Document ID: SEC-2018-1188-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market LLC
Posted Date: 2018-07-31T04:00Z

[Federal Register Volume 83, Number 147 (Tuesday, July 31, 2018)]
[Notices]
[Pages 36989-36992]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16270]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83702; File No. SR-NASDAQ-2018-057]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Fees and Credits Under Rule 7018(a)

July 25, 2018.
    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 July 12, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Rule 7018(a) to amend qualification criteria for a credit tier 
applicable to securities of all three Tapes, and to reduce the

[[Page 36990]]

charge assessed members applicable to DOT and LIST Orders in Tape A 
securities, as described further below.\3\
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    \3\ Tape C securities are those that are listed on the Exchange, 
Tape A securities are those that are listed on NYSE, and Tape B 
securities are those that are listed on exchanges other than Nasdaq 
or NYSE.
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.cchwallstreet.com/, 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 Rule 7018(a), 
concerning the fees and credits provided for the use of the order 
execution and routing services of the Nasdaq Market Center by members 
for all securities priced at $1 or more that it trades. Rule 7018(a)(1) 
sets forth the fees and credits for the execution and routing of orders 
in Nasdaq-listed securities (Tape C); Rule 7018(a)(2) sets forth the 
fees and credits for the execution and routing of securities listed on 
the New York Stock Exchange LLC (Tape A); and Rule 7018(a)(3) sets 
forth the fees and credits for the execution and routing of securities 
listed on exchanges other than Nasdaq and NYSE (Tape B).
    The Exchange is proposing to amend the criteria required to qualify 
for credits provided to a member for displayed quotes/orders that 
provide liquidity, and to reduce a fee applicable to Tape A securities. 
Currently, under Rules 7018(a)(1)-(3) the Exchange provides credits to, 
and assesses fees on, members for execution of displayed quotes/orders 
(other than Supplemental Orders or Designated Retail Orders) if they 
qualify by meeting the requirements of the various credit and fee tiers 
under those rules. As described below, the Exchange is proposing to 
amend the Exchange's transaction fees at Rule 7018(a)(1)-(3) to amend 
qualification criteria for a credit tier applicable to securities of 
all three Tapes, and to reduce a fee under Rule 7018(a)(2) applicable 
to only Tape A securities, as described further below.
First Change
    The Exchange is proposing to amend the criteria required to qualify 
for a $0.0030 per share executed credit, which will apply to securities 
of all three Tapes under Rules 7018(a)(1)-(3). Currently, the Exchange 
provides the credit if a member has shares of liquidity provided in all 
securities through one or more of its Nasdaq Market Center MPIDs that 
represent 0.575% or more of Consolidated Volume \4\ during the month, 
including shares of liquidity provided with respect to securities that 
are listed on exchanges other than Nasdaq or NYSE that represent 0.10% 
or more of Consolidated Volume. The Exchange is proposing to increase 
the level of shares of liquidity required to be provided in all 
securities through one or more of its [sic] Nasdaq Market Center MPIDs 
from 0.575% to 0.625% or more of Consolidated Volume during the month. 
The Exchange is also proposing to increase the required level of shares 
of liquidity provided from 0.10% to 0.15% or more of Consolidated 
Volume with respect to securities that are listed on exchanges other 
than Nasdaq or NYSE.
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    \4\ Rule 7018(a) defines ``Consolidated Volume'' as 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 shall be excluded from both total Consolidated Volume and 
the member's trading activity.
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Second Change
    The purpose of the second proposed change is to reduce the fee 
assessed for a DOT \5\ or LIST \6\ Order that executes in the NYSE 
opening or reopening process.\7\ Currently, the Exchange assesses a 
$0.0015 per share executed charge on a DOT or LIST Order in a Tape A 
security that executes in the NYSE opening or reopening process. DOT is 
a routing option for Orders that the entering firm wishes to route to 
NYSE or NYSE American. LIST is a routing option that allows an Order to 
participate in the opening and/or closing process of the primary 
listing market for a security. The Exchange is proposing to reduce the 
fee assessed members for DOT or LIST Order in a Tape A security that 
executes in the NYSE opening or reopening process from $0.0015 to 
$0.0010 per share executed.
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    \5\ See Rule 4758(a)(i)-(ii).
    \6\ See Rule 4758(a)(x).
    \7\ The Exchange is also making a minor technical correction to 
the rule.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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First Change
    The Exchange believes that changing the Consolidated Volume 
qualification criteria required to qualify for the $0.0030 per share 
executed credit under Rules 7018(a)(1)-(3) is reasonable. Nasdaq 
believes that the changes to the volume thresholds are reasonable 
because the increased volume thresholds are more closely aligned to the 
corresponding credit than the current volume thresholds. This increase 
is also reflective of the Exchange's desire to provide incentives to 
attract order flow to the Exchange in return for significant market-
improving behavior. By modestly increasing both the requirement that 
members add liquidity in all securities through one or more of its 
[sic] Nasdaq Market Center MPIDs from 0.575% to 0.625%, or more, of 
Consolidated Volume, and the requirement that the member provide shares 
of liquidity with respect to securities that are listed on exchanges 
other than Nasdaq or NYSE from 0.10% to 0.15%, or more, of Consolidated 
Volume, the Exchange is increasing the volume of liquidity that a 
member must add during the month in order to qualify for the 
corresponding credit. This change will help ensure that members are 
providing significant market-improving behavior in return for credits.
    The Exchange believes that the increase in the Consolidated Volume 
thresholds needed to qualify for the $0.0030 per share executed credit 
under Rules 7018(a)(1)-(3) is an equitable allocation and is not 
unfairly discriminatory because the Exchange will apply the same credit 
to all

