[Federal Register Volume 79, Number 214 (Wednesday, November 5, 2014)]
[Notices]
[Pages 65733-65735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26227]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73469; File No. SR-BX-2014-052]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Routing Fees
October 30, 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 October 23, 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 amend Chapter XV, Section 2 entitled ``BX
Options Market--Fees and Rebates.'' Specifically, the Exchange is
proposing to amend Routing Fees.
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on November 3,
2014.
The text of the proposed rule change is 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 purpose of this filing is to amend the Routing Fees in Chapter
XV, Section 2(3) to recoup costs incurred by the Exchange to route
orders to away markets.
Today, the Exchange assesses a Non-Customer a $0.97 per contract
Routing Fee to any options exchange. The Customer \3\ Routing Fee for
option orders routed to The NASDAQ Options Market LLC (``NOM'') and
NASDAQ OMX PHLX LLC (``PHLX'') is a $0.12 per contract Fixed Fee in
addition to the actual transaction fee assessed. The Customer Routing
Fee for option orders routed to all other options exchanges \4\
(excluding NOM and PHLX) is a fixed fee of $0.22 per contract (``Fixed
Fee'') in addition to the actual transaction fee assessed. If the away
market pays a rebate, the Routing Fee is $0.12 per contract.
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\3\ The term ``Customer'' or (``C'') applies to any transaction
that is identified by a Participant for clearing in the Customer
range at The Options Clearing Corporation (``OCC'') which is not for
the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Chapter I, Section
1(a)(48)).
\4\ Including BATS Exchange, Inc. (``BATS''), BOX Options
Exchange LLC (``BOX''), the Chicago Board Options Exchange,
Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''),
International Securities Exchange, LLC (``ISE''), the Miami
International Securities Exchange, LLC (``MIAX''), NYSE Arca, Inc.
(``NYSE Arca''), NYSE MKT LLC (``NYSE Amex'') and ISE Gemini, LLC
(``Gemini'').
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With respect to the fixed costs, the Exchange incurs a fee when it
utilizes Nasdaq Execution Services LLC (``NES''), a member of the
Exchange and the Exchange's affiliated broker-dealer exclusive order
router.\5\ Each time NES routes an order to an away market, NES is
charged a clearing fee \6\ and, in the case of certain exchanges, a
transaction fee is also charged in certain symbols, which fees are
passed through to the Exchange. The Exchange currently recoups clearing
and transaction charges incurred by the Exchange as well as certain
other costs incurred by the Exchange when routing to away markets, such
as administrative and technical costs associated with operating NES,
membership fees at away markets, Options Regulatory Fees (``ORFs''),
staffing and technical costs associated with routing options. The
Exchange assesses the actual away market fee at the time that the order
was entered into the Exchange's trading system. This transaction fee is
calculated on an order-by-order basis since different away markets
charge different amounts.
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\5\ See Securities Exchange Act Release No. 71420 (January 28,
2014), 79 FR 6256 (February 3, 2014) (SR-BX-2014-004) (an
immediately effective rule change to utilize NES for outbound order
routing from BX).
\6\ The Options Clearing Corporation (``OCC'') assesses $0.01
per contract side.
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The Exchange is proposing to increase its Non-Customer Routing Fees
from $0.97 to $0.99 per contract to any options exchange. The Exchange
is proposing to increase its Customer Routing Fixed Fees to NOM and
PHLX from $0.12 to $0.13 per contract, in addition to the actual
transaction fee assessed to recoup an additional portion of the costs
incurred by the Exchange for routing these orders. The Exchange is
proposing to increase its Customer Routing Fixed Fees to all other
options exchanges (excluding NOM and PHLX) from $0.22 to $0.23 per
contract, in addition to actual transaction fees assessed. The Exchange
would also increase the Customer Routing Fee to all other options
exchanges if the away market pays a rebate from a fee of $0.12 to $0.13
per contract, because the Exchange would continue to retain the rebate
to offset the cost to route orders to offset the cost to route orders
to these away markets. The Exchange desires to recoup additional costs
at this time.
