Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options Pricing at Chapter XV, Section 2, 34414-34419 [2016-12669]
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34414
Federal Register / Vol. 81, No. 104 / Tuesday, May 31, 2016 / Notices
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 Act. The
Exchange believes that the proposed
rule change will facilitate the listing and
trading of additional types of actively
managed exchange-traded funds that
will enhance competition among market
participants, to the benefit of investors
and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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, as modified by Amendment No.
1, is consistent with the Act. Comments
may be submitted by any of the
following methods:
sradovich on DSK3TPTVN1PROD with NOTICES
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–
NASDAQ–2016–071 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–NASDAQ–2016–071. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
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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 Nasdaq. 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–
NASDAQ–2016–071 and should be
submitted on or before June 21, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–12670 Filed 5–27–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77892; File No. SR–BX–
2016–027]
Self-Regulatory Organizations;
NASDAQ BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options
Pricing at Chapter XV, Section 2
May 24, 2016.
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 19,
2016, NASDAQ BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) 3 filed with the Securities
and Exchange Commission (‘‘SEC’’ or
29 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange notes that it has legally changed
its name to NASDAQ BX, Inc. with the state of
Delaware and filed Form 1 reflecting the change,
and is in the process of changing its rules to reflect
the new name.
1 15
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‘‘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 its
Options Pricing at Chapter XV, Section
2, entitled ‘‘BX Options Market—Fees
and Rebates,’’ which governs pricing for
BX members using the BX Options
Market (‘‘BX Options’’). The Exchange
proposes to modify certain fees (per
executed contract) applicable [sic] the
Select Symbol Options Tier Schedule
for certain Penny Pilot 4 Options (each
a ‘‘Select Symbol’’ and together the
‘‘Select Symbols’’).
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqomxbx.cchwallstreet
.com/, at the principal office of the
Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Chapter XV, Section 2, to modify the
fees 5 schedule to adopt a Fee to Add
Liquidity in the Select Symbol Options 6
4 The Penny Pilot was established in June 2012
and extended in 2015. See Securities Exchange Act
Release Nos. 67256 (June 26, 2012), 77 FR 39277
(July 2, 2012) (SR–BX–2012–030) (order approving
BX option rules and establishing Penny Pilot); and
75326 (June 29, 2015), 80 FR 38481 (July 6, 2015)
(SR–BX–2015–037) (notice of filing and immediate
effectiveness extending the Penny Pilot through
June 30, 2016).
5 Fees are per executed contract. BX Chapter XV,
Section 2(1).
6 Select Symbols represent some of the highest
volume Penny Pilot Options traded on the
Exchange and in the U.S. The following are Select
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Federal Register / Vol. 81, No. 104 / Tuesday, May 31, 2016 / Notices
Tier Schedule for certain Penny Pilot
Options. The proposed Fee to Add
Liquidity would apply to BX Options
Market Maker 7 trading with NonCustomer 8 or BX Options Market
Maker, or Firm.9
Currently, Chapter XV, Section 2,
subsection (1), contains a Select
Symbols Options Tier Schedule that has
four tiers; and one fee for BX Options
Market Maker to add liquidity in Select
Symbols Options in a footnote (the
‘‘footnote’’).10 The Exchange proposes to
delete the footnote and to add a Fee to
Add Liquidity as a fifth column in the
Select Symbols Options Tier Schedule.
The proposed fees are reduced as the
Tiers increase from Tier 1 through Tier
4, as discussed in detail below.
Change 1—Penny Pilot Options: Add
Fee To Add Liquidity Column to Select
Symbols Options Tier Schedule
In Change 1, the Exchange proposes
modifications to convert the current
footnoted Fee to Add Liquidity to a fifth
column in the Select Symbols Options
Tier Schedule that is graduated per
Tiers 1 through 4. The proposed change
will not amend the criteria to qualify for
the existing tiers. The proposed change
keeps the $0.04 fee that is in the current
footnote and makes it applicable to Tier
3, while proposing new graduated fees
for the other three Tiers.
sradovich on DSK3TPTVN1PROD with NOTICES
Symbols: ASHR, DIA, DXJ, EEM, EFA, EWJ, EWT,
EWW, EWY, EWZ, FAS, FAZ, FXE, FXI, FXP, GDX,
GLD, HYG, IWM, IYR, KRE, OIH, QID, QLD, QQQ,
RSX, SDS, SKF, SLV, SPY, SRS, SSO, TBT, TLT,
TNA, TZA, UNG, URE, USO, UUP, UVXY, UYG,
VXX, XHB, XLB, XLE, XLF, XLI, XLK, XLP, XLU,
XLV, XLY, XME, XOP, XRT.
7 BX Options Market Makers may also be referred
to as ‘‘Market Makers’’. The term ‘‘BX Options
Market Maker’’ or (‘‘M’’) means a Participant that
has registered as a Market Maker on BX Options
pursuant to Chapter VII, Section 2, and must also
remain in good standing pursuant to Chapter VII,
Section 4. In order to receive Market Maker pricing
in all securities, the Participant must be registered
as a BX Options Market Maker in at least one
security. BX Chapter XV.
8 Note 1 to Chapter XV, Section 2, states: ‘‘1A
Non-Customer includes a Professional, BrokerDealer and Non-BX Options Market Maker.’’
9 The term ‘‘Firm’’ or (‘‘F’’) applies to any
transaction that is identified by a Participant for
clearing in the Firm range at OCC. BX Chapter XV.
10 The current footnote states: • BX Options
Market Maker fee to add liquidity in Select Symbols
Options will be $0.04 when trading with Firm, NonCustomer, or BX Options Market Maker.
