83_FR_28797 83 FR 28678 - 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(j) and Rule 7018(a)

83 FR 28678 - 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(j) and Rule 7018(a)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 119 (June 20, 2018)

Page Range28678-28681
FR Document2018-13163

Federal Register, Volume 83 Issue 119 (Wednesday, June 20, 2018) 
[Federal Register Volume 83, Number 119 (Wednesday, June 20, 2018)]
[Notices]
[Pages 28678-28681]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-13163]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83435; File No. SR-NASDAQ-2018-042]


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(j) and Rule 7018(a)

June 14, 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 May 31, 2018, 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Rule 7014(j) and Rule 7018(a), as described below. While these 
amendments are effective upon filing, the Exchange has designated the 
proposed amendments to be operative on June 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

[[Page 28679]]

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 Exchange is proposing to: (i) Eliminate a credit that it 
provides to members for displayed liquidity under Rule 7018(a); and 
(ii) re-establish a tier in the Nasdaq Growth Program under Rule 
7014(j).
First Change
    Currently, the Exchange provides a credit of $ 0.00305 per share 
executed to a member for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) that provide liquidity 
if the member has: (i) Shares of liquidity provided in all securities 
during the month representing at least 0.15% of Consolidated Volume \3\ 
during the month, through one or more of its Nasdaq Market Center 
Market Participant Identifiers; and (ii) adds Nasdaq Options Market 
(``NOM'') Market Maker liquidity in Penny Pilot Options and/or Non- 
Penny Pilot Options of 0.90% or more of total industry average daily 
volume in the customer clearing range for Equity and Exchange Traded 
Fund option contracts per day in a month on NOM. The Exchange provides 
the credit with the same criteria to securities of all three Tapes \4\ 
under Rule 7018(a)(1)-(3).
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    \3\ As used in Rule 7018(a), the term ``Consolidated Volume'' 
means the total consolidated volume reported to all consolidated 
transaction reporting plans by all exchanges and trade reporting 
facilities during a month in equity securities, excluding executed 
orders with a size of less than one round lot.
    \4\ There are three Tapes, which are based on the listing venue 
of the security: Tape C securities are Nasdaq-listed; Tape A 
securities are New York Stock Exchange-listed; and Tape B securities 
are listed on exchanges other than Nasdaq and NYSE.
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    The Exchange offers these credits as a means of improving market 
quality by providing its members with an incentive to increase their 
provision of liquidity on both the Exchange and NOM. However, the 
Exchange has observed over time that these credits are not serving 
their intended purpose. Indeed, no members presently qualify for 
receipt of the credits. Accordingly, the Exchange proposes to eliminate 
them.
Second Change
    The Exchange is proposing to revive, under Rule 7014(j), a portion 
of the Nasdaq Growth Program that it previously eliminated.
    Nasdaq introduced the Growth Program in 2016.\5\ The purpose of the 
Growth 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 Growth Program credit to increase their 
participation on the Exchange.
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    \5\ See Securities Exchange Act Release No. 78977 (September 29, 
2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132).
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    Presently, the Growth Program provides a member with a $0.0027 per 
share executed credit in securities priced $1 or more per share. 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 Growth Program is greater than the credit attained under Rule 
7018.
    Until late 2017, the Growth Program also included a second credit 
tier.\6\ That is, it provided a member with either a $0.0027 per share 
executed credit in securities priced $1 or more per share, or a $0.0025 
per share executed credit in securities priced at $1 or more, if the 
member met certain criteria. Again, these credit [sic] were 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 Growth 
Program was greater than the credit attained under Rule 7018.
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    \6\ The Growth Program originally included only the $0.0025 
credit. See id. It added the $0.0027 credit in June 2017. See 
Securities Exchange Act Release No. 34-80997 (June 28, 2017), 82 FR 
29348 (June 22, 2017) (SR-NASDAQ-2017-060).
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    Rule 7014(j) provided three ways in which a member could qualify 
for the $0.0025 rebate in a given month. First, the member could 
qualify for this rebate 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.\7\ Second, the member could qualify for the $0.0025 rebate 
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; (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 the preceding month, 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 as compared to the preceding month. Third, a member could 
qualify for the Growth 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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    \7\ The Growth Baseline was 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 Rule 7014(j)(1)(B)(i) (increasing its Consolidated 
Volume by 20% versus its Growth Baseline). If a member had 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 was 
used to establish a baseline.
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    In 2017, the Exchange eliminated the $0.0025 rebate tier, stating 
that it wished to simplify the operation of the Growth Program.\8\ 
However, the $0.0027 credit remains a part of the Growth Program, as 
set forth in Rule 7014(j).
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    \8\ See Securities Exchange Act Release No. 34-82062 (Nov. 13, 
2017), 82 FR 54457 (Nov. 17, 2017) (SR-NASDAQ-2017-119).
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    Since it eliminated the $0.0025 rebate tier, the Exchange has 
received interest in reviving it, and it proposes to do so now. 
However, the Exchange proposes modifications to the $0.0025 rebate tier 
that will simplify and update it. In particular, the Exchange proposes 
to omit one of the three means that it previously provided to qualify 
for the $0.0025 rebate tier--namely, the provision that qualified a 
member that (i) adds greater than 750,000 shares a day on average 
during the month through one or more of its Nasdaq Market Center MPIDs; 
(ii) increases 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 
(iii) maintains or increases its shares of liquidity provided through

