
[Federal Register Volume 78, Number 34 (Wednesday, February 20, 2013)]
[Notices]
[Pages 11935-11937]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03752]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68909; File No. SR-BX-2013-011]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Modify 
BX's Fee Schedule Governing Order Execution

February 12, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(ldquo;Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 31, 2013, NASDAQ OMX BX, Inc. (``BX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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 the 
Substance of the Proposed Rule Change

    BX proposes to modify BX's fee schedule governing order execution. 
BX will implement the proposed change on February 1, 2013. The text of 
the proposed rule change is available at http://nasdaqomxbx.cchwallstreet.com/, at BX's principal office, 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 self-regulatory organization 
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 those statements may be examined at 
the places specified in Item III [sic] below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    BX is amending its fee schedule governing order execution. All of 
the changes pertain to securities priced at $1 or more per share. 
Currently, BX pays no credit with respect to orders that execute 
against a midpoint pegged order; a credit of $0.0014 per share executed 
for routable orders that access liquidity in BX (other than orders that 
execute against a midpoint pegged order); a credit of $0.0014 per share 
executed for orders that access liquidity if entered through a BX MPID 
through which the member (i) accesses an average daily volume of 3.5 
million or more shares of liquidity during the month, or (ii) provides 
an average daily volume of 25,000 or more shares of liquidity during 
the month (other than orders that execute against a midpoint pegged 
order); and a credit of $0.0005 per share executed for all other orders 
that access liquidity in BX. BX is making the following changes to 
these fees:
     Modifying the pricing tier that currently requires 
providing an average daily volume of 25,000 or more shares of 
liquidity, such that providing an average daily volume of 1 million or 
more shares of liquidity would be required;
     Instituting a new pricing tier under which a member would 
receive a credit of $0.0010 per share executed for an order (other than 
an order that executes against a midpoint pegged order) entered through 
an MPID through which the member provides an average daily volume of at 
least 25,000, but less than 1 million, shares of liquidity during the 
month;
     Decreasing the credit applicable to orders to which no 
special credit applies from $0.0005 to $0.0004 per share executed.
    As a result of the changes, the requirements for one of the means 
by which a member may receive a credit of $0.0014 per share executed 
will be increased. However, the remaining means of receiving this 
credit, including use of routable orders, will remain unchanged. 
Moreover, a new pricing tier is being created so that members that have 
received this credit due to their levels of liquidity provision but 
that do not qualify for the higher requirements will still receive a 
credit of $0.0010 per share executed, a credit that is more than twice 
as high as the base credit of $0.0004 per share executed.
    Second, with respect to orders that provide liquidity, BX currently 
charges $0.0015 per share executed for a displayed order entered by a 
Qualified Liquidity Provider through a Qualified MPID; \3\ and $0.0018 
per share executed for all other orders. BX is making the following 
changes to these fees:
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    \3\ A Qualified Liquidity Provider is required to meet certain 
standards with regard to volumes of liquidity accessed and provided. 
A Qualified MPID is an MPID through which a Qualified Liquidity 
Provider achieves certain requirements with respect to quoting at 
the NBBO. See Rule 7018(a)(1) and (2).
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     For a midpoint pegged order that provides liquidity, BX 
will charge $0.0015 per share executed. Midpoint pegged orders are non-
displayed orders that execute at the midpoint between the national best 
bid and offer (``NBBO''), thereby providing price improvement to orders 
that execute against them.
     For other types of non-displayed orders, BX will charge 
$0.0025 per share executed.
    This change is similar in structure to pricing on The NASDAQ Stock 
Market, where members that provide liquidity using midpoint pegged 
orders receive a higher credit than with respect to other forms of non-
displayed orders. This pricing approach reflects the view that although 
displayed orders are generally preferred to non-displayed orders 
because they assist in price discovery, the use of midpoint orders 
should also be encouraged through pricing incentives because they 
provide price improvement.
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 with Sections 
6(b)(4) and (5) of the Act,\5\ 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

