[Federal Register Volume 79, Number 77 (Tuesday, April 22, 2014)]
[Notices]
[Pages 22565-22568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-09079]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71956; File No. SR-BX-2014-018]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing of Proposed Rule Change To Amend the Fee Schedule Under Exchange
Rule 7018(a) With Respect to Transactions in Securities Priced at $1
per Share or More
April 16, 2014.
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 8, 2014, 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 the fee schedule under Exchange Rule
7018(a) with respect to transactions in
[[Page 22566]]
securities priced at $1 per share or more.
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 several changes to its fees and rebates
applicable to transactions in securities priced at $1 or more under BX
Rule 7018(a).
First, the Exchange proposes to introduce a new credit for an order
entered by a member that accesses liquidity equal to or exceeding 0.1%
of total consolidated volume per month. BX will provide such firms
$0.0015 per share executed for liquidity accessing orders.
Next, the Exchange proposes to amend the criteria by which it
provides a credit of $0.0013 per share executed for liquidity accessing
orders (excluding orders executing against the midpoint). Previously,
this rate was available to a member (i) With an average daily volume of
liquidity accessed in all securities during the month of 6 million or
more shares through one or more BX Equities System MPIDs, provide
[sic], however, that (ii) the member adds and/or removes liquidity of
30,000 or more contracts per day during the month through BX Options
with an average daily volume of liquidity provided in all securities
during the month of 1 million or more shares.
The Exchange proposes to amend the criteria by which it provides a
credit of $0.0011 per share executed for liquidity accessing orders
(excluding orders executing against the midpoint). Previously, this
rate was available to 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. BX proposes to
make this credit available to members that provide an average daily
volume of at least 25,000, but less than 1 million, shares of liquidity
during the month.
In BX Rule 7018(a) the term ``Qualified Liquidity Provider'' will
be replaced with ``Qualified Market Maker'' (``QMM'') and both of these
sub-sections will clarify that for members that qualify under these
sub-sections, the member must have at least one Qualified MPID,
respectively. There will now be two tiers available for the QMM, Tier 1
and Tier 2. Tier 1 will be achieved by the methods currently outlined
in BX Rule 7018(a)(1) and (2). The Exchange proposes that a firm may
become a Qualified Market Maker (Tier 2) by having at least one
Qualified MPID, that is, an MPID through which, for at least 300
securities, the Qualified Market Maker quotes at the NBBO an average of
at least 75% of the time during the regular market hours (9:30 a.m.
through 4:00 p.m. during the month.
The Exchange proposes that the charge of $0.0014 per share executed
for a displayed order entered by a Qualified Liquidity Provider through
a Qualified MPID remains the same, but that it now applies to a
Qualified Market Maker (Tier 1) and no longer must go through a
Qualified MPID.
Additionally, the Exchange proposes that a new charge of $0.0017
per share executed will be added for a displayed order entered by a QMM
(Tier 2).
The Exchange also proposes that the charge of $0.0016 per share
executed for a displayed order entered by a member (i) with a daily
average volume of liquidity provided in all securities during the month
of 2 million or more shares through one or more BX Equities System
MPIDs, and (ii) that adds BX Options Market Maker volume under Chapter
XV of BX Options rules of 20,000 or more contracts per day during the
month, be replaced with a charge for a displayed order entered by a
member that adds liquidity equal to or exceeding $0.25% of total
consolidated volume during a month of $0.00165 per share executed.
As for a displayed order entered through a NASDAQ OMX BX Equities
System MPID through which a member provides an average daily volume of
4 million or more shares of liquidity during the month, the Exchange
proposes that the current charge of $0.0018 per share executed now
applies to a displayed order by a member that provides an average daily
volume of 2.5 million or more shares of liquidity during the month.
Next, the Exchange proposes that the charge for a midpoint pegged
order entered by a member that provides an average daily volume of 2
million or more shares of liquidity using midpoint pegged orders during
the month be reduced from $0.0010 to $0.0005 per share executed, and
that it will now apply to a midpoint pegged order entered by a member
that provides an average daily volume of 2 million or more shares of
non-displayed liquidity during the month.
