
[Federal Register Volume 80, Number 249 (Tuesday, December 29, 2015)]
[Notices]
[Pages 81402-81405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32650]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76736; File No. SR-NSX-2015-07]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt a Fee and Rebate Schedule Pursuant to Exchange Rule 16.1

December 22, 2015.
    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 December 21, 2015, National Stock Exchange, Inc. (``NSX'' 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 comment 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 adopt a new Fee and Rebate Schedule 
(the ``Fee Schedule'') pursuant to Exchange Rule 16.1 that the Exchange 
will use upon the resumption of trading on the Exchange.\3\
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    \3\ On November 9, 2015, the Exchange filed with the Commission 
a proposed rule change amending NSX Rule 11.1, Hours of Trading, to 
Rescind Interpretations and Policies .01, Cessation of Trading 
Operations on NSX in order resume trading operations on the 
Exchange, and make other amendments to the Exchange's rules in 
connection with the proposed resumption of trading on NSX. See 
Exchange Act Release No. 76390 (November 9, 2015), 80 FR 70261 
(November 13, 2015) (SR-NSX-2015-05). On December 14, 2015, the 
Commission issued an Order approving the proposed rule change. See 
Exchange Act Release No. 76640 (December 14, 2015), 80 FR 79122 
(December 18, 2015).
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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 proposes to implement a new Fee Schedule pursuant to 
NSX Rule 16.1, with the goal of maximizing the effectiveness of its 
business model and providing Equity Trading Permit (``ETP'') Holders 
\4\ a cost-effective execution venue. Accordingly, as set forth in 
greater detail below, the Exchange is proposing to adopt a fixed

[[Page 81403]]