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Specifically, the Exchange proposes to
add a fifth column, Fee to Add
Liquidity, to the Select Symbols Options
Tier Schedule when BX Options Market
Maker trades with Non-Customer or BX
Options Market Maker, or Firm. This
column will include graduated fees that
range from $0.14 for Tier 1 to $0.00 for
Tier 4,11 as follows.
Tier 1 in the Select Symbols Options
Tier Schedule is currently where a BX
Participant (‘‘Participant’’) executes less
than 0.05% of total industry customer
equity and exchange traded fund
(‘‘ETF’’) option average daily volume
(‘‘ADV’’) contracts per month. Tier 1
ranges from a $0.00 rebate to a $0.44 fee,
with a proposed $0.14 Fee to Add
Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm.12
Tier 2 in the Select Symbols Options
Tier Schedule is currently where
Participant executes 0.05% to less than
0.15% of total industry customer equity
and ETF option ADV contracts per
month. Tier 2 ranges from a $0.25 rebate
to a $0.44 fee, with a proposed $0.10
Fee to Add Liquidity when BX Options
Market Maker is trading with NonCustomer or BX Options Market Maker,
or Firm.13
Tier 3 in the Select Symbols Options
Tier Schedule is currently where
Participant executes 0.15% or more of
total industry customer equity and ETF
option ADV contracts per month. Tier 3
ranges from a $0.37 rebate to a $0.40 fee,
with a proposed $0.04 Fee to Add
Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm.14
The proposed $0.04 Fee to Add
Liquidity is the same as the fee in the
current footnote, except as proposed the
fee is graduated according to the four
Tiers.
11 As discussed, Tier 4 requires bringing the
highest amount of liquidity to the Exchange.
12 Currently, there is also a $0.44 Fee to Add
Liquidity when BX Options Market Maker is trading
with Customer. This fee remains unchanged.
13 Currently, there is also a $0.44 Fee to Add
Liquidity when BX Options Market Maker is trading
with Customer. This fee remains unchanged.
14 Currently, there is also a $0.40 Fee to Add
Liquidity when BX Options Market Maker is trading
with Customer. This fee remains unchanged.
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34415
Tier 4 in the Select Symbols Options
Tier Schedule is currently where
Participant executes more than 10,000
BX Price Improvement Auction
(‘‘PRISM’’) 15 Agency Contracts per
month; or Participant executes BX
Options Market Maker volume of 0.30%
or more of total industry customer
equity and ETF options ADV per month.
If a Participant qualifies for Tier 4 the
rates applicable to this tier will
supersede any other Select Symbols tier
rates that the Participant may qualify
for. Tier 4 ranges from a $0.37 rebate to
a $0.29 fee, with a proposed $0.00 Fee
to Add Liquidity when BX Options
Market Maker is trading with NonCustomer or BX Options Market Maker,
or Firm.16
Chapter XV, Section 2 subsection (1)
reflecting the proposed Select Symbols
Options Tier Schedule, with a new Fee
to Add Liquidity when BX Options
Market Maker is trading with NonCustomer or BX Options Market Maker,
or Firm, will read as follows:
Sec. 2 BX Options Market—Fees and
Rebates
The following charges shall apply to
the use of the order execution and
routing services of the BX Options
market for all securities.
(1) Fees for Execution of Contracts on
the BX Options Market:
*
*
*
*
*
15 PRISM is a Price Improvement Mechanism for
all-electronic BX Options whereby a buy and sell
order may be submitted in one order message to
initiate an auction at a stop price and seek potential
price improvement. Options are traded
electronically on BX Options, and all options
participants may respond to a PRISM Auction, the
duration of which is set at 200 milliseconds. PRISM
includes auto-match functionality in which a
Participant (an ‘‘Initiating Participant’’) may
electronically submit for execution an order it
represents as agent on behalf of customer, broker
dealer, or any other entity (‘‘PRISM Order’’) against
principal interest or against any other order it
represents as agent (an ‘‘Initiating Order’’) provided
it submits the PRISM Order for electronic execution
into the PRISM Auction. See Chapter VI, Section 9;
and Securities Exchange Act Release No. 76301
(October 29, 2015), 80 FR 68347 (November 4, 2015)
(SR–BX–2015–032) (order approving PRISM on
BX).
16 Currently, there is also a $0.29 Fee to Add
Liquidity when BX Options Market Maker is trading
with Customer. This fee remains unchanged.
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Federal Register / Vol. 81, No. 104 / Tuesday, May 31, 2016 / Notices
SELECT SYMBOLS OPTIONS TIER SCHEDULE
Rebate to add
liquidity
Fee to add
liquidity
Rebate to
remove
liquidity
Fee to remove
liquidity
Fee to add
liquidity
When:
Customer
BX Options
Market Maker
Customer
BX Options
Market Maker
BX Options
Market Maker
Trading with:
Non-customer
or BX Options
Market Maker,
or Firm
Customer
Non-customer
or BX Options
Market Maker,
Customer, or
Firm
Customer
Non-customer
or BX Options
Market Maker,
or Firm
sradovich on DSK3TPTVN1PROD with NOTICES
Tier 1:
Participant executes less than 0.05% of total industry
customer equity and ETF option ADV contracts per
month ........................................................................
Tier 2:
Participant executes 0.05% to less than 0.15% of total
industry customer equity and ETF option ADV contracts per month ........................................................
Tier 3:
Participant executes 0.15% or more of total industry
customer equity and ETF option ADV contracts per
month ........................................................................
Tier 4:
Participant executes greater than 10,000 PRISM
Agency Contracts per month; or Participant executes BX Options Market Maker volume of 0.30%
or more of total industry customer equity and ETF
options ADV per month .............................................
