83 FR 30998 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a New Transaction Fee for Execution of Midpoint Extended Life Orders
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 127 (July 2, 2018)
Federal Register Volume 83, Issue 127 (July 2, 2018)
| Page Range | 30998-31001 | |
| FR Document | 2018-14109 |
[Federal Register Volume 83, Number 127 (Monday, July 2, 2018)] [Notices] [Pages 30998-31001] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-14109] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83522; File No. SR-NASDAQ-2018-047] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a New Transaction Fee for Execution of Midpoint Extended Life Orders June 26, 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 June 12, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's transaction fees at Rule 7018 to adopt a new transaction fee for execution of Midpoint Extended Life Orders. While these amendments are effective upon filing, as discussed below, the Exchange will begin assessing the proposed fees on July 2, 2018.\3\ --------------------------------------------------------------------------- \3\ The Exchange initially filed the proposed pricing changes on June 1, 2018 (SR-NASDAQ-2018-043). On July [sic] 12, 2018, the Exchange withdrew that filing and submitted this filing. This filing makes technical corrections, provides further discussion of the proposed change, and clarifies the statutory basis and burden on competition discussions. --------------------------------------------------------------------------- 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 the Exchange's transaction fees at Rule 7018(a)(1)-(3) to charge no fee for execution of Midpoint Extended Life Orders in the month of July 2018 if the member executes at least 250,000 shares in Midpoint Extended Life Orders in June 2018, and adopt a fee of $0.0006 per share executed for execution of all other Midpoint Extended Life Orders in securities with a price of $1 or more. Transactions in Midpoint Extended Life Orders in securities with a price less than $1 will remain at no cost. On March 7, 2018, the Commission approved the Exchange's proposal to adopt a new Order Type, the Midpoint Extended Life Order.\4\ The Midpoint Extended Life Order is an Order Type with a Non-Display Order Attribute that is priced at the midpoint between the NBBO and that will not be eligible to execute until the Holding Period of one half of a second has passed after acceptance of the Order by the System. Once a Midpoint Extended Life Order becomes eligible to execute by existing unchanged for the Holding Period, the Order may only execute against other eligible Midpoint Extended Life Orders. The Exchange has not assessed a charge for Midpoint Extended Life Orders executions since the Exchange began to offer them on March 12, 2018.\5\ --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 82825 (March 7, 2018), 83 FR 10937 (March 13, 2018) (SR-NASDAQ-2017-074). \5\ See Securities Exchange Act Release No. 82905 (March 20, 2018), 83 FR 12988 (March 26, 2018) (SR-NASDAQ-2018-021). --------------------------------------------------------------------------- Under Rule 7018, the Exchange is proposing to assess fees for certain Midpoint Extended Life Orders beginning July 2, 2018, while continuing to provide a no fee tier for the month of July 2018 if a member meets qualification criteria based on its activity in Midpoint Extended Life Orders in June 2018. Specifically, the Exchange is proposing to assess no charge for execution of Midpoint Extended Life Orders in the month of July 2018 if the member executes at least at least [sic] 250,000 shares in Midpoint Extended Life Orders in the immediately preceding month. Thus, the new fee will be applied beginning July 2, 2018 based on the number of Midpoint Extended Life Orders executed by the member in the month of June 2018. The Exchange is also adopting a new fee of $0.0006 per share executed assessed for execution of Midpoint Extended Life Orders in securities priced at $1 or more applicable to members that do not qualify under the no cost tier described immediately above. After July 2018, the Exchange will assess a charge of $0.0006 per share executed assessed [sic] for execution of any Midpoint Extended Life Order in a security priced $1 or greater. The proposed fees cover Orders in securities of any of the three tapes. The Exchange believes that the market in Midpoint Extended Life Orders has matured to the point that it can support the proposed $0.0006 per share executed fee; however, the Exchange also believes that promoting liquidity in Midpoint Extended Life Orders continues to be warranted. Thus, the Exchange is proposing to not assess a fee for executions of Midpoint Extended Life Orders in the month of July 2018 if members have at least 250,000 shares executed in Midpoint Extended Life Orders in June 2018. Allowing transactions to occur at no cost if a member provides a certain level of Midpoint Extended Life Order liquidity will promote use of the Midpoint Extended Life Order, which will in turn help bring continued overall liquidity in Midpoint Extended Life Orders in securities priced $1 or more to the Exchange in June 2018, since members may increase their activity in Midpoint Extended Life Orders, and members that have not yet used Midpoint Extended Life Orders may begin trading in them to benefit from the zero fee tier. To the extent that members are provided [[Page 30999]] incentive to trade in Midpoint Extended Life Orders to meet the zero fee tier qualification requirement, the benefit to liquidity should continue to through July 2018 as members that qualified for the zero fee tier take advantage of the zero fee trading for the month. Fees for all Midpoint Extended Life Orders in June 2018 will remain at no cost. In addition, the Exchange is not proposing to adopt a new fee for execution of Midpoint Extended Life Orders in securities below $1 (Rule 7018(b)) whatsoever, which will continue to be allowed at no cost. Accordingly, the Exchange is proposing to amend Rule 7018(a)(1)-(3) to note: (1) That members executing a Midpoint Extended Life Order will be assessed a charge of $0.0000 per share executed in the month of July 2018 if the member executes at least 250,000 shares in Midpoint Extended Life Orders in June 2018; and (2) that all other members will be assessed a fee of $0.0006 per share executed, for executions of Midpoint Extended Life Orders in securities priced $1 or more. