[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Notices]
[Pages 28103-28105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12765]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80924; File No. SR-BX-2017-028]
Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Transaction Fees at Rule 7018
June 14, 2017.
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 June 1, 2017, NASDAQ 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 the Exchange's transaction fees at
Rule 7018 to reduce the amount of one of the credits for entering an
order that accesses liquidity in the Exchange's Equities System, as
described further below.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqbx.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 the proposed rule change is to amend the Exchange's
transaction fees at Rule 7018 to reduce a credit for entering an order
that accesses liquidity in the Exchange's Equities System for ``all
other orders,'' i.e., orders that do not qualify for other available
credits for removing liquidity.
The Exchange operates on the ``taker-maker'' model, whereby it pays
credits to members that take liquidity and charges fees to members that
provide liquidity. Currently, the Exchange offers five different
credits for orders that access liquidity on the Exchange. First, the
Exchange pays a credit of $0.0016 per share executed for an order that
accesses liquidity (excluding orders with Midpoint pegging and
excluding orders that receive price improvement and execute against an
order with a Non-displayed price) entered by a member that accesses
liquidity equal to or exceeding 0.10% of total Consolidated Volume
during a month. Second, the Exchange pays a credit of $0.0015 per share
executed to an order that accesses liquidity (excluding orders with
Midpoint pegging and excluding orders that receive price improvement
and execute against an order with a Non-displayed price) entered by a
member that accesses liquidity equal to or exceeding 0.05% of total
[[Page 28104]]
Consolidated Volume during month. Third, the Exchange pays a credit of
$0.0000 per share executed for an order that receives price improvement
and executes against an order with a Non-displayed price. Fourth, the
Exchange pays a credit of $0.0000 per share executed for an order with
Midpoint pegging that removes liquidity. Finally, the Exchange pays a
credit of $0.0006 per share executed for ``all other orders.''
The Exchange now proposes to reduce the credit for ``all other
orders'' from $0.0006 per share executed to $0.0003 per share executed.
All of the other credits and charges will remain the same.
The Exchange is making this change because it believes that the
amount of the new credit is more closely aligned to the requirements
necessary to qualify for that credit and the behavior that the credit
is designed to incentivize. The Exchange notes that, while it does pay
credits of $0.0015 and $0.0016 per share executed for accessing
liquidity, a member must also meet also meet a volume threshold of
accessing liquidity equal to or exceeding 0.05% or 0.10% of total
Consolidated Volume during that month, respectively. Unlike other
credits the Exchange offers for accessing liquidity, a member does not
have to meet any volume requirements in order to qualify for this
credit. In contrast, the Exchange pays a credit of $0.0000 per share
executed for an order that receives price improvement and executes
against an order with a Non-displayed price, and for an order with
Midpoint pegging that removes liquidity. In comparison to these other
credits and their attendant requirements, and given that the Exchange
is limited in the amount of credits that it provides to members, the
Exchange believes the new credit amount is appropriate.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\3\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\4\ 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, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(4) and (5).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \5\
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\5\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission \6\
(``NetCoalition'') the D.C. Circuit upheld the Commission's use of a
market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\7\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \8\
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\6\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\7\ See NetCoalition, at 534-535.
\8\ Id. at 537.
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Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers' . . . .'' \9\
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\9\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
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The Exchange believes that reducing the credit for ``all other
orders'' from $0.0006 to $0.0003 is reasonable because the amount of
the new credit is more closely aligned to the requirements necessary to
qualify for the credit and the behavior that it is designed to
incentivize, especially given that the Exchange is limited in the
amount of credits that it provides to members. Unlike other credits the
Exchange offers for accessing liquidity, a member does not have to meet
any volume requirements in order to qualify for this credit. While the
Exchange does pay credits of $0.0015 and $0.0016 per share executed for
accessing liquidity, a member must also meet also meet a volume
threshold of accessing liquidity equal to or exceeding 0.05% or 0.10%
of total Consolidated Volume during a month, respectively. In contrast,
the Exchange pays a credit of $0.0000 for an order that receives price
improvement and executes against an order with a Non-displayed price,
and for an order with Midpoint pegging that removes liquidity. The
Exchange believes that the new credit amount is more closely aligned to
the requirements for qualifying for that credit, especially in
comparison to the other credits offered by the Exchange and their
attendant requirements.
The Exchange believes that the proposed change is equitably
allocated among members, and is not designed to permit unfair
discrimination. BX notes that participation on the Exchange, and
eligibility for this credit, is voluntary, and that the Exchange
continues to offer other credits for which members may attempt to
qualify instead of the proposed credit. Additionally, the proposed
change to the credit amount applies to all members that otherwise
qualify for the credit. The Exchange believes that it is equitable and
not unfairly discriminatory to amend the amount of the credit for ``all
other orders,'' and not other credits, because the new credit amount is
more closely aligned to the requirements for qualifying for that
credit, especially in comparison to the other credits offered by the
Exchange and their attendant requirements.
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 not necessary or appropriate in
furtherance of the purposes of the Act. In terms of inter-market
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues 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, the Exchange must continually adjust its
fees to remain competitive with other exchanges and with alternative
trading systems that have been exempted from compliance with the
statutory standards applicable to exchanges. Because competitors are
free to modify their own fees in response, and because market
participants may readily adjust their order routing practices, the
Exchange believes that the degree to which fee changes in this market
may impose any
[[Page 28105]]
burden on competition is extremely limited.
In this instance, the proposed change to the credit available to
member firms for accessing liquidity for ``all other orders'' does not
impose a burden on competition because the Exchange's execution
services are completely voluntary and subject to extensive competition
both from other exchanges and from off-exchange venues. The new credit
applies equally to all members that otherwise meet the requirements,
e.g., accessing liquidity on the Exchange using an order that does not
qualify for one of the other available credits, and all similarly
situated members are equally capable of qualifying for the credit if
they choose to meet the requirements.
In sum, if the change proposed herein is unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
change will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
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.\10\ 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: (i) Necessary or appropriate in the public
interest; (ii) for the protection of investors; or (iii) 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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\10\ 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-2017-028 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-2017-028. 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-2017-028 and should be
submitted on or before July 11, 2017.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12765 Filed 6-19-17; 8:45 am]
BILLING CODE 8011-01-P