[Federal Register Volume 89, Number 21 (Wednesday, January 31, 2024)]
[Notices]
[Pages 6157-6159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-01861]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99430; File No. SR-BX-2024-003]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options 
7, Section 2

January 25, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on January 12, 2024, Nasdaq BX, Inc. (``BX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
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\ 15 U.S.C. 78a.
    \3\ 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 Pricing Schedule at Options 7, 
Section 2. While the changes proposed herein are effective upon filing, 
the Exchange has designated the amendments become operative on February 
1, 2024.
    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 Exchange proposes to amend BX's Pricing Schedule at Options 7, 
Section 2, BX Options Market-Fees and Rebates. Specifically, the 
Exchange proposes to amend Options 7, Section 2(5) related to the BX 
Price Improvement Auction (``PRISM'').
    Currently, the Exchange assesses the below fees and pays the below 
rebates for orders executed in its PRISM Auction.

                                                                                 Fees and Rebates (per contact)
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                                                                   Submitted PRISM auction order   Submitted PRISM auction order      PRISM response to PRISM      PRISM order traded with PRISM
                                                                         in penny classes           in non-penny classes rebate             auction fee                   response rebate
                   Type of market participants                   -------------------------------------------------------------------------------------------------------------------------------
                                                                                    Initiating                      Initiating                       Non-penny                       Non-penny
                                                                    PRISM order        order        PRISM order        order       Penny classes      classes      Penny classes      classes
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Customer........................................................           $0.00           $0.00           $0.12           $0.00           $0.40           $0.79           $0.35           $0.70
Lead Market Maker...............................................            0.00            0.00            0.00            0.00            0.50            1.25            0.00            0.00
BX Options Market Maker.........................................            0.00            0.00            0.00            0.00            0.50            1.25            0.00            0.00
Non-Customer....................................................            0.00            0.00            0.00            0.00            0.50            1.25            0.00            0.00
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    Today, the Exchange assesses no PRISM Order \4\ fees in Penny and 
Non-Penny Classes to any Participant. Today, the Exchange pays a $0.12 
per contract rebate to Customers \5\ for PRISM Orders in Non-Penny 
Classes. Today, the Exchange assesses no Initiating Order \6\ fees in 
Penny and Non-Penny Classes to any Participant for PRISM Auction 
Orders.\7\ Today, the Exchange assesses a $0.40 per contract PRISM 
Response \8\ to Customers and a $0.50 per contract PRISM Response to 
Non-Customers \9\ in Penny Classes. Today, the Exchange assesses a 
$0.79 per contract PRISM Response to Customers and a $1.25 per contract 
PRISM Response to Non-Customers in Non-Penny Classes. Today, if a PRISM 
Order trades with a PRISM Response, the Exchange pays a rebate of $0.35 
to Customers for Penny Classes and a rebate of $0.70 to Customers for 
Non-Penny Classes. Non-Customers are not paid a rebate if a PRISM Order 
trades with a PRISM Response.
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    \4\ A PRISM Order is one-side of a PRISM Auction Order that 
represents an agency order on behalf a Public Customer, broker-
dealer or other entity which is paired with an Initiating Order. See 
BX Options 7, Section 2(5).
    \5\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(48)). See BX Options 7, Section 1(a).
    \6\ An Initiating Order is one-side of a PRISM Auction Order 
that represents principal or other interest which is paired with a 
PRISM Order. See BX Options 7, Section 2(5).
    \7\ A PRISM Auction Order is a two-sided, paired order comprised 
of a PRISM Order and an Initiating Order. See BX Options 7, Section 
2(5).
    \8\ A PRISM Response is interest that executed against the PRISM 
Order pursuant to Options 3, Section 13. See BX Options 7, Section 
2(5).
    \9\ The term ``Non-Customer'' shall include a Professional, 
Broker-Dealer and Non-BX Options Market Maker. See BX Options 7, 
Section 1(a).
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Proposal
    The Exchange proposes to amend its PRISM pricing to increase its 
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers 
\10\ from $0.00 to $0.05 per contract. Customers will continue to be 
assessed no Initiating Order Fee in Penny and Non-Penny Classes. The 
Exchange also proposes to decrease its pricing for Non-Penny PRISM 
Responses for Non-Customers from $1.25 to $1.10 per contract. The 
Exchange is not amending its Non-Penny PRISM Responses for Customers.
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    \10\ The term ``Non-Customer'' shall include a Professional, 
Broker-Dealer and Non-BX Options Market Maker. See BX Options 7, 
Section 1(a).
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    While the Exchange is increasing its Initiating Order fee from 
$0.00 to $0.05 per contract in Penny and Non-Penny Classes for Non-
Customers, the Exchange believes the proposed pricing remains 
competitive and will continue to encourage BX Participants to 
participate in PRISM Orders on BX. Customers will continue to be 
assessed no Initiating Order fee in a PIXL Auction in Penny and Non-
Penny Classes. The Exchange believes that the decreased Non-Penny Non-
Customer PRISM Response fees will encourage Participants to participate 
in PRISM Orders on BX. Customers will continue

