Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees and Rebates Related to BX Price Improvement Auction (PRISM), 75157-75161 [2015-30386]
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Federal Register / Vol. 80, No. 230 / Tuesday, December 1, 2015 / Notices
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 Web site 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 such
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
publicly available. All submissions
should refer to File Number SR–FINRA–
2015–051 and should be submitted on
or before December 22, 2015.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Robert W. Errett,
Deputy Secretary.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2015–30413 Filed 11–30–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76520; File No. SR–BX–
2015–071]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Establish
Fees and Rebates Related to BX Price
Improvement Auction (PRISM)
tkelley on DSK3SPTVN1PROD with NOTICES
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 November
12, 2015, NASDAQ OMX 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.
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
23:35 Nov 30, 2015
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
November 24, 2015.
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The Exchange proposes to amend its
Options Pricing at Chapter XV, Section
2, entitled ‘‘BX Options Market—Fees
and Rebates,’’ which governs pricing for
BX members using the BX Options
Market (‘‘BX Options’’). The Exchange
proposes to adopt new subsection (5) to
add fees and rebates for BX Price
Improvement Auction (‘‘PRISM’’),
which is a mechanism for price
improvement on BX Options (‘‘Price
Improvement Mechanism’’).
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on November 16, 2015.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqomxbx.cchwallstreet
.com/, at the principal office of the
Exchange, and at the Commission’s
Public Reference Room.
Jkt 238001
The Exchange proposes to amend its
Chapter XV, Section 2 to adopt new
subsection (5) to add fees and rebates for
PRISM.
Effective on or about November 16,
2015, BX Options is introducing PRISM,
which is codified in BX Chapter VI,
Section 9 (also known as the ‘‘PRISM
Rule’’).3 PRISM is a Price Improvement
3 See Securities Exchange Act Release Nos. 76301
(October 29, 2015), 80 FR 68347 (November 4, 2015)
(SR–BX–2015–032) (approval order) (‘‘PRISM
Approval’’); and 75827 (September 3, 2015), 80 FR
54601 (September 10, 2015) (SR–BX–2015–032)
(‘‘PRISM Filing’’). In the PRISM Approval the
Exchange noted that it will file a rule change
separately with the Commission to remove Price
Improving and Post-Only Order types from its
Rules. The Exchange will not commence offering
BX PRISM until such time as it has an effective and
operative rule in place from the Commission to
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75157
Mechanism for all-electronic BX
Options whereby a buy and sell order
may be submitted in one order message
to initiate an auction at a ‘stop price’
and seek potential price improvement.
Options are traded electronically on BX
Options, and all options participants
may respond to a PRISM Auction,4 the
duration of which will be set at 200
milliseconds.5 PRISM includes automatch functionality in which a
Participant (an ‘‘Initiating Participant’’)
may electronically submit for execution
an order it represents as agent on behalf
of a Public Customer,6 Professional
customer, broker dealer, or any other
entity (‘‘PRISM Order’’) against
principal interest or against any other
order it represents as agent (an
‘‘Initiating Order’’) provided it submits
the PRISM Order for electronic
execution into the PRISM Auction
pursuant to Chapter VI, Section 9.7 The
PRISM Rule describes the circumstances
under which an Initiating Participant
may initiate an Auction. A PRISM Order
that is for a Non-Customer (account of
a broker-dealer or any other person or
entity that is not a Public Customer) is
always required to improve the same
side of the BX BBO even if there is no
resting limit order on the book. PRISM
Orders that do not comply with the
remove Price Improving and Post-Only Orders and
removes the ability to submit Price Improving and
Post-Only Orders into the auction. In the event the
Exchange determines to amend its order types to
allow the entry of non-displayed order types, e.g.
Price Improving or Post-Only Orders, the Exchange
will file a proposed rule change pursuant to Section
19(b)(2) with the Commission to seek approval for
such rule change. See also Options Technical
Update #2015–6.
4 PRISM Auction eligibility requirements and the
early conclusion of the PRISM Auction are, with
certain other PRISM features, subject to a pilot
program scheduled to expire July 18, 2016. See BX
Chapter VI, Section 9.
5 Other exchanges that have price improvement
auctions have developed different durations. See,
e.g., CBOE Rule 6.74A(b)(1)(C) (CBOE’s AIM
auction has a duration of one second); and BOX
Rule 7150(f)(1) (BOX’s PIP auction has a duration
of one hundred milliseconds, commencing on the
dissemination of the PIP broadcast).
6 For purposes of the PRISM Rule in Chapter XV,
Section 2, a Public Customer order does not include
a Professional order, and therefore a Professional
would not be entitled to Public Customer priority
as described herein. A Public Customer means a
person that is not a broker or dealer in securities.
See BX Options Rules at Chapter I, Section 1(a)(50).
A Public Customer order does not include a
Professional order for purposes of BX Rule at
Chapter VI, Section 10(a)(C)(1)(a), which governs
allocation priority. A ‘‘Professional’’ means any
person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar
month for its own beneficial account(s). A
Participant or a Public Customer may, without
limitation, be a Professional. All Professional orders
shall be appropriately marked by Participants. See
BX Rules at Chapter I, Section 1(a)(49).
7 BX PRISM will only conduct an auction for
simple (non-complex) Orders.
