[Federal Register Volume 78, Number 34 (Wednesday, February 20, 2013)]
[Notices]
[Pages 11935-11937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03752]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68909; File No. SR-BX-2013-011]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Modify
BX's Fee Schedule Governing Order Execution
February 12, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(ldquo;Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 31, 2013, NASDAQ OMX BX, Inc. (``BX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I and II
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 the
Substance of the Proposed Rule Change
BX proposes to modify BX's fee schedule governing order execution.
BX will implement the proposed change on February 1, 2013. The text of
the proposed rule change is available at http://nasdaqomxbx.cchwallstreet.com/, at BX's principal office, 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 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 those statements may be examined at
the places specified in Item III [sic] below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
BX is amending its fee schedule governing order execution. All of
the changes pertain to securities priced at $1 or more per share.
Currently, BX pays no credit with respect to orders that execute
against a midpoint pegged order; a credit of $0.0014 per share executed
for routable orders that access liquidity in BX (other than orders that
execute against a midpoint pegged order); a credit of $0.0014 per share
executed for orders that access liquidity if entered through a BX MPID
through which the member (i) accesses an average daily volume of 3.5
million or more shares of liquidity during the month, or (ii) provides
an average daily volume of 25,000 or more shares of liquidity during
the month (other than orders that execute against a midpoint pegged
order); and a credit of $0.0005 per share executed for all other orders
that access liquidity in BX. BX is making the following changes to
these fees:
Modifying the pricing tier that currently requires
providing an average daily volume of 25,000 or more shares of
liquidity, such that providing an average daily volume of 1 million or
more shares of liquidity would be required;
Instituting a new pricing tier under which a member would
receive a credit of $0.0010 per share executed for an order (other than
an order that executes against a midpoint pegged order) entered through
an MPID through which the member provides an average daily volume of at
least 25,000, but less than 1 million, shares of liquidity during the
month;
Decreasing the credit applicable to orders to which no
special credit applies from $0.0005 to $0.0004 per share executed.
As a result of the changes, the requirements for one of the means
by which a member may receive a credit of $0.0014 per share executed
will be increased. However, the remaining means of receiving this
credit, including use of routable orders, will remain unchanged.
Moreover, a new pricing tier is being created so that members that have
received this credit due to their levels of liquidity provision but
that do not qualify for the higher requirements will still receive a
credit of $0.0010 per share executed, a credit that is more than twice
as high as the base credit of $0.0004 per share executed.
Second, with respect to orders that provide liquidity, BX currently
charges $0.0015 per share executed for a displayed order entered by a
Qualified Liquidity Provider through a Qualified MPID; \3\ and $0.0018
per share executed for all other orders. BX is making the following
changes to these fees:
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\3\ A Qualified Liquidity Provider is required to meet certain
standards with regard to volumes of liquidity accessed and provided.
A Qualified MPID is an MPID through which a Qualified Liquidity
Provider achieves certain requirements with respect to quoting at
the NBBO. See Rule 7018(a)(1) and (2).
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For a midpoint pegged order that provides liquidity, BX
will charge $0.0015 per share executed. Midpoint pegged orders are non-
displayed orders that execute at the midpoint between the national best
bid and offer (``NBBO''), thereby providing price improvement to orders
that execute against them.
For other types of non-displayed orders, BX will charge
$0.0025 per share executed.
This change is similar in structure to pricing on The NASDAQ Stock
Market, where members that provide liquidity using midpoint pegged
orders receive a higher credit than with respect to other forms of non-
displayed orders. This pricing approach reflects the view that although
displayed orders are generally preferred to non-displayed orders
because they assist in price discovery, the use of midpoint orders
should also be encouraged through pricing incentives because they
provide price improvement.
2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\4\ in general, and with Sections
6(b)(4) and (5) of the Act,\5\ in particular, in that it provides 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
[[Page 11936]]
controls, and is not designed to permit unfair discrimination between
customers, issuers, brokers or dealers.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4) and (5).
