
[Federal Register Volume 80, Number 17 (Tuesday, January 27, 2015)]
[Notices]
[Pages 4325-4327]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01375]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74107; File No. SR-BX-2015-005]


Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Changes To Amend Rule 
7018 To Amend Fees and Rebates in Connection With BX's Retail Price 
Improvement Program

January 21, 2015.
    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 January 12, 2015, NASDAQ OMX BX, Inc. (``BX'' or the ``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 is proposing changes to amend BX Rule 7018 to amend 
fees and rebates in connection with BX's Retail Price Improvement 
Program.
    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. 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 proposal is to amend BX Rule 7018 to amend fees 
and rebates for execution of orders under BX's Retail Price Improvement 
(``RPI'') program. BX recently adopted the RPI program,\3\ which 
provides incentives to member firms (or a division thereof) approved by 
the Exchange to participate in the program (a ``Retail Member 
Organization'' or ``RMO'') to submit designated ``Retail Orders'' \4\ 
for the purpose of seeking price improvement. All BX members may enter 
retail price improvement orders (``RPI Orders''),\5\ a form of non-
displayed orders that are priced more aggressively than the Protected 
National Best Bid or Offer (``NBBO'') by at least $0.001 per share, for 
the purpose of offering such price improvement. RMOs may use two types 
of Retail Orders. A Type 1 Retail Order is eligible to execute only 
against RPI Orders and other orders (such as midpoint pegged orders) 
that will provide price improvement. Type 2 Retail Orders interact 
first with available RPI Orders and other price improving orders, and 
then are eligible to access non-price improving liquidity on the BX 
book and to route to other trading venues if so designated.
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    \3\ Securities Exchange Act Release No. 73410 (October 23, 
2014), 79 FR 64447 (October 29, 2014) (SR-BX-2014-048) (proposing 
RPI program and exemption from SEC Rule 612 under Regulation NMS, 17 
CFR 242.612, in connection therewith); see also Securities Exchange 
Act Release No. 73836 (December 15, 2014), 79 FR 75852 (December 19, 
2014) (SR-BX-2014-059).
    \4\ A Retail Order is defined in BX Rule 4780(a)(2), in part, as 
``an agency or riskless principal order that satisfies the criteria 
of FINRA Rule 5320.03, that originates from a natural person and is 
submitted to the Exchange by a Retail Member Organization, provided 
that no change is made to the terms of the order with respect to 
price (except in the case that a market order is changed to a 
marketable limit order) or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology.''
    \5\ A Retail Price Improvement Order is defined in BX Rule 
4780(a)(3), in part, as consisting of ``non-displayed liquidity on 
the Exchange that is priced better than the Protected NBBO by at 
least $0.001 and that is identified as such.''
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    BX currently offers a rebate of $0.0025 per share executed to RMOs 
with respect to Retail Orders that execute against RPI Orders. RMO 
Retail Orders that execute against other orders providing price 
improvement with respect to the NBBO will receive a rebate otherwise 
applicable to executions of orders that access liquidity. For Type 2 
Retail Orders that execute against non-price improving orders on the BX 
book, BX offers a rebate otherwise applicable to execution of orders 
that access liquidity. Similarly, when Type 2 Retail Orders are routed 
and execute at another trading venue, BX charges the fee otherwise 
applicable to execution of routed orders. For RPI Orders that provide 
liquidity, BX charges a fee of $0.0025 per share executed. Other orders 
that provide liquidity to Retail Orders will receive the credit or pay 
the fee otherwise applicable to orders that provide liquidity.
    BX is proposing to provide greater incentives to RMOs to 
participate in the program by providing two new tiers of credits 
provided under the program. Specifically, BX proposes to provide RMOs a 
credit of $0.0005 per share executed for a Retail Order that accesses 
non-Retail Price Improvement midpoint liquidity. This is the same 
credit all orders that execute against midpoint pegged orders currently 
receive under

[[Page 4326]]

