Document ID: SEC-2021-0928-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2021-07-07T04:00Z

[Federal Register Volume 86, Number 127 (Wednesday, July 7, 2021)]
[Notices]
[Pages 35839-35845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14388]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92300; File No. SR-NASDAQ-2021-053]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Transaction Credits and Charges at Equity 7, 
Section 118(a)

June 30, 2021.
    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 June 22, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission

[[Page 35840]]

(``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 Exchange's transaction credits 
and charges at Equity 7, Section 118(a), as described further below. 
The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
schedule of credits and charges, at Equity 7, Section 118(a). 
Specifically, the Exchange proposes to: (1) Add a new credit of $0.0028 
per share executed for members that add at least a certain threshold 
volume of liquidity in securities in Tape B; (2) add a new credit of 
$0.0030 per share executed for members that add and remove liquidity, 
including adding at least a certain threshold volume of liquidity in 
securities in midpoint orders or Midpoint Extended Life Orders (``M-
ELOs'') \3\ for securities in any Tape; (3) raise the qualifying 
threshold for an existing credit of $0.00305 per share executed for 
members that add and remove liquidity, including a certain volume of 
liquidity in midpoint orders or M-ELOs in securities in any Tape; (4) 
add new $0.0026 and $0.0027 per share executed credits for members that 
provide liquidity, grow their liquidity adding activity relative to a 
benchmark month, and achieve certain ratios of NBBO liquidity \4\ to 
displayed liquidity provided; (5) add two new supplemental credits for 
certain midpoint orders of $0.0001 or $0.0002 per share executed for 
members that provide at least certain thresholds of midpoint liquidity 
and grow their midpoint adding liquidity relative to a benchmark month; 
and (6) amend the applicability of two existing charges for members 
with orders that execute upon utilizing the ``RTFY'' routing option.\5\
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    \3\ Pursuant to Equity 4, Rule 4702(b)(14), a ``Midpoint 
Extended Life Order'' is an Order Type with a Non-Display Order 
Attribute that is priced at the midpoint between the NBBO and that 
will not be eligible to execute until a minimum period of 10 
milliseconds has passed after acceptance of the Order by the System.
    \4\ As defined in Equity 7, Section 114(g), ``NBBO liquidity 
provided'' means liquidity provided from orders (other than 
Designated Retail Orders, as that term is defined in Equity 7, 
Section 118), that establish the NBBO, and display a quantity of at 
least one round lot at the time of execution.
    \5\ Pursuant to Equity 4, Section 4758(a)(1)(A)(v)(b), ``RTFY'' 
is a routing option available for an order that qualifies as a 
Designated Retail Order under which orders check the System for 
available shares only if so instructed by the entering firm and are 
thereafter routed to destinations on the System routing table. If 
shares remain unexecuted after routing, they are posted to the 
Nasdaq Book. Once on the Nasdaq Book, should the order subsequently 
be locked or crossed by another market center, the Nasdaq System 
will not route the order to the locking or crossing market center. 
RTFY is designed to allow orders to participate in the opening, 
reopening and closing process of the primary listing market for a 
security.
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New Credit for Adding Liquidity in Tape B Securities
    The Exchange proposes to add a new credit of $0.0028 per share 
executed to a member with shares of liquidity provided in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represent 0.45% or more of Consolidated Volume \6\ during the month, 
which includes shares of liquidity provided with respect to securities 
that are listed on exchanges other than Nasdaq or NYSE (``Tape B 
Securities'') that represent 0.10% or more of Consolidated Volume.
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    \6\ Equity 7, Section 118(a) defines ``Consolidated Volume'' to 
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 a member's trading 
activity the date of the annual reconstitution of the Russell 
Investments Indexes is excluded from both total Consolidated Volume 
and the member's trading activity.
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    The Exchange notes that it presently offers three similarly 
structured credits, ranging from $0.0029 to $0.0030 per share executed, 
to members with orders that add liquidity to the Exchange representing 
more than certain threshold percentages of Consolidated Volumes (0.625% 
to 1.25%), including shares of liquidity provided with respect to 
securities in Tape B that represent at least certain threshold 
percentages of Consolidated Volume (0.15% to 0.40%).
    The proposal will add to this series of credits a new lower credit 
for members that add corresponding lower threshold volumes of liquidity 
to the Exchange, and lower threshold volumes in securities in Tape B. 
In doing so, the Exchange intends to expand opportunities for 
participants to receive a credit if they add significant liquidity to 
the Exchange, including significant liquidity in Tape B. For those 
members that engage in significant liquidity adding activity on the 
Exchange, but do not have sufficient activity to qualify for the 
existing credits, the new credit may be more readily attainable. If so, 
then such members may seek to qualify for the new credit by increasing 
their liquidity adding activity on the Exchange. To the extent that 
they do so, the quality of the market will improve, to the benefit of 
all participants.
New and Amended Credits for Adding and Removing Liquidity and Executing 
Midpoint and M-ELO Orders
    The Exchange proposes to add a new credit of $0.0030 per share 
executed to a member: (i) With shares of liquidity provided in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represent 0.875% or more of Consolidated Volume during the month; (ii) 
that executes 0.25% or more of Consolidated Volume during the month 
through providing midpoint orders and through MELO; and (iii) that 
removes at least 1.35% of Consolidated Volume during the month.
    The proposed new credit will be situated between two similarly-
structured credits that the Exchange presently provides to its members: 
(1) A $0.00295 per share executed credit to a member that adds 
liquidity representing 0.70% or more of Consolidated Volume during the 
month, executes 0.20% or more of Consolidated Volume in midpoint and M-
ELO Orders, and removes at least 1.10% of Consolidated Volume during 
the month; and (2) a $0.00305 per share executed credit to a member 
that adds liquidity representing 1.20% or more of Consolidated Volume 
during the month, executes 0.40% or more of Consolidated Volume in 
midpoint and M-ELO Orders, and removes at least 1.10% of Consolidated 
Volume during the month. As to the $0.00305 credit, the Exchange 
proposes