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\6\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\7\ 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. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78f(b). \7\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- 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.'' \8\ --------------------------------------------------------------------------- \8\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting Release''). --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \9\ (``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.\10\ 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.'' \11\ --------------------------------------------------------------------------- \9\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \10\ See NetCoalition, at 534-535. \11\ Id. at 537. --------------------------------------------------------------------------- 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' . . . .'' \12\ --------------------------------------------------------------------------- \12\ 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)). --------------------------------------------------------------------------- The proposed $0.0006 per share executed fee is reasonable because the Exchange has considered the nature of the market in Midpoint Extended Life Orders, the need to assess a fee to help cover the costs of supporting trading on Nasdaq, and the Exchange's desire to continue to promote use of Midpoint Extended Life Orders on the Exchange. Taking these factors into consideration, the Exchange has determined that $0.0006 per share executed is appropriate. The Exchange currently assess [sic] a fee of $0.0007 per share executed for certain TFTY Orders.\13\ The Exchange also assesses $0.0007 per share executed for QCST and QDRK orders, except for QCST orders that execute on Nasdaq BX for which there is no charge or credit.\14\ Thus, the lower fee is similar to existing fees for Orders executed on the Exchange and may promote use of Midpoint Extended Life Orders and consequently the quality of the market in Midpoint Extended Life Orders. The Exchange also notes that a competitor exchange assesses a fee of $0.0009 per share executed for both adding and removing all non-displayed liquidity in securities priced $1 or more.\15\ --------------------------------------------------------------------------- \13\ See Rule 7018(a)(1)-(3). \14\ Id. \15\ See Investors Exchange Fee Schedule, available at: https://iextrading.com/trading/fees/. --------------------------------------------------------------------------- As discussed extensively in its proposal,\16\ the Exchange believes that the Midpoint Extended Life Order is consistent with the Act because it is emblematic of a core function of a national securities exchange, namely matching buyers and sellers of securities on a transparent and well-regulated market, and helping these buyers and sellers come together to receive the best execution possible. The Exchange achieves this by permitting Midpoint Extended Life Orders to execute solely against other Midpoint Extended Life Orders at the midpoint of the NBBO in return for providing market-improving behavior in the form of a longer-lived midpoint order. Thus, the Exchange believes that it is important for participants using Midpoint Extended Life Orders to have a deep and liquid market. Applying a lower fee than the $0.0030 per share executed that the Exchange assesses for removing resting midpoint liquidity should provide incentive to market participants to use Midpoint Extended Life Orders while also allowing the Exchange to recoup some of the costs it incurs in offering the Order. --------------------------------------------------------------------------- \16\ See Securities Exchange Act Release No. 81311 (August 3, 2017), 82 FR 37248 (August 9, 2017) (SR-NASDAQ-2017-074). --------------------------------------------------------------------------- The Exchange also believes that allowing transactions of Midpoint Extended Life Orders at no cost in July 2018 is reasonable because it currently offers them at no cost. In addition, the Exchange does not charge a fee for transactions in Orders with a RTFY routing Order Attribute.\17\ Such an Order must meet the definition of Designated Retail Order, which requires, among other things, that the Order not originate from a trading algorithm or any other computerized methodology.\18\ Thus, allowing transactions of the RTFY Order Attribute at no cost is designed to promote the Exchange as a venue for retail investor Orders. Likewise, the Exchange is proposing to allow transactions in Midpoint Extended Life Orders at no cost in July 2018 to promote use of such Orders and consequently the quality of the market in Midpoint Extended Life Orders. --------------------------------------------------------------------------- \17\ RTFY is a routing option available for an order that qualifies as a Designated Retail Order under which orders check the System for available shares only if so instructed by the entering firm and are thereafter routed to destinations on the System routing table. If shares remain unexecuted after routing, they are posted to the book. Once on the book, should the order subsequently be locked or crossed by another market center, the System will not route the order to the locking or crossing market center. RTFY is designed to allow orders to participate in the opening, reopening and closing process of the primary listing market for a security. See Rule 4758(a)(1)(A)(v)b. \18\ See Rule 7018. --------------------------------------------------------------------------- The Exchange believes that the proposed fees are an equitable allocation and are not unfairly discriminatory because the Exchange [[Page 31000]] will apply the same fee to all similarly situated members. The Midpoint Extended Life Order may be used by any market participant that is willing to satisfy the requirements of the Order Type and meet the volume requirement therefore qualify for the proposed zero fee tiers. Moreover, members not interested in using Midpoint Extended Life Orders will continue to have the ability to enter midpoint Orders in the Nasdaq System, which have both fees and credits associated with their execution.