Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Transaction and Routing Fees, 40688-40692 [2012-16762]
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40688
Federal Register / Vol. 77, No. 132 / Tuesday, July 10, 2012 / Notices
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. 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–Phlx–
2012–81, and should be submitted on or
before July 31, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–16765 Filed 7–9–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
the Commission’s Public Reference
Room.
[Release No. 34–67339; File No. SR–BX–
2012–043]
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Adopt
Transaction and Routing Fees
July 3, 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 June 26,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Chapter XV, Section 2 entitled ‘‘BX
Options Market—Fees and Rebates’’ to
adopt rebates and fees relating to
various options, including during the
Opening Cross, and establish Routing
Fees.
While the changes proposed herein
are effective upon filing, the Exchange
has designated these changes to be
operative on July 2, 2012.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nasdaqtrader.com/
micro.aspx?id=BXRulefilings, at the
principal office of the Exchange, and at
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 filed and received
approval to operate a new options
market.3 The new market, called
NASDAQ OMX BX Options, or BX
Options, is an all-electronic trading
platform with no physical trading floor.
At this time BX proposes to adopt
various fees and rebates which would be
effective as of July 2, 2012. There are no
fees or rebates for transacting an options
business on BX prior to this date, except
for membership, services and
equipment charges, which may be
applicable, as noted in the 7000 Rules.
BX proposes to amend Chapter XV,
Section 2(1) to adopt rebates and fees for
Customers, BX Options Market Makers 4
and Non-Customers 5 in various
options 6 as follows:
FEES AND REBATES
[Per executed contract]
BX Options
market maker
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Customer
IWM, QQQ, SPY:
Rebate to Add Liquidity ............................................................................................
Fee to Add Liquidity .................................................................................................
Rebate to Remove Liquidity .....................................................................................
Fee to Remove Liquidity ..........................................................................................
BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO:
Rebate to Add Liquidity ............................................................................................
Fee to Add Liquidity .................................................................................................
Rebate to Remove Liquidity .....................................................................................
Fee to Remove Liquidity ..........................................................................................
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 67256
(June 26, 2012) (SR–BX–2012–030).
4 A BX Options Market Makers must be registered
as such pursuant to Chapter VII, Section 2 of the
1 15
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BX Options Rules, and must also remain in good
standing pursuant to Chapter VII, Section 4.
5 A Non-Customer includes a Professional, Firm,
Broker-Dealer and Non-BX Options Market Maker.
6 The Exchange is proposing to adopt fees and
rebates for options overlying iShares Russell 2000
(‘‘IWM’’), PowerShares QQQ Trust (‘‘QQQ’’)®;
Standard and Poor’s Depositary Receipts/SPDRs
PO 00000
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2 $0.15
2 $0.15
3 0.15
3 0.15
0.12
0.00
0.00
0.43
2 0.15
2 0.15
3 0.37
3 0.37
0.32
0.00
0.00
0.43
Non-Customer 1
$0.00
0.43
0.00
0.43
0.00
0.43
0.00
0.43
(‘‘SPY’’), Bank of America Corporation (‘‘BAC’’),
Citigroup, Inc. (‘‘C’’), Cisco Systems, Inc. (‘‘CSCO’’),
Ford Motor Company Common Stock (‘‘F’’), Intel
Corp (‘‘INTC’’), Microsoft Corporation (‘‘MSFT’’), JP
Morgan Chase & Co. (‘‘JPM’’), SPDR Gold Shares
(‘‘GLD’’), iShares Silver Trust (‘‘SLV’’), United
States Oil Fund LP Units (‘‘USO’’) and all other
Penny Pilot Options.
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Federal Register / Vol. 77, No. 132 / Tuesday, July 10, 2012 / Notices
FEES AND REBATES—Continued
[Per executed contract]
BX Options
market maker
Customer
All Other Penny Pilot Options:
Rebate to Add Liquidity ............................................................................................
Fee to Add Liquidity .................................................................................................
Rebate to Remove Liquidity .....................................................................................
Fee to Remove Liquidity ..........................................................................................
2 0.10
2 0.10
3 0.40
3 0.40
0.32
0.00
0.00
0.43
Non-Customer 1
0.00
0.43
0.00
0.43
1A
Non-Customer includes a Professional, Firm, Broker-Dealer and Non-BX Options Market Maker.
Rebate to Add Liquidity will be paid to a Customer or BX Options Market Maker only when the Customer or BX Options Market Maker is
contra to a Non-Customer or BX Options Market Maker.
3 The Fee to Add Liquidity will be assessed to a Customer or BX Options Market Maker only when the Customer or BX Options Market Maker
is contra to a Customer.
2 The
The Exchange would pay the Rebate
to Add Liquidity, in any symbol, to a
Customer or BX Options Market Maker
only when the Customer or BX Options
Market Maker is contra to a NonCustomer or BX Options Market Maker.
The Exchange would not pay a Rebate
to Add Liquidity to a Customer or BX
Options Market Maker if this qualifier is
not met. Similarly, the Exchange would
assess a Fee to Add Liquidity, in any
symbol, to a Customer or BX Options
Market Maker only when the Customer
or BX Options Market Maker is contra
to a Customer. The Exchange would not
assess a Fee to Add Liquidity to a
Customer or BX Options Market Maker
if this qualifier is not met.
The Exchange also proposes to amend
Chapter XV, Section 2(2) to adopt
rebates and fees for the Opening Cross
to state that Customer orders will
receive the Rebate to Remove Liquidity
during the Exchange’s Opening Cross,
unless the contra-side is also a Customer
(in which case no Fee to Remove
Exchange
Liquidity is assessed and no Rebate to
Remove Liquidity is received).
Professionals, Firms, Broker-Dealers and
Non-BX Options Market Makers will be
assessed the Fee to Remove Liquidity
during the Exchange’s Opening Cross.
Finally, the Exchange proposes to
amend Chapter XV, Section 2(4) to
adopt fees for routing contracts to
markets other the BX Options market as
follows:
Customer
BATS (Penny Pilot) ....................................................................................................
BOX ...........................................................................................................................
CBOE .........................................................................................................................
CBOE orders greater than 99 contracts in ETFs, ETNs and HOLDRS) ..................
C2 ..............................................................................................................................
ISE (Standard) ...........................................................................................................
ISE (Select Symbols) * ...............................................................................................
NOM ...........................................................................................................................
