Notice2023-25656
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend The Nasdaq Options Market LLC Pricing Schedule at Options 7, Section 2
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 21, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 223 (Tuesday, November 21, 2023)</title>
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[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81166-81171]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25656]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98934; File No. SR-NASDAQ-2023-044]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend The Nasdaq Options Market LLC Pricing Schedule at Options 7,
Section 2
November 15, 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 November 1, 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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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.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules</a>, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
[[Page 81167]]
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 NOM's Pricing
Schedule at Options 7, Section 2(1) (setting forth fees and rebates for
execution of contract on NOM) and Section 2(3) (setting forth fees for
routing contracts to markets other than NOM). Each change will be
described below.
Options 7, Section 2(1)
Fees To Remove Liquidity in Non-Penny Symbols
As set forth in Options 7, Section 2(1), the Exchange currently
charges NOM Market Makers,\3\ Non-NOM Market Makers,\4\ Firms,\5\ and
Broker-Dealers \6\ a $1.10 per contract fee for removing liquidity in
Non-Penny Symbols. The Exchange now proposes to increase this fee to
$1.25 per contract.
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\3\ 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.
\4\ 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.
\5\ The term ``Firm'' or (``F'') applies to any transaction that
is identified by a Participant for clearing in the Firm range at
OCC.
\6\ 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.
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Note 8 Incentive
Today, the Exchange provides Customers \7\ with tiered rebates for
adding liquidity in Penny Symbols that are $0.20 (Tier 1), $0.25 (Tier
2), $0.43 (Tier 3), $0.44 (Tier 4), $0.45 (Tier 5), and $0.48 (Tier 6).
These rebates are paid based on the highest volume tier that the
Customer achieves in a given month.\8\
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\7\ 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)).
\8\ See Options 7, Section 2(1), note 1.
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Today, the Exchange also links the tiered Penny Symbol Customer add
liquidity rebate program described above to its Market Access and
Routing Subsidy (``MARS'') program in Section 2(4) as a means to
attract additional liquidity to the Exchange from market participants.
Under MARS, the Exchange pays qualifying NOM Participants to subsidize
their costs of providing routing services to route orders to NOM. To
qualify for MARS, NOM Participants must have System Eligibility.\9\ In
addition, NOM Participants that have System Eligibility, and have
routed and executed the requisite number of Eligible Contracts \10\
daily in a month (``Average Daily Volume'' or ``ADV'') that add
liquidity on NOM are entitled to the tiered MARS Payments set forth in
Section 2(4), depending on the highest ADV tier achieved.\11\
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\9\ To qualify for MARS, the Participant's routing system
(``System'') would be required to: (1) enable the electronic routing
of orders to all of the U.S. options exchanges, including NOM; (2)
provide current consolidated market data from the U.S. options
exchanges; and (3) be capable of interfacing with NOM's API to
access current NOM match engine functionality. Further, the
Participant's System would also need to cause NOM to be the one of
the top three default destination exchanges for (a) individually
executed marketable orders if NOM is at the national best bid or
offer (``NBBO''), regardless of size or time or (b) orders that
establish a new NBBO on NOM's Order Book, but allow any user to
manually override NOM as a default destination on an order-by-order
basis. Any NOM Participant would be permitted to avail itself of
this arrangement, provided that its order routing functionality
incorporates the features described above and satisfies NOM that it
appears to be robust and reliable. The Participant remains solely
responsible for implementing and operating its System.
\10\ For the purpose of qualifying for the MARS Payment,
Eligible Contracts may include Firm, Non-NOM Market Maker, Broker-
Dealer, or Joint Back Office or ``JBO'' equity option orders that
add liquidity and are electronically delivered and executed.
Eligible Contracts do not include Mini Option orders.
\11\ The specified MARS Payment will be paid on all executed
Eligible Contracts that add liquidity, which are routed to NOM
through a participating NOM Participant's System and meet the
requisite Eligible Contracts ADV. No payment will be made with
respect to orders that are routed to NOM, but not executed.
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In particular, the Exchange currently links the tiered Penny Symbol
Customer rebate to add liquidity program in Penny Symbols and MARS,
each as described above, through note 8 of Options 7, Section 2(1)
where NOM Participants that qualify for any MARS Payment Tier in
Section 2(4) receive: (1) an additional $0.05 per contract Penny Symbol
Customer Rebate to Add Liquidity for each transaction which adds
liquidity in Penny Symbols in that month, in addition to qualifying
Customer Rebate to Add Liquidity Tiers 1-5, or (2) an additional $0.04
per contract Penny Symbol Customer Rebate to Add Liquidity for each
transaction which adds liquidity in Penny Symbols in that month, in
addition to qualifying Penny Symbol Customer Rebate to Add Liquidity
Tier 6 (``Note 8 Incentive''). As such, NOM Participants may earn
Customer Rebates to Add Liquidity in Penny Symbols up to $0.25 in Tier
1, $0.30 in Tier 2, $0.48 in Tier 3, $0.49 in Tier 4, $0.50 in Tier 5,
and $0.52 in Tier 6, provided they meet the qualifications in note 8.
