Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate the Fees Under Rule 7003(b) and Adopt a New Equities Regulatory Fee, 31906-31909 [2012-12997]

Download as PDF 31906 Federal Register / Vol. 77, No. 104 / Wednesday, May 30, 2012 / Notices 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– NYSEArca–2012–44 and should be submitted on or before June 20, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Elizabeth M. Murphy, Secretary. [FR Doc. 2012–12996 Filed 5–29–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67046; File No. SR–BX– 2012–031] Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate the Fees Under Rule 7003(b) and Adopt a New Equities Regulatory Fee srobinson on DSK4SPTVN1PROD with NOTICES May 23, 2012. 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 16, 2012 NASDAQ OMX BX, Inc. (‘‘BX’’ or ‘‘Exchange’’), filed with the Securities and Exchange Commission (‘‘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 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 17:58 May 29, 2012 Jkt 226001 solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to eliminate the fees under Rule 7003(b) and replace them with a new Equities Regulatory Fee. The Exchange will implement the fee effective June 1, 2012. The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets. * * * * * 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 is proposing to eliminate the fees found under Rule 7003(b) (‘‘Registration Fees’’) and adopt a new Equities Regulatory Fee. Currently, the Exchange assesses a 7003. Regulatory, Registration and Processing member firm the following Registration Fees Fees: $60 fee for each initial Form U4 (a) No change. filed for the registration of a (b) [The following fees will be collected via representative or principal; $40 fee for the Web CRD registration system for the each registration U4 transfer or reregistration of associated persons of licensing of a representative or Exchange members: principal; and $50 for each of the (1) $60 for each initial Form U4 filed for member firm’s registered representatives the registration of a representative or principal. This fee shall be waived for initial and principals for system processing registrations occurring between January 1, (this fee is currently waived). The 2009 and October 1, 2009. Exchange is proposing to eliminate (2) $40 for each registration U4 transfer or these fees and introduce a new Equities re-licensing of a representative or principal. Regulatory Fee (‘‘ERF’’), which is a tierThis fee shall be waived for transfers or relicensings occurring between January 1, 2009 based fee assessed annually at the beginning of the calendar year that and October 1, 2009. (3) $50 annually for each of the member’s covers, in part, the regulatory costs of registered representatives and principals for the Exchange. The ERF uses a member system processing. This fee shall be waived firm’s historical average daily orders for the period from January 1, 2009 until entered on the Exchange over the prior such time as the Exchange submits a calendar year as a measure of the proposed rule change to reinstate it.] member’s expected current year’s The Equities Regulatory Fee is a fee Exchange activity. assessed to member firms to offset the cost Registration Fees, as well as other of regulating member firms’ activity on the Exchange. The fee is assessed on a member membership fees collected by the firm annually based on historical daily Exchange, are intended to cover a average orders entered on the Exchange in portion of the cost of the Exchange’s the prior calendar year by a member firm, regulatory program. The Exchange’s according to the following table: regulatory program consists of, among other things, surveillance, analysis and Annual Pro-rated equities equities reg- investigation of trading occurring on the Daily order tiers regulatory ulatory fee Exchange conducted by the NASDAQ fee (7 months) OMX Group’s Market Watch group. The Exchange also has certain fixed costs > = 50,000 orassociated with running its regulatory ders $4,000 $2,333 program. In addition to the costs > = 1,000 orincurred by the regulatory program ders, but < 50,000 orders 2,500 1,458 effectuated by the Exchange, it also < 1,000 orders 0 0 incurs regulatory costs associated with a regulatory services agreement with the * * * * * Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), whereby II. Self-Regulatory Organization’s FINRA performs certain regulatory Statement of the Purpose of, and functions on behalf of the Exchange for Statutory Basis for, the Proposed Rule a fee.3 Change Exchange rules require that every In its filing with the Commission, the qualified registered representative and Exchange included statements principal of a member firm be registered concerning the purpose of and basis for with, and approved by, the Exchange.4 the proposed rule change and discussed The Exchange believes that Registration any comments it received on the 3 Rule 1001. proposed rule change. The text of these 4 Rule 1030 series. statements may be examined at the PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 E:\FR\FM\30MYN1.SGM 30MYN1 Federal Register / Vol. 77, No. 104 / Wednesday, May 30, 2012 / Notices srobinson on DSK4SPTVN1PROD with NOTICES Fees are no longer the best means to assess regulatory fees because they are based on the number of registered associated persons of Exchange members. The Exchange has found that the number of registered associated persons employed by a member firm is not the most accurate measure of regulatory cost incurred by the Exchange. Specifically, the regulatory effort expended by the Exchange is largely related to the number of orders entered into the Exchange, and is not necessarily commensurate with the total number of registered associated persons employed by a member firm. In this