[Federal Register Volume 76, Number 201 (Tuesday, October 18, 2011)]
[Notices]
[Pages 64413-64416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26855]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65538; File No. SR-BX-2011-070]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
BOX Fee Schedule

October 12, 2011.
    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 October 5, 2011, NASDAQ OMX BX, Inc. (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 Exchange filed the proposed 
rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 
19b-4(f)(2) thereunder,\4\ which renders the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ OMX BX, Inc. (the ``Exchange'') proposes to amend the Fee 
Schedule of the Boston Options Exchange Group, LLC (``BOX''). Changes 
to the BOX Fee Schedule pursuant to this proposal will be effective 
upon filing. The text of the proposed rule change is available from the 
principal office of the Exchange, at the Commission's Public Reference 
Room and also on the Exchange's Internet Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.

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 self-regulatory organization 
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 self-regulatory organization 
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
    As set forth in greater detail below, the Exchange proposes several 
changes to the BOX Fee Schedule to reflect the implementation of fees 
for Professional \5\ accounts, and for the BOX Solicitation Auction and 
Facilitation Auction mechanisms.\6\
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    \5\ See Securities Exchange Act Release No. 65036 (August 4, 
2011) 76 FR 49517 (August 10, 2011) (SR-BX-2011-049) (Notice of 
Filing and Immediate Effectiveness To Adopt a Definition of 
``Professional'' and Require That Professional Orders Be 
Appropriately Marked by BOX Options Participants). See also BOX 
Trading Rules Chapter I, Section 1(a)(52). The term ``Professional'' 
means any person or entity that (i) is not a broker or dealer in 
securities, and (ii) places more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s).
    \6\ See Securities Exchange Act Release No. 65387 (September 23, 
2011) (SR-BX-2011-034) (Order Approving Amending the BOX Trading 
Rules to Establish Facilitation and Solicitation Auction 
Mechanisms).
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Section 1 Trading Fees for Public Customer Accounts
    Currently, the trading fee for Public Customers in Section 1a of 
the BOX Fee Schedule is $0.15 per executed contract of an Improvement 
Order for a Public Customer that is not submitted as a Customer Price 
Improvement Period Order for the Price Improvement Period (``non-CPO'' 
in the ``PIP'').\7\ The Exchange proposes to add to Section 1a the same 
$0.15 fee per executed contract for Responses in the Solicitation and 
Facilitation Auction mechanisms.
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    \7\ See Price Improvement Period (``PIP'') in Chapter V, Section 
18 of the BOX Trading Rules.
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    Additionally, the fee in Section 1b is $0.25 per executed contract 
for Primary Improvement Orders for a Public Customer. The Exchange 
proposes to add to Section 1b a $0.25 fee per executed contract for 
Facilitation Orders and Solicitation Orders for Public Customers.
    Currently, the fee for Public Customers in Section 1c is $0.07 per 
executed contract for all non-PIP transactions. The Exchange proposes 
to amend Section 1c to expand this applicable fee to all non-Auction 
Transactions and define the term ``Auction Transactions'' to include 
all transactions executed through PIP, the Solicitation Auction 
mechanism, and the Facilitation Auction mechanism.
Section 2 Trading Fees for Professional Accounts
    The Exchange proposes to add the Trading Fees For Professional 
Accounts as Section 2 of the BOX Fee Schedule and renumber the Trading 
Fees For Broker Dealer Proprietary Accounts as Section 3 and Market 
Maker Trading Fees as Section 4.
    The Exchange proposes that Professional accounts pay the same fees 
as set forth for Public Customers in Section 1 of the Fee Schedule for 
all Auction Transactions. The Exchange also proposes that Professional 
accounts pay $0.20 per executed contract for all non-Auction 
Transactions.\8\
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    \8\ By comparison to Professional accounts, Trading Fees for 
non-Auction Transactions are $0.07 per executed contract for Public 
Customers and $0.40 per executed contract for Broker-Dealer 
Proprietary Accounts.
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    The Exchange also proposes to add Professional to the account types 
listed in Section 7a of the Fee Schedule that specifies the Fees for 
Adding Liquidity and Credits for Removing Liquidity in transactions on 
the BOX Book (non-Auction Transactions). These Fees and Credits for 
non-Auction Transactions are the same across all account types, now 
proposed to include Professional accounts, and the Exchange is not 
proposing any change to these Fees and Credits at this time.
Section 3 Broker Dealer Fees and Section 4 Market Maker Fees
    The Exchange proposes to amend the Fee Schedule to correspond with 
the proposed change in Section 1c of the Fee Schedule to change 
references to PIP transactions to Auction Transactions so as to include 
transactions in the Solicitation and Facilitation Auction mechanisms. 
Additionally, the Exchange proposes that broker-dealers and market 
makers pay the same fees for non-Auction Transactions as they currently 
pay for non-PIP transactions. No change to

