[Federal Register Volume 80, Number 38 (Thursday, February 26, 2015)]
[Notices]
[Pages 10553-10556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-03966]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74343; File No. SR-BX-2015-011]


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 or More per Share

February 20, 2015.
    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 February 9, 2015, 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.
---------------------------------------------------------------------------

    \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

    The Exchange proposes to amend the fee schedule under Exchange Rule 
7018(a) with respect to transactions in securities priced at $1 or more 
per share.
    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 
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

[[Page 10554]]

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 Exchange is proposing to amend BX Rule 7018(a) to provide an 
additional means by which a member firm may qualify for Tier 1 of the 
Qualified Market Maker (``QMM'') program. The QMM program provides 
incentives to Exchange members to improve the market by quoting at 
certain levels for a minimum time. A QMM is a member firm that makes a 
significant contribution to market quality by providing liquidity at 
the national best bid and offer (``NBBO'') in a large number of stocks 
for a significant portion of the day. The designation reflects the 
QMM's commitment to provide meaningful and consistent support to market 
quality and price discovery by extensive quoting at the NBBO in a large 
number of securities. In return, qualifying members receive a reduced 
charge for displayed liquidity provided. There are two QMM tiers under 
Rule 7018(a), which provide different levels of reduced charges for 
providing displayed liquidity based on the contribution the QMM makes 
to market quality.\3\
---------------------------------------------------------------------------

    \3\ Tier 1 has more stringent qualification requirements than 
Tier 2. Consequently, QMMs qualifying for Tier 1 are assessed a 
charge of $0.0014 per share executed whereas those qualifying for 
Tier 2 are assessed a charge of $0.0017 per share executed for 
providing displayed liquidity.
---------------------------------------------------------------------------

    Currently, to qualify for Tier 1 of the QMM program, a member firm 
must have (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 MPIDs that represent more than 
0.40% and 0.50%, respectively, of Consolidated Volume.\4\ For a member 
qualifying under this method, the member must have at least one 
Qualified MPID that is an MPID through which, for at least 150 
securities, the QMM quotes at the NBBO an average of at least 25% of 
the time during regular market hours (9:30 a.m. through 4:00 p.m.) 
during the month. Alternatively, a member firm may qualify for Tier 1 
if it has (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 MPIDs that represent more than 
0.30% and 0.45%, respectively, of Consolidated Volume during the month. 
For a member qualifying under this method, the member must have at 
least one Qualified MPID that is an MPID through which, for at least 
400 securities, the Qualified Market Maker quotes at the NBBO an 
average of at least 25% of the time during regular market hours (9:30 
a.m. through 4:00 p.m.) during the month. To qualify under Tier 2 of 
the QMM program, a member firm must have at least one Qualified MPID, 
that is, an MPID through which, for at least 300 securities, the QMM 
quotes at the NBBO an average of at least 75% of the time during the 
regular market hours (9:30 a.m. through 4:00 p.m.) during the month. BX 
is proposing to add a new alternative means to qualifying for Tier 1 of 
the QMM program.
---------------------------------------------------------------------------

    \4\ Consolidated Volume is defined as the total consolidated 
volume reported to all consolidated transaction reporting plans by 
all exchanges and trade reporting facilities during a month in 
equity securities, excluding executed orders with a size of less 
than one round lot. For purposes of calculating Consolidated Volume 
and the extent of a member's trading activity, expressed as a 
percentage of or ratio to Consolidated Volume, the date of the 
annual reconstitution of the Russell Investments Indexes shall be 
excluded from both total Consolidated Volume and the member's 
trading activity. See Rule 7018(a).
---------------------------------------------------------------------------

