Notice2025-19351
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Nasdaq Pricing Schedule at Equity 7, Section 114
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
October 2, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 189 (Thursday, October 2, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 189 (Thursday, October 2, 2025)]
[Notices]
[Pages 47859-47867]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-19351]
[[Page 47859]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104149; File No. SR-NASDAQ-2025-079]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend the Nasdaq Pricing Schedule at Equity 7, Section 114
September 30, 2025.
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 26, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to (i) enhance the Designated Liquidity
Provider (as defined below) program in Equity 7, Section 114(f), and
(ii) add a new Market Quality Supporter (as defined below) program in
Equity 7, Section 114(g). While these amendments are effective upon
filing, the Exchange has designated the proposed amendments to be
operative on November 1, 2025.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings">https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings</a>, and at the principal office of the Exchange.
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 (i) enhance the
Designated Liquidity Provider \3\ (``DLP'') program in Equity 7,
Section 114(f), and (ii) add a new Market Quality Supporter \4\
(``MQS'') program in Equity 7, Section 114(g).
---------------------------------------------------------------------------
\3\ A ``Designated Liquidity Provider'' or ``DLP'' is a
registered Nasdaq market maker for a Qualified Security that has
committed to maintain minimum performance standards. A DLP shall 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. See Equity 7, Section
114(f)(2).
\4\ As set out in proposed paragraph (g)(2) of Equity 7, Section
114, a ``Market Quality Supporter'' or ``MQS'' has committed to
maintain minimum performance standards in Low Volume ETPs. An MQS
shall 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.
---------------------------------------------------------------------------
Together, these proposed changes are intended to create a more
scalable, targeted, and effective market quality support structure for
Nasdaq-listed exchange-traded products (``ETPs'').
Background
Pursuant to Equity 7, Section 114(f), the Exchange currently
maintains a DLP program that is designed to enhance liquidity and
market quality in Nasdaq-listed ETPs by providing incentives to the DLP
for a Qualified Security.\5\ The DLP program provides tiered rebates to
qualifying DLPs based on a combination of performance criteria (i.e.,
market quality metrics or ``MQM'') and trading activity based on
average daily volume (``ADV'') in the DLP's assigned ETP. The MQMs are
set out in paragraph (f)(4) of Equity 7, Section 114, and measure: \6\
(1) percentage of time at the national best bid (best offer)
(``NBBO''), (2) percentage of time within 5 basis points of NBBO, (3)
average notional depth within specified basis points of the NBBO, (4)
average spread,\7\ and (5) auction quality.\8\ Primary DLPs may qualify
for either a standard DLP rebate by meeting at least 4 of 5 standard
MQMs in the assigned ETP or an enhanced DLP rebate by meeting all 5
enhanced MQMs, as specified in Equity 7, Section 114(f)(4). As set out
in Section 114(f)(5), a Primary DLP that satisfies the MQMs in Section
114(f)(4) will be eligible to receive the rebates provided in paragraph
(A) of Section 114(f)(5) in each of its assigned ETPs for which it
qualified. For ETPs with higher ADV (i.e., Tiers 1 and 2), eligible
Primary DLPs receive the standard or enhanced rebate for which they
qualified for each displayed share that adds liquidity in the ETP. For
lower ADV ETPs (i.e., Tiers 3-5), the Primary DLP receives fixed
monthly payments for their standard or enhanced rebates, as applicable,
which are in addition to any other rebate the Primary DLP is eligible
for under Equity 7, Sections 114 and 118. Specifically, Nasdaq
currently pays qualifying Primary DLPs in accordance with the following
rebate schedule in Section 114(f)(5)(A):
---------------------------------------------------------------------------
\5\ Under this program, a security may be designated as a
``Qualified Security'' if it (1) is an ETP listed on Nasdaq pursuant
to Rules 5704, 5705, 5710, 5711, 5713, 5715, 5720, 5735, 5745, 5750
or 5760, and (2) has at least one DLP. See Equity 7, Section
114(f)(1).
\6\ These MQMs are measured on average in the DLP's assigned ETP
during regular market hours, except for auction quality requirements
that are measured each auction against the metrics. See Equity 7,
Section 114(f)(4).
\7\ Average spread is the time weighted average spread in basis
points when the DLP has a two-sided quote.
\8\ Auction quality is measured by auction price deviation from
first reference price after 30 seconds before the market open
(Opening) and 120 before the market close (Closing).
----------------------------------------------------------------------------------------------------------------
Tiers ADV Standard rebate Enhanced rebate
----------------------------------------------------------------------------------------------------------------
Tier 1....................... ETP with monthly ADV greater $0.0034 per executed $0.0036 per executed
than 1 million in the prior share. share.
month.
Tier 2....................... ETP with monthly ADV between $0.0040 per executed $0.0042 per executed
250,001 and 1 million in the share. share.
prior month.
Tier 3....................... ETP with monthly ADV between $200 per month.......... $350 per month.
150,001 and 250,000 in the
prior month.
Tier 4....................... ETP with monthly ADV between $225 per month.......... $450 per month.
50,001 and 150,000 in the
prior month.
[[Page 47860]]
Tier 5....................... ETP with monthly ADV less $300 per month.......... $500 per month.
than 50,001 in the prior
month.
----------------------------------------------------------------------------------------------------------------
Further, if two DLPs are assigned to a Nasdaq-listed ETP, one may
be designated as the Secondary DLP, which may receive rebates if it
meets 2 of the enhanced MQMs in Section 114(f)(4) (excluding the
auction quality MQM).\9\ Section 114(f)(5)(A) sets forth the rebate
schedule for Secondary DLPs. For ETPs with higher ADV (i.e., Tiers 1
and 2), eligible Secondary DLPs receive an additional $0.0003 per
executed share that is in addition to any other rebate the Secondary
DLP is eligible for under Equity 7, Sections 114 and 118. For ETPs with
lower ADV (i.e., Tiers 3-5), eligible Secondary DLPs receive an
additional $150 per month that is in addition to any other rebate the
Secondary DLP is eligible for under Equity 7, Sections 114 and 118.
