[Federal Register Volume 78, Number 134 (Friday, July 12, 2013)]
[Notices]
[Pages 41966-41968]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16749]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69941; File No. SR-NSX-2013-14]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend its Fee and Rebate Schedule

July 8, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act '' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on July 1, 2013, National Stock Exchange, 
Inc. (``NSX[supreg]'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``SEC'' or ``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 comment 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

    The Exchange is proposing to amend its Fee and Rebate Schedule (the 
``Fee Schedule'') issued pursuant to Exchange Rule 16.1(a) to: (i) 
Increase the rebate paid to Equity Trading Permit (``ETP'') Holders \3\ 
that direct Double Play Orders \4\ in securities priced at $1 or above 
to the CBOE Stock Exchange, Inc. (``CBSX'') from $0.0013 per share to 
(a) $0.0045 per share for executions in five select securities 
(``Select Securities''),\5\ or (b) $0.0015 per share in all other 
securities; (ii) make it clear that the unexecuted portion of a Double 
Play Order that is returned to NSX after its initial route to the 
designated away Trading Center,\6\ and subsequently executed on the NSX 
or routed away in accordance with NSX Rule 11.15(a)(ii) is subject to 
the standard Fee Schedule; and (iii) make it clear that the $0.0030 per 
share routing fee applies only to orders routed by the Exchange in 
accordance with NSX Rule 11.15(a)(ii).\7\
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    \3\ NSX Rule 1.5 defines the term ``ETP'' as an Equity Trading 
Permit issued by the Exchange for effecting approved securities 
transactions on the Exchange's Trading Facilities.
    \4\ NSX Rule 11.11(c)(10) defines a ``Double Play Order'' as 
market or limit orders for which an ETP Holder instructs the System 
to route to designated away Trading Centers which are approved by 
the Exchange from time to time without first exposing the order to 
the NSX Book. A Double Play Order that is not executed in full after 
routing away receives a new time stamp upon return to the Exchange 
and is ranked and maintained in the NSX Book in accordance with Rule 
11.14(a).
    \5\ The five select securities include Advanced Micro Devices, 
Inc. (``AMD''), Bank of America Corp. (``BAC''), Micron Technology, 
Inc. (``MU''), Nokia Corporation (``NOK''), and Sirius XM Radio Inc. 
(``SIRI'').
    \6\ NSX Rule 2.11(a) defines a Trading Center as other 
securities exchanges, facilities of securities exchanges, automated 
trading systems, electronic communications networks or other brokers 
or dealers.
    \7\ NSX 11.15(a)(ii) provides that ``[u]nless the terms of the 
order direct otherwise, if an order (other than a Sweep Order) has 
not been executed in its entirety pursuant to paragraph (a)(1) of 
this Rule, the order shall be eligible for routing away . . .''
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    The text of the proposed rule change is available on the Exchange's 
Web site at www.nsx.com, at the Exchange'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 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 parts of such 
statements.

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

1. Purpose
    The Exchange proposes to amend Section III.A of its Fee Schedule in 
order to (i) increase the rebate paid to ETP Holders that direct Double 
Play Orders in securities priced $1 or above to CBSX from $0.0013 per 
share to (a) $0.0045 per share for executions in Select Securities, or 
(b) $0.0015 per share in all other securities; (ii) make it clear that 
the unexecuted portion of a Double Play Order that is returned to NSX 
after its initial route to the designated away Trading Center, and 
subsequently executed on the NSX or is routed away in accordance with 
NSX Rule 11.15(a)(ii) is subject to the standard Fee Schedule; and 
(iii) make it clear that the $0.0030 per share routing fee applies only 
to orders routed by the Exchange in accordance with NSX Rule 
11.15(a)(ii).
Double Play Order Rebate
    The Double Play Order is a market or limit order for which the ETP 
Holder instructs the System \8\ to bypass the NSX Book \9\ and route 
the order to a designated away Trading Center(s) that has been approved 
by the Exchange.\10\ The NSX System will provide any unexecuted portion 
of a Double Play Order with a new timestamp upon return to the 
Exchange, and the order will be processed in the manner described in 
NSX Rule 11.14 (Priority of Orders).
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    \8\ Under NSX Rule 1.5, the term ``System'' is defined as ``the 
electronic securities communications and trading facility . . . 
through which orders of Users are consolidated for ranking and 
execution.''
    \9\ Under NSX Rule 1.5, the term ``NSX Book'' is defined as 
``the System's electronic file of orders.''
    \10\ See NSX Rule 11.11(c)(10).
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    Under Section III.A of the Fee Schedule, the Exchange currently 
pays ETP Holders a rebate of $0.0013 for each share routed to and 
executed on a designated Trading Center approved by the Exchange. 
Currently, the only approved Trading Center is CBSX. The Exchange is 
proposing to increase the rebate for Double Play Orders routed to and 
executed on CBSX from $0.0013 per share to (i) $0.0045 per share for 
orders in Select Securities, and (ii) $0.0015 per share for orders in 
all other securities. This increase mirrors a proposal by the CBSX to 
increase rebates offered on its Fee Schedule that became effective on 
July 1, 2013.\11\ The Exchange intends to merely pass through rebates 
to ETP Holders that direct Double Play Orders to the CBSX.
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    \11\ See SR-CBOE-2013-65.
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    The Exchange anticipates that additional Trading Centers will be 
approved in the future for designation by ETP Holders as the 
destination for Double Play Orders. The Exchange will not pay ETP 
Holders a rebate for orders that are routed to and executed on a 
designated Trading Center other than CBSX. The Exchange notes that the 
ETP Holder directs the order to the designated away Trading Center, and 
decides the appropriate execution venue based on factors including 
whether any rebate is available. The Exchange believes that the 
proposed increase in rebates for Double Play Orders routed to and 
executed on CBSX will provide ETP Holders with an incentive to direct 
additional order flow to the NSX and CBSX.
Unexecuted Portion of Double Play Orders
    The Exchange is also proposing to amend its Fee Schedule to make it 
clear that any unexecuted portion of a Double Play Order that is 
executed on the NSX upon return from an away Trading Center, or is 
routed away in accordance

