42518 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 

15 17 CFR 200.30–3(a)(12), (59). 

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

2 17 CFR 240.19b–4. 

3Retail Orders shall mean an order type with a 

Non-Display Order Attribute submitted to the 

Exchange by a Retail Member Organization (as 

defined in Rule 4780). A Retail Order must be an 

agency Order, or riskless principal Order that 

satisfies the criteria of FINRA Rule 5320.03. The 

Retail Order must reflect trading interest of a 

natural person with no change made to the terms 

of the underlying order of the natural person with 

respect to price (except in the case of a market order 

that is changed to a marketable limit order) or side 

of market and that does not originate from a trading 

algorithm or any other computerized methodology. 

See Rule 4702(b)(6). 

4Retail Price Improving (‘‘RPI’’) Orders shall 

mean an Order Type with a Non-Display Order 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–15121 Filed 7–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release 

No.34645; File No. 812–15283] 

Cypress Creek Private Strategies 

Master Fund, L.P., et al. 

July 11, 2022. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’). 

ACTION: Notice. 

Notice of application for an order 

(‘‘Order’’) under sections 17(d) and 57(i) 

of the Investment Company Act of 1940 

(the ‘‘Act’’) and rule 17d–1 under the 

Act to permit certain joint transactions 

otherwise prohibited by sections 17(d) 

and 57(a)(4) of the Act and rule 17d–1 

under the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order to permit certain 

business development companies and 

closed-end management investment 

companies to co-invest in portfolio 

companies with certain affiliated 

investment entities. 

APPLICANTS: Cypress Creek Private 

Strategies Master Fund, L.P., 

Endowment Advisers, L.P., d/b/a 

Cypress Creek Partners, CCP Coastal 

Redwood Fund, LP, CCP Sierra 

Redwood Fund, LP, and Marinas I SPV, 

LLC. 

FILING DATES: The application was filed 

on November 16, 2021 and amended on 

December 8, 2021, May 13, 2022 and 

June 27, 2022. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing on any application by 

emailing the SEC’s Secretary at 

Secretarys-Office@sec.gov and serving 

the applicants with a copy of the request 

by email, if an email address is listed for 

the relevant Applicant below, or 

personally or by mail, if a physical 

address is listed for the relevant 

Applicant below. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on August 5, 2022, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Pursuant to rule 0–5 under the 

Act, hearing requests should state the 

nature of the writer’s interest, any facts 

bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

emailing the Commission’s Secretary at 

Secretarys-Office@sec.gov. 

ADDRESSES: The Commission: 

Secretarys-Office@sec.gov. Applicants: 

Benjamin Murray, Benjamin.murray@

cypresscreekpartners.com and George J. 

Zornada, George.Zornada@klgates.com. 

FOR FURTHER INFORMATION CONTACT: 

Christopher D. Carlson, Senior Counsel, 

or Trace W. Rakestraw, Branch Chief, at 

(202) 551–6825 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: For 

applicants’ representations, legal 

analysis, and conditions, please refer to 

applicants’ third amended and restated 

application, dated June 27, 2022, which 

may be obtained via the Commission’s 

website by searching for the file number 

at the top of this document, or for an 

applicant using the Company name 

search field, on the SEC’s EDGAR 

system. The SEC’s EDGAR system may 

be searched at http://www.sec.gov/ 

edgar/searchedgar/legacy/ 

companysearch.html. You may also call 

the SEC’s Public Reference Room at 

(202) 551–8090. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–15133 Filed 7–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95240; File No. SR–BX– 

2022–010] 

Self-Regulatory Organizations; Nasdaq 

BX, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the 

Exchange’s Transaction Credits in 

Equity 7, Section 118(e) 

July 11, 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 July 1, 

2022, Nasdaq BX, Inc. (‘‘BX’’ 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, Section 118(e), as described further 

below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/bx/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 Exchange operates on the ‘‘takermaker’’ model, whereby it generally 

pays credits to members that take 

liquidity and charges fees to members 

that provide liquidity. Currently, the 

Exchange has a schedule, at Equity 7, 

Section 118(e), which consists of several 

different credits and fees for Retail 

Orders 3 and Retail Price Improvement 

Orders 4 under Rule 4780 (Retail Price 

Improvement Program). 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 42519 

Attribute that is held on the Exchange Book in order 

to provide liquidity at a price at least $0.001 better 

than the NBBO through a special execution process 

described in Rule 4780. A Retail Price Improving 

Order may be entered in price increments of $0.001. 