2. Statutory Basis
BX believes that its proposal to amend its fees is consistent with
Section 6(b) of the Act \7\ in general, and furthers the objectives of
Section 6(b)(4) and (b)(5) of the Act \8\ in particular, in that 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 which BX operates or controls, and is not designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4), (5).
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The Exchange believes that amending the Non-Customer Routing Fee
for orders routed to any options exchange from a fee of $0.97 to $0.99
per contract, is reasonable because the Exchange desires to recoup an
additional portion of the cost it incurs when routing Non-Customer
orders. The Exchange is proposing to increase the Fixed Fee to recoup
additional costs that are incurred by the Exchange in connection with
routing these orders on behalf of its members.
The Exchange believes that amending the Customer Routing Fee for
orders routed to NOM and PHLX from a Fixed Fee of $0.12 to $0.13 per
contract, in addition to the actual transaction fee, is
[[Page 65734]]
reasonable because the Exchange desires to recoup an additional portion
of the cost it incurs when routing Customer orders to NOM or PHLX.
Today, the Exchange assesses orders routed to NOM and PHLX a lower
Fixed Fee for routing Customer orders as compared to the Fixed Fee
assessed to other options exchanges. The Exchange is proposing to
increase the Fixed Fee to recoup additional costs that are incurred by
the Exchange in connection with routing these orders on behalf of its
members.
The Exchange believes that continuing to assess lower Fixed Fees to
route Customer orders to NOM and PHLX, as compared to other options
exchanges, is reasonable as the Exchange is able to leverage certain
infrastructure to offer those markets lower fees as explained further
below.
The Exchange believes that amending the Customer Routing Fee to
other away markets, other than NOM and PHLX, from a Fixed Fee of $0.22
to $0.23 per contract, in addition to the actual transaction fee, is
reasonable because the Exchange desires to recoup an additional portion
of the cost it incurs when routing orders to these away markets. The
Fixed Fee for Customer orders is an approximation of the costs the
Exchange will be charged for routing orders to away markets. While each
destination market's transaction charge varies and there is a cost
incurred by the Exchange when routing orders to away markets,
including, OCC clearing costs, administrative and technical costs
associated with operating NES, membership fees at away markets, ORFs
and technical costs associated with routing options, the Exchange
believes that the proposed Routing Fees will enable it to recover the
costs it incurs to route Customer orders to away markets.
The Exchange believes that amending the Customer Routing Fee to
other away markets, other than NOM and PHLX, if the away market pays a
rebate, from $0.12 to $0.13 per contract is reasonable because the
Exchange desires to recoup an additional portion of the cost it incurs
when routing Customer orders to away markets, similar to the amount of
Fixed Fee it proposes to assess for orders routed to NOM and PHLX. The
Exchange is proposing to assess a Fixed Fee to recoup additional costs
that are incurred by the Exchange in connection with routing these
orders on behalf of its members. While the Exchange would continue to
retain any rebate paid by away markets, the Exchange does not assess
the actual transaction fee that is charged by away markets for Customer
orders. As a general matter, the Exchange believes that the proposed
fees for Customer orders routed to markets which pay a rebate would
allow it to recoup and cover a portion of the costs of providing
optional routing services for Customer orders because it better
approximates the costs incurred by the Exchange for routing such
orders.
The Exchange believes that amending the Non-Customer Routing Fee
for orders routed to any options exchange from a fee of $0.97 to $0.99
per contract, is equitable and not unfairly discriminatory because the
Exchange would assess the same $0.99 per contract fee to all market
participants utilizing routing for Non-Customer orders.
The Exchange believes that amending the Customer Routing Fee for
orders routed to NOM and PHLX from a Fixed Fee of $0.12 to $0.13 per
contract, in addition to the actual transaction fee, is equitable and
not unfairly discriminatory because the Exchange would assess the same
Fixed Fee to all orders routed to NOM or PHLX in addition to the
transaction fee assessed by that market.
