82 FR 18323 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Rule 7014(f) To Amend the Designated Liquidity Provider Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 73 (April 18, 2017)
Federal Register Volume 82, Issue 73 (April 18, 2017)
| Page Range | 18323-18326 | |
| FR Document | 2017-07754 |
[Federal Register Volume 82, Number 73 (Tuesday, April 18, 2017)] [Notices] [Pages 18323-18326] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-07754] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80437; File No. SR-NASDAQ-2017-035] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Rule 7014(f) To Amend the Designated Liquidity Provider Program April 12, 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 31, 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 Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's transaction fees at Rule 7014(f) to amend the Designated Liquidity Provider (``DLP'') Program (``Program''). While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on April 3, 2017. 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 DLP Program in Rule 7014(f) to eliminate the rebates that are paid pursuant to the New Product Support Incentives (``NPSI''). With the elimination of the NPSI, the Exchange also proposes to amend one of the ``Basic Rebates'' to increase that rebate from $0.0047 per executed share to $0.0070 per executed share. Nasdaq also proposes to amend the manner in which the average daily volume (``ADV'') of an exchange-traded product (``ETP'') is calculated for purposes of determining a DLP's eligibility for the Basic Rebate. The DLP Program is designed to provide incentives to market makers to make markets in certain ETPs. To achieve this goal, Nasdaq provides credits to a DLP when executing a Qualified Security. As set forth in the Rule, a DLP is a registered Nasdaq market maker for a Qualified Security that has committed to maintain minimum performance standards.\3\ A Qualified Security is defined as an exchange-traded product listed on Nasdaq pursuant to Nasdaq Rules 5705 (Exchange Traded Funds: Portfolio Depository Receipts and Index Fund Shares), 5710 (Securities Linked to the Performance of Indexes and Commodities, Including Currencies), 5720 (Trust Issued Receipts), 5735 (Managed Fund Shares), or 5745 (NextShares), and it must have at least one DLP. --------------------------------------------------------------------------- \3\ The Rule also provides that a DLP shall be selected by Nasdaq based on factors including, but not limited to, experience with making markets in exchange-traded products, adequacy of capital, willingness to promote Nasdaq as a marketplace, issuer preference, operational capacity, support personnel, and history of adherence to Nasdaq rules and securities laws. Nasdaq may limit the number of DLPs in a security, or modify a previously established limit, upon prior written notice to members. See Rule 7014(f)(2). --------------------------------------------------------------------------- Currently, a DLP may be eligible for three different kinds of rebates under the Program. First, a DLP will qualify for a ``Basic Rebate'' for adding shares of displayed liquidity in the ETP if the DLP is at the National Best Bid and Offer (``NBBO'') at least 20% of the time on average in any given month in a particular assigned ETP. The Basic Rebates vary based on the ETP's ADV in a given month. Specifically, a DLP will receive: (i) A rebate of $0.0047 per executed share of displayed liquidity in an ETP that has less than 500,000 ADV during the month; (ii) a rebate of $0.0042 per executed share of displayed liquidity in an ETP that has between 500,000 and 5 million ADV during the month; and (iii) a rebate of $0.0036 per executed share of displayed liquidity in an ETP that has greater than 5 million ADV during the month. The Basic Rebate will be paid in lieu of other rebates or fees provided under Rules 7018 and 7014. The second rebate is the NPSI rebate. Like the Basic Rebate, the NPSI rebate will be paid in lieu of other rebates or fees provided under Rules 7018 and 7014, including the Basic Rebate. A DLP will qualify for the NPSI rebate for adding shares of displayed liquidity in the ETP if the DLP is at the NBBO at least 20% of the time in the assigned ETP in any given month. The ETP itself must have a three month ADV of less than 500,000, and the ETP must be less than 36 months old. Assuming the ETP meets the NPSI volume criteria, a rebate of $0.0070 per executed share of displayed liquidity will be paid to DLPs that are assigned to ETPs that are 0-12 months from the ETP's product inception date; a rebate of $0.0065 per executed share of displayed liquidity for ETPs that are 12 to 24 months from the [[Page 18324]] ETP's product inception date, and a rebate of $0.0055 per executed share of displayed liquidity for ETPs that are 24 to 36 months from the ETP's product inception date. For purposes of calculating the number of months under the rule, the first partial month an ETP is launched will count as one month. The third rebate is the Additional Tape C ETP Incentives. This rebate will be paid in addition to other rebates or fees provided under Rules 7018 and 7014, including the Basic Rebate and the NPSI. In order to qualify for the Additional Tape C rebate, the DLP must add displayed liquidity in a Tape C ETP that is listed on Nasdaq pursuant to Nasdaq Rules 5705, 5710, 5720, 5735, or 5745.