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requirements set forth in the PRISM
Rule are not eligible to initiate an
Auction and will be immediately
cancelled. Also, PRISM Orders
submitted at or before the opening of
trading are not eligible to initiate an
Auction and will be rejected. PRISM
Orders submitted during the final two
seconds of the trading session in the
affected series are not eligible to initiate
an Auction and will be immediately
cancelled. Finally, an Initiating Order
may not be a solicited order for the
account of any BX Options Market
Maker assigned in the affected series.8
The Exchange believes that the PRISM
Auction will be beneficial to market
participants, and in particular will
encourage BX Market Makers9 to quote
at the National Best Bid or Offer
(‘‘NBBO’’) with additional size and
thereby result in tighter and deeper
markets, resulting in more liquidity on
BX. Specifically, by offering BX Market
Makers the ability to receive priority in
the proposed allocation during the
PRISM Auction up to the size of their
quote, a BX Market Maker will be
encouraged to quote with additional
size outside of the PRISM Auction at the
best and most aggressive prices. BX
believes that this incentive may result in
a narrowing of quotes and thus further
enhance BX’s market quality. BX
believes that PRISM will encourage BX
Market Makers to compete vigorously to
provide the opportunity for price
improvement in a competitive auction
process.10
This proposal establishes the fee and
rebate structure for PRISM (per
contract), in particular two new fees and
one new rebate. These would apply to
Customers,11 BX Options Market
Makers,12 and Non-Customers:
8 See
Chapter VI, Section 9(i)(C) through (G).
Options Market Makers may also be referred
to as ‘‘Market Makers’’. The term ‘‘BX Options
Market Maker’’ means a Participant that has
registered as a Market Maker on BX Options
pursuant to Chapter VII, Section 2, and must also
remain in good standing pursuant to Chapter VII,
Section 4. In order to receive Market Maker pricing
in all securities, the Participant must be registered
as a BX Options Market Maker in at least one
security.
10 For purposes of brevity, the Exchange does not
endeavor to describe all the nuances of PRISM
within this fee proposal. Additional detail regarding
PRISM can be found in PRISM Approval, PRISM
Filing, and PRISM FAQs at https://
nasdaqtrader.com/content/productsservices/
trading/PRISMFAQs.pdf.
11 The term ‘‘Customer’’ means a Public Customer
or a broker-dealer. BX Chapter 1, Section 1(a)(22).
The term ‘‘Broker-Dealer’’ applies to any transaction
which is not subject to any of the other transaction
fees applicable within a particular category.
12 BX Options Market Makers may also be referred
to as ‘‘Market Makers’’. The term ‘‘BX Options
Market Maker’’ or (‘‘M’’) means a Participant that
has registered as a Market Maker on BX Options
pursuant to Chapter VII, Section 2, and must also
tkelley on DSK3SPTVN1PROD with NOTICES
9 BX
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Jkt 238001
Change 1. The Exchange proposes to
establish fees for Submitted PRISM
Order13 (Agency Order and Contra-Side
Order).
Change 2. The Exchange proposes to
establish fees for Responded to PRISM
Auction 14 (Penny Classes 15 and nonPenny Classes).
Change 3. The Exchange proposes to
establish rebates for PRISM Order
Traded With PRISM Response.16
Each specific change is described in
detail below.
Change 1—Fees for Submitted PRISM
Order: Agency Order and Contra-Side
Order
For Submitted PRISM Order the
Exchange is proposing to establish fees
for Agency Order (per contract), and
fees for Contra-Side Order (per
contract). Currently, the Exchange has
no such fees.
The fees for Submitted PRISM Order
will range from $0.00 to $0.30 for
Agency Order. The fees for Submitted
PRISM Order will range from $0.00 to
$0.05 for Contra-Side Order.
Specifically, for Submitted PRISM
Order proposed Chapter XV, Section 2
subsection (5) will state that for
Customer there will be no fee ($0.00) for
Agency Order and no fee ($0.00) for
Contra-Side Order. Subsection (5) will
state that for BX Options Market Maker
there will be a $0.30 fee for Agency
Order and a $0.05 fee for Contra-Side
Order. Subsection (5) will state that for
Non-Customer there will be a $0.30 fee
for Agency Order and a $0.05 fee for
Contra-Side Order.
Change 2—Fees for Responded to
PRISM Auction: Penny Classes and
Non-Penny Classes
For Responded to PRISM Auction the
Exchange is proposing to establish fees
for Penny Classes (per contract), and
fees for non-Penny Classes (per
remain in good standing pursuant to Chapter VII,
Section 4. In order to receive Market Maker pricing
in all securities, the Participant must be registered
as a BX Options Market Maker in at least one
security.
13 This relates to a market participant submitting
an order into the PRISM auction.
14 This relates to a market participant responding
to a PRISM Auction.
15 Penny Classes are options listed pursuant to the
Penny Pilot, which was established in June 2012
and extended in 2015. See Securities Exchange Act
Release Nos. 67256 (June 26, 2012), 77 FR 39277
(July 2, 2012) (SR–BX–2012–030) (order approving
BX option rules and establishing Penny Pilot); and
75326 (June 29, 2015), 80 FR 38481 (July 6, 2015)
(SR–BX–2015–037) (notice of filing and immediate
effectiveness extending the Penny Pilot through
June 30, 2016).
16 This relates to a market participant submitting
a PRISM Order pursuant to a PRISM Auction and
the PRISM Order trading with PRISM Response.
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contract). Currently, the Exchange has
no such fees.
The fees for Responded to PRISM
Auction will be $0.49 (per executed
contract) for Penny Classes. The fees for
Responded to PRISM Auction will be
$0.94 (per executed contract) for nonPenny Classes. Specifically, for
Responded to PRISM Auction proposed
Chapter XV, Section 2 subsection (5)
will state that for Customer there will be
a $0.49 fee for Penny Classes and a
$0.94 fee for non-Penny Classes.
Subsection (5) will state that for BX
Options Market Maker there will be a
$0.49 fee for Penny Classes and a $0.94
fee for non-Penny Classes. Subsection
(5) will state that for Non-Customer
there will be a $0.49 fee for Penny
Classes and a $0.94 fee for non-Penny
Classes.
Change 3—Rebates for PRISM Order
Traded With PRISM Response: Penny
Classes and Non-Penny Classes
For PRISM Order Traded with PRISM
Response the Exchange is proposing to
establish rebates for Penny Classes (per
contract), and rebates for non-Penny
Classes (per contract). Currently, the
Exchange has no such rebates. These
rebates would be applied in conjunction
with the Agency Order fees that the
Submitted PRISM Order is assessed.
