[Federal Register Volume 76, Number 236 (Thursday, December 8, 2011)]
[Notices]
[Pages 76781-76783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31485]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65876; File No. SR-BX-2011-078]


 Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Routing Fees for BX

December 2, 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 November 22, 2011, NASDAQ OMX BX, Inc. (the ``Exchange'' or 
``BX'') 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

    BX is filing with the Commission a proposed rule change to modify 
pricing for BX members using the NASDAQ OMX BX Equities System. The new 
pricing will take effect immediately. The text of the proposed rule 
change is available at BX's principal office, at http:/
nasdaqomxbx.cchwallstreet.com/, at the Commission's Public Reference 
Room, and at http://www.sec.gov.

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 fees applicable 
to the new routing services on the NASDAQ OMX BX Equities Market.\3\ BX 
has a pricing model under which members are charged for the execution 
of quotes/orders posted on the BX book (i.e., quotes/orders that 
provide liquidity), while members receive a rebate for orders that 
access liquidity; this is not changing. The proposed fees, because they 
apply to routed orders, will apply only to orders executed at venues 
other than the NASDAQ OMX BX Equities Market.
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    \3\ Securities Exchange Act Release No. 65470 (October 3, 2011), 
76 FR 62489 (October 7, 2011) (SR-BX-2011-048).
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    BX proposes to amend BX Rule 7018(a) to adopt fees for the 
execution of routed orders in securities priced at $1 or more per share 
and BX Rule 7018(b) to adopt fees for routing of securities priced at 
less than $1 per share. In BX Rule 7018(a), the charges depend on both 
where the order was executed and the order's routing strategy, which is 
similar to NASDAQ Rule 7018(a).\4\ The different routing strategies, 
BSTG,\5\ BSCN,\6\ BMOP,\7\ BTFY \8\ and BCRT,\9\ are defined in BX Rule 
4758 and correlate to some of the routing strategies of NASDAQ, as 
explained below. The proposed BX routing fees are the same as or less 
than NASDAQ's, which is also explained further below.\10\
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    \4\ Similar to the fees proposed here, NASDAQ bases the charge 
on the type of routing strategy employed and where the order was 
executed, because routing fees are generally intended to the recoup 
the cost of routing the order to another venue for execution. 
However, unlike BX, NASDAQ also bases its routing fees on where the 
security is listed. This is not a significant difference because the 
proposed fees include a separate charge for execution on the NYSE.
    \5\ See BX Rule 4758(a)(1)(A)(iii).
    \6\ See BX Rule 4758(a)(1)(A)(iv).
    \7\ See BX Rule 4758(a)(1)(A)(vi).
    \8\ See BX Rule 4758(a)(1)(A)(v).
    \9\ See BX Rule 4758(a)(1)(A)(vii).
    \10\ Pursuant to a November 28, 2011 conference call with 
Commission staff, Edith Hallahan,
    Principal Associate General Counsel, the NASDAQ OMX Group, Inc., 
confirmed that the proposed BX routing fees are the same as (not 
less than) NASDAQ's existing routing fees.
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    Respecting BSTG and BSCN orders, the charge is $0.0023 per share 
executed at NYSE and $0.0030 per share executed at venues other than 
NYSE. Respecting NASDAQ's comparable STGY and SCAN orders,\11\ this 
charge is the same for shares executed on NYSE and also the same as 
what NASDAQ charges for routed executions at other venues in NASDAQ-
listed securities, NYSE-listed securities and for securities listed on 
exchanges other than NASDAQ or NYSE ($0.0030 per share).\12\ The 
Exchange believes that charging the same routing fees as NASDAQ should 
attract users to its new routing program.
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    \11\ See NASDAQ Rule 4758(a)(1)(A)(iii) and (iv).
    \12\ For NASDAQ-listed securities, there is no separate, lower 
fee for orders executed at NYSE, because NASDAQ-listed securities do 
not trade on NYSE and thus would not route there.
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    Respecting BMOP orders, the charge is $0.0025 per share executed at 
NYSE and $0.0035 per share executed at venues other than NYSE. This is 
the same as what NASDAQ charges for its comparable MOPP orders,\13\ 
which is, following the format of the NASDAQ fee schedule: (i) for 
NASDAQ-listed securities, $0.0035 per share; (ii) for NYSE-listed 
securities, $0.0035 per share executed at venues other than NYSE or 
$0.0025 per share executed at NYSE; and (iii) for securities listed on 
exchanges other than NASDAQ or NYSE, $0.0035 per share. The Exchange 
has determined that this is the appropriate charge to attract BMOP 
orders to BX.
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    \13\ See NASDAQ Rule 4758(a)(1)(A)(vi).
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    Respecting BTFY orders, the charge is $0.0022 per share executed at 
NYSE and $0.0005 per share executed at venues other than NYSE, NASDAQ 
or PSX. For orders that execute at PSX, BX will pass through all fees 
assessed and rebates offered by PSX and for orders that execute at 
NASDAQ, BX will pass through all fees assessed and rebates offered by 
NASDAQ. BX, PSX and NASDAQ are affiliates. This is the same as what 
NASDAQ charges for its comparable TFTY orders,\14\ which is $0.0022 per 
share executed at NYSE and $0.0005 per share executed at venues other 
than NYSE, BX or PSX, regardless of where the security is listed. For 
orders that execute at BX, NASDAQ gives a credit of $0.0014 for orders 
that

