[Federal Register Volume 77, Number 87 (Friday, May 4, 2012)]
[Notices]
[Pages 26588-26590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10752]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66881; File No. SR-BX-2012-028]


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 30, 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 April 26, 2012, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 May 1, 
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 Changes

1. Purpose
    BX is proposing to modify its rebate schedule with respect to 
orders that

[[Page 26589]]

access liquidity at BX.\3\ Currently, BX pays a rebate of $0.0014 per 
share executed with respect to:
---------------------------------------------------------------------------

    \3\ The change applies to securities priced at $1 or more per 
share. Fees and rebates for lower-priced securities are unchanged.
---------------------------------------------------------------------------

     An order entered by a member through a BX Equities System 
Market Participant Identifier (``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; or
     A BSTG, BSCN, BMOP, BTFY or BCRT order that accesses 
liquidity in the NASDAQ OMX BX Equities System.

BX pays a rebate of $0.0005 with respect to all other liquidity-
accessing orders. BX is proposing to eliminate the rebate with respect 
to all orders that access liquidity provided by a midpoint pegged 
order.\4\ Because such orders access liquidity at the midpoint between 
the best bid and offer, they receive price improvement of at least 
$0.005 per share. Accordingly, BX does not believe that it is necessary 
also to pay a rebate to encourage the submission of such orders. 
Rather, the execution of such orders will be free of charge.
---------------------------------------------------------------------------

    \4\ ``Pegged Orders'' are orders that, after entry, have their 
price automatically adjusted by the System in response to changes in 
either the NASDAQ OMX BX Equities Market inside bid or offer or bids 
or offers in the national market system, as appropriate. A Pegged 
Order can specify that its price will equal the inside quote on the 
same side of the market (``Primary Peg''), the opposite side of the 
market (``Market Peg''), or the midpoint of the national best bid 
and offer (``Midpoint Peg''). A Midpoint Peg Order is priced based 
upon the national best bid and offer, excluding the effect that the 
Midpoint Peg Order itself has on the inside bid or inside offer. 
Midpoint Pegged Orders will never be displayed. A Midpoint Pegged 
Order may be executed in sub-pennies if necessary to obtain a 
midpoint price. A new timestamp is created for the order each time 
it is automatically adjusted.
---------------------------------------------------------------------------

2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\5\ in general, and with Sections 
6(b)(4) and (5) of the Act,\6\ 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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The elimination of the rebate for orders that access liquidity 
provided by midpoint pegged orders is reasonable because the execution 
of such orders is free of charge. Moreover, the change is consistent 
with an equitable allocation of fees because such orders invariably 
receive price improvement of at least $0.005 per share, and therefore 
do not need an additional rebate of $0.0005 to $0.0014 to encourage 
their submission to BX. Finally, BX believes that the change is not 
unfairly discriminatory because the price improvement provided to these 
orders provides a rational basis for treating them differently from 
other orders that access liquidity at BX.
    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 of 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 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 Regarding the 
Proposed Rule Changes Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Changes and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\7\ 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(a)(ii).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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-2012-028 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 No. SR-BX-2012-028. 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 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 26590]]

printing in the Commission's Public Reference Room on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing will also be available for inspection and copying at the 
principal offices 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-2012-028 and should be submitted on or before May 25, 
2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10752 Filed 5-3-12; 8:45 am]
BILLING CODE 8011-01-P