The rebates for PRISM Order Traded
with PRISM Response will range from
$0.00 to $0.35 for Penny Classes. The
rebates for PRISM Order Traded with
PRISM Response will range from $0.00
to $0.70 for non-Penny Classes. Only
Customers will get rebates. Specifically,
for PRISM Order Traded with PRISM
Response proposed Chapter XV, Section
2 subsection (5) will state that for
Customer there will be a $0.35 rebate for
Penny Classes and a $0.70 rebate for
non-Penny Classes. Subsection (5) will
state that for BX Options Market Maker
and for Non-Customer there will be no
rebate ($0.00) for Penny Classes and no
rebate ($0.00) for non-Penny Classes.
Example 1
A Customer PRISM Agency Order in a
Penny Class (one contract) trades against a
PRISM Response in a Penny Class (one
contract). The Customer Agency Order is
assessed a fee of $0.00 and given a rebate of
$0.35 for a total rebate of $0.35 (fee $0.00 +
rebate $0.35). The market participant that
Responded to PRISM Auction will be
assessed a fee of $0.49.
Example 2
A Non-Customer PRISM Agency Order in
a Penny Class (one contract) trades against a
PRISM Response in a Penny Class (one
contract). The Non-Customer Agency Order
is assessed a fee of $0.30 and given a rebate
of $0.00 for a total fee of $0.30 (fee $0.30 +
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rebate $0.00). The market participant that
Responded to PRISM Auction will be
assessed a fee of $0.49.
As proposed, Chapter XV, Section 2
subsection (5) will read as follows:
(5) Fees and rebates for BX Price
Improvement Auction (‘‘PRISM’’)
FEES AND REBATES (PER CONTACT)
Submitted
PRISM order fee
Type of market
participants
Agency
order
Customer ..................................................
BX Options Market Maker .......................
Non-Customer ..........................................
Responded to
PRISM auction fee
Contra-side
order
$0.00
0.30
0.30
Penny
classes
$0.00
0.05
0.05
PRISM order traded with
PRISM response rebate
Non-penny
classes
$0.49
0.49
0.49
$0.94
0.94
0.94
Penny
classes
$0.35
0.00
0.00
Non-penny
classes
$0.70
0.00
0.00
BX will apply the rebate to market participants that submitted a PRISM Order pursuant to a PRISM Auction and the PRISM Order Traded with
PRISM Response. The Agency Order fee for Submitted PRISM Order will be applicable to any contract(s) for which a rebate is provided for
PRISM Order Traded with PRISM Response.
The Exchange is adopting these fees
and rebates at this time because it
believes that they will allow the
Exchange to recoup some of the costs
associated with PRISM, which promotes
price improvement to the benefit of
market participants, while also
incentivizing the use of PRISM.
tkelley on DSK3SPTVN1PROD with NOTICES
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,17
in general, and with Section 6(b)(4) and
6(b)(5) of the Act,18 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 or
system which the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
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, for
example, the Commission indicated that
market forces should generally
determine the price of non-core market
data because national market system
regulation ‘‘has been remarkably
successful in promoting market
competition in its broader forms that are
most important to investors and listed
companies.’’ 19 Likewise, in
NetCoalition v. NYSE Arca, Inc., 615
F.3d 525 (D.C. Cir. 2010), the DC 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.20 As
17 15
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
19 Exchange Act Release No. 34–51808 (June 9,
2005) (‘‘Regulation NMS Adopting Release’’).
20 See NetCoalition, 615 F.3d at 534.
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.’’ 21
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 brokerdealers 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’ . . . .’’ 22 Although the Court
and the SEC were discussing the cash
equities markets, the Exchange believes
that, as discussed above, these views
apply with equal force to the options
markets.
The Exchange’s proposal establishes
fees and rebates regarding PRISM,
which promotes price improvement to
the benefit of market participants. The
Exchange believes that PRISM will
encourage market participants, and in
particular BX Market Makers, to
compete vigorously to provide the
opportunity for price improvement in a
competitive auction process. The
Exchange believes that its proposal will
allow the Exchange to recoup costs
associated with PRISM while also
incentivizing its use.
Change 1—Fees for Submitted PRISM
Order: Agency Order and Contra-Side
Order
For Submitted PRISM Order,
establishing that there will be no fee for
Customer for Agency Order, while
18 15
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21 Id.,
at 537.
22 NetCoalition
I, 615 F.3d at 539 (quoting
ArcaBook Order, 73 FR at 74782–74783).
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establishing a $0.30 fee per contract for
BX Options Market Maker for Agency
Order and a $0.30 fee per contract for
Non-Customer for Agency Order, is
reasonable because it encourages the
desired Customer behavior. The fee is
also reasonable because the associated
revenue will allow the Exchange to
maintain and enhance its services. For
Submitted PRISM Order, establishing no
Customer fee, while establishing a $0.05
fee per contract for BX Options Market
Maker for Contra-Side Order and a $0.05
fee per contract fee for Non-Customer
for Contra-Side Order, is reasonable
because it encourages the desired
Customer behavior. The fee is also
reasonable because the associated
revenue will allow the Exchange to
maintain and enhance its services.
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. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants.
For Submitted PRISM Order,
establishing no fee for Customer
(Agency Order and Contra-Side Order)
and a fee for BX Market Maker and NonCustomer (Agency Order and ContraSide Order) is equitable and not unfairly
discriminatory. This is because the
Exchange’s proposal to assess such fee
will apply the same to all similarly
situated participants.
Change 2—Fees for Responded to
PRISM Auction: Penny Classes and
Non-Penny Classes
For Responded to PRISM Auction,
establishing that there will be a $0.49
fee per contract for Customer for Agency
Order, and the same fee for BX Options
Market Maker and for Non-Customer for
Agency Order, is reasonable because the
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tkelley on DSK3SPTVN1PROD with NOTICES
associated revenue will allow the
Exchange to maintain and enhance its
services.