\4\ The average time the DLP is at the NBBO for each assigned ETP must average at least 20%, and the average liquidity provided by the DLP for each assigned ETP must average at least 5% of the liquidity provided on Nasdaq in the respective ETP. The amount of the rebate varies according to the minimum monthly average number of ETPs to which a DLP is assigned. A DLP that has a minimum monthly average number of 10 assigned ETPs will receive a rebate of $0.0003 per executed share; a DLP that has a minimum monthly average number of 25 assigned ETPs will receive a rebate of $0.0004 per executed share; and a DLP that has a minimum monthly average number of 50 assigned ETPs will receive a rebate of $0.0005 per executed share.\5\ --------------------------------------------------------------------------- \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\ Additionally, if a current DLP has less than 10 DLP assignments, but increases the number of ETPs for which it is a DLP by 100%, the DLP will receive an incremental additional Tape C ETP rebate of $0.0001. A DLP receiving its first assignment will count as a 100% increase. This incremental rebate is only available for the first 100% increase and thus is not available for subsequent increases of 100%. --------------------------------------------------------------------------- Currently, only an ETP with a product inception date of 36 months or less is eligible for the NPSI Rebate. Nasdaq has determined that eliminating the time-based eligibility requirement may increase the number of ETPs that may be eligible for a rebate under the DLP Program, and would therefore incentivize the DLPs that are assigned to those ETPs to qualify for a rebate by, among other things, meeting the applicable quoting requirements. This is consistent with the purpose of the DLP Program and may improve the market quality of additional Nasdaq-listed ETPs. Once the time-based eligibility requirement is removed from the NPSI, the requirements for qualifying for the Basic Rebate tier for ETPs with an ADV of less than 500,000 are virtually identical to the requirements of qualifying for the NPSI rebate. Specifically, both the NPSI and the lowest level of the Basic Rebate tier have a volume requirement of less than 500,000 ADV, and both rebates require the DLP to be at the NBBO at least 20% of the time on average in the assigned ETP. Given the similarities between the NPSI and the lowest tier of the Basic Rebate, and in the interest of simplifying the operation of the Program, the Exchange has therefore determined to eliminate the NPSI rebate in its entirety.\6\ --------------------------------------------------------------------------- \6\ In eliminating the NPSI rebate, the Additional Tape C ETP Incentives rebate will be re-numbered as Rule 7014(f)(5)(B). --------------------------------------------------------------------------- Currently, a DLP will receive a Basic Rebate of $0.0047 per executed share for an ETP with a monthly ADV of less than 500,000 if the DLP is at the NBBO at least 20% of the time on average in the assigned ETP. The Exchange is also proposing to amend this tier to increase the rebate from $0.0047 per executed share to $0.0070 per executed share so that DLPs that are currently receiving the NPSI rebate will continue to receive the same rebate going forward. Nasdaq believes that it is appropriate to increase the Basic Rebate for an ETP with a monthly ADV of less than 500,000 to $0.0070 per executed share, because DLPs that currently receive an NPSI rebate of $0.0070 per executed share will continue to receive the same rebate even with the elimination of the NPSI rebate. Nasdaq believes that the proposed $0.0070 per executed share rebate is proportionate to the requirements for the Basic Rebate while acting as a sufficient incentive to DLPs in lower-volume ETPs to increase their quoting and trading activity in those securities. Nasdaq believes it is appropriate to raise the Basic Rebate for an ETP with a monthly ADV of less than 500,000, and not for other Basic Rebate tiers, because DLPs need significantly more incentives to quote and trade lower-volume ETPs than higher-volume ETPs. Finally, Nasdaq is changing the measurement used to calculate an ETP's ADV for purposes of determining a DLP's eligibility for the Basic Rebate. Currently, a