[[Page 41967]]

with NSX Rule 11.15(a)(ii), is subject to the charges on the standard 
Fee Schedule. The Exchange believes that this amendment will provide 
ETP Holders with important information on how the Exchange imposes its 
fees and clarify the fees applicable when any unexecuted portion of a 
Double Play Order is returned to the NSX and subsequently executed or 
routed away in accordance with NSX Rule 11.15(a)(ii).
Regulation NMS Routing Fee
    Finally, the Exchange is proposing to amend its Fee Schedule to 
make it clear that only orders routed by the Exchange in accordance 
with NSX Rule 11.15(a)(ii), and not Double Play Orders being routed to 
the designated away Trading Center as instructed by the ETP Holder, 
will be subject to the $0.0030 per share routing fee. An ETP Holder 
will only be charged a fee if an unexecuted portion of the Double Play 
Order returns to the Exchange, and is routed away by the Exchange in 
accordance with NSX Rule 11.15(a)(ii). The Exchange believes that, by 
not charging a routing fee for the initial routing of the Double Play 
Order, it will attract additional liquidity from ETP Holders seeking a 
low cost route and execution venue, and will further promote the 
economically efficient execution of securities transactions.
Operative Date and Notice
    The Exchange intends to make the proposed modifications, which are 
effective upon filing, operative as of the commencement of trading on 
July 1, 2013. Pursuant to Exchange Rule 16.1(c), the Exchange will 
``provide ETP Holders with notice of all relevant dues, fees, 
assessments and charges of the Exchange'' through the issuance of an 
Information Circular and will post a copy of the rule filing on the 
Exchange's Web site (www.nsx.com).
2. Statutory Basis
    The Exchange believes that the proposed increase in the rebate for 
Double Play Orders routed away and executed on the CBSX is consistent 
with the provisions of Section 6(b) of the Act,\12\ in general, and 
Sections 6(b)(4) \13\ and 6(b)(5) \14\ of the Act \15\ in particular. 
The Exchange submits that the amendments to the Fee Schedule provide 
for the equitable allocation of reasonable, dues, fees and other 
charges among market participants and persons using the facilities of 
the Exchange and are therefore consistent with Section 6(b)(4) of the 
Act. The increased rebate is equitably allocated among ETP Holders, 
issuers and persons using the Exchange's facilities because all ETP 
Holders are eligible to submit (or not submit) Double Play Orders at 
their discretion. The Exchange notes that ETP Holders using the Double 
Play Order to access the CBSX will receive a rebate rather than being 
charged the Exchange's standard fees for routing orders. This is 
because the Exchange is passing through to ETP Holders the rebate it 
receives from CBSX. Providing ETP Holders with a rebate for directing 
Double Play Orders to the CBSX is reasonable to increase order flow 
handled by the Exchange. Increased use of the Double Play Order should 
also increase liquidity at the Exchange since any unexecuted portion is 
returned to the NSX Book.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b).
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    The increased rebate is consistent with Section 6(b)(5) of the Act 
because use of the Double Play Order is available to all ETP Holders, 
without limitation, and thus the Fee Schedule amendment does not permit 
unfair discrimination among issuers, ETP Holders or their customers. 
The increased rebate is also consistent with the protection of 
investors and the public interest in that they are designed to 
encourage increased liquidity and more efficient and economical 
securities trading.
    The Exchange believes that offering a different rebate structure 
for the Select Securities is consistent with Section 6(b)(4) of the Act 
is an equitable allocation of rebates among persons entering orders on 
the Exchange. In addition, the Exchange believes that the rebates are 
reasonable based on the trading in the Selected Securities. The 
liquidity profiles of the Select Securities are different from those 
for other symbols. The NBBO market width in the Select Securities in 
the Select Securities is often $0.01, and the proposed rebate structure 
for the Select Securities is designed to approximate a midpoint between 
the NBBO. Further, the proposed rebate structure for the Select 
Securities is intended to incentivize the trading in the Select 
Securities and thus provide a greater pool of liquidity. Finally, the 
proposed rebates for the Select Securities will apply equally to all 
market participants. The Exchange submits that the different rebate 
structure for the Select Securities constitutes an equitable allocation 
of reasonable fees and other charges among ETP Holders, issuers and 
other persons using the facilities of the Exchange.
    The amended rebate structure for the Select Securities is also 
consistent with Section 6(b)(5) of the Act in that it does not permit 
unfair discrimination between ETP Holders, issuers and customers. ETP 
Holders and their customers will choose to send orders in the Select 
Securities to NSX to be eligible for the amended fee and rebate 
schedule, but they also have a choice of other execution venues with 
different pricing mechanisms as well. By offering the enhanced fee and 
rebate structure in the Select Securities, the Exchange is providing 
alternatives to ETP Holders and their customers, while also striving to 
increase the liquidity in the Select Securities on the Exchange.
    The Exchange further submits that the proposed clarifications to 
Section III.A of the Fee Schedule are consistent with the provisions of 
Section 6(b) of the Act, in general, and Section 6(b)(5) of the Act, in 
particular, in that these changes are intended to Promote just and 
equitable principles of trade and the protection of investors. The 
amendments are intended to provide clarity for ETP Holders, their 
customers, and other market participants that (i) the Exchange will 
apply its standard Fee Schedule for any portion of a Double Play Order 
that is executed on the NSX after returning from another Trading Center 
or is subsequently routed away by the Exchange in accordance with NSX 
Rule 11.15(a)(ii); and (ii) the ETP Holders will be charged the $0.0030 
routing fee in the event that the Exchange routes an order away in 
accordance with NSX Rule 11.15(a)(ii), but that such routing fees will 
not apply to the initial routing of a Double Play Order to the 
designated away Trading Center. This clarification to the Fee Schedule 
is consistent with the provisions of Section 6(b) of the Act in that 
they provide for additional transparency and clarity with respect to 
the circumstances under which a routing fee will be charged by the 
Exchange.
    Finally, the Exchange believes that the proposed amendments are 
consistent with Section 6(b)(8) of the Act in that they do not pose any 
burden on competition that is not necessary or appropriate in 
furtherance of the Act. The purpose of the proposed amendments is to 
enhance the ability of the Exchange to attract additional order flow, 
allow ETP Holders to access liquidity on the CBSX exchange, and expand 
the pool of liquidity on NSX. The amendments are designed to enhance 
competition among exchanges and thereby further the purposes of the 
Act.The exchange notes that it operates in a highly competitive 
environment in which market participants can make order entry decisions 
among competing

