Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Penny Pilot Options Fees and Rebates, 30511-30514 [2015-12830]
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Federal Register / Vol. 80, No. 102 / Thursday, May 28, 2015 / Notices
(6) The Fund will not use derivative
instruments, including options, swaps,
forwards and futures contracts, both
listed and OTC.
(7) The Fund’s net assets that are
invested in exchange-traded equities,
including ETPs and common stock, will
be invested in instruments that trade in
markets that are members of ISG or are
parties to a comprehensive surveillance
sharing agreement with the Exchange.
(8) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities and other
illiquid assets (calculated at the time of
investment).
(9) A minimum of 100,000 Shares will
be outstanding at the commencement of
trading on the Exchange.
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Notice. For the foregoing reasons,
the Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
of the Act 31 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,32
that the proposed rule change (SR–
NASDAQ–2015–023), as modified by
Amendment No. 1, is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–12835 Filed 5–27–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75032; File No. SR–
NYSEArca–2015–17]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of a
Longer Period for Commission Action
on a Proposed Rule Change To Modify
the Appointment Process Utilized by
the Exchange
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to modify the
Market Maker appointment and
withdrawal process used by the
Exchange. The proposed rule change
was published for comment in the
Federal Register on April 8, 2015.3 The
Commission received no comment
letters on the proposed rule change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is May 23, 2015. The Commission is
extending this 45-day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider this proposed rule change.
The proposed rule change, if approved,
would modify the Market Maker
appointment and withdrawal process
used by the Exchange.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the Act,5
designates July 7, 2015, as the date by
which the Commission should either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NYSEArca–2015–17).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–12836 Filed 5–27–15; 8:45 am]
asabaliauskas on DSK5VPTVN1PROD with NOTICES
[Release No. 34–75024; File No. SR–BX–
2015–029]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Regarding
Penny Pilot Options Fees and Rebates
May 21, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 11,
2015, NASDAQ OMX BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Chapter XV, entitled ‘‘Options Pricing’’
and Section 2, entitled ‘‘Options
Market—Fees and Rebates’’.
Specifically, the Exchange proposes to:
(1) Decrease the Fee to Add Liquidity in
Penny Pilot Options; 3 (2) decrease the
Rebate to Remove Liquidity in Penny
Pilot Options; and (3) delete the
Monthly Volume Tiers that apply to
Lead Market Makers.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxbx.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1 15
31 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
33 17 CFR 200.30–3(a)(12).
32 15
VerDate Sep<11>2014
SECURITIES AND EXCHANGE
COMMISSION
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
BILLING CODE 8011–01–P
May 21, 2015.
On March 20, 2015, NYSE Arca, Inc.,
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
18:18 May 27, 2015
Jkt 235001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Penny Pilot Options are options that quote and
trade pursuant to the Penny Pilot, an industry-wide
program. The Penny Pilot was established on the
Exchange in June 2012 and last extended in
December 2014. See Securities Exchange Act
Release Nos. 67256 (June 26, 2012), 77 FR 39277
(July 2, 2012) (SR–BX–2012–030) (order approving
BX option rules and establishing Penny Pilot); and
73689 (November 25, 2014), 79 FR 71488
(December 2, 2014) (SR–BX–2014–057) (notice of
filing and immediate effectiveness extending the
Penny Pilot through June 30, 2015).
2 17
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74635
(April 2, 2015), 80 FR 18909.
4 15 U.S.C. 78s(b)(2).
5 Id.
6 17 CFR 200.30–3(a)(31).
2 17
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Federal Register / Vol. 80, No. 102 / Thursday, May 28, 2015 / Notices
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend Chapter XV, Section
2. Specifically, the Exchange proposes
to: (1) Decrease the Fee to Add Liquidity
in Penny Pilot Options for Customers 4
and BX Options Market Makers;5 (2)
decrease the Rebate to Remove Liquidity
in Penny Pilot Options for Customers;
and (3) delete the Monthly Volume
Tiers (‘‘Tiers’’) that apply to Lead
Market Makers (‘‘LMMs’’, also known as
‘‘BX LMMs’’) 6 when adding liquidity in
Penny Pilot Options and contra to a
Customer.7
quote and trade in penny increments.