NYSE Arca (Penny Pilot) ...........................................................................................
NYSE Amex ...............................................................................................................
PHLX (for all options than PHLX Select Symbols) ...................................................
PHLX Select Symbols ** ...........................................................................................
Firm/Market
Maker/BrokerDealer
$0.55
0.11
0.11
0.29
0.55
0.11
0.31
0.11
0.55
0.11
0.11
0.50
$0.55
0.55
0.55
N/A
0.55
0.55
0.55
0.55
0.55
0.55
0.55
0.55
Professional
$0.55
0.11
0.31
0.31
0.55
0.29
0.39
0.55
0.55
0.31
0.36
0.55
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* These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing Liquidity in Select Symbols. See ISE’s Schedule of Fees for the complete list of symbols that are subject to these fees.
** These fees are applicable to orders routed to PHLX that are subject to Rebates and Fees for Adding and Removing Liquidity in Select Symbols. See PHLX’s Pricing Schedule for the complete list of symbols that are subject to these fees.
The Exchange believes that the
proposed fees and rebates are
competitive and will encourage BX
members to transact business on the
Exchange. Specifically, the Exchange
believes that the proposed rebates will
incentivize BX members to direct orders
to the Exchange, resulting in greater
liquidity, which benefits all market
participants. The proposed fees would
enable the Exchange to fund the various
proposed rebates and incentivize market
participants to route orders to the
Exchange. The Routing Fees are
proposed to recoup costs that the
Exchange incurs for routing and
executing certain orders on away
markets.
2. Statutory Basis
BX believes that the proposed rule
changes are consistent with the
provisions of Section 6 of the Act,7 in
general, and with Section 6(b)(4) of the
Act,8 in particular, in that they provide
for the equitable allocation of reasonable
dues, fees and other charges among
members and issuers and other persons
using any facility or system which BX
operates or controls.
7 15
8 15
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PO 00000
Transaction Charges
The Exchange believes that its
proposal to assess different fees and
rebates for IWM, QQQ and SPY as
compared to BAC, C, CSCO, F, INTC,
MSFT, JPM, GLD, SLV, USO and also
different fees and rebates for all other
Penny Pilot Options is reasonable given
the fact that certain symbols such as
IWM, QQQ and SPY, as well as other
symbols which the Exchange
differentiates, are highly liquid Penny
Pilot Options as compared to other
Penny Pilot Options. Additionally, other
U.S.C. 78f.
U.S.C. 78f(b)(4).
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options exchanges differentiate pricing
by security today.9
The Exchange believes that its
proposal to assess different fees and
rebates for IWM, QQQ and SPY as
compared to BAC, C, CSCO, F, INTC,
MSFT, JPM, GLD, SLV, USO and also
different fees and rebates for all other
Penny Pilot Options is equitable and not
unfairly discriminatory as described
hereafter. With respect to the proposed
Rebate to Add Liquidity 10 and Rebate to
Remove Liquidity 11 for IWM, QQQ,
SPY, BAC, C, CSCO, F, INTC, MSFT,
JPM, GLD, SLV, USO and all other
Penny Pilot Options, the Exchange
believes that these rebates will attract
Customer order flow to the Exchange to
the benefit of all market participants
through increased liquidity. Further, the
Exchange also believes it is reasonable,
equitable and not unfairly
discriminatory to only offer the Rebate
to Remove Liquidity to Customers and
not other market participants as an
incentive to attract Customer order flow
to the Exchange. It is an important
Exchange function to provide an
opportunity to all market participants to
trade against Customer orders.
With respect to the Rebate to Add
Liquidity, the Exchange is only paying
the Rebate to Add Liquidity to a
Customer or BX Options Market Maker
when either the Customer or a BX
Options Market Maker is contra to a
Non-Customer 12 or BX Options Market
Maker. While the Customer and BX
Options Market Maker are unaware at
the time they enter a transaction
whether they would earn a rebate, the
Exchange believes that the possibility of
earning a $0.15 or $0.10 per contract
Rebate to Add Liquidity, depending on
the security, when trading against a
Non-Customer (Professional, Firm,
9 See NASDAQ OMX PHLX LLC’s (‘‘Phlx’’)
Pricing Schedule, which has different pricing for its
Select Symbols and different pricing for other
Multiply Listed Options. See also the NASDAQ
Options Market LLC (‘‘NOM’’) at Chapter XV,
Section 2(1), which distinguishes pricing for NDX
and MNX. See also the International Securities
Exchange LLC’s (‘‘ISE’’) Fee Schedule, which
distinguishes pricing for Special Non-Select Penny
Pilot Symbols. See also the Chicago Board Options
Exchange, Incorporated’s (‘‘CBOE’’) Fees Schedule,
which distinguishes index products.
10 The Exchange proposes a Rebate to Add
Liquidity for IWM, QQQ, SPY, BAC, C, CSCO, F,
INTC, MSFT, JPM, GLD, SLV, USO of $0.15 per
contract and a Rebate to Add Liquidity for all other
Penny Pilot Options of $0.10 per contact.
11 The Exchange proposes a Rebate to Remove
Liquidity for IWM, QQQ, SPY, of $0.12 per contract
and a Rebate to Remove Liquidity for BAC, C,
CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO and
all other Penny Pilot Options of $0.32 per contact.
12 For purposes of these fees and rebates in
Chapter XV, Section 2(1), a Non-Customer includes
a Professional, Firm, Broker-Dealer and Non-BX
Options Market Maker.
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Broker-Dealer or Non-BX Options
Market Maker) or BX Options Market
Maker should incentivize these critical
market participants to add liquidity.
Increased liquidity benefits all market
participants. The Exchange believes that
offering both Customers and BX Options
Market Makers the opportunity to
receive a Rebate to Add Liquidity is
reasonable because these market
participants differ from other market
participants. Customer order flow
benefits all market participants by
improving liquidity, the quality of order
interaction and executions at the
Exchange. BX Options Market Makers
have obligations to the market and
regulatory requirements,13 which
normally do not apply to other market
participants. A BX Options Market
Maker has the obligation to make
continuous markets, engage in course of
dealings reasonably calculated to
contribute to the maintenance of a fair
and orderly market, and not make bids
or offers or enter into transactions that
are inconsistent with course of dealings.
