[Federal Register Volume 79, Number 118 (Thursday, June 19, 2014)]
[Notices]
[Pages 35194-35196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14314]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72386; File No. SR-BX-2014-031]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness 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
June 13, 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 June 6, 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 self-regulatory organization. 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 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 the
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.
[[Page 35195]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing three 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 increase for all members the credit
for an order that executes against a midpoint pegged order from $0 to
$0.0003 per share executed. Next, the Exchange proposes to create a new
fee tier for members that add 3.5 million or more shares (but less than
5 million shares) of non-displayed liquidity per day of $0.0024 per
share executed.
The Exchange also proposes to lower one of the parameters for a
member with (i) shares of liquidity provided and (ii) total shares of
liquidity accessed and provided in all securities through one or more
of its NASDAQ OMX BX Equities System market participant identifiers
(``MPIDs'') that represent more than 0.35% (proposed to be lowered to
0.30%) and 0.45%, respectively, of consolidated volume \3\
(``Consolidated Volume'') during the month.
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\3\ Consolidated Volume is the consolidated volume reported to
all consolidated transaction reporting plans by all exchanges and
trade reporting facilities. See BX Rule 7018(a)(1).
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The Exchange believes that the proposed price cut for taking
midpoint liquidity will encourage firms to access more resting midpoint
liquidity before routing to other destinations for price improvement
opportunities. Additionally, the Exchange believes that the proposed
new tier for non-displayed liquidity will encourage additional
liquidity adding activity from non-display participants. Also, relaxing
the standard to qualify as Qualified Market Maker (``QMM'') (Tier 1)
will enable more firms to be able to avail themselves of the more
advantageous QMM credits and overall pricing.
2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\4\ in general, and Sections 6(b)(4)
and (b)(5) of the Act,\5\ 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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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4), (5).
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The proposed rule changes, in part, are reflective of the
Exchange's ongoing efforts to use rebates and discounted execution fees
to attract orders that the Exchange believes will improve market
quality. Generally, the Exchange seeks to provide members with
discounts that they deem helpful, and to eliminate those that they do
not. By offering a credit for members that take liquidity at the
midpoint and by offering reduced execution fees for members that add a
certain level of non-displayed shares per day, the Exchange believes it
will be able to further promote these goals by providing better
targeted incentives for market participants. Also, relaxing the
standard to qualify as QMM (Tier 1) will enable more firms to be able
to avail themselves of the more advantageous QMM credits and overall
pricing. Each of the proposed changes is a pro-competitive price
reduction designed to enhance the Exchange's position in the
marketplace and broaden the execution opportunities for BX members.
Furthermore, the proposed rule changes are consistent with
statutory requirements, as the proposed rule changes discussed herein
are not unfairly discriminatory, do not place an unnecessary burden on
competition, and represent an equitable allocation of fees for the
reasons set forth below.
The proposed credit increase of $0 to $0.0003 per share executed
for orders that execute against a midpoint pegged order is consistent
with an equitable allocation of fees and is not unfairly discriminatory
because this rebate applies uniformly across all members. The Exchange
believes that this credit will incentivize members to execute against
midpoint liquidity and this, in turn, will lead to an increase in price
improvement liquidity and price improvement generally benefits the
investing public. Also, it is reasonable and equitable because it
reflects the availability of what is in effect a price reduction for
all members that execute against a midpoint pegged order.
Additionally, the proposed rule change to create a new tier for
members that add 3.5 million or more shares (but less than 5 million
shares) of non-displayed liquidity per day of $0.0024 per share
executed is consistent with an equitable allocation of fees and is not
unfairly discriminatory because the Exchange believes that this new
tier will incentivize members to add more non-displayed shares and
this, in turn, will lead to an increase in price improvement liquidity
and price improvement generally benefits the investing public and BX
members have an equal opportunity to avail themselves of this tier
should they desire to do so. It is reasonable in that it affects
similarly situated members in the same way and because it encourages
additional liquidity adding activity from participants that want to add
non-displayed liquidity.
Also, the proposed rule change to relax the standard to qualify as
QMM (Tier 1) by modifying one of the parameters for a member with (i)
shares of liquidity provided and (ii) total shares of liquidity
accessed and provided in all securities through one or more of its
NASDAQ OMX BX Equities MPIDs that represent more than 0.35% (proposed
to be lowered to 0.30%) and 0.45%, respectively, of Consolidated Volume
during the month is consistent with an equitable allocation of fees and
is not unfairly discriminatory because the Exchange believes that this
will enable more firms to be able to avail themselves of the more
advantageous QMM credits and overall pricing should they wish to pursue
this opportunity to reduce trading costs, and because the opportunity
will apply uniformly across all members. It is reasonable in that it
affects similarly situated firms in the same way and because it
encourages firms to take advantage of the more advantageous QMM credits
and overall pricing.
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 easily and readily favor competing
venues if they deem fee levels at a particular venue to be excessive or
rebate opportunities to be insufficient. In such an environment, BX
must continually adjust its fees or rebates to remain competitive with
other exchanges. BX believes that the proposed rule changes reflect
this very competitive environment because the proposed rule changes are
designed to ensure that the charges and credits for participation on BX
reflect 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 changes will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.\6\
BX notes that it operates in a highly competitive market in which
market
[[Page 35196]]
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.
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 increase to the credit for an order that executes
against a midpoint pegged order and the new tier for members that add
3.5 million or more shares (but less than 5 million shares) of non-
displayed liquidity per day, plus the easing of the standards to
qualify as QMM (Tier 1) enhances the Exchange's competitiveness by
introducing a credit for some and reducing fees 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 rule 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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\6\ 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 \7\ and paragraph (f) of Rule 19b-4 \8\
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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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 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 No. SR-BX-2014-031 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-2014-031. 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 offices 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-2014-031, and should be
submitted on or before July 10, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14314 Filed 6-18-14; 8:45 am]
BILLING CODE 8011-01-P