83 FR 48476 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees at Rule 7014
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 186 (September 25, 2018)
Federal Register Volume 83, Issue 186 (September 25, 2018)
| Page Range | 48476-48479 | |
| FR Document | 2018-20770 |
[Federal Register Volume 83, Number 186 (Tuesday, September 25, 2018)] [Notices] [Pages 48476-48479] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-20770] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84200; File No. SR-NASDAQ-2018-076] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees at Rule 7014 September 19, 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 September 13, 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. --------------------------------------------------------------------------- [[Page 48477]] I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the its fees at Rule 7014 to: (i) Eliminate the requirement that a member be a market maker to participate in the Qualified Market Maker (``QMM'') Program; and (ii) eliminate the additional $0.0002 per share executed credit under the NBBO Program. 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 Rule 7014 provides various Market Quality Incentive Programs available to members. The purpose of the proposed rule change is to amend Rule 7014 to: (i) Eliminate the requirement that a member be a market maker to participate in the QMM Program; and (ii) eliminate the additional $0.0002 per share executed credit under the NBBO Program. The Exchange initially filed the proposed pricing changes on September 4, 2018 (SR-NASDAQ-2018-071). On September 13, 2018, the Exchange withdrew that filing and submitted this filing, which makes a technical change to the proposed rule text. First Change The purpose of the first proposed rule [sic] change is to eliminate the requirement that a member be a market maker to participate in the QMM Program. A QMM is a member that makes a significant contribution to market quality by providing liquidity at the national best bid and offer (``NBBO'') in a large number of stocks for a significant portion of the day. In addition, the member must avoid imposing the burdens on Nasdaq and its market participants that may be associated with excessive rates of entry of orders away from the inside and/or order cancellation. The designation reflects the QMM's commitment to provide meaningful and consistent support to market quality and price discovery by extensive quoting at the NBBO in a large number of securities. In return for its contributions, certain financial benefits are provided to a QMM with respect to its order activity, as described under Rule 7014(e). These benefits include a lower rate charged for executions of orders in securities priced at $1 or more per share that access liquidity on the Nasdaq Market Center. Rule 7014(d) provides the qualification criteria a member must meet to be eligible for the QMM Program. Specifically, to be designated a QMM, a member must meet the following criteria: (1) The member is not assessed any ``Excess Order Fee'' under Rule 7018 during the month; (2) the member quotes at the NBBO at least 25% of the time during regular market hours in an average of at least 1,000 securities per day during the month; and (3) the member is a registered Nasdaq market maker.\3\ The Exchange is proposing to eliminate the requirement that a member be a Nasdaq market maker to be designated as a QMM. As a consequence, any member may participate in the program if it meets the other qualification criteria of the rule. --------------------------------------------------------------------------- \3\ In 2015, the Exchange adopted the requirement under Rule 7014(d) that a member must be a market maker to be designated a QMM. See Securities Exchange Act Release No. 74725 (April 14, 2015), 80 FR 21778 (April 20, 2015) (SR-NASDAQ-2015-032). Prior to the change, a QMM need not have been a Nasdaq market maker. Thus, the QMM designation does not by itself impose a two-sided quotation obligation or convey any of the benefits associated with being a registered market maker. This is currently the case and it will continue to be the case with the elimination of the market maker requirement. --------------------------------------------------------------------------- Second Change The purpose of the second proposed rule [sic] change is to eliminate the additional $0.0002 per share executed credit under the NBBO Program at Rule 7014(g). The NBBO Program provides two rebates per share executed. The Exchange is proposing to eliminate the $0.0002 per share executed credit, which is provided to a member for displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that provide liquidity priced at $1 or more. Under Rule 7014(g), to qualify for the additional $0.0002 per share executed credit for displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that provide liquidity priced at $1 or more, a member must (i) execute shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represents 0.5% or more of Consolidated Volume \4\ during the month, and (ii) has a ratio of at least 25% NBBO liquidity provided \5\ to liquidity provided during the month. The Exchange has observed that no members have qualified for this credit and is consequently proposing to eliminate it. --------------------------------------------------------------------------- \4\ Consolidated Volume is defined as 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. For purposes of calculating Consolidated Volume and the extent of a member's trading activity the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member's trading activity. See Rule 7018(a). \5\ NBBO liquidity provided means liquidity provided from orders (other than Designated Retail Orders, as defined in Nasdaq Rule 7018), that establish the NBBO, and displayed a quantity of at least one round lot at the time of execution. --------------------------------------------------------------------------- 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\ [[Page 48478]] (``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)). --------------------------------------------------------------------------- First Change The Exchange believes that the fees and credits of the QMM Program remain reasonable because the Exchange is not proposing to amend them. Thus, the basis set forth when the fees were adopted remain [sic] valid. The proposed elimination of the market maker requirement is reasonable, an equitable allocation and is not unfairly discriminatory because the Exchange seeks to broaden participation in the program. When the Exchange limited the QMM Program to market makers, it noted that market makers had provided the vast majority of participation in the program and were the only market participant [sic] utilizing the program at the time.