[Federal Register Volume 79, Number 174 (Tuesday, September 9, 2014)]
[Notices]
[Pages 53483-53485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21358]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72964; File No. SR-BX-2014-041]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Common Ownership
September 3, 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 August 21, 2014, 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 harmonize the treatment of the aggregation
of activity of affiliated members for the purposes of assessing charges
or credits.
The Exchange requests that this filing become operative on December
1, 2014.
The text of the proposed rule change is set forth below. Proposed
new language is in italics; deleted text is in brackets.
* * * * *
7027. Aggregation of Activity of Affiliated Members
(a) No Change
(b) No Change
(c) For purposes of this Rule 7027, the term[s set forth below
shall have the following meanings:]
[(1) An] ``affiliate'' of a member shall mean any [wholly owned
subsidiary, parent, or sister of the ]member under 75% common ownership
or control of that [is also a ]member.
[(2) A ``wholly owned subsidiary'' shall mean a subsidiary of a
member, 100% of whose voting stock or comparable ownership interest is
owned by the member, either directly or indirectly through other wholly
owned subsidiaries.]
[(3) A ``parent'' shall mean an entity that directly or indirectly
owns 100% of the voting stock or comparable ownership interest of a
member.]
[(4) A ``sister'' shall mean an entity, 100% of whose voting stock
or comparable ownership interest is owned by a parent that also owns
100% of the voting stock or comparable ownership interest of a member.]
* * * * *
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.
[[Page 53484]]
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 BX Rule 7027 to harmonize the
treatment of the aggregation of activity of affiliated members for the
purposes of assessing charges or credits by making it consistent with
the definition of ``Common Ownership'' in Chapter XV which relates to
options pricing. The aggregation suggested by these rules impacts the
Rule 7000 series where the charge assessed, or credit provided, by BX
depends upon the volume of a member's activity. A member may request
that BX aggregate its activity with the activity of its affiliates.\3\
Therefore, for purposes of applying any provision of the Rule 7000
series where the charge assessed, or credit provided, by BX depends
upon the volume of a member's activity, references to an entity
(including references to a ``member'', a ``participant'', or a ``BX
Quoting Market Participant'') shall be deemed to include the entity and
its affiliates that have been approved for aggregation.\4\
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\3\ See Rule 7027(a)(1).
\4\ See Rule 7027(b).
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Currently, BX Rule 7027 states that for purposes of applying any
provision of the Rule 7000 Series where the charge assessed, or credit
provided, by BX depends upon the volume of a member's activity, a
member may request that BX aggregate its activity with the activity of
its affiliates.\5\ The rule further stipulates that an affiliate is
considered to be a wholly-owned subsidiary, parent, or sister of the
member where the member holds 100 percent of the voting stock or other
comparable ownership interest, either directly or indirectly, in the
wholly owned subsidiary, parent, or sister member.
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\5\ An ``affiliate'' of a member shall mean any wholly owned
subsidiary, parent, or sister of the member that is also a member.
See Rule 7027(c)(1). A ``wholly owned subsidiary'' shall mean a
subsidiary of a member, 100 percent of whose voting stock or
comparable ownership interest is owned by the member, either
directly or indirectly through other wholly owned subsidiaries. See
Rule 7027(c)(2). A ``parent'' shall mean an entity that directly or
indirectly owns 100 percent of the voting stock or comparable
ownership interest of a member. See Rule 7027(c)(3). A ``sister''
shall mean an entity, 100 percent of whose voting stock or
comparable ownership interest is owned by a parent that also owns
100 percent of the voting stock or comparable ownership interest of
a member. See Rule 7027(c)(4).
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The Exchange proposes to amend Rule 7027 to conform that rule to
that of BX Options at Chapter XV so that equities and options members
are treated consistently with respect to affiliations of members for
purposes of pricing. BX's Options Rule provides, ``Common Ownership''
shall mean Participants under 75 percent common ownership or
control.\6\ The Exchange desires to take the current standard of 100
percent for equities members and align that standard to the 75 percent
standard for Options Participants.
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\6\ See BX Options Rules at Chapter XV.
