[Federal Register Volume 79, Number 118 (Thursday, June 19, 2014)]
[Notices]
[Pages 35194-35196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14314]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72386; File No. SR-BX-2014-031]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Fee Schedule Under Exchange Rule 7018(a) With Respect to Transactions 
in Securities Priced at $1 per Share or More

June 13, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 6, 2014, 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 the self-regulatory organization. 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 the fee schedule under Exchange Rule 
7018(a) with respect to transactions in securities priced at $1 per 
share or more.
    The text of the proposed rule change is also 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 the 
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.

[[Page 35195]]

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

1. Purpose
    The Exchange is proposing three changes to its fees and rebates 
applicable to transactions in securities priced at $1 or more under BX 
Rule 7018(a).
    First, the Exchange proposes to increase for all members the credit 
for an order that executes against a midpoint pegged order from $0 to 
$0.0003 per share executed. Next, the Exchange proposes to create a new 
fee tier for members that add 3.5 million or more shares (but less than 
5 million shares) of non-displayed liquidity per day of $0.0024 per 
share executed.
    The Exchange also proposes to lower one of the parameters for a 
member with (i) shares of liquidity provided and (ii) total shares of 
liquidity accessed and provided in all securities through one or more 
of its NASDAQ OMX BX Equities System market participant identifiers 
(``MPIDs'') that represent more than 0.35% (proposed to be lowered to 
0.30%) and 0.45%, respectively, of consolidated volume \3\ 
(``Consolidated Volume'') during the month.
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    \3\ Consolidated Volume is the consolidated volume reported to 
all consolidated transaction reporting plans by all exchanges and 
trade reporting facilities. See BX Rule 7018(a)(1).
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    The Exchange believes that the proposed price cut for taking 
midpoint liquidity will encourage firms to access more resting midpoint 
liquidity before routing to other destinations for price improvement 
opportunities. Additionally, the Exchange believes that the proposed 
new tier for non-displayed liquidity will encourage additional 
liquidity adding activity from non-display participants. Also, relaxing 
the standard to qualify as Qualified Market Maker (``QMM'') (Tier 1) 
will enable more firms to be able to avail themselves of the more 
advantageous QMM credits and overall pricing.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\4\ in general, and Sections 6(b)(4) 
and (b)(5) of the Act,\5\ in particular, because 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 that 
the Exchange operates or controls, and it does not unfairly 
discriminate between customers, issuers, brokers or dealers.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4), (5).
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    The proposed rule changes, in part, are reflective of the 
Exchange's ongoing efforts to use rebates and discounted execution fees 
to attract orders that the Exchange believes will improve market 
quality. Generally, the Exchange seeks to provide members with 
discounts that they deem helpful, and to eliminate those that they do 
not. By offering a credit for members that take liquidity at the 
midpoint and by offering reduced execution fees for members that add a 
certain level of non-displayed shares per day, the Exchange believes it 
will be able to further promote these goals by providing better 
targeted incentives for market participants. Also, relaxing the 
standard to qualify as QMM (Tier 1) will enable more firms to be able 
to avail themselves of the more advantageous QMM credits and overall 
pricing. Each of the proposed changes is a pro-competitive price 
reduction designed to enhance the Exchange's position in the 
marketplace and broaden the execution opportunities for BX members.
    Furthermore, the proposed rule changes are consistent with 
statutory requirements, as the proposed rule changes discussed herein 
are not unfairly discriminatory, do not place an unnecessary burden on 
competition, and represent an equitable allocation of fees for the 
reasons set forth below.
    The proposed credit increase of $0 to $0.0003 per share executed 
for orders that execute against a midpoint pegged order is consistent 
with an equitable allocation of fees and is not unfairly discriminatory 
because this rebate applies uniformly across all members. The Exchange 
believes that this credit will incentivize members to execute against 
midpoint liquidity and this, in turn, will lead to an increase in price 
improvement liquidity and price improvement generally benefits the 
investing public. Also, it is reasonable and equitable because it 
reflects the availability of what is in effect a price reduction for 
all members that execute against a midpoint pegged order.
    Additionally, the proposed rule change to create a new tier for 
members that add 3.5 million or more shares (but less than 5 million 
shares) of non-displayed liquidity per day of $0.0024 per share 
executed is consistent with an equitable allocation of fees and is not 
unfairly discriminatory because the Exchange believes that this new 
tier will incentivize members to add more non-displayed shares and 
this, in turn, will lead to an increase in price improvement liquidity 
and price improvement generally benefits the investing public and BX 
members have an equal opportunity to avail themselves of this tier 
should they desire to do so. It is reasonable in that it affects 
similarly situated members in the same way and because it encourages 
additional liquidity adding activity from participants that want to add 
non-displayed liquidity.
    Also, the proposed rule change to relax the standard to qualify as 
QMM (Tier 1) by modifying one of the parameters for a member with (i) 
shares of liquidity provided and (ii) total shares of liquidity 
accessed and provided in all securities through one or more of its 
NASDAQ OMX BX Equities MPIDs that represent more than 0.35% (proposed 
to be lowered to 0.30%) and 0.45%, respectively, of Consolidated Volume 
during the month is consistent with an equitable allocation of fees and 
is not unfairly discriminatory because the Exchange believes that this 
will enable more firms to be able to avail themselves of the more 
advantageous QMM credits and overall pricing should they wish to pursue 
this opportunity to reduce trading costs, and because the opportunity 
will apply uniformly across all members. It is reasonable in that it 
affects similarly situated firms in the same way and because it 
encourages firms to take advantage of the more advantageous QMM credits 
and overall pricing.
    The proposed pricing changes are, in part, reflective of BX's 
ongoing efforts to use responsive pricing to attract orders that BX 
believes will improve market quality.
    Finally, BX notes that it operates in a highly competitive market 
in which market participants can easily and readily favor competing 
venues if they deem fee levels at a particular venue to be excessive or 
rebate opportunities to be insufficient. In such an environment, BX 
must continually adjust its fees or rebates to remain competitive with 
other exchanges. BX believes that the proposed rule changes reflect 
this very competitive environment because the proposed rule changes are 
designed to ensure that the charges and credits for participation on BX 
reflect its desire to attract order flow that improves the market for 
all participants.