\13\ The Exchange now seeks broader participation in the program by allowing any Nasdaq member to participate in the QMM Program that qualifies under the remaining criteria. The Exchange believes that circumstances have changed over the three years since it last allowed non-Nasdaq market makers to participate in the program, such that non-market makers may have interest in meeting the criteria required to receive the fees and credits under the QMM Program. Allowing broader participation in the QMM Program may increase the market-improving participation in the QMM Program, to the extent the number of members participating in the program increase [sic]. As a consequence, the proposed change is reasonable, an equitable allocation and will not discriminate in any way. --------------------------------------------------------------------------- \13\ Supra note 3. --------------------------------------------------------------------------- Second Change The Exchange believes that elimination of the $0.0002 per share executed NBBO credit is reasonable because it eliminates a credit that the Exchange has determined to be unnecessary. In particular, the credit has not provided adequate incentive to members to meet the related qualifying requirements. The Exchange notes that the $0.0004 per share executed NBBO Program rebate will remain, thus members will continue to have the opportunity to qualify for significant rebates under the NBBO Program. The Exchange believes that elimination of the $0.0002 per share executed NBBO credit is an equitable allocation and is not unfairly discriminatory because no member currently qualifies for the credit. Thus, eliminating the credit will not discriminate in any manner and the proposed change will be applied equitably among all members. Moreover, elimination of the credit from rule book will allow the Exchange to consider new incentives. 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 changes to the incentive programs under Rule 7014 do not impose a burden on competition because the Exchange's execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. Elimination of the market maker qualification requirement from the QMM Program may promote competition among trading venues to the extent that allowing broader participation in the program makes the Exchange a more attractive venue on which to participate. The proposed elimination of the $0.0002 per share executed NBBO credit will not place any burden on competition because no members currently qualify for the credit. As noted above, the credit has not served its purpose of incentivizing members to provide the market-improving participation required by the credit's qualification criteria. Consequently, removal of the credit should not affect competition among market participants or market venues 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 foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.\14\ --------------------------------------------------------------------------- \14\ 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 [[Page 48479]] Send an email to [email protected]. Please include File Number SR-NASDAQ-2018-076 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-2018-076. 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-2018-076, and should be submitted on or before October 16, 2018. --------------------------------------------------------------------------- \15\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-20770 Filed 9-24-18; 8:45 am] BILLING CODE 8011-01-P
![48476 Federal Register / Vol. 83, No. 186 / Tuesday, September 25, 2018 / Notices
B. Self-Regulatory Organization’s date to address, among other matters, proposed rule change between the
Statement on Burden on Competition certain annual corporate ‘‘housekeeping Commission and any person, other than
The Exchange does not believe that items,’’ which the Exchange states has those that may be withheld from the
the proposed rule change will impose historically included Exchange officer public in accordance with the
any burden on competition not appointments. As such, the Commission provisions of 5 U.S.C. 552, will be
believes that waiver of the operative available for website viewing and
necessary or appropriate in furtherance
delay is consistent with the protection printing in the Commission’s Public
of the purposes of the Act. The
of investors and the public interest. Reference Room, 100 F Street NE,
proposed rule change does not address
Therefore, the Commission hereby Washington, DC 20549, on official
competitive issues but relates to the
waives the 30-day operative delay and business days between the hours of
administration and functioning of the
designates the proposed rule change as 10:00 a.m. and 3:00 p.m. Copies of the
Exchange by allowing the Exchange
operative upon filing.16 filing also will be available for
greater flexibility in attracting and At any time within 60 days of the
retaining well qualified officers to the filing of the proposed rule change, the inspection and copying at the principal
role of CRO that are not designated as Commission summarily may office of the Exchange. All comments
an Executive Vice President or Senior temporarily suspend such rule change if received will be posted without change.