The Exchange’s options pricing for
execution of contracts on the BX
Options Market has a separate section
for fees and rebates for Penny Pilot
Options.
Currently, Section 2(1) of Chapter XV
reflects Penny Pilot Options fees and
rebates for Penny Pilot Options for
Customer, BX Options Market Maker,
and Non Customer 8 as follows:
Fees and Rebates for Penny Pilot
Options
The Penny Pilot, established on the
Exchange in 2012, allows options to
FEES AND REBATES
[Per executed contract]
Customer
Penny Pilot Options:
Rebate to Add Liquidity ........................................................................................................
Fee to Add Liquidity .............................................................................................................
Rebate to Remove Liquidity .................................................................................................
Fee to Remove Liquidity ......................................................................................................
BX Options
Market Maker
2 $0.00
2 $0.10
3 0.40
3 4 0.40
0.35
N/A
N/A
0.46
NonCustomer 1
N/A
$0.45
N/A
0.46
asabaliauskas on DSK5VPTVN1PROD with NOTICES
There is also one note applicable to
the Fee to Add Liquidity for BX Options
Market Makers section that does not
change.9
The Exchange proposes to decrease by
a penny the Fee to Add Liquidity in
Penny Pilot Options for Customers and
BX Options Market Makers, and to
decrease by a penny the Rebate to
Remove Liquidity in Penny Pilot
Options for Customers.10 As a result, the
fees for adding such liquidity will be the
same for all Customers and BX Options
Market Makers (as well as LMMs); and
the rebates for removing such liquidity
will be the same for all Customers.
Thus, as a result of this filing the Fee
to Add Liquidity in Penny Pilot Options
for Customers and BX Options Market
Makers will decrease to $0.39
(previously $0.40) per executed
contract, but only when the Customer or
BX Options Market Maker is contra to
a Customer. And, as a result of this
proposal, the Rebate to Remove
Liquidity in Penny Pilot Options for
Customers will decrease to $0.34
(previously $0.35) per executed
contract, regardless of the contra party.
The proposed fee and rebate structure
will continue to incentivize adding
liquidity on BX.
In addition to reducing the fee and
rate schedule as discussed, the
Exchange also proposes to delete note 4,
which is applicable to the Fee to Add
Liquidity in Penny Pilot Options for BX
Options Market Makers only. Note 4,
which applies to LMMs in their
specifically allocated options classes
when adding liquidity and contra to a
Customer, currently indicates fees of
$0.40, $0.38, and $0.37 depending on
Monthly Volume Tier A, B, and C
thresholds, respectively.11 Thus, as a
result of the deletion of note 4, LMMs
would incur, like BX Options Market
Makers, a Fee to Add Liquidity in Penny
Pilot Options of $0.39 (previously $0.40)
per executed contract. The Exchange
believes that the current, more complex
Tier structure applicable to LMMs is no
longer needed in light of the proposed
reduction of the fee and rebate, which
continues to incentivize bringing Penny
Pilot Options liquidity to BX. The
Exchange believes that having the same
fees and rebates across the board for all
Penny Pilot Options will, as discussed,
incentivize BX Options Market Makers
and Customers to interact with a greater
number of Penny Pilot Options orders
on the Exchange.
The Exchange believes that the
proposed changes are consistent with
the Act and raise no novel issues.
4 The term ‘‘Customer’’ means a Public Customer
or a broker-dealer, and the term ‘‘Public Customer’’
means a person that is not a broker or dealer in
securities. See Chapter I, Section 1(a)(22) and
1(a)(50).
5 The term ‘‘BX Options Market Maker’’ means an
Options Participant registered with the Exchange
for the purpose of making markets in options
contracts traded on the Exchange and that is vested
with the rights and responsibilities specified in
Chapter VII of these Rules. See Chapter I, Section
1(a)(9). For discussion regarding Market Maker
quotations, see Chapter VII, Section 6.
6 The term ‘‘Lead Market Maker’’ or ‘‘LMM’’
applies to a registered BX Options Market Maker
that is approved pursuant to Chapter VII, Section
13 to be the LMM in an options class (options
classes). See also Securities Exchange Act Release
No. 72883 (August 20, 2014), 79 FR 50971 (August
26, 2014) (SR–BX–2014–035) (order approving
introduction of LMMs on BX).