[[Page 35841]]

to raise the liquidity removal threshold from 1.10% to 1.45% of 
Consolidated Volume.
    The Exchange intends for the new proposed credit to be more 
challenging for members to achieve than the existing $.00295 credit, 
but not quite as challenging to achieve as the $0.00305 credit. If 
members that currently qualify for $0.00295 credit assess that the new 
$0.0030 credit is readily attainable, whereas the $0.00305 is not so, 
then they may increase their liquidity adding and removing activities 
on the Exchange to qualify for it, and the quality of the market will 
improve, to the benefit of all participants.
    Meanwhile, the proposal to increase the liquidity removal 
requirement for the $0.00305 credit from 1.10% to 1.45% of Consolidated 
Volume will encourage those participants that already qualify for the 
credit to increase the extent of their liquidity removal activity on 
the Exchange in order to continue to qualify for it. From time to time, 
the Exchange believes it is reasonable to recalibrate the criteria for 
credits such as this one to ensure that the credits remain 
appropriately challenging for participants to attain in light of 
changes to their levels of activity on the Exchange.
New Growth Tiers for Adding Displayed Liquidity
    The Exchange proposes to add two new credits that will encourage 
its members to add and grow the extent to which they add significant 
volumes on liquidity to the Exchange, including liquidity that 
establishes the NBBO. First, the Exchange proposes to provide a $0.0026 
per share executed credit to a member that, through one or more of its 
Nasdaq Market Center MPIDs: (i) Provides shares of liquidity in all 
securities that represent equal to or greater than 0.15% of 
Consolidated Volume during the month; (ii) increases the extent to 
which it provides liquidity in all securities by 20% or more as a 
percentage of Consolidated Volume during the month relative to the 
month of May 2021; and (iii) has a ratio of at least 50% NBBO liquidity 
provided to liquidity provided by displayed quotes/orders (other than 
Supplemental Orders or Designated Retail Orders) during the month. 
Second, the Exchange proposes to provide a higher credit to a member 
that engages in higher levels of this same activity. Namely, the 
Exchange proposes to provide a $0.0027 per share executed credit to a 
member that, through one or more of its Nasdaq Market Center MPIDs: (i) 
Provides shares of liquidity in all securities that represent equal to 
or greater than 0.20% of Consolidated Volume during the month; (ii) 
increases the extent to which it provides liquidity in all securities 
by 35% or more as a percentage of Consolidated Volume during the month 
relative to the month of May 2021; and (iii) has a ratio of at least 
60% NBBO liquidity provided to liquidity provided by displayed quotes/
orders (other than Supplemental Orders or Designated Retail Orders) 
during the month.
    Again, the Exchange intends for these new credits to improve market 
quality by encouraging members to add significant volumes of liquidity 
during the month, by growing such activity over time, and by providing 
liquidity that is valued by participants because it sets the NBBO.
Supplemental Credits for Midpoint Orders
    The Exchange proposes to provide two new supplemental credits for 
midpoint orders (excluding buy (sell) orders with Midpoint pegging that 
receive an execution price that is lower (higher) than the midpoint of 
the NBBO) that provide liquidity to the Exchange. These credits will be 
in addition to other credits otherwise available to members for adding 
non-displayed liquidity to the Exchange, but a member's activity will 
