[Federal Register Volume 81, Number 136 (Friday, July 15, 2016)]
[Notices]
[Pages 46126-46129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16719]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78278; File No. SR-BX-2016-041]
Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Fees Under
Rule 7018
July 11, 2016.
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 June 30, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule
[[Page 46127]]
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 Exchange's transaction fees at
Rule 7018 to: (i) Eliminate a $0.0017 per share executed credit tier
that is provided for an order that accesses liquidity; and (ii)
eliminate a $0.0019 per share executed fee tier charged for providing
liquidity to the System.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on July 1, 2016.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqbx.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 the proposed rule change is to: (i) Eliminate a
credit tier provided for an order that accesses liquidity; and (ii)
eliminate a fee tier charged for providing liquidity to the System.
First Change
The purpose of the first proposed change is to eliminate a $0.0017
per share executed credit tier provided for an order that accesses
liquidity. The Exchange currently provides a $0.0017 per share executed
credit for an order that accesses liquidity (excluding orders with
Midpoint pegging and excluding orders that receive price improvement
and execute against an order with Midpoint pegging) entered by a member
that accesses liquidity equal to or exceeding 0.20% of total
Consolidated Volume \3\ during a month. The Exchange also has two other
credit tiers based on Consolidated Volume. Specifically, the Exchange
provides a $0.0016 and a $0.0015 per share executed credit for an order
that accesses liquidity (excluding orders with Midpoint pegging and
excluding 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% or 0.05% of total Consolidated
Volume during a month, respectively. All other orders that remove
liquidity (excluding orders with Midpoint pegging and excluding orders
that receive price improvement and execute against an order with
Midpoint pegging) receive a credit of $0.0006 per share executed. The
Exchange has observed that very few members qualify for the $0.0017 per
share executed credit tier and it has not been effective at providing
incentive to market participants to achieve the level of Consolidated
Volume needed to qualify for the credit. Accordingly, the Exchange is
proposing to eliminate the $0.0017 per share executed credit tier.
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\3\ 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 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. As used in this rule, ``price improvement'' shall mean
instances when the accepted price of an order differs from the
executed price of an order. See Rule 7018.
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Second Change
The purpose of the second proposed change is to eliminate a $0.0019
per share executed fee tier charged for providing liquidity to the
System. The Exchange currently assesses a fee of $0.0019 per share
executed for a displayed order entered by a member that adds liquidity
equal to or exceeding 0.10% of total Consolidated Volume during a
month. The Exchange also has two other fee tiers based on Consolidated
Volume. Specifically, the Exchange assesses a $0.0017 per share
executed and $0.0014 per share executed charge for a displayed order
entered by a member that adds liquidity equal to or exceeding 0.15% or
0.25% of total Consolidated Volume during a month, respectively. All
other displayed orders that provide liquidity are assessed a fee of
$0.0020 per share executed. The Exchange has observed that few members
qualify for the $0.0019 per share executed fee. Thus, the $0.0019 per
share executed fee tier has been ineffective at providing incentive to
members to provide the level of Consolidated Volume needed to qualify
for the reduced fee and the Exchange believes that removing the tier
from the fee schedule is appropriate.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \4\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act \5\ 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, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4) and (5).
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First Change
The Exchange believes that eliminating the $0.0017 per share
executed credit tier provided for an order that accesses liquidity is
reasonable because it is not providing adequate incentive to market
participants to remove liquidity from the Exchange. The Exchange must,
from time to time, assess the effectiveness of the criteria it applies
in providing reduced charges and credits, including the nature of the
market improving behavior required to receive the reduced charge or
credit. The Exchange will modify or eliminate such criteria when it
believes the criteria are ineffective, which in turn may allow the
Exchange to offer other incentives instead. The Exchange may also
adjust the level or reduced charge or credit based on its observations
of market participant behavior. In this instance, the Exchange believes
that both the criteria for the $0.0017 per share executed credit and
the level of the credit itself were ineffective at providing meaningful
incentive to market participants to improve the market appreciably. The
Exchange is limited in terms of the levels of reduced fees and credits
that it can offer, and has consequently determined that it should
eliminate the credit tier at this juncture. The Exchange notes that it
is continuing to provide other opportunities for members to receive
credits, including credit tiers that are based on Consolidated Volume.