\19\ The Exchange is assessing fees for transactions in Midpoint Extended Life Orders beginning July 2, 2018 and providing a limited time during which transactions in Midpoint Extended Life Orders may [sic] done at no cost. The proposed $0.0006 per share executed fee is lower than most other fees assessed for executions, which is reflective of the beneficial nature of the type of Order. Any member may take advantage of the lower fee by using the Order Type. Similarly, members will receive no charge in the month of July 2018 if it meets the 250,000 share execution requirement of the tier. The Exchange believes that 250,000 shares executed is a modest level that is attainable by any member that chooses to enter Midpoint Extended Life Orders. --------------------------------------------------------------------------- \19\ Based on whether the member is removing or adding liquidity. See Rule 7018(a). --------------------------------------------------------------------------- The Exchange believes that the zero fee tier for July 2018, which is based on the number of shares in Midpoint Extended Life Order executed in June 2018, is an equitable allocation and is not unfairly discriminatory because the Exchange has provided adequate notice of the changes to all members so that they may adjust their trading behavior, and any member may transact in Midpoint Extended Life Orders. Thus, all members may execute 250,000 shares or more in Midpoint Extended Life Orders in June 2018 to qualify for the zero cost tier in July 2018. The Exchange also applies qualification criteria for rebates under Rule 7014 that are based on the prior month's activity. Specifically, the DLP program under Rule 7014(f) provides three rebates that have qualification criteria based on the level of ADV it had in the prior month.\20\ --------------------------------------------------------------------------- \20\ See Rule 7014(f)(5)(A). --------------------------------------------------------------------------- Last, the Exchange is not assessing a charge for executions in Midpoint Extended Life Orders in securities priced below $1 because there are very few executions in such Orders relative to transactions in Midpoint Extended Life Orders in securities priced at $1 or greater. Allowing such transactions at no cost will help promote a deeper market in Midpoint Extended Life Orders in securities priced below $1. Thus, the Exchange believes that the no cost tier in Midpoint Extended Life Orders in securities priced below $1 remains an equitable allocation and is not unfairly discriminatory. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In this instance, the proposal to assess no fee for certain executions of Midpoint Extended Life Orders and a modest fee of $0.0006 per share executed will not place any burden on competition, but rather will help ensure continued growth in the use of Midpoint Extended Life Orders by making such Orders attractive to members that seek to execute at the midpoint with like-minded members, while also allowing the Exchange to recoup some of the costs associated with offering the Order Type. The proposal also reduces burdens on members associated with the Exchange applying fees to an Order Type for which fees have not been assessed. The new fee tiers will help members transition to fee liable transactions by providing an opportunity to avoid paying a fee for a transaction in Midpoint Extended Life Orders in July 2018 if they choose to provide 250,000 or more shares executed in Midpoint Extended Life Orders for the month of June 2018. To the extent the proposal is not successful in promoting liquidity in Midpoint Extended Life Orders, it would have no meaningful impact on competition as few transactions in Midpoint Extended Life Orders would occur. In sum, if the proposal to assess the new fee tiers for executions of Midpoint Extended Life Orders is unattractive to market participants, it is likely that the Exchange will not gain any market share and may lose market share. 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.\21\ --------------------------------------------------------------------------- \21\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- 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 CommentsUse 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-2018-047 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2018-047. This file number should be included on the subject line if email is used. To help the [[Page 31001]] 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 such 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-2018-047, and should be submitted on or before July 23, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\22\ --------------------------------------------------------------------------- \22\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-14109 Filed 6-29-18; 8:45 am] BILLING CODE 8011-01-P
![30998 Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices
PREVIOUSLY ANNOUNCED TIME AND DATE OF The text of the proposed rule change executions since the Exchange began to
THE MEETING: Thursday, June 28, 2018 at is available on the Exchange’s website at offer them on March 12, 2018.5
2:00 p.m. http://nasdaq.cchwallstreet.com/, at the Under Rule 7018, the Exchange is
CHANGES IN THE MEETING: The following principal office of the Exchange, and at proposing to assess fees for certain
item will not be considered during the the Commission’s Public Reference Midpoint Extended Life Orders
Closed Meeting on Thursday, June 28, Room. beginning July 2, 2018, while
2018: continuing to provide a no fee tier for
II. Self-Regulatory Organization’s
• Report on an investigation. Statement of the Purpose of, and