qualify it to receive only one of the two new supplemental credits at a 
time, meaning that they are not cumulative. Additionally, members that 
receive a supplemental credit will be entitled to a combined credit 
(regular and supplemental) up to a maximum of $0.0027 per share 
executed, meaning that if a member is entitled to a regular credit of 
$0.0026 per share executed as well as the $0.002 [sic] per share 
executed supplemental credit, the total combined credit provided to the 
member will be $0.0027 per share executed, rather than the full $0.0028 
per share executed.
    Specifically, the Exchange proposes to provide supplemental credits 
for midpoint orders (excluding buy (sell) orders with Midpoint pegging 
that receive an execution price that is lower (higher) than the 
midpoint of the NBBO) as follows: (1) $0.0001 per share executed if the 
member, during the month (i) provides at least 15 million shares of 
midpoint liquidity per day during the month; and (ii) increases 
providing liquidity through midpoint orders by 10% or more relative to 
the member's May 2021 average daily volume provided through midpoint 
orders; or (2) $0.0002 per share executed if the member, during the 
month (i) provides at least 15 million shares of midpoint liquidity per 
day during the month; and (ii) increases providing liquidity through 
midpoint orders by 30% or more relative to the member's May 2021 
average daily volume provided through midpoint orders.
    The purpose of these new credits is to provide extra incentives to 
members that provide non-displayed liquidity to the Exchange to do so 
through midpoint orders, as well as to grow substantially the extent to 
which they provide midpoint orders to the Exchange relative to a recent 
benchmark month. The Exchange believes that if such incentives are 
effective, then any ensuing increase in midpoint liquidity to the 
Exchange will once again improve market quality, to the benefit of all 
participants.
    The Exchange notes that it proposes to cap combined regular and 
supplemental credits at $0.0027 per share executed to manage the costs 
to the Exchange of providing these incentives. The Exchange has only 
limited resources available to it for incentive programs, and it must 
ensure that it allocates such resources appropriately to optimize their 
intended impacts.
Amend Applicability of Existing Charges for Routed Orders Using RTFY
    Additionally, the Exchange proposes to amend the applicability of 
two of its existing transaction fees. First, it proposes to amend the 
existing $0.0030 per share executed fee that it assesses to members 
that use the RTFY order routing option to execute orders which remove 
more than 4 million shares of liquidity from the Exchange or execute in 
a venue with a protected quotation under Regulation NMS other than 
Nasdaq. Second, it proposes to amend the $0.00 per share executed fee 
that it applies to members that use the RTFY order routing option to 
execute orders which remove up to 4 million shares of liquidity from 
the Exchange or execute in a venue with a protected quotation under 
Regulation NMS other than Nasdaq. The Exchange proposes to amend these 
charges by stating that it will not count RTFY-routed shares that 
execute in so-called ``taker-maker'' venues when it calculates whether 
a member has exceeded the 4 million share threshold that applies to 
both charges. The Exchange also proposes to exclude taker-maker RTFY 
executions from any fees that a member incurs for RTFY executions to 
the extent that the member exceeds the 4 million share threshold 
through executions at non-taker-maker venues.
    The Exchange proposes to exclude RTFY-routed shares executed at 
taker-maker venues from the fee qualification

