[Federal Register Volume 76, Number 181 (Monday, September 19, 2011)]
[Notices]
[Pages 58072-58074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-23975]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65337; File No. SR-BX-2011-064]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
BOX Fee Schedule
September 14, 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 September 1, 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''). The
changes to the BOX Fee Schedule pursuant to this proposal will be
effective upon filing and 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
The Exchange proposes to implement a routing fee structure that
provides a discount to BOX Options Participants (``Participants'') that
execute transactions on BOX.
Public Customer Orders on BOX which are not executable against the
BOX Book are routed to an away exchange for execution. Currently, BOX
does not assess any fee to Participants for doing so. The Exchange,
however, believes that exempting all outbound customer orders from
routing fees will result in some Participants sending a substantial and
increasing amount of non-executable orders to BOX so as to evade fees
on other exchanges. In order to curtail this abusive use of BOX
routing, the Exchange proposes to impose a routing fee structure that
provides a volume discount to Participants that execute transactions on
BOX. The proposed change will have no
[[Page 58073]]
effect on the billing of orders of non-Participants, including any
orders routed to BOX from away exchanges.
The Exchange proposes to continue to route up to 200,000 contracts
per month of Participant customer orders to an away exchange without
imposing any fee. For each contract thereafter, BOX will assess a fee
based on each Participant's total monthly volume of contracts executed
on BOX. Participants that execute less than 300,000 contracts on BOX
per month will pay a routing fee of $0.50 per contract. BOX
Participants that execute 300,000 or more contracts on BOX per month
will pay a routing fee of $0.01 per contract.
Instructing BOX to route orders away if they are non-executable on
BOX is voluntary for BOX Participants. Participants may choose not to
route their customer orders to another exchange. Participants may also
avoid paying the proposed routing fee by choosing to designate their
orders as Fill and Kill (``FAK''). FAK orders are not eligible for
routing to away exchanges. FAK orders are executed on BOX, if possible,
and then cancelled. Imposing a routing fee structure that provides a
volume discount to Participants for trading on BOX will allow BOX to
recoup a portion of its costs incurred in providing routing services
and provide an incentive to Participants to trade on BOX to benefit
from the potential discount on routing fees.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\5\ in general, and Section
6(b)(4) of the Act,\6\ 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.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that assessing a fee to Participants for
routing orders to other market venues is reasonable, equitable, and
non-discriminatory in that the fee will allow BOX to recoup a portion
of its transactions costs attendant with offering routing services. BOX
uses third-party broker-dealers to route orders to other exchanges and
incurs charges for each order routed to an away market, in addition to
the fees charged by other exchanges. BOX has been providing its routing
services to Participants at no cost and has been able to cover such
costs with revenue generated from transactions on BOX. In order to
better recover costs for routing orders, the Exchange is proposing a
routing fee structure to provide a discounted fee for Participants that
trade a certain amount of volume on BOX.
The Exchange believes the proposed volume discount being provided
to Participants that execute orders on BOX is equitable and not
unfairly discriminatory because they are open to all Participants on an
equal basis. The Exchange believes it is equitable to provide
Participants that trade on BOX a discount on fees for routing customer
orders that may not be executed on BOX because transactions executed on
BOX increase BOX market activity and market quality. Greater liquidity
and additional volume executed on BOX aids the price and volume
discovery process. The Exchange believes it is reasonable and equitable
to provide incentives to Participants to trade on BOX. Participant
trading on BOX also results in revenue that BOX is able to use to
provide routing services at a discounted cost to Participants.
Accordingly, the Exchange believes that the proposal is not unfairly
discriminatory because it promotes enhancing BOX market quality. The
changes proposed by this filing are intended to provide an incentive to
BOX Participants to submit orders for execution on BOX and not engage
in abusive and predatory practices to evade fees on other exchanges.
Finally, the Exchange notes that although routing is available to
BOX Participants for customer orders, Participants are not required to
use the routing services, but instead, BOX routing services are
completely optional. As discussed above, BOX Participants can manage
their own routing to different options exchanges or can utilize a
myriad of other routing solutions that are available to market
participants.
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.
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 \7\ and Rule 19b-4(f)(2)
thereunder,\8\ because it establishes or changes a due, fee, or other
charge applicable only to a member.
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\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
\8\ 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-2011-064 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-2011-064. 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
[[Page 58074]]
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-2011-064 and should be submitted on or before October 11, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23975 Filed 9-16-11; 8:45 am]
BILLING CODE 8011-01-P