82 FR 28176 - 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 7018(a)(2)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 117 (June 20, 2017)

[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Notices]
[Pages 28176-28178]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-12769]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80928; File No. SR-NASDAQ-2017-056]


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 7018(a)(2)

June 14, 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 June 1, 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)(2) to eliminate a $0.0001 per share executed credit 
provided to a member for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) that provide liquidity 
in securities listed on the New York Stock Exchange.
    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 Exchange's 
transaction fees at Rule 7018(a)(2) to eliminate a $0.0001 per share 
executed credit provided to a member for displayed quotes/orders (other 
than Supplemental Orders or Designated Retail Orders) that provide 
liquidity in Tape A securities. Under Rule 7018(a), the Exchange 
assesses fees for the removal of liquidity and provides credits for the 
provision thereof. The Exchange currently provides a $0.0001 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 has shares of liquidity provided in all securities during 
the month representing at least 0.2% of Consolidated Volume during the 
month, through one or more of its Nasdaq Market Center MPIDs. This 
$0.0001 per share executed credit is provided in addition to the 
credits provided for displayed quotes/orders (other than Supplemental 
Orders or Designated Retail Orders) that provide liquidity under Rule 
7018(a)(2).\3\ This credit is also provided in addition to any rebates 
that a member qualifies for under the NBBO, and QMM programs under Rule 
7014. The credit is not additive to DLP rebates under Rule 7014 or 
Designated Retail Order credits under Rule 7018.
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    \3\ The Exchange also provides a $0.0001 per share executed 
credit with identical criteria applicable to Tape B securities. See 
Rule 7018(a)(3).
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    The credit, together with an identical credit applicable to Tape B 
securities, was adopted to provide incentive to market participants to 
increase the level of liquidity provided to the Exchange, in which the 
Exchange had observed a decline in overall volume on the Exchange in 
Tape A and B securities in comparison to Tape C securities.\4\ The 
Exchange has not observed a significant improvement to the volume in 
Tape A securities on the Exchange in relation to the Tape A credit and 
is therefore proposing to eliminate the credit so that it may explore 
other incentives to improve market quality in Tape A securities.
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    \4\ See Securities Exchange Act Release No. 77378 (March 16, 
2016), 81 FR 15358 (March 22, 2016) (SR-NASDAQ-2016-037). The 
Exchange has since replaced the qualification criteria required to 
receive the Tape B $0.0001 per share executed credit. Specifically, 
to now qualify for the $0.0001 per share executed credit in Tape B 
securities, a member must have shares of liquidity provided in 
securities that are listed on exchanges other than NASDAQ or NYSE 
during the month representing at least 0.06% but less than 0.12% of 
Consolidated Volume during the month through one or more of its 
Nasdaq Market Center MPIDs. See Securities Exchange Act Release No. 
78977 (September 29, 2016), 81 FR 69140 (October 5, 2016) (SR-
NASDAQ-2016-132).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    Elimination of the $0.0001 per share executed credit provided to a 
member for displayed quotes/orders (other than Supplemental Orders or 
Designated

[[Page 28177]]

Retail Orders) that provide liquidity in Tape A securities under Rule 
7018(a)(2) is reasonable because providing a credit in addition to the 
other credits provided under Rules 7018(a) and 7014, as described 
above, is no longer necessary. As noted above, the Exchange set the 
credit at $0.0001 per share executed because it believed that providing 
such a credit would improve the market in Tape A securities. The credit 
has not significantly provided such incentive and consequently the 
Exchange believes that it should eliminate the credit to focus its 
limited funds on other incentives to improve market quality. 
Accordingly, the Exchange believes eliminating this additional Tape A 
credit is reasonable.
    Elimination of the $0.0001 per share executed credit provided to a 
member for displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) that provide liquidity in Tape A securities 
under Rule 7018(a)(2) is an equitable allocation and is not unfairly 
discriminatory because it is no longer needed to improve the market in 
Tape A securities. The Exchange has limited funds to apply in the form 
of incentives, and thus must deploy those limited funds to incentives 
that it believes will be the most effective and improve market quality 
in areas that the Exchange determines are in need of improvement. The 
Exchange has observed that the credit has not provided the incentive 
that was necessary to significantly improve the market in Tape A 
securities by attracting more order flow to the Exchange and is 
therefore removing the credit so that it may consider other incentives 
that may improve Tape A market quality. As noted above, the Exchange 
has limited funds to apply toward incentives, and although an incentive 
may not significantly achieve its goal of improving market quality, it 
may nonetheless result in a cost to the Exchange. Eliminating the 
credit will allow the Exchange deploy its limited funds to incentives 
in Tape A securities or other areas designed to improve market quality. 
Accordingly, the Exchange believes that eliminating the credit is an 
equitable allocation and is not unfairly discriminatory.

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 Exchange is proposing to eliminate an 
incentive provided to market participants, which was designed to 
improve market quality in Tape A securities. The incentive has not 
significantly improved market quality in Tape A securities and the 
Exchange does not believe that continuing to offer the credit is the 
best use of its limited fund nor would it likely achieve the market 
improvement for which it was designed. 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 
elimination of the credit should not impose a burden on competition. If 
the Exchange is incorrect in concluding that the incentive was not 
significantly effective, it will likely lose market share in Tape A 
securities to one of the many other trading venues to the extent market 
participants believe that those markets are more attractive. Thus, 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 or impose any 
burden on 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.\7\
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    \7\ 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-2017-056) 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-2017-056). 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

[[Page 28178]]

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-2017-056, and should be submitted 
on or before July 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Eduardo A. Aleman,
Assistant Secretary.
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    \8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-12769 Filed 6-19-17; 8:45 am]
 BILLING CODE 8011-01-P