[Federal Register Volume 77, Number 128 (Tuesday, July 3, 2012)]
[Notices]
[Pages 39530-39532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-16212]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67272; File No. SR-BX-2012-042]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Modify 
Its Excess Order Fee

June 27, 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 June 25, 2012, NASDAQ OMX BX, Inc. (``BX'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
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 the 
Substance of the Proposed Rule Change

    BX proposes to institute an excess order fee. [sic] BX will 
implement the proposed change on July 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, 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 those statements may be examined at 
the places specified in Item III below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    BX recently submitted a proposed rule change to introduce an Excess

[[Page 39531]]

Order Fee,\3\ aimed at reducing inefficient order entry practices of 
certain market participants that place excessive burdens on the systems 
of BX and its members and that may negatively impact the usefulness and 
life cycle cost of market data. The fee is scheduled to be implemented 
on July 2, 2012. In general, the determination of whether to impose the 
fee on a particular market participant identifier (``MPID'') is made by 
calculating the ratio between (i) entered orders, weighted by the 
distance of the order from the national best bid or offer (``NBBO''), 
and (ii) orders that execute in whole or in part. The fee is imposed on 
MPIDs that have an ``Order Entry Ratio'' of more than 100.
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    \3\ Securities Exchange Act Release No. 67007 (May 17, 2012), 77 
FR 30579 (May 23, 2012) (SR-BX-2012-033).
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    Through this proposed rule change, the Exchange is modifying the 
parameters of the fee slightly to provide that all calculations under 
the rule establishing the fee will be based on orders received by BX 
during regular market hours (generally, 9:30 a.m. to 4 p.m.) \4\ and 
will exclude orders received at other times, even if they execute 
during regular market hours. BX is making the change because the 
concerns about inefficient order entry practices that have prompted the 
fee are generally not present with regard to trading activity outside 
of regular market hours, when volumes are light. BX is also concerned 
that lower execution rates outside of regular market hours may skew 
calculations under the rule, such that an MPID that is considered 
acceptably efficient during regular market hours would be required to 
pay a fee under the rule due to its activity outside of regular market 
hours.
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    \4\ Regular market hours may be different in some circumstances, 
such as on the day after Thanksgiving, when regular market hours on 
all exchanges traditionally end at 1 p.m.
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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,\5\ in general, and with Sections 
6(b)(4) and 6(b)(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.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    As originally proposed and as modified by this proposed rule 
change, BX believes that the Order Entry Fee is reasonable because it 
is designed to achieve improvements in the quality of displayed 
liquidity and market data that will benefit all market participants. In 
addition, although the level of the fee may theoretically be very high, 
the fee is reasonable because market participants may readily avoid the 
fee by making improvements in their order entry practices that reduce 
the number of orders they enter, bring the prices of their orders 
closer to the NBBO, and/or increase the percentage of their orders that 
execute. The proposed change to the fee is reasonable because it will 
reduce the likelihood of the fee being imposed on an MPID that is 
considered acceptably efficient during regular market hours, when the 
impact of inefficient trading on BX and other market participants is 
highest.
    For similar reasons, the fee is consistent with an equitable 
allocation of fees, because although the fee may apply to only a small 
number of market participants, the fee would be applied to them in 
order to encourage better order entry practices that will benefit all 
market participants. Ideally, the fee will be applied to no one, 
because market participants will adjust their behavior in order to 
avoid the fee. The proposed change will increase the likelihood that 
the fee will not be imposed in unwarranted circumstances. Finally, BX 
believes that the fee is not unfairly discriminatory. Although the fee 
may apply to only a small number of market participants, it will be 
imposed because of the negative externalities that such market 
participants impose on others through inefficient order entry 
practices. The proposed modification to the fee is not unfairly 
discriminatory because although it will lessen the potential impact of 
the fee on MPIDs that are active outside of regular market hours, this 
change is rationally related to the fee's purpose of promoting 
efficient trading practices in conditions where inefficiency may 
negatively impact BX and other market participants.

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. Specifically, BX 
believes that the fee will constrain market participants from pursuing 
certain inefficient and potentially abusive trading strategies. To the 
extent that this change may be construed as a burden on competition, BX 
believes that it is appropriate in order to further the purposes of 
Section 6(b)(5) of the Act.\7\ The proposed change will lessen any 
burden on competition by removing from consideration orders entered 
outside of regular market hours, when concerns about the impact of 
inefficient trading on BX and other market participants are diminished.
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    \7\ 15 U.S.C. 78f(b)(5).
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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). [sic]
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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-2012-042 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-2012-042. 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

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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 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 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-2012-042, and should be 
submitted on or before July 24, 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).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16212 Filed 7-2-12; 8:45 am]
BILLING CODE 8011-01-P