DLP will qualify for the Basic Rebate if the ETP's ADV meets the applicable volume threshold, as measured in the same month in which the rebate is being paid. Nasdaq proposes to determine a DLP's eligibility for the Basic Rebate by using the ETP's ADV in the month prior to which the rebate is being paid. Nasdaq believes that adopting a prior month ADV measurement provides greater transparency and certainty to a DLP in determining the Basic Rebate than the current month measurement. Nasdaq is proposing to apply this change to all tiers of the Basic Rebate, as it believes that the basis for this change applies equally to DLPs in all of the Basic Rebate tiers. Nasdaq does not believe that DLPs will significantly alter their trading activity as a result of this change, since the relevant measurement is the ADV of the ETP to which the DLP is assigned, not the ADV of the DLP. 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 any facility, and is not designed to permit unfair 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 Exchange believes that it is reasonable to eliminate the NPSI rebate and to correspondingly increase the amount of the Basic Rebate tier for an ETP with a monthly ADV of less than 500,000. Once the time- based eligibility requirement is removed from the NPSI, the requirements for qualifying for the Basic Rebate tier for ETPs with an ADV of less than 500,000 are virtually identical to the requirements of qualifying for the NPSI rebate. Given the similarities between the NPSI and the lowest tier of the Basic Rebate, and in the interest of simplifying the operation of the Program, the Exchange believes it is reasonable to eliminate the NPSI Rebate in its entirety and concurrently re-number the Additional Tape C ETP Incentives rebate. By eliminating the NPSI rebate and raising the amount of the Basic Rebate for ETPs with an ADV of less than 500,000 to $0.0070 per executed share, Nasdaq will increase the number of ETPs that may be eligible for this rebate, while ensuring that DLPs that currently receive an NPSI rebate of $0.0070 per executed share will continue to have the same opportunity to receive that rebate amount even with the elimination of the NPSI rebate. Increasing the number of ETPs that may be eligible for the $0.0070 rebate will incentivize the DLPs that are assigned to those ETPs to qualify for the rebate by, among other things, meeting the applicable quoting requirements. This is [[Page 18325]] consistent with the purpose of the DLP Program and may improve the market quality of additional Nasdaq-listed ETPs. Even with the NPSI's time-based requirement removed, Nasdaq believes that the proposed $0.0070 per executed share rebate is proportionate to the requirements for the Basic Rebate while acting as a sufficient incentive to DLPs in lower-volume ETPs to increase their quoting and trading activity in those securities. Nasdaq believes it is reasonable to change the measurement used to calculate an ETP's ADV for purposes of determining a DLP's eligibility for the Basic Rebate. Nasdaq believes that adopting a prior month ADV measurement provides greater transparency and certainty to a DLP in determining the Basic Rebate than the current month measurement. Nasdaq is proposing to apply this change to all tiers of the Basic Rebate, as it believes that the basis for this change applies equally to DLPs in all of the Basic Rebate tiers. Nasdaq believes that eliminating the NPSI rebate, and increasing the amount of the Basic Rebate tier for an ETP with a monthly ADV of less than 500,000, is equitable and not unfairly discriminatory. In eliminating the NPSI Rebate and raising the amount of the Basic Rebate for ETPs with an ADV of less than 500,000 to $0.0070 per executed share, all DLPs that currently qualify [sic] NPSI Rebate will continue to have the opportunity to qualify for the same $0.0070 rebate that they currently receive. By raising the amount of the Basic Rebate for ETPs with an ADV of less than 500,000 to $0.0070 per executed share, DLPs that are assigned to such ETPs that are not currently receiving the $0.0070 per executed share rebate will now be eligible to receive this rebate. This will incentivize the DLPs that are assigned to such ETPs to qualify for this rebate by, among other things, meeting the applicable quoting requirements. Moreover, Nasdaq believes it is appropriate to raise the Basic Rebate for an ETP with a monthly ADV of less than 500,000, and not for other Basic Rebate tiers, because DLPs need significantly more incentives to quote and trade lower-volume ETPs than higher-volume ETPs. For these reasons, Nasdaq believes it is reasonable to raise the Basic Rebate for low-volume ETPs in this manner even though the NPSI's time-based requirement will no longer apply. Nasdaq believes that changing the measurement used to calculate an ETP's ADV for purposes of determining a DLP's eligibility for the Basic Rebate is equitable and not unfairly discriminatory. Nasdaq is proposing to apply this change to all tiers of the Basic Rebate, as it believes that the basis for this change (providing greater transparency and certainty to a DLP in determining the rebate amount) applies equally to DLPs in all of the Basic Rebate tiers. Nasdaq does not believe that DLPs will significantly alter their trading activity as a result of this change, since the relevant measurement is the ADV of the ETP to which the DLP is assigned, not the ADV of the DLP. In addition, this standard will apply to all DLPs that would otherwise qualify for the Basic Rebate. 