Notice2024-08238
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, Section 114(f)
Primary source
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Published
April 18, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 76 (Thursday, April 18, 2024)</title>
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[Federal Register Volume 89, Number 76 (Thursday, April 18, 2024)]
[Notices]
[Pages 27822-27824]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08238]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99950; File No. SR-NASDAQ-2024-017]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Equity 7, Section 114(f)
April 12, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on April 1, 2024, 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 Equity 7, Section 114(f), as
described further below.
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.
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.
[[Page 27823]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the list of
exchange-traded products (``ETPs'') that may be designated as a
``Qualified Security'' \3\ under the Exchange's Designated Liquidity
Provider (``DLP'') \4\ Program at Equity 7, Section 114(f)(1)(A).
Specifically, the Exchange proposes to add securities listed on Nasdaq
pursuant to Nasdaq Rules 5711, 5713, and 5715 to the list of securities
that may be designated as a Qualified Security, as long as it has at
least one DLP.
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\3\ Equity 7, Section 114(f)(1) says a security may be
designated as a ``Qualified Security'' if: (a) it is an exchange-
traded product listed on Nasdaq pursuant to Nasdaq Rules 5704, 5705,
5710, 5720, 5735, 5745, 5750 or 5760; and (b) it has at least one
DLP.
\4\ Equity 7, Section 114(f)(2) defines a ``Designated Liquidity
Provider'' or ``DLP'' as a registered Nasdaq market maker for a
Qualified Security that has committed to maintain minimum
performance standards. A DLP will be selected by Nasdaq based on
factors including, but not limited to, experience with making
markets in exchange-traded products, adequacy of capital,
willingness to promote Nasdaq as a marketplace, issuer preference,
operational capacity, support personnel, and history of adherence to
Nasdaq rules and securities laws. Nasdaq may limit the number of
DLPs in a security, or modify a previously established limit, upon
prior written notice to members.
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The Exchange currently offers certain fees and rebates under the
DLP Program, which applies to transactions in a Qualified Security by
one of its DLPs associated with its DLP Program market participant
identifier (``MPID''). The Exchange proposes to amend Equity 7, Section
114(f)(1)(A) to add securities listed on Nasdaq pursuant to Nasdaq
Rules 5711,\5\ 5713 (Paired Class Shares), and 5715 (Selected Equity-
linked Debt Securities) to the list of securities that may be
designated as a Qualified Security, as long as it has at least one DLP.
The Exchange proposes to add Nasdaq Rules 5711, 5713, and 5715 to the
existing list that already includes: Nasdaq Rule 5704 (Exchange Traded
Fund Shares), Nasdaq Rule 5705 (Exchange Traded Funds: Portfolio
Depository Receipts and Index Fund Shares), Nasdaq Rule 5710
(Securities Linked to the Performance of Indexes and Commodities
(Including Currencies)), Nasdaq Rule 5720 (Trust Issued Receipts),
Nasdaq Rule 5735 (Managed Fund Shares), Nasdaq Rule 5745 (Exchange-
Traded Managed Fund Shares (``NextShares'')), Nasdaq Rule 5750 (Proxy
Portfolio Shares), and Nasdaq Rule 5760 (Managed Portfolio Shares). The
Exchange believes that the DLP Program encourages DLPs to maintain
better market quality in Nasdaq-listed securities. The Exchange
recently listed shares of the iShares Bitcoin Trust and the Valkyrie
Bitcoin Fund under Nasdaq Rule 5711(d) (Commodity-Based Trust
Shares).\6\ Since these products are new and incubating, the Exchange
believes the DLP Program will be beneficial to these ETPs. Currently,
other than these two spot bitcoin ETPs, the Exchange does not have any
additional products listed under Nasdaq Rule 5711, nor does it have any
products currently listed under Rule 5713 or Rule 5715. Nonetheless,
similar to the ETPs currently listed in Equity 7, Section 114(f)(1)(A),
any future ETPs listed on Nasdaq pursuant to Nasdaq Rules 5711, 5713,
and 5715 would benefit from support from a market quality perspective.
