[Federal Register Volume 83, Number 182 (Wednesday, September 19, 2018)]
[Notices]
[Pages 47381-47384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20308]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84114; File No. SR-BX-2018-043]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Fees at
Rule 7018(a)
September 13, 2018
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 4, 2018, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission
[[Page 47382]]
(``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 its transaction fees at Rule 7018(a)
to: (i) Increase the level of total Consolidated Volume require to
qualify for a $0.0017 per share executed credit; and (ii) adopt a new
$0.0016 per share executed credit.
The text of the proposed rule change is available on the Exchange's
website 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) Increase the
level of total Consolidated Volume require to qualify for a $0.0017 per
share executed credit; and (ii) adopt a new $0.0016 per share executed
credit.
First Change
Under Rule 7018, the Exchange assesses charges and credits for the
use of the order execution and routing services of the Nasdaq BX
Equities System by members for all securities priced at $1 or more per
share that it trades. 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 several different credits for orders that access liquidity on
the Exchange. Among these credits, the Exchange pays a credit of
$0.0017 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 \3\ during a month. The
Exchange is proposing to increase the level of total Consolidated
Volume required to qualify for the credit from 0.10% to 0.12%.
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\3\ Rule 7018(a) defines Consolidated Volume 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.
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Second Change
The Exchange is proposing to adopt a new $0.0016 per share executed
credit available 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).
To receive the credit a member must (i) add liquidity equal to or
exceeding 0.60% of total Consolidated Volume during a month; and (ii)
access liquidity equal to or exceeding 0.10% of total Consolidated
Volume during a month.
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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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.'' \6\
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\6\ 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\7\
(``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.\8\ 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.'' \9\
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\7\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\8\ See NetCoalition, at 534-535.
\9\ 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'. . . .'' \10\
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\10\ 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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First Change
The Exchange believes that the $0.0017 per share executed credit is
reasonable because it remains unchanged. Consequently, the rationale
supporting the credit's reasonableness when it was adopted remains
valid. The Exchange believes that it is reasonable to increase the
total Consolidated Volume requirement because it is a modest increase
in the standard, which will ensure members are providing adequate
market participation in return for the credit.
The Exchange believes that increase to the total Consolidated
Volume requirement is an equitable allocation and is not unfairly
discriminatory because the Exchange will apply the same credit to all
similarly situated members. The proposed change is a moderate increase
to the Consolidated Volume requirement that any member may choose to
achieve if it wishes to receive the credit. Moreover, the
[[Page 47383]]
Exchange has similar credits with lower Consolidated Volume
requirements that a member may receive. For example, the Exchange
provides a credit of $0.0015 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 0.065% of total Consolidated Volume
during month. In sum, members have other opportunities to receive
credits under Rule 7018(a) should a member be unable to satisfy the
amended qualification criteria required to receive the credit.
Consequently, the Exchange believes that the proposed change is an
equitable allocation and is not unfairly discriminatory.
Second Change
The Exchange believes that the $0.0016 per share executed credit is
reasonable because it is similar to other credits available under Rule
7018(a). For example, the Exchange offers the $0.0017 per share
executed credit, which is the subject of the first proposed change. As
noted above, the $0.0017 per share executed credit, like the proposed
new credit, is provided 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).
Like the $0.0017 per share executed credit, the proposed $0.0016 per
share executed credit is provided if a member provides a certain levels
of market-improving behavior. As a consequence, the Exchange believes
that the proposed new credit is reasonable.
The Exchange believes that the $0.0016 per share executed credit is
an equitable allocation and is not unfairly discriminatory because the
Exchange will apply the same credit to all similarly situated members.
The Exchange believes that the proposed criteria a member is required
to satisfy to receive the credit is an equitable allocation and is not
unfairly discriminatory because the Exchange has similar credits with
lower Consolidated Volume requirements that a member may receive. For
example, the Exchange provides a credit of $0.0015 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 0.065% of total Consolidated
Volume during month. The Exchange also provides a credit of $0.0017 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%
\11\ of total Consolidated Volume during a month. The new credit will
require a liquidity provided threshold that ensures members achieving
this credit will meaningfully support trading on the exchange by
providing liquidity that supports the displayed market and, therefore,
market quality. The Exchange believes the proposed credit together with
the other existing credits under Rule 7018(a) provide members with
choice and flexibility. In sum, members have other opportunities to
receive credits under Rule 7018(a) should a member be unable to satisfy
the qualification criteria required to receive the proposed credit.
Consequently, the Exchange believes that the proposed change is an
equitable allocation and is not unfairly discriminatory.
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\11\ The Exchange is proposing herein to increase this
percentage of total Consolidated Volume to .12%.
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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 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 credit represents a modest increase in the criteria required
to qualify for the credit. Members may choose to increase their level
of Consolidated Volume to qualify for the credit or alternatively
provide less Consolidated Volume and receive a lower credit. The
Exchange is also proposing to provide a new opportunity for members to
receive a credit. Such a change is procompetitive and reflective of the
Exchange's efforts to make it an attractive venue to market
participants. 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 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.\12\
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\12\ 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:
[[Page 47384]]
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-2018-043 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-2018-043. 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 website (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 website 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-2018-043 and should be submitted on
or before October 10, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20308 Filed 9-18-18; 8:45 am]
BILLING CODE 8011-01-P