Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fee and Rebate Schedule To Adopt a New Pricing Model and Make Other Conforming Changes, 13353-13359 [2014-05030]
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Federal Register / Vol. 79, No. 46 / Monday, March 10, 2014 / Notices
extensive use of derivatives on impact
on the arbitrage mechanism. Will the
OTC derivatives held by the Funds
negatively impact the arbitrage
mechanism? Why or why not?
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–NYSEArca–2013–127 on
the subject line.
Paper Comments
emcdonald on DSK67QTVN1PROD with NOTICES
• 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
Numbers SR–NYSEArca–2013–127.
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 these
filings 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–2013–127 and should be
submitted on or before March 31, 2014.
Rebuttal comments should be submitted
by April 14, 2014.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–05032 Filed 3–7–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71641; File No. SR–NSX–
2014–05]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Amend
Its Fee and Rebate Schedule To Adopt
a New Pricing Model and Make Other
Conforming Changes
March 4, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on February
25, 2014, National Stock Exchange, Inc.
(‘‘NSX®’’ or the ‘‘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 comment 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 is proposing to amend
its Fee and Rebate Schedule (the ‘‘Fee
Schedule’’) issued pursuant to Exchange
Rule 16.1 to: (i) Change the Fee
Schedule applicable to executions
occurring on the Exchange through the
Auto Ex mode of order interaction
(‘‘Auto Ex Mode’’) 3 and the Order
Delivery mode of order interaction
(‘‘Order Delivery Mode’’) 4 from the
current fee and rebate structure to one
that provides for fees for adding
liquidity and rebates for removing
liquidity (a ‘‘taker/maker’’ pricing
model); (ii) in connection with the
changes to the fee and rebate structure,
eliminate the volume tiers and variable
and fixed fees and rebates under Section
I. of the current Fee Schedule (Auto Ex
Mode) and eliminate the volume tiers
28 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Rule 11.13 (Proprietary and
Agency Orders; Modes of Order Interaction),
paragraph (b)(1).
4 See Exchange Rule 11.13(b)(2).
1 15
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13353
and rebates for adding liquidity in Order
Delivery Mode under Section II. of the
current Fee Schedule; and (iii) eliminate
the rebate of $0.0015 per executed share
for Double Play Orders 5 routed to and
executed on the CBOE Stock Exchange,
Inc. (‘‘CBSX’’). The Exchange also
proposes to delete the Explanatory
Endnotes and move the content of
certain Endnotes to the text of the Fee
Schedule.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nsx.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
As part of its continuous assessment
of the U.S. equity securities markets and
the competitive environment in which it
operates, the Exchange has in recent
months undertaken a series of changes
to its Fee Schedule with the goal of
maximizing the effectiveness of its
business model, providing incentives to
Equity Trading Permit (‘‘ETP’’) Holders 6
to access the Exchange through both
Auto Ex Mode and Order Delivery
Mode, and to continue providing a highquality and cost-effective execution
venue.7 The Exchange believes that,
5 Exchange Rule 11.11(c)(10) defines a Double
Play order as a market or limit order that, upon
entry, routes to designated away Trading Centers
which are approved by the Exchange from time to
time without first exposing the order to the NSX
Book. A Double Play Order that is not executed in
full after routing away receives a new time stamp
upon return to the Exchange and is ranked and
maintained in the NSX Book in accordance with
Rule 11.14(a).
6 Exchange Rule 1.5 defines ‘‘ETP’’ as the Equity
Trading Permit issued by the Exchange for effecting
approved securities transactions on the Exchange’s
trading facilities.
7 See Exchange Act Release No. 71332 (January
16, 2014); 79 FR 3900 (January 23, 2014); (SR–NSX–
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Federal Register / Vol. 79, No. 46 / Monday, March 10, 2014 / Notices
while these changes to the Fee Schedule
have been salutary and have responded
to the needs of both the Exchange and
its customers, the evolving competitive
environment impels additional changes
to the Exchange’s fee and rebate
structure.
Accordingly, as set forth in greater
detail below, the Exchange is proposing
to restructure its fee and rebate
programs for both Auto Ex Mode and
Order Delivery Mode and adopt a model
whereby ETP Holders adding liquidity,
computed as a daily percentage of the
ETP Holder’s total consolidated volume
(‘‘TCV’’) 8 adding liquidity, will be
assessed fees that will decline from
$0.0018 per executed share to $0.0012
per executed share as the ETP Holder’s
percentage of TCV increases. The
proposed fee structure will apply in
both Auto Ex Mode and Order Delivery
Mode. ETP Holders removing liquidity
in securities priced at $1.00 and above
will receive a rebate. For securities
priced below $1.00, the Exchange
proposes to retain its fee and rebate
structure as it existed before the instant
amendment.
In proposing these amendments to the
Fee Schedule, the Exchange is
replicating certain aspects of the fee and
rebate structure currently in effect at
CBSX, including the volume tiers
currently in use by CBSX for
determining fees for providing liquidity.
The CBSX fee and rebate schedule and
all amendments thereto have been filed
with the Commission.9 In addition, the
Exchange believes that its proposal will
further simplify and streamline the
Exchange’s Fee Schedule by providing
for the same fees in both modes of order
interaction. Thus, all ETP Holders will
be subject to the same fee and rebate
structure whether they are accessing the
Exchange through Auto Ex Mode or
Order Delivery Mode.
Fee and Rebate Structure Prior to the
Proposed Changes
Prior to the changes proposed in this
rule filing, the Fee Schedule as of
January 9, 2014 contained separate fee
and rebate structures for executions
occurring through Auto Ex Mode (as
contained in Section I. of the former Fee
Schedule) and Order Delivery Mode (as
contained in Section II. of the former
Fee Schedule). Within each of those
separate fee and rebate structures, the
Exchange established ADV tiers that
provided rebates to ETP Holders for
adding liquidity and assessed fees for
removing liquidity. ETP Holders were
also given a rebate to 50% of the Market
Data Revenue (‘‘MDR’’) for ADV meeting
certain volume tiers.
Section I. Fees and Rebates Applicable
to Auto Ex Mode
The fee and rebate structure for Auto
Ex Mode under former Section I. of the
Fee Schedule was as follows:
Securities $1 and Above (All
Tapes); 10 Orders That Add and Take
Liquidity 11:
Each ETP Holder was charged $0.0030
per share for any marketable order that
removed liquidity unless the ETP
Holder executed ADV of at least 25,000
shares of added liquidity in Auto Ex
Mode during a calendar month.
The ‘‘Fixed Fee Schedule’’ applied to
each ETP Holder that executed ADV of
at least 25,000 shares of added liquidity
in Auto Ex Mode during a calendar
month unless the ETP Holder elected to
adopt the ‘‘Variable Fee Schedule’’ by
sending an email indicating this
preference to NSXTrading@NSX.com
prior to 4:00 p.m. EST on the first
trading day of the calendar month.
For Tape B securities only, each ETP
Holder that executed ADV of least
25,000 shares of added liquidity in Auto
Ex Mode during a calendar month
received a rebate of $0.0034 under the
Fixed Fee Schedule per executed share.
The former Section I. fee and rebate
structure was as follows:
Variable fee schedule
Tier
1
2
3
4
5
........
........
........
........
........
ADV
Rebate to add
liquidity
(per share)
0 & < 0.5 million shares traded ................
≥ 0.5 & < 1.5 million shares traded ..........
≥ 1.5 & < 5.0 million shares traded ..........
≥ 5.0 & < 10.0 million shares traded ........
≥10.0 million shares traded ......................
Fixed fee schedule
Fee to remove
liquidity
(per share)
$0.0024
0.0026
0.0027
0.0029
0.0031
$0.0030
0.0030
0.0030
0.0029
0.0028
MDR %
Rebate to add
liquidity
(per share)
¥%
50
50
50
50
$0.0024
0.0030
0.0031
0.0032
0.0033
Fee to remove
liquidity
(per share)
$0.0029
0.0029
0.0029
0.0028
0.0027
emcdonald on DSK67QTVN1PROD with NOTICES
The former Fee Schedule provided
that, for all Tapes, an ETP Holder
posting a Midpoint Peg Zero Display
Reserve Order received a fixed rebate of
$0.0017 per executed share; these shares
were to be included in the ADV
calculation but were not eligible for
additional rebates under Section I.
Additionally, for all Tapes, an ETP
Holder removing liquidity using a
Midpoint-Seeker Order was charged a
fixed fee of $0.0020 per executed share;
these shares were to be included in the
ADV calculation but not subject to
additional fees under Section I.
Securities under $1 (All Tapes)
Orders that Add and Take Liquidity:
For executions in securities priced
under $1.00 through Auto Ex Mode,
Section I. of the pre-amendment Fee
Schedule provided for rebates to add
liquidity and fees to remove liquidity as
follows:
2014–01) (adopting a single pricing structure for
Order Delivery Mode, establishing new rebates
based on average daily volume (‘‘ADV’’) adding
liquidity using Order Delivery Mode, eliminating
Quotation Update Fees in securities priced above
$1.00 applicable to Order Delivery Users;
eliminating the Order Delivery Notification Fee in
securities priced above $1.00, and eliminating the
market data revenue rebate to Order Delivery
Users). See also Exchange Act Release No. 70890
(November 15, 2013); 78 FR 69900 (November 21,
2013) (SR–NSX–2013–21) (among other
amendments, changing fees and rebates for
executions in Auto Ex Mode, providing an
enhanced rebate for adding liquidity in Tape B
securities, and eliminating the Order Delivery
Notification fee and quotation update fee in
securities priced below $1.00).