For Responded to PRISM Auction,
establishing that there will be a $0.94
fee per contract for Customer for ContraSide Order, and the same fee for BX
Options Market Maker and for NonCustomer for Contra-Side Order, is
reasonable because the associated
revenue will allow the Exchange to
maintain and enhance its services.
For Responded to PRISM Auction,
establishing a fee for Customer, BX
Market Maker and Non-Customer
(Agency Order and Contra-Side Order)
is equitable and not unfairly
discriminatory. This is because the
Exchange’s proposal to assess such fee
will apply the same to all similarly
situated participants.
Change 3—Rebates for PRISM Order
Traded With PRISM Response: Penny
Classes and Non-Penny Classes
For PRISM Order Traded with PRISM
Response, establishing that there will be
no rebate for BX Options Market Maker
and Non-Customer for Penny Classes,
while establishing a $0.35 rebate per
contract for Customer for Penny Classes
and a $0.70 rebate per contract for
Customer for non-Penny Pilot Classes, is
reasonable because it encourages the
desired Customer behavior. The rebate
is also reasonable because paying the
rebate only to Customers will allow the
Exchange to maintain and enhance its
services. For PRISM Order Traded with
PRISM Response, establishing that there
will be no rebate for BX Options Market
Maker and Non-Customer for non-Penny
Classes, while establishing a $0.70
rebate per contract for Customer for
non-Penny, is reasonable because it
encourages the desired Customer
behavior. The rebate is also reasonable
because paying the rebate only to
Customers will allow the Exchange to
maintain and enhance its services.23
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. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants.
For PRISM Order Traded with PRISM
Response, establishing a rebate for
Customer (Penny Classes and nonPenny Classes) and no rebate for BX
23 As noted, such rebate would be applied in
conjunction with any Agency Order fee that the
Submitted PRISM Order is assessed.
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Market Maker and Non-Customer
(Penny Classes and non-Penny Classes)
is equitable and not unfairly
discriminatory. This is because the
Exchange’s proposal to pay such rebate
will apply the same to all similarly
situated participants. The Exchange is
adopting the proposed fees and rebates
at this time because it believes that the
associated revenue will allow it to
continue and enhance PRISM, which is
beneficial to market participants.
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. Specifically,
the Exchange does not believe that its
proposal to establish fees and rebates for
PRISM will impose any burden on
competition, as discussed below.
The Exchange operates in a highly
competitive market in which many
sophisticated and knowledgeable
market participants can readily and do
send order flow to competing exchanges
if they deem fee levels or rebate
incentives at a particular exchange to be
excessive or inadequate. Additionally,
new competitors have entered the
market and still others are reportedly
entering the market shortly. These
market forces ensure that the Exchange’s
fees and rebates remain competitive
with the fee structures at other trading
platforms. In that sense, the Exchange’s
proposal is actually pro-competitive
because the Exchange is simply
establishing rebates and fees in order to
remain competitive in the current
environment.
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
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
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changes in this market may impose any
burden on competition is extremely
limited.
In this instance, the proposed changes
to the charges assessed and credits
available to member firms in respect of
PRISM do not impose a burden on
competition because the Exchange’s
execution and routing services are
completely voluntary and subject to
extensive competition both from other
exchanges and from off-exchange
venues. 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. Additionally, the changes
proposed herein are pro-competitive to
the extent that they continue to allow
the Exchange to promote and maintain
PRISM, which has the potential to result
in more efficient, price improved
executions to the benefit of market
participants.
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
Pursuant to Section 19(b)(3)(A)(ii) of
the Act,24 the Exchange has designated
this proposal as establishing or changing
a due, fee, or other charge imposed by
the self-regulatory organization on any
person, whether or not the person is a
member of the self-regulatory
organization, which renders the
proposed rule change effective upon
filing.
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
24 15
E:\FR\FM\01DEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
01DEN1
Federal Register / Vol. 80, No. 230 / Tuesday, December 1, 2015 / Notices
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 rule-comments@
sec.gov. Please include File Number SR–
BX–2015–071 on the subject line.
Paper Comments
tkelley on DSK3SPTVN1PROD with NOTICES
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2015–071. 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 Web site (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 Web site 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;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–BX–2015–071 and should
be submitted on or before December 22,
2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–30386 Filed 11–30–15; 8:45 am]
BILLING CODE 8011–01–P
25 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
23:35 Nov 30, 2015
Jkt 238001
DEPARTMENT OF STATE
[Public Notice: 9366]
60-Day Notice of Proposed Information
Collection: Smart Traveler Enrollment
Program
Notice of request for public
comment.
ACTION:
The Department of State is
seeking Office of Management and
Budget (OMB) approval for the
information collection described below.
In accordance with the Paperwork
Reduction Act of 1995, we are
requesting comments on this collection
from all interested individuals and
organizations. The purpose of this
notice is to allow 60 days for public
comment preceding submission of the
collection to OMB.
DATES: The Department will accept
comments from the public up to
February 1, 2016.
ADDRESSES: You may submit comments
by any of the following methods:
• Web: Persons with access to the
Internet may comment on this notice by
going to www.Regulations.gov. You can
search for the document by entering
‘‘Docket Number: DOS–2015–0050’’ in
the Search field. Then click the
‘‘Comment Now’’ button and complete
the comment form.
• Email: RiversDA@state.gov.
• Regular Mail: Send written
comments to: U.S. Department of State,
CA/OCS/PMO, SA–17, 10th Floor,
Washington, DC 20036.
• Fax: 202–736–9111.
• Hand Delivery or Courier: U.S.
Department of State, CA/OCS/PMO, 600
19th St. NW., 10th Floor, Washington,
DC 20036.
