[Federal Register Volume 87, Number 117 (Friday, June 17, 2022)]
[Notices]
[Pages 36562-36567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13039]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95091; File No. SR-NASDAQ-2022-036]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Transaction Fees at Equity 7, Section 118(a)

June 13, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 1, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Equity 7, Section 118, to: (i) eliminate the Nasdaq Growth Program, at 
Equity 7, Section 114(j); (ii) adjust or eliminate several of the 
Exchange's transaction credits, at Equity 7, 118(a); (iii) add a new 
credit to Equity 7, Section 118(a); and (iv) re-organize, re-format, 
and re-state the Exchange's schedule of transaction fees and credits at 
Equity 7, Section 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 proposed Rule change will (i) eliminate the Nasdaq Growth 
Program, at Equity 7, Section 114(j); (ii) adjust or eliminate several 
of the Exchange's transaction credits, at Equity 7, 118(a); (iii) add a 
new credit to Equity 7, Section 118(a); and (iv) re-organize, re-
format, and re-state the Exchange's schedule of transaction fees and 
credits at Equity 7, Section 118(a).
Elimination of the Nasdaq Growth Program
    The Exchange presently offers the ``Nasdaq Growth Program,'' as set 
forth in Equity 7, Section 114(j),\3\ which exists to incentivize 
members to increase the extent to which they add liquidity to the 
Exchange over time. Under the Nasdaq Growth Program, the Exchange 
provides a credit of $0.0025 per share executed (in securities priced 
at $1 or more) to members that provide a certain amount of liquidity to 
the Exchange and also grow the extent to which they add such liquidity 
over time. Specifically, a member is eligible for the credit if it 
both: (A) adds greater than 750,000 shares a day on average during the 
month through one or more of its Nasdaq Market Center MPIDs; and (B) 
increases its shares of liquidity provided through one or more of its 
Nasdaq Market Center MPIDs as a percent of Consolidated Volume \4\ by 
20% versus the member's Growth Baseline or (ii) have met the growth 
criteria in Equity 7, Section 114(j)(1)(A) and (j)(1)(B)(i) in three 
separate months and maintained or increased its shares of liquidity 
provided through one or more of its Nasdaq Market Center MPIDs as a 
percent of Consolidated Volume compared to the Growth Baseline 
established when the member met the

[[Page 36563]]