[[Page 35842]]

calculations and from the fees themselves because taker-maker venues 
typically do not charge fees to Nasdaq for RTFY to access their 
liquidity, whereas maker-taker venues do so. In other words, the 
Exchange charges a fee to participants that use RTFY to execute large 
volumes of shares at venues other than Nasdaq to help Nasdaq to recover 
the costs it incurs for when such shares access liquidity at maker-
taker venues. Because taker-maker venues do not contribute 
substantially to Nasdaq's RTFY routing costs, Nasdaq believes that it 
is reasonable to exclude RTFY shares that execute on taker-maker venues 
from Nasdaq's determination as to whether a participant's RTFY activity 
during a month meets the 4 million share threshold to incur the $0.0030 
per share executed fee. For the same reason, it is also reasonable to 
exclude RTFY shares executed on taker-maker venues from any RTFY 
execution fees otherwise incurred.
2. Statutory Basis
    The Exchange believes that its proposals are consistent with 
Section 6(b) of the Act,\7\ in general, and further the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that they 
provide for the equitable allocation of reasonable dues, fees and other 
charges among members and issuers and other persons using any facility, 
and are not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The proposals are also consistent with 
Section 11A of the Act relating to the establishment of the national 
market system for securities.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposals Are Reasonable
    The Exchange's proposals are reasonable in several respects. As a 
threshold matter, the Exchange is subject to significant competitive 
forces in the market for equity securities transaction services that 
constrain its pricing determinations in that market. The fact that this 
market is competitive has long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \9\
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    \9\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \10\
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    \10\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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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 
equity security transaction services. The Exchange is only one of 
several equity venues to which market participants may direct their 
order flow. Competing equity exchanges offer similar tiered pricing 
structures to that of the Exchange, including schedules of rebates and 
fees that apply based upon members achieving certain volume thresholds.
    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 proposals represent reasonable attempts by the 
Exchange to increase its liquidity and market share relative to its 
competitors.
    The Exchange believes that it is reasonable to establish new 
transaction credits, at Equity 7, Section 118(a), because each of these 
new credits will encourage the addition of and/or growth in the 
addition of various types of displayed and non-displayed liquidity to 
the Exchange, including M-ELO, midpoint, Tape B securities, and NBBO-
setting liquidity, as well as the removal of liquidity in one instance.
    First, the proposed new credit of $0.0028 per share executed--which 
will apply to members that add liquidity representing 0.45% or more of 
Consolidated Volume during the month, and add shares of liquidity in 
Tape B Securities of 0.10% or more of Consolidated Volume--will provide 
a new opportunity to members to earn a credit for providing significant 
volumes of liquidity to the Exchange without having to meet the more 
stringent qualifying criteria that apply to existing similarly-
structured $0.00295 and $0.0030 per share credits. Similarly, the 
proposed new credit of $0.0030 per share executed--which will apply to 
members that (i) add liquidity to the Exchange representing 0.875% or 
more of Consolidated Volume during the month, (ii) execute 0.25% or 
more of Consolidated Volume during the month in providing midpoint or 
M-ELO Orders, and (iii) remove from the Exchange liquidity representing 
at least 1.35% of Consolidated Volume during the month--will encourage 
members that currently qualify for an existing $0.00295 per share 
executed credit for providing a significant amount of liquidity to the 
Exchange, including midpoint and M-ELO orders, and for removing a 
significant amount of liquidity from the Exchange, to further increase 
the extent of these activities on the Exchange to earn a higher $0.0030 
credit, particularly if they deem the criteria for the new credit to be 
more readily achievable than are the criteria to qualify for the 
existing $0.00305 per share executed credit.
    Meanwhile, the proposal to increase the liquidity removal 
requirement for the $0.00305 credit from 1.10% to 1.45% of Consolidated 
Volume will encourage those participants that already qualify for the 
credit to increase the extent of their liquidity removal activity on 
the Exchange in order to continue to qualify for it. From time to time, 
the Exchange believes it is reasonable to recalibrate the criteria for 
credits such as this one to ensure that the credits remain 
appropriately challenging for participants to attain in light of 
changes to their levels of activity on the Exchange.
    It is also reasonable for the Exchange to establish $0.0026 and 
$0.0027 per share executed credits to members that: (i) Provide 
liquidity greater than certain threshold percentages of Consolidated 
Volume during the month; (ii) increase their liquidity providing 
activity in all securities by specified percentages of Consolidated 
Volume during the month relative to the month of May 2021; and (iii) 
achieve specified ratios of NBBO liquidity provided to liquidity 
provided by displayed quotes/orders (other than Supplemental Orders or 
Designated Retail Orders) during the month. These two new credits will 
encourage its members to add and grow the extent to which they add 
significant volumes of

