[Federal Register Volume 78, Number 109 (Thursday, June 6, 2013)]
[Notices]
[Pages 34136-34138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13391]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69677; File No. SR-BX-2013-037]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Options Fees and Rebates
May 31, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on May 24, 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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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.
While the changes proposed herein are effective upon filing, the
Exchange has designated these changes to be operative on June 3, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
BX proposes to amend Chapter XV, Section 2(1) to add Bank of
America Corporation (``BAC'') to the list of options overlying certain
penny pilot options (the others include IWM, QQQ and SPY, collectively
with BAC, the ``Specified Penny Pilot Options''). Additionally, the
Exchange proposes to amend certain fees and rebates for Customers and
BX Options Market Makers \3\ in the Specified Penny Pilot Options.
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\3\ A BX Options Market Maker 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.
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The Exchange proposes to increase the Rebate to Add Liquidity in
the Specified Penny Pilot Options for BX Options Market Makers from
$0.15 to $0.20 per executed contract. The Exchange also proposes to
decrease the Fee to Add Liquidity in the Specified Penny Pilot Options
for Customers and BX Options Market Makers from $0.18 to $0.10 per
executed contract. Finally, the Exchange proposes to decrease the
Rebate to Remove Liquidity in the Specified Penny Pilot Options for
Customers from $0.12 to $0.00 per executed contract.
The proposed rule change will reflect the fees and rebates as
follows:
[[Page 34137]]
Fees and Rebates
[Per executed contract]
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BX Options Non- customer
Customer market maker \1\
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BAC, IWM, QQQ and SPY:
Rebate to Add Liquidity............................... \2\ $0.00 \2\ $0.20 N/A
Fee to Add Liquidity.................................. \3\ 0.10 \3\ 0.10 0.45
Rebate to Remove Liquidity............................ 0.00 N/A N/A
Fee to Remove Liquidity............................... N/A 0.45 0.45
All Other Penny Pilot Options:
Rebate to Add Liquidity............................... \2\ 0.00 \2\ 0.10 N/A
Fee to Add Liquidity.................................. \3\ 0.40 \3\ 0.40 0.45
Rebate to Remove Liquidity............................ 0.32 N/A N/A
Fee to Remove Liquidity............................... N/A 0.45 0.45
Non-Penny Pilot Options:
Fee to Add Liquidity.................................. \4\ 0.25/0.85 \4\ 0.50/0.85 0.88
Rebate to Remove Liquidity............................ 0.70 N/A N/A
Fee to Remove Liquidity............................... N/A 0.88 0.88
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The Exchange believes that the proposed amended fees and rebates
for the Specified Penny Pilot Options, as well as including BAC to the
list of Specified Penny Pilot Options, is competitive and will
encourage BX members to transact business on the Exchange. Despite the
reduction of the Customer Rebate to Remove Liquidity to $0.00, the
Exchange believes that the increased Rebate to Add Liquidity for BX
Options Market Makers coupled with the reduction of Fees to Add
Liquidity for both Customers and BX Options Market Makers will enable
the Exchange to remain competitive with other options exchanges by
improving liquidity and that market participants will continue to send
order flow to the Exchange.
2. Statutory Basis
BX believes that the proposed rule changes are consistent with the
provisions of Section 6 of the Act,\4\ in general, and with Section
6(b)(4) of the Act,\5\ 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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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposal to include BAC in the list
of Specified Penny Pilot Options and subject to the fees and rebates
applicable thereto, is reasonable given the fact that certain symbols
such as the Specified Penny Pilot Options are highly liquid as compared
to other penny pilot options and pricing by symbol is not novel as
other options exchanges differentiate pricing by security today.\6\ The
Exchange believes that its proposal to assess different fees and
rebates for BAC (as is the case for the other Specified Penny Pilot
Options) as compared to all other penny pilot options is equitable and
not unfairly discriminatory as described hereafter.
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\6\ See NASDAQ OMX PHLX LLC's 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 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 for Specified Penny Pilot Options the
proposed increase of the Rebate to Add Liquidity for BX Options Market
Makers from $0.15 to $0.20 per executed contract (available only when
they are contra to a Non-Customer or BX Options Marker Maker) along
with the reduction in the Fee to Add Liquidity for both Customers and
BX Options Market Makers from $0.18 to $0.10 per executed contract
(available only when the Customer or BX Options Market Maker is contra
to a Customer) is reasonable because these fee and rebate changes will
help to attract order flow from BX Options Market Makers and Customers
to the Exchange to the benefit of all market participants through
increased liquidity.
The Exchange believes that increasing Specified Penny Pilot Options
Rebate to Add Liquidity for BX Options Market Makers from $0.15 to
$0.20 per executed contract and offering the rebate only to BX Options
Market Makers is equitable and not unfairly discriminatory because BX
Options Market Makers have obligations to the market and regulatory
requirements,\7\ which normally do not apply to other market
participants. By continuing to incentivize BX Options Market Makers to
add liquidity, by offering an increased rebate, will result in tighter
markets and increased order interaction.
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\7\ 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.
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Specifically, with respect to the Fee to Add Liquidity, the
Exchange believes that assessing Customers and BX Options Market Makers
a lower Fee to Add Liquidity, when they are not contra to a Customer,
as compared to Non-Customers is reasonable because the Exchange seeks
to incentivize these critical market participants to add liquidity.
Increased liquidity benefits all market participants. The Exchange also
believes that the lower Fees to Add Liquidity for Customers and BX
Options Market Makers as compared to Non-Customers are equitable and
not unfairly discriminatory because Customer order flow benefits all
market participants by improving liquidity, the quality of order
interaction and executions at the Exchange. Also, BX Options Market
Makers have obligations to the market and regulatory requirements,\8\
which normally do not apply to other market participants. A BX Options
Market Maker has the obligation to make continuous markets, engage in
course of dealings reasonably calculated to contribute to the
[[Page 34138]]
maintenance of a fair and orderly market, and not make bids or offers
or enter into transactions that are inconsistent with course of
dealings. The proposed differentiation as between Customers and BX
Options Market Makers and Non-Customers recognizes the differing
contributions made to the liquidity and trading environment on the
Exchange by Customers and BX Options Market Makers, as well as the
differing mix of orders entered.
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\8\ Id.
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The Exchange believes that for the Specified Penny Pilot Options
the proposed reduction of the Customer Rebate to Remove Liquidity from
$0.12 to $0.00 is reasonable because Customer orders will receive
benefits in the form of increased liquidity and the $0.00 rate is the
same rate that is assessed at other options exchanges.\9\ The Exchange
believes that for the Specified Penny Pilot Options the proposed
reduction of the Customer Rebate to Remove Liquidity from $0.12 to
$0.00 is equitable and not unfairly discriminatory because Customers
would still be assessed the lowest rates with respect to Non-Customers
on BX Options.
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\9\ See also the NYSE AMEX's Fees Schedule, which distinguishes
index products.
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The Exchange operates in a highly competitive market comprised of
eleven 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 fee and rebate scheme discussed
herein 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. The Exchange believes that the proposed amended fee/rebate
pricing structure for the Specified Penny Pilot Options, including the
addition of BAC to this list, would attract liquidity to and benefit
order interaction at the Exchange to the benefit of all market
participants.
Additionally, since the fees and rebates are comparable to those
present at other options venues, the Exchange believes the proposals
discussed herein do not pose a burden on competition amongst Exchange
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.\10\ 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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\10\ 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-2013-037 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-2013-037. 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-2013-037 and should be
submitted on or before June 27, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13391 Filed 6-5-13; 8:45 am]
BILLING CODE 8011-01-P