BX Options Select Symbol List
The following are Select Symbols:
ASHR, DIA, DXJ, EEM, EFA, EWJ, EWT,
EWW, EWY, EWZ, FAS, FAZ, FXE, FXI,
FXP, GDX, GLD, HYG, IWM, IYR, KRE,
OIH, QID, QLD, QQQ, RSX, SDS, SKF,
SLV, SPY, SRS, SSO, TBT, TLT, TNA,
TZA, UNG, URE, USO, UUP, UVXY,
UYG, VXX, XHB, XLB, XLE, XLF, XLI,
XLK, XLP, XLU, XLV, XLY, XME, XOP,
XRT
• Firm fee to add liquidity and fee to
remove liquidity in Select Symbols
Options will be $0.33 per contract,
regardless of counterparty.
• Non-Customer fee to add liquidity
and fee to remove liquidity in Select
Symbols Options will be $0.46 per
contract, regardless of counterparty.
• BX Options Market Maker fee to
remove liquidity in Select Symbols
Options will be $0.46 per contract when
trading with Firm, Non-Customer, or BX
Options Market Maker.
• Customer fee to add liquidity in
Select Symbols Options when contra to
another Customer is $0.33 per contract.
• Volume from all products listed on
BX Options will apply to the Select
Symbols Options Tiers.
*
*
*
*
*
The Exchange is proposing fees
changes and adopting in the Select
Symbols Options Tier Schedule a
graduated Fee to Add Liquidity when
BX Options Market Maker is trading
with Non-Customer or BX Options
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$0.00
$0.44
$0.00
$0.42
$0.14
0.10
0.44
0.25
0.42
0.10
0.20
0.40
0.37
0.39
0.04
0.25
0.29
0.37
0.25
0.00
Market Maker, or Firm. The Exchange
believes that this will provide
incentives for execution of more
contracts, and in particular Select
Symbols Options contracts, on the BX
Options Market. The proposed Fee to
Add Liquidity incentivizes execution of
Select Symbol Options Contracts on the
Exchange by the fee being lower for
each subsequent higher-level Tier.
The Exchange also believes that its
proposal should provide increased
opportunities for participation in
executions on the Exchange, facilitating
the ability of the Exchange to bring
together participants and encourage
more robust competition for orders.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Pricing Schedule
is consistent with Section 6(b) of the
Act,17 in general, and furthers the
objectives of Section 6(b)(4) and (b)(5) of
the Act,18 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility or system
which the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
17 15
18 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(4), (5).
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The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 19
Likewise, in NetCoalition v. Securities
and Exchange Commission 20
(‘‘NetCoalition’’) the D.C. Circuit upheld
the Commission’s use of a market-based
approach in evaluating the fairness of
market data fees against a challenge
claiming that Congress mandated a costbased approach.21 As the court
emphasized, the Commission ‘‘intended
in Regulation NMS that ‘market forces,
rather than regulatory requirements’
play a role in determining the market
data . . . to be made available to
investors and at what cost.’’ 22
19 Securities Exchange Act Release No. 51808
(June 29, 2005), 70 FR 37496 at 37499 (File No. S7–
10–04) (‘‘Regulation NMS Adopting Release’’) [sic].
20 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
21 See id. at 534–535.
22 See id. at 537.
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In Change 1, the Exchange proposes
modifications to convert the current
footnoted Fee to Add Liquidity 24 to a
fifth column in the Select Symbols
Options Tier Schedule. The proposed
Fee to Add Liquidity is graduated
according to Tiers 1 through 4 in the
Select Symbols Options Tier Schedule.
The proposed change keeps the current
$0.04 fee applicable to Tier 3, and
indicates that the fee is reduced as
additional liquidity is brought to the
Exchange according to Tiers 1 through
4 in the Select Symbols Options Tier
Schedule.
Specifically, the Exchange proposes
four graduated fees that range from
$0.14 for Tier 1 to $0.00 for Tier 4.
Tier 1 25 currently ranges from a $0.00
rebate to a $0.44 fee. The Exchange is
proposing in Tier 1 the largest $0.14 Fee
to Add Liquidity when BX Options
Market Maker is trading with NonCustomer or BX Options Market Maker,
or Firm. Tier 2 currently ranges from a
$0.25 rebate to a $0.44 fee. The
Exchange is proposing in Tier 2 a $0.10
Fee to Add Liquidity when BX Options
Market Maker is trading with NonCustomer or BX Options Market Maker,
or Firm. Tier 3 ranges from a $0.37
rebate to a $0.40 fee. The Exchange is
proposing in Tier 3 a $0.04 Fee to Add
Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm. The
proposed $0.04 Fee to Add Liquidity is
the same as the fee in the current
footnote, except as proposed the fee is
graduated according to the four Tiers.
Tier 4 currently ranges from a $0.37
rebate to a $0.29 fee. In Tier 4, the
Exchange is proposing the smallest
$0.00 Fee to Add Liquidity when BX
Options Market Maker is trading with
Non-Customer or BX Options Market
Maker, or Firm.
The proposed rule change is
reasonable because it continues to
encourage market participant behavior
through the fees and rebates system,
which is an accepted methodology
among options exchanges.26 Converting
the current footnote regarding Fee to
Add Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm to
the graduated Fee to Add Liquidity is
reasonable because of the nature of
Select Symbol options. These are the
most heavily traded options on the
Exchange as well as in the industry. By
graduating the proposed Fee to Add
Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm, the
Exchange is promoting transactions in
Select Symbol Options and further
promoting options liquidity on the
Exchange.