[[Page 76782]]

remove liquidity at BX, which is the equivalent of a pass through of BX 
fees, because BX currently provides a credit of $0.0014 for executions 
on BX.\15\ Accordingly, BTFY fees are the same as TFTY fees. Pass 
through fees are intended to recover costs without specifying what 
those costs are, because the applicable fees may be lengthy and 
dependent on various factors, and thereby difficult to replicate, even 
in an affiliated exchange's fee schedule. In addition, pass through 
fees are useful because they can keep pace with changes in the fees 
being passed through without extensive changes to the fee schedule.
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    \14\ See NASDAQ Rule 4758(a)(1)(A)(v).
    \15\ See BX Rule 7018(a) (Credit for entering order that 
accesses liquidity).
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    Respecting BCRT orders, for orders that execute at PSX, BX will 
pass through all fees assessed and rebates offered by PSX and for 
orders that executed at NASDAQ, BX will pass through all fees assessed 
and rebates offered by NASDAQ; PSX and NASDAQ are affiliates of BX.\16\ 
NASDAQ similarly passes through all fees assessed and rebates offered 
respecting orders routed to PSX (its affiliates) for its comparable 
CART \17\ orders executed on PSX. With respect to BX, NASDAQ gives a 
credit of $0.0014 for orders that remove liquidity at BX; this is the 
equivalent of a pass through of BX fees, because the BX fee schedule 
currently provides a credit of $0.0014 for executions on BX.\18\
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    \16\ BCRT orders can only execute on BX, PSX or NASDAQ. See BX 
Rule 4758(a)(1)(A)(vii).
    \17\ See NASDAQ Rule 4758(a)(1)(A)(xi).
    \18\ See BX Rule 7018(a) (Credit for entering order that 
accesses liquidity).
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    Respecting securities prices at less than $1 executed at a venue 
other than BX, BX proposes to amend BX Rule 7018(b) to adopt a charge 
of 0.3% of the total transaction cost. This is the same as what NASDAQ 
charges for orders that route and execute at an away market,\19\ which 
the Exchange believes is reasonable.
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    \19\ See NASDAQ Rule 7018(b).
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2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\20\ in general, and with Section 
6(b)(4) of the Act,\21\ 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 or system 
which BX operates or controls. The new routing fees are reasonable 
because they seek to recoup the cost of the execution on the other 
venue, which is generally borne by the order router and, ultimately, 
the routing exchange. In particular, pass through fees, as proposed 
herein for BTFY and BCRT orders executed on NASDAQ and BX, are 
structured to recoup routing costs. The Exchange does not believe that 
the proposed pass through of such fees for orders routed to and 
executed at NASDAQ or BX should create any inappropriate incentives or 
raise any novel regulatory issues. The pass through proposed herein 
applies to exchanges affiliated with the Exchange, NASDAQ and PHLX, 
which BX believes is reasonable and currently exists in NASDAQ Rule 
7018(a).
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    \20\ 15 U.S.C. 78f.
    \21\ 15 U.S.C. 78f(b)(4).
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    The proposed fees mimic the routing fee structure in effect on 
NASDAQ for some time.\22\ The fees for BSCN, BSTG and BMOP are the same 
on BX as for SCAN, STGY and MOPP on NASDAQ. With respect to BTFY and 
BCRT, these are the same as TFTY and CART on NASDAQ with respect to a 
pass through of charges and credits from executions at PSX. TFTY and 
CART executions at BX receive a credit of $0.0014, which is equivalent 
to the charge on BX for removing liquidity and is thereby the same as a 
pass through of BX charges. Accordingly, the proposed pass through of 
fees for BTFY and BCRT with respect to executions at NASDAQ, although 
it would not result in a credit of $0.0014, is still the same, because 
the pass through charge will be NASDAQ's charge for removing liquidity.
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    \22\ See NASDAQ Rule 7018.
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    BX also believes that the proposed routing fees are equitable. All 
similarly situated members are subject to the same fee structure, and 
access to BX is offered on fair and non-discriminatory terms. 
Specifically, the same routing fee, credit or pass through fee applies 
to any participant and does not differ based on user type (e.g., 
customer or broker-dealer).
    Furthermore, the new routing fees are reasonable and equitable in 
that the decision to use send routable orders and to use BX as a router 
is entirely voluntary; members can avail themselves of numerous other 
means of directing orders to other venues, including becoming members 
of those markets or using any of a number of competitive routing 
services offered by other exchanges and brokers.

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

    BX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Because the market 
for order execution and routing is extremely competitive, members may 
readily opt to disfavor BX's execution and routing services if they 
believe that alternatives offer them better value. For this reason and 
the reasons discussed in connection with the statutory basis for the 
proposed rule change, BX does not believe that the proposed fees 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 rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\23\ 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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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 [email protected]. Please include 
File Number SR-BX-2011-078 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-2011-078. This file 
number should be included on the

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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 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-2011-078 and should be submitted on or before 
December 29, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31485 Filed 12-7-11; 8:45 am]
BILLING CODE 8011-01-P