Vice President. it appears to the Commission that such Persons submitting comments are
C. Self-Regulatory Organization’s action is: (i) Necessary or appropriate in cautioned that we do not redact or edit
Statement on Comments on the the public interest; (ii) for the protection personal identifying information from
Proposed Rule Change Received From of investors; or (iii) otherwise in comment submissions. You should
Members, Participants, or Others furtherance of the purposes of the Act. submit only information that you wish
If the Commission takes such action, the to make available publicly. All
No written comments were either Commission shall institute proceedings submissions should refer to File
solicited or received. to determine whether the proposed rule Number SR–BX–2018–044 and should
III. Date of Effectiveness of the should be approved or disapproved. be submitted on or before October 16,
Proposed Rule Change and Timing for 2018.
IV. Solicitation of Comments
Commission Action For the Commission, by the Division of
Interested persons are invited to
Because the foregoing proposed rule submit written data, views, and Trading and Markets, pursuant to delegated
change does not: (i) Significantly affect authority.17
arguments concerning the foregoing,
the protection of investors or the public including whether the proposed rule Brent J. Fields,
interest; (ii) impose any significant change is consistent with the Act. Secretary.
burden on competition; and (iii) become Comments may be submitted by any of [FR Doc. 2018–20762 Filed 9–24–18; 8:45 am]
operative for 30 days from the date on the following methods: BILLING CODE 8011–01–P
which it was filed, or such shorter time
as the Commission may designate, it has Electronic Comments
become effective pursuant to Section • Use the Commission’s internet SECURITIES AND EXCHANGE
19(b)(3)(A)(iii) of the Act 12 and comment form (http://www.sec.gov/ COMMISSION
subparagraph (f)(6) of Rule 19b–4 rules/sro.shtml); or
thereunder.13 • Send an email to rule-comments@
A proposed rule change filed under sec.gov. Please include File Number SR– [Release No. 34–84200; File No. SR–
Rule 19b–4(f)(6) 14 normally does not BX–2018–044 on the subject line. NASDAQ–2018–076]
become operative prior to 30 days after Paper Comments Self-Regulatory Organizations; The
the date of the filing. However, Rule
19b–4(f)(6)(iii) 15 permits the • Send paper comments in triplicate Nasdaq Stock Market LLC; Notice of
Commission to designate a shorter time to Secretary, Securities and Exchange Filing and Immediate Effectiveness of
if such action is consistent with the Commission, 100 F Street NE, Proposed Rule Change To Amend
protection of investors and the public Washington, DC 20549–1090. Fees at Rule 7014
interest. The Exchange has asked the All submissions should refer to File
September 19, 2018.