The Exchange believes that the
proposed Fee to Add Liquidity in the
Select Symbol Options Tier Schedule is
reasonable because it is not a novel,
untested structure. Rather, the proposed
Fee to Add Liquidity is a graduated fees
and rebate structure that is similar to
what is offered by other options
markets 27 and is similar to the
23 See id. at 539 (quoting Securities Exchange Act
Commission at [sic] Release No. 59039 (December
2, 2008), 73 FR 74770 at 74782–74783 (December
9, 2008) (SR–NYSEArca–2006–21)).
24 The current footnote states: • BX Options
Market Maker fee to add liquidity in Select Symbols
Options will be $0.04 when trading with Firm, NonCustomer, or BX Options Market Maker.
25 Each of the four applicable Tiers, which do not
change, are described above.
26 See, e.g., fee and rebate schedules of other
options exchanges, including, but not limited to,
NASDAQ Options Market (‘‘NOM’’), NASDAQ
PHLX LLC (‘‘Phlx’’), and Chicago Board Options
Exchange (‘‘CBOE’’).
27 See, e.g., MIAX Options Exchange (‘‘MIAX’’).
Further, ‘‘[n]o one disputes that
competition for order flow is ‘fierce.’
. . . As the SEC explained, ‘[i]n the U.S.
national market system, buyers and
sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 23 Although the court
and the SEC were discussing the cash
equities markets, the Exchange believes
that these views apply with equal force
to the options markets.
The Exchange proposes to amend its
Chapter XV, Section 2, to modify certain
fees to adopt Fee to Add Liquidity in the
Select Symbol Options Tier Schedule
for certain Penny Pilot Options. The
proposed Fee to Add Liquidity in the
Select Symbols Options Tier Schedule
would, as discussed, apply where BX
Options Market Maker is trading with
Non-Customer or BX Options Market
Maker, or Firm. The Exchange believes
that its proposal is reasonable,
equitable, and not unfairly
discriminatory and should provide
increased opportunities for participation
in executions on the Exchange,
facilitating the ability of the Exchange to
bring together participants and
encourage more robust competition for
orders.
sradovich on DSK3TPTVN1PROD with NOTICES
Change 1—Penny Pilot Options: Add
Fee To Add Liquidity Column To Select
Symbols Options Tier Schedule
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34417
Exchange’s existing Select Symbols
Options Tier Schedule.28 The proposed
fee schedule is, as discussed, graduated
according to four Tiers. Thus, the
highest proposed Fee to Add Liquidity
is applicable to Tier 1, which requires
the least amount or [sic] liquidity, and
the lowest proposed Fee to Add
Liquidity is applicable to Tier 4, which
requires the greatest amount of
liquidity. The Exchange believes that
the higher fees in Tier 1 and 2 (as
opposed to the footnote fee of $0.04,
which is proposed in Tier 3) are
reasonable because they continue to
incentivize bringing liquidity to the
Exchange while enabling the Exchange
to recoup some of its costs.
The proposed Fee to Add Liquidity
that varies according to Tiers in the
Select Symbols Options Tier Schedule
clearly reflects the progressively
increasing nature of Participant
executions structured for the purpose of
attracting order flow to the Exchange.
This encourages market participant
behavior through progressive tiered fees
and rebates using an accepted
methodology among options exchanges.
The Exchange is proposing changes to
its fees schedule and adopting in the
Select Symbols Options Tier Schedule a
graduated Fee to Add Liquidity when
BX Options Market Maker is trading
with Non-Customer or BX Options
Market Maker, or Firm. The Exchange
believes that this will provide
incentives for execution of more
contracts, and in particular Select
Symbols Options contracts, on the BX
Options Market. The proposed Fee to
Add Liquidity incentivizes execution of
Select Symbol Options Contracts on the
Exchange by such fee being lower for
each subsequent higher Tier.
The Exchange also believes that its
proposal should provide increased
opportunities for participation in
executions on the Exchange, facilitating
the ability of the Exchange to bring
together participants and encourage
more robust competition for orders.
Establishing the proposed Fee to Add
Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm is
equitable and not unfairly
discriminatory. This is because the
Exchange’s proposal to add the noted
Fee to Add Liquidity in the Select
Symbols Options Tier Schedule will
apply uniformly to all similarly situated
28 See, e.g., in the Exchange’s current Select
Symbols Options Tier Schedule: The Fee to Add
Liquidity when BX Options Market Maker is trading
with Customer, and the Rebate to Add Liquidity
when Customer is trading with Non-Customer or
BX Options Market Maker, or Firm. BX Chapter XV,
Section 2(1).
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Federal Register / Vol. 81, No. 104 / Tuesday, May 31, 2016 / Notices
sradovich on DSK3TPTVN1PROD with NOTICES
Participants. The fee and rebate
schedule as proposed continues to
reflect differentiation among different
market participants. The Exchange
believes that the differentiation is
equitable and not unfairly
discriminatory, as well as reasonable,
because transactions of a BX Options
Market Maker must constitute a course
of dealings reasonably calculated to
contribute to the maintenance of a fair
and orderly market, and BX Options
Market Makers should not make bids or
offers or enter into transactions that are
inconsistent with such course of
dealings. All Market Makers are
designated as specialists on BX Options
for all purposes under the Exchange Act
or Rules thereunder.29
The Exchange believes that by making
the proposed changes it is continuing to
incentivize Participants to execute more
volume on the Exchange to further
enhance liquidity in this market.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. Specifically,
the Exchange does not believe that its
proposal to make changes to its Select
Symbols Options Tiers Schedule to
adopt the Fee to Add Liquidity when
BX Options Market Maker is trading
with Non-Customer or BX Options
Market Maker, or Firm will impose any
undue burden on competition, as
discussed below.
