10134 Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Pursuant to Equity 7, Section 114(h), the term 

‘‘Consolidated Volume’’ shares the meaning of that 

term set forth in Equity 7, Section 118(a). Equity 7, 

Section 118(a) defines ‘‘Consolidated Volume’’ to 

mean 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 is excluded from both total 

Consolidated Volume and the member’s trading 

activity. 

4Pursuant to Equity 7, Section 114(d), a member 

may be designated as a QMM if: (1) The member 

is not assessed any ‘‘Excess Order Fee’’ under 

Equity 7, Section 118 during the month; and (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. 

5See Securities Exchange Act Release No. 34– 

90719 (December 18, 2020), 85 FR 84437 (December 

28, 2020) (SR–NASDAQ–2020–87). 

If you are requesting or aggregating 

comments from other persons for 

submission to the NRC, then you should 

inform those persons not to include 

identifying or contact information that 

they do not want to be publicly 

disclosed in their comment submission. 

Your request should state that the NRC 

does not routinely edit comment 

submissions to remove such information 

before making the comment 

submissions available to the public or 

entering the comment into ADAMS. 

II. Discussion 

On December 17, 2020, the NRC 

solicited comments on DG–1361. The 

public comment period closed on 

February 16, 2021. DG–1361 is proposed 

revision 2 of regulatory guide (RG) 1.89 

of the same name. The proposed 

revision describes an approach that is 

acceptable to the staff of the NRC to 

meet regulatory requirements for 

environmental qualification of certain 

electric equipment important to safety 

for nuclear power plants. The previous 

revision of RG 1.89 was issued in June 

1984 and endorsed the use of Institute 

of Electrical and Electronic Engineers 

(IEEE) Standard (Std.) 323–1974. This 

proposed revision incorporates 

additional information regarding the 

dual logo International Electrotechnical 

Commission (IEC)/IEEE Std. 60780–323, 

‘‘Nuclear Facilities—Electrical 

Equipment Important to Safety— 

Qualification,’’ Edition 1, 2016–02. The 

NRC received two requests to extend the 

public comment period (ADAMS 

Accession Nos. ML20142A003 and 

ML21041A128), but the agency was 

unable to extend the comment period 

before the close of the comment period. 

The NRC has decided to reopen the 

public comment period for an 

additional 60 days to allow more time 

for members of the public to develop 

and submit their comments. 

Dated: February 11, 2021. 

For the Nuclear Regulatory Commission. 

Meraj Rahimi, 

Chief, Regulatory Guidance and Generic 

Issues Branch, Division of Engineering, Office 

of Nuclear Regulatory Research. 

[FR Doc. 2021–03220 Filed 2–17–21; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91107; File No. SR– 

NASDAQ–2021–006] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Exchange’s Transaction Credits at 

Equity 7, Sections 114 and 118(a) 

February 11, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

1, 2021, 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. 

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 credits at Equity 

7, Sections 114 and 118(a), as described 

further below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/rules, 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 

schedule of credits, at Equity 7, Sections 

114 and 118(a). 

Proposed Changes to Qualified Market 

Maker Rebates 

Presently, in Equity 7, Section 114, 

the Exchange offers several special 

pricing programs that are based, in part, 

upon members’ activities in securities 

priced at or more than $1 relative to 

total ‘‘Consolidated Volume.’’ 3 Among 

them is a program that provides rebates 

to Qualified Market Makers (‘‘QMMs’’).4

Pursuant to Equity 7, Section 114(e), a 

member that qualifies as a QMM is 

entitled to receive a rebate per share 

executed with respect to all displayed 

orders (other than Designated Retail 

Orders, as defined in Equity 7, Section 

118) in securities priced at $1 or more 

per share that provide liquidity in each 

of Tapes A, B, and C. Such a rebate is 

in addition to any rebate payable under 

Equity 7, Section 118(a). Specifically, 

the Exchange offers several tiers of 

rebates to QMMs. Among them, it offers 

a Tier 1 rebate of $0.0001 per share 

executed to any QMM that executes 

shares of liquidity provided in all 

securities through one or more of its 

Nasdaq Market Center MPIDs that 

represent above 0.70% up to, and 

including, 0.90% of Consolidated 

Volume during the month. Additionally, 

the Exchange offers a Tier 2 rebate of 

$0.0002 per share executed to any QMM 

that executes shares of liquidity 

provided in all securities through one or 

more of its Nasdaq Market Center MPIDs 

that represent above 0.90% of 

Consolidated Volume during the month. 

