[Federal Register Volume 76, Number 178 (Wednesday, September 14, 2011)]
[Notices]
[Pages 56845-56847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-23384]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65293; File No. SR-BX-2011-063]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
BOX Fee Schedule
September 8, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 31, 2011, 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
NASDAQ OMX BX, Inc. (the ``Exchange'') proposes to amend the Fee
Schedule of the Boston Options Exchange Group, LLC (``BOX''). While
changes to the BOX Fee Schedule pursuant to this proposal will be
effective upon filing, the changes will become operative on September
1, 2011. The text of the proposed changes is attached as Exhibit 5. The
text of the proposed rule change is available from the principal office
of the Exchange, at the Commission's Public Reference Room, and also on
the Exchange's Internet Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.
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
Section 1 Trading Fees for Public Customer Accounts
Currently, the trading fee for Public Customers is $0.10 per
executed contract for all non-PIP \5\ transactions. The Exchange
proposes to reduce this fee to $0.07.
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\5\ See Price Improvement Period (``PIP'') in Chapter V, Section
18 of the BOX Trading Rules.
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Section 2 Trading Fees for Broker-Dealer Proprietary Accounts
Currently, the trading fee for broker-dealer proprietary accounts
is $0.25 per contract traded for all classes and all transactions. The
Exchange proposes to increase this fee to $0.40 per contract traded for
all non-PIP transactions.
Fees and Credits in Section 7a
Currently, Section 7a of the BOX Fee Schedule specifies a $0.55
credit for removing liquidity and $0.55 fee for adding liquidity for
transactions in options classes not in the Penny Pilot program (``Non-
Penny classes'') on the BOX Book, and a $0.15 credit for removing
liquidity and $0.15 fee for adding liquidity for transactions in Penny
Pilot classes. These credits and fees apply equally to all account
types, whether Public Customer, Broker Dealer, or Market Maker, and are
in addition to any applicable trading fees, as described in Sections 1
through 3 of the BOX Fee Schedule.
The Exchange proposes to increase the existing credits and fees
within Section 7a for transactions in Non-Penny classes on the BOX Book
from $0.55 to $0.65, and in Penny Pilot classes, from $0.15 to $0.22.
[[Page 56846]]
Correction to QQQ Symbol in Section 7d
The Exchange also proposes a technical correction to the symbol for
the QQQQs referenced in various provisions of Section 7d of the BOX Fee
Schedule. The correct symbol is QQQ and was previously incorrectly
referenced as QQQQ.
The proposed decrease in transaction fees for Public Customers,
increase in fees for broker-dealer proprietary accounts, and increase
in the credit for removing liquidity and fee for adding liquidity on
BOX are generally intended to attract additional order flow and
increase liquidity for the benefit of all BOX market participants.
Additionally, BOX notes that it is one of nine options markets in the
national market system for standardized options. Sending orders to and
trading on BOX is entirely voluntary. Under these circumstances, BOX
transaction fees must be competitive to attract order flow, execute
orders, and grow its market. As such, BOX believes its fees are fair
and reasonable.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\6\ in general, and Section
6(b)(4) of the Act,\7\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees, and other charges among
its members and other persons using its facilities. The Exchange
believes the changes proposed are an equitable allocation of reasonable
fees and charges among BOX Options Participants. The Exchange also
believes that there is an equitable allocation of reasonable credits
among BOX Options Participants.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that it is equitable to provide a credit to
any Participant that removes liquidity from the BOX Book. The Exchange
further believes an increase in this credit may attract additional
order flow to BOX, resulting in greater liquidity to the benefit of all
market participants. The Exchange believes that the proposed fee for
adding liquidity and credit for removing liquidity in non-PIP
transactions are equitable and non-discriminatory because such fees and
credits apply uniformly to all categories of participants, across all
account types and options classes. Further, the Exchange believes the
proposed fees and credits related to non-PIP transactions to be
reasonable. BOX operates within a highly competitive market in which
market participants can readily direct order flow to any of eight other
competing venues if they deem fees at a particular venue to be
excessive. The changes proposed by this filing are intended to attract
order flow to BOX by offering incentives to all market participants to
submit their orders to BOX.
