82 FR 29348 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7014(j)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 123 (June 28, 2017)

Page Range		29348-29350
FR Document		2017-13473
Federal Register, Volume 82 Issue 123 (Wednesday, June 28, 2017)
[Federal Register Volume 82, Number 123 (Wednesday, June 28, 2017)]
[Notices]
[Pages 29348-29350]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-13473]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80997; File No. SR-NASDAQ-2017-060]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7014(j)

June 22, 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 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.\3\ 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.
    \3\ The Commission notes that Nasdaq initially filed this 
proposal as SR-NASDAQ-2017-057 on June 1, 2017. On June 9, 2017, 
Nasdaq withdrew that filing and replaced it with this filing.
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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 Rule 7014(j) to provide a second 
credit tier under the Nasdaq Growth Program.
    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 7014(j) to 
provide a second credit tier under the Nasdaq Growth Program 
(``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.
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    \4\ See Securities Exchange Act Release No. 78977 (September 29, 
2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132).
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    Rule 7014(j) currently provides three 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\ 
Second, 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. 
Third, a 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.
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    \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 current Rule 7014(j)(ii)(A) (increasing its 
Consolidated 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.
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    The Exchange is proposing to amend Rule 7014(j) to provide a second 
credit tier under the Program.\6\ Specifically, the Exchange is 
proposing a $0.0027 per share executed rebate in lieu of the current 
$0.0025 rebate. To qualify for the new rebate, a member must: (i) Add 
at least 0.04% or more [sic] of Consolidated Volume during the month 
through non-displayed orders on one or more of its Nasdaq Market Center 
MPIDs; and (ii) increase its shares of liquidity provided through one 
or more of its Nasdaq Market Center MPIDs in all securities during the 
month as a percent of Consolidated Volume by 50% versus 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. 
Thus, the first requirement of the new tier requires a member to 
provide a significant level of Consolidated Volume through non-
displayed \7\ orders, which generally provide improvement to the size 
of orders executed on the

[[Page 29349]]

Exchange.\8\ Moreover, the first requirement may encourage 
participation on the Exchange by participants with large orders who do 
not want the size of their order known. Similar to the current rebate's 
Consolidated Volume requirement provided under current Rule 
7014(j)(ii)(A), the Exchange is proposing to require a member to 
increase their [sic] shares of liquidity provided in all securities 
during the month as a percent of Consolidated Volume. Unlike the 
current rebate, which requires a member to show an increase in 
Consolidated Volume compared to the member's Growth Baseline with each 
successive month improving upon that baseline to continue to qualify 
for the rebate, the proposed new rebate requires an initial significant 
increase in Consolidated Volume compared to that member's share of 
liquidity provided in all securities in August 2016 with the member 
maintaining that level to continue receiving the proposed new 
rebate.\9\ Thus, the measure against which Consolidated Volume is 
compared remains static month to month under the criteria of the new 
rebate, whereas it can vary month to month under the current rebate's 
qualification criteria. Members that were not members of the Exchange 
in August 2016 may still qualify for the proposed new rebate. For such 
``new'' members, the Exchange will consider their share of liquidity 
provided in all securities in August 2016 as zero. The Exchange notes 
that this is the same treatment members that were not members of the 
Exchange in August 2016 receive under the current tier under the 
Program.
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    \6\ The Exchange is also proposing to renumber current Rule 
7014(j) to account for the new credit tier and make [sic] consistent 
with the numbering convention used under Rule 7014.
    \7\ Non-displayed orders are not displayed to other 
Participants, but nevertheless remain available for potential 
execution against incoming Orders until executed in full or 
cancelled. See Rule 4702(b)(3).
    \8\ For example, in May 2017 there was an average daily volume 
of 6.7 billion shares. Applying the proposed 0.04% Consolidated 
Volume qualification criteria to May 2017 would result in 
approximately 2.7 million shares a day and 59 million shares for the 
month.
    \9\ This measure is currently a component of the definition of 
Growth Baseline, which is a measure for determining eligibility for 
the existing rebate under current Rule 7014(j). See note 5 supra.
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    The Exchange believes that the new rebate tier provides members 
with additional flexibility in qualifying for the Program and incentive 
to provide greater Consolidated Volume, thereby furthering the 
Program's goal of incentivizing participation on the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change to the Program is 
reasonable because, although the proposed rebate is higher than the 
current rebate provided under the Program, the qualification criteria 
is higher than the current rebate. Moreover, the Exchange offers other 
similar rebates in return for market improving behavior.\12\ For 
example, the Exchange provides $0.0027 per share executed in Tape C 
securities if a member has shares of liquidity provided in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represent more than 0.30% of Consolidated Volume during the month.\13\
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    \12\ See Rule 7018(a).
    \13\ See Rule 7018(a)(1). The Exchange notes that, although the 
required level of Consolidated Volume is significantly higher for 
this credit tier as compared to the proposed rebate, members 
qualifying for the proposed rebate must also increase their shares 
of liquidity provided substantially.
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    The Exchange believes that the proposed change is equitably 
allocated among members, and is not designed to permit unfair 
discrimination. The Exchange notes that participation in the Program is 
voluntary, and that any member may qualify for the credit if it meets 
the qualification requirements. The Exchange is adopting the new credit 
tier to provide members with an incentive to increase their 
participation significantly, as represented by a percent of 
Consolidated Volume. The Exchange believes that the proposed rebate 
will serve as a logical extension of the current rebate. Specifically, 
a member that continues to qualify under the current rebate will 
eventually increase its shares of liquidity to a point that is 50% or 
greater than its shares of liquidity in August 2016. Thus, so long as 
the member provides 0.04% or more of Consolidated Volume through one or 
more of its Nasdaq Market Center MPIDs during the month through non-
displayed orders, the member would receive the higher rebate. The 
Exchange is electing to use August 2016 as the benchmark for the 
qualification criteria under the second requirement of the rebate tier 
because the member's activity during that month was unaffected by 
foreknowledge of the Program. The proposed change applies to all 
members that otherwise qualify for the Program, namely members that add 
at least 0.04% or more of Consolidated Volume during the month through 
one or more of its [sic] Nasdaq Market Center MPIDs and has [sic] 
shares of liquidity to a point that is greater that is 50% or greater 
than their shares of liquidity in August 2016. The Exchange believes 
that it is an equitable allocation and is not unfairly discriminatory 
to use zero as the level of shares of liquidity provided in August 2016 
for members that were not members in August 2016 because they are 
similarly positioned as other members of the Exchange that were members 
at that time yet did not have shares of liquidity provided in August 
2016. The Exchange notes that all members must provide a significant 
level of Consolidated Volume to qualify for the proposed new rebate 
regardless of their membership status in August 2016, in addition to 
meeting the proposed growth criteria. Moreover, the Exchange believes 
that all members should have the opportunity to participate in the 
Program and, to the extent that the proposed new rebate attracts new 
members to the Exchange, all market participants will benefit from the 
added liquidity new members provide. As noted above, the Exchange 
currently uses zero as the level of shares of liquidity provided in 
August 2016 for members that were not members in August 2016 for 
purposes of qualifying for the $0.0025 per share executed credit. The 
Exchange notes that participation in the Program is entirely voluntary 
and proposed rebate will be provided to any member that meets the 
qualification criteria.