criteria for the third month.\5\ The Exchange provides this Nasdaq 
Growth Program credit in lieu of other credits that it otherwise makes 
available to a member for displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) that provide liquidity 
under Equity 7, Section 118 if the former credit is greater than the 
latter credit.
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    \3\ See Securities Exchange Act Release No. 78977 (September 29, 
2016), 81 FR 69140 (October 5, 2016) (SR-NASDAQ-2016-132).
    \4\ Pursuant to Equity 7, Section 118(a), the term 
``Consolidated Volume'' shall 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 shall be excluded 
from both total Consolidated Volume and the member's trading 
activity. For the purposes of calculating the extent of a member's 
trading activity during the month on Nasdaq and determining the 
charges and credits applicable to such member's activity, all M-ELO 
Orders that a member executes on Nasdaq during the month will count 
as liquidity-adding activity on Nasdaq.
    \5\ As defined in Equity 7, Section 114, the ``Growth Baseline'' 
is the member's shares of liquidity provided in all securities 
through one or more of its Nasdaq Market Center MPIDs as a percent 
of Consolidated Volume during the last month a member qualified for 
the Nasdaq Growth Program under Equity 7, Section 114(j)(1)(B)(i). 
If a member has not qualified for a credit under this program, its 
May 2018 share of liquidity provided in all securities through one 
or more of its Nasdaq Market Center MPIDs as a percent of 
Consolidated Volume is used to establish a baseline.
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    The Exchange proposes to eliminate the Nasdaq Growth Program 
because it has not been successful in accomplishing its objectives. 
That is, it has not induced members to grow materially the extent to 
which they add liquidity to the Exchange over time. The Exchange has 
limited resources to allocate to incentive programs like this one and 
it must, from time to time, reallocate those resources to maximize 
their net impact on the Exchange, market quality, and participants. 
Going forward, the Exchange plans to reallocate the resources it 
devotes to the Nasdaq Growth Program to other incentive programs that 
it hopes will be more impactful.
Adjustments to Transaction Credits for Displayed Quotes/Orders (Other 
Than Supplemental Orders or Designated Retail Orders) That Provide 
Liquidity to the Exchange
    Next, the Exchange proposes to adjust several existing credits to 
its members for displayed quotes/orders (other than Supplemental Orders 
or Designated Retail Orders) that provide liquidity to the Exchange. 
For all of these credits described below, the purpose of the changes is 
to recalibrate the credits to account for changes in member behavior 
over time that have rendered the credits less challenging for members 
to attain. That is, the Exchange proposes to reduce the amount of the 
credits because members now readily meet the volume requirements to 
qualify for them, such that the credits reward these members for 
remaining static in their activity on the Exchange. By reducing the 
amount of these credits, the Exchange wishes to incent such members to 
strive to qualify for higher available credits by further increasing 
the extent to which they add liquidity to the Exchange.
    Currently, the Exchange provides a $0.0025 per share executed 
credit for securities in all three Tapes 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 0.10% of Consolidated 
Volume. The Exchange proposes to reduce the amount of this credit to 
$0.0020 per share executed for securities in all three Tapes.
    Currently, the Exchange also provides a $0.0020 per share executed 
credit for securities in Tape C to a member with shares of liquidity 
provided in all securities representing less than 0.10% of Consolidated 
Volume, through one or more of its Nasdaq Market Center MPIDs; provided 
that (i) the member also provides a daily average of at least 250,000 
shares of liquidity provided in securities listed on an exchange other 