the month of July 2018 if a member
CONTACT PERSON FOR MORE INFORMATION: meets qualification criteria based on its
Statutory Basis for, the Proposed Rule activity in Midpoint Extended Life
For further information and to ascertain Change
what, if any, matters have been added, Orders in June 2018. Specifically, the
deleted or postponed, please contact the In its filing with the Commission, the Exchange is proposing to assess no
Office of the Secretary at (202) 551– Exchange included statements charge for execution of Midpoint
5400. concerning the purpose of and basis for Extended Life Orders in the month of
the proposed rule change and discussed July 2018 if the member executes at
Dated: June 28, 2018. any comments it received on the least at least [sic] 250,000 shares in
Brent J. Fields, proposed rule change. The text of these Midpoint Extended Life Orders in the
Secretary. statements may be examined at the immediately preceding month. Thus,
[FR Doc. 2018–14281 Filed 6–28–18; 4:15 pm] places specified in Item IV below. The the new fee will be applied beginning
BILLING CODE 8011–01–P Exchange has prepared summaries, set July 2, 2018 based on the number of
forth in sections A, B, and C below, of Midpoint Extended Life Orders
the most significant aspects of such executed by the member in the month
SECURITIES AND EXCHANGE statements. of June 2018. The Exchange is also
COMMISSION adopting a new fee of $0.0006 per share
A. Self-Regulatory Organization’s executed assessed for execution of
[Release No. 34–83522; File No. SR– Statement of the Purpose of, and
NASDAQ–2018–047] Midpoint Extended Life Orders in
Statutory Basis for, the Proposed Rule securities priced at $1 or more
Change applicable to members that do not
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of 1. Purpose qualify under the no cost tier described
Filing and Immediate Effectiveness of immediately above. After July 2018, the
The purpose of the proposed rule
Proposed Rule Change To Adopt a Exchange will assess a charge of $0.0006
change is to amend the Exchange’s
New Transaction Fee for Execution of per share executed assessed [sic] for
transaction fees at Rule 7018(a)(1)–(3) to
Midpoint Extended Life Orders execution of any Midpoint Extended
charge no fee for execution of Midpoint
Life Order in a security priced $1 or
June 26, 2018. Extended Life Orders in the month of
greater. The proposed fees cover Orders
Pursuant to Section 19(b)(1) of the July 2018 if the member executes at
in securities of any of the three tapes.
Securities Exchange Act of 1934 least 250,000 shares in Midpoint
The Exchange believes that the market
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Extended Life Orders in June 2018, and
in Midpoint Extended Life Orders has
notice is hereby given that, on June 12, adopt a fee of $0.0006 per share
matured to the point that it can support
2018, The Nasdaq Stock Market LLC executed for execution of all other
the proposed $0.0006 per share
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Midpoint Extended Life Orders in
executed fee; however, the Exchange
Securities and Exchange Commission securities with a price of $1 or more.
also believes that promoting liquidity in
(‘‘SEC’’ or ‘‘Commission’’) the proposed Transactions in Midpoint Extended Life
Midpoint Extended Life Orders
rule change as described in Items I, II, Orders in securities with a price less
continues to be warranted. Thus, the
and III below, which Items have been than $1 will remain at no cost.
Exchange is proposing to not assess a
prepared by the Exchange. The On March 7, 2018, the Commission
fee for executions of Midpoint Extended
Commission is publishing this notice to approved the Exchange’s proposal to
Life Orders in the month of July 2018 if
solicit comments on the proposed rule adopt a new Order Type, the Midpoint
members have at least 250,000 shares
change from interested persons. Extended Life Order.4 The Midpoint
executed in Midpoint Extended Life
Extended Life Order is an Order Type
I. Self-Regulatory Organization’s Orders in June 2018. Allowing
with a Non-Display Order Attribute that
Statement of the Terms of Substance of transactions to occur at no cost if a
is priced at the midpoint between the
the Proposed Rule Change member provides a certain level of
NBBO and that will not be eligible to
Midpoint Extended Life Order liquidity
The Exchange proposes to amend the execute until the Holding Period of one
will promote use of the Midpoint
Exchange’s transaction fees at Rule 7018 half of a second has passed after
Extended Life Order, which will in turn
to adopt a new transaction fee for acceptance of the Order by the System.
help bring continued overall liquidity in
execution of Midpoint Extended Life Once a Midpoint Extended Life Order
Midpoint Extended Life Orders in
Orders. becomes eligible to execute by existing
securities priced $1 or more to the
While these amendments are effective unchanged for the Holding Period, the
Exchange in June 2018, since members
upon filing, as discussed below, the Order may only execute against other
may increase their activity in Midpoint
Exchange will begin assessing the eligible Midpoint Extended Life Orders.
Extended Life Orders, and members that
proposed fees on July 2, 2018.3 The Exchange has not assessed a charge
have not yet used Midpoint Extended
daltland on DSKBBV9HB2PROD with NOTICES
for Midpoint Extended Life Orders
1 15
Life Orders may begin trading in them
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4. discussion of the proposed change, and clarifies the
to benefit from the zero fee tier. To the
3 The Exchange initially filed the proposed statutory basis and burden on competition extent that members are provided
pricing changes on June 1, 2018 (SR–NASDAQ– discussions.
2018–043). On July [sic] 12, 2018, the Exchange 4 See Securities Exchange Act Release No. 82825 5 See Securities Exchange Act Release No. 82905
withdrew that filing and submitted this filing. This (March 7, 2018), 83 FR 10937 (March 13, 2018) (SR– (March 20, 2018), 83 FR 12988 (March 26, 2018)
filing makes technical corrections, provides further NASDAQ–2017–074). (SR–NASDAQ–2018–021).