[[Page 36991]]

similarly-situated members that meet its requirements. The credit and 
its corresponding volume requirements will apply equally to 
transactions in securities of all the Tapes. The Exchange believes that 
the new volume requirements will not significantly impact the number of 
members that will likely qualify for the corresponding credit, since 
the new volume thresholds are a modest increase over the current volume 
thresholds. Participation in the Exchange's various credit tiers is 
completely voluntary, and members may always elect to either qualify 
for the corresponding credit by adding sufficient liquidity to the 
Exchange to meet the new volume requirement, or by electing to qualify 
for a different credit. Finally, by modestly increasing the total 
volume of liquidity as well as the liquidity provided with respect to 
securities that are listed on exchanges other than Nasdaq or NYSE that 
a member must add during the month in order to qualify for the 
corresponding credit, the proposed change will help ensure that members 
are providing significant market-improving behavior in return for 
credits.
Second Change
    The Exchange believes that reducing the fee assessed for a DOT or 
LIST Order in a Tape A security that executes in the NYSE opening or 
reopening process from $0.0015 to $0.0010 per share executed is 
reasonable. The Exchange notes that it currently assesses a charge of 
$0.00095 per share executed for the execution of a LIST Order in a Tape 
B security in the NYSEAmex closing process.\10\ This fee decrease is 
reflective of the Exchange's desire to provide incentives to market 
participants to use the routing function of the Exchange. When routing 
Orders to non-Nasdaq exchanges such as NYSE, the Exchange incurs costly 
connectivity charges related to telecommunication lines, membership and 
access fees, and other related costs when routing orders. Although the 
Exchange may realize less overall fees from [sic] proposed fee decrease 
for DOT and LIST Orders that execute in the NYSE opening or reopening 
processes, the Exchange believes that it will continue to be able to 
recover the costs it incurs to route such Orders to NYSE.
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    \10\ See Rule 7018(a)(3).
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    The Exchange believes that reducing the fee assessed for a DOT or 
LIST Order that executes in the NYSE opening or reopening process is an 
equitable allocation and is not unfairly discriminatory because the 
Exchange will apply the same fee to all similarly situated members that 
meet its requirements. The proposed fee is only available to Tape A 
securities because DOT and LIST Orders include Tape A securities, 
whereas the Exchange's fee tiers for routing and execution of Tape C 
and B securities are covered under Rules 7018(a)(1) and (3), 
respectively. These rules provide the fees assessed for execution of 
Tape C and B securities on the primary listing exchange, which have 
previously been found to be equitably allocated.\11\ Moreover, the fee 
is more closely aligned with the fee that the Exchange assesses for the 
execution of LIST Orders in Tape B securities that execute in the 
NYSEAmex closing process. The Exchange believes that the lower fee may 
attract more Orders in Tape A securities to the Exchange and promote 
the use of the Exchange's routing functionality, while also providing 
all members with reduced fees for the execution of their DOT and LIST 
Orders. Last, the Exchange notes that participation in the Exchange's 
various fee and credit tiers is completely voluntary, and members may 
always elect to enter Orders in Tape A securities that they wish to 
execute on NYSE either directly or through intermediaries.
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    \11\ The Commission notes that these fees were filed effective 
on filing pursuant to Section 19(b)(3)(A) of the Act and thus the 
Commission made no findings regarding the fees.
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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. 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 fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    In this instance, the proposed rule change does not impose a burden 
on competition because the Exchange's execution services are completely 
voluntary and subject to extensive competition both from other 
exchanges and from off-exchange venues. With respect to the first 
proposed change, the Exchange will apply the same volume thresholds to 
all members for transactions in the securities of all three of the 
Tapes. As noted, participation in the Exchange's various credit tiers 
is completely voluntary, and the Exchange does not believe that the new 
Consolidated Volume thresholds will significantly impact the number of 
members that will likely qualify for the corresponding credit. Members 
may always elect to either qualify for the new Consolidated Volume 
thresholds by adding sufficient liquidity to the Exchange to meet the 
new volume requirement, or by electing to qualify for a different 
credit. As such, the Exchange believes that the proposed Consolidated 
Volume thresholds will not negatively impact who will qualify for the 
corresponding credits, but will rather have a positive impact on 
overall market quality as members increase their participation in the 
market to qualify for the particular credit. With respect to the second 
proposed change, the Exchange does not believe that the reduction in 
the fee assessed for execution of DOT and LIST Orders in Tape A 
securities burdens competition, but it rather promotes competition by 
making the Exchange a more attractive venue to enter such Orders. If, 
however, the Exchange is incorrect and the changes proposed herein are 
unattractive to members, it is likely that Nasdaq will lose market 
share as a result. Accordingly, Nasdaq does not believe that the 
proposed changes will impair the ability of members or competing order 
execution venues to maintain their competitive standing in the 
financial markets.

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\
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    \12\ 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

[[Page 36992]]

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-2018-057 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-2018-057. 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-2018-057, and should be submitted 
on or before August 21, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-16270 Filed 7-30-18; 8:45 am]
 BILLING CODE 8011-01-P