The proposed differentiation as between
Customers and BX Options Market
Makers and other market participants
recognizes the differing contributions
made to the liquidity and trading
environment on the Exchange by
Customers and BX Options Market
Makers, as well as the differing mix of
orders entered. Further, as noted herein,
the Customer and BX Options Market
Maker are unaware at the time the order
is entered whether they would receive
a $0.15 or $0.10 per contract Rebate to
Add Liquidity, depending on the
security, because they are unaware of
the identity of the contra-party, which
would determine whether they receive a
rebate. The Exchange believes that the
Customer and BX Options Market Maker
rebate is equitable and not unfairly
discriminatory because the Rebate to
Add Liquidity, which is only being
offered to Customers and BX Options
Market Makers, would reward these
participants for posting liquidity when
they are contra to a Non-Customer
(Professionals, Firms, Broker-Dealer or
13 Pursuant to Chapter VII (Market Participants),
Section 5 (Obligations of Market Makers), in
registering as a Market Maker, an Options
Participant commits himself to various obligations.
Transactions of a Market Maker in its market
making capacity must constitute a course of
dealings reasonably calculated to contribute to the
maintenance of a fair and orderly market, and
Market Makers should not make bids or offers or
enter into transactions that are inconsistent with
such course of dealings. Further, all Market Makers
are designated as specialists on BX for all purposes
under the Act or rules thereunder. See Chapter VII,
Section 5.
PO 00000
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Fmt 4703
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Non-BX Options Market Makers) or a
BX Options Market Maker.
The Exchange believes that offering
certain market participants a Rebate to
Add Liquidity of $0.15 per contract for
IWM, QQQ, SPY, BAC, C, CSCO, F,
INTC, MSFT, JPM, GLD, SLV, USO and
a Rebate to Add Liquidity of $0.10 per
contract for all other Penny Pilot
Options is reasonable, equitable and not
unfairly discriminatory because options
overlying IWM, QQQ, SPY, BAC, C,
CSCO, F, INTC, MSFT, JPM, GLD, SLV,
USO are more liquid, with tighter bid/
ask differentials and therefore the
Exchange believes a higher Rebate to
Add Liquidity is required to incentivize
Customers or BX Options Market
Makers to post liquidity for the
opportunity to obtain a rebate. The
Exchange believes that offering a $0.32
per contract Rebate to Remove Liquidity
for options overlying BAC, C, CSCO, F,
INTC, MSFT, JPM, GLD, SLV, USO and
all other Penny Pilot Options is
reasonable, equitable and not unfairly
discriminatory because the Exchange
desires to incentivize participants to
transact Customer orders on the
Exchange and obtain this rebate. The
Exchange believes that this rebate will
incentivize members to bring order flow
and increase the liquidity on the
Exchange to the benefit of all market
participants. The Exchange believes that
offering Customers a $0.12 per contract
Rebate to Remove Liquidity for IWM,
QQQ and SPY is reasonable, equitable
and not unfairly discriminatory because
the Exchange believes that the rebate
will incentivize market participants to
transact business on the Exchange and
the opportunity to receive the rebate
will bring liquidity to BX to the benefit
of all market participants.
The Exchange’s proposal to create
Fees to Add Liquidity, in certain
circumstances, and Fees to Remove
Liquidity for IWM, QQQ, SPY, BAC, C,
CSCO, F, INTC, MSFT, JPM, GLD, SLV,
USO and all other Penny Pilot Options
is reasonable because the fees would
enable the Exchange to reward
Customers and in some cases BX
Options Market Makers that add or
remove liquidity with rebates. The
advantage of increased Customer order
flow benefits all market participants. In
addition, the proposed Fees to Add and
Remove Liquidity are less than the rates
assessed by other exchanges for similar
fees.14 The Exchange’s proposal to only
assess the Fee to Add Liquidity to a
Customer or BX Options Market Maker
14 See BATS Exchange, Inc.’s Fee Schedule. See
also NOM Chapter XV, Section 2 (the Penny Pilot
Fees to Remove Liquidity are $0.45 per contract for
all market participants).
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Federal Register / Vol. 77, No. 132 / Tuesday, July 10, 2012 / Notices
when the Customer or BX Options
Market Maker is contra to a Customer is
reasonable, equitable and not unfairly
discriminatory because the Exchange
would only pay a Rebate to Remove
Liquidity to a Customer and this fee
enables the Exchange to reward
Customers by offering a rebate. As
previously, mentioned, attracting
Customer order flow to the Exchange
benefits all market participants. Also,
BX Options Market Makers have
burdens, as previously noted, that do
not apply to other market participants.
All Non-Customer market participants
(Professionals, Firms, Broker-Dealers
and Non-BX Options Market Makers)
would be assessed the same Fee to Add
Liquidity on every transaction. The
Exchange’s proposal to create Fees to
Add Liquidity and Fees to Remove
Liquidity for IWM, QQQ, SPY, BAC, C,
CSCO, F, INTC, MSFT, JPM, GLD, SLV,
USO and all other Penny Pilot Options
is equitable and not unfairly
discriminatory for the reasons which
follow hereafter. The Exchange is not
assessing Customers a Fee to Remove
Liquidity for any security. The
Exchange believes that attracting
Customer orders to BX benefits all
market participants and it is an
important Exchange function to provide
an opportunity to all market
participants to trade against Customer
orders. The Exchange is also uniformly
assessing all other market participants
(BX Options Market Makers,
Professionals, Firms, Broker-Dealers and
Non-BX Options Market Makers) the
same $0.43 per contract Fee to Remove
Liquidity.
The Exchange is assessing Customers
and BX Options Market Makers lower
Fees to Add Liquidity, and only when
contra a Customer, as compared to other
market participants because as
previously stated Customers and BX
Options Market Makers make different
contributions to the liquidity and
trading environment on the Exchange as
compared to other market participants.
Non-Customer participants do not bring
the unique benefits that Customer order
flow provides the market nor do these
participants have the obligations that
were described herein for BX Options
Market Makers. The Exchange is
uniformly assessing all other market
participants (Professionals, Firms,
Broker-Dealers and Non-BX Options
Market Makers) a $0.43 per contract Fee
to Add Liquidity, similar to the Fee to
Remove Liquidity.
