[Federal Register Volume 77, Number 68 (Monday, April 9, 2012)]
[Notices]
[Pages 21140-21142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-8426]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66718; File No. SR-BX-2012-021]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
Pricing for BX Members Using the NASDAQ OMX BX Equities System

April 3, 2012.
    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 March 29, 2012, The NASDAQ OMX 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 BX. 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 proposes to modify pricing for BX members using the NASDAQ OMX 
BX Equities System. BX will implement the proposed change on April 2, 
2012. The text of the proposed rule change is available at http://nasdaqomxbx.cchwallstreet.com, at BX's principal office, 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, BX 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. BX 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
    BX is proposing to modify its rebate schedule with respect to 
orders that access liquidity at BX.\3\ Currently, BX pays a rebate of 
$0.0014 per share executed with respect to orders entered through a 
market participant identifier (``MPID'') through which a member routes 
an average daily volume of 25,000 or more shares during the month.\4\ 
For members that qualify for this rebate provision, the rebate applies 
to all shares entered through the MPID and executed on BX during the 
month, regardless of whether they are designated for routing. BX is 
proposing to eliminate this method of qualifying for a $0.0014 per 
share rebate, and replace it with an across-the-board rebate of $0.0014 
per share executed for all orders that are designated for routing but 
that access liquidity on BX.
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    \3\ The change applies to securities priced at $1 or more per 
share. Fees and rebates for lower-priced securities are unchanged.
    \4\ The $0.0014 per share executed rebate is also available for 
orders entered through an MPID through which the member (i) accesses 
an average daily volume of 3.5 million or more shares of liquidity, 
or (ii) provides an average daily volume of 25,000 or more shares of 
liquidity during the month.
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    Both the provision being eliminated and the new provision are 
designed to provide incentives for BX members to make greater use of 
the Exchange's recently introduced routing service. The change reflects 
a concern that some members may be ``gaming'' the current provision by 
using BX's router only to the extent necessary to qualify for the 
higher rebate, which then applies to all of their orders entered 
through the applicable MPID. By contrast, the change would apply the 
$0.0014 rebate to all orders that are designated for routing, 
regardless of volume, but would not apply to orders that are not 
designated for routing. Other methods of

[[Page 21141]]

qualifying for a $0.0014 per share rebate, based on the extent of 
liquidity accessing or liquidity providing on BX, will remain in effect 
for all orders executed on BX.\5\
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    \5\ A member that qualified for a $0.0014 per share rebate based 
on the extent of its liquidity providing or liquidity accessing and 
that used routable orders would not receive a double rebate on its 
routable orders.
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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,\6\ in general, and with Sections 
6(b)(4) and (5) of the Act,\7\ 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, and is not designed to permit 
unfair discrimination between customers, issuers, brokers or dealers. 
All similarly situated members are subject to the same fee structure, 
and access to BX is offered on fair and non-discriminatory terms.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed elimination of the $0.0014 per share executed rebate 
tier for MPIDs through which a member routes a daily average of 25,000 
shares is reasonable because it is being replaced by a $0.0014 per 
share rebate for all routable orders that execute on BX, and because 
other means of receiving a $0.0014 per share rebate for order 
executions remain in effect. BX also believes that the proposal is 
reasonable because the current tier related to the BX routing service 
was being utilized with respect to non-routable orders to a greater 
extent than the Exchange had intended. BX believes that refocusing the 
incentive on routable orders will do more to encourage members to make 
use of BX's routing services. The proposal is also consistent with an 
equitable allocation of fees because members will either receive a 
credit for routable orders that access liquidity on BX or pay fees in 
connection with routable orders that execute at venues other than BX. 
BX also notes that the increased use of the BX router may encourage 
members to post liquidity on BX to the extent that routable orders 
check the BX book. Finally, the Exchange believes that the change is 
not unreasonably discriminatory because affected members are being 
provided with alternative means to earn the same rebate with respect to 
both routable and non-routable orders.
    The proposed introduction of a $0.0014 per share executed rebate 
with respect to all routable orders is reasonable because it will 
result in a rebate being paid with respect to all routable orders that 
execute on BX, regardless of the volume of the member. Accordingly, the 
change will maintain or increase the rebate with respect to all such 
orders. The proposed introduction is consistent with an equitable 
allocation of fees because the Exchange believes that it is equitable 
to provide a financial incentive to members to make greater use of a 
service as a means of increasing its usage. In this regard, however, BX 
further notes that the rebate does not exceed the fees paid by 
liquidity providers on BX. Finally, BX believes that the rebate is not 
unreasonably discriminatory because it is not the exclusive means by 
which members may receive an enhanced rebate.
    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. In such an 
environment, BX must continually adjust its fees 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 numerous alternatives exist to the execution and 
routing services offered by BX, if BX increases its fees to an 
excessive extent, it will lose customers to its competitors. 
Accordingly, BX believes that competitive market forces help to ensure 
that the fees it charges for execution and routing are reasonable, 
equitably allocated, and non-discriminatory.

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. Moreover, the rebate 
provided with respect to execution of routable orders is lower than the 
fee charged to liquidity providers, such that BX is not providing a 
rebate that is higher than the corresponding charge. For these reasons 
and the reasons discussed in connection with the statutory basis for 
the proposed rule change, BX does not believe that the proposed changes 
will unfairly affect the ability of members or competitors 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

    Written comments were neither solicited nor 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.\8\ 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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    \8\ 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-2012-021 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-2012-021. 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

[[Page 21142]]

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 such 
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-2012-021 and should be submitted on or before April 
30, 2012.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-8426 Filed 4-6-12; 8:45 am]
BILLING CODE 8011-01-P