Document ID: SEC-2013-1615-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2013-09-16T04:00Z

[Federal Register Volume 78, Number 179 (Monday, September 16, 2013)]
[Notices]
[Pages 56962-56967]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22401]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70361; File No. SR-NASDAQ-2013-114]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
the Qualified Market Maker Program Under Rule 7014, the Fees Assessed 
Under Rule 7015(g), and the Schedule of Fees and Rebates Under Rule 
7018(a)

September 10, 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 August 29, 2013 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is proposing to the Qualified Market Maker Program under 
Rule 7014, the fees assessed under Rule 7015(g), and the its schedule 
of fees and rebates for execution and routing of orders for securities 
priced at $1 or more under Rule 7018(a). NASDAQ will begin assessing 
the fees effective September 1, 2013.
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com, at NASDAQ's principal office, and at the 
Commission's Public Reference Room.

[[Page 56963]]

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, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
QMM Incentive Program
    In November 2012,\3\ NASDAQ introduced a market quality incentive 
program under which a member may be designated as a QMM with respect to 
one or more of its market participant identifiers (``MPIDs'') if:
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 68209 (November 9, 
2012), 77 FR 69519 (November 19, 2012) (SR-NASDAQ-2012-126).
---------------------------------------------------------------------------

     the member is not assessed any ``Excess Order Fee'' under 
Rule 7018 during the month; \4\ and
---------------------------------------------------------------------------

    \4\ Rule 7018(m). Last year, NASDAQ 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.
---------------------------------------------------------------------------

     through such MPID the member quotes at the national best 
bid or best offer (``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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    Thus, to be a QMM, a member must make a significant contribution to 
market quality by providing liquidity at the NBBO in a large number of 
stocks for a significant portion of the day. In addition, the member 
must avoid imposing the burdens on NASDAQ and its market participants 
that may be associated with excessive rates of entry of orders away 
from the inside and/or order cancellation. A QMM may be, but is not 
required to be, a registered market maker in any security; thus, the 
QMM designation does not by itself impose a two-sided quotation 
obligation or convey any of the benefits associated with being a 
registered market maker. The designation does, however, reflect the 
QMM's commitment to provide meaningful and consistent support to market 
quality and price discovery by extensive quoting at the NBBO in a large 
number of securities. Thus, the program is designed to attract 
liquidity both from traditional market makers and from other firms that 
are willing to commit capital to support liquidity at the NBBO. By 
providing incentives under the program, NASDAQ hopes to provide 
improved trading conditions for all market participants through 
narrower bid-ask spreads and increased depth of liquidity available at 
the inside market. In addition, the program reflects an effort to use 
financial incentives to encourage a wider variety of members, including 
members that may be characterized as high-frequency trading firms, to 
make positive commitments to promote market quality.
    Currently, a member that is a QMM with respect to a particular MPID 
(a ``QMM MPID'') is eligible to receive certain financial benefits. 
These benefits are described below:
     The QMM may receive an NBBO Setter Incentive credit of 
$0.0005 with respect to orders that qualify for the NBBO Setter 
Incentive Program (i.e., displayed orders with a size of at least one 
round lot that set the NBBO or join another trading center at the NBBO) 
\7\ and that are entered through the QMM MPID. In order to receive an 
NBBO Setter Incentive credit at the $0.0005 rate, the QMM must also 
have a volume of liquidity provided through the QMM MPID (as a 
percentage of Consolidated Volume) \8\ that exceeds the lesser of the 
volume of liquidity provided through such QMM MPID during the first 
month in which the MPID qualified as a QMM MPID (as a percentage of 
Consolidated Volume) or 1.0% of Consolidated Volume.\9\ If a QMM does 
not satisfy these volume requirements, it will receive an NBBO Setter 
Incentive credit of $0.0002 per share executed with respect to orders 
that qualify for the NBBO Setter Incentive Program.\10\
---------------------------------------------------------------------------

    \7\ See Rule 7014(f) and (g).
    \8\ ``Consolidated Volume'' is the total consolidated volume 
reported to all consolidated transaction reporting plans by all 
exchanges and trade reporting facilities.
    \9\ The QMM will also receive the $0.0005 per share rate during 
the first month in which an MPID becomes a QMM MPID.
    \10\ Designated Retail Orders (as defined in Rule 7018) are not 
be eligible to receive an NBBO Setter Incentive credit.
---------------------------------------------------------------------------

