[Federal Register Volume 84, Number 149 (Friday, August 2, 2019)]
[Notices]
[Pages 37931-37933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16481]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86508; File No. SR-BX-2019-027]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend BX
Pricing at Options 7, Section 3 Titled BX Options Market--Ports and
Other Services
July 29, 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 July 15, 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 solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BX pricing at Options 7, Section 3
titled ``BX Options Market--Ports and Other Services.'' The amendment
will describe the pricing with respect to an upcoming technology
infrastructure migration.
[[Page 37932]]
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 Exchange proposes to amend BX pricing at Options 7, Section 3
titled ``BX Options Market--Ports and Other Services.'' During the
month of August 2019, BX Participants will be required to transition
from current FIX Ports,\3\ CTI Ports \4\ and FIX DROP Ports \5\ to new
FIX Ports, CTI Ports and FIX DROP Ports in connection with an upcoming
technology infrastructure migration.
---------------------------------------------------------------------------
\3\ Financial Information eXchange'' or '' FIX'' is an interface
that allows Participants and their Sponsored Customers to connect,
send, and receive messages related to orders to and from the
Exchange. Features include the following: (1) Execution messages;
(2) order messages; and (3) risk protection triggers and cancel
notifications. See Chapter VI, Section 21(a)(i)(A).
\4\ Clearing Trade Interface (``CTI'') is a real-time clearing
trade update message that is sent to a Participant after an
execution has occurred and contains trade details specific to that
Participant. The information includes, among other things, the
following: (i) The Clearing Member Trade Agreement or ``CMTA'' or
The Options Clearing Corporation or ``OCC'' number; (ii) Exchange
badge or house number; (iii) the Exchange internal firm identifier;
(iv) an indicator which will distinguish electronic and non-
electronically delivered orders; (v) liquidity indicators and
transaction type for billing purposes; and (vi) capacity. See
Chapter VI, Section 19(b)(1).
\5\ FIX DROP is a real-time order and execution update message
that is sent to a Participant after an order been received/modified
or an execution has occurred and contains trade details specific to
that Participant. The information includes, among other things, the
following: (i) Executions; (ii) cancellations; (iii) modifications
to an existing order; and (iv) busts or post-trade corrections. See
Chapter VI, Section 19(b)(3).
---------------------------------------------------------------------------
Description of Migration and Pricing Impact
In connection with this migration, Participants will request new
FIX Ports, CTI Ports and FIX DROP Ports during the month of August,
which are duplicative of the type and quantity of their current ports,
at no additional cost to allow for testing of the new ports and allow
for continuous connection to the match engine during the transition
period.\6\ For example, a BX Participant with 3 FIX Ports, 1 CTI Port
and 1 FIX DROP Port on August 1, 2019 could request 3 new FIX Ports, 1
CTI Port and 1 FIX DROP Port for the month of August 2019 at no
additional cost. The BX Participant would be assessed only for the
legacy market ports, in this case 3 FIX Ports, 1 CTI Port and 1 FIX
DROP Port, for the month of August 2019 and would not be assessed for
the new ports, which are duplicative of the current ports. A
Participant may acquire any additional legacy ports during the month of
August 2019 and would be assessed the charges indicated in the current
Pricing Schedule. The migration does not require a Participant to
acquire any additional ports, rather the migration requires a new port
to replace any existing ports provided the Participant desired to
maintain the same number of ports.\7\ A Participant desiring to enter
orders into BX is required to obtain 1 FIX Port. A Participant may also
obtain order and execution ports, such as a CTI Port and/or a FIX DROP
Port, to receive clearing and execution messages. The number of
additional FIX or order and execution ports obtained by a Participant
is dependent on the Participant's business needs.
---------------------------------------------------------------------------
\6\ Participants would contact Market Operations to acquire new
duplicative FIX Ports, CTI Ports and FIX DROP Ports. See Options
Technical Update #2019-3.
\7\ The migration is 1:1 and therefore would not require a
Participant to acquire new ports, nor would it reduce the number of
ports needed to connect.
---------------------------------------------------------------------------
Applicability to and Impact on Participants \8\
---------------------------------------------------------------------------
\8\ On May 21, 2019, the SEC Division of Trading and Markets
(the ``Division'') issued fee filing guidance titled ``Staff
Guidance on SRO Rule Filings Relating to Fees'' (``Guidance'').