You must include the DS form
number (if applicable), information
collection title, and the OMB control
number in any correspondence.
FOR FURTHER INFORMATION CONTACT:
Direct requests for additional
information regarding the collection
listed in this notice, including requests
for copies of the proposed collection
instrument and supporting documents,
to Derek Rivers, Bureau of Consular
Affairs, Overseas Citizens Services (CA/
OCS/PMO), U.S. Department of State,
SA–17, 10th Floor, Washington, DC
20036 or at RiversDA@state.gov.
SUPPLEMENTARY INFORMATION:
• Title of Information Collection:
Smart Traveler Enrollment Program.
• OMB Control Number: 1405–0152.
• Type of Request: Revision of a
Currently Approved Collection.
• Originating Office: CA/OCS/PMO.
• Form Number: DS–4024, DS–4024e.
SUMMARY:
PO 00000
Frm 00119
Fmt 4703
Sfmt 4703
75161
• Respondents: United States Citizens
and Nationals.
• Estimated Number of Respondents:
1,010,389.
• Estimated Number of Responses:
1,010,389.
• Average Time per Response: 20
minutes.
• Total Estimated Burden Time:
336,796 hours.
• Frequency: On Occasion.
• Obligation to Respond: Voluntary.
We are soliciting public comments to
permit the Department to:
• Evaluate whether the proposed
information collection is necessary for
the proper functions of the Department.
• Evaluate the accuracy of our
estimate of the time and cost burden for
this proposed collection, including the
validity of the methodology and
assumptions used.
• Enhance the quality, utility, and
clarity of the information to be
collected.
• Minimize the reporting burden on
those who are to respond, including the
use of automated collection techniques
or other forms of information
technology.
Please note that comments submitted
in response to this Notice are public
record. Before including any detailed
personal information, you should be
aware that your comments as submitted,
including your personal information,
will be available for public review.
Abstract of Proposed Collection
The STEP makes it possible for U.S.
nationals to register on-line from
anywhere in the world. In the event of
a family emergency, natural disaster or
international crisis, U.S. embassies and
consulates rely on this registration
information to provide critical
information and assistance to them. 22
U.S.C. 2715 is one of the main legal
authorities that deem the usage of this
form necessary.
Methodology
99% of responses are received via
electronic submission on the Internet.
The service is available on the
Department of State, Bureau of Consular
Affairs Web site https://travel.state.gov at
https://step.state.gov/step/. The paper
version of the collection permits
respondents who do not have Internet
access to provide the information to the
U.S. embassy or consulate by fax, mail
or in person.
E:\FR\FM\01DEN1.SGM
01DEN1
]]>Agencies
[Federal Register Volume 80, Number 230 (Tuesday, December 1, 2015)]
[Notices]
[Pages 75157-75161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30386]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76520; File No. SR-BX-2015-071]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Establish
Fees and Rebates Related to BX Price Improvement Auction (PRISM)
November 24, 2015.
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 November 12, 2015, NASDAQ OMX 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 its Options Pricing at Chapter XV,
Section 2, entitled ``BX Options Market--Fees and Rebates,'' which
governs pricing for BX members using the BX Options Market (``BX
Options''). The Exchange proposes to adopt new subsection (5) to add
fees and rebates for BX Price Improvement Auction (``PRISM''), which is
a mechanism for price improvement on BX Options (``Price Improvement
Mechanism'').
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on November
16, 2015.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxbx.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 its Chapter XV, Section 2 to adopt
new subsection (5) to add fees and rebates for PRISM.
Effective on or about November 16, 2015, BX Options is introducing
PRISM, which is codified in BX Chapter VI, Section 9 (also known as the
``PRISM Rule'').\3\ PRISM is a Price Improvement Mechanism for all-
electronic BX Options whereby a buy and sell order may be submitted in
one order message to initiate an auction at a `stop price' and seek
potential price improvement. Options are traded electronically on BX
Options, and all options participants may respond to a PRISM
Auction,\4\ the duration of which will be set at 200 milliseconds.\5\
PRISM includes auto-match functionality in which a Participant (an
``Initiating Participant'') may electronically submit for execution an
order it represents as agent on behalf of a Public Customer,\6\
Professional customer, broker dealer, or any other entity (``PRISM
Order'') against principal interest or against any other order it
represents as agent (an ``Initiating Order'') provided it submits the
PRISM Order for electronic execution into the PRISM Auction pursuant to
Chapter VI, Section 9.\7\ The PRISM Rule describes the circumstances
under which an Initiating Participant may initiate an Auction. A PRISM
Order that is for a Non-Customer (account of a broker-dealer or any
other person or entity that is not a Public Customer) is always
required to improve the same side of the BX BBO even if there is no
resting limit order on the book. PRISM Orders that do not comply with
the
[[Page 75158]]
requirements set forth in the PRISM Rule are not eligible to initiate
an Auction and will be immediately cancelled. Also, PRISM Orders
submitted at or before the opening of trading are not eligible to
initiate an Auction and will be rejected. PRISM Orders submitted during
the final two seconds of the trading session in the affected series are
not eligible to initiate an Auction and will be immediately cancelled.
Finally, an Initiating Order may not be a solicited order for the
account of any BX Options Market Maker assigned in the affected
series.\8\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release Nos. 76301 (October 29,
2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032) (approval
order) (``PRISM Approval''); and 75827 (September 3, 2015), 80 FR
54601 (September 10, 2015) (SR-BX-2015-032) (``PRISM Filing''). In
the PRISM Approval the Exchange noted that it will file a rule
change separately with the Commission to remove Price Improving and
Post-Only Order types from its Rules. The Exchange will not commence
offering BX PRISM until such time as it has an effective and
operative rule in place from the Commission to remove Price
Improving and Post-Only Orders and removes the ability to submit
Price Improving and Post-Only Orders into the auction. In the event
the Exchange determines to amend its order types to allow the entry
of non-displayed order types, e.g. Price Improving or Post-Only
Orders, the Exchange will file a proposed rule change pursuant to
Section 19(b)(2) with the Commission to seek approval for such rule
change. See also Options Technical Update #2015-6.