The Exchange would uniformly assess a $0.13 per contract Fixed Fee
to orders routed to NASDAQ OMX exchanges because the Exchange is
passing along the saving realized by leveraging NASDAQ OMX's
infrastructure and scale to market participants when those orders are
routed to NOM or PHLX and is providing those saving to all market
participants. Furthermore, it is important to note that when orders are
routed to an away market they are routed based on price first.\9\ The
Exchange believes that it is equitable and not unfairly discriminatory
to assess a fixed cost of $0.13 per contract to route orders to NOM and
PHLX because the cost, in terms of actual cash outlays, to the Exchange
to route to those markets is lower. For example, costs related to
routing to NOM and PHLX are lower as compared to other away markets
because NES is utilized by all three exchanges to route orders.\10\ NES
and the three NASDAQ OMX options markets have a common data center and
staff that are responsible for the day-to-day operations of NES.
Because the three exchanges are in a common data center, Routing Fees
are reduced because costly expenses related to, for example,
telecommunication lines to obtain connectivity are avoided when routing
orders in this instance. The costs related to connectivity to route
orders to other NASDAQ OMX exchanges are lower than the costs to route
to a non-NASDAQ OMX exchange. When routing orders to non-NASDAQ OMX
exchanges, the Exchange incurs costly connectivity charges related to
telecommunication lines, membership and access fees, and other related
costs when routing orders.
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\9\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
\10\ See Chapter VI, Section 11 of NOM and BX Rules. See also
PHLX Rule 1080(m)(iii)(A).
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The Exchange believes that amending the Customer Routing Fee to
other away markets, other than NOM and PHLX, from a Fixed Fee of $0.22
to $0.23 per contract is equitable and not unfairly discriminatory
because the Exchange would assess the same Fixed Fee to all orders
routed to away markets other than NOM and PHLX in addition to the
transaction fee, provided the away market does not pay a rebate.
The Exchange's proposal to increase the Customer Routing Fee to all
other options exchanges that pay a rebate, other than NOM and PHLX,
from $0.12 to $0.13 per contract is equitable and not unfairly
discriminatory because the Exchange would assess the same Fixed Fee
that is proposed when routing Customer orders to a NASDAQ OMX exchange.
All market participants that route an order to an away market, other
than NOM or PHLX, would be assessed a uniform fee of $0.13 per contract
if the away market (non-NASDAQ OMX exchange) pays a rebate. These
proposals would apply uniformly to all market participants when routing
to an away market that pays a rebate, other than NOM and PHLX.
Finally, market participants may submit orders to the Exchange as
ineligible for routing or ``DNR'' to avoid Routing Fees.\11\ Also,
orders are routed to an away market based on price first.\12\
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\11\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
\12\ See Chapter VI, Section 11 of BX Rules.
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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 does not believe that the
proposal creates a burden on intra-market competition because the
Exchange is applying the same Routing Fees to all market participants
in the same manner dependent on the routing venue, with the exception
of Customers. The Exchange will continue to assess separate Customer
Routing Fees. Customers will continue to receive the lowest fees as
compared to non-Customers when routing orders, as is the case today.
Other options exchanges also assess lower Routing Fees for
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customer orders as compared to non-customer orders.\13\
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\13\ BATS assesses lower customer routing fees as compared to
non-customer routing fees per the away market. For example BATS
assesses ISE customer routing fees of $0.52 per contract and an ISE
non-customer routing fee of $ 0.65 per contract. See BATS BZX
Exchange Fee Schedule.
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The Exchange's proposal would allow the Exchange to continue to
recoup its costs when routing Customer orders to PHLX or NOM as well as
away markets that pay a rebate when such orders are designated as
available for routing by the market participant. The Exchange continues
to pass along savings realized by leveraging NASDAQ OMX's
infrastructure and scale to market participants when Customer orders
are routed to PHLX and NOM and is providing those savings to all market
participants. Today, other options exchanges also assess fixed routing
fees to recoup costs incurred by the exchange to route orders to away
markets.\14\
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\14\ See CBOE's Fees Schedule and ISE's Fee Schedule.
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Market participants may submit orders to the Exchange as ineligible
for routing or ``DNR'' to avoid Routing Fees.\15\ Also, orders are
routed to an away market based on price first.\16\
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\15\ See note 11.
\16\ See note 12.
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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 rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\17\ 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.
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\17\ 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-2014-052 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2014-052. 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-2014-052 and
should be submitted on or before November 26, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
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\18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-26227 Filed 11-4-14; 8:45 am]
BILLING CODE 8011-01-P