Within the Guidance, the Division noted, among other things, that
the purpose discussion should address ``how the fee may apply
differently (e.g., additional cost vs. additional discount) to
different types of market participants (e.g., market makers,
institutional brokers, retail brokers, vendors, etc.) and different
sizes of market participants.'' See Guidance (available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Guidance
also suggests that the purpose discussion should include numerical
examples. Where possible, the Exchange is including numerical
examples. In addition, the Exchange is providing data to the
Commission in support of its arguments herein. The Guidance covers
all aspects of a fee filing, which the Exchange has addressed
throughout this filing.
---------------------------------------------------------------------------
The proposal is not intended to impose any additional fees on any
BX Participants. All Participants may enter orders on BX. As noted
above, a BX Participant may enter all orders on BX through one FIX
Port. The Exchange does not require a BX Participant to obtain more
than one FIX Port, however, a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to meet its individual business
needs. This proposal is intended to permit a BX Participant to migrate
its current FIX Ports, CTI Ports and FIX DROP Ports at no additional
costs during the month of August 2019 to allow for continuous
connection to the Exchange. Participants would only be assessed a fee
for their current FIX Ports, CTI Ports and FIX DROP Ports and not be
assessed a fee for any new duplicative ports they acquire in connection
with the technology infrastructure migration. This proposal is not
intended to have a pricing impact.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ 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. The proposal is also consistent with
Section 11A of the Act relating to the establishment of the national
market system for securities. Moreover, the Exchange believes that its
proposal complies with Commission guidance on SRO fee filings that the
Commission Staff issued on May 21, 2019.\11\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
\11\ See Guidance, supra note 8. Although the Exchange believes
that this filing complies with the Guidance, the Exchange does not
concede that the standards set forth in the Guidance are consistent
with the Exchange Act and reserves its right to challenge those
standards through administrative and judicial review, as
appropriate.
---------------------------------------------------------------------------
The Proposal Is Reasonable
The Exchange's proposal is reasonable in several respects. As a
threshold matter, the Exchange is subject to significant competitive
forces in the market for options transaction services that constrain
its pricing determinations in that market. The fact that this market is
competitive has long been recognized by the courts. In NetCoalition v.
Securities and Exchange Commission,
[[Page 37933]]
the D.C. Circuit stated as follows: ``[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'. . . .'' \12\
---------------------------------------------------------------------------
\12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is one of several options
venues to which market participants may direct their order flow, and it
represents a small percentage of the overall market. The Exchange
believes its proposal is reasonable because it will not cause a pricing
impact on any BX Participant, rather the proposal is intended to permit
BX Participants to migrate their FIX Ports, CTI Ports and FIX DROP
Ports to new technology at no additional cost during the month of
August 2019. This proposal, which offers new duplicative ports to
Participants at no cost, will allow Participants to test and maintain
continuous connection to the Exchange during the month of August 2019.
The Proposal Represents an Equitable Allocation and Is Not Unfairly
Discriminatory
The Exchange believes its proposal allocates its fees fairly among
its market participants. The proposal is equitable and not unfairly
discriminatory. All Participants may enter orders on BX. As noted
above, a BX Participant may enter all orders on BX through one FIX
Port. The Exchange does not require a BX Participant to obtain more
than one FIX Port, however, a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to meet its individual business
needs. This proposal is not intended to have a pricing impact to any BX
Participant.
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.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. This proposal does not amend pricing or functionality.
Rather, this technology migration will enable BX Participants to
continue to connect to BX, as is the case today, for the entry of
orders.
Intra-Market Competition
The proposal does not impose an undue burden on intra-market
competition. All Participants may enter orders on BX. As noted above, a
BX Participant may enter all orders on BX through one FIX Port. The
Exchange does not require a BX Participant to obtain more than one FIX
Port, however, a Participant may obtain multiple FIX Ports, a CTI Port
or a FIX DROP Port to meet its individual business needs. This proposal
is not intended to have a pricing impact to any BX Participant.
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.\13\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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-2019-027 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-2019-027. 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-2019-027 and should be submitted on
or before August 23, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-16481 Filed 8-1-19; 8:45 am]
BILLING CODE 8011-01-P