For the month of December 2020 only, 

the Exchange amended the definition of 

‘‘Consolidated Volume’’ in Equity 7, 

Section 114,5 to account for an 

unexpected rise in sub-dollar trading 

which stood to adversely impact 


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Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices 10135 

6The Exchange also proposes to delete rule text 

in Equity 7, Section 118 that set forth the same 

special methodology for calculating volumes as a 

percentage of Consolidated Volume during the 

month of December 2020. At this time, the 

Exchange does not propose to apply this special 

methodology beyond December 2020 to its schedule 

of transaction fees and credits, at Equity 7, Section 

118. This, for purposes of calculating the pricing 

tiers set forth in Equity 7, Section 118, the Exchange 

does not exclude sub-dollar volume. The Exchange 

proposes to remove the special methodology from 

the rule text, as it is no longer operative. 

members’ qualifications for tiered 

pricing programs—including the QMM 

pricing program—because such 

qualifications depend upon members 

achieving threshold percentages of 

volumes as a percentage of Consolidated 

Volume, and the rise in sub-dollar 

volume had diluted these percentage 

calculations. Specifically, the Exchange 

amended the definition of 

‘‘Consolidated Volume’’ to state that for 

purposes of determining which credits 

were applicable to a member during the 

month of December 2020, the Exchange 

would calculate the member’s volume 

and total Consolidated Volume twice. 

First, it would calculate the member’s 

volume and Consolidated Volume as 

presently set forth in Equity 7, Section 

118(a). Second, it would calculate the 

member’s volume and Consolidated 

Volume by excluding volume and 

Consolidated Volume that consists of 

executed orders in securities priced less 

than $1. Thereafter, the Exchange would 

evaluate which of these two member 

volume and Consolidated Volume 

calculations would qualify members for 

the most advantageous credits and 

charges for the month of December 2020 

and then it would apply those credits 

and charges to its members. Thus, if but 

for the rise of sub-dollar volume in 

December, a member would have 

qualified for a higher credit or a lower 

fee tier that month, then the Exchange 

would have applied that higher credit or 

lower fee tier to the member’s trading 

activity during the month. 

In making this change, the Exchange 

reasoned that it would have been unfair 

for its members that execute significant 

dollar volumes in securities priced at or 

above $1 on the Exchange to fail to 

achieve or to lose their existing 

qualifications for special pricing in 

December 2020 due to anomalous 

behavior to which they did not 

contribute. The Exchange noted that 

although the change applied only to 

pricing in December 2020, it would 

monitor sub-dollar volumes going 

forward, and assess whether additional 

pricing adjustments are warranted if 

sub-dollar volumes remained elevated 

relative to the norm. 

In fact, the Exchange has observed 

that the rise in sub-dollar volume has 

not abated, and that it continues to 

threaten the ability of some Exchange 

members to qualify for their pricing 

tiers. In January 2021, sub-dollar 

volume comprised 13.65 percent of 

Consolidated Volume. By comparison, 

sub-dollar volume comprised only 9.28 

percent of Consolidated Volume, on 

average, during all of 2020. In 

particular, the sub-dollar phenomenon 

continues to threaten the ability of 

QMMs to attain their Tier 1 and Tier 2 

credit tiers. In January 2021, several 

QMMs experienced these adverse 

impacts. 

Accordingly, the Exchange proposes 

to amend the definition of 

‘‘Consolidated Volume’’ in Equity 7, 

Section 114(h) to apply the December 

2020 pricing formulation going forward 

for purposes of determining whether a 

QMM qualifies for Tier 1 or Tier 2 QMM 

rebates.6 That is, the Exchange will 

calculate a QMM’s volume and total 

Consolidated Volume twice. First, it 

will calculate the QMM’s volume and 

Consolidated Volume as presently set 

forth in Equity 7, Section 118(a). 

Second, with certain modifications 

discussed below, it will calculate the 

QMM’s volume and Consolidated 

Volume by excluding volume and 

Consolidated Volume that consists of 

executed orders in securities priced less 

than $1. Thereafter, the Exchange will 

evaluate which of these two QMM 

volume and Consolidated Volume 

calculations would qualify QMMs for 

the most advantageous credit tier and 

then it will apply those credits. 

