
[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Notices]
[Pages 3545-3547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01064]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76915; File No. SR-BX-2016-001]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 7018

January 14, 2016.
    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 4, 2016, 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 amend the fee schedule under Exchange Rule 
7018(a) with respect to execution and routing of orders in securities 
priced at $1 or more per share.
    The text of the proposed rule change is also 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.

[[Page 3546]]

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.

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 under BX Rule 
7018(a), relating to fees and credits provided for orders in securities 
priced and $1 or more per share that execute on BX.
    Under BX Rule 7018(a), the Exchange provides credits to member 
firms that access liquidity on BX. The Exchange is proposing to add a 
new credit tier for orders that access liquidity (excluding orders with 
midpoint pegging and excluding orders that receive price improvement 
and execute against an order with midpoint pegging). The new credit 
tier will be for a member that adds and accesses liquidity equal to or 
exceeding 0.50% of total consolidated volume during a month. The 
proposed credit for the tier will be $0.0017 per share executed.
    The Exchange also proposes to amend a fee for providing liquidity 
through the NASDAQ OMX BX Equities System (the ``System''), by 
eliminating one of the criteria applicable to the fee and decreasing 
the fee. Specifically, the current fee for a displayed order entered by 
a member that (i) adds liquidity equal to or exceeding 0.25% of total 
Consolidated Volume during a month; and (ii) adds and accesses 
liquidity equal to or exceeding 0.50% of total Consolidated Volume 
during a month is $0.0016 per share executed. The Exchange proposes to 
eliminate criteria (i) and decrease the fee to $0.0014 per share 
executed.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\3\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\4\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other fees 
among members and issuers and other persons using any facility or 
system which the Exchange operates or controls, and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, for example, the Commission indicated that market forces should 
generally determine the price of non-core market data because national 
market system regulation ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \5\ Likewise, in NetCoalition v. NYSE 
Arca, Inc.\6\ (``NetCoalition'') the DC Circuit upheld the Commission's 
use of a market-based approach in evaluating the fairness of market 
data fees against a challenge claiming that Congress mandated a cost-
based approach.\7\ As the court emphasized, the Commission ``intended 
in Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \8\
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    \5\ Securities Exchange Act Release No. 51808 at 37499 (June 9, 
2005) (``Regulation NMS Adopting Release'').
    \6\ NetCoalition v. NYSE Arca, Inc., 615 F.3d 525 (D.C. Cir. 
2010).
    \7\ See NetCoalition, at 534.
    \8\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \9\
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    \9\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783).
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    The Exchange believes that the proposed new credit tier for orders 
that access liquidity (excluding orders with midpoint pegging and 
excluding orders that receive price improvement and execute against an 
order with midpoint pegging), entered by a member that adds and 
accesses liquidity equal to or exceeding 0.50% of total consolidated 
volume during a month is reasonable because it provides an additional 
opportunity for market participants to receive credits for 
participation on BX and the Exchange desires to further incentivize 
member firms to participate in the Exchange by removing liquidity. The 
Exchange also believes that the proposed rule change is an equitable 
allocation and is not unfairly discriminatory because the Exchange will 
provide the same credit to all similarly situated members that achieve 
the level of total consolidated volume required by the tier.
    BX believes that the proposed fee decrease from $0.0016 per share 
executed to $0.0014 per share executed, as well as the elimination of 
the first criteria below (criteria (i)), for a displayed order entered 
by a member that (i) adds liquidity equal to or exceeding 0.25% of 
total Consolidated Volume during a month; and (ii) adds and accesses 
liquidity equal to or exceeding 0.50% of total Consolidated Volume 
during a month are reasonable because decreasing the fee and 
eliminating the first criteria will provide firms more flexibility in 
attaining the tier and further incentivize participation in the market.
    The Exchange also believes that this proposed rule change is an 
equitable allocation and is not unfairly discriminatory because it will 
further encourage market participant activity and will also support 
price discovery and liquidity provision. The Exchange also believes 
this proposed rule change is an equitable allocation and is not 
unfairly discriminatory because the Exchange will apply the same fee 
and credit to all similarly situated members.
    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 or credit 
opportunities available at other venues to be more favorable. In such 
an environment, BX must continually adjust its fees and credits 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 they reflect changes to both credits and fees designed to 
incentivize changes in market participant behavior to the benefit of 
the market overall.

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

    The Exchange does not believe that the proposed rule change will 
result in

[[Page 3547]]

a burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\10\ In terms of 
inter-market competition, the Exchange 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, or credit opportunities available at other venues to be 
more favorable. In such an environment, the Exchange must continually 
adjust its fees and credits to remain competitive with other exchanges 
and with alternative trading systems that have been exempted from 
compliance with the statutory standards applicable to exchanges. 
Because competitors are free to modify their own fees and credits in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited. In this instance, both the proposed new credit tier 
and the modification to the fee are subject to extensive competition 
both from other exchanges and from off-exchange venues.
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    \10\ 15 U.S.C. 78f(b)(8).
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    In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that the Exchange will lose market share as 
a result. Accordingly, the Exchange does not believe that the proposed 
changes will 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

    No written comments were either solicited or received.

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

    The foregoing change has become effective pursuant to Section 
19(b)(3)(A) of the Act \11\ and paragraph (f) of Rule 19b-4 \12\ 
thereunder. 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2016-001 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-2016-001. 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-2016-001, and should be 
submitted on or before February 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01064 Filed 1-20-16; 8:45 am]
 BILLING CODE 8011-01-P