    Under the new Tier 1 qualification standard, a member firm must 
have (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 MPIDs that represent more than 
0.20% and 0.30%, respectively, of Consolidated Volume during the month. 
For a member qualifying under this method, the member must have at 
least one Qualified MPID, that is, an MPID through which, for at least 
200 securities, the QMM quotes at the NBBO an average of at least 50% 
of the time during regular market hours (9:30 a.m. through 4:00 p.m.) 
during the month. The member must also provide an average daily volume 
of 1.5 million shares or more using orders with midpoint pegging during 
the month. The Exchange notes that the percentages of total shares of 
liquidity accessed and provided in all securities through its MPIDs is 
lower than both of the other two Tier 1 standards, and is higher than 
the related Tier 2 standard, which has no such requirement. In 
addition, the number of securities that the QMM must quote at the NBBO 
is lower than one of the Tier 1 standards and the Tier 2 standard, 
although it is higher than the other Tier 1 standard. Lastly, the 
amount of time that a member firm must quote at the NBBO in those 
securities is higher in the proposed new Tier 1 standard, but lower 
than Tier 2 standard. Unlike all of the current Tier 1 and Tier 2 
standards, the new proposed Tier 1 standard requires a member firm to 
also provide an average daily volume of 1.5 million shares or more 
using orders with midpoint pegging during the month. The Exchange notes 
that although displayed orders are generally preferred to non-displayed 
orders because they assist in price discovery, the use of midpoint 
orders should also be encouraged through pricing incentives because 
they provide price improvement. Accordingly, adding an additional 
requirement that provides an incentive to provide midpoint pegging 
orders is consistent with the QMM program's goal of improving the 
market on BX.\5\
---------------------------------------------------------------------------

    \5\ The Exchange notes that it provides reduced fees for 
providing midpoint liquidity through Midpoint Peg orders. See Rule 
7018(a).
---------------------------------------------------------------------------

    The Exchange is implementing the proposed change on February 9, 
2015. The calculations of the rule, however, are based on a full 
month's trading. As such, for the abbreviated first month that the new 
rule is effective, the Exchange is basing the calculations of the 
criteria of the new standard on the trading that occurs during the 
effective date through the end of the month. Otherwise, all member 
firms would be penalized by the shorter timeframe in which to meet the 
standard.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\6\ in general, and with Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ 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 the Exchange operates or controls, and is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4) and (5).

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

[[Page 10555]]

    The Exchange believes that the proposed change is reasonable 
because it provides a further incentive to BX member firms to enhance 
the quality of the market by providing meaningful improvement, to the 
benefit of all market participants. The Exchange also believes that the 
proposed criteria of the new qualification standard are both reasonable 
and an equitable allocation because they are comparable to the other 
two means of qualifying for Tier 1. Although some requirements are 
lower than those of the current standards, the Exchange has added an 
additional mid-point pegging requirement, which the Exchange believes 
makes the new standard as stringent as the existing standards, and more 
so than the Tier 2 standard. As a consequence, all member firms that 
qualify under the new standard will receive the benefits of the Tier 
and those that do qualify under the new standard have provided 
comparable market improvement as other member firms that qualify under 
the other standards of Tier 1. The Exchange also believes that it is 
reasonable and an equitable allocation of the fee to consider only 
Consolidated Volume that accrued during the time that the new Tier 1 
standard is effective for the month of February 2015. As noted, the 
Exchange is implementing the new standard on February 9, 2015. Various 
criteria under the new standard compare the trading that the member 
firm does during the month against monthly totals of Consolidated 
Volume for the full month. Solely for the purpose of calculating 
eligibility for the abbreviated month of February 2015, the Exchange is 
only considering the member's activity and Consolidated Volume for the 
time that the rule is effective on February 9th through the end of the 
month. The exchange believes that by doing so, all member firms will 
have the opportunity to qualify under the new standard without penalty 
for the abbreviated time to reach the levels of trading required by the 
rule.
    Lastly, the Exchange believes that the proposed change further 
perfects the mechanism of a free and open market by increasing the 
means by which a member firm may qualify for this beneficial, market 
improving program. The new standard is based on an alternative mix of 
market-improving order activity. Accordingly, to the extent that the 
new standard increases the number of member firms that qualify under 
the tier, market quality will increase.

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.\8\ 
BX notes that it operates in a highly competitive market in which 
market 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In this instance, the addition of the new Tier 1 QMM standard 
provides an additional means for member firms to improve the market to 
gain the benefit of the reduced charge for adding displayed liquidity. 
Member firms are not compelled to participate in the program if they 
deem the requirements too burdensome to justify the reduced charge. 
Accordingly, the Exchange does not believe that the proposed changes 
will impair the ability of member firms or competing order execution 
venues to maintain their competitive standing in the financial markets.

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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2015-011 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-BX-2015-011. 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 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-
2015-011, and should be submitted on or before March 19, 2015.


[[Page 10556]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-03966 Filed 2-25-15; 8:45 am]
BILLING CODE 8011-01-P