Document ID: SEC-2022-1559-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2022-11-29T05:00Z

[Federal Register Volume 87, Number 228 (Tuesday, November 29, 2022)]
[Notices]
[Pages 73348-73353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25947]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96375; File No. SR-NASDAQ-2022-064]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend NOM Options 7, Section 2

November 22, 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 November 10, 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 Nasdaq Options Market LLC 
(``NOM'') Pricing Schedule at Options 7, Section 2, ``Nasdaq Options 
Market--Fees and Rebates.'' \3\
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    \3\ The Exchange originally filed SR-NASDAQ-2022-061 on November 
1, 2022. On November 10, 2022, the Exchange withdrew SR-NASDAQ-2022-
061 and submitted this rule change.
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    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 Exchange proposes to amend NOM's Pricing Schedule at Options 7, 
Section 2(1), ``Nasdaq Options Market--Fees and Rebates,'' to: (1) 
amend the Tier 6 Professional \4\ Rebate to Add Liquidity in Penny 
Symbols; (2) amend the criteria for the Tier 3 and Tier 6 Rebates to 
Add Liquidity in Penny Symbols; and (3) add an incentive to achieve a 
higher Tier 6 Professional Rebate to Add Liquidity in Penny Symbols.
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    \4\ Pursuant to Options 7, Section 1(a) the term 
``Professional'' or (``P'') means any person or entity that (i) is 
not a broker or dealer in securities, and (ii) places more than 390 
orders in listed options per day on average during a calendar month 
for its own beneficial account(s) pursuant to Options 1, Section 
1(a)(47). All Professional orders shall be appropriately marked by 
Participants.

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[[Page 73349]]

    Today, NOM Options 7, Section 2(1) provides for various fees and 
rebates applicable to NOM Participants. Specifically, the Rebates to 
Add Liquidity in Penny Symbols are as follows:

                                    Rebates To Add Liquidity in Penny Symbols
----------------------------------------------------------------------------------------------------------------
                                       Tier 1       Tier 2       Tier 3       Tier 4       Tier 5       Tier 6
----------------------------------------------------------------------------------------------------------------
Customer..........................      ($0.20)      ($0.25)      ($0.43)      ($0.44)      ($0.45)  \7\ ($0.48)
Professional......................       (0.20)       (0.25)       (0.43)       (0.44)       (0.45)       (0.48)
Broker-Dealer.....................       (0.10)       (0.10)       (0.10)       (0.10)       (0.10)       (0.10)
Firm..............................       (0.10)       (0.10)       (0.10)       (0.10)       (0.10)       (0.10)
Non-NOM Market Maker..............       (0.10)       (0.10)       (0.10)       (0.10)       (0.10)       (0.10)
NOM Market Maker..................       (0.20)       (0.25)   \4\ (0.30)   \4\ (0.32)  \11\ (0.44)       (0.48)
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    Customer and Professional Rebates to Add Liquidity in Penny Symbols 
are paid per the highest tier achieved among the 6 available tiers. To 
determine the applicable percentage of total industry customer equity 
and ETF option average daily volume, unless otherwise stated, the 
Exchange considers the Participant's Penny and Non-Penny Symbol 
Customer and/or Professional volume that adds liquidity. Below are the 
criteria for each Rebate to Add Liquidity in Penny Symbol tier.