7 Fees and rebates may together also be referred
to as ‘‘fees/rebates’’ or ‘‘rates’’.
8 A Non-Customer includes a Professional, Firm,
Broker-Dealer and Non-BX Options Market Maker.
9 Unchanged note 3 is as follows. The Fee to Add
Liquidity will be assessed to a Customer or BX
Options Market Maker only when the Customer or
BX Options Market Maker is contra to a Customer.
As discussed, the Exchange proposes to delete note
4, which is currently applicable to the Fee to Add
Liquidity for BX Options Market Makers section.
10 There continues to be no Rebate to Remove
Liquidity in Penny Pilot Options available for BX
Options Market Makers.
11 Per note 4, the Tier A threshold is Total
Volume up to 0.20% of total industry customer
equity and ETF option average daily volume
(‘‘ADV’’) contracts per day; the Tier B threshold is
Total Volume above 0.20% to 0.30%; and the Tier
C threshold is Total Volume of 0.31% or more.
‘‘Total Volume’’ is defined in note 4 as Customer,
BX Options Market Marker, LMM, and NonCustomer volume in Penny Pilot Options and/or
Non-Penny Pilot Options which either adds or
removes liquidity on BX Options. For purposes of
determining Monthly Volume Tiers, any day that
the market is not open for the entire trading day
will be excluded from such calculation.
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19:59 May 27, 2015
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asabaliauskas on DSK5VPTVN1PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 12 in general, and furthers the
objectives of Section 6(b)(5) of the Act 13
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest. BX operates in an
intensely competitive environment and
seeks to offer the same services that its
competitors offer and in which its
customers find value.
The Exchange believes that applying
the same fees to add liquidity for
Customers and BX Options Market
Makers in all Penny Pilot Options, and
applying the same rebates to remove
liquidity for Customers in all Penny
Pilot Options, promotes just and
equitable principles of trade, and fosters
cooperation and coordination with
persons engaged in facilitating
transactions in Penny Pilot Options. As
a result, the fees for adding such
liquidity will be the same for all
Customers and BX Options Market
Makers (as well as LMMs); and the
rebates for removing such liquidity will
be the same for all Customers.
The proposed rule change also
protects investors and the public
interest and seeks to establish and
promote just and equitable principles of
trade by creating more uniformity and
consistency related to fees and rebates
for Penny Pilot Options. The Exchange
believes that the proposal will not
diminish, and in fact may increase,
market making activity on the Exchange
by ensuring fees and rebates that are
reasonable and provide incentive for
trading Penny Pilot Options on the
Exchange. With this proposal, the same
fees for adding Penny Pilot Options
liquidity will be applicable for
Customers and BX Options Market
Makers; and the same rebates for
removing Penny Pilot Options liquidity
will be applicable for Customers.
The proposal to moderately decrease
the Fee to Add Liquidity in Penny Pilot
Options and the Rebate to Remove
Liquidity in Penny Pilot Options, and to
delete the Tiers that apply to LMMs, is
reasonable, equitable, and not unfairly
discriminatory.
12 15
13 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Sep<11>2014
18:18 May 27, 2015
Jkt 235001
Fees and Rebates for Penny Pilot
Options
The Exchange’s proposal to decrease
the Customer and BX Options Market
Maker Fee for Removing Liquidity in
Penny Pilot Options from $0.40 to
$0.39, and to decrease the Customer
Rebate for Removing Liquidity in Penny
Pilot Options from $0.35 to $0.34 per
contract, is reasonable because it will
continue to incentivize bringing Penny
Pilot Options liquidity to the Exchange.
This should benefit all market
participants through increased liquidity
and order interaction. The Exchange
believes that the proposed fee/rebate
change will incentivize market
participants to select the Exchange as a
venue to post liquidity and attract
additional order flow to the benefit of
all market participants. Increased
liquidity provides more trading
opportunities, which attracts other
market participants, including market
makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. Moreover, in constructing
the Exchange’s fee and rebate program,
the Exchange aims to remain
competitive with other venues so that it
is a superior choice for market
participants.