\4\ PRISM Auction eligibility requirements and the early
conclusion of the PRISM Auction are, with certain other PRISM
features, subject to a pilot program scheduled to expire July 18,
2016. See BX Chapter VI, Section 9.
\5\ Other exchanges that have price improvement auctions have
developed different durations. See, e.g., CBOE Rule 6.74A(b)(1)(C)
(CBOE's AIM auction has a duration of one second); and BOX Rule
7150(f)(1) (BOX's PIP auction has a duration of one hundred
milliseconds, commencing on the dissemination of the PIP broadcast).
\6\ For purposes of the PRISM Rule in Chapter XV, Section 2, a
Public Customer order does not include a Professional order, and
therefore a Professional would not be entitled to Public Customer
priority as described herein. A Public Customer means a person that
is not a broker or dealer in securities. See BX Options Rules at
Chapter I, Section 1(a)(50). A Public Customer order does not
include a Professional order for purposes of BX Rule at Chapter VI,
Section 10(a)(C)(1)(a), which governs allocation priority. A
``Professional'' means any person or entity that (i) is not a broker
or dealer in securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s). A Participant or a Public Customer may,
without limitation, be a Professional. All Professional orders shall
be appropriately marked by Participants. See BX Rules at Chapter I,
Section 1(a)(49).
\7\ BX PRISM will only conduct an auction for simple (non-
complex) Orders.
\8\ See Chapter VI, Section 9(i)(C) through (G).
---------------------------------------------------------------------------
The Exchange believes that the PRISM Auction will be beneficial to
market participants, and in particular will encourage BX Market
Makers\9\ to quote at the National Best Bid or Offer (``NBBO'') with
additional size and thereby result in tighter and deeper markets,
resulting in more liquidity on BX. Specifically, by offering BX Market
Makers the ability to receive priority in the proposed allocation
during the PRISM Auction up to the size of their quote, a BX Market
Maker will be encouraged to quote with additional size outside of the
PRISM Auction at the best and most aggressive prices. BX believes that
this incentive may result in a narrowing of quotes and thus further
enhance BX's market quality. BX believes that PRISM will encourage BX
Market Makers to compete vigorously to provide the opportunity for
price improvement in a competitive auction process.\10\
---------------------------------------------------------------------------
\9\ BX Options Market Makers may also be referred to as ``Market
Makers''. The term ``BX Options Market Maker'' means a Participant
that has registered as a Market Maker on BX Options pursuant to
Chapter VII, Section 2, and must also remain in good standing
pursuant to Chapter VII, Section 4. In order to receive Market Maker
pricing in all securities, the Participant must be registered as a
BX Options Market Maker in at least one security.
\10\ For purposes of brevity, the Exchange does not endeavor to
describe all the nuances of PRISM within this fee proposal.
Additional detail regarding PRISM can be found in PRISM Approval,
PRISM Filing, and PRISM FAQs at https://nasdaqtrader.com/content/productsservices/trading/PRISMFAQs.pdf.
---------------------------------------------------------------------------
This proposal establishes the fee and rebate structure for PRISM
(per contract), in particular two new fees and one new rebate. These
would apply to Customers,\11\ BX Options Market Makers,\12\ and Non-
Customers:
---------------------------------------------------------------------------
\11\ The term ``Customer'' means a Public Customer or a broker-
dealer. BX Chapter 1, Section 1(a)(22). The term ``Broker-Dealer''
applies to any transaction which is not subject to any of the other
transaction fees applicable within a particular category.
\12\ BX Options Market Makers may also be referred to as
``Market Makers''. The term ``BX Options Market Maker'' or (``M'')
means a Participant that has registered as a Market Maker on BX
Options pursuant to Chapter VII, Section 2, and must also remain in
good standing pursuant to Chapter VII, Section 4. In order to
receive Market Maker pricing in all securities, the Participant must
be registered as a BX Options Market Maker in at least one security.
---------------------------------------------------------------------------
Change 1. The Exchange proposes to establish fees for Submitted
PRISM Order\13\ (Agency Order and Contra-Side Order).
---------------------------------------------------------------------------
\13\ This relates to a market participant submitting an order
into the PRISM auction.
---------------------------------------------------------------------------
Change 2. The Exchange proposes to establish fees for Responded to
PRISM Auction \14\ (Penny Classes \15\ and non-Penny Classes).
---------------------------------------------------------------------------
\14\ This relates to a market participant responding to a PRISM
Auction.
\15\ Penny Classes are options listed pursuant to the Penny
Pilot, which was established in June 2012 and extended in 2015. See
Securities Exchange Act Release Nos. 67256 (June 26, 2012), 77 FR
39277 (July 2, 2012) (SR-BX-2012-030) (order approving BX option
rules and establishing Penny Pilot); and 75326 (June 29, 2015), 80
FR 38481 (July 6, 2015) (SR-BX-2015-037) (notice of filing and
immediate effectiveness extending the Penny Pilot through June 30,
2016).
---------------------------------------------------------------------------
Change 3. The Exchange proposes to establish rebates for PRISM
Order Traded With PRISM Response.\16\
---------------------------------------------------------------------------
\16\ This relates to a market participant submitting a PRISM
Order pursuant to a PRISM Auction and the PRISM Order trading with
PRISM Response.
---------------------------------------------------------------------------
Each specific change is described in detail below.
Change 1--Fees for Submitted PRISM Order: Agency Order and Contra-Side
Order
For Submitted PRISM Order the Exchange is proposing to establish
fees for Agency Order (per contract), and fees for Contra-Side Order
(per contract). Currently, the Exchange has no such fees.
