[Federal Register Volume 82, Number 222 (Monday, November 20, 2017)]
[Notices]
[Pages 55145-55147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25039]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82075; File No. SR-BX-2017-050]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Transaction Fees at Rule 7018 To Change the Amounts of 
Certain Credits for Entering Orders That Access Liquidity in the 
Exchange's Equities System

November 14, 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 November 1, 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 change the amounts of certain credits for entering orders 
that access liquidity in the Exchange's Equities System.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqbx.cchwallstreet.com/ 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 purposes of the proposed rule changes are to amend the 
Exchange's transaction fees at Rule 7018 to: (1) increase from $0.0016 
to $0.0017 its per share executed credit for orders that access 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with a Non-
displayed price) entered by members that accesses liquidity equal to or 
exceeding 0.10% of total Consolidated Volume during a month; and (2) 
reduce its credit for entering an order that accesses liquidity in the 
Exchange's Equities System for ``all other orders,'' i.e., orders that 
do not qualify for other available credits for removing liquidity.
    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 offers five different 
credits for orders that access liquidity on the Exchange. First, the 
Exchange pays a credit of $0.0016 per share executed for an order that 
accesses liquidity (excluding orders with Midpoint pegging and 
excluding orders that receive price improvement and execute against an 
order with a Non-displayed price) entered by a member that accesses 
liquidity equal to or exceeding 0.10% of total Consolidated Volume 
during a month. Second, the Exchange pays a credit of $0.0015 per share 
executed to an order that accesses liquidity (excluding orders with 
Midpoint pegging and excluding orders that receive price improvement 
and execute against an order with a Non-displayed price) entered by a 
member that accesses liquidity equal to or exceeding 0.05% of total 
Consolidated Volume during [sic] month. Third, the Exchange pays a 
credit of $0.0000 per share executed for an order that receives price 
improvement and executes against an order with a Non-displayed price. 
Fourth, the Exchange pays a credit of $0.0000 per share executed for an 
order with Midpoint pegging that removes liquidity. Finally, the 
Exchange pays a credit of $0.0003 per share executed for ``all other 
orders.''
    The Exchange now proposes to increase from $0.0016 to $0.0017 its 
(per share executed) credit for orders that access liquidity (excluding 
orders with Midpoint pegging and excluding orders that receive price 
improvement and execute against an order with a Non-

[[Page 55146]]

displayed price) entered by members that accesses [sic] liquidity equal 
to or exceeding 0.10% of total Consolidated Volume during a month. The 
Exchange also proposes to reduce the credit for ``all other orders'' 
from $0.0003 per share executed to $0.0001 per share executed. All of 
the other credits and charges will remain the same.
    The Exchange is proposing the first of these changes to provide a 
greater incentive to member firms to remove liquidity from the 
Exchange.
    The Exchange is proposing the second of these changes because it 
believes that a $0.0001 credit is more closely aligned to the 
requirements necessary to qualify for that credit and the behavior that 
the credit is designed to incentivize. The Exchange notes that, unlike 
other credits the Exchange offers for accessing liquidity, a member 
does not have to meet any volume requirements in order to qualify for 
this credit. In contrast, the Exchange pays a credit of $0.0000 per 
share executed for an order that receives price improvement and 
executes against an order with a Non-displayed price, and for an order 
with Midpoint pegging that removes liquidity. In comparison to these 
other credits and their attendant requirements, and given that the 
Exchange is limited in the amount of credits that it provides to 
members, the Exchange believes the new credit amount is appropriate.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\3\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\4\ 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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    \3\ 15 U.S.C. 78f(b).
    \4\ 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.'' \5\
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    \5\ 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 \6\ 
(``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.\7\ 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.'' \8\
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    \6\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \7\ See NetCoalition, at 534--535.
    \8\ 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'. . . .'' \9\ Although the court and the 
SEC were discussing the cash equities markets, the Exchange believes 
that these views apply with equal force to the options markets.
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    \9\ 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 it is reasonable to increase from 
$0.0016 to $0.0017 its (per share executed) credit 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 [sic]) entered by members that access liquidity equal 
to or exceeding 0.10% of total Consolidated Volume during a month. The 
Exchange must, from time to time, assess the effectiveness of its 
credits in achieving their intended objectives and adjust the levels of 
such credits based on the Exchange's observations of market participant 
behavior. In this instance, the Exchange determined that the level of 
the credit should be increased to provide a stronger incentive to 
market participants to improve the market. The Exchange believes that 
the proposed credit increase is equitable and is not unfairly 
discriminatory it [sic] will apply to all member firms that achieve the 
minimum level of Consolidated Volume required by the tier.
    The Exchange believes that reducing the credit for ``all other 
orders'' from $0.0003 to $0.0001 is reasonable because the amount of 
the new credit is more closely aligned to the requirements necessary to 
qualify for the credit and the behavior that it is designed to 
incentivize, especially given that the Exchange is limited in the 
amount of credits that it provides to members. Unlike other credits the 
Exchange offers for accessing liquidity, a member does not have to meet 
any volume requirements in order to qualify for this credit. While the 
Exchange does presently pay credits of $0.0015 and $0.0016 per share 
executed for accessing liquidity, a member must also meet also meet 
[sic] a volume threshold of accessing liquidity equal to or exceeding 
0.05% or 0.10% of total Consolidated Volume during a month, 
respectively. In contrast, the Exchange pays a credit of $0.0000 for an 
order that receives price improvement and executes against an order 
with a Non-displayed price, and for an order with Midpoint pegging that 
removes liquidity. The Exchange believes that the new credit amount is 
more closely aligned to the requirements for qualifying for that 
credit, especially in comparison to the other credits offered by the 
Exchange and their attendant requirements.
    The Exchange believes that the second 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 credit, is voluntary, and that the Exchange 
continues to offer other credits for which members may attempt to 
qualify instead of the proposed credit. Additionally, the proposed 
change to the credit amount applies to all members that otherwise 
qualify for the credit.

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.

[[Page 55147]]

    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 changes to credits do not impose a burden on 
competition because participation in the Exchange is optional and is 
the subject of competition from other exchanges. The proposed changes 
to the credits are reflective of the Exchange's overall efforts to 
provide greater incentives to market participants in the form of 
credits for market participation it believes needs improvement to the 
benefit of all participants. For these reasons, the Exchange does not 
believe that any of the proposed changes 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 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.\10\
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    \10\ 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-2017-050 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-2017-050. 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BX-2017-050 and should be 
submitted on or before December 11, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25039 Filed 11-17-17; 8:45 am]
 BILLING CODE 8011-01-P