Voglio sapere a riguardo di…

jbell on DSKJLSW7X2PROD with NOTICES

Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices members qualifications for tiered pricing programsincluding the QMM
pricing programbecause such qualifications depend upon members achieving threshold percentages of volumes as a percentage of Consolidated Volume, and the rise in sub-dollar volume had diluted these percentage calculations. Specifically, the Exchange amended the definition of Consolidated Volume to state that for purposes of determining which credits were applicable to a member during the month of December 2020, the Exchange would calculate the members volume and total Consolidated Volume twice.
First, it would calculate the members volume and Consolidated Volume as presently set forth in Equity 7, Section 118a. Second, it would calculate the members volume and Consolidated Volume by excluding volume and Consolidated Volume that consists of executed orders in securities priced less than $1. Thereafter, the Exchange would evaluate which of these two member volume and Consolidated Volume calculations would qualify members for the most advantageous credits and charges for the month of December 2020
and then it would apply those credits and charges to its members. Thus, if but for the rise of sub-dollar volume in December, a member would have qualified for a higher credit or a lower fee tier that month, then the Exchange would have applied that higher credit or lower fee tier to the members trading activity during the month.
In making this change, the Exchange reasoned that it would have been unfair for its members that execute significant dollar volumes in securities priced at or above $1 on the Exchange to fail to achieve or to lose their existing qualifications for special pricing in December 2020 due to anomalous behavior to which they did not contribute. The Exchange noted that although the change applied only to pricing in December 2020, it would monitor sub-dollar volumes going forward, and assess whether additional pricing adjustments are warranted if sub-dollar volumes remained elevated relative to the norm.
In fact, the Exchange has observed that the rise in sub-dollar volume has not abated, and that it continues to threaten the ability of some Exchange members to qualify for their pricing tiers. In January 2021, sub-dollar volume comprised 13.65 percent of Consolidated Volume. By comparison, sub-dollar volume comprised only 9.28
percent of Consolidated Volume, on average, during all of 2020. In particular, the sub-dollar phenomenon continues to threaten the ability of
VerDate Sep<11>2014

17:47 Feb 17, 2021

Jkt 253001

QMMs to attain their Tier 1 and Tier 2
credit tiers. In January 2021, several QMMs experienced these adverse impacts.
Accordingly, the Exchange proposes to amend the definition of Consolidated Volume in Equity 7, Section 114h to apply the December 2020 pricing formulation going forward for purposes of determining whether a QMM qualifies for Tier 1 or Tier 2 QMM
rebates.6 That is, the Exchange will calculate a QMMs volume and total Consolidated Volume twice. First, it will calculate the QMMs volume and Consolidated Volume as presently set forth in Equity 7, Section 118a.
Second, with certain modifications discussed below, it will calculate the QMMs volume and Consolidated Volume by excluding volume and Consolidated Volume that consists of executed orders in securities priced less than $1. Thereafter, the Exchange will evaluate which of these two QMM
volume and Consolidated Volume calculations would qualify QMMs for the most advantageous credit tier and then it will apply those credits.
The Exchange believes that its QMM
program plays an important role in improving the quality of, deepening liquidity in, and tightening spreads in its market. The QMM pricing program, in turn, offers rebates that are critical to incenting members to meet the quoting requirements for acting as QMMs. To the extent that a rise in sub-dollar trading by non-QMMs imperils the ability of QMMs to qualify for the rebates that motivate members to serve as QMMs, the Exchange believes that it is appropriate to act to preserve the effectiveness of these rebates, including by potentially excluding sub-dollar volume from the rebate eligibility criteria.
Where the Exchange proposes to exclude sub-dollar volume from the QMM rebate qualification formulas, the Exchange also proposes to raise the threshold percentages of Consolidated Volume that a QMM must achieve to qualify for Tier 1 rebates. The Exchange proposes to raise the eligibility threshold for the Tier 1 rebate to ensure that it is calibrated appropriately. That 6 The Exchange also proposes to delete rule text in Equity 7, Section 118 that set forth the same special methodology for calculating volumes as a percentage of Consolidated Volume during the month of December 2020. At this time, the Exchange does not propose to apply this special methodology beyond December 2020 to its schedule of transaction fees and credits, at Equity 7, Section 118. This, for purposes of calculating the pricing tiers set forth in Equity 7, Section 118, the Exchange does not exclude sub-dollar volume. The Exchange proposes to remove the special methodology from the rule text, as it is no longer operative.

PO 00000

Frm 00102

Fmt 4703

Sfmt 4703

10135

is, while the Exchange proposes to exclude sub-dollar volume to prevent the rebate qualification criteria from becoming too difficult to attain, the Exchange also wants to ensure that, exclusive of sub-dollar volume, these criteria do not become too easy to attain and that they continue to incentivize QMMs to add more liquidity to the Exchange in securities priced at $1 or more. The Exchange believes that a small upward adjustment to the Consolidated Volume threshold will ensure that the Tier 1 rebate remains reasonably challenging for QMMs to achieve if sub-dollar volume is excluded. Specifically, to qualify for the Tier 1 rebate when excluding subdollar volume, the Exchange proposes that a QMM must execute shares of liquidity in securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.80%, up to and including, 0.90% of Consolidated Volume during a month. Meanwhile, to qualify for the Tier 2 rebate again, when excluding sub-dollar volume, the Exchange proposes that the qualification requirements will remain unchanged: A
QMM must execute shares of liquidity in securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.90% of Consolidated Volume during a month.
The following example illustrates the operation of the proposed changes to the QMM rebate tiers when taken together.
During a month, a QMM adds 90
million shares to the Exchange, of which 300,000 shares consists of volume in sub-dollar securities.
Meanwhile, total Consolidated Volume for that month is 13 billion shares, of which 1.8 billion shares consists of executions in sub-dollar securities. To determine whether the QMM qualifies for a Tier 1 QMM rebate under the proposal, the Exchange would first determine whether the QMMs volume, inclusive of its sub-dollar activity, is between 0.70% and 0.90% of Consolidated Volume including subdollar volume. In this example, the QMM would not qualify for Tier 1
under this formula because the QMM
added only 0.69% of Consolidated Volume during the month. Nevertheless, the Exchange would determine next whether the QMM would qualify for the Tier 1 rebate under the alternative formula in which the QMMs sub-dollar volume and sub-dollar-attributable Consolidated Volume are excluded from the calculation, while also raising the QMMs qualifying threshold percentages of Consolidated Volume to between 0.80% and 0.90%. Under this alternative formula, the QMM would
E:FRFM18FEN1.SGM

18FEN1