
[Federal Register Volume 79, Number 174 (Tuesday, September 9, 2014)]
[Notices]
[Pages 53483-53485]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21358]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72964; File No. SR-BX-2014-041]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Common Ownership

September 3, 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 August 21, 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 harmonize the treatment of the aggregation 
of activity of affiliated members for the purposes of assessing charges 
or credits.
    The Exchange requests that this filing become operative on December 
1, 2014.
    The text of the proposed rule change is set forth below. Proposed 
new language is in italics; deleted text is in brackets.
* * * * *

7027. Aggregation of Activity of Affiliated Members

    (a) No Change
    (b) No Change
    (c) For purposes of this Rule 7027, the term[s set forth below 
shall have the following meanings:]
    [(1) An] ``affiliate'' of a member shall mean any [wholly owned 
subsidiary, parent, or sister of the ]member under 75% common ownership 
or control of that [is also a ]member.
    [(2) A ``wholly owned subsidiary'' shall mean a subsidiary of a 
member, 100% of whose voting stock or comparable ownership interest is 
owned by the member, either directly or indirectly through other wholly 
owned subsidiaries.]
    [(3) A ``parent'' shall mean an entity that directly or indirectly 
owns 100% of the voting stock or comparable ownership interest of a 
member.]
    [(4) A ``sister'' shall mean an entity, 100% of whose voting stock 
or comparable ownership interest is owned by a parent that also owns 
100% of the voting stock or comparable ownership interest of a member.]
* * * * *

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.

[[Page 53484]]

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 BX Rule 7027 to harmonize the 
treatment of the aggregation of activity of affiliated members for the 
purposes of assessing charges or credits by making it consistent with 
the definition of ``Common Ownership'' in Chapter XV which relates to 
options pricing. The aggregation suggested by these rules impacts the 
Rule 7000 series where the charge assessed, or credit provided, by BX 
depends upon the volume of a member's activity. A member may request 
that BX aggregate its activity with the activity of its affiliates.\3\ 
Therefore, for purposes of applying any provision of the Rule 7000 
series where the charge assessed, or credit provided, by BX depends 
upon the volume of a member's activity, references to an entity 
(including references to a ``member'', a ``participant'', or a ``BX 
Quoting Market Participant'') shall be deemed to include the entity and 
its affiliates that have been approved for aggregation.\4\
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    \3\ See Rule 7027(a)(1).
    \4\ See Rule 7027(b).
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    Currently, BX Rule 7027 states that for purposes of applying any 
provision of the Rule 7000 Series where the charge assessed, or credit 
provided, by BX depends upon the volume of a member's activity, a 
member may request that BX aggregate its activity with the activity of 
its affiliates.\5\ The rule further stipulates that an affiliate is 
considered to be a wholly-owned subsidiary, parent, or sister of the 
member where the member holds 100 percent of the voting stock or other 
comparable ownership interest, either directly or indirectly, in the 
wholly owned subsidiary, parent, or sister member.
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    \5\ An ``affiliate'' of a member shall mean any wholly owned 
subsidiary, parent, or sister of the member that is also a member. 
See Rule 7027(c)(1). A ``wholly owned subsidiary'' shall mean a 
subsidiary of a member, 100 percent of whose voting stock or 
comparable ownership interest is owned by the member, either 
directly or indirectly through other wholly owned subsidiaries. See 
Rule 7027(c)(2). A ``parent'' shall mean an entity that directly or 
indirectly owns 100 percent of the voting stock or comparable 
ownership interest of a member. See Rule 7027(c)(3). A ``sister'' 
shall mean an entity, 100 percent of whose voting stock or 
comparable ownership interest is owned by a parent that also owns 
100 percent of the voting stock or comparable ownership interest of 
a member. See Rule 7027(c)(4).
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    The Exchange proposes to amend Rule 7027 to conform that rule to 
that of BX Options at Chapter XV so that equities and options members 
are treated consistently with respect to affiliations of members for 
purposes of pricing. BX's Options Rule provides, ``Common Ownership'' 
shall mean Participants under 75 percent common ownership or 
control.\6\ The Exchange desires to take the current standard of 100 
percent for equities members and align that standard to the 75 percent 
standard for Options Participants.
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    \6\ See BX Options Rules at Chapter XV.
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    Pursuant to Rule 7027(a)(1), a member requesting aggregation of 
affiliate activity shall be required to certify to BX the affiliate 
status of entities whose activity it seeks to aggregate prior to 
receiving approval for aggregation, and shall be required to inform BX 
immediately of any event that causes an entity to cease to be an 
affiliate. BX shall review available information regarding the 
entities, and reserves the right to request additional information to 
verify the affiliate status of an entity. BX shall approve a request 
unless it determines that the certification is not accurate. Pursuant 
to Rule 7027(a)(2), if two or more members become affiliated on or 
prior to the sixteenth day of a month, and submit the required request 
for aggregation on or prior to the twenty-second day of the month, an 
approval of the request by BX shall be deemed to be effective as of the 
first day of that month. If two or more members become affiliated after 
the sixteenth day of a month, or submit a request for aggregation after 
the twenty-second day of the month, an approval of the request by BX 
shall be deemed to be effective as of the first day of the next 
calendar month. The Exchange intends to amend the BX options rules to 
similarly require the certifications and approvals as noted herein. The 
Exchange intends that this rule change and the options rule changes 
noted herein harmonize the process by which the Exchange gathers 
information related to affiliated members and then in turn, for 
purposes of pricing, treat both equities and options members alike with 
respect to the application of aggregated pricing.
    The Exchange proposes to apply this pricing as of December 1, 2014 
and issue a Trader Alert to its members.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest, 
in that the proposal will harmonize the treatment of the aggregation of 
activity of affiliated members for the purposes of assessing charges or 
credits with the treatment of the aggregation of activity of affiliated 
members in relation to options pricing so that more members will be 
able to benefit from lower charges and/or increased credits. The 
proposal will further serve to reduce disparity of treatment between 
members with regards to the pricing of different services and reduce 
any potential for confusion in how activity can be aggregated. The 
Exchange believes the rule change avoids disparate treatment of members 
that have divided their various business activities between separate 
corporate entities as compared to members that operate those business 
activities within a single corporate entity. By way of example, subject 
to appropriate information barriers, many firms that are members of the 
Exchange operate both a market making desk and a public customer 
business within the same corporate entity. In contrast, other members 
may be part of a corporate structure that separates those business 
lines into different corporate affiliates, either for business, 
compliance or historical reasons, and those affiliates are not also 
considered wholly owned affiliates. Those corporate affiliates, in 
turn, are required to maintain separate memberships with the Exchange. 
Absent the proposed change, such corporate affiliates that cannot be 
considered wholly owned but are under common control would not receive 
the same treatment as members who are considered wholly owned 
affiliates. Accordingly, the Exchange believes that its proposed policy 
is fair and equitable, and not unreasonably discriminatory in 
permitting both wholly owned and common control. In addition to 
ensuring fair and equal treatment of its members, the Exchange does not 
want to create incentives for its members to restructure their business 
operations or compliance functions simply due to the Exchange's pricing 
structure.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that this proposed rule change may enable 
additional equity members to aggregate pricing because the standard 
will be reduced from 100 percent to 75 percent for these members. There 
are no current equity members that would no longer be entitled to the 
aggregation as a result of this rule change. Further, the Exchange 
seeks to harmonize the manner in which aggregated pricing is treated on 
its three markets, The NASDAQ Stock Market