Commission to waive the 30-day Number SR–BX–2018–044. This file
operative delay so that the proposed number should be included on the Pursuant to Section 19(b)(1) of the
rule change may become operative subject line if email is used. To help the Securities Exchange Act of 1934
immediately upon filing. The Exchange Commission process and review your (‘‘Act’’) 1, and Rule 19b–4 thereunder,2
notes that waiver of the operative delay comments more efficiently, please use notice is hereby given that on
will allow it to amend its By-Laws by only one method. The Commission will September 13, 2018, The Nasdaq Stock
September 26, 2018. The Exchange post all comments on the Commission’s Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
states that the boards of the Affiliated internet website (http://www.sec.gov/ filed with the Securities and Exchange
Exchanges will collectively meet on that rules/sro.shtml). Copies of the Commission (‘‘SEC’’ or ‘‘Commission’’)
submission, all subsequent the proposed rule change as described
12 15 U.S.C. 78s(b)(3)(A)(iii). amendments, all written statements in Items I, II, and III, below, which Items
13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– with respect to the proposed rule have been prepared by the Exchange.
4(f)(6)(iii) requires a self-regulatory organization to change that are filed with the The Commission is publishing this
daltland on DSKBBV9HB2PROD with NOTICES
give the Commission written notice of its intent to
file the proposed rule change, along with a brief Commission, and all written notice to solicit comments on the
description and text of the proposed rule change, communications relating to the proposed rule change from interested
at least five business days prior to the date of filing persons.
of the proposed rule change, or such shorter time 16 For purposes only of waiving the 30-day
as designated by the Commission. The Exchange operative delay, the Commission has also
has satisfied this requirement. considered the proposed rule’s impact on
17 17 CFR 200.30–3(a)(12).
14 17 CFR 240.19b–4(f)(6). 1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See
15 17 CFR 240.19b–4(f)(6)(iii). 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4.
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I. Self-Regulatory Organization’s for a significant portion of the day. In displayed quotes/orders (other than
Statement of the Terms of Substance of addition, the member must avoid Supplemental Orders or Designated
the Proposed Rule Change imposing the burdens on Nasdaq and its Retail Orders) that provide liquidity
The Exchange proposes to amend the market participants that may be priced at $1 or more, a member must (i)
its fees at Rule 7014 to: (i) Eliminate the associated with excessive rates of entry execute shares of liquidity provided in
requirement that a member be a market of orders away from the inside and/or all securities through one or more of its
maker to participate in the Qualified order cancellation. The designation Nasdaq Market Center MPIDs that
Market Maker (‘‘QMM’’) Program; and reflects the QMM’s commitment to represents 0.5% or more of
(ii) eliminate the additional $0.0002 per provide meaningful and consistent Consolidated Volume 4 during the
share executed credit under the NBBO support to market quality and price month, and (ii) has a ratio of at least
Program. discovery by extensive quoting at the 25% NBBO liquidity provided 5 to
The text of the proposed rule change NBBO in a large number of securities. In liquidity provided during the month.
is available on the Exchange’s website at return for its contributions, certain The Exchange has observed that no
http://nasdaq.cchwallstreet.com/, at the financial benefits are provided to a members have qualified for this credit
principal office of the Exchange, and at QMM with respect to its order activity, and is consequently proposing to
the Commission’s Public Reference as described under Rule 7014(e). These eliminate it.
Room. benefits include a lower rate charged for
executions of orders in securities priced 2. Statutory Basis
II. Self-Regulatory Organization’s at $1 or more per share that access The Exchange believes that its
Statement of the Purpose of, and liquidity on the Nasdaq Market Center. proposal is consistent with Section 6(b)
Statutory Basis for, the Proposed Rule Rule 7014(d) provides the of the Act,6 in general, and furthers the
Change qualification criteria a member must objectives of Sections 6(b)(4) and 6(b)(5)
In its filing with the Commission, the meet to be eligible for the QMM of the Act,7 in particular, in that it
Exchange included statements Program. Specifically, to be designated provides for the equitable allocation of
concerning the purpose of and basis for a QMM, a member must meet the reasonable dues, fees and other charges
the proposed rule change and discussed following criteria: (1) The member is not among members and issuers and other
any comments it received on the assessed any ‘‘Excess Order Fee’’ under persons using any facility, and is not
proposed rule change. The text of these Rule 7018 during the month; (2) the designed to permit unfair
statements may be examined at the member quotes at the NBBO at least discrimination between customers,
places specified in Item IV below. The 25% of the time during regular market issuers, brokers, or dealers.