The Exchange operates in a highly
competitive market in which many
sophisticated and knowledgeable
market participants can readily and do
send order flow to competing exchanges
if they deem fee levels or rebate
incentives at a particular exchange to be
excessive or inadequate. Additionally,
new competitors have entered the
market and still others are reportedly
entering the market shortly. These
market forces ensure that the Exchange’s
fees and rebates remain competitive
with the fee structures at other trading
platforms. In that sense, the Exchange’s
proposal is actually pro-competitive
because the Exchange is simply
continuing its fees and rebates for Penny
Pilot Options in the Select Symbols
Options Tier Schedule, and is
establishing a graduated Fee to Add
Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm in
29 See Chapter VII, Section 5, entitled
‘‘Obligations of Market Makers.’’ See also Chapter
VII, Section 2.
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[sic] in order to remain competitive in
the current environment.
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. In terms of
inter-market competition, the Exchange
notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues if they deem fee levels at a
particular venue to be excessive, or
rebate opportunities available at other
venues to be more favorable. In such an
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
In terms of intra-market competition,
the Exchange notes that price
differentiation among different market
participants operating on the Exchange
(e.g., Customer and BX Options Market
Maker) is reasonable. Customer activity,
for example, enhances liquidity on the
Exchange for the benefit of all market
participants and benefits all market
participants by providing more trading
opportunities, which attracts market
makers. An increase in the activity of
these market participants (particularly
in response to pricing) in turn facilitates
tighter spreads, which may cause an
additional corresponding increase in
order flow from other market
participants.
Moreover, unlike others [sic] market
participants each BX Options Market
Maker commits to various obligations.
These obligations include, for example,
transactions of a BX Market Maker must
constitute a course of dealings
reasonably calculated to contribute to
the maintenance of a fair and orderly
market, and BX Market Makers should
not make bids or offers or enter into
transactions that are inconsistent with
such course of dealings.30
In this instance, the proposed changes
to the fees to establish a Fee to Add
Liquidity when BX Options Market
Maker is trading with Non-Customer or
BX Options Market Maker, or Firm in
the Select Symbols Options Tiers
Schedule, does not impose a burden on
30 See
PO 00000
Chapter VII, Section 5.
Frm 00110
Fmt 4703
Sfmt 4703
competition because the Exchange’s
execution and routing services are
completely voluntary and subject to
extensive competition both from other
exchanges and from off-exchange
venues. If the changes proposed herein
are unattractive to market participants,
it is likely that the Exchange will lose
market share as a result.
Accordingly, the Exchange does not
believe that the proposed changes will
impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets. Additionally, the
changes proposed herein are procompetitive to the extent that they
continue to allow the Exchange to
promote and maintain order executions.
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,31 the Exchange has designated
this proposal as establishing or changing
a due, fee, or other charge imposed by
the self-regulatory organization on any
person, whether or not the person is a
member of the self-regulatory
organization, which renders the
proposed rule change effective upon
filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
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
31 15
E:\FR\FM\31MYN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
31MYN1
Federal Register / Vol. 81, No. 104 / Tuesday, May 31, 2016 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2016–027 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–77890; File No. SR–
NASDAQ–2016–072])
• 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–2016–027. 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–
2016–027 and should be submitted on
or before June 21, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–12669 Filed 5–27–16; 8:45 am]
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BILLING CODE 8011–01–P
32 17
CFR 200.30–3(a)(12).
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Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change, as
Modified by Amendment No. 1 Thereto,
Relating to the Listing and Trading of
the Shares of the Amplify Dow Theory
Forecasts Buy List ETF of Amplify ETF
Trust
May 24, 2016.
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 10,
2016, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in in Items I
and II below, which Items have been
prepared by Nasdaq. On May 20, 2016,
the Exchange filed Amendment No. 1 to
the proposed rule change. The
Commission is publishing this notice, as
modified by Amendment No. 1 thereto,
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
Nasdaq proposes to list and trade the
shares of the Amplify Dow Theory
Forecasts Buy List ETF (the ‘‘Fund’’) of
Amplify ETF Trust (the ‘‘Trust’’) under
Nasdaq Rule 5735 (‘‘Managed Fund
Shares’’).3 The shares of the Fund are
collectively referred to herein as the
‘‘Shares.’’
The text of the proposed rule change
is available at https://
nasdaq.cchwallstreet.com/, at Nasdaq’s
principal office, and at the
Commission’s Public Reference Room.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Commission approved Nasdaq Rule 5735 in
Securities Exchange Act Release No. 57962 (June
13, 2008), 73 FR 35175 (June 20, 2008) (SR–
NASDAQ–2008–039). There are already multiple
actively-managed funds listed on the Exchange; see,
e.g., Securities Exchange Act Release Nos. 72506
(July 1, 2014), 79 FR 38631 (July 8, 2014) (SR–
NASDAQ–2014–050) (order approving listing and
trading of First Trust Strategic Income ETF); 69464
(April 26, 2013), 78 FR 25774 (May 2, 2013) (SR–
NASDAQ–2013–036) (order approving listing and
trading of First Trust Senior Loan Fund); 66489
(February 29, 2012), 77 FR 13379 (March 6, 2012)
(SR–NASDAQ–2012–004) (order approving listing
and trading of WisdomTree Emerging Markets
Corporate Bond Fund). The Exchange believes the
proposed rule change raises no significant issues
not previously addressed in those prior
Commission orders.