regard, the Exchange notes that member firms must comply with, among other things, the order protection requirements of Regulation NMS,5 which effectively means that an order of a registered representative’s customer will not necessarily be executed on BX, but rather on a venue at which it will receive the best price for its customer. As a consequence of the current Registration Fee structure, a majority of these fees are paid by member firms with comparatively large groups of registered representatives that do not necessarily trade on the Exchange, and therefore are not a significant part of the regulatory expense incurred by the Exchange. Notwithstanding, under the current Registration Fee structure, such member firms are assessed greater regulatory fees as compared to a member firm with few registered representatives, but a large number of orders (and therefore greater regulatory cost) entered into the Exchange. The proposed ERF is designed to more closely allocate the regulatory expenses incurred by the Exchange to the member firms responsible for those expenses. In lieu of assessing fees based on the number of Exchange-registered associated persons, the Exchange is proposing to assess a fee on the number of orders entered into the Exchange by a member firm. The Exchange will assess the ERF annually at the beginning of the calendar year based on a member firm’s historical average daily orders entered into the Exchange over the prior calendar year.6 The Exchange is using a member firm’s average daily orders entered into the Exchange in the prior calendar year as a measure of such 5 17 CFR 242.600, et seq. calculation of a member firm’s average daily orders in any given calendar year is based only on the trading days during the year that it was a member of the Exchange. For example, if a member firm was approved by the Exchange on October 10, 2013, only the trading days from that date through the end of the year would be used for purposes of calculating the firm’s average daily orders, which would be done in early 2014. 6 The VerDate Mar<15>2010 17:58 May 29, 2012 Jkt 226001 firm’s anticipated order activity in the current year. The Exchange believes that using such a measure will more closely tie the member firm’s Exchange order activity in the current year to the projected regulatory costs incurred by the Exchange for such member’s Exchange activity in that same year. The ERF is tiered so that member firms that enter what is essentially an immaterial number of orders into the Exchange will not be assessed an ERF. Member firms that qualify under the mid-level tier of the ERF will be assessed a fee of $2,500 annually, and member firms that qualify for the top tier of the ERF will be assessed $4,000 annually. The Exchange selected the tiers so that an approximately equal number of member firms would fall under each tier. Member firms that fall under the first tier represent a relatively small regulatory cost to the Exchange, the sum of which is covered by other regulatory fees paid by these members. The Exchange allocated the total of fees assessed annually under the current Registration Fees among the remaining two tiers so that the fees collected would closely approximate the Registration Fees assessed annually, with the member firms that fall under the top tier paying a larger fee than those under the mid-level tier. As such, the Exchange believes that the orderbased tier structure of the ERF is a more fair allocation of fees assessed for regulatory expenses. Because the Exchange is implementing the ERF midcalendar year, it will prorate the annual fee for each member firm from June 1, 2012 through December 31, 2012 and use the average daily order for calendar year 2011 for purposes of calculating its ERF obligation for calendar year 2012. As noted above, the Exchange believes that the ERF is a better means of allocating the regulatory costs incurred by the Exchange than the current Registration Fees, and it does not anticipate the ERF will result in an increase or decrease in total fees assessed to cover regulatory costs. Rather, the Exchange believes that the ERF will result in a more equitable allocation of the fees assessed for this purpose. In this regard, the Exchange will evaluate annually, at the close of the calendar year, the amount of revenue collected from the ERF to ensure that the fees collected are commensurate with the projected needs of the Exchange’s regulatory program as represented by the regulatory costs incurred during that year. If the Exchange determines regulatory revenues would exceed regulatory costs, it would adjust the ERF to bring the fees PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 31907 in line with such costs and use the adjusted ERF in the calculation of member firm fees due in the next annual ERF assessment.7 If the Exchange determines that the fees collected under the ERF are commensurate with regulatory costs, the Exchange would not adjust the ERF. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b)(4) of the Act 8 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 it does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange believes that the new ERF is a more equitable allocation of fees as compared to the current Registration Fees, in that the ERF is tied to the use of, and hence regulatory cost incurred by, the Exchange. The Exchange determined to have three tiers under the ERF, with each tier representing a near equal number of Exchange member firms. In selecting the proposed fees under each of the tiers of the ERF, the Exchange first analyzed the distribution of Registration Fees among member firms in comparison to the distribution among member firms under various potential fees under the tiers of the ERF. The Exchange elected to assess the ERF based on the proposed tiers because the Exchange found