The Exchange believes that its QMM 

program plays an important role in 

improving the quality of, deepening 

liquidity in, and tightening spreads in 

its market. The QMM pricing program, 

in turn, offers rebates that are critical to 

incenting members to meet the quoting 

requirements for acting as QMMs. To 

the extent that a rise in sub-dollar 

trading by non-QMMs imperils the 

ability of QMMs to qualify for the 

rebates that motivate members to serve 

as QMMs, the Exchange believes that it 

is appropriate to act to preserve the 

effectiveness of these rebates, including 

by potentially excluding sub-dollar 

volume from the rebate eligibility 

criteria. 

Where the Exchange proposes to 

exclude sub-dollar volume from the 

QMM rebate qualification formulas, the 

Exchange also proposes to raise the 

threshold percentages of Consolidated 

Volume that a QMM must achieve to 

qualify for Tier 1 rebates. The Exchange 

proposes to raise the eligibility 

threshold for the Tier 1 rebate to ensure 

that it is calibrated appropriately. That 

is, while the Exchange proposes to 

exclude sub-dollar volume to prevent 

the rebate qualification criteria from 

becoming too difficult to attain, the 

Exchange also wants to ensure that, 

exclusive of sub-dollar volume, these 

criteria do not become too easy to attain 

and that they continue to incentivize 

QMMs to add more liquidity to the 

Exchange in securities priced at $1 or 

more. The Exchange believes that a 

small upward adjustment to the 

Consolidated Volume threshold will 

ensure that the Tier 1 rebate remains 

reasonably challenging for QMMs to 

achieve if sub-dollar volume is 

excluded. Specifically, to qualify for the 

Tier 1 rebate (when excluding subdollar volume), the Exchange proposes 

that a QMM must execute shares of 

liquidity in securities through one or 

more of its Nasdaq Market Center MPIDs 

that represent above 0.80%, up to and 

including, 0.90% of Consolidated 

Volume during a month. Meanwhile, to 

qualify for the Tier 2 rebate (again, 

when excluding sub-dollar volume), the 

Exchange proposes that the qualification 

requirements will remain unchanged: A 

QMM must execute shares of liquidity 

in securities through one or more of its 

Nasdaq Market Center MPIDs that 

represent above 0.90% of Consolidated 

Volume during a month. 

The following example illustrates the 

operation of the proposed changes to the 

QMM rebate tiers when taken together. 

During a month, a QMM adds 90 

million shares to the Exchange, of 

which 300,000 shares consists of 

volume in sub-dollar securities. 

Meanwhile, total Consolidated Volume 

for that month is 13 billion shares, of 

which 1.8 billion shares consists of 

executions in sub-dollar securities. To 

determine whether the QMM qualifies 

for a Tier 1 QMM rebate under the 

proposal, the Exchange would first 

determine whether the QMM’s volume, 

inclusive of its sub-dollar activity, is 

between 0.70% and 0.90% of 

Consolidated Volume (including subdollar volume). In this example, the 

QMM would not qualify for Tier 1 

under this formula because the QMM 

added only 0.69% of Consolidated 

Volume during the month. Nevertheless, 

the Exchange would determine next 

whether the QMM would qualify for the 

Tier 1 rebate under the alternative 

formula in which the QMM’s sub-dollar 

volume and sub-dollar-attributable 

Consolidated Volume are excluded from 

the calculation, while also raising the 

QMM’s qualifying threshold percentages 

of Consolidated Volume to between 

0.80% and 0.90%. Under this 

alternative formula, the QMM would 


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10136 Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(4) and (5). 

9NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 

2010) (quoting Securities Exchange Act Release No. 

59039 (December 2, 2008), 73 FR 74770, 74782–83 

(December 9, 2008) (SR–NYSEArca–2006–21)). 

qualify for Tier 1 rebates as it added 

0.80% of Consolidated Volume 

(exclusive of sub-dollar volume). Insofar 

as the proposal would provide for the 

Exchange to apply the calculation 

results that are most advantageous to the 

QMM, the Exchange in this example 

would apply the Tier 1 rebate to the 

QMM. 