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to be assessed a lower Non-Penny PRISM Response fee as compared to 
other Participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed changes to its Pricing Schedule are 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 \13\ 
(``NetCoalition''), the D.C. Circuit stated, ``[n]o one disputes that 
competition for order flow is [revaps]fierce.' . . . As the SEC 
explained, [revaps][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'. . . .'' \14\
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    \13\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \14\ 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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    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 only one of seventeen 
options exchanges to which market participants may direct their order 
flow. Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules. Within the 
foregoing context, the proposal represents a reasonable attempt by the 
Exchange to attract additional order flow to the Exchange and increase 
its market share relative to its competitors.
    The Exchange's proposal to amend its PRISM pricing to increase its 
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers 
from $0.00 to $0.05 per contract is reasonable. While the Exchange is 
increasing its Initiating Order fee from $0.00 to $0.05 in Penny and 
Non-Penny Classes for Non-Customers, the Exchange believes the proposed 
pricing remains competitive and will continue to encourage BX 
Participants to participate in PRISM Orders on BX. The Exchange's 
proposal to decrease its pricing for Non-Penny PRISM Responses for Non-
Customers from $1.25 to $1.10 per contract is reasonable. The Exchange 
believes that the decreased Non-Penny PRISM Response fees will 
encourage Participants to attract order flow to BX since the Exchange 
is no longer assessing any fees to participate in PRISM Orders on BX. 
The proposed pricing is comparable to the spread between the agency 
order and responses in a price improvement auction on another options 
exchange.\15\
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    \15\ BOX Exchange LLC (``BOX'') assesses customers no agency 
order fee and assesses Non-Customers a $0.05 per contract agency 
order fee in Penny and Non-Penny classes in BOX's Price Improvement 
Period or ``PIP''. BOX assesses a Penny Response Fee of $0.49 per 
contract for Customers and $0.50 per contract for Non-Customers in 
PIP. BOX assesses a Non-Penny Response Fee of $0.96 per contract for 
Customers and $1.15 per contract for Non-Customers in PIP.
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    The Exchange's proposal to amend its PRISM pricing to increase its 
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers 
from $0.00 to $0.05 per contract is equitable and not unfairly 
discriminatory. The Exchange will uniformly not assess a Penny or Non-
Penny Initiating Order fee to any Non-Customer. While Customers will 
continue to not be assessed an Initiating Order fee in Penny and Non-
Penny Classes, the Exchange notes that Customer activity enhances 
liquidity on the Exchange for the benefit of all market participants 
and benefits all market participants by providing more trading 
opportunities, which attracts market makers. The Initiating Order fee 
is comparable to other options exchanges. The Exchange's proposal to 
decrease its pricing for Non-Penny PRISM Responses for Non-Customers 
from $1.25 to $1.10 per contract is equitable and not unfairly 
discriminatory. The Exchange will uniformly assess the $1.10 per 
contract Non-Penny PRISM Responses to Non-Customers. Customers will 
continue to be assessed a lower Non-Penny PRISM Response fee of $0.79 
per contract. Assessing Customers a lower Non-Penny PRISM Response fee 
of $0.79 per contract as compared to $1.10 per contract for Non-
Customers is equitable and not unfairly discriminatory as Customer 
activity enhances liquidity on the Exchange for the benefit of all 
market participants and benefits all market participants by providing 
more trading opportunities, which attracts market makers.

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.
Intermarket Competition
    The proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants with 
another choice to initiate a price improvement auction. 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. 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.
Intramarket Competition
    The Exchange's proposal to amend its PRISM pricing to increase its 
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers 
from $0.00 to $0.05 per contract does not impose an undue burden on 
competition. The Exchange will uniformly not assess a Penny or Non-
Penny Initiating Order Fee to any Non-Customer. While Customers will 
continue to not be assessed an Initiating Order fee in Penny and Non-
Penny Classes, the Exchange notes that Customer activity enhances 
liquidity on the Exchange for the benefit of all market participants 
and benefits all market participants by providing more trading 
opportunities, which attracts market makers. The Exchange's proposal to 
decrease its pricing for Non-Penny PRISM Responses for Non-Customers 
from $1.25 to $1.10 per contract does not impose an undue burden on

[[Page 6159]]

competition. The Exchange will uniformly assess the $1.10 per contract 
Non-Penny PRISM Responses to Non-Customers. Customers will continue to 
be assessed a lower Non-Penny PRISM Response fee of $0.79 per contract. 
Assessing Customers a lower Non-Penny PRISM Response fee of $0.79 per 
contract as compared to $1.10 per contract for Non-Customers does not 
impose an undue burden on competition as Customer activity enhances 
liquidity on the Exchange for the benefit of all market participants 
and benefits all market participants by providing more trading 
opportunities, which attracts market makers.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).
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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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 15 U.S.C. 78s(b)(2)(B).
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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-2024-003 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-2024-003. 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 
a.m. and 3 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-2024-003 and should be 
submitted on or before February 21, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01861 Filed 1-30-24; 8:45 am]
BILLING CODE 8011-01-P