these tiers to correlate the closest to the regulatory costs incurred by the Exchange, as offset by the other regulatory fees collected. In this regard, the Exchange notes that certain member firms that have historical average daily orders of less than 1,000 are not assessed a fee under proposed Rule 7003(b) because such members [sic] firms represent a much smaller regulatory cost to the Exchange relative to member firms that enter a greater number of orders and the sum of such costs is generally met by other regulatory fees assessed these member firms.9 As the goal of the ERF is to more 7 The Exchange will conduct and complete this assessment in January of each year. If an adjustment to the ERF is warranted, the Exchange would submit a proposed rule change to the Commission to amend the ERF fee schedule. Shortly thereafter, the Exchange would assess the ERF on its member firms based on the new fee and members’ average daily orders in the prior year. If no change in the ERF is warranted, the Exchange would use the existing ERF fee schedule as a basis for assessing the fee. 8 15 U.S.C. 78f(b)(4). 9 For example, BX assesses each member firm an annual membership fee of $3,000 and a monthly trading rights fee of $500. See Rule 7001(a). E:\FR\FM\30MYN1.SGM 30MYN1 srobinson on DSK4SPTVN1PROD with NOTICES 31908 Federal Register / Vol. 77, No. 104 / Wednesday, May 30, 2012 / Notices equitably assess regulatory fees, the Exchange believes that it is not unfairly discriminatory to member firms that fall under the mid-level and top tiers to assess no ERF on certain low-order volume member firms that already pay other regulatory fees adequate to cover the regulatory costs incurred by the Exchange associated with such member firms’ activities in a given year. The Exchange divided the total fees assessed under the Registration Fees among the mid-level and top tiers, with 50,000 average daily orders representing the mid-point between remaining two thirds of member firms falling under these tiers and the top tier paying a greater amount than the mid-level tier based on the relative regulatory cost such member firms represent to the Exchange. The Exchange also believes that the ERF is a reasonable fee as it is assessed on member firms based on their usage of the Exchange, and the Exchange does not believe that the new fee will result in a net increase in fees received compared to the fees currently received through assessment of the Registration Fees. Because the Exchange is more closely tying regulatory fees with regulatory costs and because the Exchange has taken great care in determining the tiers under which member firms will fall under the fee, as described above, the Exchange does not believe that the proposed fee unfairly discriminates between member firms assessed the fee. In addition, because the Exchange is implementing the ERF in the middle of a calendar year, it is pro-rating the fees assessed to reflect the partial calendar year of the ERF’s effectiveness and that member firms may have paid Registration Fees through the first five months of 2012. The ERF will be applied to all member firms equally, based upon the tier under which they fall. The Exchange also believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act 10 because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. As a self-regulatory organization, the Exchange has an obligation to regulate its member firms and their associated persons. The regulatory fees assessed by the Exchange are designed to cover the expenses associated with running an effective regulatory program. Eliminating the Registration Fees and implementing the ERF will not negatively impact the total fees assessed to help cover the regulatory program costs. As discussed, the total fees assessed under Rule 7003(b) will be compared annually to the regulatory costs expected to be incurred during the same calendar year, and the Exchange will make any adjustments to the fee needed to keep it in line with such costs. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes that the new fee is pro-competitive as it will more closely align the fee assessed for the Exchange’s regulatory program with the use of the Exchange, thus allowing member firms to compete for order flow on a level playing field in terms of regulatory fees assessed as a precondition for participation on the Exchange. The Exchange notes a member firm that believes the ERF to be an excessive burden may reduce its order flow to the Exchange, thus reducing the impact of the ERF, or may withdraw as a member of the Exchange altogether. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor 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 11 and subparagraph (f)(2) of Rule 19b–4 thereunder.12 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 to determine whether the proposed rule should be approved or disapproved. 11 15 10 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 17:58 May 29, 2012 12 17 Jkt 226001 PO 00000 U.S.C. 78s(b)(3)(a)(ii). CFR 240.19b–4(f)(2). Frm 00081 Fmt 4703 Sfmt 4703 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 rulecomments@sec.gov. Please include File Number SR–BX–2012–031 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2012–031. 