8 The proposed amended Fee Schedule defines
‘‘TCV’’ as the total consolidated volume calculated
as the volume reported by all exchanges and trade
reporting facilities to a consolidated transaction
reporting plan.
9 See, e.g., Exchange Act Release No. 66665
(March 27, 2012); 77 FR 19741 (April 2, 2012) (SR–
CBOE–2012–029).
10 The term ‘‘Tapes’’ refers to the designation
assigned in the Consolidated Tape Association
(‘‘CTA’’) Plan for reporting trades with respect to
securities in Networks A, B and C. Tape A
securities are those listed on the New York Stock
Exchange, Inc.; Tape B securities are listed on
NYSE MKT, formerly NYSE Amex, and regional
exchanges. Tape C securities are those listed on the
NASDAQ Stock Market LLC.
11 This section in the former Fee Schedule
referenced former Explanatory Endnote (2), which
provided that, except for Midpoint Peg Zero Display
reserve orders (as specified in Rule 11.11(c)(2)(B),
only ‘‘Displayed orders’’ are eligible for a rebate,
and Displayed Orders mean orders that are not
‘‘Zero Display Orders’’ (which means ‘‘Zero Display
reserve orders’’ as specified in Rule 11.11(c)(2)(A)).
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Federal Register / Vol. 79, No. 46 / Monday, March 10, 2014 / Notices
Tier
ADV
Rebate to add liquidity
(per share)
1 .........
All ..................
Lesser of: 0.25% of trade value 7and 25% of the quote spread 8 ......................................
Section II. Fees and Rebates Applicable
in Order Delivery Mode
The fee and rebate structure for Order
Delivery Mode under former Section II.
of the Fee Schedule was as follows:
Fee to remove liquidity
(per share)
Securities $1 and Above (All Tapes):
Each ETP Holder approved for use of
Order Delivery Mode (‘‘Order Delivery
User’’) executing ADV of added
liquidity of at least 15 million shares in
0.30% of trade value.
Order Delivery Mode during a calendar
month would receive a per share rebate
as follows:
Rebate to add
liquidity
(per share)
Tier
ADV of added
liquidity
1 ........
2 ........
3 ........
≥ 15 million shares traded ................................................................................................................................................
≥ 20 million shares traded ................................................................................................................................................
≥ 25 million shares traded ................................................................................................................................................
Each Order Delivery User executing
ADV of added liquidity in the following
amounts through both Order Delivery
Mode and Auto Ex Mode during a
calendar month would receive a per
share rebate on the shares executed
through Order Delivery Mode, as well as
any volume-based rebate for adding
liquidity under Section I. above:
Rebate to add
liquidity
(per share
executed in
order
delivery mode)
Tier
Order delivery ADV
Auto Ex. ADV
1 ........
2 ........
≥ 300,000–749,999 ...........................................................
≥ 750,000 ..........................................................................
≥ 2 million shares traded ..................................................
≥ 3 million shares traded ..................................................
emcdonald on DSK67QTVN1PROD with NOTICES
Additionally, the Fee Schedule
provided that an Order Delivery User
paid no fee for Order Delivery
Notifications delivered by the System to
that Order Delivery User for potential
execution against a posted displayed or
undisplayed order in any security
priced at $1.00 and above.
Securities Under $1 (All Tapes):
For securities priced under $1.00, the
Fee Schedule further provided that an
Order Delivery User paid no fee for any
Order Delivery Notification delivered by
the System to that Order Delivery User
for potential execution against a posted
displayed or undisplayed order in any
security priced below $1.00.
Section III. (Other Services) Fees and
Rebates
Section III A. of the pre-amendment
Fee Schedule, Order Routing (All Tapes)
provided that orders routed by the
Exchange in accordance with Exchange
Rule 11.15(a)(ii) 12 were charged a fee of
$0.0030 per executed share.
The Fee Schedule further provided
that an ETP Holder entering a Double
Play Order 13 received a fixed rebate for
12 Rule 11.15(a)(ii) entitled Routing to Away
Trading Centers describes the handling of orders
eligible for routing to other Trading Centers.
13 Exchange Rule 11.11(c)(10) defined a ‘‘Double
Play Order’’ as market or limit order for which an
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each share directed to and executed on
CBSX of $0.0015 per share. These shares
were not included in the ADV
calculation or eligible for additional
rebates under Section I. of the Fee
Schedule. An ETP Holder entering a
Double Play Order would not be
charged a routing fee under Section III
for the initial routing to a designated
away Trading Center. Any unexecuted
portion of a Double Play Order that is
returned and executed on the Exchange
shall be subject to either Section I of this
Schedule, or a fee of $0.0030 per share
under Section III if the order is
subsequently routed to an away Trading
Center in accordance with Exchange
Rule 11.15(a)(ii).
Explanatory Endnotes
Prior to the instant amendments, the
Fee Schedule contained Explanatory
Endnotes numbered (1) through (14)
inclusive, which are as follows, with
ETP Holder instructs the System to route to
designated away Trading Centers which are
approved by the Exchange from time to time
without first exposing the order to the NSX Book.
A Double Play Order that is not executed in full
after routing away receives a new time stamp upon
return to the Exchange and is ranked and
maintained in the NSX Book in accordance with
Rule 11.14(a).
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$0.0005
0.0013
0.0017
$0.0005
0.0010
additional parenthetical explanatory
text in certain instances:
(1) As specified in Rule 11.13(b)(1).
(This Endnote references a description
of Auto Ex Mode relevant to Section I
of the pre-amendment Fee Schedule).
(2) Except for Midpoint Peg Zero
Display Reserve Orders (as specified in
Rule 11.11(c)(2)(B)), only ‘‘Displayed
Orders’’ are eligible for a rebate.
Displayed Orders mean orders that are
not ‘‘Zero Display Orders’’ (which
means ‘‘Zero Display Reserve Orders’’ as
specified in Rule 11.11(c)(2)(A)).
(3) Reserved.
(4) ‘‘Auto-Ex ADV’’ means, with
respect to an ETP Holder, the average
number of shares the ETP Holder has
executed in Auto-Ex Mode on the
Exchange in all NMS stocks when the
Exchange is open for trading (excluding
partial trading days) (or partial month,
as applicable). Only shares executed by
an ETP Holder in Auto-Ex Mode will be
used by the Exchange to calculate the
minimum ADV contained in Section I.
Regardless of an ETP Holder’s Auto-Ex
ADV, an ETP Holder shall receive a
fixed per share rebate for Midpoint Peg
Zero Display Reserve Orders, and that
ETP Holder will not be eligible for
additional rebates under Section I
above.
(5) Reserved.
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Federal Register / Vol. 79, No. 46 / Monday, March 10, 2014 / Notices
(6) Market Data Revenue (‘‘MDR’’)
Rebates:
(a) Assuming the minimum ADV
threshold(s) are achieved, an ETP
Holder will receive a MDR Rebate (in
such percent as is specified above) of
the MDR attributable to such ETP
Holder’s trading and quoting of
Displayed Orders at prices equal to or
greater than one dollar in Auto-Ex Mode
or Order Delivery Mode, as applicable.
ETP Holders will not receive MDR
Rebates attributable to (x) Zero Display
Orders or (y) securities quoted at prices
less than one dollar.
(b) Adjustments. To the extent market
data revenue from Tape ‘‘A’’, ‘‘B’’ or ‘‘C’’
transactions is subject to any
adjustment, rebates provided under this
program may be adjusted accordingly.
(c) De Minimis Rebates. An ETP
Holder will not receive a MDR Rebate in
any calendar quarter in which the MDR
Rebate attributable to the ETP Holder is
less than $250.
(d) Quarterly Payments. MDR Rebates
will be paid on a quarterly basis.
(7) ‘‘Trade value’’ means a dollar
amount equal to the price per share
multiplied by the number of shares
executed.
(8) ‘‘Quote spread’’ means a dollar
amount equal to the number of shares
executed multiplied by the difference at
the time of execution between (x) the
price per share of the national best bid,
and (y) the price per share of the
national best offer, in each case as such
quotes are disseminated pursuant to an
effective National Market System plan
and as the terms ‘‘national best bid’’ and
‘‘national best offer’’ are defined in Rule
600 of Regulation NMS; provided, that
no rebate based on the quote spread
shall be payable during any period in
which the market is locked or crossed.
(9) As specified in Rule 11.13(b)(2). A
marketable order entered with a
handling instruction other than Post
Only through an order delivery session
by an ETP Holder that is an order
delivery participant will be subject to
the Auto-Ex Mode fee schedule
contained in Section I above. (This
Endnote references the description of
Order Delivery Mode under Rule
11.13(b)(2) and provides additional
information as to the fees applicable in
certain instances.)
(10) Reserved.
(11) Orders that are routed via NSX
and executed in another market center.
(This Endnote provides a description of
what constitutes a ‘‘routed order’’ for
purposes of the fees under Section III.A
of the Fee Schedule.
(12) Authorized recipients of the
Exchange’s Depth of Book feed must
execute required documentation with,
and be approved by, the Exchange prior
to receiving the service.
(13) Upon verification and approval
by NSX, the number of shares executed
by ETP Holders under common
ownership and control will be
aggregated for purposes of calculating
average daily volumes. See Rule 16.3.
