[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Notices]
[Pages 43933-43936]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10952]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100136; File No. SR-BX-2024-015]


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

May 14, 2024.
    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, 2024, 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 Pricing Schedule at 
Options 7, Section 2.
    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 its Pricing Schedule at Options 7, 
Section 2(1) to establish an additional incentive

[[Page 43934]]

for Participants with respect to Apple, Inc. (``AAPL'').
    Today, the Exchange assesses the following fees and rebates in 
Penny and Non-Penny Symbols:

                              Penny Symbols
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           Market participant              Maker rebate      Taker fee
------------------------------------------------------------------------
Lead Market Maker.......................     \2\ ($0.24)           $0.50
Market Maker............................     \2\ ($0.20)           $0.50
Non-Customer............................         ($0.12)           $0.50
Firm....................................         ($0.12)           $0.50
Customer................................         ($0.30)   \1\ \4\ $0.40
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                            Non-Penny Symbols
------------------------------------------------------------------------
                                           Maker rebate/
           Market participant                   fee          Taker fee
------------------------------------------------------------------------
Lead Market Maker.......................     \2\ ($0.45)           $1.25
Market Maker............................     \2\ ($0.40)           $1.25
Non-Customer............................           $0.45           $1.25
Firm....................................           $0.45           $1.25
Customer................................     \3\ ($1.10)           $0.79
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    Today, the Exchange offers Participants two ways to reduce the 
Penny Symbol Customer Taker Fee which is currently $0.40 per contract. 
In note 1 of Options 7, Section 2, the Exchange offers Participants a 
reduced Penny Symbol Customer \3\ Taker Fee of $0.33 per contract, 
instead of $0.40 per contract, in SPDR S&P 500 ETF (``SPY''), Invesco 
QQQ Trust Series 1 (``QQQ'') and iShares Russell 2000 ETF (``IWM''). 
Further, in note 4 of Options 7, Section 2, the Exchange offers 
Participants \4\ that increase their executed Customer volume which 
removes liquidity in a given month by at least 70% above their March 
2024 volume as measured by a percentage of TCV, a Taker Fee discount of 
$0.05 per contract in Penny Symbols, excluding SPY, QQQ, and IWM.\5\
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    \3\ 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 Options 7, Section 1(a).
    \4\ The Exchange proposes to change the word ``Members'' to 
Participants'' in note 4 of Options 7, Section 2 to conform with the 
definition of options participants on BX in Options 1, Section 
1(a)(40).
    \5\ Members with no Customer volume in the remove liquidity 
segment for the month of March 2024 may qualify for the Taker Fee 
discount by having any new volume considered as added volume. The 
note 4 incentive is available through September 30, 2024.
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    At this time, the Exchange proposes to amend note 1 of Options 7, 
Section 2 to extend the discounted Penny Symbol Customer Taker Fee of 
$0.33 per contract to AAPL, in addition to SPY, QQQ, and IWM. Further, 
the Exchange proposes to exclude AAPL from the Penny Taker Fee discount 
in note 4 of Options 7, Section 2, similar to SPY, QQQ, and IWM. With 
note 4, qualifying Participants pay a Customer Taker Fee of $0.35 per 
contract (instead of $0.40 per contract) in Penny Symbols, however, BX 
excludes SPY, QQQ, and IWM from the note 4 incentive because 
Participants are entitled to a lower Penny Customer Taker Fees of $0.33 
per contract for those symbols per note 1. Penny transactions in AAPL 
that remove liquidity would similarly be entitled to the note 1 
discount, but not the note 4 discount.
    The Exchange believes that the proposed amendments will attract 
additional AAPL Penny transactions that remove liquidity to BX similar 
to SPY, QQQ and IWM.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    BX's 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 securities 
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, 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'. . . .'' \8\
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    \8\ 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)).
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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.'' \9\
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    \9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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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

[[Page 43935]]

security 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. As such, the 
proposal represents a reasonable attempt by the Exchange to increase 
its liquidity and market share relative to its competitors.
    The Exchange's proposal to reduce the Penny Symbol Customer Taker 
Fee from $0.40 to $0.33 per contract for trades which remove liquidity 
in AAPL in note 1 of Options 7, Section 2 is reasonable because it will 
attract additional Customer Penny Symbol AAPL transactions that remove 
liquidity to BX. The Exchange believes that it is reasonable to pay 
lower fees in AAPL, similar to SPY, QQQ, and IWM, as compared to other 
options symbols because the Exchange is seeking to incentivize greater 
order flow in these highly liquid Penny Symbols which are subject to 
greater competition among options exchanges.
    The Exchange's proposal to reduce the Penny Symbol Customer Taker 
Fee from $0.40 to $0.33 per contract for trades which remove liquidity 
in AAPL in note 1 of Options 7, Section 2 is equitable and not unfairly 
discriminatory because Customer liquidity enhances market quality on 
the Exchange by providing more trading opportunities, which benefits 
all market participants. Additionally, the Exchange will assess the 
lower Taker Fee in AAPL uniformly to all Customer Penny Symbol Taker 
Fee transactions similar to SPY, QQQ and IWM.
    The Exchange's proposal to exclude AAPL Penny transactions that 
remove liquidity from note 4 of Options 7, Section 2 is reasonable 
because with the proposed change to note 1 of Options 7, Section 2, 
Participants would be entitled to a lower Penny Customer Taker Fee of 
$0.33 per contract in AAPL.
    The Exchange's proposal to exclude AAPL Penny transactions that 
remove liquidity from note 4 of Options 7, Section 2 is equitable and 
not unfairly discriminatory because the Exchange would not permit any 
transaction to remove liquidity in AAPL in Penny Symbols to receive the 
discount in note 4 of Options 7, Section 2.

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 intra-market competition, the Exchange does not believe 
that its proposal will place any category of market participant at a 
competitive disadvantage. The Exchange's proposal to reduce the Penny 
Symbol Customer Taker Fee from $0.40 to $0.33 per contract for trades 
which remove liquidity in AAPL in note 1 of Options 7, Section 2 does 
not impose an undue burden on competition because Customer liquidity 
enhances market quality on the Exchange by providing more trading 
opportunities, which benefits all market participants. Additionally, 
the Exchange will assess the lower Taker Fee in AAPL uniformly to all 
Customer Penny Symbol Taker Fee transactions similar to SPY, QQQ and 
IWM. Also, the Exchange's proposal to exclude AAPL Penny transactions 
that remove liquidity from note 4 of Options 7, Section 2 does not 
impose an undue burden on competition because the Exchange would not 
permit any transaction to remove liquidity in AAPL in Penny Symbols to 
receive the discount in note 4 of Options 7, Section 2.
    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 
options 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 sum, 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)(ii) of the Act.\10\
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    \10\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BX-2024-015 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-2024-015. 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,

[[Page 43936]]

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-2024-015 and should be 
submitted on or before June 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10952 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P