83 FR 10933 - 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 To Eliminate the Small Cap Incentive Program and the Limit Up Limit Down Pricing Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 49 (March 13, 2018)

[Federal Register Volume 83, Number 49 (Tuesday, March 13, 2018)]
[Notices]
[Pages 10933-10934]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-04963]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82822; File No. SR-NASDAQ-2018-017]


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 To Eliminate the 
Small Cap Incentive Program and the Limit Up Limit Down Pricing Program

March 7, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 26, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Rule 7014 to eliminate the Small Cap Incentive Program and the Limit Up 
Limit Down Pricing Program, as described below.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on March 1, 2018.
    The text of the proposed rule change is available on the Exchange's 
website 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 of 
the Exchange's Rules to eliminate the Small Cap Incentive Program 
(``SCIP'') and the Limit Up Limit Down (``LULD'') Pricing Program.
SCIP Program
    The SCIP is a rebate program that presently applies to Exchange 
market markers (``Nasdaq Market Makers'') registered in Nasdaq-listed 
companies with a market capitalization (``cap'') of less than $100 
million. Under the program, Nasdaq Market Makers registered in a 
designated SCIP symbol receive an additional displayed liquidity rebate 
of $0.0005 per share executed for executions at or above $1.00 (``SCIP 
Rebate'') if their percent of time at the NBBO is above 50% for the 
month (``NBBO Test''). The SCIP Rebate is in addition to all other 
applicable displayed rebates. For shares executed below $1.00, Nasdaq 
Market Makers are subject to the following rates: (i) The rebate to add 
liquidity is 0.10% of the total dollar volume; and (ii) the fee to 
remove liquidity is 0.25% of the total dollar volume.
    The Exchange established the SCIP to encourage Nasdaq Market Makers 
to improve market quality for Nasdaq-listed companies with market caps 
of under $100 million. Although the program has had some limited 
success, it has not been effective to the extent intended when 
introduced. Accordingly, the Exchange no longer believes that the 
operation of the SCIP is an appropriate allocation of its limited 
resources and it proposes to eliminate the program.
LULD Pricing Program
    The LULD program is a rebate program designed to provide incentives 
to market participants to provide liquidity during periods of 
extraordinary volatility in a select group of NMS Stocks chosen by the 
Exchange (``LULD Liquidity Symbols'').
    Specifically, for LULD Liquidity Symbol securities priced $1 or 
more, the Exchange offers an incentive in the form of a $0.0010 per 
share executed rebate to Nasdaq Market Makers that enter displayed 
orders to buy (other than Designated Retail Orders, as defined in Rule 
7018) when the LULD Liquidity Symbol security enters a Limit State 
based on an NBO that equals the lower price band and does not cross the 
NBB (``Limit Down Limit State''). To be eligible, the Nasdaq Market 
Maker must be registered as a market maker for the LULD Liquidity 
Symbol.
    Similarly, for LULD Liquidity Symbol securities priced $1 or more, 
the Exchange provides a $0.0010 per share executed rebate to Nasdaq 
Market Makers that enter displayed orders to buy (other than Designated 
Retail Orders, as defined in Rule 7018) when the LULD Liquidity Symbol 
security enters a Straddle State based on an NBB that is below the 
lower price band (``Limit Down Straddle State'').
    Finally, the Exchange provides an incentive to all market 
participants that enter Orders in an LULD Liquidity Symbol during a 
Trading Pause and receive an execution of that Order. The Exchange 
provides a $0.0005 per share executed rebate, which is provided upon 
execution of the eligible Order in the reopening process at the 
conclusion of the Trading Pause.
    The Exchange intended for the LULD Pricing Program to improve 
market quality by promoting liquidity and price discovery for LULD 
Liquidity Symbols that have triggered Limit Up/Limit Down processes. 
Subsequent to the introduction of the LULD Pricing Program, certain 
enhancements to the LULD Plan have been implemented which reduced LULD 
pauses and supported a more orderly resumption of securities subject to 
LULD pauses. Therefore, the LULD Pricing Program is no longer needed 
and the Exchange proposes to eliminate it.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\3\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\4\ 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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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that its proposals to eliminate the SCIP and 
the LULP Pricing Program are reasonable

[[Page 10934]]

because neither Pricing Program has been effective to the extent 
intended. In addition, improvements to the implementation of the LULD 
Plan have made the LULD Pricing Program unnecessary. Furthermore, the 
Exchange has limited resources available to it to devote to the 
operation of special pricing programs and as such, it is equitable to 
allocate those resources to those programs that are effective and away 
from those programs that are ineffective. The proposals are equitable 
and not unfairly discriminatory because the elimination of the SCIP and 
the LULD Pricing Program will apply uniformly to all similarly situated 
members.

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 elimination of the SCIP and the LULD 
Pricing Program will 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. In sum, if the changes proposed herein are unattractive to 
market participants, it is likely that the 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. Further, the Exchange does not believe that 
elimination of the programs will impose a burden on competition among 
market participants because the impact of the proposal will apply 
equally to all members that presently qualify for the programs.

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.\5\
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    \5\ 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-2018-017 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-2018-017. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2018-017, and should be submitted 
on or before April 3, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-04963 Filed 3-12-18; 8:45 am]
 BILLING CODE 8011-01-P