---------------------------------------------------------------------------
\9\ The Secondary DLP is determined by using the same factors
for DLPs in Section 114(f)(2), 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.
---------------------------------------------------------------------------
Lastly, the DLP program also has an additional Tape C ETP incentive
for Primary DLPs based on their quoting performance across their ETP
assignments. As set forth in Section 114(f)(4), the Exchange currently
requires that the average time the Primary DLP is at the NBBO for each
assigned ETP averages at least 20%, and the average liquidity provided
by the Primary DLP for each assigned ETP averages at least 5% of the
liquidity provided on Nasdaq in the respective ETP. Qualifying Primary
DLPs are then provided incremental rebates for each displayed share
that adds liquidity in a Tape C ETP in accordance with the following
schedule in Section 114(f)(5)(B):
----------------------------------------------------------------------------------------------------------------
Tier 1 Tier 2 Tier 3 Tier 4
----------------------------------------------------------------------------------------------------------------
Minimum Monthly Average Number 10................ 25................ 50................ 100.
of Assigned ETPs as a Primary
DLP.
Incremental Tape C ETP Rebate... $0.0002 per $0.0003 per $0.0004 per $0.0005 per
executed share. executed share. executed share. executed share.
----------------------------------------------------------------------------------------------------------------
Proposal 1: DLP Program
As discussed in detail below, the Exchange proposes to enhance the
current DLP program in Equity 7, Section 114(f) by: (1) eliminating the
distinction between Primary and Secondary DLPs, eliminating Secondary
DLP rebates, and limiting the number of DLPs to one DLP per Qualified
Security; (2) replacing the distinction between standard and enhanced
MQMs (and associated rebates) with a single set of MQMs (and associated
rebates); (3) adding a new ``Low Volume'' \10\ group framework; (4)
replacing some of the current MQMs with more detailed MQMs; (5)
increasing the fixed monthly DLP rebates for Tiers 3-5; (6) updating
the qualifications, eligibility thresholds, and associated rebates for
the additional Tape C ETP incentive; and (7) making non-substantive
changes throughout proposed Section 114(f) to remove all references to
``fees'' as the Exchange would only provide incentives under the DLP
Program and to add references to ``stipends'' to refer to the monthly
fixed payments the Exchange would provide to eligible DLPs.\11\ With
the proposed amendments, the Exchange is seeking to enhance market
quality and encourage broader DLP participation, including in
investment strategies that exhibit wider spreads and lower trading
volume.
---------------------------------------------------------------------------
\10\ As discussed below, ``Low Volume'' will mean ETPs with a
monthly ADV of 1 million shares or less in the prior month. This ADV
volume threshold equates to the ADV volume threshold for Tiers 2-5
under the current DLP rebate program in Equity 7, Section
114(f)(5)(A). The Exchange is not proposing to amend the DLP
program's ADV volume thresholds under this proposal.
\11\ The term ``rebates'' would therefore refer to the
incentives that are provided per executed share.
---------------------------------------------------------------------------
As described above, the DLP program currently provides separate
rebates for eligible Primary and Secondary DLPs. Primary DLPs are also
eligible for standard or enhanced rebates based on whether they meet
the relevant standard or enhanced MQMs. The Exchange now proposes to
remove the distinction between Primary and Secondary DLPs, and
eliminate the Secondary DLP rebates (and associated qualifications)
under Equity 7, Section 114(f)(4) and (5). The Exchange also proposes
to eliminate the standard and enhanced rebates (and associated
qualifications) under Equity 7, Section 114(f)(4) and (5). Under this
proposal, and as further described below, any DLP may qualify for one
set of tiered rebates if it meets specified MQMs applicable to their
assigned ETP.
The Exchange also proposes in Section 114(f) to limit the number of
DLPs in a Qualified Security so that as proposed, there may only be one
DLP per Qualified Security. This is to better align the rule text to
current practice where issuers only have one DLP per Qualified
Security. Accordingly, the Exchange will make corresponding changes in
paragraphs (f)(1)(B) and (f)(2) to make clear that only one DLP will be
assigned per Qualified Security. Specifically in the definition of
Qualified Security in paragraph (f)(1)(B), the Exchange proposes to
remove the reference to ``at least'' one DLP so that it will be clear
the Qualified Security has only one DLP. Also in paragraph (f)(2), the
Exchange proposes to remove the last sentence, which currently provides
that Nasdaq may limit the number of DLPs in a security, or modify a
previously established limit, upon prior written notice to members.
This language will no longer be relevant once the Exchange limits the
number of DLPs in a Qualified Security to just one.
The Exchange also proposes to make clear how the DLP program will
interact with the MQS program by providing in paragraph (f) that a DLP
that is designated as a MQS of a Qualified Security may also be
eligible to receive the MQS stipend in proposed Section 114(g),
provided that the DLP meets the Market Quality Metrics in the DLP
program as specified in Section 114(f)(4)(B) as well as the Market
Quality Metrics for the MQS program as specified in proposed Section
114(g).
In proposed Section 114(f)(4)(A), the Exchange proposes to add a
new Low Volume group framework. As used in the DLP program, the term
``High Volume'' ETPs will mean ETPs with a monthly ADV of more than 1
million shares in the prior month (i.e., Tier 1).
[[Page 47861]]
The term ``Low Volume'' ETPs will mean ETPs with a monthly ADV of 1
million shares or less in the prior month, which equates to the ADV
volume threshold for Tiers 2-5 under the current DLP rebate program in
Section 114(f)(5)(A). The Exchange will further segment Low Volume ETPs
into Investment Strategy Groups A-C, which will be different ETP
investment strategies segmented by their average NBBO spread in basis
points, over the prior two calendar years. The Exchange would look at
the NBBO continuously throughout the regular trading hours of the day
and take the average of the NBBO across all of those times. That
average would be the NBBO for the day, which is then taken and averaged
across two calendar years to determine the Investment Strategy group.
These Investment Strategy Groups will be checked by the Exchange
each calendar year to ensure the investment strategy's average NBBO
spread remains within its respective Investment Strategy Group.