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 such 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 publicly available. All submissions should refer to File Number SR–BX– 2012–031, and should be submitted on or before June 20, 2012. E:\FR\FM\30MYN1.SGM 30MYN1 Federal Register / Vol. 77, No. 104 / Wednesday, May 30, 2012 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Elizabeth M. Murphy, Secretary. [FR Doc. 2012–12997 Filed 5–29–12; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice 7898] Culturally Significant Objects Imported for Exhibition srobinson on DSK4SPTVN1PROD with NOTICES Determinations: ‘‘50th Anniversary Remembrance of the Tragedy at Orly’’ SUMMARY: Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, et seq.; 22 U.S.C. 6501 note, et seq.), Delegation of Authority No. 234 of October 1, 1999, and Delegation of Authority No. 236–3 of August 28, 2000 (and, as appropriate, Delegation of Authority No. 257 of April 15, 2003), I hereby determine that the object to be included in the exhibition ‘‘50th Anniversary Remembrance of the Tragedy at Orly,’’ imported from abroad by the High Museum of Art for temporary exhibition within the United States, is of cultural significance. The object is imported pursuant to a loan agreement with the foreign owners or custodians. I also determine that the exhibition or display of the exhibit object at the High Museum of Art in Atlanta, Georgia from on or about June 2, 2012 to on or about September 9, 2012; and possible additional exhibitions or venues yet to be determined; is in the national interest. I have ordered that Public Notice of these Determinations be published in the Federal Register. FOR FURTHER INFORMATION CONTACT: For further information, including a listing of the exhibit object, contact Ona M. Hahs, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202–632–6473). The mailing address is U.S. Department of State, SA– 5, L/PD, Fifth Floor (Suite 5H03), Washington, DC 20522–0505. Dated: May 23, 2012. J. Adam Ereli, Principal Deputy Assistant Secretary, Bureau of Educational and Cultural Affairs, Department of State. [FR Doc. 2012–13101 Filed 5–29–12; 8:45 am] 13 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:31 May 29, 2012 Dated: May 8, 2012. William J. Burns, Deputy Secretary of State. DEPARTMENT OF STATE [Public Notice 7900] [FR Doc. 2012–13096 Filed 5–29–12; 8:45 am] The Designation of Abdallah Azzam Brigades, Also Known as Abdullah Azzam Brigades, Also Known as Ziyad al-Jarrah Battalions of the Abdullah Azzam Brigades, Also Known as Yusuf al-’Uyayri Battalions of the Abdullah Azzam Brigades as a Foreign Terrorist Organization Pursuant to Section 219 of the Immigration and Nationality Act, as Amended Based upon a review of the Administrative Record assembled in this matter, and in consultation with the Attorney General and the Secretary of the Treasury, I conclude that there is a sufficient factual basis to find that the relevant circumstances described in section 219 of the Immigration and Nationality Act, as amended (hereinafter ‘‘INA’’) (8 U.S.C. 1189), exist with respect to Abdallah Azzam Brigades, and also known as Abdullah Azzam Brigades, also known as Ziyad al-Jarrah Battalions of the Abdullah Azzam Brigades, also known as Yusuf al’Uyayri Battalions of the Abdullah Azzam Brigades. Therefore, I hereby designate the aforementioned organization and its aliases as a foreign terrorist organization pursuant to section 219 of the INA. This determination shall be published in the Federal Register. Dated: May 8, 2012. Thomas R. Nides, Deputy Secretary of State. [FR Doc. 2012–13106 Filed 5–29–12; 8:45 am] BILLING CODE 4710–10–P DEPARTMENT OF STATE [Public Notice 7901] Determination and Certification Under the Arms Export Control Act Pursuant to section 40A of the Arms Export Control Act (22 U.S.C. 2781), and Executive Order 11958, as amended, I hereby determine and certify to the Congress that the following countries are not cooperating fully with United States antiterrorism efforts: Cuba, Eritrea, Iran, Democratic People’s Republic of Korea (DPRK, or North Korea), Syria, Venezuela. This determination and certification shall be transmitted to the Congress and published in the Federal Register. BILLING CODE 4710–05–P Jkt 226001 31909 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 BILLING CODE 4710–10–P DEPARTMENT OF STATE [Public Notice 7899] The Designation of Abdallah Azzam Brigades, Also Known as Abdullah Azzam Brigades, Also Known as Ziyad al-Jarrah Battalions of the Abdullah Azzam Brigades, Also Known as Yusuf al-’Uyayri Battalions of the Abdullah Azzam Brigades, as a Specially Designated Global Terrorist Pursuant to Section 1(b) of Executive Order 13224, as Amended Acting under the authority of and in accordance with section 1(b) of Executive Order 13224 of September 23, 2001, as amended by Executive Order 13268 of July 2, 2002, and Executive Order 13284 of January 23, 2003, I hereby determine that the organization known as Abdallah Azzam Brigades, and also known as Abdullah Azzam Brigades, also known as Ziyad al-Jarrah Battalions of the Abdullah Azzam Brigades, also known as Yusuf al’Uyayri Battalions of the Abdullah Azzam Brigades, committed, or poses a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States. Consistent with the determination in section 10 of Executive Order 13224 that ‘‘prior notice to persons determined to be subject to the Order who might have a constitutional presence in the United States would render ineffectual the blocking and other measures authorized in the Order because of the ability to transfer funds instantaneously,’’ I determine that no prior notice needs to be provided to any person subject to this determination who might have a constitutional presence in the United States, because to do so would render ineffectual the measures authorized in the Order. This notice shall be published in the Federal Register. Dated: May 3, 2012. Thomas R. Nides, Deputy Secretary of State. [FR Doc. 2012–13104 Filed 5–29–12; 8:45 am] BILLING CODE 4710–10–P E:\FR\FM\30MYN1.SGM 30MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 104 (Wednesday, May 30, 2012)]
[Notices]
[Pages 31906-31909]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12997]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67046; File No. SR-BX-2012-031]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate
the Fees Under Rule 7003(b) and Adopt a New Equities Regulatory Fee