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

[[Page 29350]]

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 provide a new, 
higher, Program rebate, which will require a member to provide 
significant Consolidated Volume together with a significant increase to 
its Consolidated Volume over a baseline amount of Consolidated Volume 
it had in August 2016. This proposed rebate is designed to provide 
incentive to members to increase their participation on the Exchange. 
Participation in the Program is completely voluntary and the criteria 
will ensure that all members that qualify for the Program have both 
shown a significant increase in their participation on the Exchange and 
are providing significant overall participation on the Exchange. 
Ultimately, if members conclude that the qualification requirements are 
set too high, or the rebate too low, it is likely that the Exchange 
will realize very little benefit from the incentive. If the proposed 
rebate is successful in increasing participation on the Exchange, then 
other trading venues may also make a similar rebate available to their 
participants. Thus, the Exchange does not believe that the proposed 
rule change will impose any burden on competition whatsoever, but 
rather believes that the proposal is pro-competitive.

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.\14\
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    \14\ 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-2017-060 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-2017-060. 
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-2017-060, and should be submitted on or before July 19, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13473 Filed 6-27-17; 8:45 am]
 BILLING CODE 8011-01-P
29350 Federal Register / Vol. 82, No. 123 / Wednesday, June 28, 2017 / Notices

order routing practices, the Exchange IV. Solicitation of Comments For the Commission, by the Division of
believes that the degree to which fee Trading and Markets, pursuant to delegated
changes in this market may impose any Interested persons are invited to authority.15
burden on competition is extremely submit written data, views, and Eduardo A. Aleman,
limited. arguments concerning the foregoing, Assistant Secretary.
In this instance, the Exchange is including whether the proposed rule [FR Doc. 2017–13473 Filed 6–27–17; 8:45 am]
proposing to provide a new, higher, change is consistent with the Act. BILLING CODE 8011–01–P
Program rebate, which will require a Comments may be submitted by any of
member to provide significant the following methods:
Consolidated Volume together with a SECURITIES AND EXCHANGE
Electronic Comments COMMISSION
significant increase to its Consolidated
Volume over a baseline amount of • Use the Commission’s Internet [Release No. 34–81001; File No. SR–DTC–
Consolidated Volume it had in August comment form (http://www.sec.gov/ 2017–009]
2016. This proposed rebate is designed rules/sro.shtml); or
to provide incentive to members to Self-Regulatory Organizations; The
increase their participation on the • Send an email to rule-comments@
Depository Trust Company; Notice of
Exchange. Participation in the Program sec.gov. Please include File Number SR– Filing of Proposed Rule Change To
is completely voluntary and the criteria NASDAQ–2017–060 on the subject line. Establish a Swap Margin Segregation
will ensure that all members that qualify Paper Comments Account for the Segregation of Swap
for the Program have both shown a Margin With Respect to Deposited
significant increase in their • Send paper comments in triplicate Securities
participation on the Exchange and are to Secretary, Securities and Exchange
providing significant overall Commission, 100 F Street NE., June 22, 2017.
participation on the Exchange. Washington, DC 20549–1090. Pursuant to Section 19(b)(1) of the
Ultimately, if members conclude that Securities Exchange Act of 1934
the qualification requirements are set All submissions should refer to File (‘‘Act’’) 1 and Rule 19b–4 thereunder, 2
too high, or the rebate too low, it is Number SR–NASDAQ–2017–060. This notice is hereby given that on June 15,
likely that the Exchange will realize file number should be included on the 2017, The Depository Trust Company
