Notice2025-20255
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Additional Incentive Provided to Qualified Market Makers in Equity 7, Section 114(e) and To Introduce a New Credit for Non-Displayed Midpoint Quotes/Orders Under Equity 7, Section 118(a)(1)
Primary source
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Published
November 19, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 221 (Wednesday, November 19, 2025)</title>
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[Federal Register Volume 90, Number 221 (Wednesday, November 19, 2025)]
[Notices]
[Pages 52123-52125]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-20255]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104181; File No. SR-NASDAQ-2025-088]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend the Additional Incentive Provided to Qualified Market Makers
in Equity 7, Section 114(e) and To Introduce a New Credit for Non-
Displayed Midpoint Quotes/Orders Under Equity 7, Section 118(a)(1)
November 14, 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 30, 2025, 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 additional incentive provided to
Qualified Market Makers in Equity 7, Section 114(e) (Market Quality
Incentive Programs) and to introduce a new credit for non-displayed
midpoint quotes/orders under Equity 7, Section 118(a)(1) (Fees for
Execution and Routing of Orders).
These amendments are effective upon filing. However, the Exchange
has designated the amendments to become operative on October 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 amend the Exchange's
schedule of rebates, at Equity 7, Section 114(e) (Qualified Market
Maker Program) to adjust the additional incentive provided to Qualified
Market Makers (``QMMs'') and to amend Equity 7, Section 118(a)(1) (Fees
for Execution and Routing of Orders) to introduce a new credit for non-
displayed midpoint quotes/orders.
Currently, the Exchange provides a member designated as a QMM with
an additional rebate of $0.000075 per share executed in Tapes A and C
and $0.00005 per share executed in Tape B for a QMM's market
participant identification (``MPID'') if the MPID (i) executes shares
of liquidity provided that represents above 1.25% of Consolidated
Volume \3\ during the month; (ii) quotes at the NBBO at least 50% of
the time during the month during regular market hours in an average of
at least 2,700 symbols per day; (iii) quotes at the national best bid
or national best offer (``NBBO'') at least 50% of the time during the
month during regular market hours in an average of at least 1,200
symbols in securities in Tape A per day; and (iv) executes shares of
liquidity provided that represents an increase of at least 0.50% of
Consolidated Volume relative to May 2020. For purposes of this rebate,
an MPID is considered to be quoting at the NBBO if the MPID has a
displayed order (other than a Designated Retail Order) at either the
national best bid or the national best offer or both the national best
bid and offer. On a daily basis, Nasdaq determines the number of
securities that satisfy the 50% NBBO requirements for the MPID.
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\3\ ``Consolidated Volume'' shall mean the total consolidated
volume reported to all consolidated transaction reporting plans by
all exchanges and trade reporting facilities during a month in
equity securities, excluding executed orders with a size of less
than one round lot.
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The Exchange proposes to modify this additional rebate in various
ways. First, the revised rebate would only be available to QMMs that
qualify for the QMM Tier 2 rebate. Second, the amount of the rebate
would increase to $0.0001 per share executed, and this rebate would be
the same amount regardless of whether the execution is in Tape A, B, or
C. Third, the Exchange also proposes to modify the criteria to qualify
for this new rebate. The new criteria are that the MPID adds liquidity
that represents above 0.325% of Consolidated Volume during the month
and that the MPID achieves at least a 95% ratio of its liquidity adding
activity to its total activity on the Exchange during the month. The
Exchange hopes that this new additional rebate will incentivize QMMs to
qualify for the Tier 2 rebate and to add more displayed liquidity to
the Exchange, which will improve overall market quality.
Additionally, the Exchange currently provides credits to members
for non-displayed orders (other than Supplemental Orders) that provide
liquidity. The Exchange is proposing to add a credit of $0.0027 per
share executed to Tapes A, B and C in midpoint orders (excluding buy
(sell) orders with Midpoint pegging that receive an execution price
that is lower (higher) than the midpoint of the NBBO). The credit will
be available to a member who adds during the month an average daily
volume (``ADV'') of 20 million or more shares of midpoint liquidity.