than Nasdaq, or (ii) the member routes a daily average volume of at 
least 10,000 shares during the month via the QDRK routing strategy. The 
Exchange proposes to reduce the amount of this credit for securities in 
Tape C to $0.0018 per share executed.
    Currently, the Exchange provides a $0.0025 per share executed 
credit for securities in all three Tapes to a member that provides a 
daily average of at least 4 million shares of liquidity, of which more 
than 1.5 million shares per day must consist of non-displayed 
liquidity, excluding midpoint orders, or Midpoint Extended Life Orders 
(``M-ELOs''). The Exchange proposes to reduce the amount of this credit 
to $0.0020 per share executed for securities in all three Tapes.
    Finally, the Exchange currently provides a credit of $0.0020 per 
share executed for securities in Tapes A and B and $0.0015 per share 
executed for securities in Tape C for all other displayed quotes/orders 
that provide liquidity to the Exchange. The Exchange proposes to reduce 
the amount of this credit to $0.0018 per share executed for securities 
in Tapes A and B, and to $0.0013 per share executed for securities in 
Tape C.
Elimination of Two Credits for Non-Displayed Orders (Other Than 
Supplemental Orders) That Provide Liquidity to the Exchange
    The Exchange proposes to eliminate two credits for non-displayed 
orders (other than Supplemental orders) that provide liquidity to the 
Exchange.
    Presently, the Exchange provides a credit of $0.0019 per share 
executed for securities in Tapes and B [sic], and $0.0013 per share 
executed for securities in Tape C, to a member with midpoint orders 
(excluding buy (sell) orders with Midpoint pegging that receive an 
execution price that is lower (higher) than the midpoint of the NBBO) 
if the member (i) executes a combined volume of 1 million or more 
shares in midpoint orders provided and M-ELO executed during the month 
through one or more of its Nasdaq Market Center MPIDs and (ii) has a 
10% or greater increase in midpoint orders provided and M-ELO executed 
through one or more of its Nasdaq Market Center MPIDs during the month 
over the month of April 2019. The Exchange proposes to eliminate this 
credit.
    The Exchange also provides a credit of $0.00125 per share executed 
for securities in Tapes A and B, and $0.0010 per share executed for 
securities in Tape C, to a member with other non-displayed orders if 
the member, during the month (i) provides 0.30% or more of Consolidated 
Volume through non-displayed orders (including midpoint orders) and 
through M-ELO Orders; and (ii) increases providing liquidity through 
non-displayed orders (including midpoint orders) and through M-ELO 
Orders by 0.10% or more as a percentage of Consolidated Volume relative 
to the member's August 2020 Consolidated Volume provided through non-
displayed orders (including midpoint orders) and through M-ELO. The 
Exchange also proposes to eliminate this credit.
    The Exchange proposes to eliminate these two credits because the 
baseline months for the growth elements of these tiers--April 2019 and 
August 2020--are no longer relevant benchmarks, as substantial 
increases in trading volumes have occurred since times. As such, these 
credits no longer provide growth incentives that are aligned with the 
Exchange's needs. Again, the Exchange has limited resources to devote 
to incentive programs, and it is appropriate for the Exchange to 
reallocate these incentives periodically in a manner that best achieves 
the Exchange's overall mix of objectives.
Adjustment to Existing Credits and Addition of New Credit for Non-
Displayed Orders (Other Than Supplemental Orders) That Provide 
Liquidity to the Exchange
    The Exchange proposes to adjust and add to a series of credits that 
the Exchange presently offers to members that either grow the extent of 
their volumes of M-ELO or midpoint orders relative to a baseline month 
or execute a substantial number of such orders on the Exchange during 
the month.
    Presently, the Exchange provides a credit of $0.0001 per share 
executed to