(14) In the event of any change to this
Fee and Rebate Schedule at other than
the end of a calendar month, volume
calculations will be made on the basis
of such number of full trading days
within such month during which the
unchanged pricing or rebate program’s
terms are in effect.
Restructured Fee and Rebate Program
The Exchange is proposing to amend
Section I. of the Fee Schedule to
eliminate the Variable and Fixed Fee
Schedules for securities priced at $1.00
and above across all Tapes and to adopt
the fee and rebate structure currently
used by CBSX. The Exchange will
therefore, consistent with the pricing
model in use by CBSX, charge fees to
ETP Holders adding liquidity and
provide a rebate to ETP Holders
removing liquidity. Consequently, the
ADV tiers and their associated per share
rebates to add liquidity, the fees
assessed to remove liquidity, and the
Market Data Revenue (‘‘MDR’’) rebate
under the pre-amendment Fee
Schedule, will be rescinded. The
Exchange also proposes to eliminate the
enhanced rebate for ADV of at least
25,000 shares of added liquidity in Tape
B securities.
The Exchange also proposes as a part
of these amendments to amend Section
II. of the Fee Schedule to eliminate the
separate fee and rebate structure
applicable to executions by Order
Delivery Users in Order Delivery Mode
and in some instances through a
combination of activity through Auto Ex
Mode and Order Delivery Mode. As
proposed, there will be one schedule of
transaction fees and rebates that will
apply in both modes of interaction with
the Exchange. The section headings of
the Fee Schedule will be renumbered in
view of the elimination of the separate
Order Delivery Mode Fee Schedule that
formerly comprised the content of
Section II.
Under the proposed new fee and
rebate schedule for Section I., the
Exchange will assess a per share fee for
adding liquidity, based on a percentage
of TCV of liquidity in one day. The
maximum fee for adding liquidity will
be $0.0018 per executed share, based on
the ETP Holder adding less than 0.08%
of TCV of liquidity in one day. Proposed
amended Section I. of the Fee Schedule
provides six additional levels that
reduce the per share fee based on
successively higher percentages of TCV
adding liquidity in one day. The lowest
fee of $0.0012 per executed share would
apply to ETP Holders adding 0.052% or
more of TCV of liquidity in one day.
The Exchange represents that the tiers
are designed to progressively reduce the
fees assessed to ETP Holders daily as
their liquidity provision increases.
Specifically, the Exchange believes that
every .08 percent increase in liquidity
executed with respect to TCV (.09
percent and .10 percent as such ETP
Holder’s quantity of liquidity provision
moves up through the tier levels),
produces an additive effect on the
revenues collected by the Exchange.
Therefore, the Exchange is proposing to
incentivize greater liquidity provision
by reducing fees payable for providing
liquidity as an ETP Holder’s level of
liquidity provision increases. The
Exchange’s proposal represents an
aspirational effort to attract greater
posted liquidity by reduced fees at the
specified levels.
The TCV tiers and the associated fees
that the Exchange proposes to charge for
providing liquidity at the specified
levels are as follows:
emcdonald on DSK67QTVN1PROD with NOTICES
FEES FOR PROVIDING LIQUIDITY (MAKER)
Maker (adds less than 0.08% of TCV of liquidity in one day) ................................................................................................
Maker (adds at least 0.08% but less than 0.16% of TCV of liquidity in one day) ..................................................................
Maker (adds at least 0.16% but less than 0.24% of TCV of liquidity in one day) ..................................................................
Maker (adds at least 0.24% but less than 0.33% of TCV of liquidity in one day) ..................................................................
Maker (adds at least 0.33% but less than 0.42% of TCV of liquidity in one day) ..................................................................
Maker (adds at least 0.42% but less than 0.52% of TCV of liquidity in one day) ..................................................................
Maker (adds 0.52% or more of TCV of liquidity in one day) ..................................................................................................
Zero Display Maker.
Maker (adds liquidity using a Zero Display Order or Zero Display Primary Peg Order) ........................................................
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$0.0018 per share.
0.0017 per share.
0.0016 per share.
0.0015 per share.
0.0014 per share.
0.0013 per share.
0.0012 per share.
0.0018 per share.
Federal Register / Vol. 79, No. 46 / Monday, March 10, 2014 / Notices
13357
FEES FOR PROVIDING LIQUIDITY (MAKER)—Continued
Maker (adds liquidity using a Zero Display Mid-Point Peg or Zero Display Market Peg Order) ............................................
As noted in the table above, the
Exchange proposes fee provisions for
ETP Holders adding liquidity through
Zero Display Reserve orders.14 ETP
Holders will pay a fee of $0.0018 per
executed share of added liquidity using
a Zero Display Order; a Zero Display
Primary Peg Order; a Zero Display MidPoint Peg Order; or Zero Display Market
Peg Order. The fees for adding liquidity
in these order types irrespective of TCV
is intended to incentivize ETP Holders
to use these ‘‘dark’’ orders.
The Exchange has also proposed to
specify that transactions that are (i)
Taker; (ii) Routed Away; (iii) Zero
Display Maker; or (iv) Maker in
securities priced below $1.00 will not
count toward an ETP Holder’s
percentage of TCV.
Further, as proposed, the rates for
adding liquidity contained in Section I.
0.0018 per share.
of the Fee Schedule will apply to all
transactions in securities priced at and
above $1.00 made by the same ETP
Holder on any day in which such ETP
Holder adds the established percentage
or more of TCV of liquidity.
For ETP Holders removing liquidity,
the Exchange proposes to adopt the
following rebate schedule:
REBATES FOR REMOVING LIQUIDITY (TAKER)
Taker (removes Zero Display Mid-Point Peg or Zero Display Market Peg Order) .................................................................
emcdonald on DSK67QTVN1PROD with NOTICES
Taker (all other order types) ....................................................................................................................................................
The Exchange is proposing to pay a
rebate of $0.0015 per executed share to
ETP Holders removing liquidity from
the NSX Book. Such rebate will also be
paid to ETP Holders for removing
‘‘dark’’ order types, specifically the Zero
Display Mid-Point Peg or Zero Display
Market Peg order types.
The Exchange believes that, by
offering a rebate to ETP Holders
removing liquidity in securities priced
at $1.00 or greater, there will be a
marked improvement in the quality of
execution. It is anticipated that
improvement in execution quality
should lead to a greater number of
market participants attempting to access
the resting liquidity on the NSX Book.15
Furthermore, the Exchange believes that
the rebate of $0.0015 to remove liquidity
will offer attractive economic incentives
to liquidity takers and, in conjunction
with the fee structure for liquidity
providers, will offer ETP Holders a
better quality of execution.
For securities priced below $1.00, the
Exchange proposes to retain the existing
pre-amendment fee and rebate structure.
ETP Holders adding liquidity will
receive a per share rebate equal to the
lesser of 0.25% of the trade value and
25% of the quote spread at the time of
execution. A fee of 0.30% of trade value
will be charged to ETP Holders
removing liquidity in sub-dollar priced
securities.
Pursuant to Exchange Rule 16.3, upon
an ETP Holder’s request the Exchange
will aggregate the activity of the ETP
Holder and its affiliates for purposes of
applying the fees and rebates applicable
to liquidity providers and liquidity
takers.
14 Pursuant to Exchange Rule 11.11(c)(2)(A), a
Reserve Order entered with zero display quantity is
a ‘‘Zero Display Reserve Order.’’ The price of a Zero
Display Reserve Order may be set (‘‘pegged’’) to
track the buy-side of the Protected BBO, the sellside of the Protected BBO, or the midpoint of the
Protected BBO. A pegged Zero Display Reserve
Order which tracks the inside quote of the opposite
side of the market is defined as a Market Peg; a
pegged Zero Display Reserve Order that tracks the
midpoint is defined as a Midpoint Peg; and a
pegged Zero Display Reserve Order that tracks the
inside quote of the same side of the market is
defined as a Primary Peg.
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18:00 Mar 07, 2014
Jkt 232001
Amendments to Section III; Elimination
of Rebate for Double Play Orders
The Exchange proposes that, for
orders routed by the Exchange and
executed in another market center in
accordance with Exchange Rule
11.15(a)(ii), the following fees will
apply:
ORDERS ROUTED AWAY
Transactions in securities priced $1 or
greater.
Transactions in securities priced below
$1.
$0.0030 per share.
0.30% of trade value.
These are the same fees that applied
prior to the instant amendments. The
proposal by the Exchange also includes
eliminating the rebate of $0.0015 per
share for Double Play Orders directed to
and executed on CBSX.16 The proposed
changes to Section I. of the Fee
Schedule provide a rebate for takers of
liquidity in the amount of $0.0015 per
executed share, which renders
unnecessary the specific rebate for a
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
$0.0015 rebate per
share.
0.0015 rebate per
share.
Double Play Order, which is designed to
allow ETP Holders to remove liquidity
at the designated away Trading Centers.
Elimination of Explanatory Endnotes
The Exchange has also proposed
eliminating the Explanatory Endnotes of
the Fee Schedule, numbered (1) through
(14) inclusive. In certain instances, the
Exchange proposes to move the
information contained in an
Explanatory Endnote to the text of the
relevant section of the Fee Schedule; in
others, deletion of the Endnote is
proposed because the accompanying
sections of the Fee Schedule have been
deleted.