fee schedule that provides for discrete pricing for shares executed in 
securities priced at $1.00 and above, and those priced at less than 
$1.00. Within these pricing structures, the fees will vary based on 
whether an ETP Holder's order takes liquidity or adds liquidity or if 
the order is routed. To determine an ETP Holder's monthly cost for 
shares traded, the Exchange will make order matching computations on a 
monthly basis for each ETP Holder. The Exchange will also assess 
regulatory, connectivity, and market data fees. The Exchange proposes 
to eliminate certain fees and rebates from its former Fee Schedule to 
conform the schedule to the Exchange's current business model.\5\ The 
Exchange's proposed Fee Schedule is described below.
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    \4\ 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.
    \5\ Pursuant to a rule filing with the Commission, the Exchange 
ceased trading operations as of the close of business on May 30, 
2014. See Securities Exchange Act Release No. 72107 (May 6, 2014), 
79 FR 27017 (May 12, 2014) (SR-NSX-2014-14).
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Securities Priced at $1.00 and Above (All Tapes) \6\
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    \6\ 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.
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    For all securities priced $1.00 and above, the Exchange is 
proposing competitively priced fees that apply to all ETP Holders 
uniformly. For all orders that remove liquidity from the NSX Book \7\ 
(referred to as ``taker'' orders), the Exchange proposes to assess a 
fee of $0.0003 per executed share. If the ETP Holder's order is routed 
elsewhere, the Exchange will, instead, assess a fee of $0.0030 per 
executed share. However, a liquidity removing order that is a directed 
order will cost $0.0035 per executed share.\8\
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    \7\ The NSX Book is defined in Rule 1.5N.(1) as the Exchange's 
electronic file of orders.
    \8\ The term ``directed order'' refers to an order entered by an 
ETP Holder into the NSX trading system with instructions to route 
the order to a specified away trading center. The Exchange proposes 
to assess a higher fee for directed orders, because these orders 
will be costlier to route and execute than other routed orders. NSX 
uses third party broker-dealers to send the ETP Holder's directed 
order to another trading center. The Exchange must pay this third 
party broker on a per share executed basis, making the routing of 
these directed orders costlier to execute.
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    The Exchange notes that the fee that the Exchange will charge for 
taking liquidity from the Exchange in securities priced $1.00 or above, 
while $0.0002 higher than the fee that the Exchange used prior to 
ceasing trading operations of the close of business on May 30, 2014, is 
the lowest standard liquidity removing fee of any stock exchange in the 
National Market System that does not use the inverse pricing model. In 
light of these minimal taker fees, the fee structure does not provide 
for rebates to ETP Holders posting liquidity. While ETP Holders will 
not receive rebates for posting liquidity, ETP Holders will, 
nonetheless, not have to pay a fee for posting liquidity on the NSX 
Book (referred to as ``maker'' orders) for all order types. This 
pricing structure for securities priced $1.00 or more will make for a 
cost-effective execution venue for ETP Holders and their customers. 
Furthermore, the fees will not provide an advantage to any ETP Holder 
or investor over another. Lastly, in order to further incentivize 
posting and removing liquidity, the Exchange will no longer charge an 
increased fee for either adding liquidity using a Zero Display Reserve 
Order (i.e., a ``dark'' order) or removing liquidity by removing a Zero 
Display Reserve Order from the NSX Book.\9\
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    \9\ By comparison, prior to ceasing trading operations, the 
Exchange assessed a fee of $0.0001 per executed share for posting 
liquidity in securities priced at $1.00 and above, with the 
exception of posting liquidity using a Zero Display Reserve Order, 
for which the Exchange assessed a fee of $0.0002 per execute share. 
ETP Holders removing liquidity in securities priced at $1.00 and 
above were assessed a fee of $0.0001 and, for removing any Zero 
Display Reserve Order, a fee of $0.0002.
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Securities Priced Under $1.00 (All Tapes)
    For executions in all securities priced under $1.00, the Exchange 
is proposing to implement a Fee Schedule that is nearly identical to 
the maker-taker model that the Exchange used prior to the cessation of 
the Exchange's trading operations. For orders that remove liquidity or 
are routed, the Exchange proposes to assess a fee of 0.30% of the 
executed trade value.\10\ For directed orders, the Exchange proposes to 
assess a higher fee of 0.35% of the executed trade value for reasons 
described above.\11\ ETP Holders that add liquidity will receive a 
rebate of 0.25% of the trade value or 25% of the quote spread,\12\ 
whichever is smaller. The proposed fee and rebate structure will not 
favor any investor or ETP holder over another as all ETP holders are 
subject to the same fee and rebate program. The Exchange believes that 
the proposed fee and rebate structure will provide for a fair and 
competitive execution venue in securities priced below $1.00.
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    \10\ ``Trade value'' means a dollar amount equal to the price 
per share multiplied by the number of shares executed.
    \11\ See fn. 8, supra.
    \12\ ``Quote spread'' means a dollar amount equal to the number 
of shares executed multiplied by the difference at the time of 
execution between (x) the price per share of the national best bid, 
and (y) the price per share of the national best offer, in each case 
as such quotes are disseminated pursuant to an effective National 
Market System plan and as the terms ``national best bid'' and 
``national best offer'' are defined in Rule 600 of Regulation NMS.
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Regulatory, Market Data, and Connectivity Fees
    The Exchange also proposes to assess ETP Holders with regulatory, 
market data, and connectivity fees. The Exchange proposes to assess a 
regulatory fee of $500 per calendar month for each ETP Holder. This 
amount is the same amount that the Exchange charged prior to ceasing 
trading operations. The regulatory fee is designed to assure that ETP 
Holders share in the cost of adequately funding the regulatory function 
for the NSX marketplace.\13\
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    \13\ The $500 per month regulatory fee was first adopted by the 
Exchange in 2011. See Securities Exchange Act Release No. 64208 
(April 6, 2011), 76 FR 20412 (April 12, 2011) (SR-NSX-2011-02).
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    The Exchange will offer its proprietary market data to ETP Holders 
and other authorized recipients through the NSX Depth of Book Feed \14\ 
at a price of $500 per calendar month, $100 more per month than the 
Exchange charged ETP Holders and other authorized recipients prior to 
the time that the Exchange ceased its trading operations.\15\ 
Additionally, ETP Holders will be assessed the same connectivity or 
logical port fee of $100 per session per calendar month as ETP Holders 
were assessed prior to the time that the Exchange ceased its trading 
operations in May 2014.
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    \14\ The NSX Depth of Book Feed is the Exchange's proprietary 
market data feed. It is available on a uniform basis to all ETP 
Holders authorized to receive the feed, as well as to any other 
authorized recipients.
    \15\ The Exchange proposes to remove from the Depth of Book Feed 
Section of the Fee Schedule prior text regarding application for and 
approval of the Depth of Book Feed service. The Exchange believes 
this text to be extraneous, in light of the purpose of and content 
of the Fee Schedule.
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Other Fee Adjustments
    To provide a more accessible and competitive marketplace, the 
Exchange is proposing to remove several fees that the Exchange assessed 
prior to ceasing its trading operations. The proposed Fee Schedule does 
not provide for the one-time onboarding fee of $5,000 that the Exchange 
previously assessed applicant ETP Holders applying to become order 
delivery users. Prior to December 14, 2015, the Exchange offered order 
delivery as a mode of order interaction with the Exchange's trading 
system, as provided in Rule 11.13(b) and Interpretations and Policies 
.01 thereunder. The Exchange has amended