Exchange has prepared summaries, set hours in an average of at least 1,000 The Commission and the courts have
forth in sections A, B, and C below, of securities per day during the month; repeatedly expressed their preference
the most significant aspects of such and (3) the member is a registered for competition over regulatory
statements. Nasdaq market maker.3 The Exchange is intervention in determining prices,
proposing to eliminate the requirement products, and services in the securities
A. Self-Regulatory Organization’s that a member be a Nasdaq market markets. In Regulation NMS, while
Statement of the Purpose of, and maker to be designated as a QMM. As adopting a series of steps to improve the
Statutory Basis for, the Proposed Rule a consequence, any member may current market model, the Commission
Change participate in the program if it meets the highlighted the importance of market
1. Purpose other qualification criteria of the rule. forces in determining prices and SRO
Second Change revenues and, also, recognized that
Rule 7014 provides various Market
current regulation of the market system
Quality Incentive Programs available to The purpose of the second proposed ‘‘has been remarkably successful in
members. The purpose of the proposed rule [sic] change is to eliminate the promoting market competition in its
rule change is to amend Rule 7014 to: additional $0.0002 per share executed broader forms that are most important to
(i) Eliminate the requirement that a credit under the NBBO Program at Rule investors and listed companies.’’ 8
member be a market maker to 7014(g). The NBBO Program provides
participate in the QMM Program; and Likewise, in NetCoalition v. Securities
two rebates per share executed. The and Exchange Commission 9
(ii) eliminate the additional $0.0002 per Exchange is proposing to eliminate the
share executed credit under the NBBO $0.0002 per share executed credit, 4 Consolidated Volume is defined as the total
Program. which is provided to a member for consolidated volume reported to all consolidated
The Exchange initially filed the displayed quotes/orders (other than transaction reporting plans by all exchanges and
proposed pricing changes on September Supplemental Orders or Designated trade reporting facilities during a month in equity
4, 2018 (SR–NASDAQ–2018–071). On Retail Orders) that provide liquidity securities, excluding executed orders with a size of
September 13, 2018, the Exchange less than one round lot. For purposes of calculating
priced at $1 or more. Under Rule Consolidated Volume and the extent of a member’s
withdrew that filing and submitted this 7014(g), to qualify for the additional trading activity the date of the annual reconstitution
filing, which makes a technical change $0.0002 per share executed credit for of the Russell Investments Indexes shall be
to the proposed rule text. excluded from both total Consolidated Volume and
3 In 2015, the Exchange adopted the requirement
the member’s trading activity. See Rule 7018(a).
First Change 5 NBBO liquidity provided means liquidity
under Rule 7014(d) that a member must be a market
provided from orders (other than Designated Retail
The purpose of the first proposed rule maker to be designated a QMM. See Securities
Orders, as defined in Nasdaq Rule 7018), that
[sic] change is to eliminate the Exchange Act Release No. 74725 (April 14, 2015),
establish the NBBO, and displayed a quantity of at
daltland on DSKBBV9HB2PROD with NOTICES
80 FR 21778 (April 20, 2015) (SR–NASDAQ–2015–
requirement that a member be a market 032). Prior to the change, a QMM need not have
least one round lot at the time of execution.
maker to participate in the QMM been a Nasdaq market maker. Thus, the QMM
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(4) and (5).
Program. A QMM is a member that designation does not by itself impose a two-sided
8 Securities Exchange Act Release No. 51808
makes a significant contribution to quotation obligation or convey any of the benefits
associated with being a registered market maker. (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
market quality by providing liquidity at This is currently the case and it will continue to (‘‘Regulation NMS Adopting Release’’).
the national best bid and offer be the case with the elimination of the market 9 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
(‘‘NBBO’’) in a large number of stocks maker requirement. 2010).