                             Monthly Volume
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Tier 1.....................  Participant adds Customer, Professional,
                              Firm, Non-NOM Market Maker and/or Broker-
                              Dealer liquidity in Penny Symbols and/or
                              Non-Penny Symbols of up to 0.10% of total
                              industry customer equity and ETF option
                              average daily volume (``ADV'') contracts
                              per day in a month.
Tier 2.....................  Participant adds Customer, Professional,
                              Firm, Non-NOM Market Maker and/or Broker-
                              Dealer liquidity in Penny Symbols and/or
                              Non-Penny Symbols above 0.10% to 0.20% of
                              total industry customer equity and ETF
                              option ADV contracts per day in a month.
Tier 3.....................  Participant: (a) adds Customer,
                              Professional, Firm, Non-NOM Market Maker
                              and/or Broker-Dealer liquidity in Penny
                              Symbols and/or Non-Penny Symbols above
                              0.20% to 0.30% of total industry customer
                              equity and ETF option ADV contracts per
                              day in a month; or (b) adds Customer and/
                              or Professional liquidity in Penny Symbols
                              and/or Non-Penny Symbols of 0.15% to less
                              than 0.20% of total industry customer
                              equity and ETF option ADV contracts per
                              day in a month and qualifies for MARS.
Tier 4.....................  Participant adds Customer, Professional,
                              Firm, Non-NOM Market Maker and/or Broker-
                              Dealer liquidity in Penny Symbols and/or
                              Non-Penny Symbols above 0.30% to 0.40% of
                              total industry customer equity and ETF
                              option ADV contracts per day in a month.
Tier 5.....................  Participant adds Customer, Professional,
                              Firm, Non-NOM Market Maker and/or Broker-
                              Dealer liquidity in Penny Symbols and/or
                              Non-Penny Symbols above 0.40% to 0.80% of
                              total industry customer equity and ETF
                              option ADV contracts per day in a month.
Tier 6.....................  Participant adds Customer, Professional,
                              Firm, Non-NOM Market Maker and/or Broker-
                              Dealer liquidity in Penny Symbols and/or
                              Non-Penny Symbols above 0.80% or more of
                              total industry customer equity and ETF
                              option ADV contracts per day in a month,
                              or Participant adds: (1) Customer and/or
                              Professional liquidity in Penny Symbols
                              and/or Non-Penny Symbols of 0.20% or more
                              of total industry customer equity and ETF
                              option ADV contracts per day in a month,
                              and (2) has added liquidity in all
                              securities through one or more of its
                              Nasdaq Market Center MPIDs that represent
                              1.00% or more of Consolidated Volume in a
                              month or qualifies for MARS (defined
                              below).
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Penny Symbols
    Today, Customers and Professionals are paid the following Penny 
Symbol Rebates: for Tier 1 a $0.20 per contract, for Tier 2 a $0.25 per 
contract, for Tier 3 a $0.43 per contract, for Tier 4 a $0.44 per 
contract, for Tier 5 a $0.45 per contract and for Tier 6 a $0.48 per 
contract. Today, Customers may increase their Tier 6 Penny Symbol 
Rebate if they meet certain criteria.\5\ Broker-Dealers,\6\ Firms,\7\ 
and Non-NOM Market Makers \8\ are paid a $0.10 per contract Rebate to 
Add Liquidity in Penny Symbols regardless of the tier.

[[Page 73350]]