The Exchange’s proposal to pay
Customers a Rebate to Remove Liquidity
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during the Opening Cross 15 except
when contra to a Customer, while all
market participants except the
Customer, the Non-Customer and BX
Options Market Maker are assessed the
Fee to Remove Liquidity, is reasonable
because the Exchange seeks to continue
to incentivize market participants to
transact orders at the Exchange during
the Opening Cross. Further, the
Exchange’s proposal to assess NonCustomers and BX Options Market
Makers a Fee to Remove Liquidity
enables the Exchange to reward those
Customer orders that remove liquidity.
While the Customer is unaware at the
time the transaction is entered whether
a rebate would be earned, the Exchange
believes that the possibility of earning a
Rebate to Remove Liquidity when
trading against a Non-Customer should
incentivize Customer order flow to the
benefit of all market participants.
The Exchange’s proposal to pay a
Customer a Rebate to Remove Liquidity
during the Opening Cross except when
contra to a Customer, while all market
participants except the Customer, the
Non-Customer and BX Options Market
Maker are assessed the Fee to Remove
Liquidity, is equitable and not unfairly
discriminatory because as mentioned
previously Customer order flow benefits
all market participants and similar to
other rebates proposed herein, the
Customer traditionally pays lower fees.
Customer order flow benefits all market
participants by improving liquidity, the
quality of order interaction and
executions at the Exchange. Also, the
Exchange is proposing to assess a Fee to
Remove Liquidity on all market
participants uniformly, other than a
Customer, during the Opening Cross to
fund the proposed rebate. This is similar
to a rebate and fee offered in the
Opening Cross on the NOM.16
The Exchange’s proposed requirement
that a BX Options Market Maker must
be registered as a BX Options Market
Maker in at least one security to qualify
for the fees and rebates applicable to a
BX Options Market Maker in Chapter
XV, Section 2 is reasonable, equitable
and not unfairly discriminatory because
the Exchange desires to incentivize BX
Options Market Makers to be actively
engaged in market making to qualify for
the fees and rebates proposed herein.
Also, NOM has the same requirement
for its transaction fees in Chapter XV,
15 The Opening Cross is the process for
determining the price at which orders shall be
executed at the open and for executing those orders.
16 See The NASDAQ Stock Market, LLC Rules at
Chapter XV, Section 2.
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40691
Section 2 of the NOM Rules.17 The
Exchange would uniformly apply this
standard in paying rebates and assessing
fees to BX Options Market Makers.
Routing Fees
The proposed Routing Fees are
reasonable because they seek to recoup
costs that are incurred by the Exchange
when routing Customer, Firm, Market
Maker, Broker-Dealer and Professional
orders to away markets on behalf of
members. Each destination market’s
transaction charge varies and there is a
standard clearing charge for each
transaction incurred by the Exchange
along with other administrative and
technical costs 18 that are incurred by
the Exchange. The Exchange believes
that the proposed Routing Fees would
enable the Exchange to recover the
remove fees assessed to each market
participant by the away market, plus
clearing and other administrative and
technical fees 19 for the execution of
orders routed to BX and executed on an
away market.
The Exchange also believes that the
proposed Routing Fees are equitable and
not unfairly discriminatory because they
would be uniformly applied to all
market participant orders that are routed
to an away market and to cover the
respective cost to route the order. The
Exchange applied a similar
methodology in calculating the Routing
Fees for each market participant by
adding not more than a $0.11 per
contract fee to the away market’s
remove fee to determine the Routing
Fees.
The Exchange operates in a highly
competitive market comprised of ten
U.S. options exchanges in which
sophisticated and knowledgeable
market participants can and do send
order flow to competing exchanges if
they deem fee levels at a particular
exchange to be excessive. The Exchange
believes that the proposed fee and
rebate scheme is competitive and
17 See Securities Exchange Act Release No. 62543
(July 21, 2010), 75 FR 44037 (July 27, 2010) (SR–
NASDAQ–2012–075).
18 The Exchange utilizes the Nasdaq Options
Services LLC (‘‘NOS’’), a member of the Exchange
and the Exchange’s exclusive order router to route
orders in options listed and open for trading on the
BX to destination markets. See Securities Exchange
Act Release No. 67256 (June 26, 2012) (SR–BX–
2012–030).
19 The Exchange assesses the away market’s
remove fee plus a $0.06 clearing cost and another
$0.05 per contract associated with administrative
and technical costs associated with operating NOS.
Each time NOS routes to away markets NOS is
charged a $0.06 clearing fee and, in the case of
certain exchanges, a transaction fee is also charged
in certain symbols, which fees are passed through
to the Exchange. There are also membership fees at
away markets, and technical costs associated with
routing.
E:\FR\FM\10JYN1.SGM
10JYN1
40692
Federal Register / Vol. 77, No. 132 / Tuesday, July 10, 2012 / Notices
similar to other fees and rebates in place
on other exchanges. The Exchange
believes that this competitive
marketplace materially impacts the fees
and rebates present on the Exchange
today and substantially influences the
proposal set forth above.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
BX 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. To the contrary, BX
has designed its fees and rebates to
compete effectively for the execution
and routing of options contracts and to
reduce the overall cost to investors of
options trading. The Exchange believes
that the proposed fee/rebate pricing
structure would attract liquidity to and
benefit order interaction at the Exchange
to the benefit of all 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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.20 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.
mstockstill on DSK4VPTVN1PROD with NOTICES
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
20 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Mar<15>2010
16:28 Jul 09, 2012
Jkt 226001
• Send an email to rule-comments@
DEPARTMENT OF STATE
sec.gov. Please include File Number SR–
[Public Notice 7947]
BX–2012–043 on the subject line.
30-Day Notice of Proposed Information
Paper Comments
Collection: DS–158, Contact
Information and Work History for
• Send paper comments in triplicate
Nonimmigrant Visa Applicant
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
ACTION: Notice of request for public
100 F Street NE., Washington, DC
comment and submission to OMB of
20549–1090.
proposed collection of information.
All submissions should refer to File
SUMMARY: The Department of State has
Number SR–BX–2012–043. This file
submitted the following information
number should be included on the
subject line if email is used. To help the collection request to the Office of
Management and Budget (OMB) for
Commission process and review your
approval in accordance with the
comments more efficiently, please use
Paperwork Reduction Act of 1995.
only one method. The Commission will
• Title of Information Collection:
post all comments on the Commission’s Contact Information and Work History
Internet Web site (https://www.sec.gov/
for Nonimmigrant Visa Applicant.
rules/sro.shtml). Copies of the
• OMB Control Number: 1405–0144.
submission, all subsequent
• Type of Request: Extension of a
amendments, all written statements
Currently Approved Collection.
with respect to the proposed rule
• Originating Office: CA/VO/L/R.
change that are filed with the
• Form Number: DS–158.
