Document ID: SEC-2023-1062-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2023-09-27T04:00Z

[Federal Register Volume 88, Number 186 (Wednesday, September 27, 2023)]
[Notices]
[Pages 66541-66547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20962]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98475; File No. SR-NASDAQ-2023-037]

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

September 21, 2023.
    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 September 13, 2023, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 66542]]

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

    The Exchange proposes to amend The Nasdaq Options Market LLC 
(``NOM'') Pricing Schedule at Options 7, Section 2.\3\
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    \3\ On September 13, 2023, the Exchange withdrew SR-NASDAQ-2023-
033 and replaced it with the instant rule change.
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    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend NOM's Pricing Schedule at Options 7, 
Section 2, Nasdaq Options Market--Fees and Rebates. Today, NOM Options 
7, Section 2(1) provides for various fees and rebates applicable to NOM 
Participants.
    Today, Customer,\4\ Professional,\5\ and NOM Market Maker \6\ 
Rebates to Add Liquidity in Penny Symbols are paid per the highest tier 
achieved among the available tiers. The tiers for Customer and 
Professional Rebates to Add Liquidity in Penny Symbols are below.
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    \4\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(47)). See Options 7, Section 1(a).
    \5\ The term ``Professional'' or (``P'') means any person or 
entity that (i) is not a broker or dealer in securities, and (ii) 
places more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s) pursuant 
to Options 1, Section 1(a)(47). All Professional orders shall be 
appropriately marked by Participants. See Options 7, Section 1(a).
    \6\ The term ``NOM Market Maker'' or (``M'') is a Participant 
that has registered as a Market Maker on NOM pursuant to Options 2, 
Section 1, and must also remain in good standing pursuant to Options 
2, Section 9. In order to receive NOM Market Maker pricing in all 
securities, the Participant must be registered as a NOM Market Maker 
in at least one security. See Options 7, Section 1(a).
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Monthly Volume
    Tier 1: Participant adds Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols of up to 0.10% of total industry customer equity and 
ETF option average daily volume (``ADV'') contracts per day in a month.
    Tier 2: Participant adds Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols above 0.10% of total industry customer equity and ETF 
option ADV contracts per day in a month.
    Tier 3: Participant: (a) adds Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols above 0.20% of total industry customer equity and ETF 
option ADV contracts per day in a month; or (b) adds Customer and/or 
Professional liquidity in Penny Symbols and/or Non-Penny Symbols above 
0.05% of total industry customer equity and ETF option ADV contracts 
per day in a month and qualifies for MARS.
    Tier 4: Participant adds Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols above 0.30% of total industry customer equity and ETF 
option ADV contracts per day in a month.
    Tier 5: Participant adds Customer, Professional, Firm, Non-NOM 
Market Maker and/or Broker-Dealer liquidity in Penny Symbols and/or 
Non-Penny Symbols above 0.40% of total industry customer equity and ETF 
option ADV contracts per day in a month.
    Tier 6##: Participant adds Customer, Professional, Firm, 
Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Symbols 
and/or Non-Penny Symbols above 0.70% or more of total industry customer 
equity and ETF option ADV contracts per day in a month, or Participant: 
(1) adds Customer and/or Professional liquidity in Penny Symbols and/or 
Non-Penny Symbols of 0.10% or more of total industry customer equity 
and ETF option ADV contracts per day in a month, and (2) has added 
liquidity in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 1.00% or more of Consolidated Volume in a 
month or qualifies for MARS (defined below).
    To determine the applicable percentage of total industry customer 
equity and ETF option average daily volume for a Customer and 
Professional Rebate to Add Liquidity in Penny Symbols, unless otherwise 
stated, the Participant's Penny Symbol and Non-Penny Symbol Customer 
and/or Professional volume that adds liquidity will be included.\7\
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    \7\ See note 1 in Options 7, Section 2.
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    With respect to the NOM Market Maker Rebates to Add Liquidity in 
Penny Symbols, today, rebates are paid on the below tier 
qualifications.
Monthly Volume
    Tier 1: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols of up to 0.10% of total industry 
customer equity and ETF option average daily volume (``ADV'') contracts 
per day in a month.
    Tier 2: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols above 0.10% of total industry customer 
equity and ETF option ADV contracts per day in a month.
    Tier 3: Participant: (a) adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols above 0.20% of total industry customer 
equity and ETF option ADV contracts per day in a month; or (b)(1) adds 
NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols 
above 0.07% of total industry customer equity and ETF option ADV 
contracts per day in a month, (2) transacts in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent (i) 0.70% 
or more of Consolidated Volume (``CV'') which adds liquidity in the 
same month on The Nasdaq Stock Market or (ii) 70 million shares or more 
ADV which adds liquidity in the same month on The Nasdaq Stock Market, 
(3) transacts in Tape B securities through one or more of its Nasdaq 
Market Center MPIDs that represent 0.10% or more of CV which adds 
liquidity in the same month on The Nasdaq Stock Market, and (4) 
executes greater than 0.01% of CV via Market-on- Close/Limit-on-Close 
(``MOC/LOC'') volume within The Nasdaq Stock Market Closing Cross in 
the same month.
    Tier 4: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols of above 0.60% of total industry 
customer equity and ETF option ADV contracts per day in a month.
    Tier 5: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols of above 0.40% of total industry 
customer equity and ETF option ADV contracts per day in a