[[Page 81404]]

its rules and no longer offers order delivery as a mode of interaction 
and therefore the $5,000 onboarding fee is no longer applicable.\16\
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    \16\ See fn. 3, supra.
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    The Exchange is also proposing to remove language regarding the 
assessing of ``Pass Through Fees.'' These fees, which are incurred from 
the ETP Holder's use of directed orders, will be factored into the cost 
of sending a directed order, as described above. Also, as described 
above, the Exchange will no longer assess a greater fee for adding 
liquidity using a Zero Display Reserve Order or removing a Zero Display 
Reserve Order from the NSX Book. The Exchange also proposes to remove 
from the Fee Schedule reference to fees assessed for using a ``Double 
Play Order,'' because the Exchange no longer offers the Double Play 
Order functionality.\17\
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    \17\ See fn. 3, supra.
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    Pursuant to Exchange Rule 16.1(c), the Exchange will ``provide ETP 
Holders with notice of all relevant dues, fees, assessments and charges 
of the Exchange'' through the issuance of an Information Circular and 
will post the Fee Schedule and the instant rule filing on the 
Exchange's Web site, www.nsx.com.
 2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\18\ in general and, in 
particular, Section 6(b)(4) of the Act,\19\ 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. The 
proposed rule change is also consistent with Section 6(b)(5) of the 
Act,\20\ 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, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Exchange submits that the proposed Fee Schedule equitably 
allocates fees and that the fees contained therein are reasonable, as 
required by Section 6(b)(4) of the Act. The Exchange is proposing to 
adopt a model whereby an ETP Holder adding liquidity to the Exchange in 
securities priced at $1.00 or greater will pay no fee, and ETP Holders 
removing liquidity from the Exchange in securities priced at $1.00 or 
greater will pay a fee of $0.0003 on a per share executed basis, which 
is lower than the standard liquidity removing fee of any other stock 
exchange in the National Market System that does not utilize an inverse 
pricing structure. The Exchange's fees for routed orders are also 
reasonable as they are comparable to fees charged by other exchanges 
for routed orders.\21\
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    \21\ For example, EDGX Exchange, Inc. (``EDGX'') charges a 
standard rate of $0.0029 per share executed for routing and removing 
liquidity in securities priced at or above $1.00, as compared to the 
Exchange's proposed fee of $0.0030 per executed share. For routed 
orders in securities below $1.00, EDGX charges a standard rate of 
0.30% of the dollar value of the trade, as compared to the Exchange 
charging 0.30% of the dollar value of the trade. For directed 
orders, EDGX charges $0.0032 per executed share, as compared to the 
Exchange charging $0.0035 per executed share.
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    Further, for securities priced below $1.00, the Exchange is 
proposing to maintain a maker-taker fee structure, as it did as of May 
30, 2014, with the exception of charging a higher fee for directed 
orders that is based on the higher cost associated with routing such 
orders.
    In addition to being reasonable, all of the proposed execution fees 
are equitably allocated in that they will apply uniformly to all ETP 
Holders accessing the System. Each ETP Holder will have the ability to 
determine the extent to which the Exchange's proposed structure will 
provide it with an economic incentive to use the System, and model its 
business accordingly. Thus, the Fee Schedule provides for a low-cost, 
simple, and streamlined approach which will benefit both ETP Holders 
and the Exchange in determining revenues and expenses, as well as 
maximizing the Exchange's competitive position.
    The Exchange also submits that its proposed regulatory, market 
data, and connectivity fees are consistent with Section 6(b)(4) of the 
Act. The fees are competitively and reasonably priced \22\ and are 
equitably allocated in that the regulatory, market data, and 
connectivity fees are applied uniformly to ETP Holders, with the 
connectivity fee assessed on a usage basis.
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    \22\ For these fees, the Exchange is charging prices less than 
or equal to those prices that several of the Exchange's competitors 
charge their members. For example, EDGX charges $500 per port per 
month fee and a $500 per month depth of book fee. Further, the 
Chicago Stock Exchange charges $600 per month for its ``SRO fee,'' 
which is comparable to the Exchange's regulatory fee.
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    The Exchange further submits that the proposed execution fees 
satisfy the requirements of Section 6(b)(5) of the Act in that they do 
not permit unfair discrimination between customers, issuers, brokers, 
or dealers, and are 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. Under the proposed 
changes to the Fee Schedule, all ETP Holders executing orders on the 
Exchange will be subject to one fee and/or rebate structure, and such 
changes are thereby designed to meet the requirements of the Section 
6(b)(5) that the rules of the Exchange not permit unfair discrimination 
among ETP Holders and their customers. The Exchange submits that the 
proposal will promote just and equitable principles of trade by 
providing a streamlined Fee Schedule that will reduce the 
administrative burdens and expenses incurred by ETP Holders in 
determining the revenues and costs associated with its activity on the 
Exchange. Moreover, the Exchange believes that offering low execution 
fees will incentivize market participants to post and to access the 
liquidity on the NSX Book, which would inure to the benefit of all 
market participants seeking greater and better execution opportunities. 
In this regard, the proposed Fee Schedule will promote just and 
equitable principles of trade and operate to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system under Section 6(b)(5).
    The Exchange's market data, regulatory, and connectivity fees are 
also consistent with Section 6(b)(5) of the Act. These fees will be 
uniformly applied to all ETP Holders, with the sole variable being the 
connectivity fee that is derived from the number of connections that 
the ETP Holder maintains with NSX (i.e., the greater the number of 
connections, the higher the monthly fee). For these reasons, the 
proposed fees do not permit unfair discrimination among ETP Holders, as 
the fees are uniformly applied to each ETP Holder. Further, assessing 
these fees will operate to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, 
because the Fees allow the Exchange to provide the requisite services 
to function competitively within the National Market System, and also 
ensure that the Exchange can maintain a consistent source of funding to 
support its regulatory compliance obligations.
    Further, eliminating the Exchange's former fee for adding liquidity 
by using a Zero Display Reserve Order or removing liquidity provided by 
a Zero Display Reserve Order from the NSX