May 23, 2012.
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 16, 2012 NASDAQ OMX BX, Inc. (``BX'' or ``Exchange''), filed
with the Securities and Exchange Commission (``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 the
Substance of the Proposed Rule Change

The Exchange proposes to eliminate the fees under Rule 7003(b) and
replace them with a new Equities Regulatory Fee. The Exchange will
implement the fee effective June 1, 2012.
The text of the proposed rule change is below. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *

7003. Regulatory, Registration and Processing Fees

(a) No change.
(b) [The following fees will be collected via the Web CRD
registration system for the registration of associated persons of
Exchange members:
(1) $60 for each initial Form U4 filed for the registration of a
representative or principal. This fee shall be waived for initial
registrations occurring between January 1, 2009 and October 1, 2009.
(2) $40 for each registration U4 transfer or re-licensing of a
representative or principal. This fee shall be waived for transfers
or re-licensings occurring between January 1, 2009 and October 1,
2009.
(3) $50 annually for each of the member's registered
representatives and principals for system processing. This fee shall
be waived for the period from January 1, 2009 until such time as the
Exchange submits a proposed rule change to reinstate it.]
The Equities Regulatory Fee is a fee assessed to member firms to
offset the cost of regulating member firms' activity on the
Exchange. The fee is assessed on a member firm annually based on
historical daily average orders entered on the Exchange in the prior
calendar year by a member firm, according to the following table:

