[Federal Register Volume 78, Number 177 (Thursday, September 12, 2013)]
[Notices]
[Pages 56249-56251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22165]
[[Page 56249]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70339; File No. SR-BX-2013-051]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Fees Assessed for Connectivity to the Exchange Under Rule 7015 and
Amend the Fees Assessed and Credits Paid Under Exchange Rule 7018(a)
September 6, 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 August 28, 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 a rule change to amend fees assessed for
connectivity to the Exchange under Rule 7015. The Exchange is also
amending the fees assessed and credits paid under Exchange Rule 7018(a)
for executing certain trades that either add liquidity to or remove
liquidity from the Exchange's order book in securities priced at $1 per
share or greater. The text of the proposed rule change is also
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
The Exchange is proposing to modify two sets of fees: (1)
Connectivity fees assessed under Exchange Rule 7015, and (2) execution
fees and credits assessed or granted under Exchange Rule 7018(a) with
respect to securities priced at $1 per share or greater.
Connectivity Fees. The Exchange is proposing to increase the fee
assessed for use of TCP ITCH data feed pairs to connect to the BX
System. TCP ITCH data feed pairs are a type of port pair \3\ that firms
may subscribe to receive market data through a private (i.e., not
shared) connection to BX. By contrast, a firm may subscribe to a
Multicast ITCH data feed pair,\4\ which provides access to a shared
distribution of market data that is distributed to all subscribers
simultaneously. BX assesses a fee of $400 per month for each port pair
used to connect to BX using protocols other than Multicast ITCH.
Currently, subscription to a TCP ITCH data feed pair is covered by this
fee. Unlike Multicast ITCH data, TCP ITCH data requires substantially
greater hardware infrastructure to support subscribers because BX must
support each individual TCP ITCH connection, including the transmission
of the large volume of market data through each port. By contrast, BX
transmits market data for Multicast ITCH through a single point, which
is accessed by all subscribers. In light of increased costs resulting
from a need to support the hardware and support demands of the service,
the Exchange is proposing to increase the fees for subscription to a
TCP ITCH data port from $400 per month, per port pair to $750 per
month, per port pair.
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\3\ BX uses the term ``data feed pair'' herein and in the rule
as a more precise description of the intended use and functionality
of the port pair.
\4\ For a fee of $1,000 per month for software-based TotalView-
ITCH or $2,500 per month for combined software- and hardware-based
TotalView-ITCH.
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BX is also proposing to increase the $400 monthly fee assessed
under Rule 7015 for port pairs used to enter orders in Exchange trading
systems to $500 per month. The change does not affect ports used to
receive market data, to enter quotes, or to enter trade reports into
the FINRA/NASDAQ Trade Reporting Facility. The change applies both to
members that obtain ports for direct access, and non-member service
bureaus that act as a conduit for orders entered by BX members that are
their customers.
BX notes that it has not increased the $400 fee since its adoption
in January 2009.\5\ When the Exchange initially adopted its fees, it
set its fee levels appropriate to the start-up nature of the Exchange's
new equities trading platform and in manner designed to attract order
flow to the Exchange. Since that time, the BX has matured as a market,
resulting in higher volumes. As a consequence, the Exchange has
experienced greater hardware demands and costs associated with offering
connectivity options. Accordingly, BX believes that an increase in
access services fees is now warranted to help ensure that its market
data technology continues to perform at a high level of responsiveness
and efficiency.
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\5\ Securities Exchange Act Release No. 61595 (Feb. 2, 2009), 74
FR 6441 (Feb. 9, 2009) (SR-BX-2009-004).
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Execution Fees and Credits. The Exchange proposes to amend four
fees and credits governed by Rule 7018(a), which applies to securities
priced at $1 per share or greater. The first three adjustments apply to
credits the Exchange offers members for entering order that accesses
liquidity in the NASDAQ OMX BX Equities System. The first applies to
order entered by a member through a BX Equities System Market
Participant Identifier (``MPID'') through which the member (i) accesses
an average daily volume of 3.5 million or more shares of liquidity, or
(ii) provides an average daily volume of 1 million or more shares of
liquidity during the month (excluding an order that executes against a
midpoint pegged order). Currently, the credit pays $0.0014 per share
executed. BX is lowering that credit to $0.0013 per share executed.
The second adjustment applies to order entered by a member through
a BX Equities System 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 (excluding an order that executes against a
midpoint pegged order). Currently, the credit offered is $0.0010 per
share executed, and BX proposes to increase that credit to $0.0011 per
share executed.
The third adjustment is an increase from $0.0004 to $0.0007 in
credit per share executed for all orders entered in securities priced
at $1 per share or greater that accesses liquidity in the NASDAQ OMX BX
Equities System. This increase is a ``catch-all'' that applies to all
other orders that access liquidity in securities priced $1 per share or
greater that are not specified elsewhere in Rule 7018(a) (i.e., not in
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the liquidity program described in the preceding two paragraphs, not
midpoint peg orders, and not any of the multiple order types otherwise
specified).