     The QMM receives a credit of $0.0001 per share executed 
with respect to all other displayed orders in securities priced at $1 
or more per share that provide liquidity and that are entered through a 
QMM MPID (in addition to any credit payable under Rule 7018).\11\ 
Designated Retail Orders are not eligible to receive this additional 
credit.
---------------------------------------------------------------------------

    \11\ If the QMM also participates in NASDAQ Investor Support 
Program (the ``ISP'') NASDAQ will pay the greater of any applicable 
credit under the ISP or the QMM program, but not a credit under both 
programs.
---------------------------------------------------------------------------

     For a number of shares not to exceed the lower of the 
number of shares of liquidity provided through a QMM MPID or 20 million 
shares per trading day (the ``Numerical Cap''), NASDAQ has charged a 
fee of $0.0028 per share executed for orders in securities priced at $1 
or more per share that access liquidity on the NASDAQ Market Center and 
that are entered through the same QMM MPID; provided, however, that 
orders that would otherwise be charged $0.0028 per share executed under 
Rule 7018 have not counted toward the Numerical Cap; and provided 
further that after the first month in which an MPID becomes a QMM MPID, 
the QMM's volume of liquidity added, provided, and/or routed through 
the QMM MPID during the month (as a percentage of Consolidated Volume) 
is not less than 0.05% lower than the volume of liquidity added, 
provided, and/or routed through such QMM MPID during the first month in 
which the MPID qualified as a QMM MPID (as a percentage of Consolidated 
Volume). For shares above the Numerical Cap, NASDAQ has charged the 
rate otherwise applicable under Rule 7018.

With regard to the $0.0028 per share executed access fee paid by QMMs, 
as described above, NASDAQ is proposing to eliminate the Numerical Cap 
and increase the charge for removing liquidity from NASDAQ from $0.0028 
to $0.0029 per share executed for orders in securities priced at $1 or 
more per share that access liquidity on the NASDAQ

[[Page 56964]]

Market Center and that are entered through a QMM MPID.

    NASDAQ adopted the $0.0028 access fee in March 2013.\12\ The change 
reduced the rate QMMs were paying prior to the change from $0.0030 or 
$0.0029 per share executed but limited the number of shares on which 
the fee was calculated to a number of shares not to exceed the number 
of shares of liquidity provided through a QMM MPID.\13\ In adopting the 
lower rate together with other new incentives, NASDAQ noted that the 
proposed changes to the program were intended to encourage members to 
promote price discovery and market quality by quoting at the NBBO for a 
significant portion of each day in a large number of securities, 
thereby benefitting NASDAQ and other investors by committing capital to 
support the execution of orders. NASDAQ subsequently limited the number 
of shares eligible for the incentive program's access fee rate to the 
lower of a number of shares not to exceed the number of shares of 
liquidity provided through a QMM MPID or 20 million shares per trading 
day.\14\
---------------------------------------------------------------------------

    \12\ Securities Exchange Act Release No. 68905 (February 12, 
2013), 78 FR 11716 (February 19, 2013) (SR-NASDAQ-2013-023).
    \13\ See Rules 7018(a)(1)-(3), which assess a fee of $0.0030 or 
$0.0029 per share executed for orders that access liquidity on the 
NASDAQ Market Center.
    \14\ Securities Exchange Act Release No. 69376 (April 15, 2013), 
78 FR 23611 (April 19, 2013) (SR-NASDAQ-2013-063).
---------------------------------------------------------------------------

