Document ID: SEC-2015-0017-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2015-01-05T05:00Z

[Federal Register Volume 80, Number 2 (Monday, January 5, 2015)]
[Notices]
[Pages 272-274]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30801]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73948; File No. SR-NASDAQ-2014-124]

 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7018 Fees

December 29, 2014.
    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 December 16, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a 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

    NASDAQ is proposing to modify NASDAQ Rule 7018 fees assessed for 
execution and routing securities listed on execution and routing 
securities listed on the New York Stock Exchange (``NYSE'') as well as 
a few minor clarifications to NASDAQ Rules 7018(a)(2) and (3).
    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments be operative on January 1, 
2015.
    The text of the proposed rule change is available at 
nasdaq.cchwallstreet.com at NASDAQ's principal office, 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, NASDAQ included statements 
concerning the purpose of, and basis for,

[[Page 273]]

the proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing to amend NASDAQ Rule 7018(a)(2) to modify fees 
assessed for execution and routing securities listed on the NYSE, as 
well as a few minor clarifications to NASDAQ Rules 7018(a)(2) and (3).
    Specifically, the Exchange is proposing to increase the charge for 
DOT or LIST orders that execute in the NYSE closing process from 
$0.00095 per share executed to $0.0010 per share executed. The Exchange 
is proposing to increase the charge for DOT or LIST orders that execute 
in the NYSE opening process or reopening process from $0.0005 per share 
executed to $0.0015 per share executed.
    The Exchange is raising both of the above fees for DOT or LIST 
orders routed to NYSE because NASDAQ is seeking to cover the cost of 
routing and to reflect recent increases in the fees charged by NYSE 
with respect to orders routed to it by NASDAQ. Each time NES executes 
an order at an away market, NES is charged a clearing fee and, in the 
case of certain exchanges, a transaction fee is also charged in certain 
symbols, which fees are passed through to the Exchange.
    The Exchange currently recoups clearing and transaction charges 
incurred by the Exchange as well as certain other costs incurred by the 
Exchange when routing to away markets, such as administrative and 
technical costs associated with operating NES, membership fees at away 
markets, staffing and technical costs associated with routing orders. 
The Exchange assesses the actual away market fee at the time that the 
order was entered into the Exchange's trading system. This transaction 
fee is calculated on an order-by-order basis since different away 
markets charge different amounts. The Exchange desires to recoup 
additional costs at this time.
    Additionally, NASDAQ Rules 7018(d) and (e) set forth fees assessed 
for executions received in the Opening and Closing Crosses. The rule 
provides a fee of $0.0004 per share executed assessed for all other 
quotes and orders not otherwise noted under the rules. The Exchange is 
proposing to increase the fee from $0.0004 to $0.0006 per share 
executed for imbalance-only and continuous book orders in the Opening 
and Closing Crosses. The proposed increases to the fees assessed for 
executions in the Closing and Opening Crosses will help the Exchange 
recapture some of the costs it incurs operating the cross system, while 
maintaining very low fees for the execution of orders in these crosses.
    The Exchange is also eliminating NASDAQ Rule 7018(g), the 
subsection concerning retail price improvement program (the 
``Program'') pricing for retail orders and retail price improvement 
orders, because the pilot program expires at the end of 2014.
    Finally, the Exchange is clarifying in two places in each of NASDAQ 
Rule 7018(a)(2) and NASDAQ Rule 7018(a)(3) that the language regarding 
DOT or LIST orders explicitly refers to a charge. These changes are 
being made solely for the purpose of adding additional clarity.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\3\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\4\ 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 or system which NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. This proposal is reasonable, equitable and not 
unfairly discriminatory for the reasons noted below.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that increasing the fees for DOT or LIST 
orders that execute in the NYSE closing from $0.00095 per share 
executed to $0.0010 per share executed, as well as increasing the fees 
for DOT or LIST orders that execute in the NYSE opening or reopening 
processes from $0.0005 per share executed to $0.0015 per share 
executed, are reasonable because the Exchange would apply such fees 
uniformly and desires to recoup an additional portion of the cost it 
incurs when routing such orders that execute in the NYSE closing, 
opening or reopening processes.
    The Exchange believes that increasing these fees for DOT or LIST 
orders that execute in the NYSE closing, opening or reopening processes 
are equitable and not unfairly discriminatory because the Exchange 
would assess the same increased fees to all market participants 
utilizing routing for DOT or LIST orders that execute in the NYSE 
opening or reopening processes.
    When routing orders to non-NASDAQ OMX exchanges such as NYSE, the 
Exchange incurs costly connectivity charges related to 
telecommunication lines, membership and access fees, and other related 
costs when routing orders. The Exchange believes that the proposed fee 
increases for DOT or LIST orders that execute in the NYSE closing, 
opening or reopening processes will enable Nasdaq to recover the costs 
it incurs to route such orders to NYSE. Each destination market's 
transaction charge varies and there is a cost incurred by the Exchange 
when routing orders to away markets, including administrative and 
technical costs associated with operating NES, as well as membership 
fees at away markets.
    NASDAQ also believes that the changes to the fees assessed for 
participation in the Opening and Closing Crosses are consistent with an 
equitable allocation of a reasonable fee and not unfairly 
discriminatory. Specifically, the Exchange is proposing to increase the 
fee from $0.0004 to $0.0006 per share executed for imbalance-only and 
continuous book orders in the Opening and Closing Crosses. The Exchange 
believes that the fees are reasonable because supporting the crosses 
requires capital investment to maintain a system that facilitates an 
orderly auction process, and the proposed increases are designed to 
offset the costs the Exchange incurs in operating the crosses. 
Moreover, the proposed fees are equitably allocated because they apply 
a fee on all members that benefit from participation in the Opening and 
Closing Crosses, and are based on the type of order entered and 
contribution to market quality. Similarly, the proposed fees are not 
unfairly discriminatory because they are based on the type of order 
executed in the crosses and the benefit to market quality that such 
orders provide. NASDAQ believes that the proposal to increase the 
charges assessed for executions in the crosses is reasonable, equitably 
allocated and not unfairly discriminatory because the increased fees 
are identical in amount and apply to all members that elect to 
participate in the crosses and receive an execution. Moreover, NASDAQ 
does not believe that the increased fees will negatively impact 
participation in the crosses as current rates assessed for the open and 
closing cross continue to be materially