Proposed Amendments to Existing 

Transaction Credits 

In addition to the above, the Exchange 

proposes to amend three of the credits 

it offers to members in displayed quotes 

or orders in securities in all three Tapes 

(other than Supplemental Orders or 

Designated Retail Orders) that add 

liquidity to the Exchange, as set forth in 

Equity 7, Section 118(a). 

First, the Exchange proposes to 

amend a credit it presently offers of 

$0.00295 per share executed to a 

member with shares of liquidity 

provided in all securities through one or 

more of its Nasdaq Market Center MPIDs 

that represent 0.90% or more of 

Consolidated Volume during the month, 

which includes shares of liquidity 

provided with respect to securities that 

are listed on exchanges other than 

Nasdaq or NYSE that represent 0.25% or 

more of Consolidated Volume. The 

Exchange proposes to decrease the 

threshold percentage of Consolidated 

Volume necessary to qualify for this 

credit from 0.90% to 0.85%. The 

Exchange proposes to lower this 

threshold to render it easier for 

members to qualify for the $0.00295 per 

share executed credit. More members 

may seek to attain this credit to the 

extent that it is more accessible to them. 

If more members increase their liquidity 

adding activity on the Exchange to 

attain this credit, then the quality of the 

market will improve, to the benefit of all 

participants. 

Second, the Exchange proposes to 

amend a credit it presently offers of 

$0.0029 per share executed to a member 

with shares of liquidity provided in all 

securities through one or more of its 

Nasdaq Market Center MPIDs that 

represent more than 0.70% of 

Consolidated Volume during the month. 

The Exchange proposes to decrease the 

threshold percentage of Consolidated 

Volume necessary to qualify for this 

credit from 0.70% to 0.675%. The 

Exchange also proposes to lower this 

threshold to render it easier for 

members to qualify for the $0.0029 per 

share executed credit. Again, more 

members may seek to attain this credit 

to the extent that it is more accessible 

to them. If more members increase their 

liquidity adding activity on the 

Exchange to attain this credit, then the 

quality of the market will improve, to 

the benefit of all participants. 

Third, the Exchange proposes to 

amend a credit it presently offers of 

$0.0025 per share executed to a member 

that provides a daily average of at least 

4 million shares of liquidity, of which 

greater than 1.5 million shares per day 

must comprise non-displayed liquidity, 

excluding midpoint orders. The 

Exchange proposes to amend the credit 

to state that the ‘‘greater than 1.5 million 

shares per day’’ requirement may be 

satisfied, not only by adding nondisplayed liquidity (excluding midpoint 

orders), but also by using Midpoint 

Extended Life Orders (‘‘M–ELOs’’). The 

Exchange proposes this change to 

provide a new incentive for members to 

increase significant liquidity each day 

in M–ELO Orders, as well as to render 

the credit easier for members to attain, 

thereby enticing more members to try to 

grow their liquidity adding activity on 

the Exchange to do so. To the extent that 

the proposed amended credit succeeds 

in increasing the number of its members 

that attain the credit, and in increasing 

the volume of liquidity provided to the 

Exchange, then the quality of the market 

will improve for all participants. 

New Proposed Growth Tier 

Finally, the Exchange proposes to 

amend Equity 7, Section 118(a), to 

establish a new $0.0029 per share 

executed credit to a member, for 

displayed quotes or orders in securities 

in all three Tapes (other than 

Supplemental Orders or Designated 

Retail Orders) that add liquidity to the 

Exchange, to the extent that the 

member, through one or more of its 

Nasdaq Market Center MPIDs: (i) 

Provides shares of liquidity in all 

securities that represent equal to or 

greater than 0.65% of Consolidated 

Volume during the month; (ii) increases 

its average daily volume of M–ELO 

Orders executed by 150% or more 

during the month relative to the month 

of January 2021; and (iii) executes an 

average daily volume of at least 750,000 

shares in M–ELO Orders for the month. 

The Exchange intends for this new 

credit to encourage members to grow the 

extent to which they utilize the M–ELO 

Order Type on the Exchange, and to 

reward those members that do so in 

significant volumes. The Exchange 

believes that any ensuing increase in 

M–ELO liquidity on the Exchange will 

improve the quality of the Nasdaq 

market generally as well as the 

experiences of those members that 

choose to interact with the market 

through M–ELO. To the extent that the 

proposed new credit succeeds in having 

its members attain the credit, and in 

increasing the volume of liquidity 

provided to the Exchange, then the 

quality of the market will improve for 

all participants. 