    NASDAQ is now proposing to increase the fee assessed to members, 
but no longer restrict the number of shares eligible for the lower 
rate. NASDAQ believes that eliminating the Numerical Cap will further 
incent members to participate in the program by eliminating any 
restriction on the total number of shares eligible for the program's 
lower fee. NASDAQ notes that the increase in the charge to $0.0029 
continues to represent a reduction in the access fees that most market 
participants are assessed under Rule 7018. NASDAQ will continue to 
require QMMs seeking to qualify for the $0.0029 rate to have, after the 
first month in which an MPID becomes a QMM MPID, volume of liquidity 
added, provided, and/or routed through the QMM MPID during the month 
(as a percentage of Consolidated Volume) that is not less than 0.05% 
lower than the volume of liquidity added, provided, and/or routed 
through such QMM MPID during the first month in which the MPID 
qualified as a QMM MPID (as a percentage of Consolidated Volume).
Amended Fees for TCP ITCH Data Feed Pairs
    The Exchange is proposing to increase the fee assessed for use of 
TCP ITCH data feed pairs to connect to the NASDAQ System. TCP ITCH data 
feed pairs are a type of port pair \15\ to which firms may subscribe to 
receive market data through a private (i.e., not shared) connection to 
NASDAQ. By contrast, a firm may subscribe to a Multicast ITCH data feed 
pair,\16\ which provides access to a shared distribution of market 
data, which is distributed to all subscribers simultaneously. NASDAQ 
assesses a fee of $500 per month for each port pair used to connect to 
NASDAQ using protocols other than Multicast ITCH. Currently, 
subscription to a TCP ITCH data feed pair is covered by this fee. 
Unlike Multicast ITCH data, TCP ITCH data requires substantially 
greater hardware infrastructure to support subscribers because NASDAQ 
must support each individual TCP ITCH connection, including the 
transmission of the large volume of market data through each port. By 
contrast, NASDAQ transmits market data for Multicast ITCH through a 
single point, which is accessed by all subscribers. In light of 
increased costs resulting from a need to support the hardware and 
support demands of the service, the Exchange is proposing to increase 
the fees for subscription to a TCP ITCH data port from $500 per month, 
per port pair to $750 per month, per port pair.
---------------------------------------------------------------------------

    \15\ NASDAQ uses the term ``data feed pair'' herein and in the 
rule as a more precise description of the intended use and 
functionality of the port pair.
    \16\ For a fee of $1,000 per month for software-based TotalView-
ITCH or $2,500 per month for combined software- and hardware-based 
TotalView-ITCH.
---------------------------------------------------------------------------

Changes to NASDAQ Market Center Tiers
    NASDAQ is proposing to modify several tiers under which members may 
receive credits with respect to orders that provide liquidity. First, 
under Rule 7018(a)(1), NASDAQ provides credits to member firms for 
their displayed quotes/orders that provide liquidity in securities 
listed on NASDAQ. The tiers are based on various measurements of 
providing liquidity. Currently, the lowest credit NASDAQ provides is 
$0.0020 per share executed. This tier is the default if a member firm 
does not fall within any of the other tiers of the rule. NASDAQ is 
proposing to adopt a new default tier under which members would receive 
$0.0015 per share executed, while imposing modest volume requirements 
with respect to the $0.0020 tier. Specifically, to qualify for that 
tier, a member must have shares of liquidity provided in all securities 
during the month less than 0.10% of Consolidated Volume during the 
month,\17\ through one or more of its Nasdaq Market Center MPIDs, 
including a daily average volume of shares of liquidity provided in 
securities listed on an exchange other than NASDAQ of at least 250,000. 
NASDAQ believes that the change to the $0.0020 tier will provide an 
incentive for members that trade NASDAQ-listed securities on NASDAQ to 
also use NASDAQ to trade securities listed on other exchanges. In 
addition, the reduction in the level of the default credit will allow 
NASDAQ to reduce costs in a period of persistent low trading volumes in 
the cash equities markets.
---------------------------------------------------------------------------

    \17\ If the member has at least 0.10% of Consolidated Volume 
during the month through one or more of its Nasdaq Market Center 
MPIDs, it would qualify for a credit of $0.0025 under Rule 
7018(a)(1).
---------------------------------------------------------------------------