The Exchange also proposes that the charge for midpoint pegged
order entered by a member that provides an average daily volume of 1
million or more, but less than 2 million, shares of liquidity using
midpoint pegged orders during the month be reduced from $0.00125 to
$0.0009 per share executed, and that it will now apply to a midpoint
pegged order entered by a member that provides an average daily volume
of 1 million or more, but less than 2 million shares of non-displayed
liquidity.
The Exchange additionally proposes that a new charge for other non-
displayed orders (other than those pegged to the midpoint) entered by a
member that provides an average daily volume of 5 million or more
shares of non-displayed liquidity, that a charge [sic] will be added of
$0.0019 per share executed.
Finally, the Exchange also proposes to make several grammatical and
conforming changes to BX Rule 7018(a) for the purposes of consistency
and clarity.
2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\3\ in general, and Sections 6(b)(4)
and (b)(5) of the Act,\4\ 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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\3\ 15 U.S.C. 78f.
\4\ 15 U.S.C. 78f(b)(4), (5).
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At a high level, the changes simplify various aspects of the BX fee
schedule to encourage firms to make use of the favorable economics it
offers. By [sic] assigning rates to members based on their aggregate
activity instead of on an MPID by MPID basis enhances a member's
ability to earn certain
[[Page 22567]]
proposed rates. By assigning displayed liquidity fees based on the
total amount of liquidity provided, firms are more likely to be able to
attain trading thresholds to receive superior execution rates. By
lowering fees across multiple levels of firm level activity, BX ensures
that growth in participation occurs across a broad contingent of
Exchange members. In effect, this change lowers prices for BX members.
More specifically, the proposed increase of $0.0013 to $0.0015 per
share executed of the credit for an order that accesses liquidity
(excluding liquidity pegged to the midpoint) entered by a member that
accesses liquidity equal to or exceeding 0.1% of total consolidated
volume during a month is consistent with an equitable allocation of
fees and is not unfairly discriminatory because it is remains [sic]
consistent with the Exchange's approach of providing a credit for
orders accessing liquidity, which benefits all market participants, and
is applicable to all such orders. Additionally, it is reasonable
because it reflects the availability of what is in effect a price
reduction for all members that access liquidity in this manner.
The applicability of the credit of $0.0013 per share executed for
an order that accesses liquidity (excluding liquidity pegged to the
midpoint) entered by a member with a daily average volume of liquidity
provided in all securities during the month of 1 million or more shares
is consistent with an equitable allocation of fees and is not unfairly
discriminatory because it does not change the credit, but simply
reduces the requirement of 6 million or more shares through one or more
BX Equities System MPIDs, and that adds/or removes liquidity of 30,000
or more contracts per days [sic] during the month through BX Options
(excluding any order that executes against a midpoint pegged order) to
simply 1 million or more shares. The amount of the credit is not being
changed, and is reasonable because it has the potential to reduce
aggregate fees while simplifying the process for obtaining that
particular rate.
The applicability of the credit of $0.0011 per share executed for
an order that accesses liquidity (excluding liquidity pegged to the
midpoint) entered by a member that provides an average daily volume of
at least 25,000, but less than 1 million, shares of liquidity during
the month is consistent with an equitable allocation of fees and is not
unfairly discriminatory because it does not change the credit, but
simply removes the requirement that the order is entered by a member
through a BX Equities System MPID. The amount of the credit is in
essence not being changed. As discussed above, the change makes the
credit more inclusionary since some firms may have multiple MPIDs.
The applicability of the charge of $0.0014 per share executed for a
displayed order entered by a Qualified Market Maker (Tier 1) is
consistent with an equitable allocation of fees and is not unfairly
discriminatory because it does not change the charge, but merely
substitutes ``Qualified Market Maker (Tier 1)'' for ``Qualified
Liquidity Provider through a Qualified MPID''. Moreover, this change,
much like the others above, make [sic] a more favorable rate available
to a member as a whole, and not for just one of its constituent MPIDs.
