[Federal Register Volume 87, Number 15 (Monday, January 24, 2022)]
[Notices]
[Pages 3625-3628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01221]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93989; File No. SR-BX-2022-001]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the BX 
Pricing Schedule at Options 7, Section 2

January 18, 2022.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 3, 2022, Nasdaq BX, Inc. (``BX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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\ 15 U.S.C. 78a.
    \3\ 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 BX Pricing Schedule at Options 
7, Section 2, as described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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 amend the BX Pricing 
Schedule at Options 7, Section 2.

[[Page 3626]]

Specifically, the Exchange proposes to: (1) Increase the Taker Fees in 
Penny Symbols for all market participants except Customers \4\ from 
$0.46 to $0.50 per contract, (2) increase the Customer Taker Fee in SPY 
from $0.26 to $0.31 per contract, and (3) remove the higher Maker 
Rebate of $0.42 per contract currently offered to Lead Market Makers 
\5\ and Market Makers \6\ for IWM, GLD, SLV, and TSLA.
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    \4\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(48)).
    \5\ The term ``Lead Market Maker'' or (``LMM'') applies to a 
registered BX Options Market Maker that is approved pursuant to 
Options 2, Section 3 to be the LMM in an options class (options 
classes).
    \6\ The term ``BX Options Market Maker'' or (``M'') is a 
Participant that has registered as a Market Maker on BX Options 
pursuant to Options 2, Section 1, and must also remain in good 
standing pursuant to Options 2, Section 9. In order to receive 
Market Maker pricing in all securities, the Participant must be 
registered as a BX Options Market Maker in at least one security.
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Penny Taker Fee
    Today, the Exchange charges LMM, Market Maker, Non-Customer,\7\ 
Firm,\8\ and Customer orders in Penny Symbols a Taker Fee of $0.46 per 
contract. For Customer orders in SPY, the Exchange charges a reduced 
Taker Fee of $0.26 per contract.
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    \7\ The term ``Non-Customer'' shall include a Professional, 
Broker-Dealer and Non-BX Options Market Maker.
    \8\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
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    The Exchange now proposes to increase the Penny Taker Fees for all 
market participants except Customers from $0.46 to $0.50 per contract. 
The Exchange also proposes to increase the Customer Taker Fee in SPY 
from $0.26 to $0.31 per contract.
Penny Maker Rebate
    The Exchange currently offers LMMs and Market Makers a Maker Rebate 
in Penny Symbols that is $0.29 per contract (LMMs) and $0.25 per 
contract (Market Makers). For AAPL, IWM, GLD, QQQ, SLV, and TSLA, both 
LMMs and Market Makers are currently offered a higher Maker Rebate of 
$0.42 per contract.
    The Exchange now proposes to remove IWM, GLD, SLV, and TSLA from 
the list of Penny Symbols eligible to receive the higher $0.42 per 
contract Maker Rebate. While the Exchange will no longer offer the 
higher rebate for IWM, GLD, SLV, and TSLA, Participants will still 
receive the Penny Maker Rebate in these Penny Symbols, albeit at a 
lower rate of $0.29 per contract (for LMMs) and $0.25 per contract (for 
Market Makers). Furthermore, LMMs and Market Makers will continue to be 
provided the higher $0.42 Maker Rebate for AAPL and QQQ orders under 
this proposal.
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's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[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'. . . .'' \11\
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    \11\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \12\
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    \12\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow.
    Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules. As such, the 
proposal represents a reasonable attempt by the Exchange to increase 
its liquidity and market share relative to its competitors.
Penny Taker Fee
    The Exchange believes that its proposal to increase the Penny Taker 
Fees for all market participants except Customers from $0.46 to $0.50 
per contract is reasonable. While the Penny Taker Fees are increasing 
in this manner, the Exchange believes that its fees remain competitive 
with other options exchanges.\13\ Accordingly, the Exchange believes 
that the proposed fees will continue to attract order flow to BX to the 
benefit of all market participants. The Exchange further believes that 
increasing the Penny Taker Fees from $0.46 to $0.50 per contract is 
equitable and not unfairly discriminatory because the proposed changes 
will apply uniformly to all similarly situated Participants.
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    \13\ For example, Nasdaq MRX, LLC (``MRX'') currently charges 
all market participants except Priority Customers a Penny Taker Fee 
of $0.50 per contract. See MRX Options 7, Section 3. In addition, 
NYSE Arca Options similarly charges all market participants except 
Customers a take liquidity fee in Penny Issues of $0.50 per 
contract. See NYSE Arca Options Fees and Charges, Transaction Fee 
for Electronic Executions--Per Contract.
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    The Exchange believes that its proposal to increase the Customer 
Taker Fee in SPY from $0.26 to $0.31 per contract is reasonable. While 
the Customer Taker Fee in SPY is increasing, Customers will continue to 
receive favorable pricing compared to all other market participants on 
BX. In particular, no other market participants except Customers are 
currently eligible to receive this reduced Taker Fee in SPY. These 
market participants are instead assessed the Penny Taker Fee of $0.46 
per contract today (which is increasing to $0.50 per contract under 
this proposal). The Exchange believes that offering the reduced Taker 
Fee in