------------------------------------------------------------------------
Average NBBO spread in basis
Investment Strategy Group points
------------------------------------------------------------------------
A *.................................... 15 or less.
B **................................... 16-28.
C ***.................................. 29 or more.
------------------------------------------------------------------------
* Investment Strategy Group A will consist of the following investment
strategies: government fixed income, North American or USD denominated
developed market fixed income, developed market equities, and
currencies.
** Investment Strategy Group B will consist of the following investment
strategies: micro- to small-cap developed market equities, multi asset
strategies other than absolute returns, commodities tracking,
international fixed income, and derivatives.
*** Investment Strategy Group C will consist of the following investment
strategies: emerging market equities, emerging market fixed income,
multi asset absolute return strategies, commodities strategies and
exchange-traded notes (``ETNs'').
Group A includes ETP investment strategies that have relatively low
trading volumes but exhibit relatively tighter NBBO spreads compared to
Groups B and C, which include relatively low trading volume investment
strategies with increasingly wider NBBO spreads. Each Nasdaq-listed ETP
will be assigned an Investment Strategy Group, which will be publicly
available and updated to reflect any changes to the assigned group.\12\
---------------------------------------------------------------------------
\12\ The list of investment strategies in Investment Strategy
Groups A-C will be publicly available on Nasdaq's website and
updated to ensure the investment strategy's average NBBO spread
remains within its respective Investment Strategy Group.
---------------------------------------------------------------------------
As discussed in detail below, the Investment Strategy Groups will
be used to tailor the MQMs that DLPs will need to meet in their
assigned ETPs to qualify for DLP rebates. The proposed Investment
Strategy Group framework is intended to more precisely calibrate the
DLP incentives to the liquidity profile of the investment strategy that
the DLP's assigned ETP falls under. The proposed framework is also
intended to incentivize market makers to become DLPs in ETPs,
particularly ETPs that have lower trading volume and are less liquid.
Proposed Section 114(f)(4)(B) will set forth the MQM thresholds
that the DLP must meet based on which Investment Strategy Group or High
Volume (i.e., Tier 1) ETP \13\ they are assigned, as follows:
---------------------------------------------------------------------------
\13\ As currently set forth in Equity 7, Section 114(f)(5)(A),
Tier 1 ETPs have a monthly ADV greater than 1 million in the prior
month.
----------------------------------------------------------------------------------------------------------------
Investment Investment Investment
Market quality metrics High volume ETPs Strategy Group A Strategy Group B Strategy Group C
ETPs ETPs ETPs
----------------------------------------------------------------------------------------------------------------
Time at the NBBO with a minimum 40% 45% 45% 45%
notional size of $5,000............
Average Notional Depth within 25 $75,000 $40,000 $30,000 $20,000
basis points of the NBBO...........
Average Spread in basis points...... 25 35 60 100
Auction Reference Price Difference 150 150 150 150
(Opening) of first reference price
within 30 seconds prior to the
market open must be within basis
points.............................
Auction Reference Price Difference 50 50 50 50
(Closing) of first reference price
within 120 seconds prior to the
market close must be within basis
points.............................
Auction Spread in basis points with 75 105 180 300
$37,500 notional depth (Opening)...
Auction Spread in basis points with 25 35 60 100
$75,000 notional depth (Closing)...
----------------------------------------------------------------------------------------------------------------
The proposed MQMs are similar to the current MQMs except the
Exchange is proposing to refine some of the existing MQMs (e.g., adding
that time at the NBBO must be with a minimum notional size of $5,000).
The Exchange also proposes to delete the existing MQM that requires the
DLP to be a certain percentage of time within 5 basis points of the
NBBO, and add the new auction spread MQMs described above.
To be eligible for the proposed DLP rebates and stipends in
paragraph (5)(A) of Section 114(f), DLPs will need to meet 5 of the 7
MQMs described above, including auction spread (both opening and
closing),\14\ in the assigned ETP as measured by Nasdaq. The Exchange
is requiring DLPs meet the two auction spread metrics because the
opening and the closing auctions are important parts of the day as
these auctions set the benchmark prices. The Exchange also wants to
ensure that there is ample liquidity during this vital part of the
trading day.
---------------------------------------------------------------------------
\14\ Specifically, the MQMs are Auction Spread in basis points
with $37,500 notional depth (Opening) and Auction Spread in basis
points with $75,000 notional depth (Closing).
---------------------------------------------------------------------------
Proposed Section 114(f)(4)(B) will also provide that for leveraged
and inverse ETPs, the average spread, auction spread, and auction
reference price difference metrics will be multiplied by the absolute
value of the leverage factor of the ETP. Because
[[Page 47862]]
leveraged and inverse ETPs often exhibit higher price volatility
relative to standard, non-leveraged and non-inverse ETPs, the DLP is
often taking on higher risk and costs to take on these products.
Adjusting these MQMs by the absolute value of the ETP's leverage factor
aligns the rebate structure with the DLP's cost of taking these
products on. These MQMs will be measured on average in the assigned ETP
during regular market hours, except for the auction price difference
and auction spread metrics that are measured at and directly before
each auction, respectively, against the metrics and averaged for the
period.
Proposed Section 114(f)(4)(C) will provide the new qualifications
for the additional Tape C ETP incentives for DLPs. Specifically, to be
eligible for the rebates in proposed paragraph (5)(B) of Section
114(f), a DLP must meet the same average notional depth and average
spread metrics as described above for proposed paragraph (4)(B) of
Section 114(f). Specifically those metrics are as follows:
----------------------------------------------------------------------------------------------------------------
Investment Investment Investment
Market quality metrics High volume ETPs Strategy Group A Strategy Group B Strategy Group C
ETPs ETPs ETPs
----------------------------------------------------------------------------------------------------------------
Average Notional Depth within 25 $75,000 $40,000 $30,000 $20,000
basis points of the NBBO...........
Average Spread in basis points...... 25 35 60 100
----------------------------------------------------------------------------------------------------------------
DLPs will need to meet the above additional Tape C incentive MQMs
in order to be eligible for the additional Tape C incentives in
paragraph (5)(B) of Section 114(f).