Endnotes (1) (a reference to the
description of Auto Ex Mode in
Exchange Rule 11.13) and (9) (a
reference to the description of Order
Delivery Mode in Rule 11.13 and
additional information regarding the
fees applicable to an Order Delivery
order with instructions other than Post
Only), will both be deleted because they
are inapposite in the context of the
proposed changes to the Fee Schedule
and the elimination of separate pricing
structures for each mode of order
interaction.
Endnote (2) regarding rebates for nondisplayed orders is no longer applicable
in view of the changes to the pricing
model. Similarly, Endnote (4) addresses
‘‘Auto- Ex ADV’’ which is no longer
relevant in the proposed pricing model.
15 The ‘‘NSX Book’’ is the System’s electronic file
of orders (Exchange Rule 1.5).
16 See Exchange Act Release No. 70890
(November 15, 2013); 78 FR 69900 (November 21,
2013) (SR–NSX–2013–21), cited at footnote 7,
supra.
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emcdonald on DSK67QTVN1PROD with NOTICES
Endnote (6) provides information on
the MDR, which is being eliminated
from the Fee Schedule and thus is no
longer needed.
Endnote (7), defining ‘‘trade value’’
and Endnote (8), defining ‘‘quote
spread’’ are proposed to be deleted and
their content moved to the body of the
Fee Schedule. Also, the text of each of
Endnotes (11) through (14) has been
moved to the body of the Fee Schedule
and the deletion of such Endnotes is
proposed.
Finally, Endnotes (3), (5) and (10),
which were ‘‘reserved’’ will also be
deleted.
Pursuant to Exchange Rule 16.1(c),
the Exchange will ‘‘provide ETP Holders
with notice of all relevant dues, fees,
assessments and charges of the
Exchange’’ through the issuance of a
Regulatory Circular of the changes to the
Fee Schedule and will provide a copy
of the rule filing on the Exchange’s Web
site, www.nsx.com.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) of the
Act,17 in general and, in particular,
Section 6(b)(4) of the Act,18 which
requires that the rules of a national
securities exchange provide for the
equitable allocation of reasonable dues,
fees, and other charges among its
members and issuers and other persons
using its facilities, and with Section
6(b)(5) of the Act,19 which requires,
among other things, that the rules of a
national securities exchange not permit
unfair discrimination between
customers, issuers, brokers, or dealers,
and be designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
The Exchange submits that the
proposed changes in the Fee Schedule
to restructure its fee and rebate
programs for both Auto Ex Mode and
Order Delivery Mode are equitably
allocated and reasonable, as required by
Section 6(b)(4). The Exchange is
proposing to adopt a model whereby an
ETP Holder’s added liquidity, computed
as a daily percentage of the ETP
Holder’s TCV adding liquidity, will be
subject to fees that will decline from
$0.0018 per executed share to $0.0012
per executed share as the ETP Holder’s
percentage of TCV increases. The
proposed fees are equitably allocated in
that they will apply to all ETP Holders
20 See, e.g., NASDAQ OMX BX fee schedule at
www.nasdaqtrader.com/Trader.aspx?id=bx_pricing;
CBSX fee schedule at www.cboe.com/publish/
cbsxfeeschedule/cbsxfeeschedule.pdf.
17 15
U.S.C. 78f(b).
18 15 U.S.C. 78(f)(b)(4).
19 15 U.S.C. 78f(b)(5).
VerDate Mar<15>2010
18:00 Mar 07, 2014
accessing the System, using both Auto
Ex Mode and Order Delivery Mode.
Each ETP Holder will have the ability to
determine the extent to which the
Exchange’s proposed structure will
provide it with an economic incentive
to use the System, and model its
business accordingly.
Specifically, the Exchange is
proposing to eliminate rebates for
adding liquidity and the MDR for
securities priced at and above $1.00
under Section I. of the Fee Schedule,
and instead provide rebates to ETP
Holders removing liquidity in securities
priced at $1.00 and above will receive
a standard rebate of $0.0015 per
executed share, including removing
Zero Display Mid-Point or Zero Display
Market Peg Orders. The Exchange
submits that this approach constitutes
an equitable allocation of reasonable
fees and rebates because the fees and
rebates are applicable to all ETP Holders
irrespective of the mode of interaction
used to access the System.
The Exchange submits that converting
the qualification for the different fee
tiers for Maker transactions in securities
priced $1 or greater, from measuring by
nominal amount of shares to measuring
by relative percentage of TCV, is
reasonable because it allows the
Exchange to account for changes in
national industry-wide volume. The
Exchange believes that the change is
equitable and not unfairly
discriminatory because it will be
applied to all ETP Holders. Further,
other exchanges also measure volume
using percentage of TCV.
The Exchange further states that its
proposals constitute reasonable dues
and fees in that they provide for a more
simplified and streamlined approach
which will benefit both ETP Holders
and the Exchange in determining
revenues and expenses. In that regard,
the change from the pre-amendment fee
and rebate structure also aligns the
Exchange’s fee and rebate programs
with those used by other national
securities exchanges.20 The Exchange
submits that its proposed fee and rebate
structure is reasonable in that it is
designed to achieve the goal of
maximizing the Exchange’s competitive
position, simplifying and streamlining
its Fee Schedule, and promoting an
efficient structure that aligns with that
of other exchanges and thereby can
operate to reduce the administrative
costs and burdens on ETP Holders.
Jkt 232001
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Fmt 4703
Sfmt 4703
The Exchange believes that retaining
the pre-amendment fee and rebate
structure for securities priced below
$1.00, i.e., ETP Holders adding liquidity
will receive a per share rebate equal to
the lesser of 0.25% of the trade value
and 25% of the quote spread at the time
of execution and ETP Holders removing
liquidity will be charged a fee of 0.30%
of the trade value, is consistent with
Section 6(b)(4) of the Act. The preamendment fee and rebate structure for
sub-dollar securities will be equitably
allocated in that all ETP Holders
executing orders in such securities will
be subject to its provisions; the fee and
rebate structure is reasonable in that it
recognizes the differences between
securities priced below $1.00 and those
priced at $1.00 and above and retains
the fee and rebate structure that best
addresses the Exchange’s goals of
greater liquidity, price improvement,
and execution quality.
As part of the proposed changes, the
Exchange will eliminate the rebate of
$0.0015 per executed share that it pays
to ETP Holders that direct Double Play
Orders to CBSX. The Exchange submits
that eliminating this rebate is consistent
with Section 6(b)(4) of the Act. The
proposed change is equitably allocated
in that it applies to all executions by
ETP Holders using Double Play Orders;
the proposal is reasonable in that the
proposed rebate changes provide for a
rebate in the same amount for all ETP
Holders removing liquidity, thereby
aligning the treatment of executions of
Double Play Orders with that of all other
orders removing liquidity and providing
for a rebate in the same amount.
The Exchange also believes that the
proposed changes described above
satisfy the requirements of Section
6(b)(5) of the Act in that they do not
permit unfair discrimination between
customers, issuers, brokers, or dealers,
and are designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system. Under the
proposed changes to the Fee Schedule,
all ETP Holders executing orders on the
Exchange will be subject to one fee and
rebate structure applicable to both
modes of order interaction, and such
changes are thereby designed to meet
the requirements of the Section 6(b)(5)
that the rules of the Exchange not
permit unfair discrimination among ETP
Holders and their customers. The
Exchange submits that, to the extent that
the amendments to the Fee Schedule
align with the fee and rebate programs
of other exchanges, they will promote
just and equitable principles of trade by
reducing the administrative burdens
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emcdonald on DSK67QTVN1PROD with NOTICES
and expenses incurred by ETP Holders
in determining the revenues and costs
associated with its activity on the
Exchange.
Moreover, the Exchange believes that
offering rebates to ETP Holders
removing liquidity in securities priced
at $1.00 or greater will incentivize more
such liquidity-takers to trade on the
Exchange, which will in turn provide
greater opportunities for liquidity
providers to experience a better
execution quality. Improvement in
execution quality should, the Exchange
posits, lead to a greater number of
market participants seeking to access
the liquidity on the NSX Book, which
would inure to the benefit of all ETP
Holders seeking greater and better
execution opportunities. In this regard,
the Exchange believes that proposed
amendments to the Fee Schedule meet
the test of an equitable allocation of
reasonable dues and fees under Section
6(b)(4) as well as promoting just and
equitable principles of trade and
operating to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system under Section 6(b)(5).
The Exchange submits that its
proposal to eliminate the Explanatory
Endnotes of the Fee Schedule,
numbered (1) through (14) inclusive, in
certain instances moving the
information contained in an
Explanatory Endnote to the text of the
relevant section of the Fee Schedule and
in others deleting the Endnote because
the accompanying sections of the Fee
Schedule have been deleted, is
consistent with Section 6(b)(5) of the
Act. The Exchange is proposing these
amendments to add greater clarity and
transparency to the Fee Schedule
which, it believes will be enhanced by
deleting obsolete references and moving
relevant retained Endnote text to the
accompanying section of the Fee
Schedule. The Exchange submits that
these amendments are consistent with
Section 6(b)(5) in that they promote just
and equitable principles of trade and
operate to protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
The proposed rule change seeks to
adopt a fee and rebate structure, certain
aspects of which are already in use by
CBSX, and it will apply to all ETP
Holders irrespective of the mode of
order interaction used to access the
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18:00 Mar 07, 2014
Jkt 232001
Exchange. The Exchange submits that,
given that it previously had separate fee
and rebate programs for executions
occurring through Auto Ex Mode and
Order Delivery Mode, moving to a single
schedule for transaction fees and rebates
for both modes of order interaction
should impose no burden on
competition. Moreover, the proposed
changes will, the Exchange believes,
operate to enhance rather than burden
competition by aspiring to increase
liquidity and improve execution quality
on the Exchange through reasonable and
equitably allocated economic
incentives.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change has taken
effect upon filing pursuant to Section
19(b)(3)(A)(ii) of the Act 21 and
subparagraph (f)(2) of Rule 19b–4.22
At any time within 60 days of the
filing of such 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.