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Pursuant to Rule 7027(a)(1), a member requesting aggregation of
affiliate activity shall be required to certify to BX the affiliate
status of entities whose activity it seeks to aggregate prior to
receiving approval for aggregation, and shall be required to inform BX
immediately of any event that causes an entity to cease to be an
affiliate. BX shall review available information regarding the
entities, and reserves the right to request additional information to
verify the affiliate status of an entity. BX shall approve a request
unless it determines that the certification is not accurate. Pursuant
to Rule 7027(a)(2), if two or more members become affiliated on or
prior to the sixteenth day of a month, and submit the required request
for aggregation on or prior to the twenty-second day of the month, an
approval of the request by BX shall be deemed to be effective as of the
first day of that month. If two or more members become affiliated after
the sixteenth day of a month, or submit a request for aggregation after
the twenty-second day of the month, an approval of the request by BX
shall be deemed to be effective as of the first day of the next
calendar month. The Exchange intends to amend the BX options rules to
similarly require the certifications and approvals as noted herein. The
Exchange intends that this rule change and the options rule changes
noted herein harmonize the process by which the Exchange gathers
information related to affiliated members and then in turn, for
purposes of pricing, treat both equities and options members alike with
respect to the application of aggregated pricing.
The Exchange proposes to apply this pricing as of December 1, 2014
and issue a Trader Alert to its members.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \7\ in general, and furthers the objectives of Section
6(b)(5) of the Act \8\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest,
in that the proposal will harmonize the treatment of the aggregation of
activity of affiliated members for the purposes of assessing charges or
credits with the treatment of the aggregation of activity of affiliated
members in relation to options pricing so that more members will be
able to benefit from lower charges and/or increased credits. The
proposal will further serve to reduce disparity of treatment between
members with regards to the pricing of different services and reduce
any potential for confusion in how activity can be aggregated. The
Exchange believes the rule change avoids disparate treatment of members
that have divided their various business activities between separate
corporate entities as compared to members that operate those business
activities within a single corporate entity. By way of example, subject
to appropriate information barriers, many firms that are members of the
Exchange operate both a market making desk and a public customer
business within the same corporate entity. In contrast, other members
may be part of a corporate structure that separates those business
lines into different corporate affiliates, either for business,
compliance or historical reasons, and those affiliates are not also
considered wholly owned affiliates. Those corporate affiliates, in
turn, are required to maintain separate memberships with the Exchange.
Absent the proposed change, such corporate affiliates that cannot be
considered wholly owned but are under common control would not receive
the same treatment as members who are considered wholly owned
affiliates. Accordingly, the Exchange believes that its proposed policy
is fair and equitable, and not unreasonably discriminatory in
permitting both wholly owned and common control. In addition to
ensuring fair and equal treatment of its members, the Exchange does not
want to create incentives for its members to restructure their business
operations or compliance functions simply due to the Exchange's pricing
structure.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposed rule change may enable
additional equity members to aggregate pricing because the standard
will be reduced from 100 percent to 75 percent for these members. There
are no current equity members that would no longer be entitled to the
aggregation as a result of this rule change. Further, the Exchange
seeks to harmonize the manner in which aggregated pricing is treated on
its three markets, The NASDAQ Stock Market
[[Page 53485]]
LLC, NASDAQ OMX PHLX LLC and BX and as between equities and options, by
developing one standard for aggregated pricing and one method for
collecting such information on aggregated pricing to ensure proper
validation of that pricing in the manner in which it is occurring on BX
for equity members today.
Today, BATS Exchange, Inc. (``BATS'') equity members are permitted
to aggregate share volume calculations for wholly owned affiliates. The
Exchange [sic] allows a member to aggregate volume with other members
that control, are controlled by, or are under common control with such
member.\9\ To the extent two or more affiliated companies maintain
separate Exchange memberships and can demonstrate their affiliation by
showing they control, are controlled by, or are under common control
with each other, the Exchange will permit such members to count overall
volume of the affiliates in calculating volume. BATS does not specify a
specific percentage for such aggregation. The Exchange is specifying 75
percent, similar to the percentage applied to Options Participants.
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\9\ See Securities Exchange Act Release No. 64211 (April 6,
2011), 76 FR 20414 (April 12, 2014) [sic] (SR-BATS-2011-012).
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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. The Exchange is merely seeking to harmonize
the treatment of the aggregation of activity of affiliated members for
the purposes of assessing charges or credits with those rules contained
in Chapter XV which relate to options pricing. The Exchange also
believes that certain market participants may be able to aggregate
because the standard is decreasing from 100 percent to 75 percent.
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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest; does not
impose any significant burden on competition; and by its terms does not
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate., it has become
effective pursuant to Section 19(b)(3)(A) \10\ of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
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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.
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-2014-041 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-2014-041. 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-2014-041 and should be
submitted on or before September 30, 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. 2014-21358 Filed 9-8-14; 8:45 am]
BILLING CODE 8011-01-P