[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