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–NSX–2014–05 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–NSX–2014–05. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NSX–
2014–05 and should be submitted on or
before March 31, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–05030 Filed 3–7–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71648; File No. SR–CBOE–
2014–017]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change, as Modified by
Amendment 1, To Amend Its Rules
Related to Complex Orders
March 5, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
23 17
21 15
U.S.C. 78s(b)(3)(A)(ii).
22 17 CFR 240.19b–4.
PO 00000
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13359
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 79, Number 46 (Monday, March 10, 2014)]
[Notices]
[Pages 13353-13359]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05030]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71641; File No. SR-NSX-2014-05]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Fee and Rebate Schedule To Adopt a New Pricing Model and Make
Other Conforming Changes
March 4, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on February 25, 2014, National Stock Exchange, Inc.
(``NSX[supreg]'' or the ``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
comment 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 is proposing to amend its Fee and Rebate Schedule (the
``Fee Schedule'') issued pursuant to Exchange Rule 16.1 to: (i) Change
the Fee Schedule applicable to executions occurring on the Exchange
through the Auto Ex mode of order interaction (``Auto Ex Mode'') \3\
and the Order Delivery mode of order interaction (``Order Delivery
Mode'') \4\ from the current fee and rebate structure to one that
provides for fees for adding liquidity and rebates for removing
liquidity (a ``taker/maker'' pricing model); (ii) in connection with
the changes to the fee and rebate structure, eliminate the volume tiers
and variable and fixed fees and rebates under Section I. of the current
Fee Schedule (Auto Ex Mode) and eliminate the volume tiers and rebates
for adding liquidity in Order Delivery Mode under Section II. of the
current Fee Schedule; and (iii) eliminate the rebate of $0.0015 per
executed share for Double Play Orders \5\ routed to and executed on the
CBOE Stock Exchange, Inc. (``CBSX''). The Exchange also proposes to
delete the Explanatory Endnotes and move the content of certain
Endnotes to the text of the Fee Schedule.
---------------------------------------------------------------------------
\3\ See Exchange Rule 11.13 (Proprietary and Agency Orders;
Modes of Order Interaction), paragraph (b)(1).
\4\ See Exchange Rule 11.13(b)(2).
\5\ Exchange Rule 11.11(c)(10) defines a Double Play order as a
market or limit order that, upon entry, routes to designated away
Trading Centers which are approved by the Exchange from time to time
without first exposing the order to the NSX Book. A Double Play
Order that is not executed in full after routing away receives a new
time stamp upon return to the Exchange and is ranked and maintained
in the NSX Book in accordance with Rule 11.14(a).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nsx.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
As part of its continuous assessment of the U.S. equity securities
markets and the competitive environment in which it operates, the
Exchange has in recent months undertaken a series of changes to its Fee
Schedule with the goal of maximizing the effectiveness of its business
model, providing incentives to Equity Trading Permit (``ETP'') Holders
\6\ to access the Exchange through both Auto Ex Mode and Order Delivery
Mode, and to continue providing a high-quality and cost-effective
execution venue.\7\ The Exchange believes that,
[[Page 13354]]
while these changes to the Fee Schedule have been salutary and have
responded to the needs of both the Exchange and its customers, the
evolving competitive environment impels additional changes to the
Exchange's fee and rebate structure.
---------------------------------------------------------------------------
\6\ Exchange Rule 1.5 defines ``ETP'' as the Equity Trading
Permit issued by the Exchange for effecting approved securities
transactions on the Exchange's trading facilities.
\7\ See Exchange Act Release No. 71332 (January 16, 2014); 79 FR
3900 (January 23, 2014); (SR-NSX-2014-01) (adopting a single pricing
structure for Order Delivery Mode, establishing new rebates based on
average daily volume (``ADV'') adding liquidity using Order Delivery
Mode, eliminating Quotation Update Fees in securities priced above
$1.00 applicable to Order Delivery Users; eliminating the Order
Delivery Notification Fee in securities priced above $1.00, and
eliminating the market data revenue rebate to Order Delivery Users).
See also Exchange Act Release No. 70890 (November 15, 2013); 78 FR
69900 (November 21, 2013) (SR-NSX-2013-21) (among other amendments,
changing fees and rebates for executions in Auto Ex Mode, providing
an enhanced rebate for adding liquidity in Tape B securities, and
eliminating the Order Delivery Notification fee and quotation update
fee in securities priced below $1.00).
---------------------------------------------------------------------------
Accordingly, as set forth in greater detail below, the Exchange is
proposing to restructure its fee and rebate programs for both Auto Ex
Mode and Order Delivery Mode and adopt a model whereby ETP Holders
adding liquidity, computed as a daily percentage of the ETP Holder's
total consolidated volume (``TCV'') \8\ adding liquidity, will be
assessed fees that will decline from $0.0018 per executed share to
$0.0012 per executed share as the ETP Holder's percentage of TCV
increases. The proposed fee structure will apply in both Auto Ex Mode
and Order Delivery Mode. ETP Holders removing liquidity in securities
priced at $1.00 and above will receive a rebate. For securities priced
below $1.00, the Exchange proposes to retain its fee and rebate
structure as it existed before the instant amendment.
---------------------------------------------------------------------------
\8\ The proposed amended Fee Schedule defines ``TCV'' as the
total consolidated volume calculated as the volume reported by all
exchanges and trade reporting facilities to a consolidated
transaction reporting plan.
---------------------------------------------------------------------------
In proposing these amendments to the Fee Schedule, the Exchange is
replicating certain aspects of the fee and rebate structure currently
in effect at CBSX, including the volume tiers currently in use by CBSX
for determining fees for providing liquidity. The CBSX fee and rebate
schedule and all amendments thereto have been filed with the
Commission.\9\ In addition, the Exchange believes that its proposal
will further simplify and streamline the Exchange's Fee Schedule by
providing for the same fees in both modes of order interaction. Thus,
all ETP Holders will be subject to the same fee and rebate structure
whether they are accessing the Exchange through Auto Ex Mode or Order
Delivery Mode.
---------------------------------------------------------------------------
\9\ See, e.g., Exchange Act Release No. 66665 (March 27, 2012);
77 FR 19741 (April 2, 2012) (SR-CBOE-2012-029).
---------------------------------------------------------------------------
Fee and Rebate Structure Prior to the Proposed Changes
Prior to the changes proposed in this rule filing, the Fee Schedule
as of January 9, 2014 contained separate fee and rebate structures for
executions occurring through Auto Ex Mode (as contained in Section I.
of the former Fee Schedule) and Order Delivery Mode (as contained in
Section II. of the former Fee Schedule). Within each of those separate
fee and rebate structures, the Exchange established ADV tiers that
provided rebates to ETP Holders for adding liquidity and assessed fees
for removing liquidity. ETP Holders were also given a rebate to 50% of
the Market Data Revenue (``MDR'') for ADV meeting certain volume tiers.
Section I. Fees and Rebates Applicable to Auto Ex Mode
The fee and rebate structure for Auto Ex Mode under former Section
I. of the Fee Schedule was as follows:
Securities $1 and Above (All Tapes); \10\ Orders That Add and Take
Liquidity \11\:
---------------------------------------------------------------------------
\10\ The term ``Tapes'' refers to the designation assigned in
the Consolidated Tape Association (``CTA'') Plan for reporting
trades with respect to securities in Networks A, B and C. Tape A
securities are those listed on the New York Stock Exchange, Inc.;
Tape B securities are listed on NYSE MKT, formerly NYSE Amex, and
regional exchanges. Tape C securities are those listed on the NASDAQ
Stock Market LLC.
\11\ This section in the former Fee Schedule referenced former
Explanatory Endnote (2), which provided that, except for Midpoint
Peg Zero Display reserve orders (as specified in Rule
11.11(c)(2)(B), only ``Displayed orders'' are eligible for a rebate,
and Displayed Orders mean orders that are not ``Zero Display
Orders'' (which means ``Zero Display reserve orders'' as specified
in Rule 11.11(c)(2)(A)).
---------------------------------------------------------------------------
Each ETP Holder was charged $0.0030 per share for any marketable
order that removed liquidity unless the ETP Holder executed ADV of at
least 25,000 shares of added liquidity in Auto Ex Mode during a
calendar month.
The ``Fixed Fee Schedule'' applied to each ETP Holder that executed
ADV of at least 25,000 shares of added liquidity in Auto Ex Mode during
a calendar month unless the ETP Holder elected to adopt the ``Variable
Fee Schedule'' by sending an email indicating this preference to
NSXTrading@NSX.com prior to 4:00 p.m. EST on the first trading day of
the calendar month.
For Tape B securities only, each ETP Holder that executed ADV of
least 25,000 shares of added liquidity in Auto Ex Mode during a
calendar month received a rebate of $0.0034 under the Fixed Fee
Schedule per executed share.
