[Federal Register Volume 79, Number 248 (Monday, December 29, 2014)]
[Notices]
[Pages 78119-78121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30275]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73894; File No. SR-BX-2014-060]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Ports
December 19, 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 December 15, 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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[[Page 78120]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend chapter XV, section 3 entitled ``BX
Options Market--Access Services.'' Specifically, the Exchange is
proposing to adopt additional port fees.
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on January 2,
2015.
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 adopt Port Fees for the following
ports: Order Entry Ports,\3\ CTI Ports,\4\ BX Depth Ports,\5\ BX TOP
Ports,\6\ and Order Entry DROP Ports,\7\ (collectively ``BX Ports'').
The Exchange proposes to assess a $200 Port Fee for each of the BX
Ports on a per port, per month, per mnemonic basis. The Exchange would
also note that BX Depth and BX Top Port Fees will be assessed to non-BX
Participants and BX Participants. Additionally, the Exchange will note
that it will continue to assess no fee for SQF Ports \8\ by placing the
SQF Port Fee in new chapter XV, section 3(b) along with the new BX Port
Fees.
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\3\ The Order Entry Port Fee is a connectivity fee in connection
with routing orders to the Exchange via an external order entry
port. BX Participants access the Exchange's network through order
entry ports. A BX Participant may have more than one order entry
port.
\4\ CTI offers real-time clearing trade updates. A real-time
clearing trade update is a message that is sent to a member after an
execution has occurred and contains trade details. The message
containing the trade details is also simultaneously sent to The
Options Clearing Corporation. The trade messages are routed to a
member's connection containing certain information. The
administrative and market event messages include, but are not
limited to: system event messages to communicate operational-related
events; options directory messages to relay basic option symbol and
contract information for options traded on the Exchange; complex
strategy messages to relay information for those strategies traded
on the Exchange; trading action messages to inform market
participants when a specific option or strategy is halted or
released for trading on the Exchange; and an indicator which
distinguishes electronic and non-electronically delivered orders.
\5\ BX Depth is a data feed that provides quotation information
for individual orders on the BX book, last sale information for
trades executed on BX, and Order Imbalance Information as set forth
in BX Rules chapter VI, section 8. BX Depth is the options
equivalent of the BX TotalView/ITCH data feed that BX offers under
BX Rule 7023 with respect to equities traded on BX. As with
TotalView, members use BX Depth to ``build'' their view of the BX
book by adding individual orders that appear on the feed, and
subtracting individual orders that are executed. See chapter VI,
section 1 at subsection (a)(3)(A).
\6\ BX TOP Port is a data feed that provides the BX Best Bid and
Offer (``BBO'') and last sale information for trades executed on BX.
The BBO and last sale information are identical to the information
that BX sends to the Options Price Regulatory Authority (``OPRA'')
and which OPRA disseminates via the consolidated data feed for
options. BX TOP Port is the options equivalent of the BX Basic data
feed offered for equities under BX Rule 7047. See chapter VI,
section 1 at subsection (a)(3)(B).
\7\ The DROP interface provides real time information regarding
orders sent to BX and executions that occurred on BX. The DROP
interface is not a trading interface and does not accept order
messages.
\8\ SQF ports are ports that receive inbound quotes at any time
within that month. The SQF Port allows a BX Participant to access
information such as execution reports and other relevant data
through a single feed. For example, this data would show which
symbols are trading on BX and the current state of an options symbol
(i.e., open for trading, trading, halted or closed). Auction
notifications and execution reports are also available. BX Market
Makers rely on data available through the SQF Port to provide them
the necessary information to perform market making activities.
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Each BX Options Participant is assigned a Market Participant
Identifier or ``mnemonic'' \9\ and in some cases, certain BX
Participants request multiple mnemonics for purposes of accounting for
trading activity. These mnemonics identify users at a particular BX
Participant. The Exchange bills its Port Fees based on the number of
mnemonics configured for each port. By way of example, if a BX
Participant, ABC, requested 2 ports from the Exchange and further
requested that each port be configured to be accessed by 4 mnemonics or
in some cases account numbers,\10\ the BX Participant would be billed
for 8 ports at the rate of $550 [sic] per port for that month. All
billing is captured at the Participant level. BX Participants may
choose to have multiple mnemonics or in some case multiple account
numbers for the convenience of conducting their business, however only
one mnemonic and one account number is required to conduct business on
BX.
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\9\ A mnemonic is a unique identifier consisting of a four
character alpha code.
\10\ Account numbers are assigned by the Exchange and associated
with particular BX Participants.