[[Page 36564]]

a member, through one or more of its Nasdaq Market Center MPIDs, 
either: (i) increases the extent of its ADV of M-ELO Orders and/or 
midpoint orders (that execute against M-ELO Orders) in all securities 
by an ADV of 1 million shares or more during the month relative to the 
month of June 2021; or (ii) executes a combined volume of at least 3 
million shares ADV through midpoint orders provided and M-ELO Orders 
during the month and increases the extent of its ADV of midpoint orders 
provided and M-ELO Orders in all securities by 100% or more during the 
month relative to the month of June 2021. Alternatively, the Exchange 
provides a credit of $0.00015 per share executed to a member which, 
through one or more of its Nasdaq Market Center MPIDs, either: (i) 
increases the extent of its ADV of M-ELO Orders and/or midpoint orders 
(that execute against M-ELO Orders) in all securities by an ADV of 2 
million shares or more during the month relative to the month of June 
2021; or (ii) executes a combined volume of at least a 4 million shares 
ADV through midpoint orders provided and M-ELO Orders during the month 
and increases the extent of its ADV of midpoint orders provided and M-
ELO Orders in all securities by 150% or more during the month relative 
to the month of June 2021. The Exchange proposes to lower first of 
these credits from $0.0001 to $0.00005 per share executed and lower the 
second of these credits from $0.00015 to $0.00010 per share executed.
    Next, the Exchange proposes to add a new credit of $0.0015 per 
share executed for a member that, through one or more of its Nasdaq 
Market Center MPIDs, executes a combined volume of at least a 5 million 
shares ADV through midpoint orders provided and M-ELO Orders during the 
month. This new proposed credit will not be combinable with the other 
two existing credits.
    Together, the adjustments to the two existing credits, and the 
addition of the third, will re-align existing incentives for members to 
grow or add M-ELO or midpoint liquidity while introducing a new 
incentive for members to add even larger volumes of M-ELO and midpoint 
orders during the month to attain the highest existing level of 
credits. To the extent that the Exchange succeeds through these 
proposals in increasing the addition of midpoint or M-ELO liquidity or 
executions on the Exchange, all participants will benefit from the 
increase in market quality.
    Additionally, and as part of the reorganization described below, 
the Exchange proposes to relocate the two existing credits and the new 
credit in the section of the schedule entitled ``Supplemental credit to 
member for displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) that provide liquidity (per share executed.'' 
The Exchange believes that the three credits are, in fact, supplemental 
credits and belong logically in that section of the schedule.
    Finally, for ease of reference, the Exchange proposes to refer to 
these three credits as ``M-ELO Supplemental Credits,'' and label them 
M-ELO Supplemental Credit A ($0.00005), B ($0.0001), and C ($0.00015), 
respectively.
Elimination of Supplemental Credit for Certain Midpoint Orders
    Presently, the Exchange provides a supplemental credit for midpoint 
orders (excluding buy (sell) orders with midpoint pegging that receive 
an execution price that is lower (higher) than the midpoint of the 
NBBO). A member currently receives a credit of either: (a) $0.0001 per 
share executed for orders in securities in all three Tapes if the 
member, during the month (i) provides at least 15 million shares of 
midpoint liquidity per day during the month and (ii) increases 
providing liquidity through midpoint orders by 10% or more relative to 
the member's May 2021 ADV provided through midpoint orders; or (b) 
$0.0002 per share executed for orders in securities in all three Tapes 
if the member, during the month (i) provides at least 15 million shares 
of midpoint liquidity per day during the month; and (ii) increases 
providing liquidity through midpoint orders by 30% or more relative to 
the member's May 2021 ADV provided through midpoint orders. The 
Exchange proposes to eliminate the $0.001 per share executed credit but 
retain the $0.0002 per share executed credit.
    The Exchange proposes to eliminate the credit because many members 
now readily meet the volume requirements to qualify for it, such that 
the credit in many cases rewards these members for remaining static in 
their activity on the Exchange. By eliminating the lower of these two 
credits, the Exchange wishes to incent such members to strive to 
qualify for the higher credit by further increasing the extent to which 
they add liquidity to the Exchange.
Reorganization and Re-Formatting of Exchange's Schedule of Transaction 
Credits and Charges
    In addition to the above changes to the substance of the Exchange's 
schedule of credits and fees, at Equity 7, Section 118(a), the Exchange 
also proposes non-substantive amendments to the schedule that will re-
organize and re-format it to render it shorter, better and more 
logically organized, and easier to read and comprehend.
    Most notably, the Exchange proposes to consolidate the schedule of 
charges and fees and restate it as a single chart. Presently, the Rule 
lists the contents of the schedule three times successively--once for 
securities in Tape A, once for securities in Tape B, and once for 
securities in Tape C. This format is cumbersome for participants to 
read and onerous for the Exchange to maintain. The proposed amendments 
will shorten and simplify the schedule by listing all of the Exchange's 
transaction credits and charges one time. It will do so by reformatting 
the schedule into a chart with rows listing each tier of credit/charge 
and columns listing the applicable amounts of those credits/charges for 
transactions in securities in each of the three Tapes. In the proposed 
amended and restated schedule, when a credit or charge does not apply 
to securities in a particular Tape, the chart will so indicate with the 
term ``N/A.'' \6\
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    \6\ The proposed rule change is similar to the formatting and 
organization changes made to the Exchange's sister exchange, Nasdaq 
BX, Inc., in 2019. See Securities Exchange Act Release No. 85912 
(May 22, 2019); 84 FR 24834 (May 29, 2019) (SR-BX-2019-013).
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    The Exchange also proposes to re-format and emphasize in bold type 
the headings for the credits and fees that comprise the schedule so 
that members can distinguish these sections more easily. The proposal 
will simplify the schedule by removing redundant explanatory text, such 
as the phrase ``per share executed'' for each credit/charge (the 
headings of the chart already indicate that all credits and charges 
apply on a per share executed basis), ``charge to . . .'' (as the 
headings of the schedule already state where they are charges and 
credits), and ``in additional to the credits provided for . . .'' 
(which is not needed for credits already under the heading 
``Supplemental credit to member . . .'').
    The proposed amendments will consolidate existing definitions of 
certain terms used within Section 118(a) into a single bulleted 
definitions paragraph at the outset of the Rule, including the terms 
``ADV'' (or ``Average Daily Volume''), ``Consolidated Volume,'' and 
``Designated Retail Order.'' The proposal will not make any substantive 
changes to the meanings of these terms.
    The proposal will also re-format aspects of the schedule where 
presently, multiple credits and charges are listed in the same cells, 
and are thus difficult to read. For example, the proposed rule