    NASDAQ is also eliminating several tiers under Rules 7018(a)(1)-
(3), which are tied to activity on the NASDAQ Options Market and which 
are not used significantly by market participants. Specifically, NASDAQ 
is removing from each subparagraph of Rule 7018(a) the following credit 
tiers, together with associated credits:
     member with (i) shares of liquidity provided in all 
securities during the month representing more than 0.10% of 
Consolidated Volume during the month, through one or more of its Nasdaq 
Market Center MPIDs, and (ii) an average daily volume during the month 
of more than 100,000 contracts of liquidity accessed or provided 
through one or more of its Nasdaq Options Market MPIDs.
     member with (i) shares of liquidity provided in all 
securities during the month representing more than 1.0% of Consolidated 
Volume during the month, through one or more of its Nasdaq Market 
Center MPIDs, and (ii) an average daily volume during the month of more 
than 200,000 contracts of liquidity accessed or provided through one or 
more of its Nasdaq Options Market MPIDs.
     member (i) with shares of liquidity provided in all 
securities during the month representing at least 0.05% of Consolidated 
Volume during the month, through one or more of its Nasdaq Market 
Center MPIDs, and (ii) that qualifies for the Penny Pilot Tier 4 NOM 
Market Maker Rebate to Add Liquidity under Chapter XV, Section 2 of the 
Nasdaq Options Market rules during the month through one or more of its 
Nasdaq Options Market MPIDs.
     member (i) with shares of liquidity provided in all 
securities during the

[[Page 56965]]

month representing at least 0.10% of Consolidated Volume during the 
month, through one or more of its Nasdaq Market Center MPIDs, and (ii) 
that qualifies for the Penny Pilot Tier 4 NOM Market Maker Rebate to 
Add Liquidity under Chapter XV, Section 2 of the Nasdaq Options Market 
rules during the month through one or more of its Nasdaq Options Market 
MPIDs.
    NASDAQ is modifying the eligibility requirements for a tier found 
under each subparagraph of Rule 7018(a). Specifically, each of the 
identical tiers currently provides two means to qualify for a credit, 
which are based on the liquidity provided by a member's Designated 
Retail Orders. Currently, the tiers provide a:
     credit for displayed Designated Retail Orders, if entered 
through an MPID through which (i) at least 90% of the shares of 
liquidity provided during the month are provided through Designated 
Retail Orders, or (ii) the member provides shares of liquidity through 
Designated Retail Orders that represent at least 0.30% of Consolidated 
Volume during the month and the member qualifies for the Penny Pilot 
Tier 4 Customer and Professional Rebate to Add Liquidity under Chapter 
XV, Section 2 of the Nasdaq Options Market rules during the month 
through one or more of its Nasdaq Options Market MPIDs.

NASDAQ is removing the second criteria from each of the tiers, which 
ties eligibility for a credit to the volume of liquidity provided 
through Designated Retail Orders and the member's qualification for the 
Penny Pilot Tier 4 during the month through one or more of its Nasdaq 
Options Market MPIDs. A member will continue to qualify for the credit 
if it meets the remaining criteria focused on the extent to which the 
member uses an MPID for Designated Retail Orders.

    NASDAQ is also clarifying language in two credit tiers under each 
subparagraph of Rule 7018(a). The language is designed to align the 
text of the tier with terms and definitions used in the NASDAQ Options 
Market rules, which are also referenced in the tiers. Specifically, 
NASDAQ is amending:
     the tier that provides a credit to members (i) with shares 
of liquidity provided in all securities during the month representing 
more than 0.15% of Consolidated Volume during the month, through one or 
more of its Nasdaq Market Center MPIDs, and (ii) an average daily 
volume during the month of more than 100,000 contracts of liquidity 
accessed or provided through one or more of its Nasdaq Option Market 
MPIDs. NASDAQ is deleting language concerning the volume calculation 
and replacing it with more precise language that references the NASDAQ 
Option Market rules. NASDAQ is not changing how eligibility for the 
tier is calculated in any way.
     The tier that provides a credit to members (i) with shares 
of liquidity provided in all securities during the month representing 
at least 0.45% of Consolidated Volume during the month, through one or 
more of its Nasdaq Market Center MPIDs, and (ii) that qualifies for the 
Penny Pilot Tier 8 Customer and Professional Rebate to Add Liquidity 
under Chapter XV, Section 2 of the Nasdaq Options Market rules during 
the month through one or more of its Nasdaq Options Market MPIDs. 
NASDAQ is adding, deleting and rearranging language in the rule to use 
more precise terms in references to rebates under the NASDAQ Options 
Market rules. NASDAQ is not changing how eligibility for the tier is 
calculated in any way.
Amended Fees for Execution and Routing of Securities Listed on NYSE
    NASDAQ is proposing to amend fees assessed for routing orders in 
New York Stock Exchange, Inc. (``NYSE'') listed securities that execute 
at NYSE. Currently, NASDAQ assesses a charge of $0.0025 per share 
executed for DOTI, STGY, SCAN, SKNY, SKIP, TFTY, SAVE or SOLV orders 
executed at NYSE, as well as LIST orders executed at NYSE outside of an 
opening, closing, or reopening process. NASDAQ generally assesses a 
charge of $0.0030 per share executed for such orders executed 
elsewhere.\18\ NASDAQ is proposing to increase the charge assessed for 
DOTI, STGY, SCAN, SKNY, SKIP, LIST, TFTY, SAVE and SOLV orders executed 
at NYSE to $0.0030 so that it is consistent with the fee generally 
charged for such order routing.
---------------------------------------------------------------------------

