[Federal Register Volume 80, Number 180 (Thursday, September 17, 2015)]
[Notices]
[Pages 55888-55891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23289]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75904; File No. SR-BX-2015-056]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 7018

September 11, 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 September 1, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed

[[Page 55889]]

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 the fee schedule under Exchange Rule 
7018(a) with respect to execution and routing of orders in securities 
priced at $1 or more per share and to amend a credit under BX Rule 
7018(e).
    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments be operative on September 
1, 2015.
    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 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 the fee schedule under BX Rule 
7018(a), relating to charges and credits provided for orders in 
securities priced and $1 or more per share that execute on BX, as well 
as to reduce a credit provided in connection with the Retail Price 
Improvement (``RPI'') program under BX Rule 7018(e).
    Under BX Rule 7018(a), the Exchange provides credits to member 
firms that access certain levels of liquidity on BX per month. The 
Exchange is proposing to amend several of the credit tiers for orders 
that access liquidity (excluding orders with midpoint pegging and 
excluding orders that receive price improvement and execute against an 
order with midpoint pegging), as well as modify the criteria for 
receiving certain of the credits. The Exchange also proposes a few 
minor changes made for the purposes of clarity and conformity.
    Specifically, the Exchange proposes to add a new credit tier of 
$0.0016 per share executed, which will be provided for orders that 
access liquidity, excluding orders with midpoint pegging \3\ and orders 
that receive price improvement and execute against an order with 
midpoint pegging, entered by a member that accesses liquidity equal to 
or exceeding 0.15% of total consolidated volume \4\ (``Consolidated 
Volume'') during a month. Additionally, the Exchange proposes to amend 
the credit tier of $0.0015 per share executed, which is provided for 
orders that access liquidity, excluding orders with midpoint pegging 
and orders that receive price improvement and execute against an order 
with midpoint pegging, entered by a member that accesses liquidity 
equal or exceeding 0.10% of Consolidated Volume by reducing the 
Consolidated Volume threshold to 0.09%.
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    \3\ A Midpoint Peg order has its priced based upon the national 
best bid and offer, excluding the effect that the Midpoint Peg Order 
itself has on the inside bid or inside offer. Primary Pegged Orders 
with an offset amount and Midpoint Pegged Orders will never be 
displayed. A Midpoint Pegged Order may be executed in sub-pennies if 
necessary to obtain a midpoint price. A new timestamp is created for 
the order each time it is automatically adjusted.
    \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).
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    BX also proposes to eliminate the credit tier of $0.0012 per share 
executed, which currently is provided for orders that access liquidity, 
excluding orders with midpoint pegging and orders that receive price 
improvement and execute against an order with midpoint pegging, entered 
by a member that accesses liquidity equal to or exceeding 0.10% [sic] 
of total Consolidated Volume during a month.
    Next, the Exchange proposes to revise the criteria for a member to 
qualify for the credit tier of $0.0008 per share executed, which will 
be provided for orders that access liquidity, excluding orders with 
midpoint pegging and orders that receive price improvement and execute 
against an order with midpoint pegging, entered by a member that 
accesses (rather than adds as is currently stated) liquidity equal to 
or exceeding 0.05% (rather than 0.02% that is the current level), of 
total Consolidated Volume during a month.
    BX is also proposing to slightly increase the charge for providing 
liquidity through the NASDAQ OMX BX Equities System (``System'') for a 
displayed order entered by a member that (i) adds liquidity equal to or 
exceeding 0.25% of total Consolidated Volume during a month; and (ii) 
adds and accesses liquidity equal to or exceeding 0.50% of total 
Consolidated Volume during a month from $0.0014 per share executed to 
$0.0016 per share executed.
    Currently, a firm may become a Qualified Market Maker (``QMM'') by 
being a member that provides through one or more of its BX System MPIDs 
more than 0.15% 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 national best bid and offer 
(``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 Exchange is 
proposing to increase the Consolidated Volume requirement from 0.15% to 
0.20% during the month and to eliminate the additional requirement that 
the member must also provide an average daily volume of 1.5M shares or 
more of non-displayed liquidity during the month.
    Lastly, the Exchange is proposing to amend a credit provided under 
the Retail Price Improvement (``RPI'') program in BX Rule 7018(e). The 
Exchange's RPI program provides incentives to member firms (or a 
division thereof) approved by the Exchange to participate in the 
program (a ``Retail Member Organization'') to submit designated 
``Retail Orders'' \5\ for the purpose of seeking price improvement. The 
Exchange is proposing to decrease the credit of $0.0002 per share 
executed to $0.0000 per share executed that is provided for a Retail 
Order that receives price improvement (when the accepted price of an 
order is different than the