[[Page 36565]]

will separate the single cells listing a ``charge or credit to [a] 
member entering TFTY, MOPB, MOPP, SAVE, SOLV, CART, QDRK, QCST or 
directed order that executes in a venue other than the Nasdaq Market 
Center'' into multiple rows corresponding to each of them individually.
    Additionally, the proposal will amend the existing line item 
entitled ``Credit to other members'' by retitling it ``Credit for all 
other displayed quotes/order that provide liquidity (per share 
executed).'' This proposal will clarify that this credit applies to 
members for all other displayed quotes/orders not otherwise covered by 
all of the preceding credits for displayed quotes or orders that 
provide liquidity to the Exchange (rather than a subset thereof).
    The Exchange will relocate several charges and credits that are 
either misplaced or logically belong in other sections of the schedule. 
For example, in the section entitled ``Charge to enter orders that 
execute in the Nasdaq Market Center,'' the Exchange proposes to move 
the $0.0030 per share executed credit for ``all other orders that 
execute in the Nasdaq Market Center'' to the end of the section, as it 
is a baseline charge absent the availability of discounted charges. 
Additionally, the Exchange proposes to move from the displayed credits 
section of the schedule to the section listing supplemental credits for 
displayed orders/quotes that provide liquidity (other than Supplemental 
orders or Designated Retail Orders) the following three credits, as 
these credits logically are supplemental, rather than regular credits: 
(a) a $0.0005 per share executed credit for securities in Tape B for a 
member with shares of liquidity provided in all securities through one 
or more of its Nasdaq Market Center MPIDs that represent at least 1.75% 
of Consolidated Volume, including shares of liquidity provided with 
respect to securities that are listed on exchanges other than Nasdaq or 
NYSE that represent at least 0.60% of Consolidated Volume; (b) a 
$0.0001 per share executed credit for securities in Tape B for a member 
with shares of liquidity provided in securities that are listed on 
exchanges other than Nasdaq or NYSE during the month representing at 
least 0.10% of Consolidated Volume through one or more of its Nasdaq 
Market Center MPIDs; and (c) a $0.0005 per share executed credit for 
securities in Tape A for a member with shares of liquidity provided in 
Tape A securities through one or more of its Nasdaq Market Center MPIDs 
that represent at least 0.75% of Consolidated Volume, and shares of 
liquidity provided in Tape B securities through one or more of its 
Nasdaq Market Center MPIDs that represent at least 0.60% of 
Consolidated Volume. Similarly, the Exchange proposes to relocate to 
the regular displayed credits section of the schedule two credits that 
are misplaced now in the supplemental credits section: (a) a $0.0026 
per share executed credit for securities in all Tapes to a member that, 
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 0.15% of Consolidated Volume; (ii) increases the extent to 
which it provides liquidity in all securities as a percentage of 
Consolidated Volume by 20% or more during the month relative to the 
month of May 2021; and (iii) has a ratio of at least 50% NBBO liquidity 
provided (as defined in Equity 7, Section 114(g)) to liquidity provided 
by displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) during the month; and (b) a $0.0027 per share 
executed credit for securities in all Tapes to a member that, 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 
0.20% of Consolidated Volume; (ii) increases the extent to which it 
provides liquidity in all securities as a percentage of Consolidated 
Volume by 35% or more during the month relative to the month of May 
2021; and (iii) has a ratio of at least 60% NBBO liquidity provided (as 
defined in Equity 7, Section 114(g)) to liquidity provided by displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) during the month. Finally, the Exchange proposes to relocate to 
the section entitled ``Supplemental credit to member for displayed 
quotes/orders (other than Supplemental Orders) that provide liquidity 
(per share executed) the following credit, which was also misplaced in 
error: a $0.0005 per share executed credit for securities in Tape B to 
a member with shares of liquidity provided in securities that are 
listed on exchanges other than Nasdaq or NYSE during the month 
representing at least 0.10% of Consolidated Volume through one or more 
of its Nasdaq Market Center MPIDs.
    Other non-substantive changes include correcting current 
inconsistencies in terminology, capitalizing defined terms, de-
capitalizing undefined terms, and de-capitalizing the first word in the 
row. Misspellings of certain terms, including ``RTFY,'' ``TFYY,'' and 
``MELO,'' will be corrected to ``RFTY,'' ``TFTY,'' and ``M-ELO,'' 
respectively. The proposal also reconciles terminological 
inconsistencies among the three existing statements of the schedule, 
e.g., ``nondisplayed'' and ``non-displayed'', and ``of'' and ``of 
which.'' The proposal also duly capitalizes the defined terms 
``Order,'' ``Customer,'' and ``Market Hours.''
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it 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. The proposal is also consistent with Section 11A 
of the Act relating to the establishment of the national market system 
for securities.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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The Proposals are Reasonable, an Equitable Allocation of Fees, and are 
not Unfairly Discriminatory
    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 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' . . . .'' \9\
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    \9\ NetCoalition 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)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market

