[Federal Register Volume 77, Number 179 (Friday, September 14, 2012)]
[Notices]
[Pages 56883-56886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22688]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67822; File No. SR-BX-2012-060]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Transaction Fees
September 10, 2012.
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 30, 2012, NASDAQ OMX BX, Inc. (``BX'' or ``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 Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 Chapter XV, Section 2 entitled ``BX
Options Market--Fees and Rebates'' to amend rebates and fees relating
to various options and make technical corrections to this section.
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=BXRulefilings, at
the
[[Page 56884]]
principal office of the Exchange, and at the Commission's Public
Reference Room.
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 Exchange 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 Exchange 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 purpose of the proposed rule change is to amend Chapter XV,
Section 2(1) to amend rebates and fees for Customers, BX Options Market
Makers \3\ and Non-Customers \4\ in various options,\5\ as well as
remove certain options from the Fees and Rebates schedule below,\6\ as
follows:
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\3\ A BX Options Market Makers must be registered as such
pursuant to Chapter VII, Section 2 of the BX Options Rules, and must
also remain in good standing pursuant to Chapter VII, Section 4.
\4\ A Non-Customer includes a Professional, Firm, Broker-Dealer
and Non-BX Options Market Maker.
\5\ The Exchange is proposing to amend fees and rebates for
options overlying iShares Russell 2000 (``IWM''), PowerShares QQQ
Trust (``QQQ'')[supreg]; Standard and Poor's Depositary Receipts/
SPDRs (``SPY''); and all other Penny Pilot Options.
\6\ The Exchange is proposing to eliminate fees and rebates for
Bank of America Corporation (``BAC''), Citigroup, Inc. (``C''),
Cisco Systems, Inc. (``CSCO''), Ford Motor Company Common Stock
(``F''), Intel Corp (``INTC''), Microsoft Corporation (``MSFT''), JP
Morgan Chase & Co. (``JPM''), SPDR Gold Shares (``GLD''), iShares
Silver Trust (``SLV'') and United States Oil Fund LP Units (``USO'')
(``Deleted Symbols'').
Fees and Rebates
[Per executed contract]
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BX Options
Customer market maker Non-customer \1\
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IWM, QQQ and SPY:
Rebate to Add Liquidity............................ \2\ $0.[15]00 \2\ $0.15 [$0.00] N/A
Fee to Add Liquidity............................... \3\ 0.1[5]8 \3\ 0.1[5]8 0.4[3]5
Rebate to Remove Liquidity......................... 0.12 [0.00] N/A [0.00] N/A
Fee to Remove Liquidity............................ [0.00] N/A 0.4[3]5 0.4[3]5
[BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV and USO:
Rebate to Add Liquidity............................ \2\ 0.15 \2\ 0.15 0.00
Fee to Add Liquidity............................... \3\ 0.37 \3\ 0.37 0.43
Rebate to Remove Liquidity......................... 0.32 0.00 0.00
Fee to Remove Liquidity............................ 0.00 0.43 0.43]
All Other Penny Pilot Options:
Rebate to Add Liquidity............................ \2\ 0.[1]00 \2\ 0.10 [0.00] N/A
Fee to Add Liquidity............................... \3\ 0.40 \3\ 0.40 0.4[3]5
Rebate to Remove Liquidity......................... 0.32 [0.00] N/A [0.00] N/A
Fee to Remove Liquidity............................ [0.00] N/A 0.4[3]5 0.4[3]5
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\1\ A Non-Customer includes a Professional, Firm, Broker-Dealer and Non-BX Options Market Maker.
\2\ The Rebate to Add Liquidity will be paid to a Customer or BX Options Market Maker only when the Customer or
BX Options Market Maker is contra to a Non-Customer or BX Options Market Maker.
\3\ The Fee to Add Liquidity will be assessed to a Customer or BX Options Market Maker only when the Customer or
BX Options Market Maker is contra to a Customer.
The Exchange is proposing to eliminate the Rebate to Add Liquidity,
in any symbol, to a Customer. The Exchange is also proposing to
increase the Fee to Add Liquidity in IWM, QQQ and SPY from $0.15 to
$0.18 per executed contract for Customers and BX Options Market Makers.
For Non-Customers the Fee to Add or to Remove Liquidity in IWM, QQQ and
SPY and for all other Penny Pilot Options would increase from $0.43 to
$0.45 per executed contract. Additionally, for BX Options Market Makers
the Fee to Remove Liquidity in IWM, QQQ and SPY and for all other Penny
Pilot Options would increase from $0.43 to $0.45 per executed contract.
The Exchange is also proposing to remove entirely from the Fees and
Rebates schedule certain other options.\7\
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\7\ Id. As a result, the pricing for the Deleted Symbols
currently in place will be eliminated and revert to the current fees
and rebates for all other Penny Pilot Options. The Rebate to Add
Liquidity will decrease for Customers and BX Options Market Makers
from $0.15 to $0.00 and from $0.15 to $0.10 per contract,
respectively. A Non-Customer will continue not to be paid a Rebate
for Adding Liquidity. The Rebate to Remove Liquidity will remain
unchanged, a Customer will continue to be paid a $0.32 per contract
rebate and BX Options Market Makers and Non-Customers will not be
entitled to a Rebate to Remove Liquidity. The Fee to Remove
Liquidity will remain unchanged for Customers as they will not be
assessed this fee as is the case today. The Fee for Removing
Liquidity will increase for BX Options Market Makers and Non-
Customers from $0.43 to $0.45 per contract because the Exchange is
proposing to increase this fee.