[[Page 81405]]

Book and incorporating pass-through fees into the cost of executing a 
directed order is consistent with Section 6(b)(5) of the Act. The 
elimination of these fees will be uniformly applied to current and 
prospective ETP Holders. Thus, the proposed reduction or removal of the 
fees do not permit unfair discrimination among ETP Holders. 
Additionally, reducing or removing the fees will serve to decrease cost 
and increase liquidity, further removing impediments to and perfecting 
the mechanism of a free and open market and a national market system.

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 proposed rule 
change seeks to adopt a Fee Schedule that will apply uniformly to all 
ETP Holders accessing the Exchange. The Exchange further submits that 
its proposed execution, regulatory, market data, and connectivity fees 
have been reasonably calibrated such that they should impose no burden 
on competition. Moreover, the proposed fees and rebates will enhance 
rather than burden competition by operating to increase liquidity and 
improve execution quality on the Exchange through reasonable and 
equitably allocated economic incentives.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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 \23\ and subparagraph (f)(2) of Rule 
19b-4.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \24\ 17 CFR 240.19b-4(f)(2).
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    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.

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-2015-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSX-2015-07. 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-2015-07 and should be 
submitted on or before January 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-32650 Filed 12-28-15; 8:45 am]
 BILLING CODE 8011-01-P


