[Federal Register Volume 75, Number 13 (Thursday, January 21, 2010)]
[Notices]
[Pages 3503-3506]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-1015]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61342; File No. SR-BX-2009-088]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
the Fee Schedule of the Boston Options Exchange Facility
January 13, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 3504]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 31, 2009, NASDAQ OMX BX, Inc. (the ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the self-regulatory organization. The Exchange
filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) of
the Act,\3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the
proposal effective upon filing with the Commission. The Commission is
publishing this notice to solicit comments on the proposed rule from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Fee Schedule of the Boston
Options Exchange Group, LLC (``BOX''). The text of the proposed rule
change is available from the principal office of the Exchange, at the
Commission's Public Reference Room, on the Exchange's Internet Web site
at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/, and on
the Commission's Web site at http://www.sec.gov.
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 self-regulatory organization
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 self-regulatory organization
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The BOX Fee Schedule currently lists certain execution fees as
``standard'' trading fees, meaning that these execution fees are not
dependent upon whether the transaction added or removed liquidity on
BOX.\5\ These standard fees, specifically within Sections 2 and 3 of
the BOX Fee Schedule, are applicable for Broker Dealer proprietary
accounts and Market Maker accounts, respectively, and are currently set
at $0.20 per contract executed.\6\ The Exchange proposes to make the
following adjustments to standard trading fees:
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\5\ See Section 7 of the BOX Fee Schedule which sets forth any
applicable ``liquidity fees and credits.''
\6\ According to Section 1 of the BOX Fee Schedule a Public
Customer is charged $0.15 per executed contract of an Improvement
Order on its behalf in the PIP where that order is not submitted as
a Customer PIP Order (``CPO'') whereby it is labeled as a ``non-
CPO.'' There are no other trading fees for any other Public Customer
Orders which may be executed on BOX, including CPOs and Public
Customer orders on the Book, except for the charges and credits
described in Section 7 of the BOX Fee Schedule.
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Broker Dealer Trading Fees
Section 2 of the BOX Fee Schedule describes the current standard
transaction fee applicable to Broker Dealer transactions which is
currently set at $0.20. The Exchange proposes that the standard fee for
Broker Dealer transactions in all options classes, excluding
transactions in Standard & Poor's Depositary Receipts[reg] (``SPY''),
Powershares[reg] QQQ Trust Series 1 (``QQQQ'') and iShares Russell
2000[reg] Index Fund (``IWM'') and transactions in the Price
Improvement Period (``PIP''), be set at $0.25 per contract.
Market Maker Trading Fees:
The Exchange proposes to amend Section 3 of the BOX Fee Schedule
relating to transaction fees applicable to BOX Market Makers.\7\
Specifically, the Exchange proposes to adopt a per contract transaction
fee that is based on the number of contracts a BOX Market Maker
executes in a month, excluding transactions in SPY, QQQQ and IWM and
transactions within the PIP, as follows: \8\
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\7\ The fees proposed herein for Market Makers vary from the
fees proposed for Broker Dealers as the obligations for the two are
different. For example, Market Makers must maintain active two-sided
markets in options classes to which they are assigned and also have
certain restrictions regarding trading activity in classes outside
of their assignment, both of which do not apply to Broker Dealers on
BOX.
\8\ The current standard Market Maker fee is $0.20 per contact.
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Per
Average daily volume (ADV) for Market Maker contract
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ADV of 150,001 contracts and greater........................ $0.13
ADV of 100,001 contracts to 150,000 contracts............... 0.16
ADV of 50,001 contracts to 100,000 contracts................ 0.18
ADV of 10,001 contracts to 50,000 contracts................. 0.20
ADV of 0 contracts to 10,000 contracts...................... 0.25
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This proposed tiered fee schedule is designed to incent BOX Market
Makers to increase their quoting and trading activity on BOX. As a
Market Maker's monthly trading volume increases the per-contract fee
that a Market Maker is charged for such executions is decreased. The
Exchange proposes that the new tiered fees apply to all BOX Market
Makers for transactions in all classes traded on BOX (excluding
executions which occur in the PIP auction and executions in SPY, QQQQ,
& IWM). The BOX Market Maker's ADV will be calculated at the end of
each trading month. All executions for that month will be charged the
same per-contract fee rate according to the respective ADV achieved by
the Market Maker.
Section 3(b) of the BOX Fee Schedule currently sets forth a volume
discount that is applicable to the execution fees of BOX Market Makers.
The volume discount currently is $0.03 and $0.05 per contract upon the
Market Maker achieving an ADV of 25,000 and 50,000 contracts per month,
respectively. The tiered fee schedule, as outlined above, will
effectively apply the same goal as the Market Maker volume discount,
which is to incent more quoting activity and trading volume by Market
Makers on BOX. The Exchange therefore proposes to eliminate, in its
entirety, the Market Maker volume discount of Section 3(b) of the BOX
Fee Schedule.
Reduction of Fees and Credits in Section 7
The Exchange proposes to reduce the existing credits and fees
within Section 7 for both Non-Penny Pilot Classes and Penny Pilot
Classes, from $0.75 to $0.55 and from $0.20 to $0.15, respectively and
for transactions in the PIP, from $0.20 to $0.15.\9\ These credits and
fees apply equally to all account types, whether Public Customer, Firm
or Market Maker and are in addition to any applicable trading fees, as
described in Sections 1 through 3 of the BOX Fee Schedule.
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\9\ The Exchange notes that prior to this proposal the fees and
credits of Section 7 did not apply to transactions in SPY, QQQQ and
IWM. Similarly, the reduction in fees discussed in this section
(``Reduction of Fees and Credits in Section 7'') do not apply to
transactions in SPY, QQQQ and IWM.