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The Exchange is also proposing to make technical corrections in
Chapter XV, Section 2 by replacing ``$0.00'' with ``N/A'' for several
categories. This is not a change to these fees and rebates, but a
technical amendment since in these instances ``N/A'' better reflects
that a fee is not relevant for this category rather than ``$0.00''
which simply reflects that no fee is currently being charged for this
category.
The Exchange believes that the proposed amended fees and rebates
are competitive and will encourage BX members to transact business on
the Exchange. Despite the reduction of the Customer rebate to $0.00,
the Exchange believes that the fees remain competitive with other
options exchanges and that market participants will continue to send
order flow to the Exchange.
[[Page 56885]]
2. Statutory Basis
BX believes that the proposed rule changes are consistent with the
provisions of Section 6 of the Act,\8\ in general, and with Section
6(b)(4) of the Act,\9\ in particular, in that they provide for the
equitable allocation of reasonable dues, fees and other charges among
members and issuers and other persons using any facility or system
which BX operates or controls.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposal to assess different fees
and rebates for IWM, QQQ and SPY as compared to all other Penny Pilot
Options is reasonable given the fact that certain symbols such as IWM,
QQQ and SPY are highly liquid Penny Pilot Options as compared to other
Penny Pilot Options. Additionally, other options exchanges
differentiate pricing by security today.\10\
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\10\ See NASDAQ OMX PHLX LLC's (``Phlx'') Pricing Schedule,
which has different pricing for its Select Symbols and different
pricing for other Multiply Listed Options. See also the NASDAQ
Options Market LLC (``NOM'') at Chapter XV, Section 2(1), which
distinguishes pricing for NDX and MNX. See also the International
Securities Exchange LLC's Fee Schedule, which distinguishes pricing
for Special Non-Select Penny Pilot Symbols. See also the Chicago
Board Options Exchange, Incorporated's Fees Schedule, which
distinguishes index products.
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The Exchange believes that its proposal to assess different fees
and rebates for IWM, QQQ and SPY as compared to all other Penny Pilot
Options is equitable and not unfairly discriminatory as described
hereafter. With respect to the proposed elimination of the Rebate to
Add Liquidity \11\ for IWM, QQQ, SPY and all other Penny Pilot Options,
the Exchange believes it is critical to incentivize BX Options Market
Makers because they have obligations to the market and regulatory
requirements,\12\ which normally do not apply to other market
participants. A BX Options Market Maker has the obligation to make
continuous markets, engage in a course of dealings reasonably
calculated to contribute to the maintenance of a fair and orderly
market, and not make bids or offers or enter into transactions that are
inconsistent with a course of dealings. The Exchange is proposing to
eliminate the Customer Rebate to Add Liquidity because the Exchange
believes that Customers do not require a similar incentive as do BX
Options Market Makers because they post liquidity on the Exchange for
reasons other than the opportunity to receive rebates and additionally,
Customers, unlike BX Options Market Makers, are not assessed a Fee to
Remove Liquidity.\13\ BX Options Market Makers would continue to
receive the opportunity to earn a $0.10 per contract (all other Penny
Pilot Options) or $0.15 per contract (IWM, QQQ, and SPY) Rebate to Add
Liquidity only when they are contra to a Non-Customer or BX Options
Market Maker. The proposed differentiation as between Customers and BX
Options Market Makers and other market participants recognizes the
differing contributions made to the liquidity and trading environment
on the Exchange by BX Options Market Makers, as well as the differing
mix of orders entered. This is not to say that Customer order flow is
not important, to the contrary, the Exchange believes that the pursuit
of such order flow by BX Options Market Makers and other market
participants because of the valuable liquidity Customer order flow
brings to the marketplace is the very reason that at this time, the
Exchange desires to incentivize and reward BX Options Market Makers to
make continuous markets and pursue Customer Order which can be freely
removed at no expense. Also, it is important to note that BX Options
Market Makers are unaware at the time the order is entered whether they
would be entitled to a $0.10 or $0.15 per contract Rebate to Add
Liquidity, depending on the security, because they are unaware of the
identity of the contra-party, which would determine whether they
receive a rebate. Because of anonymity of the contra-parties, BX
Options Market Makers aggressively pursue order flow which benefits all
market participants.
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\11\ The Exchange proposes to eliminate for Customers the Rebate
to Add Liquidity for IWM, QQQ, and SPY of $0.15 per contract and of
$0.10 per contract for other Penny Pilot Options.
\12\ Pursuant to Chapter VII (Market Participants), Section 5
(Obligations of Market Makers), in registering as a Market Maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Further, all Market
Makers are designated as specialists on BX for all purposes under
the Act or rules thereunder. See Chapter VII, Section 5.
