the
would test its operational procedures for sec.gov. Please include File Number SR– Securities Exchange Act of 1934
FICC–2017–802 on the subject line. (‘‘Act’’),1 and Rule 19b–4 thereunder,2
30 See 17 CFR 240.17Ad–22(e)(7)(i). notice is hereby given that on March 1,
31 See
Paper Comments
17 CFR 240.17Ad–22(e)(7)(ii).
32 See 17 CFR 240.17Ad–22(e)(7)(iv). • Send paper comments in triplicate 1 15 U.S.C. 78s(b)(1).
33 See 17 CFR 240.17Ad–22(e)(7)(v). to Secretary, Securities and Exchange 2 17 CFR 240.19b–4.

VerDate Sep<11>2014 18:19 Mar 14, 2017 Jkt 241001 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 E:\FR\FM\15MRN1.SGM 15MRN1
Document Created: 2017-03-15 06:04:25
Document Modified: 2017-03-15 06:04:25
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 13884