[[Page 28680]]

one or more of its Nasdaq Market Center MPIDs as a percent of 
Consolidated Volume as compared to the preceding month. The Exchange 
also proposes to reset the Growth Baseline as a member's May 2018 share 
of liquidity provided in all securities through one or more of its 
Nasdaq Market Center MPIDs as a percent of Consolidated Volume.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.''\11\
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    \11\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission 
\12\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of 
a market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\13\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.''\14\
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    \12\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \13\ See NetCoalition, at 534-535.
    \14\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \15\ Although the court and 
the SEC were discussing the cash equities markets, the Exchange 
believes that these views apply with equal force to the options 
markets.
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    \15\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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First Change
    The proposal to eliminate the $0.00305 per share executed credits 
for all three Tapes is reasonable because these credits have not been 
effective in achieving their intended objective of incentivizing 
members to provide liquidity to the Exchange and to NOM. The Exchange 
has limited resources available to it to devote to the operation of 
special pricing programs and as such, it is reasonable and equitable 
for the Exchange to allocate those resources to those programs that are 
effective and away from those programs that are ineffective. The 
proposals are also equitable and not unfairly discriminatory because 
the proposed changes to the credits will apply uniformly to all 
similarly situated members.
Second Change
    The Exchange believes that re-establishing a $0.0025 per share 
executed credit as part of the Nasdaq Growth Program is reasonable for 
the reasons that the Exchange set forth in its original proposal to 
establish that credit.\16\ In addition, the Exchange believes that it 
is reasonable to re-establish the credit tier notwithstanding the fact 
that it previously eliminated the tier, because the Exchange believes 
that the program is more likely to be successful now than it was 
previously in achieving its objective of increasing participation on 
the Exchange. In particular, the Exchange notes that it has recently 
received member interest in re-establishing the tier and has determined 
that it is worthwhile to respond to such interest if doing so will 
promote increased Exchange participation. The Exchange notes that it 
intends to monitor the Growth Program closely to determine whether it 
does, in fact, attract qualifying interest and incentivize greater 
participation. If it does not do so, the Exchange will either further 
modify or once again move to eliminate the $0.0025 rebate tier.
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    \16\ See Securities Exchange Act Release No. 78977 (September 
29, 2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132).
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    The Exchange also believes that it is reasonable to modify the 
rebate tier from its prior formulation as a means of streamlining the 
qualifications for the tier and rendering it easier for the Exchange to 
administer and members to understand. The Exchange furthermore believes 
that it is reasonable to reset the Growth Baseline to May 2018 as that 
is the last month of activity prior to the restart of the program.
    Again, the Exchange believes that the proposal to re-establish the 
$0.0025 rebate tier is an equitable allocation and is not unfairly 
discriminatory for the reasons that the Exchange set forth in its 
original proposal to establish that credit.\17\ The Exchange also 
believes that its proposed changes to the prior iteration of the rebate 
tier are equitable and non-discriminatory because they will apply 
uniformly to members and will simplify the Growth Program. The Exchange 
further notes that reviving this tier will benefit members and the 
markets by providing additional means by which members may obtain 
credits in exchange for increasing their participation in the markets.
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    \17\ See id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    In this instance, the proposed elimination of the $0.00305 per 
share executed credit and the revival of the $0.0025 credit will not 
impose a burden on competition because the Exchange's