2. Statutory Basis 

The Exchange believes that its 

proposals are consistent with Section 

6(b) of the Act,7 in general, and further 

the objectives of Sections 6(b)(4) and 

6(b)(5) of the Act,8 in particular, in that 

they provide for the equitable allocation 

of reasonable dues, fees and other 

charges among members and issuers and 

other persons using any facility, and are 

not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. The 

proposals are also consistent with 

Section 11A of the Act relating to the 

establishment of the national market 

system for securities. 

The Proposals Are Reasonable 

The Exchange’s proposals are 

reasonable in several respects. As a 

threshold matter, the Exchange is 

subject to significant competitive forces 

in the market for equity securities 

transaction services that constrain its 

pricing determinations in that market. 

The fact that this market is competitive 

has long been recognized by the courts. 

In NetCoalition v. Securities and 

Exchange Commission, the D.C. Circuit 

stated as follows: ‘‘[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 brokerdealers 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 ’. . . .’’ 9

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 


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10Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(‘‘Regulation NMS Adopting Release’’). 

broader forms that are most important to 

investors and listed companies.’’ 10

Numerous indicia demonstrate the 

competitive nature of this market. For 

example, clear substitutes to the 

Exchange exist in the market for equity 

security transaction services. The 

Exchange is only one of several equity 

venues to which market participants 

may direct their order flow. Competing 

equity exchanges offer similar tiered 

pricing structures to that of the 

Exchange, including schedules of 

rebates and fees that apply based upon 

members achieving certain volume 

thresholds. 

Within this environment, market 

participants can freely and often do shift 

their order flow among the Exchange 

and competing venues in response to 

changes in their respective pricing 

schedules. Within the foregoing context, 

the proposals represent reasonable 

attempts by the Exchange to increase its 

liquidity and market share relative to its 

competitors. 

As to the Exchange’s proposal to 

potentially exclude sub-dollar volume 

for purposes of determining QMMs’ 

qualifications for Tier 1 and Tier 2 

rebates, the Exchange believes that this 

proposal is reasonable because in its 

absence, QMMs may fail to qualify for 

their existing QMM pricing tiers or fail 

to qualify for better pricing tiers. The 

Exchange does not wish to penalize 

QMMs that engage in significant activity 

on the Exchange in securities priced at 

or above $1 due to the sub-dollar trading 

activities of other firms. The proposed 

rule change would seek to avoid such a 

penalty by calculating eligibility for Tier 

1 and Tier 2 rebates by first including 

and then excluding sub-dollar volume, 

and then by applying the calculation 

that would result in the pricing 

determination that is most advantageous 

to each QMM. 

At the same time, the Exchange 

believes that it is reasonable, when 

excluding sub-dollar volume from its 

QMM Tier eligibility formulas, to 

increase the threshold percentages of 

Consolidated Volume that a QMM must 

achieve to qualify for the Tier 1 rebate. 

This proposal will help to properly 

calibrate eligibility criteria for the QMM 

Tier 1 rebate so that, when excluding 

sub-dollar volume, the Tier is neither 

too hard nor too easy for QMMs to 

attain. That is, even though excluding 

sub-dollar volume from the calculations 

may help QMMs to remain in their 

existing Tiers even as sub-dollar activity 

by other firms rises, the Exchange also 

wants to be sure that the Tiers continue 

to challenge QMMs to add additional 

volume in stocks priced at or above $1. 

The Exchange notes that if QMMs are 

unable to meet the higher Consolidated 

Volume percentage requirements for 

Tier 1, they still may qualify for the Tier 

under the existing qualification formula, 

which includes sub-dollar volume but 

applies lower Consolidated Volume 

percentage requirements. 

As to the Exchange’s proposals to ease 

the qualification criteria for three of its 

transaction credits, at Equity 7, Section 

118(a), the Exchange believes that these 

proposals are reasonable because they 

will ease or broaden the eligibility 

criteria for the credits and, in doing so, 

they will encourage more members to 

try to attain the credits by adding 

additional liquidity to the Exchange. If 

more members increase their liquidity 

adding activity on the Exchange to 

attain these credits, then the quality of 

the market will improve, and the 

Exchange will become more attractive to 

existing and prospective participants. 