The Exchange notes that this proposed rule change will increase
both the fees and credit for non-PIP transactions. The result is that
BOX will collect an increased fee from Participants that add liquidity
on BOX and credit another Participant an equal amount for removing
liquidity. Stated otherwise, the collection of the increased fees will
not result in additional revenue to BOX, but will simply allow BOX to
provide the credit incentive to Participants to attract additional
order flow. The Exchange believes it is appropriate to provide
incentives to market participants to direct order flow to remove
liquidity from BOX, similar to various and widely-used payment for
order flow programs used by other options exchanges. While BOX provides
incentives to market participants to remove liquidity from BOX, the
cumulative effect of the changes proposed will be an increase in fees
for those participants that add liquidity in non-PIP transactions. The
Exchange believes that incentives provided to those that remove
liquidity will attract additional order flow to BOX. Further, the
Exchange believes that a cumulative increase in transaction fees will
not deter participants from adding liquidity on BOX, and that they will
be more likely to add more liquidity to the BOX market so that they may
interact with those participants seeking to remove liquidity.
The Exchange believes the transaction fees proposed for non-PIP
transactions in broker-dealer proprietary accounts are reasonable. As
stated above, BOX operates within a highly competitive business. The
proposed increase in fees charged to broker-dealer proprietary accounts
is designed to be comparable to the costs that such accounts would be
charged at competing venues. Further, and as stated above, the Exchange
believes that participants that add liquidity on BOX will not be
impaired by the cumulative increase to fees on broker-dealer
proprietary accounts proposed.
Moreover, the Exchange believes it is equitable and not unfairly
discriminatory to charge broker-dealer proprietary accounts comparably
higher fees than BOX Market Makers. Market Makers have obligations that
other Participants do not. In particular, they must maintain active
two-sided markets in the classes in which they are appointed, and must
meet certain minimum quoting requirements. As such, the Exchange
believes it is appropriate that Market Makers be charged lower
transaction fees on BOX. The Exchange also believes it is equitable and
not unfairly discriminatory that Public Customer be charged lower
transaction fees than broker-dealers on BOX. The securities markets
generally, and BOX in particular, have historically aimed to improve
markets for investors and develop various features within the market
structure for customer benefit. As such, the Exchange believes the
proposed reduction in Public Customer transaction fees is appropriate
and not unfairly discriminatory.
The Exchange believes the proposed reduction in Public Customer
transaction fees is reasonable. The Exchange believes it promotes the
best interests of investors to have lower transaction costs for Public
Customers, and that the proposed reduction in fees will attract
additional Public Customer order flow to BOX. Additionally and as
previously stated, the Exchange believes the proposed increase in the
credit for removing liquidity will attract additional order flow to
BOX, providing greater liquidity to the benefit of all market
participants.
The proposed changes 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 among all BOX Participants. The Exchange believes
the proposed transaction fees and credits are fair and reasonable and
must be competitive with fees and credits in place on other exchanges.
Further, the Exchange believes that this competitive marketplace
impacts the fees and credits present on BOX today and influences the
proposal set forth above.
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.
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.
[[Page 56847]]
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 \8\ and Rule 19b-4(f)(2)
thereunder,\9\ because it establishes or changes a due, fee, or other
charge applicable only to a member.
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\8\ 15 U.S.C. 78s(b)(3)(A)(ii).
\9\ 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 summarily may temporarily suspend 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 [email protected]. Please include
File Number SR-BX-2011-063 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2011-063. 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NW.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. The text of the proposed rule change is available on
the Commission's Web site at http://www.sec.gov. 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 Number
SR-BX-2011-063 and should be submitted on or before October 5, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23384 Filed 9-13-11; 8:45 am]
BILLING CODE 8011-01-P