Indeed, this change makes the provision of such a rate less
discriminatory.
The new charge of $0.0017 per share executed for a displayed order
entered by a Qualified Market Maker (Tier 2) and the introduction of a
method for obtaining this status is consistent with an equitable
allocation of fees and is not unfairly discriminatory because it
expands the eligibility of favorable rates to add liquidity under the
QMM program. It is reasonable because the program has proven valuable
in improving the quotations of BX, which, in turn, benefits market
participants who seek to access liquidity at favorable rates.
The increase to the charge of $0.0016 per share executed for a
displayed order entered by a member (i) with a daily average volume of
liquidity provided in all securities during the month of 2 million or
more shares through one or more BX Equities System MPIDs, and (ii) that
adds BX Options Market Maker volume under Chapter XV of BX Options
rules of 20,000 or more contracts per day during the month, to a charge
of $0.00165 per share executed for a displayed order entered and
replaces the above requirement with a requirement that it be by a
member that adds liquidity equal to or exceeding 0.25% of total
consolidated volume during the month is consistent with an equitable
allocation of fees and is not unfairly discriminatory because it only
modestly increases the charge by $0.00005 per share executed and the
updated requirement applicable to the member entering the displayed
order is reasonable because it affects similarly situated members in
the same way.
The applicability of the charge of $0.0018 per share executed for a
displayed order entered by a member that provides an average daily
volume of 2.5 million or more shares of liquidity during the month is
consistent with an equitable allocation of fees and is not unfairly
discriminatory because it does not change the credit, but simply
reduces the number of shares required to reach this level from 4
million to 2.5 million or more shares of liquidity during the month. It
is reasonable in that it affects similarly situated members in the same
way.
The reduction of the charge from $0.0010 to $0.0005 per share
executed for a midpoint pegged order entered by a member that provides
an average daily volume of 1 million shares, but less than 2 million
shares of non-displayed liquidity (previously, liquidity using midpoint
pegged orders) is consistent with an equitable allocation of fees and
is not unfairly discriminatory because the Exchange believes that it is
appropriate to charge a lower fee to midpoint pegged orders, which
provide price improvement. It is also reasonable because it affects
similarly situated members in the same way.
The new charge for non-displayed orders (other than those pegged to
the midpoint) entered by a member that provides an average daily volume
of 5 million or more shares of non-displayed liquidity of $0.0019 per
share executed is consistent with an equitable allocation of fees and
is not unfairly discriminatory because use of non-displayed orders is
wholly voluntary. It is also reasonable because it encourages
additional activity from large non-display participants.
The proposed pricing changes are, in part, reflective of BX's
ongoing efforts to use responsive pricing to attract orders that BX
believes will improve market quality.
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. BX believes that the proposed rule change reflects this
competitive environment because it is designed to ensure that the
charges and credits for participation on BX reflect changes in the cost
of such participation to BX, and its desire to attract order flow that
improves the market for all participants.
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
[[Page 22568]]
necessary or appropriate in furtherance of the purposes of the Act, as
amended.\5\ BX notes that it operates in a highly competitive market in
which market participants can readily favor over 40 different competing
exchanges and alternative trading systems 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 increases with respect to certain orders coupled
with the easier to qualify for pricing tier for members active in the
Exchange's cash equities market enhances the Exchange's competitiveness
by reducing fees for some and raising fees modestly for others.
Moreover, because there are numerous competitive alternatives to the
use of the Exchange, it is likely that BX will lose market share as a
result of the changes if they are unattractive to market participants.
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.
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\5\ 15 U.S.C. 78f(b)(8).
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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 change has become effective pursuant to Section
19(b)(3)(A) of the Act \6\ and paragraph (f) of Rule 19b-4 \7\
thereunder. 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-2014-018 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2014-018. 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-2014-018 and
should be submitted on or before May 13, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09079 Filed 4-21-14; 8:45 am]
BILLING CODE 8011-01-P