The former Section I. fee and rebate structure was as follows:
----------------------------------------------------------------------------------------------------------------
Variable fee schedule Fixed fee schedule
------------------------------------ -----------------------------------
Tier ADV Rebate to add Fee to remove MDR % Rebate to add Fee to remove
liquidity (per liquidity (per liquidity (per liquidity (per
share) share) share) share)
----------------------------------------------------------------------------------------------------------------
1........ 0 & < 0.5 $0.0024 $0.0030 -% $0.0024 $0.0029
million shares
traded.
2........ >= 0.5 & < 1.5 0.0026 0.0030 50 0.0030 0.0029
million shares
traded.
3........ >= 1.5 & < 5.0 0.0027 0.0030 50 0.0031 0.0029
million shares
traded.
4........ >= 5.0 & < 10.0 0.0029 0.0029 50 0.0032 0.0028
million shares
traded.
5........ >=10.0 million 0.0031 0.0028 50 0.0033 0.0027
shares traded.
----------------------------------------------------------------------------------------------------------------
The former Fee Schedule provided that, for all Tapes, an ETP Holder
posting a Midpoint Peg Zero Display Reserve Order received a fixed
rebate of $0.0017 per executed share; these shares were to be included
in the ADV calculation but were not eligible for additional rebates
under Section I. Additionally, for all Tapes, an ETP Holder removing
liquidity using a Midpoint-Seeker Order was charged a fixed fee of
$0.0020 per executed share; these shares were to be included in the ADV
calculation but not subject to additional fees under Section I.
Securities under $1 (All Tapes) Orders that Add and Take Liquidity:
For executions in securities priced under $1.00 through Auto Ex
Mode, Section I. of the pre-amendment Fee Schedule provided for rebates
to add liquidity and fees to remove liquidity as follows:
[[Page 13355]]
----------------------------------------------------------------------------------------------------------------
Rebate to add liquidity (per
Tier ADV share) Fee to remove liquidity (per share)
----------------------------------------------------------------------------------------------------------------
1............ All................. Lesser of: 0.25% of trade value 0.30% of trade value.
\7\and 25% of the quote spread \8\.
----------------------------------------------------------------------------------------------------------------
Section II. Fees and Rebates Applicable in Order Delivery Mode
The fee and rebate structure for Order Delivery Mode under former
Section II. of the Fee Schedule was as follows:
Securities $1 and Above (All Tapes):
Each ETP Holder approved for use of Order Delivery Mode (``Order
Delivery User'') executing ADV of added liquidity of at least 15
million shares in Order Delivery Mode during a calendar month would
receive a per share rebate as follows:
------------------------------------------------------------------------
Rebate to add
Tier ADV of added liquidity liquidity (per
share)
------------------------------------------------------------------------
1................... >= 15 million shares traded..... $0.0005
2................... >= 20 million shares traded..... 0.0013
3................... >= 25 million shares traded..... 0.0017
------------------------------------------------------------------------
Each Order Delivery User executing ADV of added liquidity in the
following amounts through both Order Delivery Mode and Auto Ex Mode
during a calendar month would receive a per share rebate on the shares
executed through Order Delivery Mode, as well as any volume-based
rebate for adding liquidity under Section I. above:
------------------------------------------------------------------------
Rebate to add
liquidity (per
Tier Order delivery ADV Auto Ex. ADV share executed
in order
delivery mode)
------------------------------------------------------------------------
1........ >= 300,000-749,999... >= 2 million shares $0.0005
traded.
2........ >= 750,000........... >= 3 million shares 0.0010
traded.
------------------------------------------------------------------------
Additionally, the Fee Schedule provided that an Order Delivery User
paid no fee for Order Delivery Notifications delivered by the System to
that Order Delivery User for potential execution against a posted
displayed or undisplayed order in any security priced at $1.00 and
above.
Securities Under $1 (All Tapes):
For securities priced under $1.00, the Fee Schedule further
provided that an Order Delivery User paid no fee for any Order Delivery
Notification delivered by the System to that Order Delivery User for
potential execution against a posted displayed or undisplayed order in
any security priced below $1.00.
Section III. (Other Services) Fees and Rebates
Section III A. of the pre-amendment Fee Schedule, Order Routing
(All Tapes) provided that orders routed by the Exchange in accordance
with Exchange Rule 11.15(a)(ii) \12\ were charged a fee of $0.0030 per
executed share.
---------------------------------------------------------------------------
\12\ Rule 11.15(a)(ii) entitled Routing to Away Trading Centers
describes the handling of orders eligible for routing to other
Trading Centers.
---------------------------------------------------------------------------
The Fee Schedule further provided that an ETP Holder entering a
Double Play Order \13\ received a fixed rebate for each share directed
to and executed on CBSX of $0.0015 per share. These shares were not
included in the ADV calculation or eligible for additional rebates
under Section I. of the Fee Schedule. An ETP Holder entering a Double
Play Order would not be charged a routing fee under Section III for the
initial routing to a designated away Trading Center. Any unexecuted
portion of a Double Play Order that is returned and executed on the
Exchange shall be subject to either Section I of this Schedule, or a
fee of $0.0030 per share under Section III if the order is subsequently
routed to an away Trading Center in accordance with Exchange Rule
11.15(a)(ii).
---------------------------------------------------------------------------
\13\ Exchange Rule 11.11(c)(10) defined a ``Double Play Order''
as market or limit order for which an ETP Holder instructs the
System to route to designated away Trading Centers which are
approved by the Exchange from time to time without first exposing
the order to the NSX Book. A Double Play Order that is not executed
in full after routing away receives a new time stamp upon return to
the Exchange and is ranked and maintained in the NSX Book in
accordance with Rule 11.14(a).
---------------------------------------------------------------------------
Explanatory Endnotes
Prior to the instant amendments, the Fee Schedule contained
Explanatory Endnotes numbered (1) through (14) inclusive, which are as
follows, with additional parenthetical explanatory text in certain
instances:
(1) As specified in Rule 11.13(b)(1). (This Endnote references a
description of Auto Ex Mode relevant to Section I of the pre-amendment
Fee Schedule).
(2) Except for Midpoint Peg Zero Display Reserve Orders (as
specified in Rule 11.11(c)(2)(B)), only ``Displayed Orders'' are
eligible for a rebate. Displayed Orders mean orders that are not ``Zero
Display Orders'' (which means ``Zero Display Reserve Orders'' as
specified in Rule 11.11(c)(2)(A)).
(3) Reserved.
(4) ``Auto-Ex ADV'' means, with respect to an ETP Holder, the
average number of shares the ETP Holder has executed in Auto-Ex Mode on
the Exchange in all NMS stocks when the Exchange is open for trading
(excluding partial trading days) (or partial month, as applicable).
Only shares executed by an ETP Holder in Auto-Ex Mode will be used by
the Exchange to calculate the minimum ADV contained in Section I.
Regardless of an ETP Holder's Auto-Ex ADV, an ETP Holder shall receive
a fixed per share rebate for Midpoint Peg Zero Display Reserve Orders,
and that ETP Holder will not be eligible for additional rebates under
Section I above.
(5) Reserved.
[[Page 13356]]
(6) Market Data Revenue (``MDR'') Rebates:
(a) Assuming the minimum ADV threshold(s) are achieved, an ETP
Holder will receive a MDR Rebate (in such percent as is specified
above) of the MDR attributable to such ETP Holder's trading and quoting
of Displayed Orders at prices equal to or greater than one dollar in
Auto-Ex Mode or Order Delivery Mode, as applicable. ETP Holders will
not receive MDR Rebates attributable to (x) Zero Display Orders or (y)
securities quoted at prices less than one dollar.
(b) Adjustments. To the extent market data revenue from Tape ``A'',
``B'' or ``C'' transactions is subject to any adjustment, rebates
provided under this program may be adjusted accordingly.
(c) De Minimis Rebates. An ETP Holder will not receive a MDR Rebate
in any calendar quarter in which the MDR Rebate attributable to the ETP
Holder is less than $250.
(d) Quarterly Payments. MDR Rebates will be paid on a quarterly
basis.
(7) ``Trade value'' means a dollar amount equal to the price per
share multiplied by the number of shares executed.
(8) ``Quote spread'' means a dollar amount equal to the number of
shares executed multiplied by the difference at the time of execution
between (x) the price per share of the national best bid, and (y) the
price per share of the national best offer, in each case as such quotes
are disseminated pursuant to an effective National Market System plan
and as the terms ``national best bid'' and ``national best offer'' are
defined in Rule 600 of Regulation NMS; provided, that no rebate based
on the quote spread shall be payable during any period in which the
market is locked or crossed.
(9) As specified in Rule 11.13(b)(2). A marketable order entered
with a handling instruction other than Post Only through an order
delivery session by an ETP Holder that is an order delivery participant
will be subject to the Auto-Ex Mode fee schedule contained in Section I
above. (This Endnote references the description of Order Delivery Mode
under Rule 11.13(b)(2) and provides additional information as to the
fees applicable in certain instances.)
(10) Reserved.
(11) Orders that are routed via NSX and executed in another market
center. (This Endnote provides a description of what constitutes a
``routed order'' for purposes of the fees under Section III.A of the
Fee Schedule.
(12) Authorized recipients of the Exchange's Depth of Book feed
must execute required documentation with, and be approved by, the
Exchange prior to receiving the service.