The fourth adjustment to the fee schedule for the BX Equities
Market is an decrease from $0.0015 to $0.0014 per share executed in the
charge for providing liquidity through the NASDAQ OMX BX Equities
System for Displayed order entered by a Qualified Liquidity Provider
through a Qualified MPID. The Exchange charges a reduced fee for
members providing liquidity if they meet the criteria of a ``Qualified
Liquidity Provider.'' These criteria (which BX is not modifying)
include requirements that the member access and provide volumes of
liquidity in excess of certain levels, expressed as a percentage of
Consolidated Volume.\6\ BX is now proposing to further reduce the fee
changed under that program from $0.0015 to $0.0014 per share executed.
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\6\ ``Consolidated Volume'' is the consolidated volume of shares
reported to all consolidated transaction reporting plans by all
exchanges and trade reporting facilities during a month.
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2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\7\ in general, and Section 6(b)(4)
of the Act,\8\ in particular, because 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 that the
Exchange operates or controls, and it does not unfairly discriminate
between customers, issuers, brokers or dealers.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
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The proposed connectivity fee increases are reasonable because they
reflect the increased costs associated with offering connectivity
options on BX. The proposed fees are equitable and not unfairly
discriminatory because the Exchange is assessing the fees equally among
subscribers to the service. Moreover, the proposed fees are not
unfairly discriminatory as it enables the Exchange to allocate the
increased costs of connectivity to the Exchange to those who subscribe
to the service. The Exchange believes that the increased fees will
enable it to cover its costs and earn an appropriate return on its
investment in market technology and services.
With respect to execution fees under Exchange Rule 7018(a), the
Exchange believes that the minor fee modifications 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, and are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers. In
particular, with respect to the credits offered for orders executed
that access liquidity on BX in securities priced at $1 or greater, the
Exchange notes that decreasing the credit paid to members qualifying
for the highest volume tier and increasing the credit for members
qualifying for the lower tier or for no tier (as is the case with the
``catch-all'' rate), will encourage more members to access liquidity
from BX. BX expects that small and medium-sized member firms will
benefit most from the proposed changes. Additionally, by increasing the
overall quantities of executed orders that access liquidity, as BX
believes will occur, BX expects to also increase total liquidity
available on its market, increase total order interaction on its order
book, and improve overall execution quality for all members.
With respect to the decrease from $0.0015 to $0.0014 per share
executed in the charge for providing liquidity through the NASDAQ OMX
BX Equities System for Displayed order entered by a Qualified Liquidity
Provider through a Qualified MPID, the Exchange believes that the
proposed modification 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
controls, and are not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. In particular, the Exchange
first notes the proposed changes do not modify the requirements with
respect to the current $0.0015 per share executed rate for Displayed
orders that provide liquidity. The current Liquidity Provider program
has itself been accepted as consistent with the Exchange Act.
Additionally, the decrease in the applicable rate for such
Displayed orders is reasonable because it will further encourage
members to qualify for the program, and increase the total volume of
orders displayed on the Exchange. Increased display of liquidity on the
Exchange will benefit all members, as described above. Moreover, the
Exchange continues to offer an even more favorable charge to members
using midpoint pegged orders, which may be used by all members,
regardless of volume.
The proposed fee reduction is consistent with an equitable
allocation of fees because it is consistent with the established
practice at a number of national securities exchanges of providing more
favorable fee economics to members that contribute to market quality
and the Exchange's market share by achieving certain volume
requirements. A member that provides and displays a comparatively large
volume of liquidity is demonstrating its commitment to the viability of
BX's market model by posting orders at prices that attract members
seeking liquidity. Accordingly, BX believes that it is equitable for
the fees charged to such a member to be more favorable than the fees
charged to members providing lower volumes of liquidity. The Exchange
further believes that the change is not unfairly discriminatory because
the associated volume requirements are not very high and because the
Exchange provides an alternative means of paying a lower fee for orders
that provide liquidity.
The Exchange 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. Accordingly, if
the Exchange's proposed fee is deemed excessive, a market participant
currently subscribed to the data service may elect to cancel its
subscription and either subscribe to another connectivity option or
route its order flow to another competitor exchange with lower fees.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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. 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, or rebate opportunities
available at other venues to be more favorable. 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.
Because competitors are free to modify their own fees in response, and
because market participants may readily adjust their order routing
practices, BX believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In this instance, the increased subscription fee is reflective of
the increased costs associated with offering the associated
connectivity options. As
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such, the fees are targeted to apply to only those that subscribe to,
and derive benefit from, subscription to the connectivity options. In
terms of TCP ITCH data feed fee, the Exchange will continue to offer
other data connectivity options and firms may seek out third party
providers of such data as well, should the firms determine that the
cost of subscribing to the TCP ITCH data feed is excessive.
With respect to the execution fees and credits, the minor
modifications described herein are a direct response to competition,
which should be viewed as a positive signal that a competitive market
exists. If the changes are unattractive to market participants, it is
likely that BX will lose market share as a result. Accordingly, BX does
not believe that the proposed changes will 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
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.\9\ 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: (i) Necessary or appropriate in the public interest; (ii)
for the protection of investors; or (iii) otherwise in furtherance of
the purposes of the Act.
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\9\ 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-2013-051 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-2013-051. 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-2013-051 and
should be submitted on or before October 3, 2013.
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\10\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Kevin M O'Neill,
Deputy Secretary.
[FR Doc. 2013-22165 Filed 9-11-13; 8:45 am]
BILLING CODE 8011-01-P