[Federal Register Volume 88, Number 93 (Monday, May 15, 2023)]
[Notices]
[Pages 31090-31092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10247]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97464; File No. SR-BX-2023-010]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7,
Section 118
May 9, 2023.
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 May 1, 2023, 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 Equity 7, Section 118(a) to exclude
certain days for purposes of calculating Consolidated Volume and
trading activity, as described further below.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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 Equity 7,
Section 118(a) to exclude certain days for purposes of calculating
Consolidated Volume and trading activity. Specifically, the Exchange
also proposes to amend Equity 7, Section 118(a) to exclude the
following from calculations of total Consolidated Volume and the
member's trading activity for purposes of volume calculations for
equity pricing tiers/incentives: (1) the dates on which stock options,
stock index options, and stock index futures expire (i.e., the third
Friday of March, June, September, and December) (``Triple Witch
Dates''); (2) the dates on which the MSCI Equity Indexes are rebalanced
(i.e., on a quarterly basis) (``MSCI Rebalance Dates''); (3) the dates
on which the S&P 400, S&P 500, and S&P 600 Indexes are rebalanced
(i.e., on a quarterly basis) (``S&P Rebalance Dates''); and (4) and the
date of the annual reconstitution of the Nasdaq-100 and Nasdaq
Biotechnology Indexes (``Nasdaq Reconstitution Date'').
[[Page 31091]]
Currently, the Exchange excludes the date of the annual reconstitution
of the Russell Investments Indexes from calculations of total
Consolidated Volume and the member's trading activity for purposes of
volume calculations for equity pricing tiers/incentives.
For the same reasons that the Exchange currently excludes the date
of the annual reconstitution of the Russell Investments Indexes from
these calculations, the Exchange believes it is appropriate to exclude
Triple Witch Dates, MSCI Rebalance Dates, S&P Rebalance Dates, and the
Nasdaq Reconstitution Date from these calculations in the same manner,
as trading volumes on such days are generally far in excess of volumes
on other days during the month, and market participants that are not
otherwise active on the Exchange to a great extent often participate on
the Exchange on such dates to rebalance holdings, or in the case of
Triple Witch Dates, to close out or roll over positions prior to
expiration. The Exchange believes this change to normal activity may
affect a member's ability to meet the applicable volume thresholds
under its volume-based tiers. The Exchange notes that the proposed
exclusion of Triple Witch Dates, MSCI Rebalance Dates, S&P Rebalance
Dates, and the Nasdaq Reconstitution Date from the relevant
calculations would be applied in the same manner that the Exchange
currently excludes the date of the annual reconstitution of the Russell
Investments Indexes from such calculations.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\3\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\4\ 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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\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes it is reasonable, equitable, and not unfairly
discriminatory to exclude Triple Witch Dates, MSCI Rebalance Dates, S&P
Rebalance Dates, and the Nasdaq Reconstitution Date from calculations
of total Consolidated Volume and the member's trading activity for
purposes of volume calculations for equity pricing tiers/incentives. As
described above, Triple Witch Dates, MSCI Rebalance Dates, S&P
Rebalance Dates, and the Nasdaq Reconstitution Date typically have
extraordinarily high and/or abnormally distributed trading volumes
which, in turn, may affect a member's ability to meet the applicable
volume thresholds under its transaction pricing tiers/incentives, and
the Exchange believes that excluding such days from the relevant
calculations for purposes of determining a member's qualification for
such tiers/incentives would help to avoid penalizing members that might
otherwise have met the requirements to qualify for such tiers/
incentives. The Exchange believes that the proposal is reasonable
because it will diminish the likelihood of a de facto price increase
occurring because a member is not able to reach a volume percentage on
that date that it reaches on other trading days during the month.
The Exchange further believes that the change is consistent with an
equitable allocation of fees and is not unfairly discriminatory.