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![Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices 30999
incentive to trade in Midpoint Extended approach in evaluating the fairness of the Midpoint Extended Life Order is
Life Orders to meet the zero fee tier market data fees against a challenge consistent with the Act because it is
qualification requirement, the benefit to claiming that Congress mandated a cost- emblematic of a core function of a
liquidity should continue to through based approach.10 As the court national securities exchange, namely
July 2018 as members that qualified for emphasized, the Commission ‘‘intended matching buyers and sellers of securities
the zero fee tier take advantage of the in Regulation NMS that ‘market forces, on a transparent and well-regulated
zero fee trading for the month. Fees for rather than regulatory requirements’ market, and helping these buyers and
all Midpoint Extended Life Orders in play a role in determining the market sellers come together to receive the best
June 2018 will remain at no cost. In data . . . to be made available to execution possible. The Exchange
addition, the Exchange is not proposing investors and at what cost.’’ 11 achieves this by permitting Midpoint
to adopt a new fee for execution of Further, ‘‘[n]o one disputes that Extended Life Orders to execute solely
Midpoint Extended Life Orders in competition for order flow is ‘fierce.’ against other Midpoint Extended Life
securities below $1 (Rule 7018(b)) . . . As the SEC explained, ‘[i]n the U.S. Orders at the midpoint of the NBBO in
whatsoever, which will continue to be national market system, buyers and return for providing market-improving
allowed at no cost. sellers of securities, and the broker- behavior in the form of a longer-lived
Accordingly, the Exchange is dealers that act as their order-routing midpoint order. Thus, the Exchange
proposing to amend Rule 7018(a)(1)–(3) agents, have a wide range of choices of believes that it is important for
to note: (1) That members executing a where to route orders for execution’; participants using Midpoint Extended
Midpoint Extended Life Order will be [and] ‘no exchange can afford to take its Life Orders to have a deep and liquid
assessed a charge of $0.0000 per share market share percentages for granted’ market. Applying a lower fee than the
executed in the month of July 2018 if because ‘no exchange possesses a $0.0030 per share executed that the
the member executes at least 250,000 monopoly, regulatory or otherwise, in Exchange assesses for removing resting
shares in Midpoint Extended Life the execution of order flow from broker midpoint liquidity should provide
Orders in June 2018; and (2) that all dealers’ . . . .’’ 12 incentive to market participants to use
other members will be assessed a fee of The proposed $0.0006 per share Midpoint Extended Life Orders while
$0.0006 per share executed, for executed fee is reasonable because the also allowing the Exchange to recoup
executions of Midpoint Extended Life Exchange has considered the nature of some of the costs it incurs in offering
Orders in securities priced $1 or more. the market in Midpoint Extended Life the Order.
Orders, the need to assess a fee to help The Exchange also believes that
2. Statutory Basis cover the costs of supporting trading on allowing transactions of Midpoint
The Exchange believes that its Nasdaq, and the Exchange’s desire to Extended Life Orders at no cost in July
proposal is consistent with Section 6(b) continue to promote use of Midpoint
of the Act,6 in general, and furthers the 2018 is reasonable because it currently
Extended Life Orders on the Exchange.
objectives of Sections 6(b)(4) and 6(b)(5) offers them at no cost. In addition, the
Taking these factors into consideration,
of the Act,7 in particular, in that it Exchange does not charge a fee for
the Exchange has determined that
provides for the equitable allocation of transactions in Orders with a RTFY
$0.0006 per share executed is
reasonable dues, fees and other charges routing Order Attribute.17 Such an
appropriate. The Exchange currently
among members and issuers and other Order must meet the definition of
assess [sic] a fee of $0.0007 per share
persons using any facility, and is not Designated Retail Order, which requires,
executed for certain TFTY Orders.13 The
designed to permit unfair among other things, that the Order not
Exchange also assesses $0.0007 per
discrimination between customers, originate from a trading algorithm or
share executed for QCST and QDRK
issuers, brokers, or dealers. any other computerized methodology.18
orders, except for QCST orders that
The Commission and the courts have execute on Nasdaq BX for which there Thus, allowing transactions of the RTFY
repeatedly expressed their preference is no charge or credit.14 Thus, the lower Order Attribute at no cost is designed to
for competition over regulatory fee is similar to existing fees for Orders promote the Exchange as a venue for
intervention in determining prices, executed on the Exchange and may retail investor Orders. Likewise, the
products, and services in the securities promote use of Midpoint Extended Life Exchange is proposing to allow
markets. In Regulation NMS, while Orders and consequently the quality of transactions in Midpoint Extended Life
adopting a series of steps to improve the the market in Midpoint Extended Life Orders at no cost in July 2018 to
current market model, the Commission Orders. The Exchange also notes that a promote use of such Orders and
highlighted the importance of market competitor exchange assesses a fee of consequently the quality of the market
forces in determining prices and SRO $0.0009 per share executed for both in Midpoint Extended Life Orders.