[[Page 3627]]

SPY of $0.31 per contract to Customers is equitable and not unfairly 
discriminatory because the proposed pricing will apply uniformly to all 
similarly situated Participants. Customer liquidity benefits all market 
participants by providing more trading opportunities which attracts 
market makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads and may cause an additional 
corresponding increase in order flow from other market participants.
Penny Maker Rebate
    The Exchange believes that its proposal to remove IWM, GLD, SLV, 
and TSLA from the list of Penny Symbols eligible to receive the higher 
$0.42 per contract Maker Rebate is reasonable. While the Exchange will 
no longer offer the higher rebate, Participants will still receive a 
Maker Rebate in these Penny Symbols, albeit at a lower rate of $0.29 
per contract (for LMMs) and $0.25 per contract (for Market Makers). 
Other than the $0.30 Penny Maker Rebate currently provided to 
Customers, these are still the highest Penny Maker Rebates provided to 
market participants today.\14\ Accordingly, the Exchange believes that 
its rebate program for Penny Symbols will remain attractive for LMMs 
and Market Makers, and will continue to attract order flow to BX to the 
benefit of all market participants.
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    \14\ As a comparison, Non-Customers and Firms are currently 
provided a Penny Maker Rebate of $0.12 per contract.
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    The Exchange believes that its proposal is equitable and not 
unfairly discriminatory as the changes will apply uniformly to all 
similarly situated Participants. With the proposed changes, the 
Exchange will still provide LMMs and Market Makers some of the highest 
Penny Maker Rebates in IWM, GLD, SLV, and TSLA compared to other market 
participants.\15\ Further, the Exchange believes that offering more 
favorable pricing for LMMs and Market Makers is equitable and not 
unfairly discriminatory. Unlike other market participants, LMMs and 
Market Makers add value through continuous quoting and the commitment 
of capital. As it relates to the higher Penny Maker Rebate provided to 
LMMs compared to Market Makers, the Exchange believes that this 
differentiation is equitable and not unfairly discriminatory given that 
LMMs are subject to heightened quoting obligations compared to Market 
Makers.\16\ The higher rebate therefore recognizes the differing 
contributions made to the liquidity and trading environment on the 
Exchange by LMMs. Overall, the Exchange believes that incentivizing 
both LMMs and Market Makers to provide greater liquidity benefits all 
market participants through the quality of order interaction.
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    \15\ See supra note 13 with accompanying text.
    \16\ See Options 2, Section 4(j) (setting forth the 90% or 
higher quoting obligations for LMMs) and Section 5(d) (setting forth 
the 60% or higher quoting obligations for Market Makers).
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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.
    In terms of intra-market competition, all pricing would be 
uniformly assessed to similarly situated market participants. Customers 
will continue to receive favorable pricing as compared to other market 
participants because Customer liquidity enhances market quality on the 
Exchange by providing more trading opportunities, which benefits all 
market participants. Furthermore, the proposed changes to the Penny 
Maker Rebate program for LMMs and Market Makers are designed to 
incentivize these market participants to provide greater liquidity, 
which benefits all market participants through the quality of order 
interaction.
    In terms of inter-market competition, the Exchange believes that 
with the proposed changes, its pricing remains competitive with other 
options markets and will offer market participants with another choice 
of where to transact options. 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 rebate opportunities available at other venues to be 
more favorable. In such an environment, the Exchange must continually 
adjust its fees to remain competitive with other options exchanges. 
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 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 Participants 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 rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\17\
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    \17\ 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 [email protected]. Please include 
File Number SR-BX-2022-001 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-2022-001. 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 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

[[Page 3628]]

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 10:00 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. 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-
2022-001, and should be submitted on or before February 14, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01221 Filed 1-21-22; 8:45 am]
BILLING CODE 8011-01-P