    \18\ Members are charged $0.0005 per share executed for TFTY 
orders that execute at venues other than NYSE, NASDAQ OMX BX or 
NASDAQ OMX PSX. This rate reflects the fact that the routing table 
for TFTY orders is generally focused on low-cost execution venues. 
In addition, orders that execute at NASDAQ OMX BX or NASDAQ OMX PSX 
are generally assessed different fees than orders executed at other 
venues. NASDAQ also provides a credit of $0.0015 per share executed 
for orders that add liquidity at the NYSE after routing. See Rule 
7018(a)(2).
---------------------------------------------------------------------------

    NASDAQ is also proposing to increase the fee assessed for execution 
of MOPB and MOPP orders executed at NYSE. Currently, NASDAQ assesses a 
charge of $0.0027 per share executed for MOPB or MOPP orders executed 
at NYSE, and a charge of $0.0035 per share executed for MOPB or MOPP 
orders executed at venues other than NYSE. NASDAQ is proposing to 
increase the charge assessed for execution of MOPB and MOPP orders 
executed at NYSE to $0.0035 per share executed, so that it is 
consistent with the fee assessed for such orders executed at venues 
other than NYSE.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\19\ in general, and with 
Sections 6(b)(4) and 6(b)(5) 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 or system which NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f.
    \20\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The changes to the QMM Program are reasonable because they serve to 
maintain an incentive structure designed to benefit all market 
participants by encouraging quoting at or near the NBBO in a wide range 
of securities. The QMM program is intended to encourage members to 
promote price discovery and market quality by quoting at the NBBO for a 
significant portion of each day in a large number of securities, 
thereby benefitting NASDAQ and other investors by committing capital to 
support the execution of orders. The proposed changes to the program 
are intended to further promote these goals by eliminating the 
Numerical Cap, which limited the number of shares eligible for the 
reduced fee, while increasing the fee a modest amount to offset the now 
unlimited number of shares eligible for the lower fee of the program. 
Accordingly, NASDAQ hopes thereby to maintain the benefits associated 
with the QMM program while reducing its cost, thereby making the 
program sustainable in the longer term. In addition, the elimination of 
the Numerical Cap and the rate change are consistent with an equitable 
allocation of fees and not unfairly discriminatory because they do not 
alter the eligibility of QMMs to participate in the program and receive 
associated benefits.
    The proposed fee increase to TCP ITCH data feed pairs under Rule 
7015(g) is reasonable because it reflects the increased costs 
associated with offering the connectivity option. NASDAQ notes that it 
not raising the fee assessed for

[[Page 56966]]