[[Page 28681]]

execution services are completely voluntary and subject to extensive 
competition both from other exchanges and from off-exchange venues.
    The proposed changes to the credits are reflective of a robust and 
competitive securities market, where trading venues must provide 
incentives to participants in the form of credits to attract order flow 
and adjust those incentives to make them more competitive or to allow 
the Exchange to provide other market-improving incentives elsewhere.
    Moreover, trading venues are free to adjust their fees and credits 
in response to any changes that the Exchange makes to its fees and 
credits. If any of 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.

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.\18\
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    \18\ 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2018-042 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-2018-042. 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-2018-042, and should be submitted 
on or before July 11, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13163 Filed 6-19-18; 8:45 am]
 BILLING CODE 8011-01-P

28678 Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices the proposed increase to the route-out Commission shall institute proceedings For the Commission, by the Division of fees will apply equally to all market to determine whether the proposed rule Trading and Markets, pursuant to delegated participant orders that are routed to should be approved or disapproved. authority.8 away exchanges in connection with the Eduardo A. Aleman, Plan, and will help offset costs IV. Solicitation of Comments Assistant Secretary. associated with routing orders via the Interested persons are invited to [FR Doc. 2018–13169 Filed 6–19–18; 8:45 am] Plan. Furthermore as noted above, the submit written data, views, and BILLING CODE 8011–01–P Exchange believes that its proposed fees arguments concerning the foregoing, remain competitive with another including whether the proposed rule options exchange. change is consistent with the Act. SECURITIES AND EXCHANGE The Exchange notes that it operates in COMMISSION Comments may be submitted by any of a highly competitive market in which market participants can readily favor the following methods: [Release No. 34–83435; File No. SR– NASDAQ–2018–042] competing venues if they deem fee Electronic Comments levels at a particular venue to be Self-Regulatory Organizations; The excessive, or rebate opportunities • Use the Commission’s internet Nasdaq Stock Market LLC; Notice of available at other venues to be more comment form (http://www.sec.gov/ Filing and Immediate Effectiveness of favorable. In such an environment, the rules/sro.shtml); or Proposed Rule Change To Amend the Exchange must continually adjust its • Send an email to rule-comments@ Exchange’s Transaction Fees at Rule fees to remain competitive with other sec.gov. Please include File Number SR– 7014(j) and Rule 7018(a) exchanges and with alternative trading MRX–2018–19 on the subject line. systems that have been exempted from June 14, 2018. compliance with the statutory standards Paper Comments Pursuant to Section 19(b)(1) of the applicable to exchanges. Because Securities Exchange Act of 1934 competitors are free to modify their own • Send paper comments in triplicate (‘‘Act’’) 1, and Rule 19b–4 thereunder,2 fees in response, and because market to Secretary, Securities and Exchange notice is hereby given that on May 31, participants may readily adjust their Commission, 100 F Street NE, 2018, The Nasdaq Stock Market LLC order routing practices, the Exchange Washington, DC 20549–1090. (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the believes that the degree to which fee All submissions should refer to File Securities and Exchange Commission changes in this market may impose any Number SR–MRX–2018–19. This file (‘‘SEC’’ or ‘‘Commission’’) the proposed burden on competition is extremely number should be included on the rule change as described in Items I, II, limited. In sum, if the changes proposed subject line if email is used. To help the and III below, which Items have been herein are unattractive to market Commission process and review your prepared by the Exchange. The participants, it is likely that the comments more efficiently, please use Commission is publishing this notice to Exchange will lose market share as a only one method. The Commission will solicit comments on the proposed rule result. Accordingly, the Exchange does post all comments on the Commission’s change from interested persons. not believe that the proposed changes internet website (http://www.sec.gov/ I. Self-Regulatory Organization’s will impair the ability of members or rules/sro.shtml). Copies of the Statement of the Terms of Substance of competing order execution venues to submission, all subsequent the Proposed Rule Change maintain their competitive standing in amendments, all written statements the financial markets. with respect to the proposed rule The Exchange proposes to amend the change that are filed with the Exchange’s transaction fees at Rule C. Self-Regulatory Organization’s 7014(j) and Rule 7018(a), as described Statement on Comments on the Commission, and all written communications relating to the below. While these amendments are Proposed Rule Change Received From effective upon filing, the Exchange has Members, Participants, or Others proposed rule change between the Commission and any person, other than designated the proposed amendments to No written comments were either those that may be withheld from the be operative on June 1, 2018. solicited or received. public in accordance with the The text of the proposed rule change III. Date of Effectiveness of the provisions of 5 U.S.C. 552, will be is available on the Exchange’s website at Proposed Rule Change and Timing for available for website viewing and http://nasdaq.cchwallstreet.com/, at the Commission Action printing in the Commission’s Public principal office of the Exchange, and at Reference Room, 100 F Street NE, the Commission’s Public Reference The foregoing rule change has become Room. effective pursuant to Section Washington, DC 20549, on official 19(b)(3)(A)(ii) of the Act,6 and Rule business days between the hours of II. Self-Regulatory Organization’s 19b–4(f)(2) 7 thereunder. At any time 10:00 a.m. and 3:00 p.m. Copies of the Statement of the Purpose of, and within 60 days of the filing of the filing also will be available for Statutory Basis for, the Proposed Rule proposed rule change, the Commission inspection and copying at the principal Change summarily may temporarily suspend office of the Exchange. All comments In its filing with the Commission, the such rule change if it appears to the received will be posted without change. Exchange included statements Commission that such action is: (i) Persons submitting comments are concerning the purpose of and basis for cautioned that we do not redact or edit sradovich on DSK3GMQ082PROD with NOTICES Necessary or appropriate in the public the proposed rule change and discussed interest; (ii) for the protection of personal identifying information from any comments it received on the investors; or (iii) otherwise in comment submissions. You should proposed rule change. The text of these furtherance of the purposes of the Act. submit only information that you wish statements may be examined at the If the Commission takes such action, the to make available publicly. All submissions should refer to File 8 17 CFR 200.30–3(a)(12). 6 15 U.S.C. 78s(b)(3)(A)(ii). Number SR–MRX–2018–19 and should 1 15 U.S.C. 78s(b)(1). 7 17 CFR 240.19b–4(f)(2). be submitted on or before July 11, 2018. 2 17 CFR 240.19b–4. VerDate Sep<11>2014 17:58 Jun 19, 2018 Jkt 244001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1

Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices 28679 places specified in Item IV below. The Nasdaq Growth Program that it Second, the member could qualify for Exchange has prepared summaries, set previously eliminated. the $0.0025 rebate by: (i) Adding greater forth in sections A, B, and C below, of Nasdaq introduced the Growth than 750,000 shares a day on average the most significant aspects of such Program in 2016.5 The purpose of the during the month through one or more statements. Growth Program is to provide a credit of its Nasdaq Market Center MPIDs; (ii) per share executed for members that increasing its shares of liquidity A. Self-Regulatory Organization’s meet certain growth criteria. The credit provided through one or more of its Statement of the Purpose of, and is designed to provide an incentive to Nasdaq Market Center MPIDs as a Statutory Basis for, the Proposed Rule members that do not qualify for other percent of Consolidated Volume by 20% Change credits under Rule 7018 in excess of the versus the member’s Growth Baseline in 1. Purpose Growth Program credit to increase their the preceding month, and (iii) participation on the Exchange. maintaining or increasing its shares of The Exchange is proposing to: (i) Presently, the Growth Program liquidity provided through one or more Eliminate a credit that it provides to provides a member with a $0.0027 per of its Nasdaq Market Center MPIDs as a members for displayed liquidity under share executed credit in securities percent of Consolidated Volume as Rule 7018(a); and (ii) re-establish a tier priced $1 or more per share. The credit compared to the preceding month. in the Nasdaq Growth Program under is provided in lieu of other credits Third, a member could qualify for the Rule 7014(j). provided to the member for displayed Growth Program by: (i) Adding greater First Change quotes/orders (other than Supplemental than 750,000 shares a day on average Orders or Designated Retail Orders) that during the month through one or more Currently, the Exchange provides a provide liquidity under Rule 7018, if the of its Nasdaq Market Center MPIDs in credit of $ 0.00305 per share executed credit under the Growth Program is three separate months; (ii) increasing its to a member for displayed quotes/orders greater than the credit attained under shares of liquidity provided through one (other than Supplemental Orders or Rule 7018. or more of its Nasdaq Market Center Designated Retail Orders) that provide Until late 2017, the Growth Program MPIDs as a percent of Consolidated liquidity if the member has: (i) Shares also included a second credit tier.6 That Volume by 20% versus the member’s of liquidity provided in all securities is, it provided a member with either a Growth Baseline in three separate during the month representing at least $0.0027 per share executed credit in months; and (iii) maintaining or 0.15% of Consolidated Volume 3 during securities priced $1 or more per share, increasing its shares of liquidity the month, through one or more of its or a $0.0025 per share executed credit provided through one or more of its Nasdaq Market Center Market in securities priced at $1 or more, if the Nasdaq Market Center MPIDs as a Participant Identifiers; and (ii) adds member met certain criteria. Again, percent of Consolidated Volume Nasdaq Options Market (‘‘NOM’’) these credit [sic] were provided in lieu compared to the Growth Baseline Market Maker liquidity in Penny Pilot of other credits provided to the member established when the member met the Options and/or Non- Penny Pilot for displayed quotes/orders (other than criteria for the third month. Options of 0.90% or more of total Supplemental Orders or Designated In 2017, the Exchange eliminated the industry average daily volume in the Retail Orders) that provide liquidity $0.0025 rebate tier, stating that it customer clearing range for Equity and under Rule 7018, if the credit under the wished