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Today, the NASDAQ Options Market LLC (``NOM'') assesses port fees
for similar ports, with the exception of SQF. The Exchange desires to
commence assessing such fees on BX at this time, with the exception of
SQF as it desires to continue to encourage BX Market Makers to
participate in this market.
2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of section 6 of the Act,\11\ in general, and with section
6(b)(4) and 6(b)(5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that adopting Port Fees for the BX Ports at
$200 per port, per month, per mnemonic is reasonable because it would
allow the Exchange to recoup fees associated with offering the BX
Ports. The BX Port Fees reflect a portion of the costs that the
Exchange bears with respect to offering and maintaining the BX Ports.
The Port Fees are reasonable because they enable the Exchange to
offset, in part, its connectivity costs associated with making such
ports available, including costs based on gateway software and hardware
enhancements and resources dedicated to gateway development, quality
assurance, and support. The Exchanges port fees are lower than the
costs for ports at other options exchanges \13\ as BX Options is a
relatively new market and the Exchange seeks to remain competitive with
more mature options markets.
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\13\ Miami International Securities Exchange LLC (``MIAX'')
assesses ports fees that range from $1,000 to $5,000 depending on
connectivity levels. See MIAX's Fee Schedule. ISE Gemini, LLC (``ISE
Gemini'') assesses port fees that range from $750-$12,500 depending
on connectivity levels. See ISE Gemini's Fee Schedule. Finally, C2
Options Exchange, Incorporated (``C2'') assesses port fees that
range from $500-$1,000 depending on connectivity levels. See C2's
Fee Schedule.
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The Exchange believes that Port Fees for the BX Ports at $200 per
port, per month, per mnemonic is equitable and not unfairly
discriminatory because the
[[Page 78121]]
Exchange will assess the same fees for all BX Ports to all BX
Participants.
The Exchange believes that continuing to assess no fee for SQF
Ports, while assessing fees for other BX Ports, is reasonable because
the Exchange desires to incentivize more BX Market Makers to engage in
market marking activities on the Exchange. The proposal would provide
all BX Market Makers with the opportunity to maintain lower costs while
also obtaining and utilizing the appropriate number of SQF to conduct
their business.
The Exchange believes that continuing to assess no fee for SQF
Ports, while assessing fees for other BX Ports, is equitable and not
unfairly discriminatory because SQF Ports are utilized particularly by
BX Market Makers in connection with their market making activities.
Unlike other BX Participants, BX Market Makers add value to the market
through continuous quoting \14\ and a commitment of capital. The
Exchange has traditionally assessed BX Market Makers lower transaction
fees as compared to other BX Participants because BX Market Makers have
obligations to make continuous markets, engage in a course of dealings
reasonably calculated to contribute to the maintenance of a fair and
orderly market, and not make bids or offers or enter into transactions
that are inconsistent with a course of dealings.\15\ Also, because of
the volume of message traffic, BX Market Makers that utilize SQF Ports
require more technology infrastructure and more ports than BX
Participants that are not engaged in market making.
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\14\ Pursuant to chapter VII (Market Participants), section 5
(Obligations of Market Makers), in registering as a market maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. See chapter VII, section
5.
\15\ See chapter VII, section 5.
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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 believes the proposed BX Port
fees are fair and equitable, and therefore, will not unduly burden any
particular group of market participants trading on the Exchange. The
Exchange's proposal to adopt fees for the BX Ports would be applied in
a uniform manner to all BX Participants. The proposed fees are designed
to ensure a fair and reasonable use of Exchange resources by allowing
the Exchange to recoup a certain portion of connectivity costs, while
continuing to offer competitive rates to BX Participants given the
market is not a mature market.
With respect to the SQF Port Fee, the Exchange believes that
continuing to assess no fee for SQF Ports, while assessing fees for
other BX Ports, does not impose an undue burden on competition because
SQF Ports are utilized particularly by BX Market Makers that add value
to the market through continuous quoting \16\ and a commitment of
capital. The Exchange has traditionally assessed BX Market Makers lower
transaction fees as compared to other BX Participants because BX Market
Makers have obligations to make continuous markets, engage in a course
of dealings reasonably calculated to contribute to the maintenance of a
fair and orderly market, and not make bids or offers or enter into
transactions that are inconsistent with a course of dealings.\17\
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\16\ See note 14.
\17\ See note 15.
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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.\18\ 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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\18\ 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-2014-060 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-2014-060. 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-2014-060 and should be
submitted on or before January 20, 2015.\19\
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2014-30275 Filed 12-24-14; 8:45 am]
BILLING CODE 8011-01-P