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 and rebates 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 rebates 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. Here, increasing the Basic Rebate for ETPs with an ADV of less than 500,000 to $0.0070 per executed share, eliminating the NPSI rebate, and changing the measurement of an ETP's ADV for purposes of the Basic Rebate 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. With these proposed changes, all similarly-situated members are equally capable of qualifying for the proposed Basic Rebate for ETPs with an ADV of less than 500,000 if they choose to meet the requirements of the Program and the Basic Rebate, and the same rebate will be paid to all members that qualify for it. In addition, members will continue to have opportunities to qualify for the Tape C Rebate under the Program. Nasdaq believes that raising the Basic Rebate for an ETP with a monthly ADV of less than 500,000, and not for other Basic Rebate tiers, does not constitute a burden on competition not necessary or appropriate, because DLPs need significantly more incentives to quote and trade lower-volume ETPs than higher-volume ETPs. Eliminating the NPSI Rebate and increasing the proposed Basic Rebate for ETPs with an ADV of less than 500,000 to $0.0070 per executed share will expand the scope of ETPs, and the DLPs that are assigned to them, that are eligible for this rebate, while helping ensure that DLPs that currently qualify for the $0.0070 rebate under the NPSI will continue to qualify for this amount. This change will therefore incentivize the DLPs that are assigned to ETPs with an ADV of less than 500,000, and which do not currently qualify for the NPSI Rebate, to qualify for the rebate by, among other things, meeting the applicable quoting requirements, which may improve the market quality of additional Nasdaq-listed ETPs. Given the competitive nature of the market for listing and trading ETPs, these changes which [sic] may encourage other market venues to make similar changes 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. 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\ 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. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- [[Page 18326]] IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal 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 No. SR-NASDAQ-2017-035 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 No. SR-NASDAQ-2017-035. 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 will also 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 No. SR-NASDAQ-2017-035 and should be submitted on or before May 9, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\10\ --------------------------------------------------------------------------- \10\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-07754 Filed 4-17-17; 8:45 am] BILLING CODE 8011-01-P
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rules/sro.shtml). Copies of the solicit comments on the proposed rule minimum performance standards.3 A
submission, all subsequent change from interested persons. Qualified Security is defined as an
amendments, all written statements exchange-traded product listed on
I. Self-Regulatory Organization’s
with respect to the proposed rule Nasdaq pursuant to Nasdaq Rules 5705
Statement of the Terms of Substance of
change that are filed with the (Exchange Traded Funds: Portfolio
the Proposed Rule Change
Commission, and all written Depository Receipts and Index Fund
communications relating to the The Exchange proposes to amend the Shares), 5710 (Securities Linked to the
proposed rule change between the Exchange’s transaction fees at Rule Performance of Indexes and
Commission and any person, other than 7014(f) to amend the Designated Commodities, Including Currencies),
those that may be withheld from the Liquidity Provider (‘‘DLP’’) Program 5720 (Trust Issued Receipts), 5735
public in accordance with the (‘‘Program’’). (Managed Fund Shares), or 5745
provisions of 5 U.S.C. 552, will be While these amendments are effective (NextShares), and it must have at least
available for Web site viewing and upon filing, the Exchange has one DLP.