The fees for Submitted PRISM Order will range from $0.00 to $0.30
for Agency Order. The fees for Submitted PRISM Order will range from
$0.00 to $0.05 for Contra-Side Order. Specifically, for Submitted PRISM
Order proposed Chapter XV, Section 2 subsection (5) will state that for
Customer there will be no fee ($0.00) for Agency Order and no fee
($0.00) for Contra-Side Order. Subsection (5) will state that for BX
Options Market Maker there will be a $0.30 fee for Agency Order and a
$0.05 fee for Contra-Side Order. Subsection (5) will state that for
Non-Customer there will be a $0.30 fee for Agency Order and a $0.05 fee
for Contra-Side Order.
Change 2--Fees for Responded to PRISM Auction: Penny Classes and Non-
Penny Classes
For Responded to PRISM Auction the Exchange is proposing to
establish fees for Penny Classes (per contract), and fees for non-Penny
Classes (per contract). Currently, the Exchange has no such fees.
The fees for Responded to PRISM Auction will be $0.49 (per executed
contract) for Penny Classes. The fees for Responded to PRISM Auction
will be $0.94 (per executed contract) for non-Penny Classes.
Specifically, for Responded to PRISM Auction proposed Chapter XV,
Section 2 subsection (5) will state that for Customer there will be a
$0.49 fee for Penny Classes and a $0.94 fee for non-Penny Classes.
Subsection (5) will state that for BX Options Market Maker there will
be a $0.49 fee for Penny Classes and a $0.94 fee for non-Penny Classes.
Subsection (5) will state that for Non-Customer there will be a $0.49
fee for Penny Classes and a $0.94 fee for non-Penny Classes.
Change 3--Rebates for PRISM Order Traded With PRISM Response: Penny
Classes and Non-Penny Classes
For PRISM Order Traded with PRISM Response the Exchange is
proposing to establish rebates for Penny Classes (per contract), and
rebates for non-Penny Classes (per contract). Currently, the Exchange
has no such rebates. These rebates would be applied in conjunction with
the Agency Order fees that the Submitted PRISM Order is assessed.
The rebates for PRISM Order Traded with PRISM Response will range
from $0.00 to $0.35 for Penny Classes. The rebates for PRISM Order
Traded with PRISM Response will range from $0.00 to $0.70 for non-Penny
Classes. Only Customers will get rebates. Specifically, for PRISM Order
Traded with PRISM Response proposed Chapter XV, Section 2 subsection
(5) will state that for Customer there will be a $0.35 rebate for Penny
Classes and a $0.70 rebate for non-Penny Classes. Subsection (5) will
state that for BX Options Market Maker and for Non-Customer there will
be no rebate ($0.00) for Penny Classes and no rebate ($0.00) for non-
Penny Classes.
Example 1
A Customer PRISM Agency Order in a Penny Class (one contract)
trades against a PRISM Response in a Penny Class (one contract). The
Customer Agency Order is assessed a fee of $0.00 and given a rebate
of $0.35 for a total rebate of $0.35 (fee $0.00 + rebate $0.35). The
market participant that Responded to PRISM Auction will be assessed
a fee of $0.49.
Example 2
A Non-Customer PRISM Agency Order in a Penny Class (one
contract) trades against a PRISM Response in a Penny Class (one
contract). The Non-Customer Agency Order is assessed a fee of $0.30
and given a rebate of $0.00 for a total fee of $0.30 (fee $0.30 +
[[Page 75159]]
rebate $0.00). The market participant that Responded to PRISM
Auction will be assessed a fee of $0.49.
As proposed, Chapter XV, Section 2 subsection (5) will read as
follows:
(5) Fees and rebates for BX Price Improvement Auction (``PRISM'')
Fees and Rebates (per Contact)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Submitted PRISM order fee Responded to PRISM auction PRISM order traded with PRISM
-------------------------------- fee response rebate
Type of market participants ---------------------------------------------------------------
Agency order Contra-side Non-penny Non-penny
order Penny classes classes Penny classes classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Customer................................................ $0.00 $0.00 $0.49 $0.94 $0.35 $0.70
BX Options Market Maker................................. 0.30 0.05 0.49 0.94 0.00 0.00
Non-Customer............................................ 0.30 0.05 0.49 0.94 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
BX will apply the rebate to market participants that submitted a PRISM Order pursuant to a PRISM Auction and the PRISM Order Traded with PRISM Response.
The Agency Order fee for Submitted PRISM Order will be applicable to any contract(s) for which a rebate is provided for PRISM Order Traded with PRISM
Response.
The Exchange is adopting these fees and rebates at this time
because it believes that they will allow the Exchange to recoup some of
the costs associated with PRISM, which promotes price improvement to
the benefit of market participants, while also incentivizing the use of
PRISM.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\17\ in general, and with
Section 6(b)(4) and 6(b)(5) of the Act,\18\ 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 or system which the Exchange operates or controls, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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, for example, the Commission indicated that market forces should
generally determine the price of non-core market data because national
market system regulation ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \19\ Likewise, in NetCoalition v.
NYSE Arca, Inc., 615 F.3d 525 (D.C. Cir. 2010), the DC 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.\20\ 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.'' \21\
---------------------------------------------------------------------------
\19\ Exchange Act Release No. 34-51808 (June 9, 2005)
(``Regulation NMS Adopting Release'').
\20\ See NetCoalition, 615 F.3d at 534.
\21\ Id., at 537.
---------------------------------------------------------------------------
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' . . . .'' \22\ Although the Court and
the SEC were discussing the cash equities markets, the Exchange
believes that, as discussed above, these views apply with equal force
to the options markets.
---------------------------------------------------------------------------
\22\ NetCoalition I, 615 F.3d at 539 (quoting ArcaBook Order, 73
FR at 74782-74783).