Commission, and all written
• Respondents: Nonimmigrant Visa
Applicants.
communications relating to the
• Estimated Number of Respondents:
proposed rule change between the
Commission and any person, other than 10,000.
• Estimated Number of Responses:
those that may be withheld from the
10,000.
public in accordance with the
• Average Hours per Response: 1
provisions of 5 U.S.C. 552, will be
hour.
available for Web site viewing and
• Total Estimated Burden: 10,000
printing in the Commission’s Public
hours.
Reference Room, 100 F Street NE.,
• Frequency: One Time per visa
Washington, DC 20549, on official
application.
business days between the hours of 10
• Obligation to Respond: Required to
a.m. and 3 p.m. Copies of the filing also Obtain or Retain a Benefit.
will be available for inspection and
DATES: Submit comments to the Office
copying at the principal office of the
of Management and Budget (OMB) for
Exchange. All comments received will
up to 30 days from July 10, 2012.
be posted without change; the
ADDRESSES: Direct comments to the
Commission does not edit personal
Department of State Desk Officer in the
identifying information from
Office of Information and Regulatory
submissions. You should submit only
Affairs at the Office of Management and
information that you wish to make
Budget (OMB). You may submit
available publicly. All submissions
comments by the following methods:
should refer to File Number SR–BX–
• Email:
2012–043 and should be submitted on
oira_submission@omb.eop.gov. You
or before July 31, 2012.
must include the DS form number,
information collection title, and OMB
For the Commission, by the Division of
control number in the subject line of
Trading and Markets, pursuant to delegated
your message.
authority.21
• Fax: 202–395–5806. Attention: Desk
Kevin M. O’Neill,
Officer for Department of State.
Deputy Secretary.
FOR FURTHER INFORMATION CONTACT: You
[FR Doc. 2012–16762 Filed 7–9–12; 8:45 am]
may obtain copies of the proposed
BILLING CODE 8011–01–P
information collection and supporting
documents from Sydney Taylor, Visa
Services, U.S. Department of State, 2401
E Street NW., L–603, Washington, DC
20520–0106, who may be reached on
(202) 663–3721.
SUPPLEMENTARY INFORMATION: We are
soliciting public comments to permit
21 17 CFR 200.30–3(a)(12).
the Department to:
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
E:\FR\FM\10JYN1.SGM
10JYN1
]]>Agencies
[Federal Register Volume 77, Number 132 (Tuesday, July 10, 2012)]
[Notices]
[Pages 40688-40692]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16762]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67339; File No. SR-BX-2012-043]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
Transaction and Routing Fees
July 3, 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 June 26, 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend Chapter XV, Section 2 entitled ``BX
Options Market--Fees and Rebates'' to adopt rebates and fees relating
to various options, including during the Opening Cross, and establish
Routing Fees.
While the changes proposed herein are effective upon filing, the
Exchange has designated these changes to be operative on July 2, 2012.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nasdaqtrader.com/micro.aspx?id=BXRulefilings, 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 filed and received approval to operate a new options
market.\3\ The new market, called NASDAQ OMX BX Options, or BX Options,
is an all-electronic trading platform with no physical trading floor.
At this time BX proposes to adopt various fees and rebates which would
be effective as of July 2, 2012. There are no fees or rebates for
transacting an options business on BX prior to this date, except for
membership, services and equipment charges, which may be applicable, as
noted in the 7000 Rules.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 67256 (June 26,
2012) (SR-BX-2012-030).
---------------------------------------------------------------------------
BX proposes to amend Chapter XV, Section 2(1) to adopt rebates and
fees for Customers, BX Options Market Makers \4\ and Non-Customers \5\
in various options \6\ as follows:
---------------------------------------------------------------------------
\4\ A BX Options Market Makers must be registered as such
pursuant to Chapter VII, Section 2 of the BX Options Rules, and must
also remain in good standing pursuant to Chapter VII, Section 4.
\5\ A Non-Customer includes a Professional, Firm, Broker-Dealer
and Non-BX Options Market Maker.
\6\ The Exchange is proposing to adopt fees and rebates for
options overlying iShares Russell 2000 (``IWM''), PowerShares QQQ
Trust (``QQQ'')[supreg]; Standard and Poor's Depositary Receipts/
SPDRs (``SPY''), Bank of America Corporation (``BAC''), Citigroup,
Inc. (``C''), Cisco Systems, Inc. (``CSCO''), Ford Motor Company
Common Stock (``F''), Intel Corp (``INTC''), Microsoft Corporation
(``MSFT''), JP Morgan Chase & Co. (``JPM''), SPDR Gold Shares
(``GLD''), iShares Silver Trust (``SLV''), United States Oil Fund LP
Units (``USO'') and all other Penny Pilot Options.
Fees and Rebates
[Per executed contract]
----------------------------------------------------------------------------------------------------------------
BX Options
Customer market maker Non-Customer \1\
----------------------------------------------------------------------------------------------------------------
IWM, QQQ, SPY:
Rebate to Add Liquidity............................... \2\ $0.15 \2\ $0.15 $0.00
Fee to Add Liquidity.................................. \3\ 0.15 \3\ 0.15 0.43
Rebate to Remove Liquidity............................ 0.12 0.00 0.00
Fee to Remove Liquidity............................... 0.00 0.43 0.43
BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO:
Rebate to Add Liquidity............................... \2\ 0.15 \2\ 0.15 0.00
Fee to Add Liquidity.................................. \3\ 0.37 \3\ 0.37 0.43
Rebate to Remove Liquidity............................ 0.32 0.00 0.00
Fee to Remove Liquidity............................... 0.00 0.43 0.43
[[Page 40689]]
All Other Penny Pilot Options:
Rebate to Add Liquidity............................... \2\ 0.10 \2\ 0.10 0.00
Fee to Add Liquidity.................................. \3\ 0.40 \3\ 0.40 0.43
Rebate to Remove Liquidity............................ 0.32 0.00 0.00
Fee to Remove Liquidity............................... 0.00 0.43 0.43
----------------------------------------------------------------------------------------------------------------
\1\ A Non-Customer includes a Professional, Firm, Broker-Dealer and Non-BX Options Market Maker.