The Exchange hopes that by proposing the new credit it will incentivize
members to increase their liquidity providing activity at the midpoint
on the Exchange, which will improve overall market quality.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b)
[[Page 52124]]
of the Act,\4\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\5\ 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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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed change to its schedule of credits is
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for equity
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' . . . .'' \6\
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\6\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (Dec. 2, 2008),
73 FR 74770, 74782-83 (Dec. 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.'' \7\
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\7\ 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
equity security transaction services. The Exchange is only one of
several equity venues to which market participants may direct their
order flow. Competing equity exchanges offer similar tiered pricing
structures to that of the Exchange, including schedules of rebates and
fees that apply based upon members achieving certain volume thresholds.
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.
The Exchange believes that it is reasonable, equitable, and not
unfairly discriminatory to modify the additional rebate for QMMs in
Section 114(e) to only make it available to QMMs that qualify for the
Tier 2 rebate; to increase the amount of this additional rebate to
$0.0001 per share executed, and make this amount the same regardless of
whether the execution is in Tape A, B, or C; and to modify the criteria
to qualify for this new rebate so that an MPID has to add liquidity
that represents above 0.325% of Consolidated Volume during the month
and has to achieve at least a 95% ratio of its liquidity adding
activity to its total activity on the Exchange during the month. The
Exchange believes that the modified QMM additional rebate will
encourage QMMs to provide increased displayed liquidity on the
Exchange, which will improve the market quality overall, to the benefit
of all market participants.
Likewise, the Exchange believes that it is reasonable, equitable,
and not unfairly discriminatory to establish a new credit under Section
118(a)(1) for non-displayed orders (other than Supplemental Orders) by
offering members a credit in the amount of $0.0027 per share executed,
regardless of Tape, for midpoint orders (excluding buy (sell) orders
with Midpoint pegging that receive an execution price that is lower
(higher) than the midpoint of the NBBO) if the member provides an ADV
of 20 million or more shares of mid-point liquidity on the Exchange
during the month. The Exchange believes that this new credit will
encourage members to provide even more midpoint liquidity on the
Exchange.
To the extent that these proposed changes succeed in increasing the
levels of liquidity and activity on the Exchange, then the Exchange
will experience improvements in its market quality, which stands to
benefit all market participants. The Exchange notes that the proposed
rebate and credit are voluntary. The Exchange further believes that the
rebate and credit are not unfairly discriminatory because they will be
applied uniformly to all members that meet the specified criteria.
The Exchange notes that if there are market participants who are
dissatisfied with these proposals, they are free to shift their order
flow to competing venues that may offer more generous pricing or less
stringent qualifying criteria.
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.
Intramarket Competition
The Exchange does not believe that its proposals will place any
category of Exchange participant at a competitive disadvantage. The
Exchange intends for its proposals to incentivize liquidity adding
activity. The Exchange notes that its members are free to trade on
other venues to the extent they believe that the proposals are not
attractive. As one can observe by looking at any market share chart,
price competition between exchanges is fierce, with liquidity and
market share moving freely between exchanges in reaction to fee and
credit changes.
Inter-Market Competition
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 rebates and credits 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 credits
in response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
adding a supplemental rebate or a credit in this market may impose any
burden on competition is extremely limited.
In this instance, the modification of the additional QMM rebate
under Section 114(e) and the introduction of a new credit under Section
118(a)(1) are intended to incentivize liquidity adding activity on the
Exchange and do not impose a burden on competition. By
[[Page 52125]]
offering a modified rebate and a new credit to market participants that
meet certain criteria the Exchange is enhancing its appeal as a trading
venue and encouraging increased participation in its order execution
and routing processes while maintaining a competitive pricing
structure. As discussed above, the proposed modified rebate and new
credit do not disadvantage any specific group or market participants.
Instead, they provide equitable incentives that are available to all
members that meet the applicable criteria.
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)(ii) of the Act.\8\
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\8\ 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#7705021b125a14181a1a121903043704121459101801"><span class="__cf_email__" data-cfemail="95e7e0f9f0b8f6faf8f8f0fbe1e6d5e6f0f6bbf2fae3">[email protected]</span></a>. Please include
file number SR-NASDAQ-2025-088 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-2025-088. 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-2025-088 and should be submitted
on or before December 10, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-20255 Filed 11-18-25; 8:45 am]
BILLING CODE 8011-01-P
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