Finally, the Exchange believes that its 

proposal is reasonable to establish a 

new add credit with a growth 

component tied to M–ELO activity. The 

proposal will encourage members to 

increase the extent to which they utilize 

M–ELO Orders on the Exchange, and it 

will reward members that do so in 

significant volumes. The Exchange 

believes that any ensuing increase in 

M–ELO liquidity on the Exchange will 

improve the quality of the Nasdaq 

market generally as well as the 

experiences of those members that 

choose to interact with the market 

through M–ELO. Additionally, if 

members increase their liquidity adding 

activity on the Exchange to attain this 

new credit, then the quality of the 

market will improve, and the Exchange 

will become more attractive to existing 

and prospective participants. The 

Exchange notes that it selected January 

2021 as the baseline for the growth 

requirements because it is the month 

immediately preceding the 

establishment of the new tier. 

The Exchange notes that those market 

participants that are dissatisfied with 

the proposals are free to shift their order 

flow to competing venues that offer 

them lower charges or higher or more 

readily attainable credits. 

The Proposals Are Equitable Allocations 

of Credits 

The Exchange believes its proposals 

will allocate its credits fairly among its 

market participants. 

The Exchange believes that its 

proposal to amend the qualification 

criteria for Tier 1 and Tier 2 QMM 

rebates is an equitable allocation 

because it would bolster the 

effectiveness of QMM rebates, which are 

imperiled by a rise in sub-dollar trading. 

Maintaining the attainability of QMM 

rebates is crucial to ensuring 

participation in the QMM program, 

which in turn is an important 

contributor to the quality of the Nasdaq 

market. Although the recent spike in 

sub-dollar pricing also threatens to 

upend the ability of members to qualify 

for Nasdaq’s other volume-based tiers of 

credits and charges, the Exchange 

believes that its most pressing need is to 

address the threat to the QMM program 

given that several QMMs are already 

experiencing adverse pricing effects 

from the sub-dollar phenomenon. The 

Exchange notes that it continues to 

assess whether and how to modify its 

other volume-based pricing programs 

going forward to accommodate the rise 

in sub-dollar volumes. 

The Exchange also believes that it an 

equitable allocation, when excluding 

sub-dollar volume from the QMM Tier 

1 eligibility formula, to increase the 

threshold percentage of Consolidated 

Volume that a QMM must achieve to 

qualify for the credit. The Exchange 

believes that it is fair to calibrate 

eligibility criteria for the Tier 1 rebate so 

that the Tiers are neither too hard nor 

too easy for QMMs to attain. That is, just 

as the Exchange believes that it is 

equitable, for the reasons discussed 

above, to help QMMs to remain in their 

existing Tiers by excluding sub-dollar 

activity, the Exchange also believes it is 

beneficial to market quality to continue 

to challenge QMMs to add additional 

volume in stocks priced at or above $1. 

The Exchange notes that if QMMs are 

unable to meet the higher Consolidated 

Volume percentage requirement for the 

Tier 1 rebate, they still may qualify for 

the Tier under the existing qualification 

formula, which includes sub-dollar 

volume but applies lower Consolidated 

Volume percentage requirements. 

It is also equitable for the Exchange to 

amend three of its transaction credits, 

by lowering and broadening their 

eligibility requirements, respectively, as 

a means of encouraging more members 

to try to attain the credits by adding 

additional liquidity to the Exchange, 

including in M–ELO Orders. To the 

extent that the Exchange succeeds in 

increasing liquidity on the Exchange, 

including in M–ELO Orders, then the 

Exchange will experience improvements 

in its market quality, which will benefit 

all market participants. 

Lastly, the Exchange believes that it is 

equitable to establish a new add credit 

tier that is tied to the growth of M–ELO 

activity. The M–ELO Order Type 


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provides a valuable means by which 

like-minded participants, with shared 

time horizons, can safely interact on the 

market and mitigate the risk of adverse 

selection and information leakage. The 

addition of this new proposed credit tier 

will encourage members to increase the 

extent of their use of M–ELO Orders on 

the Exchange, and it will reward 

members that do so in significant 

volumes. The Exchange believes that 

any increase in M–ELO liquidity on the 

Exchange that follows from the 

introduction of this new credit will 

improve the quality of the Nasdaq 

market generally as well as the 

experiences of those members that 

choose to interact with the market 

through M–ELO Orders. Additionally, if 

members increase their liquidity adding 

activity on the Exchange to attain this 

credit, then the quality of the market 

will improve, and the Exchange will 

become more attractive to existing and 

prospective participants. 