very little benefit from the incentive. If subject line if email is used. To help the (‘‘DTC’’) filed with the Securities and
the proposed rebate is successful in Commission process and review your Exchange Commission (‘‘Commission’’)
increasing participation on the comments more efficiently, please use the proposed rule change as described
Exchange, then other trading venues only one method. The Commission will in Items I, II and III below, which Items
may also make a similar rebate available post all comments on the Commission’s have been prepared by DTC. DTC filed
to their participants. Thus, the Exchange Internet Web site (http://www.sec.gov/ the proposed rule change pursuant to
does not believe that the proposed rule rules/sro.shtml). Copies of the Section 19(b)(3)(A) of the Act 3 and Rule
change will impose any burden on submission, all subsequent 19b–4(f)(6) 4 thereunder. The
competition whatsoever, but rather amendments, all written statements Commission is publishing this notice to
believes that the proposal is pro- with respect to the proposed rule solicit comments on the proposed rule
competitive. change that are filed with the change from interested persons.
C. Self-Regulatory Organization’s Commission, and all written I. Clearing Agency’s Statement of the
Statement on Comments on the communications relating to the Terms of Substance of the Proposed
Proposed Rule Change Received From proposed rule change between the Rule Change
Members, Participants, or Others Commission and any person, other than The proposed rule change by DTC
those that may be withheld from the would add new Rule 36 (Segregated
No written comments were either public in accordance with the
solicited or received. Accounts for Swap Margin) (‘‘Proposed
provisions of 5 U.S.C. 552, will be Rule 36’’) to provide Accounts 5 for the
III. Date of Effectiveness of the available for Web site viewing and segregation of Securities held at DTC
Proposed Rule Change and Timing for printing in the Commission’s Public that are intended to be Pledged as swap
Commission Action Reference Room, 100 F Street NE., margin in conformity with certain
The foregoing rule change has become Washington, DC 20549 on official regulations applicable to swap
effective pursuant to Section business days between the hours of counterparties posting swap margin.
19(b)(3)(A)(ii) of the Act.14 10:00 a.m. and 3:00 p.m. Copies of the The proposal would allow Participants
At any time within 60 days of the filing also will be available for to transfer Deposited Securities to an
filing of the proposed rule change, the inspection and copying at the principal Account (‘‘Swap Margin Segregation
Commission summarily may office of the Exchange. All comments Account’’) of a Pledgee designated for
temporarily suspend such rule change if received will be posted without change; the purpose of segregating interests in
it appears to the Commission that such the Commission does not edit personal Deposited Securities securing margin
action is: (i) Necessary or appropriate in identifying information from
15 17 CFR 200.30–3(a)(12).
the public interest; (ii) for the protection submissions. You should submit only
asabaliauskas on DSKBBXCHB2PROD with NOTICES

1 15 U.S.C. 78s(b)(1).
of investors; or (iii) otherwise in information that you wish to make 2 17 CFR 240.19b–4.
furtherance of the purposes of the Act. available publicly. All submissions 3 15 U.S.C. 78s(b)(3)(A).
If the Commission takes such action, the should refer to File Number SR– 4 17 CFR 240.19b–4(f)(6).

Commission shall institute proceedings NASDAQ–2017–060, and should be 5 Each capitalized term not otherwise defined

to determine whether the proposed rule submitted on or before July 19, 2017. herein has its respective meaning as set forth in the
should be approved or disapproved. Rules, By-Laws and Organization Certificate of The
Depository Trust Company (the ‘‘DTC Rules’’),
available at http://www.dtcc.com/legal/rules-and-
14 15 U.S.C. 78s(b)(3)(A)(ii). procedures.aspx.

VerDate Sep<11>2014 17:22 Jun 27, 2017 Jkt 241001 PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 E:\FR\FM\28JNN1.SGM 28JNN1
Document Created: 2017-06-28 01:10:36
Document Modified: 2017-06-28 01:10:36
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 29348