[Federal Register Volume 78, Number 80 (Thursday, April 25, 2013)]
[Notices]
[Pages 24458-24461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-09711]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69392; File No. SR-BX-2013-030]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Routing Fees
April 18, 2013.
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 April 9, 2013, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``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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[[Page 24459]]
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 various fees for routing
options to away markets.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on May 1, 2013.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxbx.cchwallstreet.com, at the 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to recoup costs that the Exchange
incurs for routing and executing certain orders in equity options to
away markets. Today, the Exchange assesses Non-Customers a flat rate of
$0.95 per contract on all Non-Customer orders routed to any away market
and the Exchange assesses Customer orders a fixed fee plus the actual
transaction fee dependent on the away market. Specifically, the
Exchange assesses Customer orders routed to The NASDAQ Options Market
LLC (``NOM'') and NASDAQ OMX PHLX LLC (``PHLX'') '') [sic] a fixed fee
of $0.05 per contract in addition to the actual transaction fee
assessed by the away market. The Exchange assesses Customer orders
routed to all other away markets, except NOM and PHLX, a fixed fee of
$0.11 per contract in addition to the actual transaction fee assessed
by the away market, unless the away market pays a rebate, then the
Routing Fee is $0.00.
The fixed fees are based on costs that are incurred by the Exchange
when routing to an away market in addition to the away market's
transaction fee. For example, the Exchange incurs a fee when it
utilizes Nasdaq Options Services LLC (``NOS''), a member of the
Exchange and the Exchange's exclusive order router,\3\ to route orders
in options listed and open for trading to destination markets. Each
time NOS routes to away markets NOS incurs a clearing-related cost \4\
and, in the case of certain exchanges, a transaction fee is also
charged in certain symbols, which fees are passed through to the
Exchange. The Exchange also incurs administrative and technical costs
associated with operating NOS, membership fees at away markets, Options
Regulatory Fees (``ORFs'') and technical costs associated with routing
options. For Customer orders, the transaction fee assessed by the
Exchange is based on the away market's actual transaction fee or rebate
for a particular market participant at the time that the order was
entered into the Exchange's trading system. This transaction fee is
calculated on an order-by-order basis for Customer orders, since
different away markets charge different amounts. In the event that
there is no transaction fee or rebate assessed by the away market, the
only fee assessed is the fixed Routing Fee.
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\3\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
\4\ The Options Clearing Corporation (``OCC'') assesses a
clearing fee of $0.01 per contract side. See Securities Exchange Act
Release No. 68025 (October 10, 2012), 77 FR 63398 (October 16, 2012)
(SR-OCC-2012-18).
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The Exchange is proposing to amend the Routing Fees to all other
options exchanges, except NOM and PHLX, to increase the fixed fee from
$0.11 to $0.15 per contract.\5\ The Exchange currently does not recoup
all of its costs to route to away markets other than NOM and PHLX. As
mentioned herein, the Exchange incurs costs when routing to away
markets including away market transaction fees, ORFs, clearing fees,
Section 31 related fees, connectivity and membership fees. The Exchange
is not recouping its costs currently with the $0.11 per contract fixed
fee and proposes to increase the fixed fee to $0.15 per contract.
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\5\ The Exchange is not proposing to amend Non-Customer Routing
Fees or Routing Fees for Customer orders routed to NOM or PHLX.
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2. Statutory Basis
BX believes that its proposal to amend its pricing is consistent
with Section 6(b) of the Act \6\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\7\ in particular, in that it
is an equitable allocation of reasonable fees and other charges among
its 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 amending the Customer Routing Fee to
other away markets, other than NOM and PHLX, from a fixed fee of $0.11
to $0.15 per contract, in addition to the actual transaction fee, is
reasonable because the proposed fixed fee for Customer orders is an
approximation of the costs the Exchange will be charged for routing
orders to away markets. For example, today, NYSE MKT LLC (``Amex'')
does not assess a Customer transaction fee.\8\ Today, the Exchange
would therefore assess a Customer order that was routed to Amex an
$0.11 per contract Routing Fee. The Exchange's effective per contract
expenses to route to Amex which include the ORF, OCC clearing charges,
Section 31 related fees, connectivity and membership fees, are not
covered by the $0.11 per contract and are slightly higher than the
$0.15 per contract. As a general matter, the Exchange believes that the
proposed fees will allow it to recoup and cover its costs of providing
optional routing services for Customer orders because it better
approximates the costs incurred by the Exchange for routing such
orders. While, each destination market's transaction charge varies and
there is a cost incurred by the Exchange when routing orders to away
markets, including OCC clearing costs, administrative and technical
costs associated with operating NOS, membership fees at away markets,
ORFs and technical costs associated with routing options, the Exchange
believes that the proposed Routing Fees will enable it to recover the
costs it incurs to route Customer orders to away markets. Today, the
Exchange is paying a higher average cost per contract to route Customer
orders to away markets, other than NOM and PHLX.
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\8\ See Amex's Fee Schedule.
