[Federal Register Volume 78, Number 242 (Tuesday, December 17, 2013)]
[Notices]
[Pages 76353-76355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29894]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71039; File No. SR-BX-2013-060]


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

December 11, 2013.
    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 December 2, 2013, NASDAQ OMX BX, Inc. (``BX'' 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 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

    The Exchange proposes to amend Chapter XV, Section 2 entitled ``BX 
Options Market--Fees and Rebates'' to amend various fees for routing 
options to away markets.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.com, at the principal 
office of the Exchange, 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 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 this filing is to amend the Routing Fees in Section 
2(3) of Chapter XV in order to recoup costs the Exchange incurs for 
routing and executing certain orders in equity options to away markets. 
Today, the Exchange assesses a Non-Customer a $0.95 per contract 
Routing Fee to any options exchange. The Customer Routing Fee for 
option orders routed to The NASDAQ Options Exchange LLC (``NOM'') and 
NASDAQ OMX PHLX LLC (``PHLX'') is a $0.05 per contract Fixed Fee in 
addition to the actual transaction fee assessed. The Customer Routing 
Fee for option orders routed to all other options exchanges \3\ 
(excluding NOM and PHLX) is a fixed fee of $0.15 per contract (``Fixed 
Fee'') in addition to the actual transaction fee assessed. If the away 
market pays a rebate, the Routing Fee is $0.00 per contract.\4\
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    \3\ Including BATS Exchange, Inc. (``BATS''), BOX Options 
Exchange LLC (``BOX''), the Chicago Board Options Exchange, 
Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''), 
International Securities Exchange, LLC (``ISE''), the Miami 
International Securities Exchange, LLC (``MIAX''), NYSE Arca, Inc. 
(``NYSE Arca''), NYSE MKT LLC (``NYSE Amex'') and Topaz Exchange, 
LLC (``Gemini'').
    \4\ For all Routing Fees, the transaction fee will continue to 
be based on the away market's actual transaction fee or rebate for 
particular market participants and in the case that there is no 
transaction fee or rebate assessed by the away market, the Fixed 
Fee.
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    The Exchange proposes to increase the Customer Routing Fixed Fee of 
$0.15 per contract when an option order is routed to all other 
exchanges to $0.20 per contract. With respect to the fixed costs, the 
Exchange incurs a fee when it utilizes Nasdaq Options Services LLC 
(``NOS''), a member of the Exchange and the Exchange's exclusive order 
router.\5\ Each time NOS routes an order to an away market, NOS is 
charged a clearing fee \6\ and, in the case of certain exchanges, a 
transaction fee is also charged in certain symbols, which fees are 
passed through to the Exchange. The Exchange currently recoups clearing 
and transaction charges incurred by the Exchange as well as certain 
other costs incurred by the Exchange when routing to away markets, such 
as administrative and technical costs associated with operating NOS, 
membership fees at away markets, Options Regulatory Fees (``ORFs'') and 
technical costs associated with routing options. The Exchange assesses 
the actual away market fee at the time that the order was entered into 
the Exchange's trading system. This transaction fee would be calculated 
on an order-by-order basis since different away markets charge 
different amounts.
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    \5\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
    \6\ The Options Clearing Corporation (``OCC'') assesses $0.01 
per contract side.
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    A new market entrant recently adopted an ORF.\7\ The Exchange 
proposes to increase its Fixed Fee from $0.15 to $0.20 per contract to 
recoup costs associated with increased costs.
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    \7\ Gemini adopted an ORF of $0.0010 per contract. See 
Securities Exchange Act Release No. 70200 (August 14, 2013), 78 FR 
51242 (August 20, 2013) (SR-Topaz-2013-01).
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2. Statutory Basis
    BX believes that its proposal to amend its Pricing Schedule is 
consistent with Section 6(b) of the Act \8\ in general, and furthers 
the objectives of Section 6(b)(4) and (b)(5) of the Act \9\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among members and

[[Page 76354]]