Proposed section 114(f)(5) will provide that a DLP that satisfies
the MQMs above will be eligible to receive the rebates and stipends
provided in paragraph (A) below in each of its assigned ETPs for which
it qualified, and the rebates provided in paragraph (B) in any Tape C
ETP that meets the criteria of paragraph (1)(A) above.\15\ As is the
case today, rebates and stipends in paragraph (A) below will be in lieu
of or in addition to, as specified, other rebates or fees provided
under Equity 7, Sections 118 and 114. The rebates in paragraph (B)
below will be in addition to other rebates or fees provided under
Equity 7, Sections 118 and 114, including those in Section 114(f)(5)(A)
(i.e., the proposed DLP incentives) and Section 114(g) (i.e., the
proposed MQS stipend, as discussed below). Proposed Section 114(f)(5)
will also provide that the Exchange will calculate the pricing tiers
herein for the current month based on the DLP's prior month activity
(instead of basing the tier calculations on the current month as it
does today). This change will align the DLP Program with the amendments
to SEC Rule 610(d) to enhance price transparency.\16\
---------------------------------------------------------------------------
\15\ Paragraph (1)(A) of Section 114(f) provides the list of
Nasdaq-listed ETPs that are included in the DLP program as Qualified
Securities, provided it has at least one DLP. Specifically, these
are ETPs listed pursuant to Rules 5704, 5705, 5710, 5711, 5713,
5715, 5720, 5735, 5745, 5750, or 5760.
\16\ See Securities Exchange Act Release No. 101070 (September
18, 2024), 89 FR 81620 (October 8, 2024) (S7-30-22).
---------------------------------------------------------------------------
Proposed paragraph (A) of Section 114(f)(5) will set forth the
amended DLP rebates and stipends. As discussed above, the Exchange is
eliminating the distinction between standard and enhanced rebates, and
removing the Secondary DLP rebates in paragraph (A). Instead, the
Exchange will pay DLP rebates and stipends according to the following
schedule:
------------------------------------------------------------------------
Tiers ADV Rebate/stipend
------------------------------------------------------------------------
Tier 1........................ ETP with monthly ADV $0.0034 per
greater than 1 executed share.
million in the prior
month.
Tier 2........................ ETP with monthly ADV $0.0040 per
between 250,001 and 1 executed share.
million in the prior
month.
Tier 3........................ ETP with monthly ADV $350 per month.
between 150,001 and
250,000 in the prior
month.
Tier 4........................ ETP with monthly ADV $450 per month.
between 50,001 and
150,000 in the prior
month.
Tier 5........................ ETP with monthly ADV $500 per month.
less than 50,001 in
the prior month.
------------------------------------------------------------------------
In particular, the Exchange proposes to increase the fixed monthly
payments (i.e., stipends) in Tiers 3-5 from $200 to $350 (Tier 3), $225
to $450 (Tier 4), and $300 to $500 (Tier 5). Tier 1-2 rebates will
remain at the same levels currently provided for the standard DLP
rebates. The proposed changes are intended to better incentivize DLPs
to quote in lower volume and less liquid ETPs, recognizing that there
may be higher costs to do so. The Exchange also proposes to clarify in
paragraph (5)(A) of Section 114(f) that the Tiers 1-2 rebates will be
in lieu of any other rebate the DLP is eligible for under Equity 7,
Sections 114 and 118. This is current practice today, but the Exchange
is adding this language for transparency and to avoid potential
confusion.\17\ Unlike the Tiers 3-5 DLP stipends, which are additive,
the Tiers 1 and 2 DLP rebates are not because the Exchange is trying to
greater incentivize DLPs to quote in lower volume and less liquid ETPs.
---------------------------------------------------------------------------
\17\ The Exchange notes that paragraph (5)(A) already specifies
that for Tiers 3-5, the DLP will be eligible to receive a fixed
payment per month in addition to any other rebate the DLP is
eligible for under Equity 7, Sections 114 and 118.
---------------------------------------------------------------------------
The Exchange also proposes that for the current month of a new DLP
allocation of a symbol (i.e., in the context of a listing transfer from
another exchange or switching DLPs on a symbol), the DLP will
automatically be eligible to receive the relevant rebate or stipend.
New launches will automatically get the Tier 5 stipend for the current
month. The Exchange will not have trading volume data for a newly-
launched ETP for its first month, so it is proposing to automatically
provide the DLP of the newly-launched ETP with the base Tier 5 rebate
of $500 in the first month. For listing transfers or DLP allocations,
where there is trading volume data for these ETPs, that trading volume
data would be applied to determine which Tier rebate or stipend the DLP
would receive for the current month of the transfer or allocation.
After the first month, the DLP will need to satisfy the MQMs relevant
to their assigned ETP, as set forth in proposed Section 114(f)(4)(B).
Proposed paragraph (B) of Section 114(f)(5) will set forth the
amended additional Tape C incentives. As proposed, this will be
provided to all eligible DLPs (and removing the references around
Primary DLPs which is currently the case) that add liquidity in a Tape
C ETP and will clarify that the
[[Page 47863]]
DLP needs to meet the two DLP MQMs specified in proposed paragraph
(4)(C) above. Specifically, the Exchange proposes to provide DLPs
rebates in accordance with the following schedule:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Minimum Monthly Average Number of 20.................... 35.................... 75................... 135.................. 200.
Assigned ETPs as a DLP and meeting
the Average Notional Depth and
Average Spread metrics in
paragraph (4)(B).
Incremental Tape C ETP Rebate...... $0.00025 per executed $0.00035 per executed $0.0004 per executed $0.00045 per executed $0.00055 per executed
share. share. share. share. share.
--------------------------------------------------------------------------------------------------------------------------------------------------------
As proposed, the Exchange will increase the minimum monthly average
number of assigned Tape C ETPs needed to qualify for each rebate tier,
increase the rebates in Tiers 1-2 and decrease the rebate in Tier 4.
The Exchange will also add a new Tier 5 rebate. The proposed changes
reflect the growing number of ETPs listed on the Exchange, and are
designed to expand liquidity support in Tape C ETPs and ensure that
DLPs contributing to market quality in these ETPs are appropriately
incentivized.