revenues and, also, recognized that adding and removing all non-displayed The Exchange believes that the
current regulation of the market system liquidity in securities priced $1 or proposed fees are an equitable
‘‘has been remarkably successful in more.15 allocation and are not unfairly
promoting market competition in its As discussed extensively in its discriminatory because the Exchange
broader forms that are most important to proposal,16 the Exchange believes that
17 RTFY is a routing option available for an order
investors and listed companies.’’ 8
that qualifies as a Designated Retail Order under
Likewise, in NetCoalition v. Securities 10 See NetCoalition, at 534–535. which orders check the System for available shares
and Exchange Commission 9 11 Id. at 537.
only if so instructed by the entering firm and are
12 Id. at 539 (quoting Securities Exchange Act
(‘‘NetCoalition’’) the D.C. Circuit upheld thereafter routed to destinations on the System
Release No. 59039 (December 2, 2008), 73 FR routing table. If shares remain unexecuted after
the Commission’s use of a market-based 74770, 74782–83 (December 9, 2008) (SR–
daltland on DSKBBV9HB2PROD with NOTICES
routing, they are posted to the book. Once on the
NYSEArca–2006–21)). book, should the order subsequently be locked or
6 15 U.S.C. 78f(b). 13 See Rule 7018(a)(1)–(3).
crossed by another market center, the System will
7 15 U.S.C. 78f(b)(4) and (5). 14 Id.
not route the order to the locking or crossing market
8 Securities Exchange Act Release No. 51808 15 See Investors Exchange Fee Schedule, available center. RTFY is designed to allow orders to
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) at: https://iextrading.com/trading/fees/. participate in the opening, reopening and closing
(‘‘Regulation NMS Adopting Release’’). 16 See Securities Exchange Act Release No. 81311 process of the primary listing market for a security.
9 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. (August 3, 2017), 82 FR 37248 (August 9, 2017) See Rule 4758(a)(1)(A)(v)b.
2010). (SR–NASDAQ–2017–074). 18 See Rule 7018.
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![31000 Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices
will apply the same fee to all similarly market in Midpoint Extended Life Life Orders would occur. In sum, if the
situated members. The Midpoint Orders in securities priced below $1. proposal to assess the new fee tiers for
Extended Life Order may be used by any Thus, the Exchange believes that the no executions of Midpoint Extended Life
market participant that is willing to cost tier in Midpoint Extended Life Orders is unattractive to market
satisfy the requirements of the Order Orders in securities priced below $1 participants, it is likely that the
Type and meet the volume requirement remains an equitable allocation and is Exchange will not gain any market share
therefore qualify for the proposed zero not unfairly discriminatory. and may lose market share.
fee tiers. Moreover, members not Accordingly, the Exchange does not
B. Self-Regulatory Organization’s
interested in using Midpoint Extended believe that the proposed changes will
Statement on Burden on Competition
Life Orders will continue to have the impair the ability of members or
ability to enter midpoint Orders in the The Exchange does not believe that competing order execution venues to
Nasdaq System, which have both fees the proposed rule change will impose maintain their competitive standing in
and credits associated with their any burden on competition not the financial markets.
execution.19 The Exchange is assessing necessary or appropriate in furtherance
fees for transactions in Midpoint of the purposes of the Act. In terms of C. Self-Regulatory Organization’s
Extended Life Orders beginning July 2, inter-market competition, the Exchange Statement on Comments on the
2018 and providing a limited time notes that it operates in a highly Proposed Rule Change Received From
during which transactions in Midpoint competitive market in which market Members, Participants, or Others
Extended Life Orders may [sic] done at participants can readily favor competing No written comments were either
no cost. The proposed $0.0006 per share venues if they deem fee levels at a solicited or received.
executed fee is lower than most other particular venue to be excessive, or
rebate opportunities available at other III. Date of Effectiveness of the
fees assessed for executions, which is
reflective of the beneficial nature of the venues to be more favorable. In such an Proposed Rule Change and Timing for
type of Order. Any member may take environment, the Exchange must Commission Action
advantage of the lower fee by using the continually adjust its fees to remain The foregoing rule change has become
Order Type. Similarly, members will competitive with other exchanges and effective pursuant to Section
receive no charge in the month of July with alternative trading systems that 19(b)(3)(A)(ii) of the Act.21
2018 if it meets the 250,000 share have been exempted from compliance At any time within 60 days of the
execution requirement of the tier. The with the statutory standards applicable filing of the proposed rule change, the
Exchange believes that 250,000 shares to exchanges. Because competitors are Commission summarily may
executed is a modest level that is free to modify their own fees in temporarily suspend such rule change if
attainable by any member that chooses response, and because market it appears to the Commission that such
to enter Midpoint Extended Life Orders. participants may readily adjust their action is: (i) Necessary or appropriate in
The Exchange believes that the zero order routing practices, the Exchange the public interest; (ii) for the protection
fee tier for July 2018, which is based on believes that the degree to which fee of investors; or (iii) otherwise in
the number of shares in Midpoint changes in this market may impose any furtherance of the purposes of the Act.
