
[Federal Register Volume 79, Number 91 (Monday, May 12, 2014)]
[Notices]
[Pages 27012-27014]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10779]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72106; File No. SR-NSX-2014-12]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Fee and Rebate Schedule To Change Certain Fees Applicable to 
Liquidity Providers, Eliminate a Rebate and Adopt a Fee for Removing 
Liquidity, and Reducing a Fee for Routed Orders, All With Respect to 
Securities Priced at $1.00 or Greater

May 6, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on April 30, 2014, National Stock Exchange, Inc. (``NSX[supreg]'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(``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 is proposing to amend its Fee and Rebate Schedule (the 
``Fee Schedule'') issued pursuant to Exchange Rule 16.1. Specifically, 
the Exchange is seeking to amend Section I. (Transaction Fees and 
Rebates) to provide that Exchange Equity Trading Permit (``ETP'') \3\ 
Holders will be charged a fee for providing liquidity and for removing 
liquidity in securities priced at $1.00 or greater. The Exchange 
proposes to eliminate rebates paid to ETP Holders removing liquidity in 
securities priced at $1.00 or greater. The Exchange also proposes to 
amend Section II. of the Fee Schedule (Other Services), subsection A., 
Order Routing (All Tapes), to reduce the fee for orders in securities 
priced at $1.00 or greater that are routed to other trading centers.
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    \3\ Exchange Rule 1.5 defines ``ETP'' as the Equity Trading 
Permit issued by the Exchange for effecting approved securities 
transactions on the Exchange's trading facilities.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.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 parts of such 
statements.

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 the Fee Schedule, Section I. to 
change the fee and rebate structure applicable to ETP Holders providing 
and removing liquidity on the Exchange in securities priced at $1.00 
and above across all Tapes.\4\ Specifically, the Exchange

[[Page 27013]]