The Note 8 Incentive was intended to attract additional order flow
to NOM by way of encouraging participation in both the tiered Customer
add liquidity rebate program and in MARS. The Exchange, however, has
observed that this rebate program has not accomplished its objective
and therefore proposes to eliminate this program in note 8 of Options
7, Section 2(1).
Note 9 Incentive
Today, pursuant to note 9 of Options 7, Section 2(1), NOM
Participants that transact in all securities through one or more of its
Nasdaq Market Center MPIDs that represent 3.00% or more of Consolidated
Volume in the same month on The Nasdaq Stock Market receive a $0.50 per
contract Rebate to Add Liquidity in Penny Symbols as Customer, a $0.48
per contract rebate as Professional,\12\ a $1.00 per contract Rebate to
Add Liquidity in Non-Penny Symbols as Customer, and a $0.90 per
contract Rebate to Add liquidity in Non-Penny Symbols as Professional
(``Note 9 Incentive''). Participants that qualify for the Note 9
Incentive are not be eligible for any other rebates in Tiers 1-6 or
other rebate incentives on NOM for Customer and Professional order flow
in Options 7, Section 2(1).
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\12\ 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.
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The Exchange now proposes to increase $1.00 Customer Rebate to Add
Liquidity in Non-Penny Symbols to $1.10. The Exchange is increasing the
rebate amount without changing the
[[Page 81168]]
qualifications in the Note 9 Incentive so that NOM Participants can
bring the same amount of volume as they do today on The Nasdaq Stock
Market to receive larger rebate in Customer Add Liquidity volume in
Non-Penny Symbols.\13\ Overall, the Exchange believes that the
increased rebate will bring greater volume to both The Nasdaq Stock
Market and NOM, to the benefit of all market participants.
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\13\ Any NOM Participant may trade equities on The Nasdaq Stock
Market because they are already approved members. Although a NOM
Participant may potentially incur additional labor and/or costs to
establish connectivity to The Nasdaq Stock Market, there are no
additional membership fees for NOM Participants that want to
transact on The Nasdaq Stock Market.
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Note 10 Incentive
Today, pursuant to note 10 of Options 7, Section 2(1), NOM
Participants that (a) add Customer, Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer liquidity in Penny Symbols and/or Non-Penny
Symbols above 1.20% of total industry customer equity and ETF option
ADV contracts per day in a month, (b) execute greater than 0.04% of
Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close (``MOC/
LOC'') volume within The Nasdaq Stock Market Closing Cross within a
month, and (c) add greater than 1.5 million shares per day of non-
displayed volume within The Nasdaq Stock Market within a month receive
a $0.55 per contract Rebate to Add Liquidity in Penny Symbols as
Customer, a $0.48 per contract Rebate to Add Liquidity in Penny Symbols
as Professional, and a $1.05 per contract Rebate to Add Liquidity in
Non-Penny Symbols as Customer, and a $0.90 per contract Rebate to Add
Liquidity in Non-Penny Symbols as Professional (``Note 10 Incentive'').
Participants that qualify for the Note 10 Incentive are not be eligible
for any other rebates in Tiers 1-6 or other rebate incentives on NOM
for Customer and Professional order flow in Options 7, Section 2(1).
The Exchange now proposes to amend the NOM volume threshold in part
(a) of the Note 10 Incentive by increasing 1.20% to 1.50% of total
industry customer equity and ETF option ADV contracts per day in a
month. The Exchange also proposes to increase the $1.05 Customer Rebate
to Add Liquidity in Non-Penny Symbols to $1.15. No other changes are
being proposed to the rebates and qualifications in the Note 10
Incentive. As amended, the Note 10 Incentive will provide: ``NOM
Participants that (a) add Customer, Professional, Firm, Non-NOM Market
Maker and/or Broker-Dealer 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, (b) execute greater than 0.04% of
Consolidated Volume (``CV'') via Market-on-Close/Limit-on-Close (``MOC/
LOC'') volume within The Nasdaq Stock Market Closing Cross within a
month, and (c) add greater than 1.5 million shares per day of non-
displayed volume within The Nasdaq Stock Market within a month will
receive a $0.55 per contract Rebate to Add Liquidity in Penny Symbols
as Customer, a $0.48 per contract Rebate to Add Liquidity in Penny
Symbols as Professional, and a $1.15 per contract Rebate to Add
Liquidity in Non-Penny Symbols as Customer, and a $0.90 per contract
Rebate to Add Liquidity in Non-Penny Symbols as Professional.
