Small Cap Incentive Pilot (“SCIP”)

As announced in Equity Trader Alert #2016 - 30, effective Friday, April 1, 2016, and pending filing with the SEC, Nasdaq will introduce a Small Cap Incentive Pilot for Nasdaq Market Makers registered in Nasdaq-listed symbols with a market cap less than $100 million. Details include:

• Nasdaq Market Markers registered in a SCIP symbol will receive a displayed liquidity rebate of $0.0005 per share (“SCIP Rebate”) if their percent of time at the National Best Bid or Offer is above 50% (“NBBO Test”) for the month. The SCIP Rebate will be in addition to all other applicable displayed rebates.
• For shares Executed Below $1.00, Nasdaq Market Makers will be subject to the following rates for shares executed below $1.00: The Rebate to Add Liquidity will be 0.10% (10 basis points) of the total dollar volume and the Fee to Remove Liquidity will be 0.25% (25 basis points) of the total dollar volume.
• There will be no fee for all quotes and orders executed in the Nasdaq Opening or Closing Cross, or any other cross (e.g. Halt, LULD) for Nasdaq Market Makers that meet the NBBO Test in SCIP symbols. All quotes and orders exclude Market-on-Close and Limit-on-Close orders executed in the Nasdaq Closing Cross and Market-on-Open, Limit-on-Open, Good-till-Cancelled, and Immediate-or-Cancel orders executed in the Nasdaq Opening Cross.

SCIP Liquidity Codes

The SCIP eligible securities will have unique liquidity codes for displayed orders to assist in tracking of rebates. These codes will replace the current “A”, “7”, and “8” liquidity codes. The unique codes are as follows:

All other liquidity codes, such as those used to signify executions in crosses, routing, removing liquidity, or adding non-display liquidity, will remain unchanged for the SCIP symbols.

SCIP Liquidity code examples assuming symbol NDAQ is a SCIP eligible symbol.

Market Maker passing NBBO test:

A registered Market Maker in Symbol NDAQ quotes at the NBBO 60% of the time and meets the NBBO test of 50%. The Market Maker uses a displayed order to add liquidity in NDAQ and receives a liquidity code of ‘a’. The market maker will receive an additional $0.0005 per share executed on top of any other rebates the Market Maker qualifies for.

Market Maker not passing NBBO test:

A registered Market Maker in Symbol NDAQ only quotes at the NBBO 45% of the time and fails to meet the NBBO test of 50%. The Market Maker uses a displayed order to add liquidity in NDAQ and receives a liquidity code of ‘a’. The market maker is not eligible for the SCIP incentive in this symbol and will receive their standard rebates for adding displayed liquidity.

All other Members:

A Member is not a registered Market Maker in NDAQ and thus is not eligible for the SCIP incentives. The Member uses a displayed order to add liquidity in NDAQ and receives a liquidity code of ‘a’. The Member will receive their standard rebates for adding displayed liquidity.

The list of SCIP can be found here.

The Exchange will add or remove symbols based on the Threshold every six months and announce any changes via an Equity Trader Alert. The Exchange may also adjust the Threshold periodically via a rule filing based on the results of the SCIP.