[[Page 274]]

less than the standard fee for accessing liquidity.
    The Exchange believes that removing NASDAQ Rule 7018(g), the 
subsection concerning pricing for the Program, is reasonable because 
the Program is a pilot that is not being renewed so the related pricing 
is made moot. The Exchange also believes that this change is consistent 
with an equitable allocation of a reasonable fee and not unfairly 
discriminatory because the ending of the pilot for this Program and 
associated pricing applies uniformly across all Exchange members.
    The Exchange also believes that the proposed rule change 
clarifications to DOT or LIST orders in two places in each of NASDAQ 
Rule 7018(a)(2) and NASDAQ Rule 7018(a)(3) is consistent with the 
provisions of Section 6 of the Act,\5\ in general, and with Sections 
6(b)(5) of the Act \6\ in particular, in that it is designed to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest. Specifically, this is achieved through clarifications 
to the language regarding DOT or LIST orders that will now explicitly 
refer to a charge and thereby promote market participants' improved 
understanding of the rule.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\7\ NASDAQ 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, 
NASDAQ must continually adjust its fees to remain competitive with 
other exchanges and with alternative trading systems that have been 
exempted from compliance with the statutory standards applicable to 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, NASDAQ believes that the degree to which fee 
changes in this market may impose any burden on competition is 
extremely limited.
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    \7\ 15 U.S.C. 78f(b)(8).
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    In this instance, the changes to routing fees do not impose a 
burden on competition because NASDAQ's routing services are optional 
and are the subject of competition from other exchanges and broker-
dealers that offer routing services, as well as the ability of members 
to develop their own routing capabilities. The increased fees for DOT 
or LIST orders that execute in the NYSE closing, opening or reopening 
processes are reflective of the Exchange's need to recover the costs it 
incurs to route such orders to NYSE. In sum, if the changes proposed 
herein are unattractive to market participants, it is likely that 
NASDAQ will lose market share or routable order flow as a result. 
Additionally, the modestly increased fees for execution in the NASDAQ 
crosses are reflective of a need to support and improve NASDAQ systems, 
which in turn benefit market quality, and ultimately, competition.
    Accordingly, NASDAQ 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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\8\ 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 necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2014-124 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-NASDAQ-2014-124. 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 Web site (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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2014-124 and should 
be submitted on or before January 26, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2014-30801 Filed 1-2-15; 8:45 am]
BILLING CODE 8011-01-P