[Federal Register Volume 79, Number 91 (Monday, May 12, 2014)]
[Notices]
[Pages 27012-27014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10779]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72106; File No. SR-NSX-2014-12]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Fee and Rebate Schedule To Change Certain Fees Applicable to
Liquidity Providers, Eliminate a Rebate and Adopt a Fee for Removing
Liquidity, and Reducing a Fee for Routed Orders, All With Respect to
Securities Priced at $1.00 or Greater
May 6, 2014.
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 April 30, 2014, National Stock Exchange, Inc. (``NSX[supreg]''
or the ``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 is proposing to amend its Fee and Rebate Schedule (the
``Fee Schedule'') issued pursuant to Exchange Rule 16.1. Specifically,
the Exchange is seeking to amend Section I. (Transaction Fees and
Rebates) to provide that Exchange Equity Trading Permit (``ETP'') \3\
Holders will be charged a fee for providing liquidity and for removing
liquidity in securities priced at $1.00 or greater. The Exchange
proposes to eliminate rebates paid to ETP Holders removing liquidity in
securities priced at $1.00 or greater. The Exchange also proposes to
amend Section II. of the Fee Schedule (Other Services), subsection A.,
Order Routing (All Tapes), to reduce the fee for orders in securities
priced at $1.00 or greater that are routed to other trading centers.
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\3\ Exchange Rule 1.5 defines ``ETP'' as the Equity Trading
Permit issued by the Exchange for effecting approved securities
transactions on the Exchange's trading facilities.
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The text of the proposed rule change is available on the Exchange's
Web site at http://www.nsx.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 parts 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 amend the Fee Schedule, Section I. to
change the fee and rebate structure applicable to ETP Holders providing
and removing liquidity on the Exchange in securities priced at $1.00
and above across all Tapes.\4\ Specifically, the Exchange
[[Page 27013]]
proposes to: (i) Reduce the fee charged to ETP Holders providing
liquidity (a ``Maker'') from $0.0018 per executed share to $0.0001. An
ETP Holder providing liquidity through the use of any Zero Display
Reserve Order will be charged a fee of $0.0002.\5\
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\4\ The term ``Tapes'' refers to the designation assigned in the
Consolidated Tape Association (``CTA'') Plan for reporting trades
with respect to securities in Networks A, B and C. Tape A securities
are those listed on the New York Stock Exchange, Inc.; Tape B
securities are listed on NYSE MKT, formerly NYSE Amex, and regional
exchanges. Tape C securities are those listed on the NASDAQ Stock
Market LLC.
\5\ Exchange Rule 11.11(c)(2)(A) defines a Zero Display Reserve
Order as a Reserve Order with zero display quantity. The price of a
Zero Display Reserve Order may be set or ``pegged'' to track the
buy-side of the Protected Best Bid or Offer (``BBO''), the sell side
of the Protected BBO, or the midpoint of the Protected BBO. The PBBO
is defined in Exchange Rule 1.5P.(3) as the better of: (a) The
Protected National Best Bid or Offer; or (b) the displayed top of
the NSX Book.
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The Exchange is also proposing to eliminate rebates to ETP Holders
removing liquidity (``Taker'') in securities priced at $1.00 or greater
and is proposing to instead charge ETP Holders removing liquidity a fee
of $0.0001 per executed share. An ETP Holder removing any Zero Display
Reserve Order will be charged a fee of $0.0002 per executed share.
The Exchange believes that its proposal to eliminate rebates for
removing liquidity in securities priced at $1.00 or greater and instead
charge fees to Takers of liquidity, combined with its proposal to
reduce the fees charged to ETP Holders providing liquidity from $0.0018
to $0.0001, or $0.0002 when providing liquidity through the use of Zero
Display Reserve Orders, advances its goal of providing market
participants with a high-quality and cost-effective execution venue.
The proposed pricing model also represents a determination by the
Exchange that it is reasonable and appropriate to move away from a
pricing structure for securities priced at $1.00 and above that employs
a rebate to draw Takers to the Exchange.
The Exchange further believes that its proposal to lower the per
share fee for executions of orders adding liquidity from $0.0018 to
$0.0001, or $0.0002 for executions through the use of Zero Display
Reserve Orders, will incentivize ETP Holders to provide more liquidity
which, in turn, will enhance opportunities for price improvement and
better overall execution quality (i.e., market participants seeking to
remove liquidity will benefit from the anticipated higher execution
rates at better prices resulting from more available liquidity posted
on the NSX Book \6\).
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\6\ The ``NSX Book'' is the electronic file of orders posted on
the Exchange. (See Exchange Rules 1.5N.(1) and 1.5S.(4).