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![48478 Federal Register / Vol. 83, No. 186 / Tuesday, September 25, 2018 / Notices
(‘‘NetCoalition’’) the D.C. Circuit upheld members participating in the program execution services are completely
the Commission’s use of a market-based increase [sic]. As a consequence, the voluntary and subject to extensive
approach in evaluating the fairness of proposed change is reasonable, an competition both from other exchanges
market data fees against a challenge equitable allocation and will not and from off-exchange venues.
claiming that Congress mandated a cost- discriminate in any way. Elimination of the market maker
based approach.10 As the court qualification requirement from the
Second Change
emphasized, the Commission ‘‘intended QMM Program may promote
in Regulation NMS that ‘market forces, The Exchange believes that competition among trading venues to
rather than regulatory requirements’ elimination of the $0.0002 per share the extent that allowing broader
play a role in determining the market executed NBBO credit is reasonable participation in the program makes the
data . . . to be made available to because it eliminates a credit that the Exchange a more attractive venue on
investors and at what cost.’’ 11 Exchange has determined to be which to participate. The proposed
Further, ‘‘[n]o one disputes that unnecessary. In particular, the credit elimination of the $0.0002 per share
competition for order flow is ‘fierce.’ has not provided adequate incentive to executed NBBO credit will not place
. . . As the SEC explained, ‘[i]n the U.S. members to meet the related qualifying any burden on competition because no
national market system, buyers and requirements. The Exchange notes that members currently qualify for the credit.
sellers of securities, and the broker- the $0.0004 per share executed NBBO As noted above, the credit has not
dealers that act as their order-routing Program rebate will remain, thus served its purpose of incentivizing
agents, have a wide range of choices of members will continue to have the members to provide the market-
where to route orders for execution’; opportunity to qualify for significant improving participation required by the
[and] ‘no exchange can afford to take its rebates under the NBBO Program. credit’s qualification criteria.
market share percentages for granted’ The Exchange believes that Consequently, removal of the credit
because ‘no exchange possesses a elimination of the $0.0002 per share
should not affect competition among
monopoly, regulatory or otherwise, in executed NBBO credit is an equitable
market participants or market venues
the execution of order flow from broker allocation and is not unfairly
whatsoever.
dealers’ . . . .’’ 12 discriminatory because no member
currently qualifies for the credit. Thus, C. Self-Regulatory Organization’s
First Change eliminating the credit will not Statement on Comments on the
The Exchange believes that the fees discriminate in any manner and the Proposed Rule Change Received From
and credits of the QMM Program remain proposed change will be applied Members, Participants, or Others
reasonable because the Exchange is not equitably among all members.
No written comments were either
proposing to amend them. Thus, the Moreover, elimination of the credit from
basis set forth when the fees were solicited or received.
rule book will allow the Exchange to
adopted remain [sic] valid. The consider new incentives. III. Date of Effectiveness of the
proposed elimination of the market Proposed Rule Change and Timing for
B. Self-Regulatory Organization’s
maker requirement is reasonable, an Commission Action
equitable allocation and is not unfairly Statement on Burden on Competition
discriminatory because the Exchange The Exchange does not believe that The foregoing rule change has become
seeks to broaden participation in the the proposed rule change will impose effective pursuant to Section
program. When the Exchange limited any burden on competition not 19(b)(3)(A)(ii) of the Act.14
the QMM Program to market makers, it necessary or appropriate in furtherance At any time within 60 days of the
noted that market makers had provided of the purposes of the Act. In terms of filing of the proposed rule change, the
the vast majority of participation in the inter-market competition, the Exchange Commission summarily may
program and were the only market notes that it operates in a highly temporarily suspend such rule change if
participant [sic] utilizing the program at competitive market in which market it appears to the Commission that such
the time.13 The Exchange now seeks participants can readily favor competing action is: (i) Necessary or appropriate in
broader participation in the program by venues if they deem fee levels at a the public interest; (ii) for the protection
allowing any Nasdaq member to particular venue to be excessive, or of investors; or (iii) otherwise in
participate in the QMM Program that rebate opportunities available at other furtherance of the purposes of the Act.
qualifies under the remaining criteria. venues to be more favorable. In such an If the Commission takes such action, the
The Exchange believes that environment, the Exchange must Commission shall institute proceedings
circumstances have changed over the continually adjust its fees to remain to determine whether the proposed rule
three years since it last allowed non- competitive with other exchanges and should be approved or disapproved.