The Exchange believes that its
proposal to decrease the Customer and
BX Options Market Maker Fee for
Removing Liquidity in Penny Pilot
Options from $0.40 to $0.39, and to
decrease the Customer Rebate for
Removing Liquidity in Penny Pilot
Options from $0.35 to $0.34 per
contract, is equitable and not unfairly
discriminatory because the Exchange
will assess the fees and rebates
uniformly to all members [sic], as
applicable regardless of activity level.
The fees for adding Penny Pilot Options
liquidity will be the same for all
Customers and BX Options Market
Makers; and the rebates for removing
Penny Pilot Options liquidity will be
the same for all Customers.
The Exchange will continue to assess
all Non-Customers a higher $0.45 fee to
Add Liquidity in Penny Pilot Options.
The Exchange believes that this is
equitable and not unfairly
discriminatory. The proposed
differentiation between BX Options
Market Makers and other market
participants such as Non-Customers
recognizes the differing contributions
made to the liquidity and trading
environment on the Exchange by these
market participants. BX Options Market
Makers, unlike other market
PO 00000
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30513
participants, have obligations to the
market and regulatory requirements,14
which normally do not apply to other
market participants. A BX Options
Market Maker has the obligation to
make continuous markets, engage in
course of dealings reasonably calculated
to contribute to the maintenance of a
fair and orderly market, and not make
bids or offers or enter into transactions
that are inconsistent with such course of
dealings. On the other hand, NonCustomers, including Professionals,
Firms, Broker-Dealers and Non-BX
Options Market Makers, do not have
such obligations on the Exchange.
The Exchange further believes that is
reasonable to delete the Tiers applicable
to LMMs in respect of the Rebate to
Remove Liquidity in Penny Pilot
Options. The Exchange believes that in
light of the proposed reduced fees/
rebates discussed herein the Tiers are no
longer necessary to incentivize LMMs to
provide liquidity. The Exchange
believes that under such circumstances
it is reasonable and desirable to treat all
uniformly in terms of the rates, as
discussed.15
The Exchange believes that its
proposal to delete the Tiers applicable
to LMMs is equitable and not unfairly
discriminatory because the Exchange
will assess the fees and rebates
uniformly to all members [sic], as
applicable.
The Exchange operates in a highly
competitive market, comprised of
twelve exchanges, in which market
participants can easily and readily
direct order flow to competing venues if
they deem fee levels at a particular
venue to be excessive or rebates to be
inadequate. Accordingly, the fees that
are assessed and the rebates paid by the
Exchange, as described in the proposal,
are influenced by these robust market
forces and therefore must remain
competitive with fees charged and
rebates paid by other venues; that is, the
Exchange’s fees and rebates must
continue to be reasonable and equitably
allocated to those members that opt to
14 Chapter VII, Section 5 indicates that in
registering as a Market Maker, an Options
Participant commits himself to various obligations.
Transactions of a Market Maker in its market
making capacity must constitute a course of
dealings reasonably calculated to contribute to the
maintenance of a fair and orderly market, and
Market Makers should not make bids or offers or
enter into transactions that are inconsistent with
such course of dealings. Further, all such Market
Makers are designated as specialists on BX for all
purposes under the Act or rules thereunder. See
Chapter VII, Sections 5 and 6.
15 Unlike Customers, BX Options Market Makers
and Non-Customers continue not being eligible for
any Rebate to Remove Liquidity in Penny Pilot
Options.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
direct orders to the Exchange rather
than competing venues.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
asabaliauskas on DSK5VPTVN1PROD with NOTICES
The proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
To the contrary, BX has designed its fees
and rebates to compete effectively for
the execution and routing of Penny Pilot
Options contracts on the Exchange.
The Exchange believes that the
proposed amended fees and rebates will
attract market participants and BX
Options Market Makers to engage in
market making activities at the
Exchange, which results in tighter
markets and order interaction and
benefits all market participants.
Moreover, BX Options Market Makers
have obligations to the market and
regulatory requirements, which
normally do not apply to other market
participants.16 While BX Options
Market Makers will continue to pay a
Fee to Add Liquidity in all Penny Pilot
Options that will not be higher than for
Customers, Customers will pay a fee
which is lower than that assessed to
Non-Customers. The Exchange believes
that this does not present an undue
burden on competition because the
pricing seeks to reward liquidity
providers, which in turn benefits all
market participants.
