[Federal Register Volume 82, Number 137 (Wednesday, July 19, 2017)]
[Notices]
[Pages 33187-33189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15099]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81138; File No. SR-BX-2017-031]


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

July 13, 2017.
    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, 2017, NASDAQ 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 the Exchange's transaction fees at 
Rule 7018 to assess a new charge for adding displayed liquidity for 
members that equal or exceed a specified monthly volume threshold, as 
described further below.
    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 amend the Exchange's 
transaction fees at Rule 7018 to assess a new charge for adding 
displayed liquidity for members that equal or exceed a specified 
monthly volume threshold.
    The Exchange operates on the ``taker-maker'' model, whereby it pays 
credits to members that take liquidity and charges fees to members that 
provide liquidity. Currently, the Exchange assesses three fees to 
members that provide liquidity on BX through displayed orders if the 
member meets certain volume requirements. First, the Exchange assesses 
a charge of $0.0014 per share executed for a displayed order entered by 
a member that adds liquidity equal to or exceeding 0.25% of total 
Consolidated Volume during a month. Second, the Exchange assesses a 
charge of $0.0017 per share executed for a displayed order entered by a 
member that adds liquidity equal to or exceeding 0.15% of total 
Consolidated Volume during a month. Third, the Exchange assesses a 
charge of $0.0018 per share executed for a displayed order entered by a 
member that adds liquidity equal to or exceeding the member's Growth 
Target.\3\ A member that does not meet any of these categories will be 
assessed a charge of $0.0020 per share executed for adding displayed 
liquidity.\4\
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    \3\ The Growth Target is the liquidity the member added in 
January 2017 as a percent of total Consolidated Volume plus 0.04% of 
total Consolidated Volume. See Rule 7018.
    \4\ As set forth in Rule 7018, the Exchange also assesses other 
charges for adding other kinds of liquidity, such as non-displayed 
orders and specific order types.
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    The Exchange now proposes to assess a charge of $0.0013 per share 
executed for a displayed order entered by a member that adds liquidity 
equal to or exceeding 0.55% of total Consolidated Volume during a 
month. As with the other charges and credits in Rule 7018, Consolidated 
Volume shall be 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

[[Page 33188]]

orders with a size of less than one round lot.\5\
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    \5\ As set forth in Rule 7018(a), 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.
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    By assessing a lower charge on displayed orders for members that 
add increased liquidity, the Exchange is incentivizing members to add 
greater liquidity on BX, to the benefit of all BX market participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of 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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \8\
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    \8\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission \9\ 
(``NetCoalition'') the D.C. Circuit upheld the Commission's use of a 
market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\10\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \11\
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    \9\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \10\ See NetCoalition, at 534-535.
    \11\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \12\
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    \12\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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    The Exchange believes that the proposed charge and its attendant 
volume requirement is reasonable. In reducing the charge to add 
displayed liquidity if the volume threshold is met, the proposed charge 
and its volume requirement is designed to incentivize members to add 
greater liquidity to the Exchange. Accordingly, the amount of the 
charge is less than other charges for adding displayed liquidity, and 
the volume requirement is correspondingly more stringent than volume 
requirements for higher charges, e.g., $0.0013 per share executed for 
adding liquidity equal to or exceeding 0.55% of total Consolidated 
Volume versus $0.0014 per share executed for adding liquidity equal to 
or exceeding 0.25% of total Consolidated Volume. The Exchange also 
notes that Bats BYX Exchange, Inc. assesses a fee of $0.0013 for 
displayed orders that add liquidity where the member has an average 
daily add volume that equals or exceeds 0.40% of the Total Consolidated 
Volume.\13\ The Exchange also believes that the amount of the new 
charge is closely aligned to the requirement for qualifying for that 
charge, especially in comparison to the other charges for adding 
liquidity offered by the Exchange and their attendant requirements.
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    \13\ See Bats BYX Exchange, Inc. fee schedule.
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    The Exchange believes that the proposed change is equitably 
allocated among members, and is not designed to permit unfair 
discrimination. BX notes that participation on the Exchange, and 
eligibility for this charge, is voluntary, and that the Exchange 
continues to offer other charge [sic] for which members may attempt to 
qualify instead of the proposed charge. The proposed charge applies to 
all members that otherwise qualify for the charge by meeting its volume 
requirement. The Exchange believes that it is equitable and not 
unfairly discriminatory to adopt this charge and its volume requirement 
because the Exchange is attempting, through this charge and its volume 
requirement, to incentivize members to add greater liquidity to the 
Exchange, which may benefit all BX market participants.

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 charge for adding displayed 
liquidity does 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 new charge applies equally to all members that otherwise 
meet the requirement, i.e., adding liquidity equal to or exceeding 
0.55% of total Consolidated Volume during a month, and all similarly 
situated members are equally capable of qualifying for the charge if 
they choose to meet the requirement. The Exchange believes that the 
proposed charge will incentivize members to add greater liquidity to 
the Exchange, which may benefit all BX market participants. The 
Exchange also notes that Bats BYX Exchange, Inc. assesses the same fee 
for adding displayed liquidity with a comparable volume requirement.
    In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that the Exchange will lose market share as 
a result. Accordingly, 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.

[[Page 33189]]

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.\14\
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    \14\ 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-2017-031 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-2017-031. 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 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-2017-031 and should be 
submitted on or before August 9, 2017.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2017-15099 Filed 7-18-17; 8:45 am]
 BILLING CODE 8011-01-P