Nasdaq market makers to participate in with alternative trading systems that IV. Solicitation of Comments
the program, such that non-market have been exempted from compliance
makers may have interest in meeting the with the statutory standards applicable Interested persons are invited to
criteria required to receive the fees and to exchanges. Because competitors are submit written data, views, and
credits under the QMM Program. free to modify their own fees in arguments concerning the foregoing,
Allowing broader participation in the response, and because market including whether the proposed rule
QMM Program may increase the market- participants may readily adjust their change is consistent with the Act.
improving participation in the QMM order routing practices, the Exchange Comments may be submitted by any of
Program, to the extent the number of believes that the degree to which fee the following methods:
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changes in this market may impose any Electronic Comments
10 See NetCoalition, at 534–535. burden on competition is extremely
11 Id. at 537. limited. • Use the Commission’s internet
12 Id. at 539 (quoting Securities Exchange Act
In this instance, the proposed changes comment form (http://www.sec.gov/
Release No. 59039 (December 2, 2008), 73 FR
74770, 74782–83 (December 9, 2008) (SR– to the incentive programs under Rule rules/sro.shtml); or
NYSEArca–2006–21)). 7014 do not impose a burden on
13 Supra note 3. competition because the Exchange’s 14 15 U.S.C. 78s(b)(3)(A)(ii).
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![Federal Register / Vol. 83, No. 186 / Tuesday, September 25, 2018 / Notices 48479
• Send an email to rule-comments@ SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
sec.gov. Please include File Number SR– COMMISSION Statement of the Purpose of, and
NASDAQ–2018–076 on the subject line. Statutory Basis for, the Proposed Rule
[Release No. 34–84203; File No. SR–ISE– Change
Paper Comments
2018–79] 1. Purpose
• Send paper comments in triplicate
Self-Regulatory Organizations; Nasdaq The Exchange proposes to amend its
to Secretary, Securities and Exchange
ISE, LLC; Notice of Filing and By-Laws at Article IV, Section 7 to
Commission, 100 F Street NE,
Immediate Effectiveness of Proposed conform its provisions regarding the
Washington, DC 20549–1090.
Rule Change To Conform By-Law’s Exchange’s Chief Regulatory Officer
All submissions should refer to File CRO Provisions to Those of an Affiliate (‘‘CRO’’) to those of its affiliate, Nasdaq
Number SR–NASDAQ–2018–076. This PHLX LLC (‘‘Phlx’’).3 By-Law Article IV,
Exchange
file number should be included on the Section 7 presently requires that an
subject line if email is used. To help the September 19, 2018. officer of the Exchange 4 with the
Commission process and review your position of Executive Vice President or
Pursuant to Section 19(b)(1) of the Senior Vice President be designated as
comments more efficiently, please use Securities Exchange Act of 1934
only one method. The Commission will the CRO of the Exchange. The Exchange
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 now proposes to remove the
post all comments on the Commission’s notice is hereby given that on
internet website (http://www.sec.gov/ requirement that the CRO be an
September 6, 2018, Nasdaq ISE, LLC Executive Vice President or Senior Vice
rules/sro.shtml). Copies of the (‘‘ISE’’ or ‘‘Exchange’’) filed with the President of the Exchange. The
submission, all subsequent Securities and Exchange Commission Exchange believes that this requirement
amendments, all written statements (‘‘SEC’’ or ‘‘Commission’’) the proposed is unnecessary and notes that there may
with respect to the proposed rule rule change as described in Items I and be officers of the Exchange who are well
change that are filed with the II below, which Items have been qualified to serve in the CRO role, but
Commission, and all written prepared by the Exchange. The who may not hold the position of an
communications relating to the Commission is publishing this notice to Executive Vice President or Senior Vice