\2\ The Rebate to Add Liquidity will be paid to a Customer or BX Options Market Maker only when the Customer or
BX Options Market Maker is contra to a Non-Customer or BX Options Market Maker.
\3\ The Fee to Add Liquidity will be assessed to a Customer or BX Options Market Maker only when the Customer or
BX Options Market Maker is contra to a Customer.
The Exchange would pay the Rebate to Add Liquidity, in any symbol,
to a Customer or BX Options Market Maker only when the Customer or BX
Options Market Maker is contra to a Non-Customer or BX Options Market
Maker. The Exchange would not pay a Rebate to Add Liquidity to a
Customer or BX Options Market Maker if this qualifier is not met.
Similarly, the Exchange would assess a Fee to Add Liquidity, in any
symbol, to a Customer or BX Options Market Maker only when the Customer
or BX Options Market Maker is contra to a Customer. The Exchange would
not assess a Fee to Add Liquidity to a Customer or BX Options Market
Maker if this qualifier is not met.
The Exchange also proposes to amend Chapter XV, Section 2(2) to
adopt rebates and fees for the Opening Cross to state that Customer
orders will receive the Rebate to Remove Liquidity during the
Exchange's Opening Cross, unless the contra-side is also a Customer (in
which case no Fee to Remove Liquidity is assessed and no Rebate to
Remove Liquidity is received). Professionals, Firms, Broker-Dealers and
Non-BX Options Market Makers will be assessed the Fee to Remove
Liquidity during the Exchange's Opening Cross.
Finally, the Exchange proposes to amend Chapter XV, Section 2(4) to
adopt fees for routing contracts to markets other the BX Options market
as follows:
----------------------------------------------------------------------------------------------------------------
Firm/Market Maker/
Exchange Customer Broker-Dealer Professional
----------------------------------------------------------------------------------------------------------------
BATS (Penny Pilot)..................................... $0.55 $0.55 $0.55
BOX.................................................... 0.11 0.55 0.11
CBOE................................................... 0.11 0.55 0.31
CBOE orders greater than 99 contracts in ETFs, ETNs and 0.29 N/A 0.31
HOLDRS)...............................................
C2..................................................... 0.55 0.55 0.55
ISE (Standard)......................................... 0.11 0.55 0.29
ISE (Select Symbols) *................................. 0.31 0.55 0.39
NOM.................................................... 0.11 0.55 0.55
NYSE Arca (Penny Pilot)................................ 0.55 0.55 0.55
NYSE Amex.............................................. 0.11 0.55 0.31
PHLX (for all options than PHLX Select Symbols)........ 0.11 0.55 0.36
PHLX Select Symbols **................................. 0.50 0.55 0.55
----------------------------------------------------------------------------------------------------------------
* These fees are applicable to orders routed to ISE that are subject to Rebates and Fees for Adding and Removing
Liquidity in Select Symbols. See ISE's Schedule of Fees for the complete list of symbols that are subject to
these fees.
** These fees are applicable to orders routed to PHLX that are subject to Rebates and Fees for Adding and
Removing Liquidity in Select Symbols. See PHLX's Pricing Schedule for the complete list of symbols that are
subject to these fees.
The Exchange believes that the proposed fees and rebates are
competitive and will encourage BX members to transact business on the
Exchange. Specifically, the Exchange believes that the proposed rebates
will incentivize BX members to direct orders to the Exchange, resulting
in greater liquidity, which benefits all market participants. The
proposed fees would enable the Exchange to fund the various proposed
rebates and incentivize market participants to route orders to the
Exchange. The Routing Fees are proposed to recoup costs that the
Exchange incurs for routing and executing certain orders on away
markets.
2. Statutory Basis
BX believes that the proposed rule changes are consistent with the
provisions of Section 6 of the Act,\7\ in general, and with Section
6(b)(4) of the Act,\8\ in particular, in that they provide for the
equitable allocation of reasonable dues, fees and other charges among
members and issuers and other persons using any facility or system
which BX operates or controls.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Transaction Charges
The Exchange believes that its proposal to assess different fees
and rebates for IWM, QQQ and SPY as compared to BAC, C, CSCO, F, INTC,
MSFT, JPM, GLD, SLV, USO and also different fees and rebates for all
other Penny Pilot Options is reasonable given the fact that certain
symbols such as IWM, QQQ and SPY, as well as other symbols which the
Exchange differentiates, are highly liquid Penny Pilot Options as
compared to other Penny Pilot Options. Additionally, other
[[Page 40690]]
options exchanges differentiate pricing by security today.\9\
---------------------------------------------------------------------------
\9\ See NASDAQ OMX PHLX LLC's (``Phlx'') Pricing Schedule, which
has different pricing for its Select Symbols and different pricing
for other Multiply Listed Options. See also the NASDAQ Options
Market LLC (``NOM'') at Chapter XV, Section 2(1), which
distinguishes pricing for NDX and MNX. See also the International
Securities Exchange LLC's (``ISE'') Fee Schedule, which
distinguishes pricing for Special Non-Select Penny Pilot Symbols.
See also the Chicago Board Options Exchange, Incorporated's
(``CBOE'') Fees Schedule, which distinguishes index products.
---------------------------------------------------------------------------
The Exchange believes that its proposal to assess different fees
and rebates for IWM, QQQ and SPY as compared to BAC, C, CSCO, F, INTC,
MSFT, JPM, GLD, SLV, USO and also different fees and rebates for all
other Penny Pilot Options is equitable and not unfairly discriminatory
as described hereafter. With respect to the proposed Rebate to Add
Liquidity \10\ and Rebate to Remove Liquidity \11\ for IWM, QQQ, SPY,
BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO and all other Penny
Pilot Options, the Exchange believes that these rebates will attract
Customer order flow to the Exchange to the benefit of all market
participants through increased liquidity. Further, the Exchange also
believes it is reasonable, equitable and not unfairly discriminatory to
only offer the Rebate to Remove Liquidity to Customers and not other
market participants as an incentive to attract Customer order flow to
the Exchange. It is an important Exchange function to provide an
opportunity to all market participants to trade against Customer
orders.
---------------------------------------------------------------------------
\10\ The Exchange proposes a Rebate to Add Liquidity for IWM,
QQQ, SPY, BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO of $0.15
per contract and a Rebate to Add Liquidity for all other Penny Pilot
Options of $0.10 per contact.