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BX believes that the modifications to pricing for members providing
significant liquidity (i.e., the creation of a new $0.0010 per share
executed credit tier and the increase in the requirements for
participation in the $0.0014 per share executed tier) are reasonable
because the resulting decrease in credits for a member that provides an
average daily volume of at least 25,000, but less than 1 million,
shares of liquidity will be a modest $0.0004 per share executed, and a
member affected by the change may still qualify for the $0.0014 per
share executed credit through other means. BX believes that the change
is consistent with an equitable allocation of fees because the change
is consistent with a goal of encouraging liquidity provision through
pricing incentives, because it provides a credit that is more than
twice as high as the base credit for members that provide a relatively
modest level of liquidity (an average daily volume of at least 25,000
shares) and a credit more than three times higher than the base credit
for members that provide a significant level of liquidity (an average
daily volume of at least 1 million shares). Finally, BX believes that
the change is not unreasonably discriminatory, because liquidity
provision benefits all market participants by dampening price
volatility and because alternative means of earning a $0.0014 per share
credit remain available.
BX believes that the decrease in the credit for orders not
qualifying for any pricing tier is reasonable because it is a decrease
of only $0.0001 per share executed. BX further believes that it is
consistent with an equitable allocation of fees and is not unreasonably
discriminatory, because it is consistent with the practice of all
national securities exchanges of providing financial incentives to
members to provide liquidity or make significant use of an exchange's
facilities, while charging higher fees and/or providing lower credits
to less committed users.
BX believes that the proposed fee decrease for midpoint pegged
orders and price increase for other forms of non-displayed orders is
reasonable because in the first instance, fees are being reduced, and
in the second instance, the increase is only $0.0007 per share
executed. Moreover, the increase is reasonable because members may
readily avoid it by using displayed orders or midpoint pegged orders.
BX believes that the changes are consistent with an equitable
allocation of fees, and are not unreasonably discriminatory, because
the fees reflect a policy of using fees to encourage greater use of
displayed orders, which benefit all market participants by promoting
greater price discovery, as well as the use of midpoint pegged orders,
which benefit other market participants by providing price improvement.
Accordingly, BX believes that it is equitable to charge the highest
fees to non-displayed, non-midpoint orders, which provide the least
benefits to other market participants, while charging lower fees to
displayed orders, which benefit the entire market by revealing the
price and size of trading interest, and midpoint orders, which benefit
other participants by offering price improvement. This approach is not
unfairly discriminatory because the variation in fees is reasonably
related to valid market structure goals.
Finally, BX notes that it operates in a highly competitive market
in which market participants can readily favor competing venues if they
deem fee levels at a particular venue to be excessive. In such an
environment, BX must continually adjust its fees to remain competitive
with other exchanges and with alternative trading systems that have
been exempted from compliance with the statutory standards applicable
to exchanges. The changes reflect this environment because although
they reflect price increases, the price increases are minor and are
designed to incentivize changes in market participant behavior (i.e.,
encouraging greater use of BX's router, increased liquidity provision,
and more use of displayed and/or midpoint pegged orders) rather than to
impose significantly higher costs on market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. Because the market
for order execution is extremely competitive, members may readily opt
to disfavor BX's execution and routing services if they believe that
alternatives offer them better value. Although the proposed changes
increase fees or decrease credits in certain respects, BX believes that
these changes do not impose any burden on competition, since members
may readily favor other trading venues if they wish to avoid these
pricing changes. Moreover, within the context of BX pricing schedule,
members may also readily avoid the effect of the changes by modifying
the order types that they use. Accordingly, the impact on the fees
actually paid by members is expected to be minimal, and the change will
not impair the ability of members or competing order execution venues
to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor 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) of the Act \6\ and paragraph (f) of Rule 19b-4
thereunder.\7\ 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.
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\6\ 15 U.S.C. 78s(b)(3)(a).
\7\ 17 CFR 240.19b-4(f).
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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-2013-011 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-2013-011. 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
[[Page 11937]]
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 on official business days between the hours of 10:00
a.m. and 3:00 p.m. Copies of such filing also will be available for
inspection and copying at the principal offices 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-2013-011, and should be
submitted on or before March 13, 2013.
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\8\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03752 Filed 2-19-13; 8:45 am]
BILLING CODE 8011-01-P