Participants that qualify for this rebate would not be eligible for any
other rebates in Tiers 1-6 or other rebate incentives on NOM for
Customer and Professional order flow in Options 7, Section 2(1).''
Options 7, Section 2(3)
As set forth in Options 7, Section 2(3), the Exchange currently
assesses a Non-Customer routing fee of $0.99 per contract to any
options exchange. The Exchange also assesses a Customer routing fee of
$0.23 per contract, in addition to the actual transaction fee assessed
by the away market, for routing contracts to any options exchange other
than the Exchange's affiliates, Nasdaq BX, Inc. (``BX'') and Nasdaq
Phlx LLC (``Phlx''). If the away market (other than BX and Phlx) pays a
rebate, this Customer routing fee is $0.13 per contract instead. When
routing to BX and Phlx, the Exchange currently assesses a Customer
routing fee of $0.13 per contract in addition to the actual transaction
fee assessed.
At this time, the Exchange proposes to assess a Non-Customer an
increased routing fee to route to any options exchange of $1.20 per
contract. The Exchange also proposes to assess a Customer a routing fee
of $0.23 per contract, in addition to the actual transaction fee
assessed by the away market, for routing contracts to any options
exchange. With this change, the Exchange would no longer assess the
lower routing of $0.13 per contract, in addition to the actual
transaction fee assessed, when routing to BX and Phlx. The Exchange
would continue to assess a $0.13 per contract routing fee if the away
market pays a rebate, including BX and Phlx. The purpose of the
proposed routing fees is to recoup costs incurred by the Exchange when
routing orders to other options exchanges on behalf of NOM
Participants. In determining its proposed routing fees, the Exchange
took into account transaction fees assessed by other options exchanges,
the Exchange's projected clearing costs, and the projected
administrative, regulatory, and technical costs associated with routing
orders to other options exchanges. The Exchange will continue to use
its affiliated broker-dealer, Nasdaq Execution Services, to route
orders to other options exchanges. Routing services offered by the
Exchange are completely optional and market participants can readily
select between various providers of routing services, including other
exchanges and broker-dealers. Also, the Exchange notes that NOM
Participants may elect to mark their orders as ``Do-Not-Route'' to
avoid any routing fees.\14\ The Exchange believes that the proposed
routing fees would enable the Exchange to recover the costs it incurs
to route orders to away markets after taking into account the other
costs associated with routing orders to other options exchanges. Also,
the Exchange's proposal would uniformly assess the same Customer
routing fees, regardless of the away venue, of $0.23 per contract, in
addition to the actual transaction fee assessed, or $0.13 per contract
of the away market pays a rebate.
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\14\ See Options 3, Section 7(c).
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Technical Amendment
The Exchange proposes a technical amendment in note 11 of Options
7, Section 2(1). Note 11 currently provides that NOM Participants that
qualify for the Tier 5 NOM Market Maker Rebate to Add Liquidity in
Penny Symbols and add NOM Market Maker liquidity in Penny Symbols and/
or Non-Penny Symbols of above 0.50% of total industry customer equity
and ETF option ADV contracts per day in a month, will receive a $0.46
contract rebate to add liquidity in Penny Symbols as Market Maker in
lieu of the Tier 5 rebate (``Note 11 Incentive''). The Tier 5 NOM
Market Maker Rebate to Add Liquidity in Penny Symbol currently has two
alternative routes in ``a'' and ``b'' to qualify for the Tier 5 rebate,
but when the Exchange adopted the Note 11 Incentive, the intent was to
provide the Note 11 Incentive for NOM participants that qualified
pursuant to route ``b'' in Tier 5.\15\ The Exchange subsequently
adopted an alternative
[[Page 81169]]
route ``a'' to qualify for the Tier 5 NOM Market Maker Rebate to Add
Liquidity in Penny Symbols, but did not update the Note 11 Incentive to
specify which route applied.\16\ The Exchange therefore proposes to
clarify that the Note 11 Incentive is available for NOM Participants
that qualify for the Tier 5(b) NOM Market Maker Rebate to Add Liquidity
in Penny Symbols. The proposed change will align the rule text with the
original intent of the incentive.
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\15\ See Securities Exchange Act Release No. 87276 (October 10,
2019), 84 FR 55644 (October 17, 2019) (SR-NASDAQ-2019-084). At the
time of adopting the Note 11 Incentive, only route ``b'' was
available to qualify for Tier 5.
