[Federal Register Volume 84, Number 111 (Monday, June 10, 2019)]
[Notices]
[Pages 26910-26912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12086]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86027; File No. SR-BX-2019-016]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, 
Section 118(a) To Adopt Pricing for the Recently Adopted SCAR Routing 
Strategy

June 4, 2019.
    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 May 22, 2019, Nasdaq BX, Inc. (``BX'' or ``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 proposes to amend Equity 7, Section 118(a), as 
described further below.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqbx.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 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 purpose of the proposed rule change is to adopt pricing for the 
recently adopted SCAR routing strategy,\3\ which will be implemented on 
May 13, 2019.\4\ In sum, SCAR is a routing option under which orders 
check the System \5\ for available shares and simultaneously route to 
the other equity markets operated by Nasdaq, Inc., The Nasdaq Stock 
Market (``Nasdaq'') and Nasdaq PSX (``PSX'' and together with Nasdaq 
and the Exchange, the ``Nasdaq Affiliated Exchanges'').\6\
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    \3\ See BX Rule 4758(a)(1)(A)(x). See also Securities Exchange 
Act Release No. 85368 (March 20, 2019), 84 FR 11362 (March 26, 2019) 
(SR-BX-2019-004).
    \4\ See Equity Trader Alert #2019-29.
    \5\ The term ``System'' shall mean the automated system for 
order execution and trade reporting owned and operated by the 
Exchange. See Rule 4701(a).
    \6\ If shares remain unexecuted after routing, they are posted 
on the Exchange's book or cancelled. Once on the book, should the 
order subsequently be locked or crossed by another market center, 
the System will not route the order to the locking or crossing 
market center. See Rule 4758(a)(1)(A)(x).
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    The Exchange initially filed the proposed pricing changes on May 
13, 2019 (SR-BX-2019-014). On May 22,

[[Page 26911]]