The Exchange believes the proposals
discussed herein do not pose an undue
burden on intermarket competition. The
Exchange operates in a highly
competitive market comprised of twelve
U.S. options exchanges in which
sophisticated and knowledgeable
market participants can and do send
order flow to competing exchanges if
they deem fee levels at a particular
exchange to be excessive. The Exchange
believes that the proposed fee and
rebate scheme discussed herein is
competitive. The Exchange believes that
this competitive marketplace materially
impacts the fees and rebates present on
the Exchange today and substantially
influences the proposal set forth above.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
16 In registering as a BX Options Market Maker,
an Options Participant commits himself to various
obligations. See Chapter VII, Sections 5 and 6.
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18:18 May 27, 2015
Jkt 235001
Pursuant to Section 19(b)(3)(A)(ii) of
the Act,17 the Exchange has designated
this proposal as establishing or changing
a due, fee, or other charge imposed by
the self-regulatory organization on any
person, whether or not the person is a
member of the self-regulatory
organization, which renders the
proposed rule change effective upon
filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BX–
2015–029 and should be submitted on
or before June 18, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–12830 Filed 5–27–15; 8:45 am]
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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75026; File No. SR–CBOE–
2015–048]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2015–029 on the subject line.
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change To Amend
Exchange Rules Related to Order
Tickets
Paper Comments
May 21, 2015.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2015–029. 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
17 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00084
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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 May 11,
2015, Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6) thereunder.4
The Commission is publishing this
notice to solicit comments on the
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
1 15
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]]>Agencies
[Federal Register Volume 80, Number 102 (Thursday, May 28, 2015)]
[Notices]
[Pages 30511-30514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12830]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75024; File No. SR-BX-2015-029]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
Penny Pilot Options Fees and Rebates
May 21, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 11, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Chapter XV, entitled ``Options
Pricing'' and Section 2, entitled ``Options Market--Fees and Rebates''.
Specifically, the Exchange proposes to: (1) Decrease the Fee to Add
Liquidity in Penny Pilot Options; \3\ (2) decrease the Rebate to Remove
Liquidity in Penny Pilot Options; and (3) delete the Monthly Volume
Tiers that apply to Lead Market Makers.
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\3\ Penny Pilot Options are options that quote and trade
pursuant to the Penny Pilot, an industry-wide program. The Penny
Pilot was established on the Exchange in June 2012 and last extended
in December 2014. See Securities Exchange Act Release Nos. 67256
(June 26, 2012), 77 FR 39277 (July 2, 2012) (SR-BX-2012-030) (order
approving BX option rules and establishing Penny Pilot); and 73689
(November 25, 2014), 79 FR 71488 (December 2, 2014) (SR-BX-2014-057)
(notice of filing and immediate effectiveness extending the Penny
Pilot through June 30, 2015).
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The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxbx.cchwallstreet.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for
[[Page 30512]]
the proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Chapter XV,
Section 2. Specifically, the Exchange proposes to: (1) Decrease the Fee
to Add Liquidity in Penny Pilot Options for Customers \4\ and BX
Options Market Makers;\5\ (2) decrease the Rebate to Remove Liquidity
in Penny Pilot Options for Customers; and (3) delete the Monthly Volume
Tiers (``Tiers'') that apply to Lead Market Makers (``LMMs'', also
known as ``BX LMMs'') \6\ when adding liquidity in Penny Pilot Options
and contra to a Customer.\7\
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\4\ The term ``Customer'' means a Public Customer or a broker-
dealer, and the term ``Public Customer'' means a person that is not
a broker or dealer in securities. See Chapter I, Section 1(a)(22)
and 1(a)(50).
\5\ The term ``BX Options Market Maker'' means an Options
Participant registered with the Exchange for the purpose of making
markets in options contracts traded on the Exchange and that is
vested with the rights and responsibilities specified in Chapter VII
of these Rules. See Chapter I, Section 1(a)(9). For discussion
regarding Market Maker quotations, see Chapter VII, Section 6.
