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Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate the Market Quality Program (Rule 5950)

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Start Preamble September 18, 2018.

Pursuant to Section 19(b)(1) [1] of the Securities Exchange Act of 1934 (“Act”) [2] and Rule 19b-4 thereunder,[3] notice is hereby given that, on September 7, 2018, 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 Start Printed Page 48355solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to eliminate the Market Quality Program at Rule 5950. The text of the proposed rule change is available on the Exchange's website at, at the principal office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change

1. Purpose

The Exchange proposes to eliminate its Market Quality Program (“MQP”) and delete corresponding Rule 5950. The Exchange established the MQP in 2013 [4] to promote market quality in certain securities listed on Nasdaq (“MQP Securities”), including by providing financial incentives to market makers in MQP Securities (“MQP Market Makers”) to maintain certain quoting and liquidity standards for them.

The MQP is designed to be a one year pilot program that is set to commence if and when certain conditions are satisfied: (i) The Exchange's acceptance of an MQP Company,[5] on behalf of an MQP Security; and (ii) the entry of a relevant MQP Market Maker into the Program. To date, however, neither of these conditions for the commencement of the MQP have occurred despite efforts by the Exchange over time to make the MQP more enticing to market makers.[6] Because the MQP has yet to even satisfy the necessary pre-conditions for launching its pilot period, neither the Exchange nor the Commission has been able to assess whether or to what extent the Program is successful.

At the Commission's suggestion and pursuant to its general initiative to end pilot programs that have failed to achieve their stated objectives, the Exchange is now proposing to eliminate the MQP and delete Rule 5950, which comprises the Program. The Exchange notes that it plans to develop a replacement market quality program in the future that it hopes will be more successful in attracting market maker interest than the existing Program.

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act,[7] in general, and furthers the objectives of Section 6(b)(5) of the Act,[8] in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The Exchange believes that it is consistent with the Act to eliminate the MQP because the Exchange has limited resources available to it to devote to the operation of special programs like MQP and as such, it is reasonable and equitable for the Exchange to allocate those resources to those programs that are effective and away from those programs that are ineffective. The Exchange believes that the objectives of the MQP would best be served through a re-design of the program at a future date.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the MQP is not and has not ever been utilized and, as such, the elimination of the Program will have no impact on competition whatsoever.

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 Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act [9] and Rule 19b-4(f)(6) thereunder.[10] Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder.[11]

A proposed rule change filed under Rule 19b-4(f)(6) [12] normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),[13] the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that waiver of the 30-day delayed operative date is consistent with the protection of investors and the public interest because the MQP program has never been utilized and there is no reason for such a delay. The Commission agrees. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change operative upon filing.[14]

Start Printed Page 48356

At any time within 60 days of the filing of such 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 shall institute proceedings under Section 19(b)(2)(B) [15] of the Act to determine whether the proposed rule change 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

Paper Comments

  • 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-2018-074. 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 (​rules/​sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Nasdaq-2018-074, and should be submitted on or before October 15, 2018.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[16]

Eduardo A. Aleman,

Assistant Secretary.

End Signature End Preamble


1.  15 U.S.C.78s(b)(1).

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4.  See Securities Exchange Act Release No. 74580 (March 25, 2015), 80 FR 17126 (March 31, 2015) (SR-NASDAQ-2015-025) (reducing MQP fees to MQP Market Makers).

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5.  The term “MQP Company” is defined in Rule 5950(e)(5) as the trust or company housing the Exchange Traded Fund (“ETF”) or, if the ETF is not a series of a trust or company, then the ETF itself.

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6.  See Securities Exchange Act Release No. 69195 (March 20, 2013), 78 FR 18393 (March 26, 2013) (SR-NASDAQ-2012-137) (order granting approval of Market Quality Program) (SR-NASDAQ-2012-137) (“MQP order”). See also Securities Exchange Act Release No. 68515 (December 21, 2012), 77 FR 77141 (December 31, 2012) (SR-NASDAQ-2012-137) (notice of filing Market Quality Program as pilot, with extensive description of program) (“MQP proposal”).

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9.  15 U.S.C. 78s(b)(3)(A)(iii).

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11.  17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19 b-4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission.

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13.  17 CFR 240.19b-4(f)(6)(iii).

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14.  For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

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[FR Doc. 2018-20660 Filed 9-21-18; 8:45 am]