Proposal 2: MQS Program
The Exchange proposes to establish a new MQS program in new Section
114(g) of Equity 7. The new MQS program is designed to complement the
DLP program in Section 114(f) by allowing up to three members (i.e.,
MQSs) per ETP to participate in market quality improvement by providing
liquidity for lower volume ETPs. The Exchange believes that allowing up
to three MQSs will work to further support market quality in lower
volume ETPs and increase resiliency in market quality performance. By
incentivizing more than one MQS to meet the MQS Market Quality Metrics
described below, lower volume ETPs would have more members that are
incentivized to provide quote quality and layering of notional depth,
which can enhance the market quality in an ETP overall.
Specifically, new Section 114(g) will provide that the following
stipend discussed in this section shall apply to transactions in a
Qualified Security (as defined below) by up to three MQSs associated
with its MQS program MPID.\18\ The Exchange notes that a DLP (i.e.,
registered market maker) can also be designated as the MQS of a
Qualified Security and be eligible to receive the MQS stipend proposed
herein,\19\ but an MQS is not required to be a registered market maker.
These members are simply supporters who are trading in the ETP and have
subsequently been designated as an MQS, but they are not subject to the
same obligations as the DLP that is, in essence, the registered market
maker (i.e., lead market maker), nor are they required to meet the
registered market maker obligations in the ETP, as set forth in Equity
2, Section 5. The Exchange believes that allowing any member to
participate in the MQS Program (instead of limiting it just to
registered market makers) would fortify participation in the proposed
MQS Program, and enhance market quality in lower volume ETPs.
---------------------------------------------------------------------------
\18\ The term ``market participant identifier'' or ``MPID''
means a unique four-letter mnemonic assigned to each Participant in
the Nasdaq Market Center. A Participant may have one or more than
one MPID. See Equity 1, Section 1(a)(11).
\19\ As discussed below, the Exchange is proposing identical
qualifications as a DLP for selecting an MQS. Specifically, an MQS
shall 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. See proposed Equity 7, Section 114(g)(2).
---------------------------------------------------------------------------
In light of the above, the Exchange proposes in Section 114(g) that
a DLP that is designated as the MQS of a Qualified Security may also be
eligible to receive the MQS stipend herein, provided that the DLP meets
the Market Quality Metrics in the DLP Program as specified in proposed
Section 114(f)(4)(B) described above as well as the MQS Market Quality
Metrics as specified in this proposed Section 114(g). The term ADV
shall mean the total consolidated volume reported to all consolidated
transaction reporting plans, for each individual security, by all
exchanges and trade reporting facilities during a month divided by the
number of trading days during the month. If a security is not listed
for a full month, the number of trading days will only include the days
which the security is listed.\20\
---------------------------------------------------------------------------
\20\ See Equity 7, Section 114(f) for substantially similar
provisions in the DLP program. The Exchange is not adopting the DLP
program's language around the incentive only being applied for
executions $1 per share and above because this is only applicable to
rebates provided per executed share and not a fixed monthly stipend.
---------------------------------------------------------------------------
Proposed Section 114(g)(1) will set forth the definition of
Qualified Security, which will be defined for purposes of the MQS
program in proposed Section 114(g)(1) as an ETP listed on Nasdaq
pursuant to Nasdaq Rules 5704, 5705, 5710, 5711, 5713, 5715, 5720,
5735, 5745, 5750, or 5760, and has at least one MQS. The proposed
definition will be identical to the current definition in the DLP
program in Section 114(f)(1).
Proposed Section 114(g)(2) will set forth the definition of MQS,
which will be a market participant that has committed to maintain
minimum performance standards in Low Volume ETPs.\21\ An MQS shall 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. The proposed definition
will be similar to the definition of DLP in Section 114(f)(2) and the
MQS will be selected using the same evaluation criteria as a DLP,
except an MQS will not be required to be a registered market maker in
the Qualified Security for the reasons discussed above.\22\
---------------------------------------------------------------------------
\21\ ``Low Volume'' ETPs will have the same meaning in the MQS
program as proposed in the DLP program, and shall mean ETPs with a
monthly ADV of 1 million shares or less in the prior month. See
proposed Equity 7, Section 114(g)(4)(A).
\22\ A registered market maker has certain quoting obligations
on Nasdaq to provide two-sided quotes in the security at all times
within certain percentages from the NBBO. See Equity 2, Section 5.
---------------------------------------------------------------------------
Proposed Section 114(g)(3) will provide that if an MQS does not
meet the performance measurements under paragraph (4) in this section
for a given month, fees and credits will revert to the normal schedule
under Sections 118(a) and 114. An MQS must provide 5 days written
notice if it wishes to withdraw its registration in a Qualified
Security, unless it is also withdrawing as a market
[[Page 47864]]
maker in the Qualified Security, as applicable.\23\
---------------------------------------------------------------------------
\23\ See Equity 7, Section 114(f)(3) for substantially similar
provisions in the DLP program except the Exchange is adding ``as
applicable'' herein to clarify that a MQS does not have to be a
registered market maker.
---------------------------------------------------------------------------
In proposed Section 114(g)(4)(A), the Exchange proposes to add a
new Investment Strategy group framework, which will be identical to the
framework proposed for the DLP program in Section 114(f)(4)(A) above.
The Exchange will segment the Low Volume ETPs into Investment Strategy
groups A-C in the same way as proposed for the DLP program and will
bucket the same investment strategies into groups A-C based on the
average NBBO spread in the same way as proposed in the DLP program:
\24\
---------------------------------------------------------------------------
\24\ See supra notes 15-17 for the specific investment
strategies within each Investment Strategy group.
------------------------------------------------------------------------
Average NBBO Spread in basis
Investment Strategy Group points
------------------------------------------------------------------------
A......................................... 15 or less.
B......................................... 16-28.
C......................................... 29 or more.
------------------------------------------------------------------------
Same as proposed in the DLP program, these Investment Strategy
groups will be checked by the Exchange each calendar year to ensure the
investment strategy's average NBBO spread remains within its respective
Investment Strategy group.