\16\ See Securities Exchange Act Release No. 98721 (October 11,
2023), 88 FR 71616 (October 17, 2023) (SR-NASDAQ-2023-040).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\17\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\18\ 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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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's 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
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'. . . .'' \19\
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\19\ 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.'' \20\
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\20\ 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
options security transaction services. The Exchange is only one of
seventeen options venues 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. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
Options 7, Section 2(1)
The Exchange believes that the proposed changes to the fees and
rebates in Options 7, Section 2(1) are reasonable in several ways. The
Exchange believes that it is reasonable to increase the Fees to Remove
Liquidity in Non-Penny Symbols for NOM Market Makers, Non-NOM Market
Makers, Firms, and Broker-Dealers from $1.10 to $1.25 because the
proposed Non-Penny Symbol fee increases will be balanced by the Non-
Penny Symbol rebate increases for Customers, which are intended to
improve overall market quality on the Exchange by incentivizing market
participants to bring additional order flow and, in turn, provide more
trading opportunities to the benefit of all market participants. As
discussed above, the Exchange is proposing to increase the Non-Penny
Symbol Customer Rebate to Add Liquidity in the Note 9 Incentive from
$1.00 to $1.10 per contract without amending the current volume
qualifications in note 9 so that NOM Participants can bring the same
amount of volume as they do today on The Nasdaq Stock Market to receive
larger rebate in Customer Add Liquidity volume in Non-Penny
Symbols.\21\ The Exchange believes that the increased rebate as set
forth in the Note 9 Incentive will incentivize market participants to
send additional order flow to both The Nasdaq Stock Market and NOM,
which will in turn benefit all market participants on the equities and
options markets from the opportunity to interact with such order flow.
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\21\ See supra note 13.
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As discussed above, the Exchange is also proposing to increase the
Non-Penny Symbol Customer Rebate to Add Liquidity in the Note 10
Incentive from $1.05 to $1.15 per contract if the NOM Participant meets
the qualifications in note 10, including the increased NOM volume
threshold that requires NOM Participants to add Customer, Professional,
Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny
Symbols and/or Non-Penny Symbols above 1.50% (increased from above
1.20%) of total industry customer equity and ETF option ADV contracts
per day in a month.\22\ While the NOM volume threshold in the Note 10
Incentive will be increased under this proposal, the Exchange believes
that the proposed increase is commensurate with the corresponding
increase in the Non-Penny Symbol Customer Rebate to Add Liquidity in
the Note 10 Incentive as described above. To the extent NOM
Participants add greater liquidity on NOM to meet the proposed volume
threshold to receive the larger rebate, the Exchange believes that its
proposal will benefit all market participants who will be able to
interact with the additional liquidity. The proposed changes to the
Note 10 Incentive are designed as a means to improve overall market
quality by providing NOM Participants with a larger incentive to
increase their provision of liquidity on the Exchange's equity and
options markets.\23\ The Exchange believes that its proposal will
continue to encourage NOM Participants to send order flow to both the
options and equity markets to receive the Note 10 Incentive.
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\22\ The NOM Participant will also continue to be required to
meet the following volume qualifications (in addition to the
proposed NOM volume threshold) to receive the $1.15 Non-Penny Symbol
Customer Rebate to Add Liquidity in the Note 10 Incentive: execute
greater than 0.04% of Consolidated Volume (``CV'') via Market-on-
Close/Limit-on-Close (``MOC/LOC'') volume within The Nasdaq Stock
Market Closing Cross within a month, AND add greater than 1.5
million shares per day of non-displayed volume within The Nasdaq
Stock Market within a month.
\23\ See supra note 22.
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The Exchange also believes that the proposed changes to the fees
and rebates in Options 7, Section 2(1) as described above are equitable
and not unfairly discriminatory because they will apply uniformly to
all similarly situated participants. As it relates to the Non-Penny
Symbol fee increases, the Exchange will apply the increase to NOM
Market Makers, Non-NOM Market Makers, Firms, and Broker-Dealers while
Customers and Professionals will
[[Page 81170]]
continue to be uniformly assessed at a lower rate. The Exchange also
notes that the Note 9 Incentive and the Note 10 Incentive, each as
modified under this proposal, are available to only Customers and
Professionals. The Exchange has historically provided more favorable
pricing to both Customers and Professionals throughout its Pricing
Schedule. Furthermore, both Customer and Professional liquidity offer
benefits to the market that ultimately benefit all market participants.