------------------------------------------------------------------------
Pro-rated
Annual equities
Daily order tiers equities regulatory
regulatory fee (7
fee months)
------------------------------------------------------------------------
> = 50,000 orders $4,000 $2,333
> = 1,000 orders, but < 50,000 orders 2,500 1,458
< 1,000 orders 0 0
------------------------------------------------------------------------

* * * * *

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 is proposing to eliminate the fees found under Rule
7003(b) (``Registration Fees'') and adopt a new Equities Regulatory
Fee. Currently, the Exchange assesses a member firm the following
Registration Fees: $60 fee for each initial Form U4 filed for the
registration of a representative or principal; $40 fee for each
registration U4 transfer or re-licensing of a representative or
principal; and $50 for each of the member firm's registered
representatives and principals for system processing (this fee is
currently waived). The Exchange is proposing to eliminate these fees
and introduce a new Equities Regulatory Fee (``ERF''), which is a tier-
based fee assessed annually at the beginning of the calendar year that
covers, in part, the regulatory costs of the Exchange. The ERF uses a
member firm's historical average daily orders entered on the Exchange
over the prior calendar year as a measure of the member's expected
current year's Exchange activity.
Registration Fees, as well as other membership fees collected by
the Exchange, are intended to cover a portion of the cost of the
Exchange's regulatory program. The Exchange's regulatory program
consists of, among other things, surveillance, analysis and
investigation of trading occurring on the Exchange conducted by the
NASDAQ OMX Group's Market Watch group. The Exchange also has certain
fixed costs associated with running its regulatory program. In addition
to the costs incurred by the regulatory program effectuated by the
Exchange, it also incurs regulatory costs associated with a regulatory
services agreement with the Financial Industry Regulatory Authority,
Inc. (``FINRA''), whereby FINRA performs certain regulatory functions
on behalf of the Exchange for a fee.\3\
---------------------------------------------------------------------------

\3\ Rule 1001.
---------------------------------------------------------------------------

Exchange rules require that every qualified registered
representative and principal of a member firm be registered with, and
approved by, the Exchange.\4\ The Exchange believes that Registration

[[Page 31907]]

Fees are no longer the best means to assess regulatory fees because
they are based on the number of registered associated persons of
Exchange members. The Exchange has found that the number of registered
associated persons employed by a member firm is not the most accurate
measure of regulatory cost incurred by the Exchange. Specifically, the
regulatory effort expended by the Exchange is largely related to the
number of orders entered into the Exchange, and is not necessarily
commensurate with the total number of registered associated persons
employed by a member firm. In this regard, the Exchange notes that
member firms must comply with, among other things, the order protection
requirements of Regulation NMS,\5\ which effectively means that an
order of a registered representative's customer will not necessarily be
executed on BX, but rather on a venue at which it will receive the best
price for its customer. As a consequence of the current Registration
Fee structure, a majority of these fees are paid by member firms with
comparatively large groups of registered representatives that do not
necessarily trade on the Exchange, and therefore are not a significant
part of the regulatory expense incurred by the Exchange.
Notwithstanding, under the current Registration Fee structure, such
member firms are assessed greater regulatory fees as compared to a
member firm with few registered representatives, but a large number of
orders (and therefore greater regulatory cost) entered into the
Exchange.
---------------------------------------------------------------------------