\11\ The Exchange proposes a Rebate to Remove Liquidity for IWM,
QQQ, SPY, of $0.12 per contract and a Rebate to Remove Liquidity for
BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO and all other Penny
Pilot Options of $0.32 per contact.
---------------------------------------------------------------------------
With respect to the Rebate to Add Liquidity, the Exchange is only
paying the Rebate to Add Liquidity to a Customer or BX Options Market
Maker when either the Customer or a BX Options Market Maker is contra
to a Non-Customer \12\ or BX Options Market Maker. While the Customer
and BX Options Market Maker are unaware at the time they enter a
transaction whether they would earn a rebate, the Exchange believes
that the possibility of earning a $0.15 or $0.10 per contract Rebate to
Add Liquidity, depending on the security, when trading against a Non-
Customer (Professional, Firm, Broker-Dealer or Non-BX Options Market
Maker) or BX Options Market Maker should incentivize these critical
market participants to add liquidity. Increased liquidity benefits all
market participants. The Exchange believes that offering both Customers
and BX Options Market Makers the opportunity to receive a Rebate to Add
Liquidity is reasonable because these market participants differ from
other market participants. Customer order flow benefits all market
participants by improving liquidity, the quality of order interaction
and executions at the Exchange. BX Options Market Makers have
obligations to the market and regulatory requirements,\13\ which
normally do not apply to other market participants. A BX Options Market
Maker has the obligation to make continuous markets, engage in course
of dealings reasonably calculated to contribute to the maintenance of a
fair and orderly market, and not make bids or offers or enter into
transactions that are inconsistent with course of dealings. The
proposed differentiation as between Customers and BX Options Market
Makers and other market participants recognizes the differing
contributions made to the liquidity and trading environment on the
Exchange by Customers and BX Options Market Makers, as well as the
differing mix of orders entered. Further, as noted herein, the Customer
and BX Options Market Maker are unaware at the time the order is
entered whether they would receive a $0.15 or $0.10 per contract Rebate
to Add Liquidity, depending on the security, because they are unaware
of the identity of the contra-party, which would determine whether they
receive a rebate. The Exchange believes that the Customer and BX
Options Market Maker rebate is equitable and not unfairly
discriminatory because the Rebate to Add Liquidity, which is only being
offered to Customers and BX Options Market Makers, would reward these
participants for posting liquidity when they are contra to a Non-
Customer (Professionals, Firms, Broker-Dealer or Non-BX Options Market
Makers) or a BX Options Market Maker.
---------------------------------------------------------------------------
\12\ For purposes of these fees and rebates in Chapter XV,
Section 2(1), a Non-Customer includes a Professional, Firm, Broker-
Dealer and Non-BX Options Market Maker.
\13\ Pursuant to Chapter VII (Market Participants), Section 5
(Obligations of Market Makers), in registering as a Market Maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Further, all Market
Makers are designated as specialists on BX for all purposes under
the Act or rules thereunder. See Chapter VII, Section 5.
---------------------------------------------------------------------------
The Exchange believes that offering certain market participants a
Rebate to Add Liquidity of $0.15 per contract for IWM, QQQ, SPY, BAC,
C, CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO and a Rebate to Add
Liquidity of $0.10 per contract for all other Penny Pilot Options is
reasonable, equitable and not unfairly discriminatory because options
overlying IWM, QQQ, SPY, BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV,
USO are more liquid, with tighter bid/ask differentials and therefore
the Exchange believes a higher Rebate to Add Liquidity is required to
incentivize Customers or BX Options Market Makers to post liquidity for
the opportunity to obtain a rebate. The Exchange believes that offering
a $0.32 per contract Rebate to Remove Liquidity for options overlying
BAC, C, CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO and all other Penny
Pilot Options is reasonable, equitable and not unfairly discriminatory
because the Exchange desires to incentivize participants to transact
Customer orders on the Exchange and obtain this rebate. The Exchange
believes that this rebate will incentivize members to bring order flow
and increase the liquidity on the Exchange to the benefit of all market
participants. The Exchange believes that offering Customers a $0.12 per
contract Rebate to Remove Liquidity for IWM, QQQ and SPY is reasonable,
equitable and not unfairly discriminatory because the Exchange believes
that the rebate will incentivize market participants to transact
business on the Exchange and the opportunity to receive the rebate will
bring liquidity to BX to the benefit of all market participants.
The Exchange's proposal to create Fees to Add Liquidity, in certain
circumstances, and Fees to Remove Liquidity for IWM, QQQ, SPY, BAC, C,
CSCO, F, INTC, MSFT, JPM, GLD, SLV, USO and all other Penny Pilot
Options is reasonable because the fees would enable the Exchange to
reward Customers and in some cases BX Options Market Makers that add or
remove liquidity with rebates. The advantage of increased Customer
order flow benefits all market participants. In addition, the proposed
Fees to Add and Remove Liquidity are less than the rates assessed by
other exchanges for similar fees.\14\ The Exchange's proposal to only
assess the Fee to Add Liquidity to a Customer or BX Options Market
Maker
[[Page 40691]]
when the Customer or BX Options Market Maker is contra to a Customer is
reasonable, equitable and not unfairly discriminatory because the
Exchange would only pay a Rebate to Remove Liquidity to a Customer and
this fee enables the Exchange to reward Customers by offering a rebate.
As previously, mentioned, attracting Customer order flow to the
Exchange benefits all market participants. Also, BX Options Market
Makers have burdens, as previously noted, that do not apply to other
market participants. All Non-Customer market participants
(Professionals, Firms, Broker-Dealers and Non-BX Options Market Makers)
would be assessed the same Fee to Add Liquidity on every transaction.
The Exchange's proposal to create Fees to Add Liquidity and Fees to
Remove Liquidity for IWM, QQQ, SPY, BAC, C, CSCO, F, INTC, MSFT, JPM,
GLD, SLV, USO and all other Penny Pilot Options is equitable and not
unfairly discriminatory for the reasons which follow hereafter. The
Exchange is not assessing Customers a Fee to Remove Liquidity for any
security. The Exchange believes that attracting Customer orders to BX
benefits all market participants and it is an important Exchange
function to provide an opportunity to all market participants to trade
against Customer orders. The Exchange is also uniformly assessing all
other market participants (BX Options Market Makers, Professionals,
Firms, Broker-Dealers and Non-BX Options Market Makers) the same $0.43
per contract Fee to Remove Liquidity.