[[Page 66543]]

month and transacts in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent 0.40% or more of Consolidated Volume 
(``CV'') which adds liquidity in the same month on The Nasdaq Stock 
Market.
    Tier 6: Participant: (a)(1) adds NOM Market Maker liquidity in 
Penny Symbols and/or Non-Penny Symbols above 0.95% of total industry 
customer equity and ETF option ADV contracts per day in a month, (2) 
executes Total Volume of 250,000 or more contracts per day in a month, 
of which 30,000 or more contracts per day in a month must be removing 
liquidity, and (3) adds Firm, Broker-Dealer and Non-NOM Market Maker 
liquidity in Non-Penny Symbols of 10,000 or more contracts per day in a 
month; or (b)(1) adds NOM Market Maker liquidity in Penny Symbols and/
or Non-Penny Symbols above 1.50% of total industry customer equity and 
ETF option ADV contracts per day in a month, and (2) executes Total 
Volume of 250,000 or more contracts per day in a month, of which 15,000 
or more contracts per day in a month must be removing liquidity.
    Total Volume is defined as Customer, Professional, Firm, Broker-
Dealer, Non-NOM Market Maker and NOM Market Maker volume in Penny 
Symbols and/or Non-Penny Symbols which either adds or removes liquidity 
on NOM. Finally, today, Broker-Dealers,\8\ Firms \9\ and Non-NOM Market 
Makers \10\ are paid a $0.10 per contract Rebate to Add Liquidity in 
Penny Symbols regardless of the tier.
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    \8\ The term ``Broker-Dealer'' or (``B'') applies to any 
transaction which is not subject to any of the other transaction 
fees applicable within a particular category. See Options 7, Section 
1(a).
    \9\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC. See Options 7, Section 1(a).
    \10\ The term ``Non-NOM Market Maker'' or (``O'') is a 
registered market maker on another options exchange that is not a 
NOM Market Maker. A Non-NOM Market Maker must append the proper Non-
NOM Market Maker designation to orders routed to NOM. See Options 7, 
Section 1(a).
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Proposal
NOM Market Maker--Note 4
    At this time, the Exchange proposes to amend note 4 of Options 7, 
Section 2 which currently applies to Participants who achieve the NOM 
Market Maker Tier 3 or Tier 4 Rebate to Add Liquidity in Penny Symbols. 
Note 4 of Options 7, Section 2 currently states, ``Participants who 
achieve the NOM Market Maker Tier 3 or Tier 4 Rebate to Add Liquidity 
will receive $0.40 per contract to add liquidity in the following 
symbols: AAPL, SPY, QQQ, IWM, and VXX.'' The Exchange proposes to amend 
this rebate in note 4 of Options 7, Section 2 and also offer a second 
additional rebate.
    First, the Exchange proposes to amend the existing rebate of $0.40 
per contract in note 4 of Options 7, Section 2, which is paid to 
Participants who achieve the NOM Market Maker Tier 3 or Tier 4 Rebate 
to Add Liquidity in Penny Symbols to $0.39 per contract. Second, the 
Exchange proposes to remove the symbols ``AAPL'' and ``VXX'' as 
eligible for the existing rebate. Third, the Exchange proposes to offer 
an additional rebate, in note 4 of Options 7, Section 2, of $0.33 per 
contract to add liquidity in SPY, QQQ, and IWM to Participants who 
achieve the NOM Market Maker Tier 2 Rebate to Add Liquidity in Penny 
Symbols and execute 1 million shares or more ADV in the same month 
utilizing the M-ELO order type \11\ on The Nasdaq Stock Market, 
provided the Participant also transacts in all securities through one 
or more of its Nasdaq Market Center MPIDs that represent (i) 0.45% or 
more of Consolidated Volume (``CV'') which adds liquidity in the same 
month on The Nasdaq Stock Market or (ii) 45 million shares or more ADV 
which adds liquidity in the same month on The Nasdaq Stock Market.
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    \11\ The M-ELO order type, also known as the ``Midpoint Extended 
Life Order,'' is a Non-Displayed Order priced at the midpoint 