[[Page 55890]]

executed price of an order) and accesses non-RPI order with midpoint 
pegging.
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    \5\ A Retail Order is defined in BX Rule 4780(a)(2), in part, as 
``an agency or riskless principal order that satisfies the criteria 
of FINRA Rule 5320.03, that originates from a natural person and is 
submitted to the Exchange by a Retail Member Organization, provided 
that no change is made to the terms of the order with respect to 
price (except in the case that a market order is changed to a 
marketable limit order) or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology.''
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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,\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 is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the new and amended credit tiers for 
orders that access liquidity (excluding orders with midpoint pegging 
and excluding orders that receive price improvement and execute against 
an order with midpoint pegging), as well as the modified criteria for 
receiving certain of the credits based on Consolidated Volume together, 
as well as related clarifying changes, under BX Rule 7018(a) are 
reasonable because they provide additional opportunities for market 
participants to receive credits for participation on BX.
    Specifically, the Exchange is proposing a new of [sic] $0.0016 per 
share executed credit tier, which requires liquidity accessed of 0.15% 
or more of Consolidated Volume during the month. The Exchange is also 
proposing a [sic] eliminate the $0.0012 per share executed credit tier, 
which currently requires liquidity accessed of 0.05% or more of 
Consolidated Volume during the month. Additionally, the Exchange is 
modifying the existing credit tier of $0.0008 per share executed by 
increasing the minimum total Consolidated Volume required from 0.02% to 
0.05% and making it applicable to members that access rather than add 
liquidity. As such, the Exchange is generally providing increased 
credits for member firms that remove increasing amounts of liquidity 
from the Exchange. With respect to the accesses Consolidated Volume 
requirement to receive the $0.0008 credit, the Exchange believes this 
is reasonable because for firms to receive the increased credit they 
must remove a certain amount of Consolidated Volume, which will improve 
market quality for all participants.
    The Exchange believes that the proposed credits noted above are 
equitably allocated and are not unfairly discriminatory as they are 
provided to all member firms that achieve the minimum level of 
Consolidated Volume required by the tier, with the member firms that 
remove the greatest level of Consolidated Volume receiving the greatest 
credit. Additionally, the Exchange believes that this proposed rule 
change being changed from a member that adds liquidity to being 
applicable to a member that accesses liquidity is reasonable because 
the Exchange desires to further incentivize member firms to participate 
in the Exchange by removing liquidity.
    The Exchange believes that elimination of the $0.0012 per share 
executed credit tier is reasonable because the Exchange has added a 
$0.0016 credit tier per share executed, discussed above, and the 
Exchange desires to further incentivize member firms to participate in 
the Exchange by removing liquidity, generally. The Exchange believes 
that the proposed addition of the $0.0016 credit tier per share 
executed and elimination of the $0.0012 per share executed credit tier, 
are both an equitable allocation and are not unfairly discriminatory 
because the $0.0012 per share executed credit tier is a no longer 
needed incentive for [sic] market participant and member firms will 
continue to have the opportunity to qualify for a higher credit based 
on their participation in BX by removing liquidity.
    Additionally, the Exchange believes reducing the Consolidated 
Volume threshold for the credit tier of $0.0015 per share executed, 
which is provided for orders that access liquidity (excluding orders 
with midpoint pegging and orders that receive price improvement and 
execute against an order with midpoint pegging) and that is entered by 
a member that accesses liquidity, from equal or exceeding 0.10% of 
Consolidated Volume to 0.09%, is reasonable because it will make it 
easier for members to receive a rebate at that level and encourage 
market participant activity and will also support price discovery and 
liquidity provision. The Exchange also believes this proposed rule 
change is an equitable allocation and is not unfairly discriminatory 
because it will apply uniformly to all member firms that so qualify.
    The Exchange believes that the proposed change to slightly increase 
the charge assessed a member for entering a displayed order is 
reasonable because the exchange must balance the cost of credits 
provided for orders removing liquidity and the desire to provide QMMs 
with incentives to provide displayed orders. The Exchange notes that 
the proposed charge continues to be lower than the default charge 
assessed for all other displayed orders that do not otherwise qualify 
for a lower charge, and as such continues to act as an incentive to 
market participants to provide such liquidity. The Exchange believes 
that the proposed change is both equitably allocated and is not 
unfairly discriminatory because the slightly increased charge applies 
uniformly to all member firms that previously had qualified to receive 
such a credit.
    The Exchange believes that the proposed increase to the monthly 
Consolidated Volume requirement from 0.15% to 0.20% for a firm to 
become a QMM is reasonable because member firms are being required to 
provide through one or more of its BX System MPIDs increased 
Consolidated Volume to qualify, which will increase liquidity in the 
market overall. Additionally, 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. BX also believes it is 
reasonable to eliminate the additional requirement that the member must 
also provide an average daily volume of 1.5M shares or more of non-
displayed liquidity during the month because the Exchange believes 
removing this criteria will allow QMMs to focus on making better 
markets.
    The Exchange also believes that the proposed increase to the 
monthly Consolidated Volume requirement from 0.15% to 0.20% for a firm 
to become a QMM is both equitably allocated and is not unfairly 
discriminatory because it [sic] the slightly higher Consolidated Volume 
requirement applies uniformly to firms seeking to qualify as a QMM. The 
Exchange also believes that the proposed changes to the criteria for a 
firm to qualify as a QMM expands the opportunity for firms to qualify 
as a QMM and further perfects the mechanism of a free and open market 
by making it easier to qualify for this beneficial, market improving 
program