2 17
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
34419
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq 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. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares of the Fund under
Nasdaq Rule 5735, which governs the
listing and trading of Managed Fund
Shares 4 on the Exchange. The Fund will
be an actively-managed exchange-traded
fund (‘‘ETF’’). The Shares will be
offered by the Trust, which was
established as a Massachusetts business
trust on January 6, 2015.5 The Trust is
registered with the Commission as an
investment company and has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission.6 The Fund will be a series
of the Trust.
Amplify Investments LLC will be the
investment adviser (‘‘Adviser’’) to the
Fund. The following will serve as
investment sub-advisers (each, a ‘‘SubAdviser’’) to the Fund: Horizon
Investment Services, LLC (‘‘Horizon’’)
and Penserra Capital Management LLC
(‘‘Penserra’’). Quasar Distributors LLC
4 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1) (the ‘‘1940 Act’’) organized
as an open-end investment company or similar
entity that invests in a portfolio of securities
selected by its investment adviser consistent with
its investment objectives and policies. In contrast,
an open-end investment company that issues Index
Fund Shares, listed and traded on the Exchange
under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the
price and yield performance of a specific foreign or
domestic stock index, fixed income securities index
or combination thereof.
5 The Commission has issued an order, upon
which the Trust may rely, granting certain
exemptive relief under the 1940 Act. See
Investment Company Act Release No. 31582 (April
28, 2015) (File No. 812–14423) (the ‘‘Exemptive
Relief’’).
6 See Post-Effective Amendment No. 2 to
Registration Statement on Form N 1A for the Trust,
dated May 5, 2016 (File Nos. 333 207937 and 811
23108). The descriptions of the Fund and the
Shares contained herein are based, in part, on
information in the Registration Statement.
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]]>Agencies
[Federal Register Volume 81, Number 104 (Tuesday, May 31, 2016)]
[Notices]
[Pages 34414-34419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12669]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77892; File No. SR-BX-2016-027]
Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options
Pricing at Chapter XV, Section 2
May 24, 2016.
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 19, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') \3\ filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The Exchange notes that it has legally changed its name to
NASDAQ BX, Inc. with the state of Delaware and filed Form 1
reflecting the change, and is in the process of changing its rules
to reflect the new name.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Options Pricing at Chapter XV,
Section 2, entitled ``BX Options Market--Fees and Rebates,'' which
governs pricing for BX members using the BX Options Market (``BX
Options''). The Exchange proposes to modify certain fees (per executed
contract) applicable [sic] the Select Symbol Options Tier Schedule for
certain Penny Pilot \4\ Options (each a ``Select Symbol'' and together
the ``Select Symbols'').
---------------------------------------------------------------------------
\4\ The Penny Pilot was established in June 2012 and extended in
2015. See Securities Exchange Act Release Nos. 67256 (June 26,
2012), 77 FR 39277 (July 2, 2012) (SR-BX-2012-030) (order approving
BX option rules and establishing Penny Pilot); and 75326 (June 29,
2015), 80 FR 38481 (July 6, 2015) (SR-BX-2015-037) (notice of filing
and immediate effectiveness extending the Penny Pilot through June
30, 2016).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxbx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Chapter XV, Section 2, to modify
the fees \5\ schedule to adopt a Fee to Add Liquidity in the Select
Symbol Options \6\
[[Page 34415]]
Tier Schedule for certain Penny Pilot Options. The proposed Fee to Add
Liquidity would apply to BX Options Market Maker \7\ trading with Non-
Customer \8\ or BX Options Market Maker, or Firm.\9\
---------------------------------------------------------------------------
\5\ Fees are per executed contract. BX Chapter XV, Section 2(1).
\6\ Select Symbols represent some of the highest volume Penny
Pilot Options traded on the Exchange and in the U.S. The following
are Select Symbols: ASHR, DIA, DXJ, EEM, EFA, EWJ, EWT, EWW, EWY,
EWZ, FAS, FAZ, FXE, FXI, FXP, GDX, GLD, HYG, IWM, IYR, KRE, OIH,
QID, QLD, QQQ, RSX, SDS, SKF, SLV, SPY, SRS, SSO, TBT, TLT, TNA,
TZA, UNG, URE, USO, UUP, UVXY, UYG, VXX, XHB, XLB, XLE, XLF, XLI,
XLK, XLP, XLU, XLV, XLY, XME, XOP, XRT.
\7\ BX Options Market Makers may also be referred to as ``Market
Makers''. The term ``BX Options Market Maker'' or (``M'') means a
Participant that has registered as a Market Maker on BX Options
pursuant to Chapter VII, Section 2, and must also remain in good
standing pursuant to Chapter VII, Section 4. In order to receive
Market Maker pricing in all securities, the Participant must be
registered as a BX Options Market Maker in at least one security. BX
Chapter XV.
\8\ Note 1 to Chapter XV, Section 2, states: ``\1\A Non-Customer
includes a Professional, Broker-Dealer and Non-BX Options Market
Maker.''
\9\ The term ``Firm'' or (``F'') applies to any transaction that
is identified by a Participant for clearing in the Firm range at
OCC. BX Chapter XV.
---------------------------------------------------------------------------
Currently, Chapter XV, Section 2, subsection (1), contains a Select
Symbols Options Tier Schedule that has four tiers; and one fee for BX
Options Market Maker to add liquidity in Select Symbols Options in a
footnote (the ``footnote'').\10\ The Exchange proposes to delete the
footnote and to add a Fee to Add Liquidity as a fifth column in the
Select Symbols Options Tier Schedule. The proposed fees are reduced as
the Tiers increase from Tier 1 through Tier 4, as discussed in detail
below.
---------------------------------------------------------------------------
\10\ The current footnote states: BX Options Market
Maker fee to add liquidity in Select Symbols Options will be $0.04
when trading with Firm, Non-Customer, or BX Options Market Maker.