\13\ Today, Customers are not assessed a Fee to Remove Liquidity
unlike other market participants.
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The Exchange's proposal to increase the Fee to Add Liquidity for
IWM, QQQ, SPY for all market participants and for Non-Customers in all
other Penny Pilot Options, as well as to increase the Fee to Remove
Liquidity for IWM, QQQ, SPY and all other Penny Pilot Options for BX
Options Market Makers and for Non-Customers is reasonable because the
increased fees would allow the Exchange to continue to reward Customers
for removing liquidity, and BX Options Market Makers for providing
liquidity with rebates. The advantage of increased Customer order flow
benefits all market participants. In addition, the proposed amended
Fees to Add or to Remove Liquidity are no greater than the rates
assessed by other exchanges for similar fees.\14\ Attracting Customer,
BX Options Market Maker, and Non-Customer order flow to the Exchange
benefits all market participants. BX Options Market Makers have burdens
that do not apply to other market participants. The Exchange is also
uniformly assessing all Non-Customer market participants
(Professionals, Firms, Broker-Dealers, Non-BX Options Market Makers and
BX Options Market Makers) the same $0.45 per executed contract Fee to
Add or to Remove Liquidity on every transaction.
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\14\ See BATS Exchange, Inc.'s Fee Schedule. See also NOM
Chapter XV, Section 2 (the Penny Pilot Fees to Remove Liquidity are
$0.45 per contract for all market participants).
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The Exchange's proposal to increase the Fee to Add Liquidity for
IWM, QQQ, SPY for all market participants and for Non-Customers of all
other Penny Pilot Options is equitable and not unfairly discriminatory
because the Exchange is increasing all market participant Fees to Add
Liquidity. Specifically, while Customers and BX Options Market Makers
are being increased by $0.03 per executed contract, Non-Customers are
being increased by $0.02 per executed contract because they are
assessed higher fees. The Exchange is assessing higher fees to all
participants and not a select group of market participants. The
Exchange's proposal to increase the Fee to Remove Liquidity for BX
Options Market Makers and Non-Customers for IWM, QQQ, SPY and for all
other Penny Pilot Options is equitable and not unfairly discriminatory
because the Exchange is uniformly assessing all market participants,
except Customers,\15\ a $0.45 per executed contract Fee to Remove
Liquidity.
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\15\ Customers are not assessed a Fee to Remove Liquidity today
in either Penny Pilot or all other Penny Pilot Options.
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The Exchange believes that its proposal to eliminate the fees and
rebates currently in place for Deleted Symbols and instead include
these symbols in all other Penny Pilot Options and assess those fees
and pay those rebates is reasonable because the Exchange does not
believes [sic] it is necessary to incentivize BX Options Participants
with higher rebates and lower fees as compare [sic] to other Non-Penny
[sic] Pilot Options. The Exchange believes that the fee [sic] and
[[Page 56886]]
rebates in place for all other Penny Pilot Options will continue to
incentivize NOM Participants to transact business on the Exchange
because despite the increase to the fees and the rebate reduction, the
pricing for these Non-Penny [sic] Pilot Options remains competitive.
The Exchange also believes that it is equitable and not unfairly
discriminatory to assess the Deleted Symbols the fees and rebates
currently assessed and paid all other Penny Pilot Options because the
fees and rebates would be the same as those assessed and paid for all
other Non-Penny [sic] Pilot Options today. The Exchange would assess
and pay fees and rebates for the Deleted Symbols, which are Non-Penny
[sic] Pilot symbols, the same pricing as is assessed and paid for all
other Non-Penny [sic] Pilot symbols options.
The Exchange's proposal to make technical corrections in Chapter
XV, Section 2, by replacing ``$0.00'' with ``N/A'' for several
categories is reasonable, equitable and not unfairly discriminatory
because this is not a change to these fees and rebates, but a
clarification that in these instances ``N/A'' better reflects that a
fee is not relevant for this category rather than using ``$0.00'' which
simply reflects that no fee is currently being charged for this
category.
The Exchange operates in a highly competitive market comprised of
ten U.S. options exchanges in which sophisticated and knowledgeable
market participants can and do send order flow to competing exchanges
if they deem fee levels at a particular exchange to be excessive. The
Exchange believes that the proposed amended fee and rebate scheme is
competitive and similar to other fees and rebates in place on other
exchanges. The Exchange believes that this competitive marketplace
materially impacts the fees and rebates present on the Exchange today
and substantially influences the proposal set forth above.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX 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. To the contrary, BX has designed its fees and
rebates to compete effectively for the execution and routing of options
contracts and to reduce the overall cost to investors of options
trading. The Exchange believes that the proposed fee/rebate pricing
structure would attract liquidity to and benefit order interaction at
the Exchange to the benefit of all market participants.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
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 Act.\16\ At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 email to [email protected]. Please include
File Number SR-BX-2012-060 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-2012-060. This file
number should be included on the subject line if email 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 NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the 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-2012-060 and should be
submitted on or before October 5, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22688 Filed 9-13-12; 8:45 am]
BILLING CODE 8011-01-P