---------------------------------------------------------------------------
The Exchange's proposal establishes fees and rebates regarding
PRISM, which promotes price improvement to the benefit of market
participants. The Exchange believes that PRISM will encourage market
participants, and in particular BX Market Makers, to compete vigorously
to provide the opportunity for price improvement in a competitive
auction process. The Exchange believes that its proposal will allow the
Exchange to recoup costs associated with PRISM while also incentivizing
its use.
Change 1--Fees for Submitted PRISM Order: Agency Order and Contra-Side
Order
For Submitted PRISM Order, establishing that there will be no fee
for Customer for Agency Order, while establishing a $0.30 fee per
contract for BX Options Market Maker for Agency Order and a $0.30 fee
per contract for Non-Customer for Agency Order, is reasonable because
it encourages the desired Customer behavior. The fee is also reasonable
because the associated revenue will allow the Exchange to maintain and
enhance its services. For Submitted PRISM Order, establishing no
Customer fee, while establishing a $0.05 fee per contract for BX
Options Market Maker for Contra-Side Order and a $0.05 fee per contract
fee for Non-Customer for Contra-Side Order, is reasonable because it
encourages the desired Customer behavior. The fee is also reasonable
because the associated revenue will allow the Exchange to maintain and
enhance its services. 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. An increase in the activity of these market
participants in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow from other market
participants.
For Submitted PRISM Order, establishing no fee for Customer (Agency
Order and Contra-Side Order) and a fee for BX Market Maker and Non-
Customer (Agency Order and Contra-Side Order) is equitable and not
unfairly discriminatory. This is because the Exchange's proposal to
assess such fee will apply the same to all similarly situated
participants.
Change 2--Fees for Responded to PRISM Auction: Penny Classes and Non-
Penny Classes
For Responded to PRISM Auction, establishing that there will be a
$0.49 fee per contract for Customer for Agency Order, and the same fee
for BX Options Market Maker and for Non-Customer for Agency Order, is
reasonable because the
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associated revenue will allow the Exchange to maintain and enhance its
services.
For Responded to PRISM Auction, establishing that there will be a
$0.94 fee per contract for Customer for Contra-Side Order, and the same
fee for BX Options Market Maker and for Non-Customer for Contra-Side
Order, is reasonable because the associated revenue will allow the
Exchange to maintain and enhance its services.
For Responded to PRISM Auction, establishing a fee for Customer, BX
Market Maker and Non-Customer (Agency Order and Contra-Side Order) is
equitable and not unfairly discriminatory. This is because the
Exchange's proposal to assess such fee will apply the same to all
similarly situated participants.
Change 3--Rebates for PRISM Order Traded With PRISM Response: Penny
Classes and Non-Penny Classes
For PRISM Order Traded with PRISM Response, establishing that there
will be no rebate for BX Options Market Maker and Non-Customer for
Penny Classes, while establishing a $0.35 rebate per contract for
Customer for Penny Classes and a $0.70 rebate per contract for Customer
for non-Penny Pilot Classes, is reasonable because it encourages the
desired Customer behavior. The rebate is also reasonable because paying
the rebate only to Customers will allow the Exchange to maintain and
enhance its services. For PRISM Order Traded with PRISM Response,
establishing that there will be no rebate for BX Options Market Maker
and Non-Customer for non-Penny Classes, while establishing a $0.70
rebate per contract for Customer for non-Penny, is reasonable because
it encourages the desired Customer behavior. The rebate is also
reasonable because paying the rebate only to Customers will allow the
Exchange to maintain and enhance its services.\23\ 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. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants.
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\23\ As noted, such rebate would be applied in conjunction with
any Agency Order fee that the Submitted PRISM Order is assessed.
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For PRISM Order Traded with PRISM Response, establishing a rebate
for Customer (Penny Classes and non-Penny Classes) and no rebate for BX
Market Maker and Non-Customer (Penny Classes and non-Penny Classes) is
equitable and not unfairly discriminatory. This is because the
Exchange's proposal to pay such rebate will apply the same to all
similarly situated participants. The Exchange is adopting the proposed
fees and rebates at this time because it believes that the associated
revenue will allow it to continue and enhance PRISM, which is
beneficial to market participants.
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. Specifically, the Exchange does
not believe that its proposal to establish fees and rebates for PRISM
will impose any burden on competition, as discussed below.
The Exchange operates in a highly competitive market in which many
sophisticated and knowledgeable market participants can readily and do
send order flow to competing exchanges if they deem fee levels or
rebate incentives at a particular exchange to be excessive or
inadequate. Additionally, new competitors have entered the market and
still others are reportedly entering the market shortly. These market
forces ensure that the Exchange's fees and rebates remain competitive
with the fee structures at other trading platforms. In that sense, the
Exchange's proposal is actually pro-competitive because the Exchange is
simply establishing rebates and fees in order to remain competitive in
the current environment.
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 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 proposed changes to the charges assessed and
credits available to member firms in respect of PRISM do not impose a
burden on competition because the Exchange's execution and routing
services are completely voluntary and subject to extensive competition
both from other exchanges and from off-exchange venues. 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. Additionally, the
changes proposed herein are pro-competitive to the extent that they
continue to allow the Exchange to promote and maintain PRISM, which has
the potential to result in more efficient, price improved executions to
the benefit of market participants.
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
Pursuant to Section 19(b)(3)(A)(ii) of the Act,\24\ the Exchange
has designated this proposal as establishing or changing a due, fee, or
other charge imposed by the self-regulatory organization on any person,
whether or not the person is a member of the self-regulatory
organization, which renders the proposed rule change effective upon
filing.
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\24\ 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
[[Page 75161]]
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 rule-comments@sec.gov. Please include
File Number SR-BX-2015-071 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2015-071. 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 Web site (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 Web site 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; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
All submissions should refer to File Number SR-BX-2015-071 and
should be submitted on or before December 22, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Robert W. Errett,
Deputy Secretary.
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\25\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-30386 Filed 11-30-15; 8:45 am]
BILLING CODE 8011-01-P