proposes to: (i) Reduce the fee charged to ETP Holders providing 
liquidity (a ``Maker'') from $0.0018 per executed share to $0.0001. An 
ETP Holder providing liquidity through the use of any Zero Display 
Reserve Order will be charged a fee of $0.0002.\5\
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    \4\ The term ``Tapes'' refers to the designation assigned in the 
Consolidated Tape Association (``CTA'') Plan for reporting trades 
with respect to securities in Networks A, B and C. Tape A securities 
are those listed on the New York Stock Exchange, Inc.; Tape B 
securities are listed on NYSE MKT, formerly NYSE Amex, and regional 
exchanges. Tape C securities are those listed on the NASDAQ Stock 
Market LLC.
    \5\ Exchange Rule 11.11(c)(2)(A) defines a Zero Display Reserve 
Order as a Reserve Order with zero display quantity. The price of a 
Zero Display Reserve Order may be set or ``pegged'' to track the 
buy-side of the Protected Best Bid or Offer (``BBO''), the sell side 
of the Protected BBO, or the midpoint of the Protected BBO. The PBBO 
is defined in Exchange Rule 1.5P.(3) as the better of: (a) The 
Protected National Best Bid or Offer; or (b) the displayed top of 
the NSX Book.
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    The Exchange is also proposing to eliminate rebates to ETP Holders 
removing liquidity (``Taker'') in securities priced at $1.00 or greater 
and is proposing to instead charge ETP Holders removing liquidity a fee 
of $0.0001 per executed share. An ETP Holder removing any Zero Display 
Reserve Order will be charged a fee of $0.0002 per executed share.
    The Exchange believes that its proposal to eliminate rebates for 
removing liquidity in securities priced at $1.00 or greater and instead 
charge fees to Takers of liquidity, combined with its proposal to 
reduce the fees charged to ETP Holders providing liquidity from $0.0018 
to $0.0001, or $0.0002 when providing liquidity through the use of Zero 
Display Reserve Orders, advances its goal of providing market 
participants with a high-quality and cost-effective execution venue. 
The proposed pricing model also represents a determination by the 
Exchange that it is reasonable and appropriate to move away from a 
pricing structure for securities priced at $1.00 and above that employs 
a rebate to draw Takers to the Exchange.
    The Exchange further believes that its proposal to lower the per 
share fee for executions of orders adding liquidity from $0.0018 to 
$0.0001, or $0.0002 for executions through the use of Zero Display 
Reserve Orders, will incentivize ETP Holders to provide more liquidity 
which, in turn, will enhance opportunities for price improvement and 
better overall execution quality (i.e., market participants seeking to 
remove liquidity will benefit from the anticipated higher execution 
rates at better prices resulting from more available liquidity posted 
on the NSX Book \6\).
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    \6\ The ``NSX Book'' is the electronic file of orders posted on 
the Exchange. (See Exchange Rules 1.5N.(1) and 1.5S.(4).
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    The Exchange also proposes to amend Section II.A. of the Fee 
Schedule, Order Routing (All Tapes), to reduce the fee for orders in 
securities priced at $1.00 or greater that are routed to other trading 
centers from $0.0025 to $0.0020. The Exchange believes that, in 
conjunction with its proposal to reduce fees to liquidity providers and 
eliminate rebates and charge fees to Takers, this reduction in the fee 
for routed orders is an appropriate amendment that will operate to draw 
more liquidity to the Exchange while operating to reduce costs incurred 
by ETP Holders.
    The Exchange submits that the proposed Fee Schedule changes will 
operate to provide an economic incentive to ETP Holders to post more 
liquidity on the NSX Book and draw more Takers to access such 
liquidity. The Exchange anticipates that increased activity by 
liquidity providers and liquidity removers will result in improved 
price discovery, enhanced price improvement, and better overall 
execution quality while at the same time providing a cost effective 
execution venue.
 2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\7\ in general and, in 
particular, Section 6(b)(4) of the Act,\8\ which requires that the 
rules of a national securities exchange provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities; and with 
Section 6(b)(5) of the Act,\9\ which requires, among other things, that 
the rules of a national securities exchange not permit unfair 
discrimination between customers, issuers, brokers, or dealers, and be 
designed to promote just and equitable principles of trade, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78(f)(b)(4) [sic].
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange submits that its proposals to change its pricing model 
in securities priced at $1.00 and above to reduce the fees charged to 
liquidity providers that post liquidity on the NSX Book, eliminate 
rebates and adopt fees for Takers, and reduce the fee for routed 
orders, meet the requirement of Section 6(b)(4) of the Act that fees 
assessed by the Exchange be reasonable. By proposing lower fees charged 
to ``Makers'' for adding liquidity, the Exchange seeks to expand its 
liquidity pool by incentivizing ETP Holders to post more liquidity on 
the NSX Book. The Exchange anticipates that more liquidity will improve 
price discovery and execution quality and will draw more Takers to the 
Exchange.
    In eliminating rebates to Takers and instead adopting a fee for 
removing liquidity, the Exchange is seeking to assure that there is 
equilibrium in its Fee Schedule by having the fees applicable to both 
``Makers'' and ``Takers'' align. The Exchange aspires to provide a 
reasonable economic incentive for ETP Holders to post liquidity on the 
NSX Book, or seek to remove such liquidity. The Exchange believes that 
the proposed structure promotes marketplace efficiency and informed 
decision-making about a choice of execution venues. All ETP Holders 
posting liquidity, removing liquidity, or entering orders that are 
routed away, in securities priced at $1.00 and above, will be subject 
to the same fees. Accordingly, the Exchange submits that its proposal 
meets the requirements of Section 6(b)(4) of the Act.
    The Exchange further submits that its proposal meets the 
requirements of Section 6(b)(5) of the Act. By seeking to attract more 
liquidity to the NSX market through the proposed amendment, the 
Exchange aspires to improve execution quality, price discovery and 
cost-effectiveness. In addition, the Exchange submits that the 
amendments to the Fee Schedule will benefit market participants through 
a competitive pricing model that will be attractive to investors. These 
factors further the purposes of Section 6(b)(5) of the Act in that they 
do not to permit unfair discrimination between customers, issuers, 
brokers or dealers.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act. The Exchange 
believes, in fact, that the proposed change will operate to enhance 
rather than burden competition by continuing to position the Exchange 
as a cost-efficient and high quality execution venue with a reasonable 
and transparent pricing structure.
    Specifically, the Exchange believes that its pricing proposal will 
enhance competition by reducing the fees charged per executed share to 
ETP Holders for providing liquidity in securities priced at $1.00 or 
greater from $0.0018 to $0.0001, or $0.0002 for adding liquidity using 
Zero Display

[[Page 27014]]

Reserve Orders. For liquidity ``Takers'' the Exchange is proposing to 
eliminate a rebate of $0.0017 per executed share and charge a fee of 
$0.0001, or $0.0002 for removing any Zero Display Reserve Order. The 
Exchange anticipates that eliminating the rebates paid to ETP Holders 
removing liquidity places it in a unique competitive position among 
equity exchanges. Similarly, the Exchange submits that its proposal to 
reduce the fee for routed orders from $0.0025 to $0.0020 enhances its 
position as a cost-efficient trading venue and supports the Exchange's 
belief that its proposed pricing model promotes rather than burdens 
competition.
    The Exchange submits that the proposed fee changes aspire to 
enhance the Exchange's competitive position by offering a cost-
efficient, high-quality execution venue that provides for pricing that 
responds to the concerns expressed by market participants and others 
about the impact of rebates on the selection of execution venue. The 
Exchange submits that its proposal poses no burden on competition and, 
in fact, seeks to foster greater competition among trading venues.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited or received written comments on the 
proposed rule change from ETP Holders or others.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has taken effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of Rule 
19b-4.\11\ At any time within 60 days of the filing of such 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR.240.19b-4.
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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-NSX-2014-12 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-NSX-2014-12. 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-NSX-2014-12 and should be 
submitted on or before June 2, 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. 2014-10779 Filed 5-9-14; 8:45 am]
BILLING CODE 8011-01-P


