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Federal Register / Vol. 86, No. 51 / Thursday, March 18, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES

The Exchange proposes to amend two of the credits it offers to members in displayed quotes or orders in securities in all three Tapes other than Supplemental Orders or Designated Retail Orders that add liquidity to the Exchange.
First, the Exchange proposes to amend a credit it presently offers of $0.00295 per share executed to a member that, through one or more of its Nasdaq Market Center MPIDs i adds shares of liquidity during the month representing at least 0.50% of Consolidated Volume during the month;
ii adds at least 0.35% of Consolidated Volume during the month in securities in Tape C; and iii adds at least 0.15%
of Consolidated Volume during the month in Designated Retail Orders 4 for securities in any Tape. The Exchange proposes to increase the threshold percentage of Consolidated Volume necessary to qualify for this credit from 0.50% to 0.80%. The Exchange proposes to raise this threshold to incentivize members to increase the extent of their liquidity adding activity to continue to qualify for the $0.00295
per share executed credit. If members increase their liquidity adding activity on the Exchange to continue to qualify for this credit, then the quality of the market will improve, to the benefit of all participants.
Second, the Exchange proposes to amend a credit it presently offers of $0.0030 per share executed to a member with shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 1.00% of Consolidated Volume during the month and shares of non-displayed liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.25% of Consolidated Volume. The Exchange proposes to decrease the threshold percentage of Consolidated Volume necessary to qualify for this credit from 1.00% to 0.95%. The Exchange proposes to lower this threshold to render it easier for members to qualify volume that consists of executions in securities priced less than $1, while also applying distinct qualifying volume thresholds to each Tier. The Exchange will then assess which of these two calculations would qualify the member for the most advantageous credits for the month and then it will apply those credits to the member.
4 Pursuant to Equity 7, Section 118, a Designated Retail Order is an agency or riskless principal order that meets the criteria of FINRA Rule 5320.03
and that originates from a natural person and is submitted to Nasdaq by a member that designates it pursuant to this section, provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology.

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for the $0.0030 per share executed credit. The Exchange believes that more members may seek to attain this credit to the extent that it is more accessible to them. If more members increase their liquidity adding activity on the Exchange to attain this credit, then the quality of the market will improve, to the benefit of all participants.
In addition to the above, the Exchange proposes to establish a new credit for non-displayed orders other than supplemental orders. Specifically, the Exchange proposes to provide a new credit for other non-displayed orders if a member, during the month: i Provides 0.30% or more of Consolidated Volume through non-displayed orders other than midpoint orders; and ii increases providing liquidity through non-displayed orders including midpoint orders by 10% or more relative to the members February 2021
average daily volume provided through non-displayed orders including midpoint orders. The amount of this credit will be $0.00125 per share executed for securities in Tapes A and B and $0.00075 per share executed for securities in Tape C.
The Exchange intends for this new credit to reward members that provide significant volumes of non-displayed liquidity on the Exchange and to encourage such members to further grow the extent to which they provide non-displayed liquidity to the Exchange. The Exchange believes that any ensuing increase in non-displayed liquidity on the Exchange will improve the quality of the Nasdaq market. In particular, the Exchange intends to encourage members to increase the extent to which they provide nondisplayed liquidity in securities in Tapes A and B, as the Exchange believes that an increase in such liquidity is most needed and likely to be most beneficial to market quality.
2. Statutory Basis The Exchange believes that its proposals are consistent with Section 6b of the Act,5 in general, and further the objectives of Sections 6b4 and 6b5 of the Act,6 in particular, in that they provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The proposals are also consistent with Section 11A of the Act relating to the 5 15
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establishment of the national market system for securities.
The Proposals Are Reasonable The Exchanges proposals are 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: no one disputes that competition for order flow is fierce. . . . As the SEC explained, in the U.S. national market system, buyers and sellers of securities, and the brokerdealers 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. . . . 7
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. 8
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 7 NetCoalition v. SEC, 615 F.3d 525, 539 D.C. Cir.
2010 quoting Securities Exchange Act Release No.
59039 December 2, 2008, 73 FR 74770, 7478283
December 9, 2008 SRNYSEArca200621.
8 Securities Exchange Act Release No. 51808
June 9, 2005, 70 FR 37496, 37499 June 29, 2005
Regulation NMS Adopting Release.

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