Proposed Section 114(g)(4)(B) will set forth the MQM thresholds
that MQSs will need to meet based on which Investment Strategy group
ETP they are assigned.
----------------------------------------------------------------------------------------------------------------
Investment Investment Investment
Market quality metrics Strategy Group A Strategy Group B Strategy Group C
ETPs ETPs ETPs
----------------------------------------------------------------------------------------------------------------
Average Notional Depth within 75 basis points of the $125,000 $75,000 $50,000
NBBO..................................................
Average Spread in basis points......................... 35 60 100
Auction Spread in basis points with $37,500 notional 105 180 300
depth (Opening).......................................
Auction Spread in basis points with $75,000 notional 35 60 100
depth (Closing).......................................
----------------------------------------------------------------------------------------------------------------
The Exchange proposes that to be eligible for the stipend in
paragraph (5) below, MQSs will need to meet the above MQMs in the
assigned ETP as measured by Nasdaq. For leveraged and inverse ETPs, the
average spread and auction spread metrics are multiplied by the
absolute value of the leverage factor of the ETP. Because leveraged and
inverse ETPs often exhibit higher price volatility relative to
standard, non-leveraged ETPs, the MQS is often taking on higher risk
and costs to take on these products. Adjusting these MQMs by the
absolute value of the ETP's leverage factor aligns the rebate structure
with the MQS's cost of taking these products on. These MQMs are
measured on average in the assigned ETP during regular market hours,
except for the auction spread metric that is measured directly before
each auction against the metrics and averaged for the period. The
Exchange also proposes that an MQS that is also designated as the DLP
in a Qualified Security will need to meet the MQMs as set out in
Section 114(f)(4) above to receive the MQS stipend.
Proposed Section 114(g)(5) will provide that an MQS that satisfies
the MQMs in paragraph (4) above will be eligible to receive the MQS
stipend of $175 per month in each of its assigned ETPs for which it
qualified. The MQS stipend will be a fixed payment per month in
addition to other rebates or fees for which the MQS is eligible and
provided under Equity 7, Sections 118 and 114. This stipend will only
apply to the MPID where a member is an MQS. Same as proposed in the DLP
program, the Exchange proposes that for the current month following the
new MQS allocation of a symbol (i.e., in the context of a listing
transfer from another exchange or switching MQSs on a symbol), the MQS
will be automatically eligible to receive the MQS stipend. New launches
will automatically get the MQS stipend for the current month as well.
After the first month, the MQS will need to satisfy the MQMs relevant
to their assigned ETP, as set forth in Section 114(g)(4)(B). Further,
in proposed Section 114(g)(5), the Exchange proposes to specify that it
will calculate the MQS stipend for the current month based on the prior
month's activity (instead of basing the tier calculations on the
current month as it does today), which will align to how the Exchange
proposes to calculate the pricing tiers in its DLP program described
above.
Proposal 3: Technical Amendments
The Exchange proposes technical amendments to reflect the addition
of new Section 114(g). Specifically, the Exchange proposes to renumber
current Sections 114(g)-(k) as Sections 114(h)-(l). The Exchange also
proposes to update the cross-cite to current Section 114(g) within the
definition of ``Designated Retail Order'' in Equity 7, Section 118(a).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\25\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\26\ 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 notes that its
ETP listing business operates in a highly-competitive market in which
market participants, which include both ETP issuers and ETP market
makers, 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 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 ETP market makers on the Exchange, which will
enhance market quality in listed ETPs on the Exchange.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
Proposal 1: DLP Program
The Exchange believes that the proposed changes to the DLP program
are reasonable, equitable, and not unfairly discriminatory for the
reasons that follow. As a general matter, the Exchange must from time
to time assess the effectiveness of the incentives it provides to
market participants in return for the beneficial behavior required to
receive the incentive. In this case, the Exchange is proposing to
enhance the current DLP program in
[[Page 47865]]
Equity 7, Section 114(f) by: (1) eliminating the distinction between
Primary and Secondary DLPs, eliminating Secondary DLP rebates, and
limiting the number of DLPs to one DLP per Qualified Security; (2)
replacing the distinction between standard and enhanced MQMs (and
associated rebates) with a single set of MQMs (and associated rebates);
(3) adding a new Low Volume group framework; (4) replacing some of the
current MQMs with more detailed MQMs; (5) increasing the fixed monthly
DLP rebates for Tiers 3-5; (6) updating the qualifications, eligibility
thresholds, and associated rebates for the additional Tape C ETP
incentive; and (7) making non-substantive changes throughout proposed
Section 114(f) to remove all references to ``fees'' as the Exchange
would only provide incentives under the DLP Program and to add
references to ``stipends'' to refer to the monthly fixed payments the
Exchange would provide to eligible DLPs. Taken together, the proposed
enhancements to the DLP program are intended to help the Exchange
compete as a listing venue for ETPs, including with respect to Low
Volume ETPs. Further, the Exchange notes that the proposed incentives
are based on achieving certain objective MQMs. The revised MQMs are
designed to encourage DLPs to uphold better quality markets in Nasdaq-
listed ETPs and also ensure a scalable business model to support new
and incubating ETPs that often trade less on a daily basis and exhibit
less liquidity. The Exchange believes that providing incentives that
are based on the quality of the market in individual ETPs, including
those that generally have lower volumes and wider spreads, will
incentivize DLPs to provide tight and deep markets in those securities.
The proposed changes to the DLP program reflects a competitive pricing
structure designed to incentivize market participants to direct their
order flow to the Exchange and enhance market quality in Nasdaq-listed
ETPs.