[[Page 35843]]

liquidity to the Exchange, including liquidity that establishes the 
NBBO.
    Next, the Exchange believes it is reasonable to establish two new 
supplemental credits for midpoint orders (other than buy (sell) orders 
with Midpoint Pegging that receive execution prices that are lower 
(higher) than the midpoint of the NBBO) as follows: (1) $0.0001 per 
share executed if the member, during the month (i) provides at least 15 
million shares of midpoint liquidity per day during the month; and (ii) 
increases providing liquidity through midpoint orders by 10% or more 
relative to the member's May 2021 average daily volume provided through 
midpoint orders; or (2) $0.0002 per share executed if the member, 
during the month (i) provides at least 15 million shares of midpoint 
liquidity per day during the month; and (ii) increases providing 
liquidity through midpoint orders by 30% or more relative to the 
member's May 2021 average daily volume provided through midpoint 
orders. These proposals are reasonable because they will provide extra 
incentives to members that provide non-displayed liquidity to the 
Exchange to do so through midpoint orders, as well as to grow 
substantially the extent to which they provide midpoint orders to the 
Exchange relative to a recent benchmark month. The Exchange believes 
that if such incentives are effective, then any ensuing increase in 
midpoint liquidity to the Exchange will once again improve market 
quality, to the benefit of all participants.
    The Exchange believes that it is reasonable to exclude from the 
supplemental credits orders with Midpoint Pegging which execute at 
prices less aggressive than the midpoint of the NBBO because such 
orders already receive price improvements, such that members do not 
require additional inducements to enter these orders on the Exchange.
    Furthermore, the Exchange believes that it is reasonable to cap the 
amount of combined regular and supplemental credits it proposes to 
offer members under this program to $0.0027 per share executed. This 
cap will allow the Exchange to manage its costs of providing these 
incentives. The Exchange has only limited resources available to it for 
incentive programs, and it must ensure that it allocates such resources 
appropriately to optimize their intended impacts.
    Finally, the Exchange believes that it is reasonable to exclude 
RTFY-routed shares that are executed at taker-maker venues from its 
calculations for determining whether RTFY participants will incur a 
$0.0030 per share executed fee when their shares execute at away venues 
as well as from the fee itself, to the extent it is otherwise 
applicable to a member. Taker-maker venues typically do not charge fees 
to Nasdaq for RTFY to access their liquidity, whereas maker-taker 
venues do so. The Exchange charges a fee to participants that use RTFY 
to execute large volumes of shares at venues other than Nasdaq to help 
Nasdaq to recover the costs it incurs for such shares to access 
liquidity at maker-taker venues. Because taker-maker venues do not 
contribute substantially to Nasdaq's RTFY routing costs, Nasdaq 
believes that it is reasonable to exclude RTFY shares that execute on 
taker-maker venues from Nasdaq's determination as to whether a 
participant's RTFY activity during a month meets the 4 million share 
threshold to incur the $0.0030 per share executed fee. For the same 
reason, it is also reasonable to exclude RTFY shares executed on taker-
maker venues from any RTFY execution fees otherwise incurred.
    The Exchange notes that those market participants that are 
dissatisfied with the proposals are free to shift their order flow to 
competing venues that offer more generous pricing or less stringent 
qualifying criteria.
The Proposals Are Equitable Allocations of Credits