between the National Best Bid and Offer (``NBBO'') and is eligible 
for execution only against other eligible M-ELOs and only after a 
minimum period of 10 milliseconds (``Holding Period'') has passed 
after acceptance of the Order by the System. All market participants 
on The Nasdaq Stock Market LLC may utilize this order type. See 
Nasdaq Equities 4, Rule 4702(b)(14). Of note, the Commission 
recently approved a rule proposal amending the Holding Period of the 
M-ELO order type so that it may adjust dynamically between .025 and 
2.5 milliseconds upon real-time assessments of market conditions. 
See Securities and Exchange Act Release No. 98321 (September 7, 
2003), 88 FR 62850 (September 13, 2023) (SR-NASDAQ-2022-079). This 
rule change has not yet been implemented.
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    Therefore, in order to qualify for the new $0.33 per contract 
rebate to add liquidity in SPY, QQQ, and IWM, in note 4 of Options 7, 
Section 2, a Participant must first qualify for the NOM Market Maker 
Tier 2 Rebate to Add Liquidity in Penny Symbols and execute 1 million 
shares or more ADV in the same month utilizing the M-ELO order type on 
The Nasdaq Stock Market. Further, a Participant must transact in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represent either (i) 0.45% or more of CV which adds liquidity in the 
same month \12\ on The Nasdaq Stock Market; or (ii) 45 million shares 
or more ADV which adds liquidity in the same month on The Nasdaq Stock 
Market to receive a $0.33 per contract to add liquidity in SPY, QQQ, 
and IWM.
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    \12\ The Exchange notes that 0.45% or more of Consolidated 
Volume (``CV'') is approximately $44 million.
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    The Exchange believes the amendment to the current rebate in note 4 
of Options 7, Section 2 will continue to incentivize Participants to 
add liquidity to NOM to qualify for the $0.39 per contract rebate to 
add liquidity in SPY, QQQ, and IWM despite the lower rebate ($0.40 to 
$0.39 per contract) and removal of AAPL and VXX. Additionally, the 
Exchange believes that introducing a new $0.33 rebate for Participants 
who achieve the NOM Market Maker Tier 2 Rebate to Add Liquidity in 
Penny Symbols, in addition to other qualifications, will create an 
additional opportunity for Market Makers to increase their liquidity 
adding activity on the Exchange's equity market. The Exchange believes 
that the new note 4 rebate qualifying criteria will incentivize 
participation in greater volume from cross asset activity, which would 
improve the overall quality of the Exchange's marketplace to the 
benefit of all market participants, both on NOM and The Nasdaq Stock 
Market.
NOM Market Maker--Tier 3 Qualifier
    The Exchange also proposes to amend the qualifications in the Tier 
3 NOM Market Maker Rebate to Add Liquidity in Penny Symbol that 
currently state,

    Participant: (a) adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols above 0.20% of total industry 
customer equity and ETF option ADV contracts per day in a month; or 
(b)(1) adds NOM Market Maker liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.07% of total industry customer equity and ETF 
option ADV contracts per day in a month, (2) transacts in all 
securities through one or more of its Nasdaq Market Center MPIDs 
that represent (i) 0.70% or more of Consolidated Volume (``CV'') 
which adds liquidity in the same month on The Nasdaq Stock Market or 
(ii) 70 million shares or more ADV which adds liquidity in the same 
month on The Nasdaq Stock Market, (3) transacts in Tape B securities 
through one or more of its Nasdaq Market Center MPIDs that represent 
0.10% or more of CV which adds liquidity in the same month on The 
Nasdaq Stock Market, and (4) executes greater than 0.01% of CV via 
Market-on-Close/Limit-on-Close (``MOC/LOC'') volume within The 
Nasdaq Stock Market Closing Cross in the same month.