(13) Upon verification and approval by NSX, the number of shares
executed by ETP Holders under common ownership and control will be
aggregated for purposes of calculating average daily volumes. See Rule
16.3.
(14) In the event of any change to this Fee and Rebate Schedule at
other than the end of a calendar month, volume calculations will be
made on the basis of such number of full trading days within such month
during which the unchanged pricing or rebate program's terms are in
effect.
Restructured Fee and Rebate Program
The Exchange is proposing to amend Section I. of the Fee Schedule
to eliminate the Variable and Fixed Fee Schedules for securities priced
at $1.00 and above across all Tapes and to adopt the fee and rebate
structure currently used by CBSX. The Exchange will therefore,
consistent with the pricing model in use by CBSX, charge fees to ETP
Holders adding liquidity and provide a rebate to ETP Holders removing
liquidity. Consequently, the ADV tiers and their associated per share
rebates to add liquidity, the fees assessed to remove liquidity, and
the Market Data Revenue (``MDR'') rebate under the pre-amendment Fee
Schedule, will be rescinded. The Exchange also proposes to eliminate
the enhanced rebate for ADV of at least 25,000 shares of added
liquidity in Tape B securities.
The Exchange also proposes as a part of these amendments to amend
Section II. of the Fee Schedule to eliminate the separate fee and
rebate structure applicable to executions by Order Delivery Users in
Order Delivery Mode and in some instances through a combination of
activity through Auto Ex Mode and Order Delivery Mode. As proposed,
there will be one schedule of transaction fees and rebates that will
apply in both modes of interaction with the Exchange. The section
headings of the Fee Schedule will be renumbered in view of the
elimination of the separate Order Delivery Mode Fee Schedule that
formerly comprised the content of Section II.
Under the proposed new fee and rebate schedule for Section I., the
Exchange will assess a per share fee for adding liquidity, based on a
percentage of TCV of liquidity in one day. The maximum fee for adding
liquidity will be $0.0018 per executed share, based on the ETP Holder
adding less than 0.08% of TCV of liquidity in one day. Proposed amended
Section I. of the Fee Schedule provides six additional levels that
reduce the per share fee based on successively higher percentages of
TCV adding liquidity in one day. The lowest fee of $0.0012 per executed
share would apply to ETP Holders adding 0.052% or more of TCV of
liquidity in one day.
The Exchange represents that the tiers are designed to
progressively reduce the fees assessed to ETP Holders daily as their
liquidity provision increases. Specifically, the Exchange believes that
every .08 percent increase in liquidity executed with respect to TCV
(.09 percent and .10 percent as such ETP Holder's quantity of liquidity
provision moves up through the tier levels), produces an additive
effect on the revenues collected by the Exchange. Therefore, the
Exchange is proposing to incentivize greater liquidity provision by
reducing fees payable for providing liquidity as an ETP Holder's level
of liquidity provision increases. The Exchange's proposal represents an
aspirational effort to attract greater posted liquidity by reduced fees
at the specified levels.
The TCV tiers and the associated fees that the Exchange proposes to
charge for providing liquidity at the specified levels are as follows:
Fees for Providing Liquidity (Maker)
------------------------------------------------------------------------
------------------------------------------------------------------------
Maker (adds less than 0.08% of TCV of $0.0018 per share.
liquidity in one day).
Maker (adds at least 0.08% but less 0.0017 per share.
than 0.16% of TCV of liquidity in
one day).
Maker (adds at least 0.16% but less 0.0016 per share.
than 0.24% of TCV of liquidity in
one day).
Maker (adds at least 0.24% but less 0.0015 per share.
than 0.33% of TCV of liquidity in
one day).
Maker (adds at least 0.33% but less 0.0014 per share.
than 0.42% of TCV of liquidity in
one day).
Maker (adds at least 0.42% but less 0.0013 per share.
than 0.52% of TCV of liquidity in
one day).
Maker (adds 0.52% or more of TCV of 0.0012 per share.
liquidity in one day).
Zero Display Maker...................
Maker (adds liquidity using a Zero 0.0018 per share.
Display Order or Zero Display
Primary Peg Order).
[[Page 13357]]
Maker (adds liquidity using a Zero 0.0018 per share.
Display Mid-Point Peg or Zero
Display Market Peg Order).
------------------------------------------------------------------------
As noted in the table above, the Exchange proposes fee provisions
for ETP Holders adding liquidity through Zero Display Reserve
orders.\14\ ETP Holders will pay a fee of $0.0018 per executed share of
added liquidity using a Zero Display Order; a Zero Display Primary Peg
Order; a Zero Display Mid-Point Peg Order; or Zero Display Market Peg
Order. The fees for adding liquidity in these order types irrespective
of TCV is intended to incentivize ETP Holders to use these ``dark''
orders.
---------------------------------------------------------------------------
\14\ Pursuant to Exchange Rule 11.11(c)(2)(A), a Reserve Order
entered with zero display quantity is a ``Zero Display Reserve
Order.'' The price of a Zero Display Reserve Order may be set
(``pegged'') to track the buy-side of the Protected BBO, the sell-
side of the Protected BBO, or the midpoint of the Protected BBO. A
pegged Zero Display Reserve Order which tracks the inside quote of
the opposite side of the market is defined as a Market Peg; a pegged
Zero Display Reserve Order that tracks the midpoint is defined as a
Midpoint Peg; and a pegged Zero Display Reserve Order that tracks
the inside quote of the same side of the market is defined as a
Primary Peg.
---------------------------------------------------------------------------
The Exchange has also proposed to specify that transactions that
are (i) Taker; (ii) Routed Away; (iii) Zero Display Maker; or (iv)
Maker in securities priced below $1.00 will not count toward an ETP
Holder's percentage of TCV.
Further, as proposed, the rates for adding liquidity contained in
Section I. of the Fee Schedule will apply to all transactions in
securities priced at and above $1.00 made by the same ETP Holder on any
day in which such ETP Holder adds the established percentage or more of
TCV of liquidity.
For ETP Holders removing liquidity, the Exchange proposes to adopt
the following rebate schedule:
Rebates for Removing Liquidity (Taker)
------------------------------------------------------------------------
------------------------------------------------------------------------
Taker (removes Zero Display Mid-Point $0.0015 rebate per share.
Peg or Zero Display Market Peg
Order).
Taker (all other order types)........ 0.0015 rebate per share.
------------------------------------------------------------------------
The Exchange is proposing to pay a rebate of $0.0015 per executed
share to ETP Holders removing liquidity from the NSX Book. Such rebate
will also be paid to ETP Holders for removing ``dark'' order types,
specifically the Zero Display Mid-Point Peg or Zero Display Market Peg
order types.
The Exchange believes that, by offering a rebate to ETP Holders
removing liquidity in securities priced at $1.00 or greater, there will
be a marked improvement in the quality of execution. It is anticipated
that improvement in execution quality should lead to a greater number
of market participants attempting to access the resting liquidity on
the NSX Book.\15\ Furthermore, the Exchange believes that the rebate of
$0.0015 to remove liquidity will offer attractive economic incentives
to liquidity takers and, in conjunction with the fee structure for
liquidity providers, will offer ETP Holders a better quality of
execution.
---------------------------------------------------------------------------
\15\ The ``NSX Book'' is the System's electronic file of orders
(Exchange Rule 1.5).
---------------------------------------------------------------------------
For securities priced below $1.00, the Exchange proposes to retain
the existing pre-amendment fee and rebate structure. ETP Holders adding
liquidity will receive a per share rebate equal to the lesser of 0.25%
of the trade value and 25% of the quote spread at the time of
execution. A fee of 0.30% of trade value will be charged to ETP Holders
removing liquidity in sub-dollar priced securities.
Pursuant to Exchange Rule 16.3, upon an ETP Holder's request the
Exchange will aggregate the activity of the ETP Holder and its
affiliates for purposes of applying the fees and rebates applicable to
liquidity providers and liquidity takers.
Amendments to Section III; Elimination of Rebate for Double Play Orders
The Exchange proposes that, for orders routed by the Exchange and
executed in another market center in accordance with Exchange Rule
11.15(a)(ii), the following fees will apply:
Orders Routed Away
------------------------------------------------------------------------
------------------------------------------------------------------------
Transactions in securities priced $1 $0.0030 per share.
or greater.
Transactions in securities priced 0.30% of trade value.
below $1.
------------------------------------------------------------------------
These are the same fees that applied prior to the instant
amendments. The proposal by the Exchange also includes eliminating the
rebate of $0.0015 per share for Double Play Orders directed to and
executed on CBSX.\16\ The proposed changes to Section I. of the Fee
Schedule provide a rebate for takers of liquidity in the amount of
$0.0015 per executed share, which renders unnecessary the specific
rebate for a Double Play Order, which is designed to allow ETP Holders
to remove liquidity at the designated away Trading Centers.
---------------------------------------------------------------------------
\16\ See Exchange Act Release No. 70890 (November 15, 2013); 78
FR 69900 (November 21, 2013) (SR-NSX-2013-21), cited at footnote 7,
supra.
---------------------------------------------------------------------------
Elimination of Explanatory Endnotes
The Exchange has also proposed eliminating the Explanatory Endnotes
of the Fee Schedule, numbered (1) through (14) inclusive. In certain
instances, the Exchange proposes to move the information contained in
an Explanatory Endnote to the text of the relevant section of the Fee
Schedule; in others, deletion of the Endnote is proposed because the
accompanying sections of the Fee Schedule have been deleted.