printing in the Commission’s Public designated the proposed amendments to Currently, a DLP may be eligible for
Reference Room, 100 F Street NE., be operative on April 3, 2017. three different kinds of rebates under
Washington, DC 20549 on official The text of the proposed rule change the Program. First, a DLP will qualify for
business days between the hours of is available on the Exchange’s Web site a ‘‘Basic Rebate’’ for adding shares of
10:00 a.m. and 3:00 p.m. Copies of the at http://nasdaq.cchwallstreet.com, at displayed liquidity in the ETP if the
filing also will be available for the principal office of the Exchange, and DLP is at the National Best Bid and
inspection and copying at the principal at the Commission’s Public Reference Offer (‘‘NBBO’’) at least 20% of the time
office of the Exchange. All comments Room. on average in any given month in a
received will be posted without change; particular assigned ETP. The Basic
the Commission does not edit personal II. Self-Regulatory Organization’s Rebates vary based on the ETP’s ADV in
identifying information from Statement of the Purpose of, and a given month. Specifically, a DLP will
submissions. You should submit only Statutory Basis for, the Proposed Rule receive: (i) A rebate of $0.0047 per
information that you wish to make Change executed share of displayed liquidity in
available publicly. All submissions In its filing with the Commission, the an ETP that has less than 500,000 ADV
should refer to File Number SR–CBOE– Exchange included statements during the month; (ii) a rebate of
2017–031 and should be submitted on concerning the purpose of and basis for $0.0042 per executed share of displayed
or before May 9, 2017. the proposed rule change and discussed liquidity in an ETP that has between
For the Commission, by the Division of any comments it received on the 500,000 and 5 million ADV during the
Trading and Markets, pursuant to delegated proposed rule change. The text of these month; and (iii) a rebate of $0.0036 per
authority.20 statements may be examined at the executed share of displayed liquidity in
Eduardo A. Aleman, places specified in Item IV below. The an ETP that has greater than 5 million
Assistant Secretary. Exchange has prepared summaries, set ADV during the month. The Basic
[FR Doc. 2017–07751 Filed 4–17–17; 8:45 am] forth in sections A, B, and C below, of Rebate will be paid in lieu of other
the most significant aspects of such rebates or fees provided under Rules
BILLING CODE 8011–01–P
statements. 7018 and 7014.
The second rebate is the NPSI rebate.
A. Self-Regulatory Organization’s Like the Basic Rebate, the NPSI rebate
SECURITIES AND EXCHANGE Statement of the Purpose of, and
COMMISSION will be paid in lieu of other rebates or
Statutory Basis for, the Proposed Rule fees provided under Rules 7018 and
[Release No. 34–80437; File No. SR– Change 7014, including the Basic Rebate. A DLP
NASDAQ–2017–035] will qualify for the NPSI rebate for
1. Purpose
adding shares of displayed liquidity in
Self-Regulatory Organizations; The The purpose of the proposed rule the ETP if the DLP is at the NBBO at
NASDAQ Stock Market LLC; Notice of change is to amend the DLP Program in least 20% of the time in the assigned
Filing and Immediate Effectiveness of Rule 7014(f) to eliminate the rebates that ETP in any given month. The ETP itself
Proposed Rule Change To Amend the are paid pursuant to the New Product must have a three month ADV of less
Exchange’s Transaction Fees at Rule Support Incentives (‘‘NPSI’’). With the than 500,000, and the ETP must be less
7014(f) To Amend the Designated elimination of the NPSI, the Exchange than 36 months old. Assuming the ETP
Liquidity Provider Program also proposes to amend one of the meets the NPSI volume criteria, a rebate
April 12, 2017. ‘‘Basic Rebates’’ to increase that rebate of $0.0070 per executed share of
Pursuant to Section 19(b)(1) of the from $0.0047 per executed share to displayed liquidity will be paid to DLPs
Securities Exchange Act of 1934 $0.0070 per executed share. Nasdaq also that are assigned to ETPs that are 0–12
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 proposes to amend the manner in which months from the ETP’s product
notice is hereby given that on March 31, the average daily volume (‘‘ADV’’) of an inception date; a rebate of $0.0065 per
2017, The NASDAQ Stock Market LLC exchange-traded product (‘‘ETP’’) is executed share of displayed liquidity for
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the calculated for purposes of determining a ETPs that are 12 to 24 months from the
Securities and Exchange Commission DLP’s eligibility for the Basic Rebate.
(‘‘SEC’’ or ‘‘Commission’’) the proposed The DLP Program is designed to 3 The Rule also provides that a DLP shall be
provide incentives to market makers to selected by Nasdaq based on factors including, but
sradovich on DSK3GMQ082PROD with NOTICES
rule change as described in Items I, II, not limited to, experience with making markets in
and III, below, which Items have been make markets in certain ETPs. To exchange-traded products, adequacy of capital,
prepared by the Exchange. The achieve this goal, Nasdaq provides willingness to promote Nasdaq as a marketplace,
Commission is publishing this notice to credits to a DLP when executing a issuer preference, operational capacity, support
Qualified Security. As set forth in the personnel, and history of adherence to Nasdaq rules
and securities laws. Nasdaq may limit the number
20 17 CFR 200.30–3(a)(12). Rule, a DLP is a registered Nasdaq of DLPs in a security, or modify a previously
1 15 U.S.C. 78s(b)(1). market maker for a Qualified Security established limit, upon prior written notice to
2 17 CFR 240.19b–4. that has committed to maintain members. See Rule 7014(f)(2).