Extended Life Order executed in June burden on competition is extremely If the Commission takes such action, the
2018, is an equitable allocation and is limited. Commission shall institute proceedings
not unfairly discriminatory because the In this instance, the proposal to assess to determine whether the proposed rule
Exchange has provided adequate notice no fee for certain executions of should be approved or disapproved.
of the changes to all members so that Midpoint Extended Life Orders and a
modest fee of $0.0006 per share IV. Solicitation of Comments
they may adjust their trading behavior,
and any member may transact in executed will not place any burden on Interested persons are invited to
Midpoint Extended Life Orders. Thus, competition, but rather will help ensure submit written data, views, and
all members may execute 250,000 shares continued growth in the use of arguments concerning the foregoing,
or more in Midpoint Extended Life Midpoint Extended Life Orders by including whether the proposed rule
Orders in June 2018 to qualify for the making such Orders attractive to change is consistent with the Act.
zero cost tier in July 2018. The members that seek to execute at the Comments may be submitted by any of
Exchange also applies qualification midpoint with like-minded members, the following methods:
criteria for rebates under Rule 7014 that while also allowing the Exchange to
recoup some of the costs associated with Electronic Comments
are based on the prior month’s activity.
Specifically, the DLP program under offering the Order Type. The proposal • Use the Commission’s internet
Rule 7014(f) provides three rebates that also reduces burdens on members comment form (http://www.sec.gov/
have qualification criteria based on the associated with the Exchange applying rules/sro.shtml); or
level of ADV it had in the prior fees to an Order Type for which fees • Send an email to rule-comments@
month.20 have not been assessed. The new fee sec.gov. Please include File Number SR–
Last, the Exchange is not assessing a tiers will help members transition to fee NASDAQ–2018–047 on the subject line.
charge for executions in Midpoint liable transactions by providing an
opportunity to avoid paying a fee for a Paper Comments
Extended Life Orders in securities
transaction in Midpoint Extended Life • Send paper comments in triplicate
priced below $1 because there are very
Orders in July 2018 if they choose to to Brent J. Fields, Secretary, Securities
few executions in such Orders relative
provide 250,000 or more shares and Exchange Commission, 100 F Street
to transactions in Midpoint Extended
daltland on DSKBBV9HB2PROD with NOTICES
executed in Midpoint Extended Life NE, Washington, DC 20549–1090.
Life Orders in securities priced at $1 or
greater. Allowing such transactions at Orders for the month of June 2018. To All submissions should refer to File
no cost will help promote a deeper the extent the proposal is not successful Number SR–NASDAQ–2018–047. This
in promoting liquidity in Midpoint file number should be included on the
19 Based on whether the member is removing or Extended Life Orders, it would have no subject line if email is used. To help the
adding liquidity. See Rule 7018(a). meaningful impact on competition as
20 See Rule 7014(f)(5)(A). few transactions in Midpoint Extended 21 15 U.S.C. 78s(b)(3)(A)(ii).
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![Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices 31001
Commission process and review your (‘‘Commission’’) the proposed rule statements may be examined at the
comments more efficiently, please use change as described in Items I and II places specified in Item IV below. The
only one method. The Commission will below, which Items have been prepared Exchange has prepared summaries, set
post all comments on the Commission’s by the Exchange. The Exchange has forth in Sections A, B, and C below, of
internet website (http://www.sec.gov/ designated this proposal as a ‘‘non- the most significant parts of such
rules/sro.shtml). Copies of the controversial’’ proposed rule change statements.
submission, all subsequent pursuant to Section 19(b)(3)(A) of the
amendments, all written statements Act 3 and Rule 19b–4(f)(6) thereunder,4 A. Self-Regulatory Organization’s
with respect to the proposed rule which renders it effective upon filing Statement of the Purpose of, and
change that are filed with the with the Commission. The Commission Statutory Basis for, the Proposed Rule
Commission, and all written is publishing this notice to solicit Change
communications relating to the comments on the proposed rule change 1. Purpose
proposed rule change between the from interested persons.
