FR 2024-30161

General Summary

The document serves as a notice from the Securities and Exchange Commission (SEC) regarding The Nasdaq Stock Market's proposal to amend its transaction pricing schedule. The proposal focuses on clarifying the rules for earning certain trading credits, specifically the M-ELO Supplemental Credit B, and ensures that these credits cannot be combined with others like the M-ELO Supplemental Credit A or the QMM Tier 2 Program discount. The intention is to provide clarity to market participants and ensure the equitable and transparent application of Nasdaq’s pricing rules.

Significant Issues and Concerns

One notable issue with the document is the lack of detailed reasoning behind the proposed amendments. While the stated purpose is to provide clarity, the explanation does not offer deeper insight into why certain combinations of credits and discounts are not allowed. Additionally, the terminology used may be challenging for individuals unfamiliar with the intricacies of stock market operations and transaction pricing, potentially obscuring understanding.

Moreover, the document does not provide a thorough justification for prohibiting the combination of specific credits and discounts. Offering additional context or examples could enhance transparency and help stakeholders comprehend the implications of these rules more effectively. The absence of supporting analysis or evidence to affirm that these changes do not burden competition might also raise questions about the overall impact of the amendments.

Impact on the Public Broadly

For the general public, the proposed rule change's impact might not be immediately apparent unless they are directly involved in stock trading activities. However, ensuring clarity and straightforward rules in market operations indirectly benefits the public by promoting a fairer and more transparent trading environment, which is crucial for a healthy financial marketplace.

Impact on Specific Stakeholders

For stakeholders such as traders, brokers, and financial institutions, these amendments could have more significant implications. The proposed changes may impact trading strategies, especially for those who previously relied on combining credits and discounts for cost-efficiency. On the positive side, clearer rules help prevent misunderstandings and ensure compliance with Nasdaq’s intentions, potentially reducing disputes or errors in trading activities.

Conversely, if stakeholders view the prohibitions on combining certain credits as limiting flexibility or profitability, they might perceive the changes negatively. Without comprehensive explanations or justifications, market participants might question the necessity of these restrictions, leading to dissatisfaction or calls for further clarification from Nasdaq or the SEC.

In summary, while the changes aim to enhance clarity and consistency in Nasdaq’s credit program, stakeholders would benefit from a more detailed rationale behind the limitations imposed, ensuring that the rules are understood and accepted as fair and justified.

In this document, the financial references focus on the proposed changes to the transaction pricing schedule of The Nasdaq Stock Market LLC, specifically in relation to the credits available to its members. These amendments relate to how these credits are applied and combined. Key financial references and their implications are summarized below.

Financial Allocations and Modifications

The document outlines existing financial incentives provided by Nasdaq in the form of credits to its members. Currently, members who execute a combined volume of at least 5 million shares on an average daily volume (ADV) basis through midpoint orders and M-ELO orders (a specific type of order providing liquidity) during a month are eligible for a $0.00015 credit per share executed. This financial incentive is designed to encourage members to provide liquidity to the market, potentially improving market stability and efficiency.

Additionally, the rule clarifies that this $0.00015 credit cannot be combined with M-ELO Supplemental Credit A. The Exchange further proposes to clarify that M-ELO Supplemental Credit B cannot be combined with the QMM Tier 2 Program $0.0029 discounted remove fee. This combination restriction intends to prevent members from receiving multiple benefits simultaneously, which could impact the overall balance and fairness of the credit program.

Relevance to Identified Issues

The primary concern highlighted in the document is the potential for confusion among members regarding the eligibility for these financial credits and how they interact with other fee programs. The $0.00015 credit per share and the restrictions on combining it with other credits underscore the Exchange's effort to maintain a clear and straightforward pricing structure. However, the lack of detailed reasoning or justification for why certain credits or fees cannot be combined might seem insufficient to some members, leading to doubts about the transparency or fairness of the credit allocation.

The apparent complexity in the explained combinations and exclusions of the credit offerings could present challenges for members to fully understand the financial benefits or limitations. This issue is especially relevant considering the absence of detailed explanations regarding the prohibition of combining M-ELO Supplemental Credit B with other credits, which might appear opaque without further contextual information or supporting analysis.

Overall, while the financial incentives provided—$0.00015 credit and $0.0029 discounted fee—aim to promote specific trading behaviors, the communication surrounding these adjustments would benefit from clearer distinctions and justifications. This would ensure that all market participants, irrespective of their expertise, can comprehend and engage with the financial aspects of the Exchange's amended rule changes.