---------------------------------------------------------------------------
Change 1--Penny Pilot Options: Add Fee To Add Liquidity Column to
Select Symbols Options Tier Schedule
In Change 1, the Exchange proposes modifications to convert the
current footnoted Fee to Add Liquidity to a fifth column in the Select
Symbols Options Tier Schedule that is graduated per Tiers 1 through 4.
The proposed change will not amend the criteria to qualify for the
existing tiers. The proposed change keeps the $0.04 fee that is in the
current footnote and makes it applicable to Tier 3, while proposing new
graduated fees for the other three Tiers.
Specifically, the Exchange proposes to add a fifth column, Fee to
Add Liquidity, to the Select Symbols Options Tier Schedule when BX
Options Market Maker trades with Non-Customer or BX Options Market
Maker, or Firm. This column will include graduated fees that range from
$0.14 for Tier 1 to $0.00 for Tier 4,\11\ as follows.
---------------------------------------------------------------------------
\11\ As discussed, Tier 4 requires bringing the highest amount
of liquidity to the Exchange.
---------------------------------------------------------------------------
Tier 1 in the Select Symbols Options Tier Schedule is currently
where a BX Participant (``Participant'') executes less than 0.05% of
total industry customer equity and exchange traded fund (``ETF'')
option average daily volume (``ADV'') contracts per month. Tier 1
ranges from a $0.00 rebate to a $0.44 fee, with a proposed $0.14 Fee to
Add Liquidity when BX Options Market Maker is trading with Non-Customer
or BX Options Market Maker, or Firm.\12\
---------------------------------------------------------------------------
\12\ Currently, there is also a $0.44 Fee to Add Liquidity when
BX Options Market Maker is trading with Customer. This fee remains
unchanged.
---------------------------------------------------------------------------
Tier 2 in the Select Symbols Options Tier Schedule is currently
where Participant executes 0.05% to less than 0.15% of total industry
customer equity and ETF option ADV contracts per month. Tier 2 ranges
from a $0.25 rebate to a $0.44 fee, with a proposed $0.10 Fee to Add
Liquidity when BX Options Market Maker is trading with Non-Customer or
BX Options Market Maker, or Firm.\13\
---------------------------------------------------------------------------
\13\ Currently, there is also a $0.44 Fee to Add Liquidity when
BX Options Market Maker is trading with Customer. This fee remains
unchanged.
---------------------------------------------------------------------------
Tier 3 in the Select Symbols Options Tier Schedule is currently
where Participant executes 0.15% or more of total industry customer
equity and ETF option ADV contracts per month. Tier 3 ranges from a
$0.37 rebate to a $0.40 fee, with a proposed $0.04 Fee to Add Liquidity
when BX Options Market Maker is trading with Non-Customer or BX Options
Market Maker, or Firm.\14\ The proposed $0.04 Fee to Add Liquidity is
the same as the fee in the current footnote, except as proposed the fee
is graduated according to the four Tiers.
---------------------------------------------------------------------------
\14\ Currently, there is also a $0.40 Fee to Add Liquidity when
BX Options Market Maker is trading with Customer. This fee remains
unchanged.
---------------------------------------------------------------------------
Tier 4 in the Select Symbols Options Tier Schedule is currently
where Participant executes more than 10,000 BX Price Improvement
Auction (``PRISM'') \15\ Agency Contracts per month; or Participant
executes BX Options Market Maker volume of 0.30% or more of total
industry customer equity and ETF options ADV per month. If a
Participant qualifies for Tier 4 the rates applicable to this tier will
supersede any other Select Symbols tier rates that the Participant may
qualify for. Tier 4 ranges from a $0.37 rebate to a $0.29 fee, with a
proposed $0.00 Fee to Add Liquidity when BX Options Market Maker is
trading with Non-Customer or BX Options Market Maker, or Firm.\16\
---------------------------------------------------------------------------
\15\ PRISM is a Price Improvement Mechanism for all-electronic
BX Options whereby a buy and sell order may be submitted in one
order message to initiate an auction at a stop price and seek
potential price improvement. Options are traded electronically on BX
Options, and all options participants may respond to a PRISM
Auction, the duration of which is set at 200 milliseconds. PRISM
includes auto-match functionality in which a Participant (an
``Initiating Participant'') may electronically submit for execution
an order it represents as agent on behalf of customer, broker
dealer, or any other entity (``PRISM Order'') against principal
interest or against any other order it represents as agent (an
``Initiating Order'') provided it submits the PRISM Order for
electronic execution into the PRISM Auction. See Chapter VI, Section
9; and Securities Exchange Act Release No. 76301 (October 29, 2015),
80 FR 68347 (November 4, 2015) (SR-BX-2015-032) (order approving
PRISM on BX).
\16\ Currently, there is also a $0.29 Fee to Add Liquidity when
BX Options Market Maker is trading with Customer. This fee remains
unchanged.
---------------------------------------------------------------------------
Chapter XV, Section 2 subsection (1) reflecting the proposed Select
Symbols Options Tier Schedule, with a new Fee to Add Liquidity when BX
Options Market Maker is trading with Non-Customer or BX Options Market
Maker, or Firm, will read as follows:
Sec. 2 BX Options Market--Fees and Rebates
The following charges shall apply to the use of the order execution
and routing services of the BX Options market for all securities.