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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes that the proposed Routing Fees are reasonable 
because they seek to recoup costs that are incurred by the Exchange 
when routing orders to away markets on behalf of Participants. Each 
destination market's transaction charge varies and there is a cost 
incurred by the Exchange when routing orders to away markets. The costs 
to the Exchange include clearing costs, administrative and technical 
costs associated with operating NOS, membership fees at away markets, 
ORFs and technical costs associated with routing options. The Exchange 
believes that the proposed Routing Fees would enable the Exchange to 
recover the costs it incurs to route orders to away markets in addition 
to transaction fees assessed to market participants for the execution 
of orders by the away market. Specifically, new entrants have added 
costs associated with routing.\10\ The Exchange believes that it is 
reasonable to recoup these costs borne by the Exchange on each 
transaction. The proposed $0.20 per contract Customer Routing Fixed 
Fee, which would be assessed when an option order is routed to all 
other exchanges, represents the overall cost to the Exchange for 
technical, administrative, clearing, regulatory, compliance and other 
costs, in addition to the transaction fee assessed by the away market.
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    \10\ See note 7.
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    In addition, the Exchange believes that it is equitable and not 
unfairly discriminatory to assess a $0.20 per contract Customer Routing 
Fixed Fee when an option order is routed to all other exchanges because 
this fee would be assessed uniformly on all market participants in 
addition to the actual transaction fees on all orders routed to non-
NASDAQ OMX markets.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess a fixed cost of $0.05 per contract to route 
orders to NOM and PHLX because the cost, in terms of actual cash 
outlays, to the Exchange to route to those markets is lower. For 
example, costs related to routing to NOM and PHLX are lower as compared 
to other away markets because NOS is utilized by all three exchanges to 
route orders.\11\ NOS and the three NASDAQ OMX options (PHLX, BX 
Options and NOM) markets have a common data center and staff that are 
responsible for the day-to-day operations of NOS. Because the three 
exchanges are in a common data center, Routing Fees are reduced because 
costly expenses related to, for example, telecommunication lines to 
obtain connectivity are avoided when routing orders in this instance. 
The costs related to connectivity to route orders to other NASDAQ OMX 
exchanges are de minimis. When routing orders to non-NASDAQ OMX 
exchanges, the Exchange incurs costly connectivity charges related to 
telecommunication lines and other related costs. The Exchange believes 
it is reasonable, equitable and not unfairly discriminatory to pass 
along savings realized by leveraging NASDAQ OMX's infrastructure and 
scale to market participants when those orders are routed to NOM and 
PHLX. Orders are routed to away markets in accordance with Exchange 
rules based on price.\12\ Market participants may submit orders to the 
Exchange as ineligible for routing or ``DNR'' to avoid incurring the 
Routing Fees proposed herein.\13\
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    \11\ See Chapter VI, Section 11 of the NASDAQ and BX Options 
Rules and PHLX Rule 1080(m)(iii)(A).
    \12\ See BX Rules at Chapter XII (Options Order Protection and 
Locked and Crossed Market Rules).
    \13\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    BX does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. The Exchange believes that the rule change 
would allow the Exchange to recoup its costs when routing orders 
designated as available for routing by the market participant. 
Participants may choose to mark the order as ineligible for routing to 
avoid incurring these fees.\14\ Today, other options exchanges also 
assess similar fees to recoup costs incurred when routing orders to 
away markets.
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    \14\ See note 13.
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    With respect to continuing to route orders to NOM and PHLX at a 
lower cost as compared to other away markets, the Exchange does not 
believe that the proposed amendments to increase those fees, while 
maintaining the same fee differential imposes a burden because all 
market participants would be assessed the same fees depending on the 
away market. Also, the Exchange is proposing to recoup costs incurred 
only when members request the Exchange route their orders to an away 
market. The Exchange is passing along savings realized by leveraging 
NASDAQ OMX's infrastructure and scale to market participants when those 
orders are routed to NOM and PHLX and is providing those saving to all 
market participants. Finally, the Exchange routes orders to away 
markets where the Exchange's disseminated bid or offer is inferior to 
the national best bid (best offer) price and based on price first.\15\
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    \15\ See BX Rules at Chapter XII (Options Order Protection and 
Locked and Crossed Market Rules).
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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.\16\ 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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    \16\ 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-2013-060 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-2013-060. 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

[[Page 76355]]

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 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-2013-060 and should be 
submitted on or before January 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
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    \17\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-29894 Filed 12-16-13; 8:45 am]
BILLING CODE 8011-01-P