---------------------------------------------------------------------------
\14\ See BATS Exchange, Inc.'s Fee Schedule. See also NOM
Chapter XV, Section 2 (the Penny Pilot Fees to Remove Liquidity are
$0.45 per contract for all market participants).
---------------------------------------------------------------------------
The Exchange is assessing Customers and BX Options Market Makers
lower Fees to Add Liquidity, and only when contra a Customer, as
compared to other market participants because as previously stated
Customers and BX Options Market Makers make different contributions to
the liquidity and trading environment on the Exchange as compared to
other market participants. Non-Customer participants do not bring the
unique benefits that Customer order flow provides the market nor do
these participants have the obligations that were described herein for
BX Options Market Makers. The Exchange is uniformly assessing all other
market participants (Professionals, Firms, Broker-Dealers and Non-BX
Options Market Makers) a $0.43 per contract Fee to Add Liquidity,
similar to the Fee to Remove Liquidity.
The Exchange's proposal to pay Customers a Rebate to Remove
Liquidity during the Opening Cross \15\ except when contra to a
Customer, while all market participants except the Customer, the Non-
Customer and BX Options Market Maker are assessed the Fee to Remove
Liquidity, is reasonable because the Exchange seeks to continue to
incentivize market participants to transact orders at the Exchange
during the Opening Cross. Further, the Exchange's proposal to assess
Non-Customers and BX Options Market Makers a Fee to Remove Liquidity
enables the Exchange to reward those Customer orders that remove
liquidity. While the Customer is unaware at the time the transaction is
entered whether a rebate would be earned, the Exchange believes that
the possibility of earning a Rebate to Remove Liquidity when trading
against a Non-Customer should incentivize Customer order flow to the
benefit of all market participants.
---------------------------------------------------------------------------
\15\ The Opening Cross is the process for determining the price
at which orders shall be executed at the open and for executing
those orders.
---------------------------------------------------------------------------
The Exchange's proposal to pay a Customer a Rebate to Remove
Liquidity during the Opening Cross except when contra to a Customer,
while all market participants except the Customer, the Non-Customer and
BX Options Market Maker are assessed the Fee to Remove Liquidity, is
equitable and not unfairly discriminatory because as mentioned
previously Customer order flow benefits all market participants and
similar to other rebates proposed herein, the Customer traditionally
pays lower fees. Customer order flow benefits all market participants
by improving liquidity, the quality of order interaction and executions
at the Exchange. Also, the Exchange is proposing to assess a Fee to
Remove Liquidity on all market participants uniformly, other than a
Customer, during the Opening Cross to fund the proposed rebate. This is
similar to a rebate and fee offered in the Opening Cross on the
NOM.\16\
---------------------------------------------------------------------------
\16\ See The NASDAQ Stock Market, LLC Rules at Chapter XV,
Section 2.
---------------------------------------------------------------------------
The Exchange's proposed requirement that a BX Options Market Maker
must be registered as a BX Options Market Maker in at least one
security to qualify for the fees and rebates applicable to a BX Options
Market Maker in Chapter XV, Section 2 is reasonable, equitable and not
unfairly discriminatory because the Exchange desires to incentivize BX
Options Market Makers to be actively engaged in market making to
qualify for the fees and rebates proposed herein. Also, NOM has the
same requirement for its transaction fees in Chapter XV, Section 2 of
the NOM Rules.\17\ The Exchange would uniformly apply this standard in
paying rebates and assessing fees to BX Options Market Makers.
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 62543 (July 21,
2010), 75 FR 44037 (July 27, 2010) (SR-NASDAQ-2012-075).
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Routing Fees
The proposed Routing Fees are reasonable because they seek to
recoup costs that are incurred by the Exchange when routing Customer,
Firm, Market Maker, Broker-Dealer and Professional orders to away
markets on behalf of members. Each destination market's transaction
charge varies and there is a standard clearing charge for each
transaction incurred by the Exchange along with other administrative
and technical costs \18\ that are incurred by the Exchange. The
Exchange believes that the proposed Routing Fees would enable the
Exchange to recover the remove fees assessed to each market participant
by the away market, plus clearing and other administrative and
technical fees \19\ for the execution of orders routed to BX and
executed on an away market.
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\18\ The Exchange utilizes the Nasdaq Options Services LLC
(``NOS''), a member of the Exchange and the Exchange's exclusive
order router to route orders in options listed and open for trading
on the BX to destination markets. See Securities Exchange Act
Release No. 67256 (June 26, 2012) (SR-BX-2012-030).
\19\ The Exchange assesses the away market's remove fee plus a
$0.06 clearing cost and another $0.05 per contract associated with
administrative and technical costs associated with operating NOS.
Each time NOS routes to away markets NOS is charged a $0.06 clearing
fee and, in the case of certain exchanges, a transaction fee is also
charged in certain symbols, which fees are passed through to the
Exchange. There are also membership fees at away markets, and
technical costs associated with routing.
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The Exchange also believes that the proposed Routing Fees are
equitable and not unfairly discriminatory because they would be
uniformly applied to all market participant orders that are routed to
an away market and to cover the respective cost to route the order. The
Exchange applied a similar methodology in calculating the Routing Fees
for each market participant by adding not more than a $0.11 per
contract fee to the away market's remove fee to determine the Routing
Fees.
The Exchange operates in a highly competitive market comprised of
ten U.S. options exchanges in which sophisticated and knowledgeable
market participants can and do send order flow to competing exchanges
if they deem fee levels at a particular exchange to be excessive. The
Exchange believes that the proposed fee and rebate scheme is
competitive and
[[Page 40692]]
similar to other fees and rebates in place on other exchanges. The
Exchange believes that this competitive marketplace materially impacts
the fees and rebates present on the Exchange today and substantially
influences the proposal set forth above.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX 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. To the contrary, BX has designed its fees and
rebates to compete effectively for the execution and routing of options
contracts and to reduce the overall cost to investors of options
trading. The Exchange believes that the proposed fee/rebate pricing
structure would attract liquidity to and benefit order interaction at
the Exchange to the benefit of all 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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\20\ 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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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2012-043 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-2012-043. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. 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-2012-043 and should be
submitted on or before July 31, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16762 Filed 7-9-12; 8:45 am]
BILLING CODE 8011-01-P