\4\ Rule 1030 series.
\5\ 17 CFR 242.600, et seq.
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The proposed ERF is designed to more closely allocate the
regulatory expenses incurred by the Exchange to the member firms
responsible for those expenses. In lieu of assessing fees based on the
number of Exchange-registered associated persons, the Exchange is
proposing to assess a fee on the number of orders entered into the
Exchange by a member firm. The Exchange will assess the ERF annually at
the beginning of the calendar year based on a member firm's historical
average daily orders entered into the Exchange over the prior calendar
year.\6\ The Exchange is using a member firm's average daily orders
entered into the Exchange in the prior calendar year as a measure of
such firm's anticipated order activity in the current year. The
Exchange believes that using such a measure will more closely tie the
member firm's Exchange order activity in the current year to the
projected regulatory costs incurred by the Exchange for such member's
Exchange activity in that same year. The ERF is tiered so that member
firms that enter what is essentially an immaterial number of orders
into the Exchange will not be assessed an ERF. Member firms that
qualify under the mid-level tier of the ERF will be assessed a fee of
$2,500 annually, and member firms that qualify for the top tier of the
ERF will be assessed $4,000 annually. The Exchange selected the tiers
so that an approximately equal number of member firms would fall under
each tier. Member firms that fall under the first tier represent a
relatively small regulatory cost to the Exchange, the sum of which is
covered by other regulatory fees paid by these members. The Exchange
allocated the total of fees assessed annually under the current
Registration Fees among the remaining two tiers so that the fees
collected would closely approximate the Registration Fees assessed
annually, with the member firms that fall under the top tier paying a
larger fee than those under the mid-level tier. As such, the Exchange
believes that the order-based tier structure of the ERF is a more fair
allocation of fees assessed for regulatory expenses. Because the
Exchange is implementing the ERF mid-calendar year, it will prorate the
annual fee for each member firm from June 1, 2012 through December 31,
2012 and use the average daily order for calendar year 2011 for
purposes of calculating its ERF obligation for calendar year 2012.
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\6\ The calculation of a member firm's average daily orders in
any given calendar year is based only on the trading days during the
year that it was a member of the Exchange. For example, if a member
firm was approved by the Exchange on October 10, 2013, only the
trading days from that date through the end of the year would be
used for purposes of calculating the firm's average daily orders,
which would be done in early 2014.
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As noted above, the Exchange believes that the ERF is a better
means of allocating the regulatory costs incurred by the Exchange than
the current Registration Fees, and it does not anticipate the ERF will
result in an increase or decrease in total fees assessed to cover
regulatory costs. Rather, the Exchange believes that the ERF will
result in a more equitable allocation of the fees assessed for this
purpose. In this regard, the Exchange will evaluate annually, at the
close of the calendar year, the amount of revenue collected from the
ERF to ensure that the fees collected are commensurate with the
projected needs of the Exchange's regulatory program as represented by
the regulatory costs incurred during that year. If the Exchange
determines regulatory revenues would exceed regulatory costs, it would
adjust the ERF to bring the fees in line with such costs and use the
adjusted ERF in the calculation of member firm fees due in the next
annual ERF assessment.\7\ If the Exchange determines that the fees
collected under the ERF are commensurate with regulatory costs, the
Exchange would not adjust the ERF.
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\7\ The Exchange will conduct and complete this assessment in
January of each year. If an adjustment to the ERF is warranted, the
Exchange would submit a proposed rule change to the Commission to
amend the ERF fee schedule. Shortly thereafter, the Exchange would
assess the ERF on its member firms based on the new fee and members'
average daily orders in the prior year. If no change in the ERF is
warranted, the Exchange would use the existing ERF fee schedule as a
basis for assessing the fee.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(4) of the Act \8\ 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 it does not unfairly
discriminate between customers, issuers, brokers or dealers. The
Exchange believes that the new ERF is a more equitable allocation of
fees as compared to the current Registration Fees, in that the ERF is
tied to the use of, and hence regulatory cost incurred by, the
Exchange. The Exchange determined to have three tiers under the ERF,
with each tier representing a near equal number of Exchange member
firms. In selecting the proposed fees under each of the tiers of the
ERF, the Exchange first analyzed the distribution of Registration Fees
among member firms in comparison to the distribution among member firms
under various potential fees under the tiers of the ERF. The Exchange
elected to assess the ERF based on the proposed tiers because the
Exchange found these tiers to correlate the closest to the regulatory
costs incurred by the Exchange, as offset by the other regulatory fees
collected. In this regard, the Exchange notes that certain member firms
that have historical average daily orders of less than 1,000 are not
assessed a fee under proposed Rule 7003(b) because such members [sic]
firms represent a much smaller regulatory cost to the Exchange relative
to member firms that enter a greater number of orders and the sum of
such costs is generally met by other regulatory fees assessed these
member firms.\9\ As the goal of the ERF is to more