NOM Market Makers \9\ are paid the following Penny Symbol Rebates: for 
Tier 1 a $0.20 per contract, for Tier 2 a $0.25 per contract, for Tier 
3 a $0.30 per contract, for Tier 4 a $0.32 per contract, for Tier 5 a 
$0.44 per contract and for Tier 6 a $0.48 per contract. NOM Market 
Makers are also offered Penny Symbol incentives to increase their 
rebates.\10\
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    \5\ Pursuant to note 7 within Options 7, Section 2(1), 
Participants that: (1) add Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non- Penny Symbols of 1.15% or more of total industry customer 
equity and ETF option ADV contracts per day in a month will receive 
an additional $0.02 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbol 
in that month; or (2) add Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols of 1.30% or more of total industry customer equity 
and ETF option ADV contracts per day in a month will receive an 
additional $0.05 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbols 
in that month; or (3) (a) add Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols above 0.80% of total industry customer equity and 
ETF option ADV contracts per day in a month, (b) add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer 
liquidity in Non-Penny Symbols above 0.12% of total industry 
customer equity and ETF option ADV contracts per day in a month, and 
(c) execute greater than 0.04% of Consolidated Volume (``CV'') via 
Market-on-Close/Limit-on-Close (``MOC/LOC'') volume within The 
Nasdaq Stock Market Closing Cross within a month will receive an 
additional $0.05 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbols 
in a month. 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 an equity member's trading activity, expressed as 
a percentage of or ratio to Consolidated Volume, 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.
    \6\ Pursuant to Options 7, Section 1(a), the term ``Broker-
Dealer'' or (``B'') applies to any transaction which is not subject 
to any of the other transaction fees applicable within a particular 
category.
    \7\ Pursuant to Options 7, Section 1(a), the term ``Firm'' or 
(``F'') applies to any transaction that is identified by a 
Participant for clearing in the Firm range at OCC.
    \8\ Pursuant to Options 7, Section 1(a), the term ``Non-NOM 
Market Maker'' or (``O'') is a registered market maker on another 
options exchange that is not a NOM Market Maker. A Non-NOM Market 
Maker must append the proper Non-NOM Market Maker designation to 
orders routed to NOM.
    \9\ Pursuant to Options 7, Section 1(a), the term ``NOM Market 
Maker'' or (``M'') is a Participant that has registered as a Market 
Maker on NOM pursuant to Options 2, Section 1, and must also remain 
in good standing pursuant to Options 2, Section 9. In order to 
receive NOM Market Maker pricing in all securities, the Participant 
must be registered as a NOM Market Maker in at least one security.
    \10\ See notes 4-11 of Options 7, Section 2(1).
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    The Exchange proposes to decrease the Tier 6 Professional Rebate to 
Add Liquidity in Penny Symbols within Options 7, Section 2(1) from 
$0.48 per contract to $0.47 per contract.\11\
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    \11\ The Exchange is not proposing to amend Non-Penny Symbol 
pricing.
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    The Exchange also proposes to amend the criteria for the Tier 3 and 
Tier 6 Rebates to Add Liquidity in Penny Symbols within Options 7, 
Section 2(1). Today, the criteria for the Tier 3 Rebate to Add 
Liquidity in Penny Symbols provides,
    Participant: (a) adds Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny 
Symbols above 0.20% to 0.30% of total industry customer equity and ETF 
option ADV contracts per day in a month; or (b) adds Customer and/or 
Professional liquidity in Penny Symbols and/or Non-Penny Symbols of 
0.15% \12\ to less than 0.20% \13\ of total industry customer equity 
and ETF option ADV contracts per day in a month and qualifies for 
MARS.\14\
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    \12\ 10% of total industry customer equity and ETF option ADV 
contracts per day in a month equates to 33,000 contracts.
    \13\ 20% of total industry customer equity and ETF option ADV 
contracts per day in a month equates to 66,000 contracts.
    \14\ MARS is the Exchange's Market Access and Routing Subsidy 
program described within Options 7, Section 2(4).
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    The Exchange proposes to instead provide the following Tier 3 
criteria,
    Participant: (a) adds Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny 
Symbols above 0.20% to 0.30% of total industry customer equity and ETF 
option ADV contracts per day in a month; or (b) adds Customer and/or 
Professional liquidity in Penny Symbols and/or Non-Penny Symbols of 
0.05% \15\ to less than 0.10% of total industry customer equity and ETF 