Rule 7018(a). BX is now including the credit as a stand-alone credit 
incorporated into the program. BX is also providing RMOs with a new 
credit of $0.0017 per share executed for a Retail Order that accesses 
other liquidity on the Exchange book. Currently, such an order would 
receive a credit ranging from $0.0004 to $0.0015 per share executed 
under Rule 7018(a), depending on a member firm's removing and adding 
activity during the month. BX is adding the new increased credit for a 
Retail Order that accesses other liquidity on the Exchange book, which 
will not be tied to the member firm's average daily volume during the 
month.
    As a consequence of adding the two new credit tiers to the RPI 
Program, BX is eliminating language under the rule that encompasses 
such orders, noting that the fees under Rule 7018(a) and (b) apply. 
Specifically, BX is deleting language concerning Retail Orders that 
access other liquidity at a price better than the national best bid or 
best offer. Such Retail Orders may be either Type 1 or Type 2. 
Likewise, BX is deleting language concerning Type 2 Retail Orders that 
access other liquidity from the Exchange book. The orders covered by 
these two sections are now included in the two new credit tiers of the 
rule. For example, an order that would qualify under the proposed new 
tier applicable to Retail Orders that accesses non-Retail Price 
Improvement midpoint liquidity currently falls under the section 
concerning a Retail Order that accesses other liquidity at a price 
better than the national best bid and offer. Similarly, an order that 
would qualify under the proposed new tier applicable to a Retail Order 
that accesses other liquidity on the Exchange book currently falls 
under one of the deleted sections, as such orders must be either a 
Retail Order that accesses other liquidity at a price better than the 
national best bid or best offer, or is a Type 2 Retail Order that 
accesses other liquidity from the Exchange book.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\6\ in general, and with Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed new credits provided to RMOs under the RPI program are 
reflective of BX's ongoing efforts to use pricing incentive programs to 
attract orders of retail customers to BX and improve market quality. 
The goal of this program and similar pricing incentives is to provide 
meaningful incentives for members that represent the orders of retail 
customers to increase their participation on BX. The proposed credit of 
$0.0005 per share executed with respect to Retail Orders that access 
non-Retail Price Improvement Order midpoint liquidity is reasonable 
because it merely incorporates the current credit provided for such 
orders under Rule 7018(a) into the RPI program. The change is 
consistent with an equitable allocation of fees because it will allow 
BX to disassociate the credit from the credit provided under Rule 
7018(a) so that the RPI program credit will not be affected by changes 
to the credit under Rule 7018(a). Moreover, all member firms that 
qualify for the new tier will receive the credit. BX further believes 
that the proposed credit tier is not unreasonably discriminatory 
because it is designed to separate order activity under the program 
from the normal credit provided under Rule 7018(a). As such, BX may 
increase the proposed credit, or reduce the related credit under Rule 
7018(a), resulting in a more meaningful economic benefit to member 
firms that participate in the RPI program. Such incentive pricing in 
consistent with the goal of increasing participation in this beneficial 
program.
    Similarly, BX believes that the proposed credit of $0.0017 per 
share executed with respect to Retail Orders that access other 
liquidity on the Exchange book is reasonable because it provides 
greater incentive to member firms to participate in this beneficial 
program. The proposed credit is greater than the highest credit tier 
currently available for such orders under Rule 7018(a). Moreover, as 
opposed to the other tiers under Rule 7018(a) the new credit is not 
tied to any other measure, which provides further incentive to member 
firms to participate in the program. The proposed change is consistent 
with an equitable allocation of fees because it provides incentive 
pricing to all member firms that qualify under the program. BX further 
believes that the proposed credit tier is not unreasonably 
discriminatory because it is designed to provide further meaningful 
incentives for members that represent the orders of retail customers to 
increase their participation on BX. Because retail orders are likely to 
reflect long-term investment intentions, they promote price discovery. 
Accordingly, their presence in the BX market has the potential to 
benefit all market participants. For this reason, BX believes that it 
is equitable and not unfairly discriminatory to provide significant 
financial incentives to encourage greater retail participation in the 
market.
    Elimination of the existing sections of the RPI Program that note 
that certain orders will be subject to the current fees and credits 
under Rule 7018(a) and (b) is reasonable because they are replaced by 
the new credit tiers, as discussed above. The Exchange believes that 
elimination of these sections is an equitable allocation and not 
unfairly discriminatory because they allow the Exchange to offer 
incentive pricing to a wider range of beneficial order activity, which 
will be provided to all member firms that meet the requirements for the 
credits.
    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. BX believes that the proposed rule change reflects this 
competitive environment because it is designed to allow BX to compete 
with other exchanges that offer similar price improvement programs for 
retail orders.

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. In this instance, 
the RPI program is designed to allow BX to compete more effectively 
with the New York Stock Exchange, NYSE MKT LLC, NYSE Arca, Inc. and the 
BATS-Y Exchange, all of which offer similar programs designed to 
attract retail order flow. BX believes that the proposed higher credit 
with respect to Retail Orders will enhance competition by drawing 
additional retail order flow to BX and, as a consequence, possibly 
encouraging other trading venues to make competitive pricing changes.
    For these reasons and the reasons discussed in connection with the 
statutory basis for the proposed rule change, BX does not believe that 
the proposed changes will impose any

[[Page 4327]]

burden on competition, but rather may promote competition among order 
execution venues for orders of retail customers.

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) of the Act \8\ and paragraph (f) of Rule 19b-4 
thereunder.\9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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-2015-005 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-2015-005. 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 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-2015-005, 
and should be submitted on or before February 17, 2015.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Brent J. Fields,
Secretary.
[FR Doc. 2015-01375 Filed 1-26-15; 8:45 am]
BILLING CODE 8011-01-P