    The Exchange proposes to amend the Tier 3 NOM Market Maker Rebate 
to Add Liquidity in Penny Symbol qualifications in several ways. First, 
the Exchange proposes to amend the (b)(1) qualifier to require NOM 
Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 
0.15% of total industry customer equity and ETF

[[Page 66544]]

option ADV contracts per day in a month (a change from 0.07% to 0.15%). 
Second, the Exchange proposes to amend the (b)(2)(i) qualifier to 
require 0.50% or more of CV which adds liquidity in the same month on 
The Nasdaq Stock Market (a change from 0.70% to 0.50%). Third, the 
Exchange proposes to amend the (b)(2)(ii) qualifier to require 50 
million shares or more ADV which adds liquidity in the same month on 
The Nasdaq Stock Market (a change from 70 million to 50 million 
shares). Fourth, the Exchange proposes to remove the current (b)(3) and 
(4) qualifiers and replace those qualifiers with a new (b)(3) qualifier 
that requires a Participant to execute 1.5 million shares or more ADV 
in the same month utilizing the M-ELO order type on The Nasdaq Stock 
Market. In order to qualify for the Tier 3 NOM Market Maker Rebate to 
Add Liquidity a Participant must meet either the Tier 3 (a) or (b) 
requirements. To the extent a Participant desires to qualify for the 
Tier 3 (b) requirements, all 3 parts of the requirement must be met. 
The proposed new language of the Tier 3 NOM Market Maker Rebate to Add 
Liquidity would provide,

    Participant: (a) adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols above 0.20% of total industry 
customer equity and ETF option ADV contracts per day in a month; or 
(b)(1) adds NOM Market Maker liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.15% of total industry customer equity and ETF 
option ADV contracts per day in a month, (2) transacts in all 
securities through one or more of its Nasdaq Market Center MPIDs 
that represent (i) 0.50% or more of Consolidated Volume (``CV'') 
which adds liquidity in the same month on The Nasdaq Stock Market or 
(ii) 50 million shares or more ADV which adds liquidity in the same 
month on The Nasdaq Stock Market, and (3) executes 1.5 million 
shares or more ADV in the same month utilizing the M-ELO order type 
on The Nasdaq Stock Market.

    The Exchange believes that the proposed Tier 3 NOM Market Maker 
Rebate to Add Liquidity will continue to provide NOM Participants an 
opportunity to qualify for the NOM Market Maker Tier 3 Rebate to Add 
Liquidity in more than one way. The proposed new Tier 3 NOM Market 
Maker Rebate to Add Liquidity (b) qualifiers will incentivize greater 
options participation with the amendment to (b)(1) increasing the 
percentage of total industry customer equity and ETF option ADV 
contracts per day in a month from 0.07% to 0.15%; decreasing the 
(b)(2)(i) percentage of CV required to add liquidity on The Nasdaq 
Stock Market from 0.70% to 0.50%; lowering the current share 
requirement for participation in The Nasdaq Stock Market as part of 
(b)(2)(ii) from 70 to 50 million shares; and adding a new (b)(3) 
requirement to utilize M-ELO to execute 1.5 million shares or more ADV 
on The Nasdaq Stock Market. The amended qualifiers for (b) within Tier 
3 will incentivize participation in greater volume from cross asset 
activity, which would improve the overall quality of the Exchange's 
marketplace to the benefit of all market participants, both on NOM and 
The Nasdaq Stock Market.
2. Statutory Basis
    The proposed changes to its Pricing Schedule are reasonable in 
several respects. As a threshold matter, the Exchange is subject to 
significant competitive forces in the market for options transaction 
services that constrain its pricing determinations in that market. The 
fact that this market is competitive has long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission \13\ 
(``NetCoalition''), the D.C. Circuit stated, ``[n]o one disputes that 
competition for order flow is `fierce.' . . . As the SEC explained, 
`[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \14\
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    \13\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \14\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options transaction services. The Exchange is only one of sixteen 
options exchanges to which market participants may direct their order 
flow. Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules. Within the 
foregoing context, the proposal represents a reasonable attempt by the 
Exchange to attract additional order flow to the Exchange and increase 
its market share relative to its competitors.