\6\ The term ``Lead Market Maker'' or ``LMM'' applies to a
registered BX Options Market Maker that is approved pursuant to
Chapter VII, Section 13 to be the LMM in an options class (options
classes). See also Securities Exchange Act Release No. 72883 (August
20, 2014), 79 FR 50971 (August 26, 2014) (SR-BX-2014-035) (order
approving introduction of LMMs on BX).
\7\ Fees and rebates may together also be referred to as ``fees/
rebates'' or ``rates''.
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Fees and Rebates for Penny Pilot Options
The Penny Pilot, established on the Exchange in 2012, allows
options to quote and trade in penny increments. The Exchange's options
pricing for execution of contracts on the BX Options Market has a
separate section for fees and rebates for Penny Pilot Options.
Currently, Section 2(1) of Chapter XV reflects Penny Pilot Options
fees and rebates for Penny Pilot Options for Customer, BX Options
Market Maker, and Non Customer \8\ as follows:
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\8\ A Non-Customer includes a Professional, Firm, Broker-Dealer
and Non-BX Options Market Maker.
Fees and Rebates
[Per executed contract]
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BX Options Non- Customer
Customer Market Maker \1\
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Penny Pilot Options:
Rebate to Add Liquidity..................................... \2\ $0.00 \2\ $0.10 N/A
Fee to Add Liquidity........................................ \3\ 0.40 \3 4\ 0.40 $0.45
Rebate to Remove Liquidity.................................. 0.35 N/A N/A
Fee to Remove Liquidity..................................... N/A 0.46 0.46
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There is also one note applicable to the Fee to Add Liquidity for
BX Options Market Makers section that does not change.\9\
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\9\ Unchanged note 3 is as follows. The Fee to Add Liquidity
will be assessed to a Customer or BX Options Market Maker only when
the Customer or BX Options Market Maker is contra to a Customer. As
discussed, the Exchange proposes to delete note 4, which is
currently applicable to the Fee to Add Liquidity for BX Options
Market Makers section.
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The Exchange proposes to decrease by a penny the Fee to Add
Liquidity in Penny Pilot Options for Customers and BX Options Market
Makers, and to decrease by a penny the Rebate to Remove Liquidity in
Penny Pilot Options for Customers.\10\ As a result, the fees for adding
such liquidity will be the same for all Customers and BX Options Market
Makers (as well as LMMs); and the rebates for removing such liquidity
will be the same for all Customers. Thus, as a result of this filing
the Fee to Add Liquidity in Penny Pilot Options for Customers and BX
Options Market Makers will decrease to $0.39 (previously $0.40) per
executed contract, but only when the Customer or BX Options Market
Maker is contra to a Customer. And, as a result of this proposal, the
Rebate to Remove Liquidity in Penny Pilot Options for Customers will
decrease to $0.34 (previously $0.35) per executed contract, regardless
of the contra party. The proposed fee and rebate structure will
continue to incentivize adding liquidity on BX.
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\10\ There continues to be no Rebate to Remove Liquidity in
Penny Pilot Options available for BX Options Market Makers.
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In addition to reducing the fee and rate schedule as discussed, the
Exchange also proposes to delete note 4, which is applicable to the Fee
to Add Liquidity in Penny Pilot Options for BX Options Market Makers
only. Note 4, which applies to LMMs in their specifically allocated
options classes when adding liquidity and contra to a Customer,
currently indicates fees of $0.40, $0.38, and $0.37 depending on
Monthly Volume Tier A, B, and C thresholds, respectively.\11\ Thus, as
a result of the deletion of note 4, LMMs would incur, like BX Options
Market Makers, a Fee to Add Liquidity in Penny Pilot Options of $0.39
(previously $0.40) per executed contract. The Exchange believes that
the current, more complex Tier structure applicable to LMMs is no
longer needed in light of the proposed reduction of the fee and rebate,
which continues to incentivize bringing Penny Pilot Options liquidity
to BX. The Exchange believes that having the same fees and rebates
across the board for all Penny Pilot Options will, as discussed,
incentivize BX Options Market Makers and Customers to interact with a
greater number of Penny Pilot Options orders on the Exchange.