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

    The Exchange does not believe that the proposed rule changes will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.\6\ 
BX notes that it operates in a highly competitive market in which 
market

[[Page 35196]]

participants can readily favor over 40 different competing exchanges 
and alternative trading systems if they deem fee levels at a particular 
venue to be excessive, or rebate opportunities available at other 
venues to be more favorable. In such an environment, BX must 
continually adjust its fees to remain competitive with other exchanges. 
Because competitors are free to modify their own fees in response, and 
because market participants may readily adjust their order routing 
practices, BX believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited. In 
this instance, the increase to the credit for an order that executes 
against a midpoint pegged order and the new tier for members that add 
3.5 million or more shares (but less than 5 million shares) of non-
displayed liquidity per day, plus the easing of the standards to 
qualify as QMM (Tier 1) enhances the Exchange's competitiveness by 
introducing a credit for some and reducing fees for others. Moreover, 
because there are numerous competitive alternatives to the use of the 
Exchange, it is likely that BX will lose market share as a result of 
the changes if they are unattractive to market participants. 
Accordingly, BX does not believe that the proposed rule changes will 
impair the ability of members or competing order execution venues to 
maintain their competitive standing in the financial markets.
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    \6\ 15 U.S.C. 78f(b)(8).
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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 change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\ 
thereunder. 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f).
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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 No. SR-BX-2014-031 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2014-031. 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-BX-2014-031, and should be 
submitted on or before July 10, 2014.

    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. 2014-14314 Filed 6-18-14; 8:45 am]
BILLING CODE 8011-01-P