RPI Orders collectively may be referred to as ‘‘RPI 

Interest.’’ See Rule 4702(b)(5). 

5 15 U.S.C. 78f(b). 

6 15 U.S.C. 78f(b)(4) and (5). 

7NetCoalition 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)). 8Securities Exchange Act Release No. 51808 

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

(‘‘Regulation NMS Adopting Release’’). 9See CBOE BYX Fee Schedule, at http://

markets.cboe.com/us/equities/membership/fee_

schedule/byx/; NYSE National Fee Schedule, at 

https://www.nyse.com/publicdocs/nyse/regulation/ 

nyse/NYSE_National_Schedule_of_Fees.pdf. 10The Exchange perceives no regulatory, 

structural, or cost impediments to market 

participants shifting order flow away from it. In 

particular, the Exchange notes that these examples 

of shifts in liquidity and market share, along with 

many others, have occurred within the context of 

market participants’ existing duties of Best 

Execution and obligations under the Order 

Protection Rule under Regulation NMS. 

Currently, the Exchange provides 

certain credits for Retail Orders that 

provide liquidity. The Exchange 

proposes to adopt a new credit of 

$0.0010 per share executed for Retail 

Orders with an accepted price greater 

than or equal to $10,000 that accesses 

liquidity provided by a Retail Price 

Improvement Order. The Exchange is 

also proposing to adjust the existing 

credit of $0.0021 per share executed to 

require the Retail Order to have an 

accepted price of less than $10,000. The 

Exchange hopes that the proposed new 

credit will encourage member 

organizations to increase liquidity 

providing activity on RPI Orders on the 

Exchange. If the proposal is effective in 

achieving this purpose, then the quality 

of the Exchange’s market will improve, 

particularly with respect to RPI and 

retail orders to the benefit of all 

participants, especially those who 

submit RPI and Retail Orders. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,5 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act,6 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. 

The Proposal Is Reasonable and Is an 

Equitable Allocation of Credits 

The Exchange’s proposed change to 

its schedule of credits is 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’. . . .’’ 7

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

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, and it 

represents a small percentage of the 

overall market. It is also only one of 

several taker-maker exchanges. 

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.9

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.10 Within the foregoing 

context, the proposal represents a 

reasonable attempt by the Exchange to 

increase its market share relative to its 

competitors. 

The Exchange believes it is reasonable 

and equitable to adopt a new $0.0010 

per share executed credit for Retail 

Orders with an accepted price greater 

than or equal to $10,000 that access 

liquidity provided by a Retail Price 

Improvement Order. Similarly, the 

Exchange believes that it is reasonable 

to adjust its existing $0.0021 credit to 

conform with its new proposed credit 

by requiring the Retail order to have an 

accepted price less of less than $10,000. 

As discussed above, the Exchange’s goal 

is to increase liquidity adding activity in 

RPI Orders on its platform. It is 

reasonable and equitable to address this 

need by providing an additional credit 

to member organizations that meet the 

proposed thresholds as an incentive for 

them to increase their liquidity activity 

in RPI Orders on the Exchange. If the 

proposal is effective in achieving this 

purpose, then the quality of the 

Exchange’s market will improve, 

particularly with respect to RPI and 

Retail orders to the benefit of all 

participants, especially those who 

submit RPI and Retail Orders. 

The Proposed Credit Is Not Unfairly 

Discriminatory 

The Exchange believes that the 

proposal is not unfairly discriminatory. 

As an initial matter, the Exchange 

believes that nothing about its volumebased 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 cobranded 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 intends for its proposal 

to improve market quality for all 

members that submit RPI and Retail 

Orders on the Exchange and by 

extension attract more liquidity to the 

market, improving market wide quality 

and price discovery. Although net 

adders of liquidity for RPI Orders will 

benefit most from the proposal, this 

result is fair insofar as increased 

liquidity adding activity in RPI Orders 

will help to improve market quality and 


jspears on DSK121TN23PROD with NOTICES1
42520 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f). 

the attractiveness of the Nasdaq BX 

market to all existing and prospective 

retail participants. 