2019, the Exchange withdrew that filing and submitted this filing.
    The Exchange now proposes to adopt the following pricing for SCAR 
orders in securities listed on Nasdaq (``Tape C''), NYSE (``Tape A''), 
and on exchanges other than Nasdaq and NYSE (``Tape B'') (collectively, 
``Tapes''), which execute on Nasdaq and PSX: \7\
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    \7\ Orders using the SCAR routing option that execute on the 
Exchange would be subject to the Exchange's standard fees and 
rebates. Currently, members that do not meet certain volume 
thresholds that would qualify them for a better rate (such as a 
liquidity removal credit) are assessed a standard transaction fee of 
$0.0003 per share for orders in any Tape securities priced at $1 or 
more per share that access liquidity on the Exchange. See Equity 7, 
Section 118(a).
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     SCAR orders executed on Nasdaq will be assessed a charge 
of $0.00295 per share in any Tape securities priced at $1 or more per 
share.
     SCAR orders executed on PSX will be assessed a charge of 
$0.0029 per share in any Tape securities priced at $1 or more per 
share.
     SCAR orders executed on Nasdaq or PSX in any Tape 
securities priced below $1 per share will be assessed a charge of 0.30% 
of the total transaction cost.\8\
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    \8\ This is the same rate that the Exchange currently charges 
for all securities priced below $1 that route and execute at an away 
venue. See Equity 7, Section 118(b).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the pricing structure proposed above for 
SCAR is reasonable, equitable, and not unfairly discriminatory because 
the fees are generally set at levels intended to incentivize members to 
use this new routing strategy while also allowing the Exchange to 
recoup the costs of providing routing services. For instance, the 
proposed $0.00295 per share charge for orders in any Tape securities 
priced at $1 or more per share that route to and execute on Nasdaq 
using the SCAR routing strategy is lower than the standard transaction 
charge of $0.0030 per share that would apply if the order executed 
directly on Nasdaq as the home exchange.\11\ Similarly, the proposed 
$0.0029 per share charge for such orders that route to and execute on 
PSX is lower than the standard transaction charge of $0.0030 per share 
that would apply if the order executed directly on PSX as the home 
exchange.\12\ As such, the proposed SCAR pricing is set at rates that 
make it more economical for members to use this routing strategy, 
especially for those members that do not already add and/or remove 
large amounts of volume on Nasdaq and PSX directly.
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    \11\ This fee would apply unless the member qualifies for a 
better rate (such as a discounted fee or credit) by meeting certain 
volume thresholds. See Nasdaq Equity 7, Section 118(a).
    \12\ This fee would apply unless the member qualifies for a 
better rate (such as a discounted fee or credit) by meeting certain 
volume thresholds. See PSX Equity 7, Section 3, Order Execution and 
Routing.
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    The Exchange also believes that the proposed SCAR credits and 
charges for all Tape securities priced at $1 or more per share are set 
at appropriate levels for the reasons that follow. The Exchange 
believes that the proposed $0.0029 charge for SCAR orders that route 
and execute on PSX is aligned with the $0.0029 charge currently 
assessed by Cboe BYX Exchange (``BYX''), Cboe BZX Exchange (``BZX''), 
and Cboe EDGA (``EDGA'') to their members using the ALLB, a routing 
strategy similar to SCAR in that ALLB routes between affiliated 
exchanges only,\13\ to route orders to their affiliate, Cboe EDGX 
Exchange (``EDGX'').\14\ The Exchange also believes that the proposed 
$0.00295 charge for SCAR orders that route and execute on Nasdaq is set 
at an appropriate level because it remains lower with the $0.0030 
charge currently assessed by BYX, EDGX, and EDGA to their members using 
the ALLB routing strategy to route orders to their affiliate, BZX.\15\ 
Given that Nasdaq is a more active market than PSX, the Exchange is 
proposing an incrementally higher routing charge for this market as 
opposed to the proposed charge for PSX because the Exchange believes 
that the higher volume on Nasdaq coupled with the proposed fee will be 
more effective in recouping the costs of providing routing services. 
The Exchange still believes that the proposed SCAR pricing for Nasdaq 
is set at an appropriate because it remains lower than the standard 
transaction charge of $0.0030 for accessing Nasdaq directly as well as 
the $0.0030 fee assessed by EDGX, EDGA, and BYX for their similar ALLB 
routing strategy, each as discussed above.
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    \13\ Unlike SCAR, which routes simultaneously to Nasdaq, PSX, 
and BX simultaneously in accordance with the System routing table, 
the ALLB routing strategy offered by BZX, BYZ, EDGA, and EDGX first 
checks the local book before being routed to the affiliated 
exchanges in accordance with the applicable system routing table. 
See Securities Exchange Act Release No. 85368 (March 20, 2019), 84 
FR 11362 (March 26, 2019) (SR-BX-2019-004).
    \14\ See BYX Fee Schedule, available at https://markets.cboe.com/us/equities/membership/fee_schedule/byx; BZX Fee 
Schedule, available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx; and EDGA Fee Schedule, available at 
https://markets.cboe.com/us/equities/membership/fee_schedule/edga.
    \15\ See EDGX Fee Schedule, available at https://markets.cboe.com/us/equities/membership/fee_schedule/edgx. See supra 
note 14.
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    The Exchange also believes that it is reasonable, equitable, and 
not unfairly discriminatory to assess the proposed charge for SCAR 
orders executed on Nasdaq or PSX in any Tape securities priced below $1 
per share because it is consistent with what it currently charges for 
all orders in securities priced at less than $1 per share that route 
and execute at an away venue.\16\ Lastly, the Exchange believes that 
the proposed pricing changes are equitable and not unfairly 
discriminatory because they will apply uniformly to all members.
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    \16\ The Exchange currently charges 0.30% of the total 
transaction cost for all such orders. See Equity 7, Section 118(b).
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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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange 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 rebate opportunities available at other venues to be 
more favorable. In such an environment, the Exchange must continually 
adjust its fees to remain competitive. Because competitors are free to 
modify their own fees 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, the proposed pricing for SCAR orders are intended 
to recoup the Exchange's costs associated with providing routing 
services while providing incentives to members to make use of the 
Exchange's optional routing functionality. As discussed above, the 
Exchange believes that its proposed pricing remains competitive with 
other equity exchanges.\17\ In addition, because the Exchange's routing 
services are the subject of

[[Page 26912]]

competition, including price competition, from other exchanges and 
broker-dealers that offer routing services, as well as the ability of 
members to use their own routing capabilities, it is likely that the 
Exchange will lose market share as a result of the changes if they are 
unattractive to market participants. 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.
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    \17\ See supra notes 14 and 15.
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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)(ii) of the Act.\18\
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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-2019-016 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-2019-016. 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 website (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 website 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 a.m. and 3 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. Persons submitting comments are cautioned that 
we do not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-BX-
2019-016 and should be submitted on or before July 1, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12086 Filed 6-7-19; 8:45 am]
 BILLING CODE 8011-01-P