[[Page 31908]]

equitably assess regulatory fees, the Exchange believes that it is not
unfairly discriminatory to member firms that fall under the mid-level
and top tiers to assess no ERF on certain low-order volume member firms
that already pay other regulatory fees adequate to cover the regulatory
costs incurred by the Exchange associated with such member firms'
activities in a given year. The Exchange divided the total fees
assessed under the Registration Fees among the mid-level and top tiers,
with 50,000 average daily orders representing the mid-point between
remaining two thirds of member firms falling under these tiers and the
top tier paying a greater amount than the mid-level tier based on the
relative regulatory cost such member firms represent to the Exchange.
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\8\ 15 U.S.C. 78f(b)(4).
\9\ For example, BX assesses each member firm an annual
membership fee of $3,000 and a monthly trading rights fee of $500.
See Rule 7001(a).
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The Exchange also believes that the ERF is a reasonable fee as it
is assessed on member firms based on their usage of the Exchange, and
the Exchange does not believe that the new fee will result in a net
increase in fees received compared to the fees currently received
through assessment of the Registration Fees. Because the Exchange is
more closely tying regulatory fees with regulatory costs and because
the Exchange has taken great care in determining the tiers under which
member firms will fall under the fee, as described above, the Exchange
does not believe that the proposed fee unfairly discriminates between
member firms assessed the fee. In addition, because the Exchange is
implementing the ERF in the middle of a calendar year, it is pro-rating
the fees assessed to reflect the partial calendar year of the ERF's
effectiveness and that member firms may have paid Registration Fees
through the first five months of 2012. The ERF will be applied to all
member firms equally, based upon the tier under which they fall.
The Exchange also believes that the proposed rule change is
consistent with the provisions of Section 6(b)(5) of the Act \10\
because it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system.
As a self-regulatory organization, the Exchange has an obligation to
regulate its member firms and their associated persons. The regulatory
fees assessed by the Exchange are designed to cover the expenses
associated with running an effective regulatory program. Eliminating
the Registration Fees and implementing the ERF will not negatively
impact the total fees assessed to help cover the regulatory program
costs. As discussed, the total fees assessed under Rule 7003(b) will be
compared annually to the regulatory costs expected to be incurred
during the same calendar year, and the Exchange will make any
adjustments to the fee needed to keep it in line with such costs.
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\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. To the contrary,
the Exchange believes that the new fee is pro-competitive as it will
more closely align the fee assessed for the Exchange's regulatory
program with the use of the Exchange, thus allowing member firms to
compete for order flow on a level playing field in terms of regulatory
fees assessed as a precondition for participation on the Exchange. The
Exchange notes a member firm that believes the ERF to be an excessive
burden may reduce its order flow to the Exchange, thus reducing the
impact of the ERF, or may withdraw as a member of the Exchange
altogether.

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

Written comments were neither solicited nor 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 \11\ and subparagraph (f)(2) of Rule 19b-4
thereunder.\12\ 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 to determine whether the proposed rule should be approved
or disapproved.
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\11\ 15 U.S.C. 78s(b)(3)(a)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
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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 rule-comments@sec.gov. Please include
File Number SR-BX-2012-031 on the subject line.

Paper Comments

Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2012-031. 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 such 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
publicly available. All submissions should refer to File Number SR-BX-
2012-031, and should be submitted on or before June 20, 2012.

[[Page 31909]]

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-12997 Filed 5-29-12; 8:45 am]
BILLING CODE 8011-01-P

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