[[Page 36566]]

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.'' \10\
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    \10\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    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. 
The Exchange is also subject to intense competition for retail order 
flow with off-exchange competitors, including wholesale market makers.
    The Exchange believes it is reasonable, equitable, and not unfairly 
discriminatory to eliminate the Nasdaq Growth Program because the 
Program has not been successful in inducing members to grow materially 
the extent to which they add liquidity to the Exchange over time. The 
Exchange has limited resources to allocate to incentive programs like 
this one and it must, from time to time, reallocate those resources to 
maximize their net impact on the Exchange, market quality, and 
participants. Going forward, the Exchange plans to reallocate the 
resources it devotes to the Nasdaq Growth Program to other incentive 
programs that it hopes will be more impactful.
    It is also reasonable, equitable, and not unfairly discriminatory 
for the Exchange to adjust several existing credits for displayed 
quotes/orders (other than Supplemental Orders or Designated Retail 
Orders) that provide liquidity to the Exchange. These adjustments will 
recalibrate the credits to account for changes in member behavior over 
time that have rendered the credits less challenging for members to 
attain. That is, the Exchange proposes to reduce the amount of the 
credits because many members now readily meet the volume requirements 
to qualify for them, such that the credits in many cases reward these 
members for remaining static in their activity on the Exchange. By 
reducing the amount of these credits, the Exchange wishes to incent 
such members to strive to qualify for higher available credits by 
further increasing the extent to which they add liquidity to the 
Exchange.
    It is reasonable, equitable, and not unfairly discriminatory for 
the Exchange to eliminate two credits for non-displayed orders (other 
than Supplemental orders) that provide liquidity to the Exchange. The 
baseline months for the growth elements of these tiers--April 2019 and 
August 2020--are no longer relevant benchmarks, as substantial 
increases in trading volumes have occurred since these dates. As such, 
these credits no longer provide growth incentives that are aligned with 
the Exchange's needs. Again, the Exchange has limited resources to 
devote to incentive programs, and it is appropriate for the Exchange to 
reallocate these incentives periodically in a manner that best achieves 
the Exchange's overall mix of objectives.
    It is reasonable, equitable, and not unfairly discriminatory for 
the Exchange to lower two existing credits for members that add or grow 
the extent to which they add midpoint or M-ELO liquidity to the 
Exchange, as well as add a new such credit. Together, the adjustments 
to the two existing credits, and the addition of the third, will re-
align existing incentives for members to grow or add M-ELO or midpoint 
liquidity while introducing a new incentive for members to add even 
larger volumes of M-ELO and midpoint orders during the month to attain 
the highest existing level of credits. To the extent that the Exchange 
succeeds through these proposals in increasing the addition of midpoint 
or M-ELO liquidity or executions on the Exchange, all participants will 
benefit from the increase in market quality.
    Furthermore, it is reasonable, equitable, and not unfairly 
discriminatory for the Exchange to eliminate one of its supplemental 
credits for midpoint orders (excluding buy (sell) orders with midpoint 
pegging that receive an execution price that is lower (higher) than the 
midpoint of the NBBO). Many members now readily meet the volume 
requirements to qualify for this credit, such that it rewards these 
members for remaining static in their activity on the Exchange. By 
eliminating the lower of these two credits, the Exchange wishes to 
incent such members to strive to qualify for the higher credit by 
further increasing the extent to which they add liquidity to the 
Exchange.
    The Exchange notes that the credits affected by this proposal are 
voluntary. Moreover, nothing about the Exchange's volume-based tiered 
pricing model, as set forth in Equity 7, 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 enhances price discovery and improves 
the overall quality of the equity markets.
    Those participants that are dissatisfied with the elimination of 
the Nasdaq Growth Program or the amendments to the Exchange's schedule 
of credits are free to shift their order flow to competing venues that 
provide more generous incentives or less stringent qualifying criteria.
    Finally, the Exchange believes that it is reasonable to re-
organize, re-format, and re-state its schedule of credits and charges, 
Equity 7, Section 118(a). As noted above, the existing schedule is 
needlessly long, complex, and repetitive, and it contains unintended 
inconsistencies in terminology and capitalization, as well as several 
typographical errors. The Exchange believes that its proposals to 
address these issues will render the schedule shorter, simpler, more 
consistent, better and more logically organized, and more readable, to 
the benefit of investors, participants, and the public. It will also 
ease the burden to the Exchange of administering the schedule when it 
proposes to make substantive changes thereto, as it will no longer need 
to make three amendments to the schedule to accomplish a single change. 
The Exchange does not intend for the reorganization, reformatting, or 
restatement of the schedule to themselves effect any substantive 
changes to existing credits or charges.