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consistent with the purpose of the DLP discriminatory. Nasdaq is proposing to qualify for the Tape C Rebate under the
Program and may improve the market apply this change to all tiers of the Basic Program.
quality of additional Nasdaq-listed Rebate, as it believes that the basis for Nasdaq believes that raising the Basic
ETPs. Even with the NPSI’s time-based this change (providing greater Rebate for an ETP with a monthly ADV
requirement removed, Nasdaq believes transparency and certainty to a DLP in of less than 500,000, and not for other
that the proposed $0.0070 per executed determining the rebate amount) applies Basic Rebate tiers, does not constitute a
share rebate is proportionate to the equally to DLPs in all of the Basic burden on competition not necessary or
requirements for the Basic Rebate while Rebate tiers. Nasdaq does not believe appropriate, because DLPs need
acting as a sufficient incentive to DLPs that DLPs will significantly alter their significantly more incentives to quote
in lower-volume ETPs to increase their trading activity as a result of this and trade lower-volume ETPs than
quoting and trading activity in those change, since the relevant measurement higher-volume ETPs. Eliminating the
securities. is the ADV of the ETP to which the DLP
Nasdaq believes it is reasonable to NPSI Rebate and increasing the
is assigned, not the ADV of the DLP. In proposed Basic Rebate for ETPs with an
change the measurement used to addition, this standard will apply to all
calculate an ETP’s ADV for purposes of ADV of less than 500,000 to $0.0070 per
DLPs that would otherwise qualify for executed share will expand the scope of
determining a DLP’s eligibility for the the Basic Rebate.
Basic Rebate. Nasdaq believes that ETPs, and the DLPs that are assigned to
adopting a prior month ADV B. Self-Regulatory Organization’s them, that are eligible for this rebate,
measurement provides greater Statement on Burden on Competition while helping ensure that DLPs that
transparency and certainty to a DLP in currently qualify for the $0.0070 rebate
The Exchange does not believe that under the NPSI will continue to qualify
determining the Basic Rebate than the the proposed rule change will impose
current month measurement. Nasdaq is for this amount. This change will
any burden on competition not therefore incentivize the DLPs that are
proposing to apply this change to all necessary or appropriate in furtherance
tiers of the Basic Rebate, as it believes assigned to ETPs with an ADV of less
of the purposes of the Act. In terms of than 500,000, and which do not
that the basis for this change applies inter-market competition, the Exchange
equally to DLPs in all of the Basic currently qualify for the NPSI Rebate, to
notes that it operates in a highly qualify for the rebate by, among other
Rebate tiers. competitive market in which market
Nasdaq believes that eliminating the things, meeting the applicable quoting
participants can readily favor competing requirements, which may improve the
NPSI rebate, and increasing the amount
venues if they deem fee levels at a market quality of additional Nasdaq-
of the Basic Rebate tier for an ETP with
particular venue to be excessive, or listed ETPs. Given the competitive
a monthly ADV of less than 500,000, is
rebate opportunities available at other nature of the market for listing and
equitable and not unfairly
venues to be more favorable. In such an trading ETPs, these changes which [sic]
discriminatory. In eliminating the NPSI
environment, the Exchange must may encourage other market venues to
Rebate and raising the amount of the
continually adjust its fees and rebates to make similar changes to improve their
Basic Rebate for ETPs with an ADV of
remain competitive with other market quality. Thus, the Exchange does
less than 500,000 to $0.0070 per
exchanges and with alternative trading not believe that the proposed changes
executed share, all DLPs that currently
qualify [sic] NPSI Rebate will continue systems that have been exempted from will impose any burden on competition,
to have the opportunity to qualify for compliance with the statutory standards but may rather promote competition.
the same $0.0070 rebate that they applicable to exchanges. Because
currently receive. By raising the amount competitors are free to modify their own C. Self-Regulatory Organization’s
of the Basic Rebate for ETPs with an fees and rebates in response, and Statement on Comments on the
ADV of less than 500,000 to $0.0070 per because market participants may readily Proposed Rule Change Received From
executed share, DLPs that are assigned adjust their order routing practices, the Members, Participants, or Others
to such ETPs that are not currently Exchange believes that the degree to
which fee changes in this market may No written comments were either
receiving the $0.0070 per executed solicited or received.