[[Page 64414]]

these fees is proposed. Further, the Exchange proposes to amend 
Sections 7a, 7b, and 7d to change references to the transaction fees in 
certain sections of the Fee Schedule to correspond to the renumbered 
Sections 3 and 4 of the Fee Schedule, as outlined above.
Section 7e Transactions in BOX Facilitation and Solicitation Auction
    The Exchange proposes to add Section 7e to the Fee Schedule to 
implement Fees for Adding Liquidity and Credits for Removing Liquidity 
in the BOX Facilitation and Solicitation Auction mechanisms. The fees 
and credits in Section 7e shall be applied to transactions in these 
respective mechanisms, in addition to applicable transaction fees as 
described in Section 1 through 4 of the proposed Fee Schedule. Agency 
Orders submitted in Facilitation or Solicitation will receive the 
`removal' credit. Facilitation Orders, Solicited Orders, or Responses, 
respectively, will be charged the `add' fee per executed contract. The 
Exchange proposes that the Fee for Adding Liquidity and the Credit for 
Removing Liquidity be $0.30 per contract for all classes in these 
respective auction mechanisms, and be assessed the same across all 
account types: Market Maker, Firm, Public Customer, and Professional.
Section 7f Tiered Fee for Initiating Participants Based Upon Average 
Daily Volume (ADV) of BOX Auction Transactions
    Currently, Section 7d of the Fee Schedule provides for a tiered fee 
to be applied for PIP transactions by Initiating Participants. Greater 
ADV in PIP transactions results in a reduced PIP transaction fee. The 
Exchange proposes to amend this tiered fee so as to apply all of an 
Initiating Participant's Auction Transactions (including transactions 
in the Facilitation and Solicitation Auctions, not just those in the 
PIP) to the calculation of the Initiating Participant's ADV to 
determine the transaction fee applicable to the Participant. The 
Exchange also proposes to renumber this tiered fee provision as new 
Section 7f. No changes to the ADV or tiered fee rates are proposed.
Section 8 Eligible Orders Routed to an Away Exchange
    Finally, the Exchange proposes to amend Section 8 of the BOX Fee 
Schedule to delete its current routing fees and adopt a $0.50 per 
contract routing fee for Professional accounts.\9\ The Exchange 
proposes this routing fee, in part to offset the various costs BOX 
incurs in providing routing services. BOX uses third-party broker-
dealers to route orders to other exchanges and incurs charges for each 
order routed to an away market.
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    \9\ By comparison, BOX does not route broker-dealer proprietary 
orders and thus does not assess them any routing fees. Additionally, 
BOX routes Public Customer orders to Away Exchanges at no charge.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\10\ in general, and Section 
6(b)(4) of the Act,\11\ in particular, in that it provides for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and other persons using its facilities. The Exchange 
believes the proposal is an equitable allocation of reasonable fees, 
credits, and other charges among BOX Options Participants. The proposed 
changes will allow the fees charged on BOX to remain competitive with 
other exchanges as well as apply such fees in a manner which is 
equitable among all BOX Participants. The Exchange believes the 
proposed transaction fees and credits are fair and reasonable and must 
be competitive with fees and credits in place on other exchanges. 
Further, the Exchange believes that this competitive marketplace 
impacts the fees and credits present on BOX today and influences this 
proposal.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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Auction Mechanism Fees
    The Exchange believes it is equitable and non-discriminatory to 
assess the proposed fees for the BOX Solicitation and Facilitation 
Auction mechanisms because the proposed fee for adding liquidity and 
credit for removing liquidity will apply uniformly to all categories of 
participants, across all account types, now proposed to include 
Professional accounts. The Exchange also believes the proposed fees for 
the BOX auction mechanisms to be reasonable. BOX operates within a 
highly competitive market in which market participants can readily 
direct order flow to any of eight other competing venues if they deem 
fees at a particular venue to be excessive. The fee structure proposed 
for these auction mechanisms, in particular, the proposed credit for 
removing liquidity, aims to attract additional order flow to these BOX 
auction mechanisms, providing greater potential liquidity within the 
overall BOX market to the benefit of all BOX market participants.
    The Exchange believes it is equitable and non-discriminatory to 
provide Initiating Participants a tiered fee structure related to its 
participation in BOX Auction Transactions. The proposed fee structure 
related to trading activity in BOX Auction Transactions is available to 
all BOX Options Participants and they may choose to trade on BOX to 
take advantage of the discounted fees for doing so, or not. The 
Exchange also believes the proposed fees for the BOX auction mechanisms 
to be reasonable. BOX has had this same tiered fee structure in place 
related to PIP transactions by Initiating Participants. Participants 
will benefit from the opportunity to now aggregate their trading in the 
BOX Facilitation and Solicitation Auction mechanisms with their PIP 
transactions to more easily attain a discounted fee tier. As noted 
above, BOX operates within a highly competitive market in which market 
participants can readily direct order flow to any of eight other 
competing venues if they deem fees at a particular venue to be 
excessive. The tiered fee structure proposed for trading in the BOX 
auction mechanisms aims to attract additional order flow to BOX, 
providing greater potential liquidity within the overall BOX market, 
its auction mechanisms, to the benefit of all BOX market participants.
Trading Fees for Professional Accounts
    The Exchange believes it is equitable and non-discriminatory to 
assess fees for Professional accounts that are the same in the 
Facilitation and Solicitation Auction Transactions as those fees for 
Public Customers. Also, as stated above, the Exchange believes it is 
equitable, reasonable, and non-discriminatory to assess Professional 
accounts the same liquidity related fees or credits, as those paid to 
or paid by Public Customers, Broker-Dealer Proprietary Trading accounts 
and Market Makers. Within these Auction Transactions, Professionals 
retain priority as Public Customer orders, and the Exchange believes 
that such orders benefit from the BOX fees and credits as structured 
within Auction Transactions. The proposed fees for Professional 
accounts for adding liquidity and credit for removing liquidity are 
equitable and non-discriminatory because such fees and credits apply 
uniformly to all categories of participants and across all account 
types.
    Further, the Exchange believes the proposed $0.20 fee per executed 
contract for Professional accounts in non-Auction Transactions to be 
equitable, reasonable, and not unfairly discriminatory. As stated, BOX 
operates