NOM Market Maker--Note 4

    Amending note 4 of Options 7, Section 2, which currently applies to 
Participants who achieve the NOM Market Maker Tier 3 or Tier 4 Rebate 
to Add Liquidity in Penny Symbols is reasonable in several ways. The 
Exchange believes the amendment to the current rebate in note 4 of 
Options 7, Section 2 will continue to incentivize Participants to add 
liquidity to NOM to qualify for the $0.39 per contract rebate to add 
liquidity in SPY, QQQ, and IWM despite the lower rebate ($0.40 to $0.39 
per contract) and removal of AAPL and VXX. The Exchange notes that it 
proposes to limit the rebate to adding liquidity in SPY, QQQ, and IWM, 
and not AAPL and VXX, because options on these broad-based Exchange-
Traded Funds collectively have large volumes. The amended $0.39 per 
contract rebate remains higher than the NOM Market Maker Tier 3 or Tier 
4 Rebates to Add Liquidity of $0.30 and $0.32 per contract, 
respectively. Additionally, amending note 4 of Options 7, Section 2 to 
introduce an additional rebate for Participants who achieve the NOM 
Market Maker Tier 2 Rebate to Add Liquidity in Penny Symbols is 
reasonable because it will create an additional opportunity for Market 
Makers to increase their liquidity adding activity on the Exchange's 
equity market. The Exchange believes that the new note 4 rebate 
qualifying criteria will incentivize participation in greater volume 
from cross asset activity, which would improve the overall quality of 
the Exchange's marketplace to the benefit of all market participants, 
both on NOM and The Nasdaq Stock Market. The proposed new Tier 2 NOM 
Market Maker Rebate to Add Liquidity in Penny Symbols of $0.33 per 
contract is higher than the Tier 2 NOM Market Maker Rebate to Add 
Liquidity of $0.25 per contract. Finally, the Exchange notes that all 
NOM Participants are required to become members of The Nasdaq Stock 
Market pursuant to General 3 Membership and Access rules. Therefore, a 
NOM Participant is able to transact the requisite volume on NOM as an 
Options Participant and also utilize the M-ELO order type as a member 
of The Nasdaq Stock Market. All members of The Nasdaq Stock Market LLC 
may utilize the M-ELO order type.
    Amending note 4 of Options 7, Section 2, which currently applies to 
Participants who achieve the NOM Market Maker Tier 3 or Tier 4 Rebate 
to Add Liquidity in Penny Symbols is equitable and not unfairly 
discriminatory because the Exchange

[[Page 66545]]