share rebate will now be eligible to impose any burden on competition is
receive this rebate. This will incentivize extremely limited. III. Date of Effectiveness of the
the DLPs that are assigned to such ETPs Here, increasing the Basic Rebate for Proposed Rule Change and Timing for
to qualify for this rebate by, among other ETPs with an ADV of less than 500,000 Commission Action
things, meeting the applicable quoting to $0.0070 per executed share,
requirements. Moreover, Nasdaq eliminating the NPSI rebate, and The foregoing rule change has become
believes it is appropriate to raise the changing the measurement of an ETP’s effective pursuant to Section
Basic Rebate for an ETP with a monthly ADV for purposes of the Basic Rebate do 19(b)(3)(A)(ii) of the Act.9 At any time
ADV of less than 500,000, and not for not impose a burden on competition within 60 days of the filing of the
other Basic Rebate tiers, because DLPs because the Exchange’s execution proposed rule change, the Commission
need significantly more incentives to services are completely voluntary and summarily may temporarily suspend
quote and trade lower-volume ETPs subject to extensive competition both such rule change if it appears to the
than higher-volume ETPs. For these from other exchanges and from off- Commission that such action is: (i)
reasons, Nasdaq believes it is reasonable exchange venues. With these proposed Necessary or appropriate in the public
to raise the Basic Rebate for low-volume changes, all similarly-situated members interest; (ii) for the protection of
are equally capable of qualifying for the investors; or (iii) otherwise in
sradovich on DSK3GMQ082PROD with NOTICES
ETPs in this manner even though the
NPSI’s time-based requirement will no proposed Basic Rebate for ETPs with an furtherance of the purposes of the Act.
longer apply. ADV of less than 500,000 if they choose If the Commission takes such action, the
Nasdaq believes that changing the to meet the requirements of the Program Commission shall institute proceedings
measurement used to calculate an ETP’s and the Basic Rebate, and the same to determine whether the proposed rule
ADV for purposes of determining a rebate will be paid to all members that should be approved or disapproved.
DLP’s eligibility for the Basic Rebate is qualify for it. In addition, members will
equitable and not unfairly continue to have opportunities to 9 15 U.S.C. 78s(b)(3)(A)(ii).
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![18326 Federal Register / Vol. 82, No. 73 / Tuesday, April 18, 2017 / Notices
IV. Solicitation of Comments For the Commission, by the Division of of the most significant parts of such
Trading and Markets, pursuant to delegated statements.
Interested persons are invited to authority.10
submit written data, views, and Eduardo A. Aleman, A. Self-Regulatory Organization’s
arguments concerning the foregoing, Assistant Secretary.
Statement of the Purpose of, and the
including whether the proposal is Statutory Basis for, the Proposed Rule
[FR Doc. 2017–07754 Filed 4–17–17; 8:45 am]
consistent with the Act. Comments may Change
BILLING CODE 8011–01–P
be submitted by any of the following 1. Purpose
methods:
SECURITIES AND EXCHANGE The purpose of this filing is to amend
Electronic Comments COMMISSION the Fee Schedule effective April 3, 2017.
Specifically, the Exchange proposes to
• Use the Commission’s Internet [Release No. 34–80441; File No. SR– adjust certain fees and to modify certain
comment form (http://www.sec.gov/ NYSEARCA–2017–35] incentives and qualifications by
rules/sro.shtml); or broadening the base of order flow and
Self-Regulatory Organizations; NYSE
• Send an email to rule-comments@ Arca, Inc.; Notice of Filing and
trading activity to make the different
sec.gov. Please include File No. SR– qualifications more achievable to a
Immediate Effectiveness of Proposed
NASDAQ–2017–035 on the subject line. variety of market participants.