[[Page 64415]]

within a highly competitive market. BOX, however, does not assess 
ongoing systems access fees, ongoing fees for access to BOX market 
data, or fees related to order cancellation. Professional accounts, 
while Public Customers by virtue of not being broker-dealers, generally 
engage in trading activity more similar to broker-dealer proprietary 
trading accounts (more than 390 orders per day on average). This level 
of trading activity draws on a greater amount of BOX system resources 
than that of non-Professional Public Customers. Simply, the more orders 
submitted to BOX, the more messages sent to and received from BOX, the 
more orders potentially routed to away exchanges, and the more BOX 
system resources utilized. This level of trading activity by 
Professional accounts results in greater ongoing operational costs to 
BOX. As such, BOX aims to recover its costs by assessing Professional 
accounts the same fees that it assesses to other BOX market 
participants in Facilitation and Solicitation Auction Transactions, and 
a market competitive fee proposed for non-Auction Transactions. 
Generally, competing options exchanges assess Professionals fees at 
rates more comparable to fees charged to broker-dealers. Sending orders 
to and trading on BOX are entirely voluntary. Under these 
circumstances, BOX transaction fees must be competitive to attract 
order flow, execute orders, and grow its market. As such, BOX believes 
its trading fees proposed for Professional accounts are fair and 
reasonable. While comparably higher transaction fees than those 
assessed to Public Customers, BOX is assessing Professional accounts 
transaction fees at a rate ($0.20) lower than that charged to broker-
dealer proprietary trading firms.
    Moreover, the Exchange believes it is equitable and not unfairly 
discriminatory to charge Public Customers lower fees for non-Auction 
Transactions than Professional accounts that are more akin to Broker-
Dealer Proprietary Trading Accounts. The securities markets generally, 
and BOX in particular, have historically aimed to improve markets for 
investors and develop various features within the market structure for 
customer benefit. As such, the Exchange believes the proposed non-
Auction Transaction fees for Professional accounts, as compared to 
Public Customer transaction fees, is appropriate and not unfairly 
discriminatory.
    Finally, the Exchange believes that the proposed change to adopt a 
fee for routing Professional customer orders to various markets is 
reasonable, equitable, and not unfairly discriminatory in that the fee 
will allow BOX to recoup its costs attendant with offering optional 
routing services. BOX uses third-party broker-dealers to route orders 
to other exchanges and incurs charges for each order routed to an away 
market, in addition to the fees charged by other exchanges. BOX does 
not route broker-dealer proprietary orders, and therefore, does not 
assess routing fees on such orders, and has generally been providing 
its routing services to Public Customers at a deeply discounted fee. 
BOX incurs various costs related to providing routing services. In 
order to better recover those related costs and to potentially generate 
additional revenue, the Exchange proposes a routing fee to provide this 
optional service to Professional accounts.
    The Exchange also notes that although routing is available to BOX 
Participants for customer orders, including Professionals, BOX 
Participants are not required to use the routing services. Rather, BOX 
routing services are completely optional. BOX Participants can manage 
their own routing to different options exchanges or can utilize a 
myriad of other routing solutions that are available to market 
participants. Further, as noted above, the characteristics of 
Professional accounts tend to be more similar to broker-dealers than to 
non-Professional Public Customers. As such, BOX believes Professionals 
are more likely to be able to route their orders to the exchange venues 
where they wish to trade. By assessing a fee on Professional accounts 
for routing orders, BOX aims to recover its costs in providing this 
optional service to its Participants and their Professional customer 
accounts. The Exchange believes that providing Public Customers a 
preferred rate for routing is consistent with the long history in the 
options markets of such customers being given preferred fees.

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.

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 comments on the 
proposed rule change.

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 \12\ and Rule 19b-4(f)(2) thereunder,\13\ 
because it establishes or changes a due, fee, or other charge 
applicable only to a member.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further 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 e-mail to [email protected]. Please include 
File Number SR-BX-2011-070 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2011-070. This file 
number should be included on the subject line if e-mail 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

[[Page 64416]]

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; 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-2011-070 and should be 
submitted on or before November 8, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26855 Filed 10-17-11; 8:45 am]
BILLING CODE 8011-01-P