to simplify the operation of the Exchange Traded Fund option contracts Growth Program was greater than the Growth Program.8 However, the $0.0027 per day in a month on NOM. The credit attained under Rule 7018. credit remains a part of the Growth Exchange provides the credit with the Rule 7014(j) provided three ways in Program, as set forth in Rule 7014(j). same criteria to securities of all three which a member could qualify for the Since it eliminated the $0.0025 rebate Tapes 4 under Rule 7018(a)(1)–(3). $0.0025 rebate in a given month. First, tier, the Exchange has received interest The Exchange offers these credits as a the member could qualify for this rebate in reviving it, and it proposes to do so means of improving market quality by by: (i) Adding greater than 750,000 now. However, the Exchange proposes providing its members with an incentive shares a day on average during the modifications to the $0.0025 rebate tier to increase their provision of liquidity month through one or more of its that will simplify and update it. In on both the Exchange and NOM. Nasdaq Market Center MPIDs; and (ii) particular, the Exchange proposes to However, the Exchange has observed increasing its shares of liquidity omit one of the three means that it over time that these credits are not provided through one or more of its previously provided to qualify for the serving their intended purpose. Indeed, Nasdaq Market Center MPIDs as a $0.0025 rebate tier—namely, the no members presently qualify for receipt percent of Consolidated Volume by 20% provision that qualified a member that of the credits. Accordingly, the versus the member’s Growth Baseline.7 (i) adds greater than 750,000 shares a Exchange proposes to eliminate them. day on average during the month 5 See Securities Exchange Act Release No. 78977 through one or more of its Nasdaq Second Change (September 29, 2016), 81 FR 69140 (October 5, Market Center MPIDs; (ii) increases its The Exchange is proposing to revive, 2016) (SR–NASDAQ–2016–132). shares of liquidity provided through one 6 The Growth Program originally included only under Rule 7014(j), a portion of the or more of its Nasdaq Market Center the $0.0025 credit. See id. It added the $0.0027 credit in June 2017. See Securities Exchange Act MPIDs as a percent of Consolidated 3 As used in Rule 7018(a), the term ‘‘Consolidated Release No. 34–80997 (June 28, 2017), 82 FR 29348 Volume by 20% versus the member’s Volume’’ means the total consolidated volume (June 22, 2017) (SR–NASDAQ–2017–060). Growth Baseline in the preceding reported to all consolidated transaction reporting 7 The Growth Baseline was defined as the sradovich on DSK3GMQ082PROD with NOTICES plans by all exchanges and trade reporting facilities month, and (iii) maintains or increases member’s shares of liquidity provided in all during a month in equity securities, excluding securities through one or more of its Nasdaq Market its shares of liquidity provided through executed orders with a size of less than one round Center MPIDs as a percent of Consolidated Volume lot. during the last month a member qualified for the through one or more of its Nasdaq Market Center 4 There are three Tapes, which are based on the Nasdaq Growth Program under Rule 7014(j)(1)(B)(i) MPIDs as a percent of Consolidated Volume was listing venue of the security: Tape C securities are (increasing its Consolidated Volume by 20% versus used to establish a baseline. Nasdaq-listed; Tape A securities are New York its Growth Baseline). If a member had not yet 8 See Securities Exchange Act Release No. 34– Stock Exchange-listed; and Tape B securities are qualified for a credit under this program, its August 82062 (Nov. 13, 2017), 82 FR 54457 (Nov. 17, 2017) listed on exchanges other than Nasdaq and NYSE. 2016 share of liquidity provided in all securities (SR–NASDAQ–2017–119). VerDate Sep<11>2014 17:58 Jun 19, 2018 Jkt 244001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1