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The Exchange believes that the proposed pricing for Customer
Routing Fees to all other away markets, except NOM and PHLX, is
equitable and not unfairly discriminatory because the Exchange would
assess the same fixed fee when routing orders to an away market in
addition to the away market transaction fee. The proposal would apply
uniformly to all market participants when routing to an away market
that pays a rebate. Market participants may submit orders to the
Exchange as ineligible for routing or
[[Page 24460]]
``DNR'' to avoid Routing Fees.\9\ It is important to note that when
orders are routed to an away market they are routed based on price
first.\10\
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\9\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
\10\ Id.
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Further, the Exchange believes that it is reasonable to continue to
not assess a Customer Routing Fee when routing to all other options
exchanges, except NOM and PHLX, if the away market pays a rebate. The
Exchange will continue to assess a fixed fee, which fee is being
increased with this proposal, plus the actual transaction charge
assessed by the away market when routing to all other options
exchanges, except NOM and PHLX, unless the away market pays a rebate.
The Exchange would continue to not assess a Routing Fee if the away
market pays a rebate because the Exchange believes it is reasonable to
retain the rebate to offset the Routing Fee. The Exchange believes that
market participants will have more certainty as to the Customer Routing
Fee that will be assessed by the Exchange by simply not assessing a
Routing Fee for Customer orders routed to away markets, other than NOM
and PHLX, that pay a rebate.
The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to continue to assess Customer orders that are
routed to NOM and PHLX a fixed fee of $0.05 per contract and orders
that are routed to other away markets, other than NOM and PHLX, a fixed
fee of $0.15 per contract because the cost, in terms of actual cash
outlays, to the Exchange to route to NOM and PHLX is lower. For
example, costs related to routing to PHLX are materially lower as
compared to other away markets because NOS is utilized by all three
exchanges to route orders.\11\ NOS and the three NASDAQ OMX options
markets have a common data center and staff that are responsible for
the day-to-day operations of NOS. Because the three exchanges are in a
common data center, Routing Fees are reduced because costly expenses
related to, for example, telecommunication lines to obtain connectivity
are avoided when routing orders in this instance. The costs related to
connectivity to route orders to other NASDAQ OMX exchanges are de
minimis. When routing orders to non-NASDAQ OMX exchanges, the Exchange
incurs costly connectivity charges related to telecommunication lines
and other related costs. The Exchange believes it is reasonable,
equitable and not unfairly discriminatory to pass along savings
realized by leveraging NASDAQ OMX's infrastructure and scale to market
participants when those orders are routed to BX Options.
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\11\ See Chapter VI, Section 11 of the NASDAQ and BX Options
Rules and PHLX Rule 1080(m)(iii)(A).
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Finally, the Exchange believes that it is reasonable, equitable and
not unfairly discriminatory to assess different fees for Customers
orders as compared to non-Customer orders because the Exchange has
traditionally assessed lower fees to Customers as compared to non-
Customers. Customers will continue to receive the lowest fees or no
fees when routing orders, as is the case today. Other options exchanges
also assess lower Routing Fees for customer orders as compared to non-
customer orders.\12\
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\12\ BATS assesses lower customer routing fees as compared to
non-customer routing fees per the away market. For example BATS
assesses ISE customer routing fees of $0.30 per contract and an ISE
non-customer routing fee of $0.57 per contract. See BATS BZX
Exchange Fee Schedule.
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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 not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposal creates a burden on intra-market competition because
the Exchange is applying the same Routing Fees and credits to all
market participants in the same manner dependent on the routing venue,
with the exception of Customers. The Exchange will continue to assess
separate Customer Routing Fees. Customers will continue to receive the
lowest fees or no fees when routing orders, as is the case today. Other
options exchanges also assess lower Routing Fees for customer orders as
compared to non-customer orders.\13\
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\13\ Id.
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The Exchange's proposal would allow the Exchange to continue to
recoup its costs when routing orders to away markets when such orders
are designated as available for routing by the market participant. The
Exchange continues to pass along savings realized by leveraging NASDAQ
OMX's infrastructure and scale to market participants when those orders
are routed to BX Options and is providing those savings to all market
participants. Members and member organizations may choose to mark the
order as ineligible for routing to avoid incurring these fees.\14\
Today, other options exchanges also assess fixed routing fees to recoup
costs incurred by the Exchange to route orders to away markets.\15\
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\14\ See supra note 9.
\15\ See CBOE's Fees Schedule and ISE's Fee Schedule.
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The Exchange operates in a highly competitive market, comprised of
eleven exchanges, in which market participants can easily and readily
direct order flow to competing venues if they deem fee levels at a
particular venue to be excessive. Accordingly, the fees that are
assessed by the Exchange must remain competitive with fees charged by
other venues and therefore must continue to be reasonable and equitably
allocated to those members organizations that opt to direct orders to
the Exchange rather than competing venues.
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-2013-030 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary,
[[Page 24461]]
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-1090.
All submissions should refer to File Number SR-BX-2013-030. 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 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-2013-030, and should be
submitted on or before May 16, 2013.
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. 2013-09711 Filed 4-24-13; 8:45 am]
BILLING CODE 8011-01-P