Eliminating the credit tier will apply to all market participants
equally, and will impact only a small number of members that,
[[Page 46128]]
in any given month, qualify for the credit. Such members will continue
to have opportunity to qualify for the lower Consolidated Volume-based
credit tiers. Thus, the Exchange believes that the proposed elimination
of the $0.0017 per share executed credit tier is an equitable
allocation and is not unfairly discriminatory.
Second Change
The Exchange believes that elimination of the $0.0019 per share
executed fee tier charged for providing liquidity to the System is
reasonable because it is not providing adequate incentive to market
participants to remove liquidity from the Exchange. As discussed above,
the Exchange must, from time to time, assess the effectiveness of the
criteria it applies in providing reduced charges and credits, including
the nature of the market improving behavior required to receive the
reduced charge or credit. The Exchange has observed that very few
members qualify for the $0.0019 per share executed fee, with more
members qualifying for the lower fee tiers. The Exchange believes that
both the criteria for the $0.0019 per share executed fee and the level
of the reduced fee itself were ineffective at providing meaningful
incentive to market participants to improve the market appreciably. As
a consequence, the Exchange has determined to eliminate the fee tier at
this juncture. The Exchange notes that it is continuing to provide
other opportunities for members to receive reduced fees, including
reduced fee tiers that are based on Consolidated Volume. Eliminating
the fee tier will apply to all market participants equally, and will
impact only a small number of members that in any given month qualify
for the reduced fee. All members, including the small number that
currently would qualify for the eliminated fee tier, will continue to
have opportunity to qualify for the lower Consolidated Volume-based fee
tiers. Thus, the Exchange believes that elimination of the $0.0019 per
share executed fee tier is an equitable allocation and is not unfairly
discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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. In terms of inter-market
competition, the Exchange 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, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange 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. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In this instance, the proposed changes to the charges assessed and
credits available to member firms for execution of securities in
securities of all three Tapes do not impose a burden on competition
because the Exchange's execution services are completely voluntary and
subject to extensive competition both from other exchanges and from
off-exchange venues. The proposed changes to the charges assessed and
credits provided to members for execution of orders do not impose a
burden on competition because the Exchange's execution services are
completely voluntary and subject to extensive competition both from
other exchanges and from off-exchange venues. The proposed changes are
reflective of this competition and the Exchange's desire to offer lower
fees and credits in return for market-improving liquidity, which is
ultimately limited by the Exchange's need to cover costs and make a
profit. Thus, the Exchange must carefully adjust its fees and credits
with the understanding that if the proposed changes are unattractive to
market participants, it is likely that the Exchange will lose market
share to other exchanges and off-exchange venues as a result. In this
proposal, the Exchange is eliminating a credit tier and a fee tier,
neither of which have proved effective at providing market participants
with incentive to provide the market-improving behavior required to
qualify for the two tiers. Accordingly, the Exchange is eliminating the
tiers, and may offer other tiers in the future better designed to
provide incentive to market participants to improve the market. The
Exchange believes that the changes are pro-competitive, since any other
market is free to provide similar, if not better, incentives fees and
credits should they choose to do so, which may attract market
participants to those markets to the detriment of the Exchange. For
these reasons, the Exchange does not believe that the proposed changes
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 rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\6\
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\6\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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.
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-2016-041 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-2016-041. 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
[[Page 46129]]
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-2016-041 and should be submitted on or before August
5, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16719 Filed 7-14-16; 8:45 am]
BILLING CODE 8011-01-P