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 

proposal will place any category of 

Exchange participant at a competitive 

disadvantage. As noted above, all 

member organizations of the Exchange 

will benefit from any increase in market 

activity that the proposal effectuates. 

Member organizations may modify their 

businesses so that they can meet the 

required thresholds and receive the 

credits. Moreover, members are free to 

trade on other venues to the extent they 

believe that the credits provided 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 the tier structure is 

consistent with broker-dealer fee 

practices as well as the other industries, 

as described above. 

Intermarket Competition 

The Exchange believes that its 

proposed modifications to its schedule 

of credits will not impose a burden on 

competition because the Exchange’s 

execution services are completely 

voluntary and subject to extensive 

competition from the other live 

exchanges and from off-exchange 

venues, which include alternative 

trading systems that trade national 

market system stock. 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 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 in 

response, and because market 

participants may readily adjust their 

order routing practices, the Exchange 

believes that the degree to which credits 

change in this market may impose any 

burden on competition is extremely 

limited. 

The proposed credit for adding 

liquidity is reflective of this competition 

because, as a threshold issue, the 

Exchange is a relatively small market so 

its ability to burden intermarket 

competition is limited. In this regard, 

even the largest U.S. equities exchange 

by volume has less than 17–18% 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 comprised more than 40% of 

industry volume in recent months. 

In sum, the Exchange intends for the 

proposed change to its credits for RPI 

Orders, in the aggregate, to increase 

member incentives to engage in the 

addition of liquidity on the Exchange. If 

the additional credit 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 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) 

of the Act 11 and paragraph (f) of Rule 

19b–4 12 thereunder. 

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– 

BX–2022–010 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–BX–2022–010. 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–BX–2022–010 and should 

be submitted on or before August 5, 

2022. 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Notices 42521 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3There are three Tapes, which are based on the 

listing venue of the security: Tape C securities are 

Nasdaq-listed; Tape A securities are New York 

Stock Exchange-listed; and Tape B securities are 

listed on exchanges other than Nasdaq and NYSE. 

4Pursuant to Equity 7, Section 118(a), the term 

‘‘Consolidated Volume’’ means 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. 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 count as liquidity-adding activity 

on Nasdaq. 

5QDRK is a routing option under which orders 

check the System for available shares and 

simultaneously route the remaining shares to 

destinations on the System routing table that are not 

posting Protected Quotations within the meaning of 

Regulation NMS. If shares remain un-executed after 

routing, they are posted on the book. Once on the 

book, should the order subsequently be locked or 

crossed by another market center, the System will 

not route the order to the locking or crossing market 

center. 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(4) and (5). 

8NetCoalition 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)). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–15116 Filed 7–14–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95226; File No. SR– 

NASDAQ–2022–039] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend Its 

Schedule of Credits, at Equity 7, 

Section 118 

July 11, 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 July 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Exchange’s schedule of credits, at 

Equity 7, Section 118(a)(1), 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 eliminate a credit that the 

Exchange provides to members for 

displayed liquidity under Equity 7, 

Section 118(a)(1). 

Currently, the Exchange provides a 

$0.0018 per share executed credit for 

securities in Tape C3 to a member with 

shares of liquidity provided in all 

securities representing less than 0.10% 

of Consolidated Volume,4 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 5

routing strategy. The Exchange proposes 

to eliminate this credit. 

The Exchange offers this credit as a 

means of improving market quality by 

providing its members with an incentive 

to increase liquidity on the Exchange. 

However, the Exchange has observed 

over time that this credit has not been 

successful in accomplishing its 

objective. That is, it has not induced 

members to add liquidity to the 

Exchange and members are not targeting 

this credit for growth or general use of 

the QDRK strategy. The Exchange has 

limited resources available to it to offer 

its members market-improving 

incentives, and it allocates those limited 

resources to those segments of the 

market where it perceives the need to be 

greatest and/or where it determines that 

the incentive is likely to achieve its 

intended objective. Accordingly, the 

Exchange proposes to eliminate the 

credit noted above. 

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. 

The Exchange’s proposed change to 

its schedule of credits is 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’. . . .’’ 8

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 


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