83 FR 48354 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate the Market Quality Program (Rule 5950)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 185 (September 24, 2018)

[Federal Register Volume 83, Number 185 (Monday, September 24, 2018)]
[Notices]
[Pages 48354-48356]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-20660]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84179; File No. SR-Nasdaq-2018-074]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Eliminate the Market Quality Program (Rule 5950)

September 18, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on September 7, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to

[[Page 48355]]

solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 eliminate the Market Quality Program at 
Rule 5950. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to eliminate its Market Quality Program 
(``MQP'') and delete corresponding Rule 5950. The Exchange established 
the MQP in 2013 \4\ to promote market quality in certain securities 
listed on Nasdaq (``MQP Securities''), including by providing financial 
incentives to market makers in MQP Securities (``MQP Market Makers'') 
to maintain certain quoting and liquidity standards for them.
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    \4\ See Securities Exchange Act Release No. 74580 (March 25, 
2015), 80 FR 17126 (March 31, 2015) (SR-NASDAQ-2015-025) (reducing 
MQP fees to MQP Market Makers).
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    The MQP is designed to be a one year pilot program that is set to 
commence if and when certain conditions are satisfied: (i) The 
Exchange's acceptance of an MQP Company,\5\ on behalf of an MQP 
Security; and (ii) the entry of a relevant MQP Market Maker into the 
Program. To date, however, neither of these conditions for the 
commencement of the MQP have occurred despite efforts by the Exchange 
over time to make the MQP more enticing to market makers.\6\ Because 
the MQP has yet to even satisfy the necessary pre-conditions for 
launching its pilot period, neither the Exchange nor the Commission has 
been able to assess whether or to what extent the Program is 
successful.
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    \5\ The term ``MQP Company'' is defined in Rule 5950(e)(5) as 
the trust or company housing the Exchange Traded Fund (``ETF'') or, 
if the ETF is not a series of a trust or company, then the ETF 
itself.
    \6\ See Securities Exchange Act Release No. 69195 (March 20, 
2013), 78 FR 18393 (March 26, 2013) (SR-NASDAQ-2012-137) (order 
granting approval of Market Quality Program) (SR-NASDAQ-2012-137) 
(``MQP order''). See also Securities Exchange Act Release No. 68515 
(December 21, 2012), 77 FR 77141 (December 31, 2012) (SR-NASDAQ-
2012-137) (notice of filing Market Quality Program as pilot, with 
extensive description of program) (``MQP proposal'').
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    At the Commission's suggestion and pursuant to its general 
initiative to end pilot programs that have failed to achieve their 
stated objectives, the Exchange is now proposing to eliminate the MQP 
and delete Rule 5950, which comprises the Program. The Exchange notes 
that it plans to develop a replacement market quality program in the 
future that it hopes will be more successful in attracting market maker 
interest than the existing Program.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest. 
The Exchange believes that it is consistent with the Act to eliminate 
the MQP because the Exchange has limited resources available to it to 
devote to the operation of special programs like MQP 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 Exchange believes that the objectives of the MQP 
would best be served through a re-design of the program at a future 
date.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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. The Exchange notes that the MQP 
is not and has not ever been utilized and, as such, the elimination of 
the Program will have no impact on competition whatsoever.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19 b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the 30-day delayed operative date is consistent with the 
protection of investors and the public interest because the MQP program 
has never been utilized and there is no reason for such a delay. The 
Commission agrees. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\14\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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[[Page 48356]]

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Nasdaq-2018-074 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-2018-074. 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-2018-074, and should be submitted 
on or before October 15, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20660 Filed 9-21-18; 8:45 am]
BILLING CODE 8011-01-P