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.
Intramarket Competition
    The Exchange does not believe that its proposals will place any 
category of Exchange participant at a competitive disadvantage.
    As noted above, the Exchange's intends for its proposed substantive 
changes to its credits to reallocate its limited resources more 
efficiently and

[[Page 36567]]

for optimized effect, to recalibrate them to reflect changing market 
behavior, and to align them with the Exchange's overall mix of 
objectives. The Exchange notes that its members are free to trade on 
other venues to the extent they believe that these proposals 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.
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 proposals are reflective of this 
competition.
    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.
    In sum, if the change proposed herein is 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 
change will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets.
    Finally, the Exchange does not believe that its proposal to re-
organize, re-format, and re-state its schedule of credits and fees, at 
Equity 7, Section 118(a), will have any impact on competition, as it 
will merely render the schedule shorter, simpler, more consistent, 
better and more logically organized, and more readable, to the benefit 
of investors, participants, and the public. It will also ease the 
burden to the Exchange of administering the schedule when it proposes 
to make substantive changes thereto, as it will no longer need to make 
three amendments to the schedule to accomplish a single change. The 
Exchange does not intend for the reorganization, reformatting, or 
restatement of the schedule to themselves effect any substantive 
changes to existing credits or charges.

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\
---------------------------------------------------------------------------

    \11\ 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 Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#b1c3c4ddd49cd2dedcdcd4dfc5c2f1c2d4d29fd6dec7"><span class="__cf_email__" data-cfemail="addfd8c1c880cec2c0c0c8c3d9deeddec8ce83cac2db">[email protected]</span></a>. Please include 
File Number SR-NASDAQ-2022-036 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-10

    All submissions should refer to File Number SR-NASDAQ-2022-036. 
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-2022-036 and should 
be submitted on or before July 8, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-13039 Filed 6-16-22; 8:45 am]
BILLING CODE 8011-01-P


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