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\11\ Per note 4, the Tier A threshold is Total Volume up to
0.20% of total industry customer equity and ETF option average daily
volume (``ADV'') contracts per day; the Tier B threshold is Total
Volume above 0.20% to 0.30%; and the Tier C threshold is Total
Volume of 0.31% or more. ``Total Volume'' is defined in note 4 as
Customer, BX Options Market Marker, LMM, and Non-Customer volume in
Penny Pilot Options and/or Non-Penny Pilot Options which either adds
or removes liquidity on BX Options. For purposes of determining
Monthly Volume Tiers, any day that the market is not open for the
entire trading day will be excluded from such calculation.
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The Exchange believes that the proposed changes are consistent with
the Act and raise no novel issues.
[[Page 30513]]
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \12\ in general, and furthers the objectives of Section
6(b)(5) of the Act \13\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest. BX operates in an intensely
competitive environment and seeks to offer the same services that its
competitors offer and in which its customers find value.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that applying the same fees to add liquidity
for Customers and BX Options Market Makers in all Penny Pilot Options,
and applying the same rebates to remove liquidity for Customers in all
Penny Pilot Options, promotes just and equitable principles of trade,
and fosters cooperation and coordination with persons engaged in
facilitating transactions in Penny Pilot Options. As a result, the fees
for adding such liquidity will be the same for all Customers and BX
Options Market Makers (as well as LMMs); and the rebates for removing
such liquidity will be the same for all Customers.
The proposed rule change also protects investors and the public
interest and seeks to establish and promote just and equitable
principles of trade by creating more uniformity and consistency related
to fees and rebates for Penny Pilot Options. The Exchange believes that
the proposal will not diminish, and in fact may increase, market making
activity on the Exchange by ensuring fees and rebates that are
reasonable and provide incentive for trading Penny Pilot Options on the
Exchange. With this proposal, the same fees for adding Penny Pilot
Options liquidity will be applicable for Customers and BX Options
Market Makers; and the same rebates for removing Penny Pilot Options
liquidity will be applicable for Customers.
The proposal to moderately decrease the Fee to Add Liquidity in
Penny Pilot Options and the Rebate to Remove Liquidity in Penny Pilot
Options, and to delete the Tiers that apply to LMMs, is reasonable,
equitable, and not unfairly discriminatory.
Fees and Rebates for Penny Pilot Options
The Exchange's proposal to decrease the Customer and BX Options
Market Maker Fee for Removing Liquidity in Penny Pilot Options from
$0.40 to $0.39, and to decrease the Customer Rebate for Removing
Liquidity in Penny Pilot Options from $0.35 to $0.34 per contract, is
reasonable because it will continue to incentivize bringing Penny Pilot
Options liquidity to the Exchange. This should benefit all market
participants through increased liquidity and order interaction. The
Exchange believes that the proposed fee/rebate change will incentivize
market participants to select the Exchange as a venue to post liquidity
and attract additional order flow to the benefit of all market
participants. Increased liquidity provides more trading opportunities,
which attracts other market participants, including market makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
Moreover, in constructing the Exchange's fee and rebate program, the
Exchange aims to remain competitive with other venues so that it is a
superior choice for market participants.
The Exchange believes that its proposal to decrease the Customer
and BX Options Market Maker Fee for Removing Liquidity in Penny Pilot
Options from $0.40 to $0.39, and to decrease the Customer Rebate for
Removing Liquidity in Penny Pilot Options from $0.35 to $0.34 per
contract, is equitable and not unfairly discriminatory because the
Exchange will assess the fees and rebates uniformly to all members
[sic], as applicable regardless of activity level. The fees for adding
Penny Pilot Options liquidity will be the same for all Customers and BX
Options Market Makers; and the rebates for removing Penny Pilot Options
liquidity will be the same for all Customers.
The Exchange will continue to assess all Non-Customers a higher
$0.45 fee to Add Liquidity in Penny Pilot Options. The Exchange
believes that this is equitable and not unfairly discriminatory. The
proposed differentiation between BX Options Market Makers and other
market participants such as Non-Customers recognizes the differing
contributions made to the liquidity and trading environment on the
Exchange by these market participants. BX Options Market Makers, unlike
other market participants, have obligations to the market and
regulatory requirements,\14\ which normally do not apply to other
market participants. A BX Options Market Maker has the obligation to
make continuous markets, engage in course of dealings reasonably
calculated to contribute to the maintenance of a fair and orderly
market, and not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. On the other hand, Non-
Customers, including Professionals, Firms, Broker-Dealers and Non-BX
Options Market Makers, do not have such obligations on the Exchange.
