Document ID: SEC-2013-0300-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-02-12T05:00Z

[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9972-9973]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03185]

[[Page 9972]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68847; File No. SR-NASDAQ-2013-016]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
for the Purpose of Amending Rule 7014(g)

February 6, 2013.
    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 January 30, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 Rule 7014(g). The text of the 
proposed rule change is available at http://nasdaq.cchwallstreet.com, 
at the Exchange'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, 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
    NASDAQ is amending Rule 7014(g), which establishes a pricing 
incentive program for members designated as Qualified Market Makers 
(``QMM'') under the terms of the rule. Under the QMM program, which was 
adopted in November 2012 on a six-month pilot basis,\3\ a member may be 
designated as a QMM with respect to one or more of its MPIDs if:
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    \3\ Securities Exchange Act Release No. 68209 (November 9, 
2012), 77 FR 69519 (November 19, 2012).
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     The member is not assessed any ``Excess Order Fee'' under 
Rule 7018 during the month; \4\ and
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    \4\ Rule 7018(m). NASDAQ recently introduced an Excess Order 
Fee, aimed at reducing inefficient order entry practices of certain 
market participants that place excessive burdens on the systems of 
NASDAQ and its members and that may negatively impact the usefulness 
and life cycle cost of market data. In general, the determination of 
whether to impose the fee on a particular MPID is made by 
calculating the ratio between (i) entered orders, weighted by the 
distance of the order from the NBBO, and (ii) orders that execute in 
whole or in part. The fee is imposed on MPIDs that have an ``Order 
Entry Ratio'' of more than 100.
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     Through such MPID the member quotes at the NBBO at least 
25% of the time during regular market hours \5\ in an average of at 
least 1,000 securities during the month.\6\
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    \5\ Defined as 9:30 a.m. through 4:00 p.m., or such shorter 
period as may be designated by NASDAQ on a day when the securities 
markets close early (such as the day after Thanksgiving).
    \6\ A member MPID is considered to be quoting at the NBBO if it 
has a displayed order at either the national best bid or the 
national best offer or both the national best bid and offer. On a 
daily basis, NASDAQ will determine the number of securities in which 
the member satisfied the 25% NBBO requirement. To qualify for QMM 
designation, the MPID must meet the requirement for an average of 
1,000 securities per day over the course of the month. Thus, if a 
member MPID satisfied the 25% NBBO requirement in 900 securities for 
half the days in the month, and satisfied the requirement for 1,100 
securities for the other days in the month, it would meet the 
requirement for an average of 1,000 securities.
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    The proposed rule change addresses a circumstance in which a member 
seeking to be designated as a QMM terminates the use of one MPID and 
simultaneously commences use of another MPID during the course of a 
month. In that circumstance, NASDAQ believes that it is reasonable to 
allow the member to aggregate activity on the two MPIDs, essentially 
treating them like a single MPID, for the purpose of determining 
eligibility. By codifying this interpretation, the proposed rule change 
will enhance the transparency of the rule.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with Section 
6(b)(5) of the Act \8\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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. NASDAQ believes that the 
adoption of a clear policy with respect to the interpretation of Rule 
7014(g) will promote members' understanding of the parameters of the 
rule and the efficiency of its administration.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    NASDAQ further believes that the proposed rule change is consistent 
with Sections 6(b)(4) and (b)(5) of the Act,\9\ in that it is 
consistent with an 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 
unreasonably discriminatory. The addition of rule language stipulating 
the permissibility of aggregating two MPIDs when use of one is 
terminated during the course of the month establishes a standard that 
is clear and easy to administer. The provision is equitable and not 
unreasonably discriminatory because all members seeking to terminate 
the use of an MPID during the course of a month are subject to the same 
commonsense parameters, which do not unfairly penalize a member for 
transitioning order entry activity from one MPID to another, and 
because the standard is consistent with the overall goal of the QMM 
program to encourage members to improve market quality by quoting 
extensively at or near the inside.
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    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The change will 
adopt a clear and commonsense standard for members that wish to qualify 
for the QMM program but that terminate the use of one MPID and commence 
the use of another MPID during the course of the month. NASDAQ believes 
that in fact this change will promote competition and further the pro-
competitive goals of encouraging members to improve market quality by 
quoting extensively at or near the inside, as it insures that a member 
that transitions MPIDs is not barred from participating in the program 
during the month of transition. Moreover, NASDAQ notes that because

[[Page 9973]]

the market for order execution and routing is extremely competitive, 
members may readily opt to disfavor NASDAQ's execution services if they 
believe that alternatives offer them better value. 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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay.\14\ The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because it will allow a member that terminates one MPID and 
simultaneously commences use of another MPID during the course of a 
month to aggregate activity on the two MPIDs to determine eligibility 
for the QMM program during the month of transition without delay. 
Accordingly, the Commission designates the proposal operative upon 
filing.\15\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of accelerating the 30-day operative 
delay, the Commission has considered the proposed rule change's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    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. 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-2013-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-016. 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-2013-016 and should 
be submitted on or before March 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03185 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P