option ADV contracts per day in a month and qualifies for MARS.
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    \15\ 5% of total industry customer equity and ETF option ADV 
contracts per day in a month equates to 16,500 contracts.
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    With this proposal, the Exchange intends to lower the criteria to 
achieve the Tier 3 Rebate to Add Liquidity in Penny Symbols when a 
Participant adds Customer and/or Professional liquidity in Penny 
Symbols and/or Non-Penny Symbols and qualifies for MARS. The Exchange 
believes that lowering the criteria would allow additional Participants 
to qualify for the Tier 3 Rebate to Add Liquidity in Penny Symbols.
    Today, the criteria for the Tier 6 Rebate to Add Liquidity in Penny 
Symbols provides,
    Participant adds Customer, Professional, Firm, Non-NOM Market Maker 
and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny 
Symbols above 0.80% \16\ or more of total industry customer equity and 
ETF option ADV contracts per day in a month, or Participant adds: (1) 
Customer and/or Professional liquidity in Penny Symbols and/or Non-
Penny Symbols of 0.20% or more of total industry customer equity and 
ETF option ADV contracts per day in a month, and (2) has added 
liquidity in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 1.00% or more of Consolidated Volume in a 
month or qualifies for MARS (defined below).
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    \16\ 80% of total industry customer equity and ETF option ADV 
contracts per day in a month equates to 264,000 contracts.
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    The Exchange proposes to instead provide the following Tier 6 
criteria,
    Participant adds Customer, Professional, Firm, Non-NOM Market Maker 
and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny 
Symbols above 0.70% \17\ or more of total industry customer equity and 
ETF option ADV contracts per day in a month, or Participant: (1) adds 
\18\ Customer and/or Professional liquidity in Penny Symbols and/or 
Non-Penny Symbols of 0.10% or more of total industry customer equity 
and ETF option ADV contracts per day in a month, and (2) has added 
liquidity in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 1.00% or more of Consolidated Volume in a 
month or qualifies for MARS (defined below).
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    \17\ 70% of total industry customer equity and ETF option ADV 
contracts per day in a month equates to 231,000 contracts.
    \18\ The Exchange also proposes to relocate the word ``adds'' 
within the Tier 6 criteria so the paragraph reads clearly.
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    With this proposal, the Exchange intends to lower the criteria to 
achieve the Tier 6 Rebate to Add Liquidity in Penny Symbols when a 
Participant adds Customer, Professional, Firm, Non-NOM Market Maker 
and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny 
Symbols or adds Customer and/or Professional liquidity in Penny Symbols 
and/or Non-Penny Symbols and has added liquidity in all securities 
through one or more of its Nasdaq Market Center MPIDs or qualifies for 
MARS. The Exchange believes that lowering the criteria would allow for 
additional Participants to qualify for the Tier 6 Rebate to Add 
Liquidity in Penny Symbols.
    Finally, the Exchange proposes to add an incentive (``##'') to 
achieve a higher Tier 6 Professional Rebate to Add Liquidity in Penny 
Symbols within Options 7, Section 2(1). The new incentive to the Tier 6 
Rebate to Add Liquidity in Penny Symbols would provide,
    Participants that add Customer, Professional, Firm, Non-NOM Market 
Maker and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny 
Symbols above 0.80% or more of total industry customer equity and ETF 
option ADV contracts per day in a month, or Participants that (1) add 
Customer and/or Professional liquidity in Penny Symbols and/or Non-
Penny Symbols of 0.20% or more of total industry adds customer equity 
and ETF option ADV contracts per day in a month, and (2) have added 
liquidity in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 1.00% or more of Consolidated Volume in a 
month or qualify for MARS (defined below) will receive an additional 
$0.01 per contract rebate for Professional volume which adds liquidity 
in Penny Symbols only.
    While the Exchange is lowering the Tier 6 Professional Rebate to 
Add Liquidity in Penny Symbols within Options 7, Section 2(1) from 
$0.48 per contract to $0.47 per contract, the proposed Tier 6 ``##'' 
incentive would permit Professionals to achieve a $0.48 per contract 
Tier 6 Professional Rebate to Add Liquidity in Penny Symbols provided 
they add the same amount of Customer and/or Professional liquidity in 
Penny Symbols and/or Non-Penny Symbols as they do today and continue to 
meet the remainder of the Tier 6 criteria as they do today.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\19\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5)