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venues. In such an environment, the Exchange must continually review 
and change its fees and rebates to remain competitive with other 
exchanges and to offer its ETP Holders and their customers the means to 
achieve economically efficient securities transactions. The Exchange 
believes that the proposed rule change reflects this competitive 
environment.

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

    As noted above, the Exchange believes that the proposed rule 
changes are consistent with Section 6(b) of the Act and specifically 
Section 6(b)(8) in that they do not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange believes that increasing the rebate paid to ETP 
Holders using the Double Play Order will operate to promote competition 
by potentially attracting additional liquidity to the Exchange and 
providing access to liquidity on the CBSX. The Exchange does not 
believe that passing through the rebate received from the CBSX to ETP 
Holders imposes a burden on competition for any other Exchange approved 
Trading Center since other Trading Centers may offer other competitive 
functions or features such as low cost executions, faster executions, 
of increased levels of liquidity. The ETP Holder may choose which 
offering is most attractive and the increased rebate is one factor 
which an ETP Holder may consider. As stated above, the Exchange 
operates in a highly competitive market in which market participants 
can choose competing venues. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and rebates to 
remain competitive with other exchanges.

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 written comments on 
the proposed rule change.

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

    The proposed rule change has taken effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Exchange Act \16\ and subparagraph 
(f)(2) of Rule 19b-4.\17\ At any time within 60 days of the filing of 
such 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.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4.
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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-NSX-2013-14 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-NSX-2013-14. 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 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 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-NSX-2013-14, 
and should be submitted on or before August 2, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-16749 Filed 7-11-13; 8:45 am]
BILLING CODE 8011-01-P