Any participant that is dissatisfied 

with the proposals is free to shift their 

order flow to competing venues that 

provide more generous pricing or less 

stringent qualifying criteria. 

The Proposals Are Not Unfairly 

Discriminatory 

The Exchange believes that its 

proposals ae not unfairly 

discriminatory. As an initial matter, the 

Exchange believes that nothing about its 

volume-based tiered pricing model is 

inherently unfair; instead, it is a rational 

pricing model that is well-established 

and ubiquitous in today’s economy 

among firms in various industries—from 

co-branded credit cards to grocery stores 

to cellular telephone data plans—that 

use it to reward the loyalty of their best 

customers that provide high levels of 

business activity and incent other 

customers to increase the extent of their 

business activity. It is also a pricing 

model that the Exchange and its 

competitors have long employed with 

the assent of the Commission. It is fair 

because it incentivizes customer activity 

that increases liquidity, enhances price 

discovery, and improves the overall 

quality of the equity markets. 

The Exchange believes that its 

proposal to amend the qualification 

criteria for Tier 1 and Tier 2 QMM 

rebates is not unfairly discriminatory. 

Although the rise in sub-dollar trading 

affects the attainability of many of 

Nasdaq’s volume-based pricing tiers, it 

is fair for the Exchange to address the 

impact on QMM rebates, in particular, 

because maintaining the attainability of 

QMM rebates is crucial to maintaining 

participation in the QMM program, 

which in turn is an important 

contributor to the quality of the Nasdaq 

market. Even as the Exchange continues 

to assess whether and how to generally 

modify its volume-based pricing 

programs going forward to 

accommodate the rise in sub-dollar 

volumes, the Exchange believes that a 

pressing need exists now to address the 

particular threat this phenomenon poses 

to the QMM program given that several 

QMMs are already experiencing adverse 

pricing effects. 

At the same time, it is not unfairly 

discriminatory to increase the threshold 

percentage of Consolidated Volume that 

a QMM must achieve to qualify for the 

Tier 1 rebate when the Exchange also 

excludes sub-dollar volume from the 

eligibility calculation. The Exchange 

believes that it is fair to calibrate 

eligibility criteria for the QMM Tier 1 

rebate so that the Tiers are neither too 

hard nor too easy for QMMs to attain. 

That is, just as the Exchange believes 

that it is not unfairly discriminatory, for 

the reasons discussed above, to help 

QMMs to remain in their existing Tiers 

by excluding sub-dollar activity, the 

Exchange also believes it is beneficial to 

market quality to continue to challenge 

QMMs to add additional volume in 

stocks priced at or above $1. The 

Exchange notes that if QMMs are unable 

to meet the higher Consolidated Volume 

percentage requirement for Tier 1, they 

still may qualify for the Tier under the 

existing qualification formula, which 

includes sub-dollar volume but applies 

lower Consolidated Volume percentage 

requirements. 

Moreover, the Exchange believes that 

its three proposed amendments to its 

transaction credits are not unfairly 

discriminatory because they stand to 

improve the overall market quality of 

the Exchange, to the benefit of all 

market participants, by incentivizing 

more members to provide additional 

liquidity to the Exchange, including 

M–ELO liquidity. 

Likewise, the Exchange believes that 

its new proposed add credit with a 

growth component is not unfairly 

discriminatory because it is aimed at 

encouraging the growth of M–ELO 

Orders on the Exchange, which if 

successful, stands to improve the 

quality of the Nasdaq market generally, 

to the benefit of all market participants, 

as well as improve the experiences of 

those members that choose to interact 

with the market through M–ELO. 

Additionally, if members increase their 

liquidity adding activity on the 

Exchange to attain this credit, then the 

quality of the market will improve, and 

the Exchange will become more 

attractive to existing and prospective 

participants. 