[[Page 53485]]

LLC, NASDAQ OMX PHLX LLC and BX and as between equities and options, by 
developing one standard for aggregated pricing and one method for 
collecting such information on aggregated pricing to ensure proper 
validation of that pricing in the manner in which it is occurring on BX 
for equity members today.
    Today, BATS Exchange, Inc. (``BATS'') equity members are permitted 
to aggregate share volume calculations for wholly owned affiliates. The 
Exchange [sic] allows a member to aggregate volume with other members 
that control, are controlled by, or are under common control with such 
member.\9\ To the extent two or more affiliated companies maintain 
separate Exchange memberships and can demonstrate their affiliation by 
showing they control, are controlled by, or are under common control 
with each other, the Exchange will permit such members to count overall 
volume of the affiliates in calculating volume. BATS does not specify a 
specific percentage for such aggregation. The Exchange is specifying 75 
percent, similar to the percentage applied to Options Participants.
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    \9\ See Securities Exchange Act Release No. 64211 (April 6, 
2011), 76 FR 20414 (April 12, 2014) [sic] (SR-BATS-2011-012).
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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 is merely seeking to harmonize 
the treatment of the aggregation of activity of affiliated members for 
the purposes of assessing charges or credits with those rules contained 
in Chapter XV which relate to options pricing. The Exchange also 
believes that certain market participants may be able to aggregate 
because the standard is decreasing from 100 percent to 75 percent.

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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest; does not 
impose any significant burden on competition; and by its terms does not 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate., it has become 
effective pursuant to Section 19(b)(3)(A) \10\ of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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    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.

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-2014-041 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-2014-041. 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-2014-041 and should be 
submitted on or before September 30, 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. 2014-21358 Filed 9-8-14; 8:45 am]
BILLING CODE 8011-01-P