will pay the Tier 3 and 4 NOM Market Maker rebates uniformly to any 
qualifying Participants. Additionally, amending note 4 of Options 7, 
Section 2 to introduce an additional rebate for Participants who 
achieve the NOM Market Maker Tier 2 Rebate to Add Liquidity in Penny 
Symbols is equitable and not unfairly discriminatory because the 
Exchange will pay the new Tier 2 NOM Market Maker rebate uniformly to 
any qualifying Participants. The Exchange notes that all NOM 
Participants are required to become members of The Nasdaq Stock Market 
pursuant to General 3 Membership and Access rules. Therefore, a NOM 
Participant is able to transact the requisite volume on NOM as an 
Options Participant and also utilize the M-ELO order type as a member 
of The Nasdaq Stock Market. All members of The Nasdaq Stock Market LLC 
may utilize the M-ELO order type. Additionally, Market Makers add value 
through continuous quoting and the commitment of capital.\15\ Because 
Market Makers have these obligations to the market and regulatory 
requirements that normally do not apply to other market participants, 
the Exchange believes that offering these rebates to Market Makers is 
equitable and not unfairly discriminatory in light of their 
obligations. Finally, encouraging Market Makers to add greater 
liquidity benefits all market participants, both on NOM and The Nasdaq 
Stock Market, in the quality of order interaction.
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    \15\ See Options 2, Sections 4 and 5.
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NOM Market Maker--Tier 3 Qualifier
    Amending the Tier 3 NOM Market Maker Rebate to Add Liquidity 
qualifications in several ways \16\ is reasonable because Participants 
will continue to have more than one way to qualify for the Tier 3 NOM 
Market Maker Rebate to Add Liquidity in Penny Symbols.\17\ The proposed 
new Tier 3 NOM Market Maker Rebate to Add Liquidity in Penny Symbols 
part (b) qualifier will incentivize greater options participation with 
the amendment to (b)(1) as it increases the percentage of total 
industry customer equity and ETF option ADV contracts per day in a 
month from 0.07% to 0.15%. Further part (b)(2)(i) decreases the 
percentage of CV required to add liquidity on The Nasdaq Stock Market 
from 0.70% to 0.50%, lowers the current share requirement for 
participation in The Nasdaq Stock Market as part of (b)(2)(ii) from 70 
to 50 million shares, and adds a new (b)(3) requirement to utilize M-
ELO to execute 1.5 million shares or more ADV on The Nasdaq Stock 
Market. The amended qualifiers for (b) within Tier 3 will incentivize 
participation in greater volume from cross asset activity, which would 
improve the overall quality of the Exchange's marketplace to the 
benefit of all market participants, both on NOM and The Nasdaq Stock 
Market. All NOM Participants are required to become members of The 
Nasdaq Stock Market pursuant to General 3 Membership and Access rules. 
Therefore, a NOM Participant is able to transact the requisite volume 
on NOM as an Options Participant and also utilize the M-ELO order type 
as a member of The Nasdaq Stock Market.
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    \16\ First, the Exchange proposes to amend the (b)(1) qualifier 
to require NOM Market Maker liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.15% of total industry customer equity and ETF 
option ADV contracts per day in a month (a change from 0.07% to 
0.15%). Second, the Exchange proposes to amend the (b)(2)(i) 
qualifier to require 0.50% or more of CV which adds liquidity in the 
same month on The Nasdaq Stock Market (a change from 0.70% to 
0.50%). Third, the Exchange proposes to amend the (b)(2)(ii) 
qualifier to require 50 million shares or more ADV which adds 
liquidity in the same month on The Nasdaq Stock Market (a change 
from 70 million to 50 million shares). Fourth, the Exchange proposes 
to remove the current (b)(3) and (4) qualifiers and replace those 
qualifiers with a new (b)(3) qualifier that requires a Participant 
to execute 1.5 million shares or more ADV in the same month 
utilizing the M-ELO order type on The Nasdaq Stock Market.
    \17\ In order to qualify for the Tier 3 NOM Market Maker Rebate 
to Add Liquidity a Participant must meet the (a) or (b) requirements 
within the tier.
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    Amending the Tier 3 NOM Market Maker Rebate to Add Liquidity in 
Penny Symbols qualifications in several ways \18\ is equitable and not 
unfairly discriminatory because the Exchange will pay the Tier 3 NOM 
Market Maker Rebate to Add Liquidity uniformly to all Participants that 
qualify for this tier. All NOM Participants are required to become 
members of The Nasdaq Stock Market pursuant to General 3 Membership and 
Access rules. Therefore, a NOM Participant is able to transact the 
requisite volume on NOM as an Options Participant and also utilize the 
M-ELO order type as a member of The Nasdaq Stock Market. Additionally, 
Market Makers add value through continuous quoting and the commitment 
of capital.\19\ Because Market Makers have these obligations to the 
market and regulatory requirements that normally do not apply to other 
market participants, the Exchange believes that offering the rebate to 
only Market Makers is equitable and not unfairly discriminatory in 
light of their obligations. Finally, encouraging Market Makers to add 
greater liquidity on both NOM and The Nasdaq Stock Market benefits all 
market participants, both on NOM and The Nasdaq Stock Market, in the 
quality of order interaction.
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    \18\ See supra note 14.
    \19\ See Options 2, Sections 4 and 5.
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    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to pay a rebate to add liquidity in SPY, QQQ, 
and IWM, as compared to other options, because pricing by symbol is a 
common practice on many U.S. options exchanges as a means to 
incentivize order flow to be sent to an exchange for execution in the 
most actively traded options classes, in this case actively traded 
Penny Symbols. SPY, QQQ, and IWM are among the most actively traded 
options in the U.S. The Exchange believes that this pricing will 
incentivize members to transact options in SPY, QQQ, and IWM on NOM in 
order to obtain higher NOM Market Maker rebates in Penny Symbols.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intermarket Competition
    The Exchange operates in a highly competitive market in which 
market participants can readily favor competing venues if they deem fee 
levels at a particular venue to be excessive, or rebate opportunities 
available at other venues to be more favorable. In such an environment, 
the Exchange must continually adjust its pricing to remain competitive 
with other exchanges. Because competitors are free to modify their 
pricing in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which pricing changes in this market may impose any burden on 
competition is extremely limited because other options exchanges offer 
similar pricing.
    Moreover, as noted above, price competition between exchanges is 
fierce, with liquidity and market share moving freely between exchanges 
in reaction to fee and rebate changes. In sum, if the changes proposed 
herein are unattractive to market participants, it is likely that the 
Exchange will lose market share as a result. Accordingly, the Exchange 
does not believe that the proposed changes will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets.