Commission and any person, other than The Exchange proposes to: (i) Amend
I. Self-Regulatory Organization’s paragraph (n) of Exchange Rule 11.6,
those that may be withheld from the
public in accordance with the Statement of the Terms of Substance of Routing/Posting Instructions to add a
provisions of 5 U.S.C. 552, will be the Proposed Rule Change new optional order instruction to be
available for website viewing and The Exchange filed a proposal to (i) known as Non-Displayed Swap; and (ii)
printing in the Commission’s Public amend paragraph (n) of Exchange Rule make a related change to description of
Reference Room, 100 F Street NE, 11.6, Routing/Posting Instructions to Limit Orders and MidPoint Peg Orders
Washington, DC 20549 on official add a new optional order instruction to under Exchange Rule 11.8. These
business days between the hours of be known as Non-Displayed Swap; and proposed amendments are identical to
10:00 a.m. and 3:00 p.m. Copies of such (ii) make a related change to description the rules of EDGX 8 and substantially
filing also will be available for of Limit Orders and MidPoint Peg similar to the rules of Nasdaq and Arca.9
inspection and copying at the principal Orders under Exchange Rule 11.8. The The proposed Non-Displayed Swap
office of the Exchange. All comments proposed amendments are identical to (‘‘NDS’’) instruction would provide
received will be posted without change. the rules of Cboe EDGX Exchange, Inc. orders with a Non-Displayed 10
Persons submitting comments are (‘‘EDGX’’) 5 and substantially similar to instruction resting on the EDGA Book 11
cautioned that we do not redact or edit the rules of the Nasdaq Stock Market with a greater ability to receive an
personal identifying information from LLC (‘‘Nasdaq’’) 6 and NYSE Arca, Inc. execution when that resting order is
comment submissions. You should (‘‘Arca’’).7 locked by an incoming order (e.g., the
submit only information that you wish The text of the proposed rule change price of the resting non-displayed order
to make available publicly. All is available at the Exchange’s website at is equal to the price of the incoming
submissions should refer to File www.markets.cboe.com, at the order that is to be placed on the EDGA
Number SR–NASDAQ–2018–047, and Exchange’s principal office and at the Book). The NDS instruction would be an
should be submitted on or before July Public Reference Room of the optional order instruction that would
23, 2018. Commission. allow Users 12 to have their resting non-
For the Commission, by the Division of II. Self-Regulatory Organization’s displayed orders execute against an
Trading and Markets, pursuant to delegated Statement of the Purpose of, and incoming order with a Post Only
authority.22 instruction rather than have it be locked
Statutory Basis for, the Proposed Rule
Eduardo A. Aleman, Change by the incoming order. NDS would be
Assistant Secretary. defined as an instruction that may be
In its filing with the Commission, the attached to an order with a Non-
[FR Doc. 2018–14109 Filed 6–29–18; 8:45 am]
Exchange included statements Displayed instruction that when such
BILLING CODE 8011–01–P
concerning the purpose of and basis for order is resting on the EDGA Book and
the proposed rule change and discussed would be locked by an incoming order
SECURITIES AND EXCHANGE any comments it received on the with a Post Only instruction that does
COMMISSION proposed rule change. The text of these not remove liquidity pursuant to
paragraph (4) of Exchange Rule
[Release No. 34–83521; File No. SR– 3 15 U.S.C. 78s(b)(3)(A).
CboeEDGA–2018–011] 4 17
11.6(n),13 the order with a NDS
CFR 240.19b–4(f)(6).
5 See EDGX Rules 11.6(n)(7), 11.8(b)(7) and
8 See supra note 5.
Self-Regulatory Organizations; Cboe 11.8(d)(5); see also Securities Exchange Act Release
9 See supra notes 6 and 7.
EDGA Exchange, Inc.; Notice of Filing No. 80841 (June 1, 2017), 82 FR 26559 (June 7,
10 See Exchange Rule 11.6(e)(2).
and Immediate Effectiveness of a 2017), (Notice of Filing and Immediate
Effectiveness To Add a New Optional Order 11 See Exchange Rule 1.5(d).
Proposed Rule Change to Rule 11.6, Instruction Known as Non-Displayed Swap). 12 See Exchange Rule 1.5(ee).
Definitions and Rule 11.8, Order Types 6 See Nasdaq Rule 4703(m) (defining the Trade 13 Under Exchange Rule 11.6(n)(4), an order with
Now order modifier); see also Securities Exchange a Post Only instruction will remove contra-side
June 26, 2018 Act Release No. 79282 (November 10, 2016), 81 FR liquidity from the EDGA Book if the order is an
Pursuant to Section 19(b)(1) of the 81219 (November 17, 2016) (Notice of Filing and order to buy or sell a security priced below $1.00
Securities Exchange Act of 1934 Immediate Effectiveness of Proposed Rule change to or if the value of such execution when removing
Amend Rule 4702 and Rule 4703 to Add a ‘‘Trade liquidity equals or exceeds the value of such
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Now’’ Instruction to Certain Order Types). execution if the order instead posted to the EDGA
notice is hereby given that on June 13,
daltland on DSKBBV9HB2PROD with NOTICES
7 See Arca Rule 7.31–E(d)(2)(B) (describing the Book and subsequently provided liquidity,
2018, Cboe EDGA Exchange, Inc. (the Non-Display Remove Modifier); see also Securities including the applicable fees charged or rebates
‘‘Exchange’’ or ‘‘EDGA’’) filed with the Exchange Act Release No. 76267 (October 26, 2015), provided. To determine at the time of a potential
Securities and Exchange Commission 80 FR 66951 (October 30, 2015) (Order Approving execution whether the value of such execution
Proposed Rule change Adopting New Equity when removing liquidity equals or exceeds the
Trading Rules Relating to Orders and Modifiers and value of such execution if the order instead posted
22 17 CFR 200.30–3(a)(12). Retail Liquidity Program To Reflect the to the EDGA Book and subsequently provided
1 15 U.S.C. 78s(b)(1). Implementation of Pillar, the Exchange’s New liquidity, the Exchange will use the highest possible
2 17 CFR 240.19b–4. Trading Technology Platform). Continued
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Document Created: 2018-06-30 00:17:59
Document Modified: 2018-06-30 00:17:59
| 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 | 83 FR 30998 |
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