[[Page 73351]]

of the Act,\20\ 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.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposal Is Reasonable
    The proposed changes to its Pricing Schedule are reasonable in 
several respects. As a threshold matter, the Exchange is subject to 
significant competitive forces in the market for options 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 \21\ 
(``NetCoalition''), the D.C. Circuit stated, ``[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' . . . .'' \22\
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    \21\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \22\ Id. at 539 (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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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options transaction services. The Exchange is only one of sixteen 
options exchanges to which market participants may direct their order 
flow. Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules. Within the 
foregoing context, the proposal represents a reasonable attempt by the 
Exchange to attract additional order flow to the Exchange and increase 
its market share relative to its competitors.
Options 7, Section 2(1)
    The Exchange's proposal to decrease the Tier 6 Professional Rebate 
to Add Liquidity in Penny Symbols within Options 7, Section 2(1) from 
$0.48 per contract to $0.47 per contract is reasonable because the 
Exchange is decreasing the Tier 6 rebate criteria and offering an 
incentive to permit Professionals to achieve a higher rebate. 
Participants who are able to achieve Tier 6 today would continue to be 
eligible for the Tier 6 Rebate to Add Liquidity in Penny Symbols, 
provided they continue to provide the same liquidity. Other 
Participants may also be able to qualify for the Tier 6 Rebate to Add 
Liquidity in Penny Symbols because of the lower volume requirements. 
Additionally, by submitting the same volume as today, Participants 
would be able to qualify for the same $0.48 per contract Professional 
Rebate to Add Liquidity in Penny Symbols with the proposed incentive.
    The Exchange's proposal to decrease the criteria for the Tier 6 
Rebate to Add Liquidity in Penny Symbols within Options 7, Section 2(1) 
is reasonable because Participants who are able to achieve Tier 6 
rebate today would continue to be eligible for the Tier 6 Rebate to Add 
Liquidity in Penny Symbols, provided they continued to provide the same 
liquidity. Other Participants may also be able to qualify for the Tier 
6 Rebate to Add Liquidity in Penny Symbols because of the lower volume 
requirements. The proposal permits Participants to qualify for the Tier 
6 Rebate to Add Liquidity in Penny Symbols when a Participant adds 
Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer 
liquidity in Penny Symbols and/or Non-Penny Symbols from 0.80% to 0.70% 
of total industry customer equity and ETF option ADV contracts per day 
in a month. Additionally, the Exchange is decreasing the criteria to 
achieve the Tier 6 Rebate to Add Liquidity in Penny Symbols when 
Participant adds Customer and/or Professional liquidity in Penny 
Symbols and/or Non-Penny Symbols from 0.20% to .10% or more of total 
industry customer equity and ETF option ADV contracts per day in a 
month. The remainder of the criteria within Tier 6 Rebate to Add 
Liquidity in Penny Symbols remains the same.\23\
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    \23\ The Tier 6 Rebate to Add Liquidity in Penny Symbols also 
requires that has added liquidity in all securities through one or 
more of its Nasdaq Market Center MPIDs that represent 1.00% or more 
of Consolidated Volume in a month or qualifies for MARS (defined 
below) when Participant is seeking to achieve the second part of 
Tier 6 to qualify for the rebate.
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    The Exchange's proposal to offer a Tier 6 incentive (``##'') is 
reasonable because, today, Customers may achieve a higher Tier 6 Rebate 
to Add Liquidity in Penny Symbols by meeting the criteria in current 
note 7.\24\ The Exchange notes that Participants who today qualify for 
Tier 6 Professional Rebate to Add Liquidity in Penny Symbols would be 
eligible for the incentive provided they continue to submit the same 
liquidity as today. Participants that today qualify for a lower 
Professional Rebate to Add Liquidity in Penny Symbols may have an 
opportunity to qualify for the Tier 6 Professional Rebate to Add 
Liquidity in Penny Symbols which pays the highest Professional Rebate 
to Add Liquidity in Penny Symbols.
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    \24\ Note 7 of Options 7, Section 2(1) provides that 
Participants that: (1) add Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non- Penny Symbols of 1.15% or more of total industry customer 
equity and ETF option ADV contracts per day in a month will receive 
an additional $0.02 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbol 
in that month; or (2) add Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols of 1.30% or more of total industry customer equity 
and ETF option ADV contracts per day in a month will receive an 
additional $0.05 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbols 
in that month; or (3) (a) add Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols above 0.80% of total industry customer equity and 
ETF option ADV contracts per day in a month, (b) add Customer, 
Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer 
liquidity in Non-Penny Symbols above 0.12% of total industry 
customer equity and ETF option ADV contracts per day in a month, and 
(c) execute greater than 0.04% of Consolidated Volume (``CV'') via 
Market-on-Close/Limit-on-Close (``MOC/LOC'') volume within The 
Nasdaq Stock Market Closing Cross within a month will receive an 
additional $0.05 per contract Penny Symbol Customer Rebate to Add 
Liquidity for each transaction which adds liquidity in Penny Symbols 
in a month. 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 an equity member's trading activity, expressed as 
a percentage of or ratio to Consolidated Volume, 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.
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    The Exchange's proposal to decrease the Tier 6 Professional Rebate 
to Add Liquidity in Penny Symbols within Options 7, Section 2(1) from 
$0.48 per contract to $0.47 per contract, amend the criteria for the 
Tier 6 rebate, and add a Tier 6 rebate incentive for Penny Symbols is 
equitable and not unfairly discriminatory because with this proposal, 
Customers will continue to be eligible for the highest rebates offered 
by the Exchange. Customer liquidity, unlike Professional liquidity, 
offers unique benefits to the market which benefits all market 
participants. Customer liquidity is the most sought after liquidity 
among Participants.