    The Exchange believes that it is an equitable allocation to 
establish new transaction credits and otherwise modify the eligibility 
requirements for its transaction credits because the proposals will 
encourage members to increase the extent to which they add liquidity to 
or remove liquidity from the Exchange. To the extent that the Exchange 
succeeds in increasing the levels of liquidity addition or removal 
activity on the Exchange, including in categories of liquidity for 
which there is an observed need or demand, such as midpoint, M-ELO, and 
Tape B securities, and NBBO-setting liquidity, then the Exchange will 
experience improvements in its market quality, which stands to benefit 
all market participants. The Exchange also believes it is equitable to 
recalibrate existing criteria for its credits to ensure that the 
credits remain appropriately challenging for participants to attain in 
light of changes to their levels of activity on the Exchange.
    Finally, the Exchange believes that it is equitable to exclude 
RTFY-routed shares that are executed at taker-maker venues from the 
Exchange's determinations as to whether RTFY participants will incur a 
$0.0030 per share executed fee when their shares execute at away 
venues, as well as from the fee itself, to the extent that it is 
otherwise applicable to a member. Taker-maker venues typically do not 
charge fees to Nasdaq for RTFY to access their liquidity, whereas 
maker-taker venues do so. Because taker-maker venues do not contribute 
substantially to Nasdaq's RTFY routing costs, which the $0.0030 fee 
exists to defray, Nasdaq believes that it is equitable to exclude 
shares that execute on taker-maker venues from Nasdaq's determination 
as to whether a participant's RTFY activity during a month meets the 4 
million share threshold to incur the $0.0030 per share executed fee. 
For the same reason, it is also equitable to exclude RTFY shares 
executed on taker-maker venues from any RTFY execution fees otherwise 
incurred.
    Any participant that is dissatisfied with the proposals is free to 
shift their order flow to competing venues that provide more generous 
pricing or less stringent qualifying criteria.
The Proposals Are Not Unfairly Discriminatory
    The Exchange believes that its proposals are not unfairly 
discriminatory. As an initial matter, the Exchange believes that 
nothing about its volume-based tiered pricing model is inherently 
unfair; instead, it is a rational pricing model that is well-
established and ubiquitous in today's economy among firms in various 
industries--from co-branded credit cards to grocery stores to cellular 
telephone data plans--that use it to reward the loyalty of their best 
customers that provide high levels of business activity and incent 
other customers to increase the extent of their business activity. It 
is also a pricing model that the Exchange and its competitors have long 
employed with the assent of the Commission. It is fair because it 
incentivizes customer activity that increases liquidity, enhances price 
discovery, and improves the overall quality of the equity markets.
    The Exchange believes that its proposals to adopt new credits or 
otherwise amend the qualifying criteria for its transaction credits are 
not unfairly discriminatory because these credits are available to all 
members. Moreover, these proposals stand to improve the overall market 
quality of the Exchange, to the benefit of all market participants, by 
incentivizing members to increase the extent of their liquidity adding 
or removal activity on the Exchange, including in categories of 
liquidity for which there is an observed need or demand, such as 
midpoint, M-ELO, and Tape B securities, and NBBO-setting liquidity. The 
Exchange also

[[Page 35844]]