[[Page 55891]]

and bolster displayed liquidity by eliminating the additional 
requirement that the member must also provide an average daily volume 
of 1.5M shares or more of non-displayed liquidity during the month.
    BX believes that the proposed change to decrease the credit of 
$0.0002 per share executed to $0.0000 per share executed that is 
provided for a Retail Order that receives price improvement (when the 
accepted price of an order is different than the executed price of an 
order) and accesses non-RPI order with midpoint pegging is reasonable 
because this incentive is no longer needed to improve the market for 
retail order flow. Also, the Exchange must continually adjust its 
incentives to remain competitive with other exchanges. The Exchange 
also believes the reduced credit is equitably allocated and is not 
unfairly discriminatory because it applies uniformly to all firms.
    Finally, BX notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, BX must continually adjust its fees to remain competitive 
with other exchanges and with alternative trading systems that have 
been exempted from compliance with the statutory standards applicable 
to exchanges. The changes reflect this environment because although 
they reflect changes to both credits and charges, with the price 
increases being minor, while [sic] the amended credits are designed 
overall to incentivize changes in market participant behavior to the 
benefit of the market overall.

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 dozens of 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.
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    \8\ 15 U.S.C. 78f(b)(8).
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    In this instance, the modification to the fee schedule, as well as 
modifications to the criteria to become a QMM, do not impose a burden 
on competition because it is optional and is the subject of competition 
from other exchanges. The Exchange does not believe that the proposed 
change will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets. 
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 change will 
impair the ability of members 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. 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 Number SR-BX-2015-056 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-2015-056. 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-2015-056, 
and should be submitted on or before October 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-23289 Filed 9-16-15; 8:45 am]
BILLING CODE 8011-01-P