[[Page 73352]]

Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts market makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. Paying higher rebates to Customers 
is consistent with the treatment of Customers on other options venues 
that are paid the highest rebates.\25\ The Exchange believes it is 
equitable and not unfairly discriminatory to continue to pay 
Professionals the same or lower rebates as Customers. With respect to 
Professionals, the Exchange believes that continuing to encourage 
Participants to add Professional liquidity creates competition among 
options exchanges because the Exchange believes that the rebates may 
cause market participants to select NOM as a venue to send Professional 
order flow. The Exchange notes that is equitable and not unfairly 
discriminatory to lower rebates for Professionals, who unlike 
Customers, have access to sophisticated trading systems that contain 
functionality not available to Customers. The Exchange would uniformly 
apply the Tier 6 rebate criteria and incentive to all Participants and 
would uniformly pay rebates to all qualifying Participants.
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    \25\ See Nasdaq PHLX LLC Options 7, Section 2. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
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    The Exchange's proposal to decrease the criteria to achieve the 
Tier 3 Rebate to Add Liquidity in Penny Symbols within Options 7, 
Section 2(1) is reasonable because Participants who are able to achieve 
Tier 3 rebate today would continue to be eligible for the Tier 3 Rebate 
to Add Liquidity in Penny Symbols, provided they continued to provide 
the same liquidity. Other Participants may also be able to qualify for 
the Tier 3 Rebate to Add Liquidity in Penny Symbols because of the 
lower volume requirements.
    The Exchange's proposal to decrease the criteria to achieve the 
Tier 3 Rebate to Add Liquidity in Penny Symbols within Options 7, 
Section 2(1) is equitable and not unfairly discriminatory because the 
Exchange would uniformly apply the Tier 3 rebate criteria to all 
Participants and pay the Tier 3 rebate to all qualifying 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.
Intermarket Competition
    The Exchange 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 fees to remain competitive 
with other exchanges. Because competitors are free to modify their own 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which pricing changes in this market may impose any burden on 
competition is extremely limited because other options exchanges offer 
similar rebate programs.
    Moreover, as noted above, price competition between exchanges is 
fierce, with liquidity and market share moving freely between exchanges 
in reaction to fee and rebate changes. In sum, if the changes proposed 
herein are unattractive to market participants, it is likely that the 
Exchange will lose market share as a result. Accordingly, the Exchange 
does not believe that the proposed changes will impair the ability of 
Members or competing order execution venues to maintain their 
competitive standing in the financial markets.
Intramarket Competition
    The Exchange's proposal to decrease the Tier 6 Professional Rebate 
to Add Liquidity in Penny Symbols within Options 7, Section 2(1) from 
$0.48 per contract to $0.47 per contract, amend the criteria for the 
Tier 6 rebate, and add a Tier 6 rebate incentive for Penny Symbols does 
not impose an undue burden on competition. With this proposal, 
Customers will continue to be eligible for the highest rebates offered 
by the Exchange. Customer liquidity, unlike Professional liquidity, 
offers unique benefits to the market which benefits all market 
participants. Customer liquidity is the most sought after liquidity 
among Participants. Customer liquidity benefits all market participants 
by providing more trading opportunities, which attracts market makers. 
An increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
Paying higher rebates to Customers is consistent with the treatment of 
Customers on other options venues that are paid the highest 
rebates.\26\ Paying Professionals the same or lower rebates as 
Customers does not impose an undue burden on competition. With respect 
to Professionals, the Exchange believes that continuing to encourage 
Participants to add Professional liquidity creates competition among 
options exchanges because the Exchange believes that the rebates may 
cause market participants to select NOM as a venue to send Professional 
order flow. Lowering rebates for Professionals, who unlike Customers, 
have access to sophisticated trading systems that contain functionality 
not available to Customers does not impose an undue burden on 
competition. Finally, the Exchange would uniformly apply the Tier 6 
rebate criteria and incentive to all Participants and would uniformly 
pay rebates to all qualifying Participants.
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    \26\ See Nasdaq PHLX LLC Options 7, Section 2. Phlx pays rebates 
exclusively to Customers. See also Nasdaq GEMX, LLC Options 7, 
Section 3. Priority Customers receive the highest rebates.
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    The Exchange's proposal to decrease the criteria to achieve the 
Tier 3 Rebate to Add Liquidity in Penny Symbols within Options 7, 
Section 2(1) does not impose an undue burden on competition because the 
Exchange would uniformly apply the Tier 3 rebate criteria to all 
Participants and pay the Tier 3 rebate to all qualifying Participants.

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.\27\
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    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (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

[[Page 73353]]

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 [email protected]. Please include 
File Number SR-NASDAQ-2022-064 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2022-064. 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-2022-064 and 
should be submitted on or before December 20, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25947 Filed 11-28-22; 8:45 am]
BILLING CODE 8011-01-P