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\14\ Chapter VII, Section 5 indicates that in registering as a
Market Maker, an Options Participant commits himself to various
obligations. Transactions of a Market Maker in its market making
capacity must constitute a course of dealings reasonably calculated
to contribute to the maintenance of a fair and orderly market, and
Market Makers should not make bids or offers or enter into
transactions that are inconsistent with such course of dealings.
Further, all such Market Makers are designated as specialists on BX
for all purposes under the Act or rules thereunder. See Chapter VII,
Sections 5 and 6.
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The Exchange further believes that is reasonable to delete the
Tiers applicable to LMMs in respect of the Rebate to Remove Liquidity
in Penny Pilot Options. The Exchange believes that in light of the
proposed reduced fees/rebates discussed herein the Tiers are no longer
necessary to incentivize LMMs to provide liquidity. The Exchange
believes that under such circumstances it is reasonable and desirable
to treat all uniformly in terms of the rates, as discussed.\15\
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\15\ Unlike Customers, BX Options Market Makers and Non-
Customers continue not being eligible for any Rebate to Remove
Liquidity in Penny Pilot Options.
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The Exchange believes that its proposal to delete the Tiers
applicable to LMMs is equitable and not unfairly discriminatory because
the Exchange will assess the fees and rebates uniformly to all members
[sic], as applicable.
The Exchange operates in a highly competitive market, comprised of
twelve exchanges, in which market participants can easily and readily
direct order flow to competing venues if they deem fee levels at a
particular venue to be excessive or rebates to be inadequate.
Accordingly, the fees that are assessed and the rebates paid by the
Exchange, as described in the proposal, are influenced by these robust
market forces and therefore must remain competitive with fees charged
and rebates paid by other venues; that is, the Exchange's fees and
rebates must continue to be reasonable and equitably allocated to those
members that opt to
[[Page 30514]]
direct orders to the Exchange rather than competing venues.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. To the contrary, BX has designed its fees and rebates to
compete effectively for the execution and routing of Penny Pilot
Options contracts on the Exchange.
The Exchange believes that the proposed amended fees and rebates
will attract market participants and BX Options Market Makers to engage
in market making activities at the Exchange, which results in tighter
markets and order interaction and benefits all market participants.
Moreover, BX Options Market Makers have obligations to the market and
regulatory requirements, which normally do not apply to other market
participants.\16\ While BX Options Market Makers will continue to pay a
Fee to Add Liquidity in all Penny Pilot Options that will not be higher
than for Customers, Customers will pay a fee which is lower than that
assessed to Non-Customers. The Exchange believes that this does not
present an undue burden on competition because the pricing seeks to
reward liquidity providers, which in turn benefits all market
participants.
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\16\ In registering as a BX Options Market Maker, an Options
Participant commits himself to various obligations. See Chapter VII,
Sections 5 and 6.
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The Exchange believes the proposals discussed herein do not pose an
undue burden on intermarket competition. The Exchange operates in a
highly competitive market comprised of twelve U.S. options exchanges in
which sophisticated and knowledgeable market participants can and do
send order flow to competing exchanges if they deem fee levels at a
particular exchange to be excessive. The Exchange believes that the
proposed fee and rebate scheme discussed herein is competitive. The
Exchange believes that this competitive marketplace materially impacts
the fees and rebates present on the Exchange today and substantially
influences the proposal set forth above.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(ii) of the Act,\17\ the Exchange
has designated this proposal as establishing or changing a due, fee, or
other charge imposed by the self-regulatory organization on any person,
whether or not the person is a member of the self-regulatory
organization, which renders the proposed rule change effective upon
filing.
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\17\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2015-029 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2015-029. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BX-2015-029 and should be
submitted on or before June 18, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12830 Filed 5-27-15; 8:45 am]
BILLING CODE 8011-01-P