[[Page 66546]]

Intramarket Competition
    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
    Amending note 4 of Options 7, Section 2, which currently applies to 
Participants who achieve the NOM Market Maker Tier 3 or Tier 4 Rebate 
to Add Liquidity in Penny Symbols does not impose an undue burden on 
competition because the Exchange will pay the Tier 3 and 4 NOM Market 
Maker rebates uniformly to any qualifying Participants. Additionally, 
amending note 4 of Options 7, Section 2 to introduce an additional 
rebate for Participants who achieve the NOM Market Maker Tier 2 Rebate 
to Add Liquidity in Penny Symbols does not impose an undue burden on 
competition because the Exchange will pay the new Tier 2 NOM Market 
Maker rebate uniformly to any qualifying Participants. The Exchange 
notes that all NOM Participants are required to become members of The 
Nasdaq Stock Market pursuant to General 3 Membership and Access rules. 
Therefore, a NOM Participant is able to transact the requisite volume 
on NOM as an Options Participant and also utilize the M-ELO order type 
as a member of The Nasdaq Stock Market. All members of The Nasdaq Stock 
Market LLC may utilize the M-ELO order type. Additionally, Market 
Makers add value through continuous quoting and the commitment of 
capital.\20\ Because Market Makers have these obligations to the market 
and regulatory requirements that normally do not apply to other market 
participants, the Exchange believes that offering these rebates to 
Market Makers does not impose an undue burden on competition in light 
of their obligations. Finally, encouraging Market Makers to add greater 
liquidity benefits all market participants, both on NOM and The Nasdaq 
Stock Market, in the quality of order interaction.
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    \20\ See Options 2, Sections 4 and 5.
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    Amending the Tier 3 NOM Market Maker Rebate to Add Liquidity in 
Penny Symbols qualifications in several ways \21\ does not impose an 
undue burden on competition because the Exchange will pay the Tier 3 
NOM Market Maker Rebate to Add Liquidity in Penny Symbols uniformly to 
all Participants that qualify for this tier. All NOM Participants are 
required to become members of The Nasdaq Stock Market pursuant to 
General 3 Membership and Access rules. Therefore, a NOM Participant is 
able to transact the requisite volume on NOM as an Options Participant 
and also utilize the M-ELO order type as a member of The Nasdaq Stock 
Market. Additionally, Market Makers add value through continuous 
quoting and the commitment of capital.\22\ Because Market Makers have 
these obligations to the market and regulatory requirements that 
normally do not apply to other market participants, the Exchange 
believes that offering the rebate to only Market Makers does not impose 
an undue burden on competition in light of their obligations. Finally, 
encouraging Market Makers to add greater liquidity on both NOM and The 
Nasdaq Stock Market benefits all market participants, both on NOM and 
The Nasdaq Stock Market, in the quality of order interaction.
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    \21\ See supra note 14.
    \22\ See Options 2, Sections 4 and 5.
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    The Exchange believes that paying a rebate to add liquidity in SPY, 
QQQ, and IWM, as compared to other options, does not impose an undue 
burden on competition because pricing by symbol is a common practice on 
many U.S. options exchanges as a means to incentivize order flow to be 
sent to an exchange for execution in the most actively traded options 
classes, in this case actively traded Penny Symbols. SPY, QQQ, and IWM 
are among the most actively traded options in the U.S. The Exchange 
believes that this pricing will incentivize members to transact options 
in SPY, QQQ, and IWM on NOM in order to obtain higher NOM Market Maker 
rebates in Penny Symbols.

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.\23\
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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number
    SR-NASDAQ-2023-037 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-2023-037. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2023-037 and should 
be submitted on or before October 18, 2023.
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    \24\ 17 CFR 200.30-3(a)(12).

[[Page 66547]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20962 Filed 9-26-23; 8:45 am]
BILLING CODE 8011-01-P