Rule Change Amending the NYSE Arca
Options Fee Schedule Currently, the Exchange charges all
Paper Comments
participants a fee for orders that are
• Send paper comments in triplicate April 12, 2017. executed by taking liquidity from the
to Secretary, Securities and Exchange Pursuant to Section 19(b)(1) 1 of the disseminated market (‘‘Take Liquidity
Commission, 100 F Street NE., Securities Exchange Act of 1934 (the Fee,’’ or ‘‘Take Fee’’), and offers credits
Washington, DC 20549–1090. ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 (or reduced fees) for executions
notice is hereby given that, on April 3, resulting from posting trading interest
All submissions should refer to File No. 2017, NYSE Arca, Inc. (the ‘‘Exchange’’ that is included in the disseminated
SR–NASDAQ–2017–035. This file or ‘‘NYSE Arca’’) filed with the market (‘‘Post Liquidity’’ credit). For
number should be included on the Securities and Exchange Commission non-Customers, the Exchange currently
subject line if email is used. To help the (the ‘‘Commission’’) the proposed rule charges a per contract Take Fee of $1.08
Commission process and review your change as described in Items I, II, and for executions in non-Penny pilot
comments more efficiently, please use III below, which Items have been issues.4 The Exchange proposes to
only one method. The Commission will prepared by the self-regulatory increase this Take Fee to $1.10 per
post all comments on the Commission’s organization. The Commission is contract, which is within the range of
Internet Web site (http://www.sec.gov/ publishing this notice to solicit fees charged by competing option
rules/sro.shtml.) Copies of the comments on the proposed rule change exchanges.5
submission, all subsequent from interested persons. The Exchange also currently provides
amendments, all written statements I. Self-Regulatory Organization’s a Post Liquidity per contract credit of
with respect to the proposed rule Statement of the Terms of Substance of $0.28 to Lead Market Makers (‘‘LMMs’’)
change that are filed with the the Proposed Rule Change and NYSE Arca Market Makers for
Commission, and all written executions in Penny Pilot Issues. The
The Exchange proposes to amend the Exchange proposes to increase the Post
communications relating to the NYSE Arca Options Fee Schedule (‘‘Fee
proposed rule change between the Liquidity credit for LMMs to $0.32 per
Schedule’’). The Exchange proposes to contract. The Exchange also proposes
Commission and any person, other than implement the fee change effective
those that may be withheld from the that the $0.04 per contract increase in
April 3, 2017. The proposed rule change the Post Liquidity credit would also be
public in accordance with the is available on the Exchange’s Web site available to LMMs that are eligible to
provisions of 5 U.S.C. 552, will be at www.nyse.com, at the principal office receive any other posting credits for
available for Web site viewing and of the Exchange, and at the executions in Penny Pilot Issues—
printing in the Commission’s Public Commission’s Public Reference Room. namely eligible volume per the ‘‘Market
Reference Room, 100 F Street NE., Maker Monthly Posting Credit Tiers and
II. Self-Regulatory Organization’s
Washington, DC 20549, on official Qualifications for Executions in Penny
Statement of the Purpose of, and
business days between the hours of Pilot Issues and SPY’’ (the ‘‘MM Posting
Statutory Basis for, the Proposed Rule
10:00 a.m. and 3:00 p.m. Copies of the Change Tiers’’). For instance, if an LMM
filing will also be available for qualifies for the Super Tier in the MM
inspection and copying at the principal In its filing with the Commission, the Posting Tiers, the LMM would receive a
office of the Exchange. All comments self-regulatory organization included total per contract credit for executions
received will be posted without change; statements concerning the purpose of, in Penny Pilot issues in their LMM
the Commission does not edit personal and basis for, the proposed rule change appointment of $0.37, plus the $0.04
identifying information from and discussed any comments it received
on the proposed rule change. The text
submissions. You should submit only 4 The Exchange notes that for purposes of this fee
of those statements may be examined at filing, ‘‘non-Customers’’ include: Lead Market
information that you wish to make
sradovich on DSK3GMQ082PROD with NOTICES
the places specified in Item IV below. Makers, NYSE Arca Market Makers, Firm and
available publicly. All submissions The Exchange has prepared summaries, Broker Dealers and Professional Customers.
should refer to File No. SR–NASDAQ– set forth in sections A, B, and C below, 5 See e.g., NASDAQ Options Market—Fees and
2017–035 and should be submitted on Rebates, available here, http://
or before May 9, 2017. 10 17
www.nasdaqtrader.com/
CFR 200.30–3(a)(12). Micro.aspx?id=optionsPricing and Bats BZX
1 15 U.S.C. 78s(b)(1). Options Exchange Fee Schedule, available here,
2 15 U.S.C. 78a.
https://www.bats.com/us/options/membership/fee_
3 17 CFR 240.19b–4. schedule/bzx/.
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Document Created: 2017-04-18 00:00:05
Document Modified: 2017-04-18 00:00:05
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 82 FR 18323 |
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