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For example, a Public Customer Order in a Non-Penny Pilot Class is
entered
[[Page 3505]]
into the BOX Trading Host and executes against a Broker Dealer's order
resting on the BOX Book. The Public Customer is the remover of
liquidity and the Broker Dealer is the adder of liquidity. The Public
Customer will receive a $0.55 ``removal'' credit and the Broker Dealer
will be charged a $0.55 ``add'' fee. The Public Customer will receive a
$0.55 total credit (zero charge from Section 1 plus the $0.55
``removal'' credit) and the Broker Dealer will be charged $0.80 total
(the $0.55 fee for adding liquidity in addition to the standard $0.25
transaction fee).\10\
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\10\ This example presupposes that the proposed increase in
Broker Dealer fees, from $0.20 to $0.25, is in effect.
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Fees and Charges to SPY, QQQQ, and IWM
The Exchange Traded Fund Shares (``ETFs'') SPY, QQQQ and IWM are
among the most actively traded multiply listed options classes across
all of the options exchanges. The Exchange believes that the
characteristics that these ETFs share among themselves make it
appropriate that pricing for transactions in these classes be set on
par with each other. Furthermore, the Exchange believes that the volume
and liquidity exhibited in these classes is such that the pricing
applicable to these classes be set apart from the pricing applicable to
all other options classes listed and traded on BOX.
Therefore, the Exchange proposes that the standard fee for
transactions in SPY, QQQQ and IWM be set at $0.10 per contract for
Broker Dealers and at $0.05 per contract for BOX Market Makers.\11\ The
proposed different rate as between Broker Dealers and BOX Market Makers
is based upon the obligations that Market Makers undertake on BOX, such
as posting continuous two-sided quotes, which Broker Dealers are not
subject to.
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\11\ Currently the standard fees charged for transactions in
SPY, QQQQ and IWM are $0.20 for both Market Maker and Broker Dealer
transactions. As is currently the case, most executions on BOX on
behalf of Public Customers will be free.
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The credits and fees of Section 7 of the BOX Fee Schedule currently
do not apply to executions in the classes SPY, QQQQ or IWM. The
Exchange proposes to apply Section 7's credits and fees to transactions
in these three classes as is currently applied to transactions in all
other classes on BOX. The Exchange proposes that the fees and credits
apply equally for these three classes at $0.05 for both the fees and
credits.
Transactions in the PIP
The BOX PIP is a mechanism by which BOX Participants can obtain
executions and price improvement of their customers' orders. Because
executions in the PIP are separate and distinct from non-PIP executions
the Exchange believes that pricing for executions that take place
within the PIP also be separate and distinct from non-PIP execution
rates.\12\ Therefore, the Exchange proposes that the standard fee for
transactions within the PIP, including transactions in SPY, QQQQ and
IWM, be set at $0.20 per contract, both for Broker Dealers and for BOX
Market Makers.\13\
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\12\ BOX Options Participants are able to compete within the PIP
auction for a portion of the order on the opposite side of the
Public Customer PIP Order that must be filled by submitting
Improvement Orders.
\13\ Transactions within the PIP are presently subject to a
$0.20 fee. This proposal merely breaks fees for PIP transactions
into their own distinct line item in the Fee Schedule. See Ex. 5.
Transactions within the PIP will also be subject to the fees and
credits of Section 7 of the BOX Fee Schedule, as proposed and
discussed above.
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Non-Substantive Changes
The Exchange is also proposing various non-substantive changes to
the BOX Fee Schedule. These changes are necessary for reasons such as
the elimination of certain Fee Schedule text (e.g. the proposed
elimination of the Market Maker Volume Discount of Section 3(b)) or the
renumbering of certain sections of the Fee Schedule (e.g. Section 2(b)
renumbered to Section 2(c)). Further non-substantive changes have been
proposed either to add greater clarity or remove language from the Fee
Schedule which is now considered confusing in light of the substantive
changes that are being proposed herein.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\14\ in general, and Section
6(b)(5) of the Act,\15\ in particular, as well as Section 6(b) of the
Act,\16\ in general, and Section 6(b)(4) of the Act,\17\ in particular
in that it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members and issuers and other persons
using its facilities. In particular, the proposed change will allow the
fees charged on BOX to remain competitive with other exchanges as well
as apply such fees in a manner which is equitable based upon the
particular account type, e.g. Market Maker or Broker Dealer, for which
such transactions are executed. The obligations of Market Makers on BOX
and Brokers Dealers that execute transactions on BOX are different. For
example, BOX Market Makers must maintain active two-sided markets in
options classes to which they are assigned and also have certain
restrictions regarding trading activity in classes outside of their
assignment, both of which do not apply to Broker Dealers on BOX.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4).
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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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act \18\ and Rule 19b-4(f)(2) \19\
thereunder, because it establishes or changes a due, fee, or other
charge applicable only to a member.
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\18\ 15 U.S.C. 78s(b)(3)(A)(ii).
\19\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the rule change if it
appears to the Commission that the action is necessary or appropriate
in the public interest, for the protection of investors, or would
otherwise further the purposes of the Act.
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:
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-BX-2009-088 on the subject line.
Paper Comments:
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary,
[[Page 3506]]
Securities and Exchange Commission, 100 F Street, NE., Washington DC
20549-1090.
All submissions should refer to File Number SR-BX-2009-088. This file
number should be included on the subject line if e-mail 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 Web site (http://www.sec.gov/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 inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-BX-2009-088 and should be
submitted on or before February 11, 2010.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-1015 Filed 1-20-10; 8:45 am]
BILLING CODE 8011-01-P