Endnotes (1) (a reference to the description of Auto Ex Mode in
Exchange Rule 11.13) and (9) (a reference to the description of Order
Delivery Mode in Rule 11.13 and additional information regarding the
fees applicable to an Order Delivery order with instructions other than
Post Only), will both be deleted because they are inapposite in the
context of the proposed changes to the Fee Schedule and the elimination
of separate pricing structures for each mode of order interaction.
Endnote (2) regarding rebates for non-displayed orders is no longer
applicable in view of the changes to the pricing model. Similarly,
Endnote (4) addresses ``Auto- Ex ADV'' which is no longer relevant in
the proposed pricing model.
[[Page 13358]]
Endnote (6) provides information on the MDR, which is being
eliminated from the Fee Schedule and thus is no longer needed.
Endnote (7), defining ``trade value'' and Endnote (8), defining
``quote spread'' are proposed to be deleted and their content moved to
the body of the Fee Schedule. Also, the text of each of Endnotes (11)
through (14) has been moved to the body of the Fee Schedule and the
deletion of such Endnotes is proposed.
Finally, Endnotes (3), (5) and (10), which were ``reserved'' will
also be deleted.
Pursuant to Exchange Rule 16.1(c), the Exchange will ``provide ETP
Holders with notice of all relevant dues, fees, assessments and charges
of the Exchange'' through the issuance of a Regulatory Circular of the
changes to the Fee Schedule and will provide a copy of the rule filing
on the Exchange's Web site, www.nsx.com.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\17\ in general and, in
particular, Section 6(b)(4) of the Act,\18\ which requires that the
rules of a national securities exchange provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities, and with
Section 6(b)(5) of the Act,\19\ which requires, among other things,
that the rules of a national securities exchange not permit unfair
discrimination between customers, issuers, brokers, or dealers, and be
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78(f)(b)(4).
\19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange submits that the proposed changes in the Fee Schedule
to restructure its fee and rebate programs for both Auto Ex Mode and
Order Delivery Mode are equitably allocated and reasonable, as required
by Section 6(b)(4). The Exchange is proposing to adopt a model whereby
an ETP Holder's added liquidity, computed as a daily percentage of the
ETP Holder's TCV adding liquidity, will be subject to fees that will
decline from $0.0018 per executed share to $0.0012 per executed share
as the ETP Holder's percentage of TCV increases. The proposed fees are
equitably allocated in that they will apply to all ETP Holders
accessing the System, using both Auto Ex Mode and Order Delivery Mode.
Each ETP Holder will have the ability to determine the extent to which
the Exchange's proposed structure will provide it with an economic
incentive to use the System, and model its business accordingly.
Specifically, the Exchange is proposing to eliminate rebates for
adding liquidity and the MDR for securities priced at and above $1.00
under Section I. of the Fee Schedule, and instead provide rebates to
ETP Holders removing liquidity in securities priced at $1.00 and above
will receive a standard rebate of $0.0015 per executed share, including
removing Zero Display Mid-Point or Zero Display Market Peg Orders. The
Exchange submits that this approach constitutes an equitable allocation
of reasonable fees and rebates because the fees and rebates are
applicable to all ETP Holders irrespective of the mode of interaction
used to access the System.
The Exchange submits that converting the qualification for the
different fee tiers for Maker transactions in securities priced $1 or
greater, from measuring by nominal amount of shares to measuring by
relative percentage of TCV, is reasonable because it allows the
Exchange to account for changes in national industry-wide volume. The
Exchange believes that the change is equitable and not unfairly
discriminatory because it will be applied to all ETP Holders. Further,
other exchanges also measure volume using percentage of TCV.
The Exchange further states that its proposals constitute
reasonable dues and fees in that they provide for a more simplified and
streamlined approach which will benefit both ETP Holders and the
Exchange in determining revenues and expenses. In that regard, the
change from the pre-amendment fee and rebate structure also aligns the
Exchange's fee and rebate programs with those used by other national
securities exchanges.\20\ The Exchange submits that its proposed fee
and rebate structure is reasonable in that it is designed to achieve
the goal of maximizing the Exchange's competitive position, simplifying
and streamlining its Fee Schedule, and promoting an efficient structure
that aligns with that of other exchanges and thereby can operate to
reduce the administrative costs and burdens on ETP Holders.
---------------------------------------------------------------------------
\20\ See, e.g., NASDAQ OMX BX fee schedule at
www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; CBSX fee schedule
at www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf.
---------------------------------------------------------------------------
The Exchange believes that retaining the pre-amendment fee and
rebate structure for securities priced below $1.00, i.e., ETP Holders
adding liquidity will receive a per share rebate equal to the lesser of
0.25% of the trade value and 25% of the quote spread at the time of
execution and ETP Holders removing liquidity will be charged a fee of
0.30% of the trade value, is consistent with Section 6(b)(4) of the
Act. The pre-amendment fee and rebate structure for sub-dollar
securities will be equitably allocated in that all ETP Holders
executing orders in such securities will be subject to its provisions;
the fee and rebate structure is reasonable in that it recognizes the
differences between securities priced below $1.00 and those priced at
$1.00 and above and retains the fee and rebate structure that best
addresses the Exchange's goals of greater liquidity, price improvement,
and execution quality.
As part of the proposed changes, the Exchange will eliminate the
rebate of $0.0015 per executed share that it pays to ETP Holders that
direct Double Play Orders to CBSX. The Exchange submits that
eliminating this rebate is consistent with Section 6(b)(4) of the Act.
The proposed change is equitably allocated in that it applies to all
executions by ETP Holders using Double Play Orders; the proposal is
reasonable in that the proposed rebate changes provide for a rebate in
the same amount for all ETP Holders removing liquidity, thereby
aligning the treatment of executions of Double Play Orders with that of
all other orders removing liquidity and providing for a rebate in the
same amount.
The Exchange also believes that the proposed changes described
above satisfy the requirements of Section 6(b)(5) of the Act in that
they do not permit unfair discrimination between customers, issuers,
brokers, or dealers, and are designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system. Under the
proposed changes to the Fee Schedule, all ETP Holders executing orders
on the Exchange will be subject to one fee and rebate structure
applicable to both modes of order interaction, and such changes are
thereby designed to meet the requirements of the Section 6(b)(5) that
the rules of the Exchange not permit unfair discrimination among ETP
Holders and their customers. The Exchange submits that, to the extent
that the amendments to the Fee Schedule align with the fee and rebate
programs of other exchanges, they will promote just and equitable
principles of trade by reducing the administrative burdens
[[Page 13359]]
and expenses incurred by ETP Holders in determining the revenues and
costs associated with its activity on the Exchange.
Moreover, the Exchange believes that offering rebates to ETP
Holders removing liquidity in securities priced at $1.00 or greater
will incentivize more such liquidity-takers to trade on the Exchange,
which will in turn provide greater opportunities for liquidity
providers to experience a better execution quality. Improvement in
execution quality should, the Exchange posits, lead to a greater number
of market participants seeking to access the liquidity on the NSX Book,
which would inure to the benefit of all ETP Holders seeking greater and
better execution opportunities. In this regard, the Exchange believes
that proposed amendments to the Fee Schedule meet the test of an
equitable allocation of reasonable dues and fees under Section 6(b)(4)
as well as promoting just and equitable principles of trade and
operating to remove impediments to and perfect the mechanism of a free
and open market and a national market system under Section 6(b)(5).
The Exchange submits that its proposal to eliminate the Explanatory
Endnotes of the Fee Schedule, numbered (1) through (14) inclusive, in
certain instances moving the information contained in an Explanatory
Endnote to the text of the relevant section of the Fee Schedule and in
others deleting the Endnote because the accompanying sections of the
Fee Schedule have been deleted, is consistent with Section 6(b)(5) of
the Act. The Exchange is proposing these amendments to add greater
clarity and transparency to the Fee Schedule which, it believes will be
enhanced by deleting obsolete references and moving relevant retained
Endnote text to the accompanying section of the Fee Schedule. The
Exchange submits that these amendments are consistent with Section
6(b)(5) in that they promote just and equitable principles of trade and
operate to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act. The proposed rule
change seeks to adopt a fee and rebate structure, certain aspects of
which are already in use by CBSX, and it will apply to all ETP Holders
irrespective of the mode of order interaction used to access the
Exchange. The Exchange submits that, given that it previously had
separate fee and rebate programs for executions occurring through Auto
Ex Mode and Order Delivery Mode, moving to a single schedule for
transaction fees and rebates for both modes of order interaction should
impose no burden on competition. Moreover, the proposed changes will,
the Exchange believes, operate to enhance rather than burden
competition by aspiring to increase liquidity and improve execution
quality on the Exchange through reasonable and equitably allocated
economic incentives.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has taken effect upon filing pursuant to
Section 19(b)(3)(A)(ii) of the Act \21\ and subparagraph (f)(2) of Rule
19b-4.\22\
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\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
\22\ 17 CFR 240.19b-4.
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At any time within 60 days of the filing of such 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.
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-NSX-2014-05 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-NSX-2014-05. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NSX-2014-05 and should be
submitted on or before March 31, 2014.
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\23\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05030 Filed 3-7-14; 8:45 am]
BILLING CODE 8011-01-P