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\5\ Securities listed on Nasdaq pursuant to Nasdaq Rule 5711
include Index-Linked Exchangeable Notes, Equity Gold Shares, Trust
Certificates, Commodity-Based Trust Shares, Currency Trust Shares,
Commodity Index Trust Shares, Commodity Futures Trust Shares,
Partnership Units, Trust Units, Managed Trust Securities, and
Currency Warrants.
\6\ See Securities Exchange Act Release No. 34-99306 (January
10, 2024), 89 FR 3008 (January 17, 2024).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\8\ 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. The Exchange also notes that its ETP
listing business operates in a highly competitive market in which
market participants, which include both DLPs and ETP issuers, can
readily transfer their listings or opt not to participate,
respectively, if they deem fee levels, liquidity incentive programs, or
any other factor at a particular venue to be insufficient or excessive.
The DLP Program, including the proposed rule change, reflects a
competitive pricing structure designed to incentivize issuers to list
new products and transfer existing products to the Exchange and market
participants to enroll and participate as DLPs on the Exchange, which
the Exchange believes will enhance market quality in qualified ETPs
listed on the Exchange.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes it is reasonable, equitable, and not unfairly
discriminatory to expand the list of securities that may be designated
as a Qualified Security to include securities listed on Nasdaq pursuant
to Nasdaq Rules 5711, 5713, and 5715, as long as it has at least one
DLP. The Exchange believes that its proposal to expand the list of
securities that may be designated as a Qualified Security to include
securities listed on Nasdaq pursuant to Nasdaq Rules 5711, 5713, and
5715, as long as it has at least one DLP, is reasonable because the DLP
Program encourages better market quality and ETPs currently listed on
Nasdaq pursuant to Nasdaq Rule 5711 as well as ETPs that may be listed
on Nasdaq pursuant to Nasdaq Rules 5711, 5713, and 5715 in the future
would benefit from support from a market quality perspective, like the
other ETPs currently included in the list of securities that may be
designated as a Qualified Security in Equity 7, Section 114(f)(1)(A).
As noted above, the Exchange recently listed shares of the iShares
Bitcoin Trust and the Valkyrie Bitcoin Fund under Nasdaq Rule 5711(d)
(Commodity-Based Trust Shares) and the Exchange believes the DLP
Program will be beneficial to these new ETPs. The Exchange believes
that the proposal is equitable and not unfairly discriminatory because
the expanded list of securities that may be designated as a Qualified
Security under the DLP Program would allow for more ETPs to be
designated as Qualified Securities and thereby allow more DLPs to
receive incentives under the DLP Program. In addition, Nasdaq believes
that the proposal stands to improve the quality of the Nasdaq market,
to the benefit of all market participants.
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. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem rebates or 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 rebates and fees to remain
competitive with other exchanges and with alternative trading systems
that have been exempted from compliance with
[[Page 27824]]
the statutory standards applicable to exchanges. Because competitors
are free to modify their own rebates and fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which rebate and fee changes
in this market may impose any burden on competition is extremely
limited.
The Exchange uses incentives, such as the rebates of the DLP
Program, to incentivize market participants to improve the market. In
this instance, the Exchange is proposing to expand the list of
securities that may be designated as a Qualified Security to include
securities listed on Nasdaq pursuant to Nasdaq Rules 5711, 5713, and
5715, as long as it has at least one DLP, in an effort to support
market quality and reward additional DLPs with incentives under the DLP
Program.
The Exchange notes that participation in the DLP Program is
entirely voluntary and, to the extent that registered market makers
determine that the rebates are not in line with the level of market-
improving behavior the Exchange requires, a DLP may elect to deregister
as such with no penalty. The Exchange does not believe that the
proposed change places an unnecessary burden on competition and, in
sum, if the changes proposed herein are unattractive to market makers,
it is likely that the Exchange will lose participation in the DLP
Program as a result. The Exchange does not believe that the proposal
represents a burden on competition among Exchange members, or that the
proposal 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.\9\
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\9\ 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#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="5220273e377f313d3f3f373c2621122137317c353d24">[email protected]</span></a>. Please include
file number SR-NASDAQ-2024-017 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-2024-017. 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-2024-017 and should
be submitted on or before May 9, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-08238 Filed 4-17-24; 8:45 am]
BILLING CODE 8011-01-P
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