proposed rule change between the solicit comments on the proposed rule President.5 The Exchange does not seek
Commission and any person, other than change from interested persons. to amend any of the current
those that may be withheld from the responsibilities of the CRO as set forth
public in accordance with the I. Self-Regulatory Organization’s in Section 7; 6 rather, the proposed
provisions of 5 U.S.C. 552, will be Statement of the Terms of Substance of changes are intended to give the
available for website viewing and the Proposed Rule Change Exchange more flexibility to attract and
printing in the Commission’s Public retain well qualified officers to the role
The Exchange proposes to conform
Reference Room, 100 F Street NE, of CRO that are not designated as an
the Exchange’s By-Law provisions
Washington, DC 20549 on official Executive Vice President or Senior Vice
regarding the Chief Regulatory Officer to President of the Exchange. As noted
business days between the hours of
those of its affiliate, Nasdaq PHLX LLC above, the Exchange desires to conform
10:00 a.m. and 3:00 p.m. Copies of the
(‘‘Phlx’’). the requirements to become CRO in its
filing also will be available for
inspection and copying at the principal The text of the proposed rule change By-Laws to those in the By-Laws of
office of the Exchange. All comments is available on the Exchange’s website at Phlx, which do not contain a similar
received will be posted without change. http://ise.cchwallstreet.com/, at the restriction in Article IV, Section 4–7 of
Persons submitting comments are principal office of the Exchange, and at its By-Laws that its CRO be an Executive
cautioned that we do not redact or edit the Commission’s Public Reference Vice President or Senior Vice President
personal identifying information from Room. of Phlx.7
comment submissions. You should II. Self-Regulatory Organization’s 2. Statutory Basis
submit only information that you wish Statement of the Purpose of, and The Exchange believes that its
to make available publicly. All Statutory Basis for, the Proposed Rule proposal is consistent with Section 6(b)
submissions should refer to File Change
Number SR–NASDAQ–2018–076, and 3 See Phlx By-Law Article IV, Section 4–7 (Chief
should be submitted on or before In its filing with the Commission, the Regulatory Officer).
October 16, 2018. Exchange included statements 4 In Exhibit 5, the references to ‘‘Company’’ mean
For the Commission, by the Division of concerning the purpose of and basis for the Exchange.
5 The Exchange notes that Phlx’s CRO currently
Trading and Markets, pursuant to delegated the proposed rule change and discussed
holds the position of Vice President.
authority.15 any comments it received on the 6 The CRO’s responsibilities include general
Eduardo A. Aleman, proposed rule change. The text of these supervision of the regulatory operations of the
statements may be examined at the Exchange, including responsibility for overseeing
Assistant Secretary. the Exchange’s surveillance, examination, and
places specified in Item IV below. The
[FR Doc. 2018–20770 Filed 9–24–18; 8:45 am] enforcement functions and for administering any
Exchange has prepared summaries, set regulatory services agreements with another SRO to
BILLING CODE 8011–01–P
forth in sections A, B, and C below, of which the Exchange is a party. In addition, the CRO
daltland on DSKBBV9HB2PROD with NOTICES
the most significant aspects of such shall meet with the Regulatory Oversight
Committee of the Exchange in executive session at
statements. regularly scheduled meetings of such committee,
and at any time upon request of the CRO or any
member of the Regulatory Oversight Committee.
Unlike Phlx, the Exchange’s By-Laws provide that
the CRO may also serve as the General Counsel of
1 15 U.S.C. 78s(b)(1). the Exchange. See By-Law Article IV, Section 7.
15 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. 7 See note 5 above.
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Document Created: 2018-09-25 00:21:48
Document Modified: 2018-09-25 00:21:48
| 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 48476 |
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