[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16117-16119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07615]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85627; File No. SR-BX-2019-006]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend
Transaction Fees at Equity 7, Section 118(a)
April 11, 2019.
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 April 1, 2019, 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
[[Page 16118]]
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(a), as described further below.
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(a) to adjust the qualifying
terms for an existing credit it offers to members with orders that
access liquidity on the Exchange.
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 offers a $0.0015 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) that are entered by a member that
accesses liquidity equal to or exceeding 0.075% of total Consolidated
Volume \3\ during a month. Because the Exchange has been growing in
volume over the past few months, the Exchange recently increased the
level of Consolidated Volume required to receive the credit from 0.065%
to 0.075% of total Consolidated Volume during a month.\4\ The Exchange
believes that a lower volume requirement would help more firms grow as
the exchange grows and is therefore proposing to adjust the requirement
lower to 0.070%.
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\3\ Pursuant to Equity 7, Section 118(a), the term
``Consolidated Volume'' means 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.
\4\ See Securities Exchange Act Release No. 85298 (March 13,
2019), 84 FR 10158 (March 19, 2019) (SR-BX-2019-003).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\6\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 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.'' \7\
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\7\ 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 \8\
(``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.\9\ 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.'' \10\
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\8\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\9\ See NetCoalition, at 534-535.
\10\ 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' . . . .'' \11\
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\11\ 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 decrease the
Consolidated Volume threshold for orders that access liquidity in
securities (excluding orders with Midpoint pegging and excluding orders
that receive price improvement and execute against an order with a Non-
displayed price) that are entered by a member that accesses liquidity
equal to or exceeding 0.075% of total Consolidated Volume during a
month from .075% to 0.070% of total Consolidated Volume. The proposal
is a modest decrease in the standard, which will ensure that members
are providing adequate market participation in return for the credit
while also making it more attractive to a greater number of members.
The Exchange notes that the credit remains unchanged and therefore
continues to be reasonable.
The Exchange believes that decrease 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. Again, the proposed change is a moderate
decrease to the Consolidated Volume requirement, which will make the
credit more attractive to a greater number of members, any of which may
choose to provide the level of Consolidated Volume required to receive
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
[[Page 16119]]
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 Exchange's proposed credit amendment 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
modification to the $0.0015 per share executed credit represents a
modest decrease in the criteria required to qualify for the credit.
Thus, members will be able to receive the credit by accessing a lower
amount of Consolidated Volume during a month. The Exchange believes
that lowering the level of Consolidated Volume will incentivize more
members to provide the market-improving Consolidated Volume needed to
qualify for the credit. If the proposal is 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 proposal
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:
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-2019-006 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-2019-006. 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-2019-006 and should be submitted on
or before May 8, 2019.
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).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07615 Filed 4-16-19; 8:45 am]
BILLING CODE 8011-01-P