The Exchange further believes that the proposed changes to add a
Low Volume group framework in the manner discussed above is reasonable
because the proposed framework is intended to more precisely calibrate
the DLP rebate/stipend qualifications in proposed Section 114(f)(4)(B)
and additional Tape C incentive qualifications in proposed Section
114(f)(4)(C) to the liquidity profile of the investment strategy that
the DLP's assigned ETP falls under. In other words, segmenting Low
Volume ETPs into three groups based on 2-year average NBBO spread is
intended to better align the DLP's performance expectations to the
nature of the ETP's investment strategy and structure. The Exchange
believes that the proposed framework will encourage tighter spreads and
more liquidity in investment strategies that may typically be less
actively traded or exhibit wider spreads. The Exchange notes that other
equity exchanges distinguish between different ETP investment
strategies in their fee schedules to incentivize enhanced market
quality in those ETPs, or have incentives in place to encourage greater
market quality in lower volume ETPs.\27\
---------------------------------------------------------------------------
\27\ See e.g., Cboe BZX Equities Fee Schedule for market quality
incentive program for ``LEP Securities,'' which are single-stock
ETFs determined by Cboe BZX for inclusion in the program; and NYSE
Arca Equities Schedule of Fees and Charges for market quality
incentive programs for leveraged ETPs and ``Less Active'' ETPs
(defined as ETPs that have a CADV in the prior calendar quarter that
is the greater of either less than 100,000 shares or less than
0.013% of Consolidated Tape B ADV), including Less Active leveraged
ETPs.
---------------------------------------------------------------------------
The Exchange similarly believes that the proposed changes to
increase the fixed monthly payments in Tiers 3-5 in the manner
described above will incentivize DLPs to provide tight and deep markets
in ETPs that generally have lower volume and wider spreads. The
Exchange also believes that automatically providing the DLP the
relevant tiered rebate or stipend for the current month of a new DLP
allocation of a symbol, or of a new launch, automatically providing
them the Tier 5 stipend for the current month, is reasonable because
the Exchange is providing the DLP with clear visibility into their
rebate/stipend earnings at the time of the ETP's launch or allocation.
This approach is critical as ETPs may launch or be allocated a new DLP
at various points throughout the month, potentially complicating the
DLP's ability to meet the monthly performance criteria proposed above
and making it unclear on what rebates/stipends the DLP may expect.
Furthermore, enabling the DLP to receive the rebate/stipend during the
current month ensures they have sufficient runway to quote the product
and maintain liquidity in the subsequent month as the first month of a
new DLP allocation or new launch is often one where the ETP is more
thinly traded and liquidity standards may be more difficult to meet.
The Exchange also believes that its proposal to amend the
additional Tape C incentives by increasing the monthly average number
of assigned Tape C ETPs needed to qualify for each rebate tier and to
add a new Tier 5 rebate are reasonable because these modifications
reflect the growing number of ETPs listed on Nasdaq. The Exchange also
believes that the proposed rebates are set at appropriate levels, and
will continue to incentivize DLPs to add liquidity in Tape C ETPs in
order to qualify for these rebates.
The Exchange also believes that the proposed enhancements to the
DLP program, as described above, are equitable and not unfairly
discriminatory because the Exchange will apply the amended program
uniformly to all registered market makers that are DLPs. The Exchange
does not believe it is unfairly discriminatory to only offer the
program to market makers because of their unique role in the markets,
including their obligation to provide liquidity in the securities in
which they are registered. Thus, the DLP program is a further extension
of the market maker's role in providing liquidity in specific
securities, to the benefit of all market participants. The Exchange
further believes that automatically providing the DLP the relevant
tiered rebate or stipend for the current month of a new DLP allocation
of a symbol, or of a new launch, automatically providing them the Tier
5 stipend for the current month, is not unfairly discriminatory because
this rebate/stipend will be available to all Qualified Securities
during their first month of trading or new DLP allocation. As discussed
above, enabling the DLP to receive the rebate during current month
ensures they have sufficient runway to quote the product and maintain
liquidity in the subsequent month as the first month of a new DLP
allocation or new launch is often one where the ETP is more thinly
traded and liquidity standards may be more difficult to meet. Further,
this will be strictly limited to the first month of trading, after
which the DLP must meet the MQMs set out in proposed Section
114(f)(4)(B) in order to qualify for the DLP rebates.
Ultimately, the Exchange believes that all of the changes proposed
for the enhanced DLP program, taken together, will promote price
discovery and market quality in Nasdaq-listed securities and further,
that the tightened spreads and increased liquidity from the proposal
will benefit all market participants and investors by deepening the
Exchange's liquidity pool (including in lower volume and less liquid
ETPs), offering additional flexibility for all investors to enjoy cost
savings, supporting the quality of price discovery, enhancing quoting
competition across exchanges, promoting market transparency, and
improving investor protection. Accordingly, the Exchange believes that
the proposal is reasonable, equitably
[[Page 47866]]
allocated, and non-discriminatory because it would enhance market
quality to the benefit of all market participants and investors.
Proposal 2: MQS Program
The Exchange believes that the new MQS program is reasonable
because the program is designed to attract additional market makers to
provide depth and tighter spreads in Nasdaq-listed ETPs that have lower
volume and are less liquid. As discussed above, the Exchange is
introducing a supplemental liquidity incentive framework focused on
enhancing market quality in Low Volume ETPs.
The Exchange believes that allowing up to three MQSs per Qualified
Security is reasonable because it will further support market quality
and increase resiliency by increasing coverage in Nasdaq-listed ETPs
that have lower trading volume and wider spreads. Similar to the
proposed DLP program discussed above, the Exchange believes that the
proposed changes to add a Low Volume group framework in the manner
discussed above is reasonable because the proposed framework is
intended to more precisely calibrate the MQS rebate qualifications in
proposed Section 114(g)(4) to the liquidity profile of the investment
strategy that the MQS's assigned ETP falls under. In other words,
segmenting Low Volume ETPs into three groups based on 2-year average
NBBO spread is intended to better align the MQS's performance
expectations to the nature of the ETP's investment strategy and
structure. The Exchange believes that the proposed framework will
encourage tighter spreads and more liquidity in investment strategies
that may typically be less actively traded or exhibit wider spreads
across all exchanges. The Exchange notes that other equity exchanges
distinguish between different ETP investment strategies in their fee
schedules to incentivize enhanced market quality in those ETPs, or have
incentives in place to encourage greater market quality in lower volume
ETPs.\28\
---------------------------------------------------------------------------
\28\ See supra note 30.
