[Federal Register Volume 83, Number 245 (Friday, December 21, 2018)]
[Notices]
[Pages 65771-65773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27621]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84833; File No. SR-BX-2018-062]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Transaction Fees at Equity 7, Section 118
December 17, 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 December 3, 2018, 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
Equity 7, Section 118 to adopt a new credit for entering an order that
accesses liquidity in the Nasdaq BX Equities System.
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 amend the Exchange's
transaction fees at Equity 7, Section 118 to adopt a new credit for
entering an order that accesses liquidity in the Nasdaq BX Equities
System. Specifically, the Exchange is proposing to provide a credit of
$0.0018 per share executed for orders that access liquidity in Tape A
securities (excluding orders with Midpoint pegging and excluding orders
that receive price improvement and execute against an order with a Non-
displayed price). To qualify for the proposed credit, a member must
access liquidity equal to or exceeding 0.30% of total Consolidated
Volume \3\ during a month. The proposed new credit, and its associated
qualification criteria, is similar to existing credits provided for
Orders that access liquidity, which require a certain level of total
Consolidated Volume accessed during a month to qualify.
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\3\ The term ``Consolidated Volume'' shall mean 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. See Equity 7, Section 118.
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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
[[Page 65772]]
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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The Exchange believes that the proposed $0.0018 per share executed
credit for orders that access liquidity in Tape A securities (excluding
orders with Midpoint pegging and excluding orders that receive price
improvement and execute against an order with a Non-displayed price) is
reasonable because the Exchange provides other $0.0018 per share
executed credits for entering an order that accesses liquidity in the
Nasdaq BX Equities System. For example, the Exchange currently provides
members a credit of $0.0018 per share executed for an order that
accesses liquidity in securities in Tapes A and C (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: (i) Accesses liquidity equal to or exceeding
0.20% of total Consolidated Volume during a month; and (ii) accesses
20% more liquidity as a percentage of Consolidated Volume than the
member accessed in May 2018. The proposed credit will provide another
opportunity to members to receive a $0.0018 per share executed credit
in return for certain levels of participation on the Exchange as
measured by total Consolidated Volume.
The Exchange believes that the proposed $0.0018 per share executed
credit for orders that access liquidity in Tape A securities (excluding
orders with Midpoint pegging and excluding orders that receive price
improvement and execute against an order with a Non-displayed price) is
an equitable allocation and is not unfairly discriminatory because the
Exchange will apply the same fee to all similarly situated members. To
qualify for the new credit, a member must access liquidity equal to or
exceeding 0.30% of total Consolidated Volume during a month. Like the
other qualification criteria required to receive a credit for an order
that accesses liquidity, the proposed qualification criteria ensures
that members qualifying for this credit are meaningfully participating
on the Exchange in a given month. The Exchange notes that any member
may qualify for the proposed credit if it meets the levels of total
Consolidated Volume required by the credit's qualification criteria.
Moreover, if the level of total Consolidated Volume is too high for a
member to achieve in a given month, the member may qualify for other
lower credits with lower total Consolidated Volume qualification
requirements available for orders that access liquidity in Tape A
securities (excluding orders with Midpoint pegging and excluding orders
that receive price improvement and execute against an order with a Non-
displayed price). 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. Last,
the Exchange notes that the proposed credit is limited to orders that
access liquidity in Tape A securities. The Exchange is specifically
attempting to increase the level of liquidity removal in Tape A
securities, which the Exchange has identified as an area in need of
improvement. Members will continue to have opportunities to qualify for
the same or similar credits for removal of liquidity in Tape B and C
securities. Thus, the Exchange believes that this additional new credit
provides all of its members with choice and flexibility, and is
therefore an equitable allocation and 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 new credit tier 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 proposed credit
provides another opportunity for all market participants to receive a
credit in return for market-improving activity on the Exchange. In this
regard, the new credit tier is designed to provide incentive to market
participants to remove a certain level of total Consolidated Volume
during a month receive the credit for its orders that access liquidity
in securities in Tape A securities (excluding orders with Midpoint
pegging and excluding orders that receive price improvement and execute
against an order with a Non-displayed price). Thus, the new credit may
increase activity on the Exchange by attracting removers of liquidity
in Tape A securities. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will not gain 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.\11\
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\11\ 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.
[[Page 65773]]
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-2018-062 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-2018-062. 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-2018-062 and should be submitted on
or before January 11, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27621 Filed 12-20-18; 8:45 am]
BILLING CODE 8011-01-P