[[Page 11936]]

controls, and is not designed to permit unfair discrimination between 
customers, issuers, brokers or dealers.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    BX believes that the modifications to pricing for members providing 
significant liquidity (i.e., the creation of a new $0.0010 per share 
executed credit tier and the increase in the requirements for 
participation in the $0.0014 per share executed tier) are reasonable 
because the resulting decrease in credits for a member that provides an 
average daily volume of at least 25,000, but less than 1 million, 
shares of liquidity will be a modest $0.0004 per share executed, and a 
member affected by the change may still qualify for the $0.0014 per 
share executed credit through other means. BX believes that the change 
is consistent with an equitable allocation of fees because the change 
is consistent with a goal of encouraging liquidity provision through 
pricing incentives, because it provides a credit that is more than 
twice as high as the base credit for members that provide a relatively 
modest level of liquidity (an average daily volume of at least 25,000 
shares) and a credit more than three times higher than the base credit 
for members that provide a significant level of liquidity (an average 
daily volume of at least 1 million shares). Finally, BX believes that 
the change is not unreasonably discriminatory, because liquidity 
provision benefits all market participants by dampening price 
volatility and because alternative means of earning a $0.0014 per share 
credit remain available.
    BX believes that the decrease in the credit for orders not 
qualifying for any pricing tier is reasonable because it is a decrease 
of only $0.0001 per share executed. BX further believes that it is 
consistent with an equitable allocation of fees and is not unreasonably 
discriminatory, because it is consistent with the practice of all 
national securities exchanges of providing financial incentives to 
members to provide liquidity or make significant use of an exchange's 
facilities, while charging higher fees and/or providing lower credits 
to less committed users.
    BX believes that the proposed fee decrease for midpoint pegged 
orders and price increase for other forms of non-displayed orders is 
reasonable because in the first instance, fees are being reduced, and 
in the second instance, the increase is only $0.0007 per share 
executed. Moreover, the increase is reasonable because members may 
readily avoid it by using displayed orders or midpoint pegged orders. 
BX believes that the changes are consistent with an equitable 
allocation of fees, and are not unreasonably discriminatory, because 
the fees reflect a policy of using fees to encourage greater use of 
displayed orders, which benefit all market participants by promoting 
greater price discovery, as well as the use of midpoint pegged orders, 
which benefit other market participants by providing price improvement. 
Accordingly, BX believes that it is equitable to charge the highest 
fees to non-displayed, non-midpoint orders, which provide the least 
benefits to other market participants, while charging lower fees to 
displayed orders, which benefit the entire market by revealing the 
price and size of trading interest, and midpoint orders, which benefit 
other participants by offering price improvement. This approach is not 
unfairly discriminatory because the variation in fees is reasonably 
related to valid market structure goals.
    Finally, BX 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. In such an 
environment, BX 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. The changes reflect this environment because although 
they reflect price increases, the price increases are minor and are 
designed to incentivize changes in market participant behavior (i.e., 
encouraging greater use of BX's router, increased liquidity provision, 
and more use of displayed and/or midpoint pegged orders) rather than to 
impose significantly higher costs on market participants.

B. Self-Regulatory Organization's Statement on Burden on Competition

    BX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Because the market 
for order execution is extremely competitive, members may readily opt 
to disfavor BX's execution and routing services if they believe that 
alternatives offer them better value. Although the proposed changes 
increase fees or decrease credits in certain respects, BX believes that 
these changes do not impose any burden on competition, since members 
may readily favor other trading venues if they wish to avoid these 
pricing changes. Moreover, within the context of BX pricing schedule, 
members may also readily avoid the effect of the changes by modifying 
the order types that they use. Accordingly, the impact on the fees 
actually paid by members is expected to be minimal, and the change will 
not 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

    Written comments were neither solicited nor 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) of the Act \6\ and paragraph (f) of Rule 19b-4 
thereunder.\7\ 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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    \6\ 15 U.S.C. 78s(b)(3)(a).
    \7\ 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 rule-comments@sec.gov. Please include 
File Number SR-BX-2013-011 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2013-011. 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

[[Page 11937]]

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 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-2013-011, and should be 
submitted on or before March 13, 2013.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03752 Filed 2-19-13; 8:45 am]
BILLING CODE 8011-01-P