---------------------------------------------------------------------------
The Exchange believes that the proposed MQMs for the MQS program
are reasonable as they are intended to enhance market quality by
encouraging MQSs to provide depth, tighter quoted spreads, and better
auction spreads in the open and close. The Exchange also believes that
it is reasonable to require an MQS that is also designated as the DLP
of the Qualified Security to meet the MQMs from the DLP program as
specified to qualify for the MQS rebate. This change is intended to
ensure that market makers earning incentives under both programs are
delivering comprehensive market quality. Since DLPs would already be
eligible to receive rebates under the DLP program, the Exchange
believes that the additional MQS rebate should be reserved for DLPs
meeting the requisite MQMs in proposed Section 114(f)(4)(B) and
providing sufficient value under the DLP program.
The Exchange believes that the flat monthly payment of $175 is set
at an appropriate level to incentivize MQSs to enhance market quality
in Low Volume ETPs. In addition, providing a flat stipend (as opposed
to a per-executed share rebate) would provide for a more reliable
business model for MQSs that choose to participate in this program,
particularly in lower volume and less liquid ETPs. The Exchange also
believes that automatically providing the MQS the stipend for the
current month following the new MQS allocation of a symbol or following
new launches is reasonable because the Exchange is providing the MQS
with clear visibility into their stipend earnings at the time of the
ETP's launch or new MQS allocation. This approach is critical as ETPs
may launch or get allocated to a new MQS at various points throughout
the month, potentially complicating the MQS's ability to meet the
monthly performance criteria proposed above. Furthermore, enabling the
MQS to receive the rebate during the current month ensures they have
sufficient runway to quote the product and maintain liquidity in the
subsequent month as the first month of a new MQS allocation or new
launch is often one where the ETP is more thinly traded and liquidity
standards may be more difficult to meet.
The Exchange also believes that the proposed MQS program is
equitable and not unfairly discriminatory because the Exchange will
apply the MQS program uniformly to all members that choose to
participate as MQSs. The Exchange further believes that automatically
providing the MQS the MQS stipend for the current month following the
new MQS allocation of a symbol or new launches is not unfairly
discriminatory because this stipend will be available to all Qualified
Securities during their first month of trading or new MQS allocation.
As discussed above, enabling the MQS to receive the stipend during
current month ensures they have sufficient runway to provide market
quality in the product and maintain market quality for the subsequent
month as the first month of a new MQS allocation or new launch is often
one where the ETP is more thinly traded and market quality standards
may be more difficult to meet. Further, this will be strictly limited
to the first month of trading, after which the MQS must meet the MQMs
as specified in proposed Section 114(g)(4)(B) in order to qualify for
the MQS stipend.
Further, the Exchange believes that the proposed MQS program will
promote price discovery and market quality in Nasdaq-listed securities
and further, that the tightened spreads and increased liquidity from
the proposal will benefit all market participants and investors by
deepening the Exchange's liquidity pool (particularly in lower volume
and less liquid ETPs), offering additional flexibility for all
investors to enjoy cost savings, supporting the quality of price
discovery, enhancing quoting competition across exchanges, promoting
market transparency, and improving investor protection. Accordingly,
the Exchange believes that the proposal is reasonable, equitably
allocated, and non-discriminatory because it would enhance market
quality to the benefit of all market participants and investors.
Proposal 3: Technical Amendments
The Exchange believes that the technical amendments to reflect the
addition of new Section 114(g) are reasonable, equitable, and not
unfairly discriminatory. Specifically, the Exchange proposes to
renumber current Sections 114(g)-(k) as Sections 114(h)-(l). The
Exchange also proposes to update the cross-cite to current Section
114(g) within the definition of ``Designated Retail Order'' in Equity
7, Section 118(a). The proposed changes will bring clarity and avoid
potential confusion in Exchange's Pricing Schedule to the benefit of
all market participants and investors.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed changes consisting
of the introduction of the DLP program enhancements and adoption of the
MQS program will impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. Rather, the
Exchange believes that the proposed changes, taken together, will
enhance competition by improving the market quality in Nasdaq-listed
ETPs, which will benefit all market participants through additional
trading opportunities, tighter spreads, and enhanced price discovery.
In terms of intra-market competition, as it relates to the DLP and
MQS programs, the Exchange notes the
[[Page 47867]]
respective programs will be applied uniformly to all similarly situated
market participants that are DLPs and MQSs, as applicable. The Exchange
does not believe it is unfairly discriminatory to only offer the DLP
program to registered market makers because of their unique role in the
markets, including their obligation to provide liquidity in the
securities in which they are registered. Thus, the DLP program is a
further extension of the registered market maker's role in providing
liquidity in specific ETPs, to the benefit of all market participants.
The Exchange further believes that automatically providing the
applicable DLP or MQS rebate or stipend for the current month of a new
DLP or MQS allocation of a symbol, or of a new launch, does not impose
an undue burden on intra-market competition because the applicable
rebate/stipend will be available to all Qualified Securities during
their first month of trading or new DLP/MQS allocation. As discussed
above, enabling the DLP or MQS to receive the rebate during the current
month ensures they have sufficient runway to provide market quality in
the product and maintain market quality in the subsequent month, as the
first month of a new launch or new DLP/MQS allocation is often one
where the ETP is more thinly traded and liquidity standards may be more
difficult to meet. Further, this will be strictly limited to the first
month of trading, after which the DLP and MQS must meet all of the
relevant MQMs in order to qualify for the applicable rebates.
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 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.
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) of the Act \29\ and paragraph (f) of Rule 19b-4 \30\
thereunder. 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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
---------------------------------------------------------------------------
\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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#9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8"><span class="__cf_email__" data-cfemail="384a4d545d155b5755555d564c4b784b5d5b165f574e">[email protected]</span></a>. Please include
file number SR-NASDAQ-2025-079 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-2025-079. 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 filing 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-2025-079 and should be submitted
on or before October 23, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
---------------------------------------------------------------------------
\31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-19351 Filed 10-1-25; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on October 2, 2025.
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.