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The Exchange also proposes to amend Section II.A. of the Fee
Schedule, Order Routing (All Tapes), to reduce the fee for orders in
securities priced at $1.00 or greater that are routed to other trading
centers from $0.0025 to $0.0020. The Exchange believes that, in
conjunction with its proposal to reduce fees to liquidity providers and
eliminate rebates and charge fees to Takers, this reduction in the fee
for routed orders is an appropriate amendment that will operate to draw
more liquidity to the Exchange while operating to reduce costs incurred
by ETP Holders.
The Exchange submits that the proposed Fee Schedule changes will
operate to provide an economic incentive to ETP Holders to post more
liquidity on the NSX Book and draw more Takers to access such
liquidity. The Exchange anticipates that increased activity by
liquidity providers and liquidity removers will result in improved
price discovery, enhanced price improvement, and better overall
execution quality while at the same time providing a cost effective
execution venue.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\7\ in general and, in
particular, Section 6(b)(4) of the Act,\8\ which requires that the
rules of a national securities exchange provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities; and with
Section 6(b)(5) of the Act,\9\ which requires, among other things, that
the rules of a national securities exchange not permit unfair
discrimination between customers, issuers, brokers, or dealers, and be
designed to promote just and equitable principles of trade, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78(f)(b)(4) [sic].
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange submits that its proposals to change its pricing model
in securities priced at $1.00 and above to reduce the fees charged to
liquidity providers that post liquidity on the NSX Book, eliminate
rebates and adopt fees for Takers, and reduce the fee for routed
orders, meet the requirement of Section 6(b)(4) of the Act that fees
assessed by the Exchange be reasonable. By proposing lower fees charged
to ``Makers'' for adding liquidity, the Exchange seeks to expand its
liquidity pool by incentivizing ETP Holders to post more liquidity on
the NSX Book. The Exchange anticipates that more liquidity will improve
price discovery and execution quality and will draw more Takers to the
Exchange.
In eliminating rebates to Takers and instead adopting a fee for
removing liquidity, the Exchange is seeking to assure that there is
equilibrium in its Fee Schedule by having the fees applicable to both
``Makers'' and ``Takers'' align. The Exchange aspires to provide a
reasonable economic incentive for ETP Holders to post liquidity on the
NSX Book, or seek to remove such liquidity. The Exchange believes that
the proposed structure promotes marketplace efficiency and informed
decision-making about a choice of execution venues. All ETP Holders
posting liquidity, removing liquidity, or entering orders that are
routed away, in securities priced at $1.00 and above, will be subject
to the same fees. Accordingly, the Exchange submits that its proposal
meets the requirements of Section 6(b)(4) of the Act.
The Exchange further submits that its proposal meets the
requirements of Section 6(b)(5) of the Act. By seeking to attract more
liquidity to the NSX market through the proposed amendment, the
Exchange aspires to improve execution quality, price discovery and
cost-effectiveness. In addition, the Exchange submits that the
amendments to the Fee Schedule will benefit market participants through
a competitive pricing model that will be attractive to investors. These
factors further the purposes of Section 6(b)(5) of the Act in that they
do not to permit unfair discrimination between customers, issuers,
brokers or dealers.
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 that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act. The Exchange
believes, in fact, that the proposed change will operate to enhance
rather than burden competition by continuing to position the Exchange
as a cost-efficient and high quality execution venue with a reasonable
and transparent pricing structure.
Specifically, the Exchange believes that its pricing proposal will
enhance competition by reducing the fees charged per executed share to
ETP Holders for providing liquidity in securities priced at $1.00 or
greater from $0.0018 to $0.0001, or $0.0002 for adding liquidity using
Zero Display
[[Page 27014]]
Reserve Orders. For liquidity ``Takers'' the Exchange is proposing to
eliminate a rebate of $0.0017 per executed share and charge a fee of
$0.0001, or $0.0002 for removing any Zero Display Reserve Order. The
Exchange anticipates that eliminating the rebates paid to ETP Holders
removing liquidity places it in a unique competitive position among
equity exchanges. Similarly, the Exchange submits that its proposal to
reduce the fee for routed orders from $0.0025 to $0.0020 enhances its
position as a cost-efficient trading venue and supports the Exchange's
belief that its proposed pricing model promotes rather than burdens
competition.
The Exchange submits that the proposed fee changes aspire to
enhance the Exchange's competitive position by offering a cost-
efficient, high-quality execution venue that provides for pricing that
responds to the concerns expressed by market participants and others
about the impact of rebates on the selection of execution venue. The
Exchange submits that its proposal poses no burden on competition and,
in fact, seeks to foster greater competition among trading venues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited or received written comments on the
proposed rule change from ETP Holders or others.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has taken effect upon filing pursuant to
Section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of Rule
19b-4.\11\ At any time within 60 days of the filing of such 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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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ 17 CFR.240.19b-4.
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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-NSX-2014-12 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-NSX-2014-12. 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-NSX-2014-12 and should be
submitted on or before June 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10779 Filed 5-9-14; 8:45 am]
BILLING CODE 8011-01-P