believes it is not unfairly discriminatory to recalibrate existing 
criteria for its credits to ensure that the credits remain 
appropriately challenging for participants to attain in light of 
changes to their levels of activity on the Exchange.
    Meanwhile, the Exchange's proposal is not unfairly discriminatory 
to exclude RTFY-routed shares that are executed at taker-maker venues 
from the Exchange's determination as to whether RTFY participants will 
incur a $0.0030 per share executed fee when their shares execute at 
away venues, as well as from the fee itself, to the extent it is 
otherwise applicable to a member. Although the proposal stands to 
benefit RTFY participants that execute large volumes of shares at 
taker-maker venues, insofar as such participants will no longer stand 
to pay a routing fee because of such execution activity, the Exchange 
believes it is fair to provide this benefit because taker-maker venues 
typically do not charge fees to Nasdaq for RTFY to access their 
liquidity, whereas maker-taker venues do so. Because taker-maker venues 
do not contribute substantially to Nasdaq's RTFY routing costs, which 
the $0.0030 fee exists to defray, Nasdaq believes that it is fair to 
exclude shares that execute on taker-maker venues from Nasdaq's 
determination as to whether a participant's RTFY activity during a 
month meets the 4 million share threshold to incur the $0.0030 per 
share executed fee. For the same reason, it is also not unfairly 
discriminatory to exclude RTFY shares executed on taker-maker venues 
from any RTFY execution fees otherwise incurred.
    Any participant that is dissatisfied with the proposals is free to 
shift their order flow to competing venues that provide more generous 
pricing or less stringent qualifying criteria.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intramarket Competition
    The Exchange does not believe that its proposals will place any 
category of Exchange participant at a competitive disadvantage.
    As noted above, Nasdaq's proposals to add and amend its transaction 
credits are intended to have market-improving effects, to the benefit 
of all members. Any member may elect to achieve the levels of liquidity 
required in order to qualify for the new or amended credits.
    Likewise, the Exchange's proposal will not duly burden competition 
to exclude RTFY-routed shares that are executed at taker-maker venues 
from the Exchange's determinations as to whether RTFY participants will 
incur a $0.0030 per share executed routing fee, and from the fee 
itself, to the extent that it is otherwise applicable to a member. 
Although the proposal stands to benefit RTFY participants that execute 
large volumes of shares at taker-maker venues, insofar as such 
participants will no longer stand to pay a routing fee because of such 
execution activity, the Exchange believes it is fair to provide this 
benefit because taker-maker venues typically do not charge fees to 
Nasdaq for RTFY to access their liquidity, whereas maker-taker venues 
do so. Because taker-maker venues do not substantially contribute to 
Nasdaq's RTFY routing costs, which the $0.0030 fee exists to defray, 
Nasdaq believes that it is fair to exclude shares that execute on 
taker-maker venues from Nasdaq's determination as to whether a 
participant's RTFY activity during a month meets the 4 million share 
threshold to incur the $0.0030 per share executed fee. For the same 
reason, it is also fair to exclude RTFY shares executed on taker-maker 
venues from any RTFY execution fees otherwise incurred.
    The Exchange notes that its members are free to trade on other 
venues to the extent they believe that the proposed qualification 
criteria for or amounts of these credits or fees are not attractive. As 
one can observe by looking at any market share chart, price competition 
between exchanges is fierce, with liquidity and market share moving 
freely between exchanges in reaction to fee and credit changes. The 
Exchange notes that its pricing tier structure is consistent with 
broker-dealer fee practices as well as the other industries, as 
described above.
Intermarket Competition
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its credits and 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 credits and 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which credit or fee changes in this market may impose any burden on 
competition is extremely limited.
    The proposed new and amended credits and fees are reflective of 
this competition because, even as one of the largest U.S. equities 
exchanges by volume, the Exchange has less than 20% market share, which 
in most markets could hardly be categorized as having enough market 
power to burden competition. Moreover, as noted above, price 
competition between exchanges is fierce, with liquidity and market 
share moving freely between exchanges in reaction to fee and credit 
changes. This is in addition to free flow of order flow to and among 
off-exchange venues which comprises upwards of 44% of industry volume.
    The Exchange's proposals to add new and amend its transaction 
credits are pro-competitive in that the Exchange intends for them to 
increase liquidity addition or removal activity on the Exchange, 
thereby rendering the Exchange a more attractive and vibrant venue to 
market participants. Meanwhile, the Exchange's proposal to exclude from 
the RTFY routing fees and fee calculation shares executed in taker-
maker venues is pro-competitive in that it will render the Exchange's 
RTFY routing option more attractive to participants.
    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.

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.\11\
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    \11\ 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

[[Page 35845]]

it appears to the Commission that such action is: (i) Necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2021-053 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-2021-053. 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-2021-053 and should be submitted 
on or before July 28, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-14388 Filed 7-6-21; 8:45 am]
BILLING CODE 8011-01-P