Customer liquidity benefits all market participants by providing more
trading opportunities, which attracts market makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. With respect to Professionals, the
Exchange believes that continuing to encourage NOM Participants to
bring Professional order flow to NOM creates competition among options
exchanges because the more favorable pricing may cause market
participants to select NOM as a venue to send Professional order flow.
The Exchange believes that its proposal to eliminate the Note 8
Incentive is reasonable because this rebate program has not been
successful in accomplishing its objective of incentivizing NOM
Participants to send order flow and add liquidity on the Exchange by
fortifying participation in the MARs program and the tiered Penny
Symbol Customer Rebate to Add Liquidity program. The proposed
elimination of the Note 8 Incentive will streamline the Exchange's
Pricing Schedule. The Exchange has limited resources to devote to
incentive programs, and it is appropriate for the Exchange to
reallocate these incentives periodically in a manner that best achieves
the Exchange's overall objectives to increase order flow and liquidity
on NOM. The Exchange also believes that eliminating the Note 8
Incentive is equitable and not unfairly discriminatory because the
incentive will be eliminated in its entirety and would no longer be
available to any NOM Participants.
Options 7, Section 2(3)
The Exchange's proposal to assess a Non-Customer an increased
routing fee of $1.20 to route to another options exchange, and a
Customer a routing fee of $0.23 per contract, in addition to the actual
transaction fee assessed by the away market, for routing contracts to
any options exchange \24\ is reasonable because the proposed routing
fees would enable the Exchange to recover the costs it incurs to route
orders to away markets after taking into account the other costs
associated with routing orders to other options exchanges. In
determining its proposed routing fees, the Exchange took into account
transaction fees assessed by other options exchanges, the Exchange's
projected clearing costs, and the projected administrative, regulatory,
and technical costs associated with routing orders to other options
exchanges. Routing services offered by the Exchange are completely
optional and market participants can readily select between various
providers of routing services, including other exchanges and broker-
dealers. Also, the Exchange notes that market participants may elect to
mark their orders as ``Do-Not-Route'' to avoid any routing fees.\25\
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\24\ With the proposed changes, the Exchange would no longer
assess the lower routing fee of $0.13 per contract, in addition to
the actual transaction fee assessed, when routing to BX and Phlx.
\25\ See Options 3, Section 7(c).
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The Exchange's proposal to assess a Non-Customer an increased
routing fee of $1.20 to route to another options exchange is equitable
and not unfairly discriminatory as all Non-Customers would be assessed
a uniform routing fee. Additionally, the Exchange's proposal to assess
a Customer a routing fee of $0.23 per contract, in addition to the
actual transaction fee assessed by the away market, for routing
contracts to any options exchange is equitable and not unfairly
discriminatory as all Customers will be uniformly assessed the same
routing fee, regardless of the destination market. Customers will
continue to receive favorable pricing as compared to other market
participants because Customer liquidity enhances market quality on the
Exchange by providing more trading opportunities, which benefits all
market participants. Finally, the Exchange notes that market
participants may elect to market orders as Do-Not-Route to avoid any
routing fees.
Technical Amendment
The Exchange believes that its proposal to clarify that the Note 11
Incentive is available for NOM Participants that qualify for the Tier
5(b) NOM Market Maker Rebate to Add Liquidity in Penny Symbols is
reasonable because the proposal will align the rule text with the
original intent of the Note 11 Incentive and avoid any potential
confusion about the application of the Exchange's Pricing Schedule. The
Exchange also believes that its proposal is equitable and not unfairly
discriminatory because it will apply uniformly to all similarly
situated market participants. Continuing to apply the Note 11 Incentive
to only NOM Market Makers is equitable and not unfairly discriminatory
in light of their obligations on NOM (e.g., continuous quoting
obligations).
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 intra-market
competition, the Exchange does not believe that its proposal will place
any category of market participant at a competitive disadvantage. While
some aspects of the proposal apply directly to certain market
participants as described above (e.g., increased Non-Penny Symbol
Customer Rebates to Add Liquidity), Exchange believes that the changes,
taken together, will ultimately fortify and encourage activity on the
Exchange. As discussed above, all market participants will benefit from
any increase in market activity that the proposal effectuates.
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. 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 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.
[[Page 81171]]
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.\26\
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\26\ 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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2654534a430b45494b4b434852556655434508414950"><span class="__cf_email__" data-cfemail="90e2e5fcf5bdf3fffdfdf5fee4e3d0e3f5f3bef7ffe6">[email protected]</span></a>. Please include
file number SR-NASDAQ-2023-044 on the subject line.
Paper Comments
<bullet> 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-2023-044. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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-2023-044 and should
be submitted on or before December 12, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25656 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on November 21, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.