Specifically, because trading activity on Triple Witch Dates, MSCI
Rebalance Dates, S&P Rebalance Dates, and the Nasdaq Reconstitution
Date will be excluded from determinations of a member's percentage of
Consolidated Volume, the Exchange believes it will be easier for
members to determine the volume required to meet a certain percentage
of participation than would otherwise be the case. To the extent that a
member has been active on the Exchange at a significant level
throughout the month, excluding the Triple Witch Dates, MSCI Rebalance
Dates, S&P Rebalance Dates, and the Nasdaq Reconstitution Date, on
which its percentage of Consolidated Volume is likely to be lower than
on other days, will increase its overall percentage for the month.
Conversely, even if a member was more active on Triple Witch Dates,
MSCI Rebalance Dates, S&P Rebalance Dates, and the Nasdaq
Reconstitution Date than on other dates, it is unlikely that its
activity on one day would be able to increase its overall monthly
percentage to a meaningful extent. Thus, the Exchange believes that the
change will benefit members that are in a position to achieve volume
levels required by the Exchange's pricing schedule but without harming
the ability of any members to reach such levels.
Finally, the Exchange believes that the change does not unfairly
burden competition because it will help to preserve or improve the
pricing status that would apply to members' trading activity in the
absence of Triple Witch Dates, MSCI Rebalance Dates, S&P Rebalance
Dates, and the Nasdaq Reconstitution Date, and therefore will not
impact the ability of such members to compete. The proposed rule change
would apply to all members uniformly, in that each member's volume
activities for purposes of pricing tiers/incentives would continue to
be calculated in a uniform manner and would now exclude Triple Witch
Dates, MSCI Rebalance Dates, S&P Rebalance Dates, and the Nasdaq
Reconstitution Date.
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.
Intramarket Competition
The Exchange does not believe that its proposal will place any
category of Exchange participant at a competitive disadvantage.
The Exchange intends for its proposed changes to amend the
calculation of Consolidated Volume and trading activity at Equity 7,
Section 118(a) to avoid penalizing members that might otherwise have
met the applicable volume thresholds to qualify for the Exchange's
transaction pricing tiers/incentives if not for the abnormal trading
volumes and market conditions typically experienced in the equities
markets on the Triple Witch Dates, MSCI Rebalance Dates, S&P Rebalance
Dates, and the Nasdaq Reconstitution Date. The proposed exclusion of
such dates from the relevant calculations would apply to all members
uniformly and in the same manner that the Exchange currently excludes
the date of the annual reconstitution of the Russell Investments
Indexes from such calculations.
The Exchange notes that its members are free to trade on other
venues to the extent they believe that the proposal is not attractive.
As one can observe by looking at any market share chart, price
competition between exchanges is fierce, with liquidity and market
share moving freely between exchanges in reaction to fee and credit
changes.
Intermarket Competition
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 credits and fees to remain competitive
[[Page 31092]]
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 credits
and fees in response, and because market participants may readily
adjust their order routing practices, the Exchange believes that the
degree to which credit or fee changes in this market may impose any
burden on competition is extremely limited. The proposal is reflective
of this competition.
Even as one of the largest U.S. equities exchanges by volume, the
Exchange has less than 20% market share, which in most markets could
hardly be categorized as having enough market power to burden
competition. Moreover, as noted above, price competition between
exchanges is fierce, with liquidity and market share moving freely
between exchanges in reaction to fee and credit changes. This is in
addition to free flow of order flow to and among off-exchange venues,
which comprises upwards of 50% of industry volume.
The Exchange believes the proposal to exclude certain dates from
calculating Consolidated Volume and trading activity is not concerned
with competitive issues, but rather relates to calculation
methodologies applicable to its pricing tiers/incentives.
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) of the Act \5\ and paragraph (f) of Rule 19b-4 \6\
thereunder.
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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(f).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2023-010 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-2023-010. 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 (https://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. Do
not include personal identifiable information in submissions; you
should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-BX-2023-010 and should
be submitted on or before June 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10247 Filed 5-12-23; 8:45 am]
BILLING CODE 8011-01-P