Any participant that is dissatisfied 

with the proposals is free to shift their 

order flow to competing venues that 

provide more generous pricing or less 

stringent qualifying criteria. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule changes will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Intramarket Competition 

The Exchange does not believe that its 

proposal will place any category of 

Exchange participant at a competitive 

disadvantage. 

As noted above, the proposal to 

amend the Exchange’s QMM rebate 

pricing methodology will help to ensure 

that no QMM suffers a pricing 

disadvantage due to the ongoing spike 

in sub-dollar volumes, while at the same 

time it will provide an appropriatelycalibrated incentive for QMMs to 

continue to add additional liquidity to 

the Exchange in securities priced at or 

above $1. It is not intended to provide 

a competitive advantage to any 

particular QMM. 

Meanwhile, the proposed changes to 

the qualifying criteria for three of the 

Exchange’s transaction credits will 

make it easier for members to attain 

these credits, and will thereby 

encourage more members to try to attain 

these credits by increasing their marketimproving behavior. Any member may 

elect to provide the levels or types of 

liquidity required in order to receive the 

credits. Furthermore, all members of the 

Exchange will benefit from any increase 

in market activity that the proposals 

effectuate. 

Likewise, the proposed addition of a 

rebate tied to a member’s activity in 

M–ELO Orders will encourage growth in 

that activity, to the benefit of users of 

those Order Types as well as the quality 

of the market in general. Any member 

may elect to engage in the levels of M– 

ELO liquidity required to qualify for this 

new credit. 

The Exchange notes that its members 

are free to trade on other venues to the 

extent they believe that the proposed 

amended credits are too low or the 

qualification criteria are not attractive. 

As one can observe by looking at any 

market share chart, price competition 

between exchanges is fierce, with 

liquidity and market share moving 

freely between exchanges in reaction to 

fee and credit changes. The Exchange 

notes that its pricing tier structure is 

consistent with broker-dealer fee 


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Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices 10139 

11 15 U.S.C. 78s(b)(3)(A)(ii). 12 17 CFR 200.30–3(a)(12). 

practices as well as the other industries, 

as described above. 

Intermarket Competition 

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 

credits and 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 credits and fees in 

response, and because market 

participants may readily adjust their 

order routing practices, the Exchange 

believes that the degree to which credit 

or fee changes in this market may 

impose any burden on competition is 

extremely limited. 

The proposed new and amended 

credits are reflective of this competition 

because, even as one of the largest U.S. 

equities exchanges by volume, the 

Exchange has less than 20% market 

share, which in most markets could 

hardly be categorized as having enough 

market power to burden competition. 

Moreover, as noted above, price 

competition between exchanges is 

fierce, with liquidity and market share 

moving freely between exchanges in 

reaction to fee and credit changes. This 

is in addition to free flow of order flow 

to and among off-exchange venues 

which comprises upwards of 50% of 

industry volume. 

The Exchange’s proposals are procompetitive in that the Exchange 

intends for them to preserve and 

enhance its incentive programs, as well 

as to increase liquidity adding activity 

on the Exchange, thereby rendering the 

Exchange a more attractive and vibrant 

venue to market participants. 

In sum, if the changes proposed 

herein are unattractive to market 

participants, it is likely that the 

Exchange will lose market share as a 

result. Accordingly, the Exchange does 

not believe that the proposed changes 

will impair the ability of members or 

competing order execution venues to 

maintain their competitive standing in 

the financial markets. 

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.11

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2021–006 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–2021–006. 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–2021–006 and 

should be submitted on or before March 

11, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–03212 Filed 2–17–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting; Cancellation 

FEDERAL REGISTER CITATION OF PREVIOUS

ANNOUNCEMENT: 86 FR 8061, February 3, 

2021. 

PREVIOUSLY ANNOUNCED TIME AND DATE OF

THE MEETING: Tuesday, February 16, 

2021 at 5:00 p.m. 

CHANGES IN THE MEETING: The Closed 

Meeting scheduled for Tuesday, 

February 16, 2021 at 5:00 p.m., has been 

cancelled. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information; please contact 

Vanessa A. Countryman from the Office 

of the Secretary at (202) 551–5400. 

Dated: February 16, 2021. 

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2021–03402 Filed 2–16–21; 4:15 pm] 

BILLING CODE 8011–01–P 


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