28680 Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices one or more of its Nasdaq Market Center where to route orders for execution’; further modify or once again move to MPIDs as a percent of Consolidated [and] ‘no exchange can afford to take its eliminate the $0.0025 rebate tier. Volume as compared to the preceding market share percentages for granted’ The Exchange also believes that it is month. The Exchange also proposes to because ‘no exchange possesses a reasonable to modify the rebate tier from reset the Growth Baseline as a member’s monopoly, regulatory or otherwise, in its prior formulation as a means of May 2018 share of liquidity provided in the execution of order flow from broker streamlining the qualifications for the all securities through one or more of its dealers’. . . .’’ 15 Although the court tier and rendering it easier for the Nasdaq Market Center MPIDs as a and the SEC were discussing the cash Exchange to administer and members to percent of Consolidated Volume. equities markets, the Exchange believes understand. The Exchange furthermore that these views apply with equal force believes that it is reasonable to reset the 2. Statutory Basis Growth Baseline to May 2018 as that is to the options markets. The Exchange believes that its the last month of activity prior to the proposal is consistent with Section 6(b) First Change restart of the program. of the Act,9 in general, and furthers the The proposal to eliminate the Again, the Exchange believes that the objectives of Sections 6(b)(4) and 6(b)(5) $0.00305 per share executed credits for proposal to re-establish the $0.0025 of the Act,10 in particular, in that it all three Tapes is reasonable because rebate tier is an equitable allocation and provides for the equitable allocation of these credits have not been effective in is not unfairly discriminatory for the reasonable dues, fees and other charges achieving their intended objective of reasons that the Exchange set forth in its among members and issuers and other incentivizing members to provide original proposal to establish that persons using any facility, and is not liquidity to the Exchange and to NOM. credit.17 The Exchange also believes that designed to permit unfair The Exchange has limited resources its proposed changes to the prior discrimination between customers, available to it to devote to the operation iteration of the rebate tier are equitable issuers, brokers, or dealers. of special pricing programs and as such, and non-discriminatory because they The Commission and the courts have it is reasonable and equitable for the will apply uniformly to members and repeatedly expressed their preference Exchange to allocate those resources to will simplify the Growth Program. The for competition over regulatory those programs that are effective and Exchange further notes that reviving this intervention in determining prices, away from those programs that are tier will benefit members and the products, and services in the securities ineffective. The proposals are also markets by providing additional means markets. In Regulation NMS, while equitable and not unfairly by which members may obtain credits adopting a series of steps to improve the discriminatory because the proposed in exchange for increasing their current market model, the Commission changes to the credits will apply participation in the markets. highlighted the importance of market uniformly to all similarly situated B. Self-Regulatory Organization’s forces in determining prices and SRO members. Statement on Burden on Competition revenues and, also, recognized that Second Change The Exchange does not believe that current regulation of the market system ‘‘has been remarkably successful in The Exchange believes that re- the proposed rule change will impose promoting market competition in its establishing a $0.0025 per share any burden on competition not broader forms that are most important to executed credit as part of the Nasdaq necessary or appropriate in furtherance investors and listed companies.’’11 Growth Program is reasonable for the of the purposes of the Act. In terms of Likewise, in NetCoalition v. Securities reasons that the Exchange set forth in its inter-market competition, the Exchange and Exchange Commission 12 original proposal to establish that notes that it operates in a highly (‘‘NetCoalition’’) the D.C. Circuit upheld credit.16 In addition, the Exchange competitive market in which market the Commission’s use of a market-based believes that it is reasonable to re- participants can readily favor competing approach in evaluating the fairness of establish the credit tier notwithstanding venues if they deem fee levels at a market data fees against a challenge the fact that it previously eliminated the particular venue to be excessive, or claiming that Congress mandated a cost- tier, because the Exchange believes that rebate opportunities available at other based approach.13 As the court the program is more likely to be venues to be more favorable. In such an emphasized, the Commission ‘‘intended successful now than it was previously environment, the Exchange must in Regulation NMS that ‘market forces, in achieving its objective of increasing continually adjust its fees to remain rather than regulatory requirements’ participation on the Exchange. In competitive with other exchanges and play a role in determining the market particular, the Exchange notes that it with alternative trading systems that data . . . to be made available to has recently received member interest in have been exempted from compliance investors and at what cost.’’14 re-establishing the tier and has with the statutory standards applicable Further, ‘‘[n]o one disputes that determined that it is worthwhile to to exchanges. Because competitors are competition for order flow is ‘fierce.’ respond to such interest if doing so will free to modify their own fees in . . . As the SEC explained, ‘[i]n the U.S. promote increased Exchange response, and because market national market system, buyers and participation. The Exchange notes that it participants may readily adjust their sellers of securities, and the broker- intends to monitor the Growth Program order routing practices, the Exchange dealers that act as their order-routing closely to determine whether it does, in believes that the degree to which fee agents, have a wide range of choices of fact, attract qualifying interest and changes in this market may impose any incentivize greater participation. If it burden on competition is extremely sradovich on DSK3GMQ082PROD with NOTICES 9 15 U.S.C. 78f(b). does not do so, the Exchange will either limited. 10 15 U.S.C. 78f(b)(4) and (5). In this instance, the proposed 11 Securities Exchange Act Release No. 51808 15 Id. at 539 (quoting Securities Exchange Act elimination of the $0.00305 per share (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) Release No. 59039 (December 2, 2008), 73 FR (‘‘Regulation NMS Adopting Release’’). executed credit and the revival of the 74770, 74782–83 (December 9, 2008) (SR– 12 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. NYSEArca–2006–21)). $0.0025 credit will not impose a burden 2010). 16 See Securities Exchange Act Release No. 78977 on competition because the Exchange’s 13 See NetCoalition, at 534–535. (September 29, 2016), 81 FR 69140 (October 5, 14 Id. at 537. 2016) (SR–NASDAQ–2016–132). 17 See id. VerDate Sep<11>2014 17:58 Jun 19, 2018 Jkt 244001 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1

Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices 28681 execution services are completely Electronic Comments SECURITIES AND EXCHANGE voluntary and subject to extensive COMMISSION competition both from other exchanges • Use the Commission’s internet comment form (http://www.sec.gov/ [Release No. 34–83431; File No. SR–ISE– and from off-exchange venues. 2018–51] rules/sro.shtml); or The proposed changes to the credits are reflective of a robust and • Send an email to rule-comments@ Self-Regulatory Organizations; Nasdaq competitive securities market, where sec.gov. Please include File Number SR– ISE, LLC; Notice of Filing and trading venues must provide incentives NASDAQ–2018–042 on the subject line. Immediate Effectiveness of Proposed to participants in the form of credits to Rule Change To Amend the Schedule Paper Comments of Fees Related to Complex Orders attract order flow and adjust those incentives to make them more • Send paper comments in triplicate June 14, 2018. competitive or to allow the Exchange to to Secretary, Securities and Exchange Pursuant to Section 19(b)(1) of the provide other market-improving Commission, 100 F Street NE, Securities Exchange Act of 1934 incentives elsewhere. Washington, DC 20549–1090. (‘‘Act’’),1 and Rule 19b–4 thereunder,2 Moreover, trading venues are free to All submissions should refer to File notice is hereby given that on June 1, adjust their fees and credits in response 2018, Nasdaq ISE, LLC (‘‘ISE’’ or Number SR–NASDAQ–2018–042. This to any changes that the Exchange makes ‘‘Exchange’’) filed with the Securities file number should be included on the to its fees and credits. If any of the and Exchange Commission subject line if email is used. To help the (‘‘Commission’’) the proposed rule changes proposed herein are Commission process and review your change as described in Items I and II unattractive to market participants, it is comments more efficiently, please use below, which Items have been prepared likely that the Exchange will lose market share as a result. Accordingly, only one method. The Commission will by the Exchange. The Commission is the Exchange does not believe that the post all comments on the Commission’s publishing this notice to solicit proposed changes will impair the ability internet website (http://www.sec.gov/ comments on the proposed rule change of members or competing order rules/sro.shtml). Copies of the from interested persons. execution venues to maintain their submission, all subsequent I. Self-Regulatory Organization’s competitive standing in the financial amendments, all written statements Statement of the Terms of Substance of markets. with respect to the proposed rule the Proposed Rule Change change that are filed with the C. Self-Regulatory Organization’s Commission, and all written The Exchange proposes to amend the Statement on Comments on the communications relating to the Schedule of Fees related to Complex Proposed Rule Change Received From proposed rule change between the Orders traded on the Exchange. Members, Participants, or Others The text of the proposed rule change Commission and any person, other than is available on the Exchange’s website at No written comments were either those that may be withheld from the http://ise.cchwallstreet.com/, at the solicited or received. public in accordance with the principal office of the Exchange, and at provisions of 5 U.S.C. 552, will be the Commission’s Public Reference III. Date of Effectiveness of the available for website viewing and Room. Proposed Rule Change and Timing for printing in the Commission’s Public Commission Action Reference Room, 100 F Street NE, II. Self-Regulatory Organization’s Washington, DC 20549 on official Statement of the Purpose of, and The foregoing rule change has become Statutory Basis for, the Proposed Rule effective pursuant to Section business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the Change 19(b)(3)(A)(ii) of the Act.18 filing also will be available for In its filing with the Commission, the At any time within 60 days of the Exchange included statements inspection and copying at the principal filing of the proposed rule change, the concerning the purpose of and basis for office of the Exchange. All comments Commission summarily may the proposed rule change and discussed temporarily suspend such rule change if received will be posted without change. Persons submitting comments are any comments it received on the it appears to the Commission that such proposed rule change. The text of these action is: (i) Necessary or appropriate in cautioned that we do not redact or edit personal identifying information from statements may be examined at the the public interest; (ii) for the protection places specified in Item IV below. The of investors; or (iii) otherwise in comment submissions. You should Exchange has prepared summaries, set furtherance of the purposes of the Act. submit only information that you wish forth in sections A, B, and C below, of If the Commission takes such action, the to make available publicly. All the most significant aspects of such Commission shall institute proceedings submissions should refer to File statements. to determine whether the proposed rule Number SR–NASDAQ–2018–042, and should be approved or disapproved. should be submitted on or before July A. Self-Regulatory Organization’s 11, 2018. Statement of the Purpose of, and IV. Solicitation of Comments Statutory Basis for, the Proposed Rule For the Commission, by the Division of Change Interested persons are invited to Trading and Markets, pursuant to delegated submit written data, views, and authority.19 1. Purpose sradovich on DSK3GMQ082PROD with NOTICES arguments concerning the foregoing, Eduardo A. Aleman, The purpose of the proposed rule including whether the proposed rule Assistant Secretary. change is to amend the Schedule of Fees change is consistent with the Act. [FR Doc. 2018–13163 Filed 6–19–18; 8:45 am] related to Complex Orders traded on the Comments may be submitted by any of Exchange. Specifically, the Exchange BILLING CODE 8011–01–P the following methods: 1 15 U.S.C. 78s(b)(1). 18 15 U.S.C. 78s(b)(3)(A)(ii). 19 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 17:58 Jun 19, 2018 Jkt 244001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1


Document Created: 2018-06-20 00:19:34
Document Modified: 2018-06-20 00:19:34
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 28678 
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