subscription to TCP ITCH to a level that equals or exceeds the 
subscription fee assessed for Multicast ITCH data subscription, which 
requires less hardware infrastructure and support than TCP ITCH. NASDAQ 
is taking a measured approach to increasing the fee and may further 
increase the fee in the future to more closely align the fee with 
costs. The proposed fee is equitable and not unfairly discriminatory 
because the Exchange is assessing the fee equally among subscribers to 
the service. Moreover, the proposed fee is not unfairly discriminatory 
as it enables the Exchange to allocate the increased costs of the 
connectivity option to those who subscribe to the service. The Exchange 
believes that the proposed fee for TCP ITCH data port connectivity 
access services will enable it to cover its costs and earn an 
appropriate return on its investment in market technology and services.
    The modified criteria for the $0.0020 credit tier for members 
active in NASDAQ-listed securities is reasonable because it imposes a 
modest requirement to attain the credit. The change is also reasonable 
because it requires members that provide liquidity in securities listed 
on NASDAQ to also use NASDAQ for trading other securities, thereby 
promoting greater use of NASDAQ as a trading venue for such securities 
and potentially enhancing the level of liquidity provided in non-NASDAQ 
securities. The change is consistent with an equitable allocation of 
fees because the standards for the $0.0020 credit tier requires a level 
of liquidity provision that is less rigorous than tiers that provide 
larger credits, yet provides incentive for members to provide liquidity 
sufficient to achieve a larger credit than is available under the new 
default $0.0015 credit tier. The new criteria are not unreasonably 
discriminatory because NASDAQ believes that it will not be difficult 
for members currently receiving the $0.0020 credit to continue to 
qualify for it if they wish to do so.
    The new default tier of $0.0015 per share executed is reasonable 
because although it will result in a reduction of credits for members 
not achieving other tiers, it will provide a means of reducing costs in 
a period of persistently low trading volumes. In addition, the new tier 
is consistent with an equitable allocation of fees and not unreasonably 
discriminatory because numerous tiers remain in effect through which 
members that support NASDAQ through more extensive levels of liquidity 
provision may receive higher credits. Accordingly, the lower tier is 
paid with respect to members whose participation in NASDAQ as liquidity 
providers is limited. To the extent that such members have opted to be 
more active on other trading venues, it is likely that they are 
receiving higher credits from such venues and will therefore not be 
significantly affected by the change on NASDAQ.
    The proposed deletions of the credit tiers under the subparagraphs 
of Rule 7018(a) are reasonable because they have not been significantly 
used by market participants, and therefore have not had the intended 
effect of attracting order flow to NASDAQ. Elimination of unused tiers 
is consistent with an equitable allocation of fees and is not unfairly 
discriminatory because no members will be impacted by the change.
    Similarly, the elimination of the optional criteria of tiers under 
each of the subparagraphs Rule 7018(a), which are tied to providing a 
certain level of shares of liquidity through Designated Retail Orders 
and qualifying for the Penny Pilot Tier 4 during a given month through 
one or more of its Nasdaq Options Market MPIDs, is reasonable because 
the optional criteria are not significantly used by market participants 
to qualify under the tiers. As a consequence, the criteria have not had 
the intended effect of attracting order flow to NASDAQ. Therefore, 
elimination of the unused criteria is consistent with an equitable 
allocation of fees and is not unfairly discriminatory because no 
members will be impacted by the change.
    The change with respect to the charges assessed for routing NYSE-
listed securities executed at NYSE is reasonable because it harmonizes 
these fees with the fees generally assessed for routing to venues other 
than NYSE. NASDAQ does not believe at this juncture that fees assessed 
members for routing NYSE-listed securities to the NYSE should be lower 
than the fees assessed members for routing such securities to other 
markets other than NYSE. The change is consistent with an equitable 
allocation of fees because it is allocated solely to members that use 
NASDAQ's routing services and opt to use the specified routing 
strategies for accessing NYSE. The change is not unfairly 
discriminatory because it will make the economics applicable to 
executions on NYSE less disparate from the fees applicable to 
executions on other venues. Moreover, the change is not discriminatory 
because it applies equally to all members using the specified routing 
strategies.

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.\21\ 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. In this instance, although the change to the QMM 
program may limit the benefits of the program, the incentive program in 
question remain in place and is itself reflective of the need for 
exchanges to offer significant financial incentives to attract order 
flow. 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. Finally, the changes to fee tiers and access 
services fees, although constituting fee increases, are being made with 
respect to basic trading services for which numerous substitutes exist. 
Accordingly, if the changes are unattractive to market participants, it 
is likely that NASDAQ will lose market share as a result. 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.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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.

[[Page 56967]]

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) of the Act,\22\ and paragraph (f) \23\ of Rule 19b-4, 
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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2013-114 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-2013-114. 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 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; 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-2013-114 and should 
be submitted on or before October 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22401 Filed 9-13-13; 8:45 am]
BILLING CODE 8011-01-P