Document ID: SEC-2022-1397-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2022-10-25T04:00Z

[Federal Register Volume 87, Number 205 (Tuesday, October 25, 2022)]
[Notices]
[Pages 64529-64531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23087]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96104; File No. SR-NASDAQ-2022-054]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Temporarily Waive Certain Port-Related Fees at Equity 7, Section 115 
and Equity 7, Section 130

October 19, 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 October 11, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to temporarily waive certain port-related 
fees at Equity 7, Section 115 and Equity 7, Section 130, 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

[[Page 64530]]

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 Equity 7, 
Section 115 and Equity 7, Section 130 to provide a temporary fee waiver 
for newly added OUCH order entry ports (production and Nasdaq Testing 
Facility ``NTF'' environments) with the updated version of the OUCH 
Order entry protocol,\3\ referred to as ``OUCH 5.0.'' The Exchange has 
proposed \4\ to introduce this new upgraded version of the OUCH Order 
entry protocol that will enable the Exchange to make functional 
enhancements and improvements to specific Order Types \5\ and Order 
Attributes.\6\
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    \3\ The OUCH Order entry protocol is a proprietary protocol that 
allows subscribers to quickly enter orders into the System and 
receive executions. OUCH accepts limit Orders from members, and if 
there are matching Orders, they will execute. Non-matching Orders 
are added to the Limit Order Book, a database of available limit 
Orders, where they are matched in price-time priority. OUCH only 
provides a method for members to send Orders and receive status 
updates on those Orders. See https://www.nasdaqtrader.com/Trader.aspx?id=OUCH.
    \4\ See Securities Exchange Act Release No. 95768 (September 14, 
2022), 87 FR 57534 (September 20, 2022).
    \5\ An ``Order Type'' is a standardized set of instructions 
associated with an Order that define how it will behave with respect 
to pricing, execution, and/or posting to the Exchange Book when 
submitted to Nasdaq. See Equity 1, Section 1(a)(7).
    \6\ An ``Order Attribute'' is a further set of variable 
instructions that may be associated with an Order to further define 
how it will behave with respect to pricing, execution, and/or 
posting to the Exchange Book when submitted to the Exchange. See id.
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Temporary Fee Waiver Pursuant to Equity 7, Section 115

    First, the Exchange proposes to amend Equity 7, Section 115 to 
provide a 30-day waiver of the OUCH production port fee for up to five 
\7\ newly added OUCH ports with the updated version of the OUCH Order 
entry protocol, OUCH 5.0. The fee waiver would be offered for a three-
month period, beginning on the date when OUCH 5.0 first becomes 
available on the Exchange, which such date the Exchange shall announce 
in a Equity Trader Alert. At the end of the three-month period, users 
would no longer be eligible for the waiver. A user may only receive the 
30-day waiver once per port (up to a maximum of five ports) within the 
three-month window. The Exchange proposes to offer this temporary 
waiver to encourage new, prospective customers to adopt and returning 
customers to migrate to the updated version of the OUCH Order entry 
protocol.
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    \7\ The fee waiver is limited to a maximum of five OUCH 
production ports per Web Central Registration Depository (``CRD'') 
membership.
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Temporary Fee Waiver Pursuant to Equity 7, Section 130

    Second, the Exchange proposes to amend Equity 7, Section 130 to 
provide a 30-day waiver of the $300 NTF fee in Section 130(d)(1)(B) for 
up to five \8\ newly added OUCH NTF ports with the updated version of 
the OUCH Order entry protocol, OUCH 5.0. This fee waiver would also be 
offered for a three-month period, beginning on a date specified by the 
Exchange in an Equity Trader Alert. At the end of the three-month 
period, users would no longer be eligible for the waiver. A user may 
only receive the 30-day waiver once per port (up to a maximum of five 
ports) within the three-month window. The NTF provides subscribers with 
a virtual System test environment that closely approximates the 
production environment on which they may test their automated systems 
that integrate with the Exchange. For example, the NTF provides 
subscribers a virtual System environment for testing upcoming releases 
and product enhancements, as well as testing firm software prior to 
implementation. The Exchange proposes to offer this temporary waiver to 
encourage customers to test the updated version of the OUCH Order entry 
protocol free of charge.
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    \8\ The fee waiver is limited to a maximum of five OUCH NTF 
ports per CRD membership.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its fee schedule 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 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.'' \11\
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    \11\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes that it is reasonable to provide temporary 
fee waivers for up to five newly added OUCH order entry ports 
(production and Nasdaq Testing Facility ``NTF'' environments) with the 
updated version of the OUCH Order entry protocol, OUCH 5.0. The 
Exchange believes it is important to provide users an opportunity to 
test OUCH 5.0 free of charge. The temporary fee waivers would encourage 
users to test and adopt the enhanced OUCH Order entry protocol.
    The Exchange believes that the proposed temporary fee waivers are 
an equitable allocation of reasonable dues, fees and other charges and 
not unfairly discriminatory because the Exchange will apply the same 
temporary fee waivers to all similarly situated members. The waivers 
will reduce fees for and benefit all users that add OUCH 5.0 order 
entry ports (production and NTF environments) within the three-month 
window.

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.
Intramarket Competition
    The Exchange does not believe that its proposal will place any 
category of Exchange participants at a competitive disadvantage. The 
proposed change to temporarily waive fees for newly added OUCH 5.0 
order entry ports (production and NTF environments) will apply 
uniformly to all similarly situated participants. The temporary fee 
waivers are available to all users and would enable users to test the 
OUCH enhancements at no cost.

[[Page 64531]]

Intermarket Competition
    The Exchange believes that the proposed temporary fee waivers will 
not impose a burden on competition because the Exchange's execution 
services are completely voluntary and subject to extensive competition 
both from the other live exchanges and from off-exchange venues, which 
include alternative trading systems that trade national market system 
stock.
    The proposed fee waivers are reflective of this competition 
because, as a threshold issue, the Exchange is a relatively small 
market so its ability to burden intermarket competition is limited. In 
this regard, even the largest U.S. equities exchange by volume only has 
17-18% market share, which in most markets could hardly be categorized 
as having enough market power to burden competition. The proposed fee 
waivers would facilitate adoption of enhancements to the Exchange's 
System and Order entry protocols, which is pro-competitive because the 
enhancements bolster the efficiency, functionality, and overall 
attractiveness of the Exchange in an absolute sense and relative to its 
peers. Accordingly, the Exchange does not believe that the proposed 
change will impair the ability of members, participants, 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,\12\ and Rule 19b-4(f)(2) \13\ thereunder.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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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 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-2022-054 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-2022-054. 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-2022-054 and should be submitted 
on or before November 15, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-23087 Filed 10-24-22; 8:45 am]
BILLING CODE 8011-01-P