(1) Fees for Execution of Contracts on the BX Options Market:
* * * * *
[[Page 34416]]
Select Symbols Options Tier Schedule
----------------------------------------------------------------------------------------------------------------
Rebate to
Rebate to add Fee to add remove Fee to remove Fee to add
liquidity liquidity liquidity liquidity liquidity
----------------------------------------------------------------------------------------------------------------
When: Customer BX Options Customer BX Options BX Options
Market Maker Market Maker Market Maker
----------------------------------------------------------------------------------------------------------------
Trading with: Non-customer Customer Non-customer Customer Non-customer
or BX Options or BX Options or BX Options
Market Maker, Market Maker, Market Maker,
or Firm Customer, or or Firm
Firm
----------------------------------------------------------------------------------------------------------------
Tier 1:
Participant executes less $0.00 $0.44 $0.00 $0.42 $0.14
than 0.05% of total
industry customer equity
and ETF option ADV
contracts per month........
Tier 2:
Participant executes 0.05% 0.10 0.44 0.25 0.42 0.10
to less than 0.15% of total
industry customer equity
and ETF option ADV
contracts per month........
Tier 3:
Participant executes 0.15% 0.20 0.40 0.37 0.39 0.04
or more of total industry
customer equity and ETF
option ADV contracts per
month......................
Tier 4:
Participant executes greater 0.25 0.29 0.37 0.25 0.00
than 10,000 PRISM Agency
Contracts per month; or
Participant executes BX
Options Market Maker volume
of 0.30% or more of total
industry customer equity
and ETF options ADV per
month......................
----------------------------------------------------------------------------------------------------------------
BX Options Select Symbol List
The following are Select Symbols: ASHR, DIA, DXJ, EEM, EFA, EWJ,
EWT, EWW, EWY, EWZ, FAS, FAZ, FXE, FXI, FXP, GDX, GLD, HYG, IWM, IYR,
KRE, OIH, QID, QLD, QQQ, RSX, SDS, SKF, SLV, SPY, SRS, SSO, TBT, TLT,
TNA, TZA, UNG, URE, USO, UUP, UVXY, UYG, VXX, XHB, XLB, XLE, XLF, XLI,
XLK, XLP, XLU, XLV, XLY, XME, XOP, XRT
Firm fee to add liquidity and fee to remove liquidity in
Select Symbols Options will be $0.33 per contract, regardless of
counterparty.
Non-Customer fee to add liquidity and fee to remove
liquidity in Select Symbols Options will be $0.46 per contract,
regardless of counterparty.
BX Options Market Maker fee to remove liquidity in Select
Symbols Options will be $0.46 per contract when trading with Firm, Non-
Customer, or BX Options Market Maker.
Customer fee to add liquidity in Select Symbols Options
when contra to another Customer is $0.33 per contract.
Volume from all products listed on BX Options will apply
to the Select Symbols Options Tiers.
* * * * *
The Exchange is proposing fees changes and adopting in the Select
Symbols Options Tier Schedule a graduated Fee to Add Liquidity when BX
Options Market Maker is trading with Non-Customer or BX Options Market
Maker, or Firm. The Exchange believes that this will provide incentives
for execution of more contracts, and in particular Select Symbols
Options contracts, on the BX Options Market. The proposed Fee to Add
Liquidity incentivizes execution of Select Symbol Options Contracts on
the Exchange by the fee being lower for each subsequent higher-level
Tier.
The Exchange also believes that its proposal should provide
increased opportunities for participation in executions on the
Exchange, facilitating the ability of the Exchange to bring together
participants and encourage more robust competition for orders.
2. Statutory Basis
The Exchange believes that its proposal to amend its Pricing
Schedule is consistent with Section 6(b) of the Act,\17\ in general,
and furthers the objectives of Section 6(b)(4) and (b)(5) of the
Act,\18\ in particular, in that it provides for the equitable
allocation of reasonable dues, fees and other charges among members and
issuers and other persons using any facility or system which the
Exchange operates or controls, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(4), (5).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \19\
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\19\ Securities Exchange Act Release No. 51808 (June 29, 2005),
70 FR 37496 at 37499 (File No. S7-10-04) (``Regulation NMS Adopting
Release'') [sic].
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Likewise, in NetCoalition v. Securities and Exchange Commission
\20\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\21\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \22\
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\20\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\21\ See id. at 534-535.
\22\ See id. at 537.
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[[Page 34417]]
Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \23\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
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\23\ See id. at 539 (quoting Securities Exchange Act Commission
at [sic] Release No. 59039 (December 2, 2008), 73 FR 74770 at 74782-
74783 (December 9, 2008) (SR-NYSEArca-2006-21)).
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The Exchange proposes to amend its Chapter XV, Section 2, to modify
certain fees to adopt Fee to Add Liquidity in the Select Symbol Options
Tier Schedule for certain Penny Pilot Options. The proposed Fee to Add
Liquidity in the Select Symbols Options Tier Schedule would, as
discussed, apply where BX Options Market Maker is trading with Non-
Customer or BX Options Market Maker, or Firm. The Exchange believes
that its proposal is reasonable, equitable, and not unfairly
discriminatory and should provide increased opportunities for
participation in executions on the Exchange, facilitating the ability
of the Exchange to bring together participants and encourage more
robust competition for orders.
Change 1--Penny Pilot Options: Add Fee To Add Liquidity Column To
Select Symbols Options Tier Schedule
In Change 1, the Exchange proposes modifications to convert the
current footnoted Fee to Add Liquidity \24\ to a fifth column in the
Select Symbols Options Tier Schedule. The proposed Fee to Add Liquidity
is graduated according to Tiers 1 through 4 in the Select Symbols
Options Tier Schedule. The proposed change keeps the current $0.04 fee
applicable to Tier 3, and indicates that the fee is reduced as
additional liquidity is brought to the Exchange according to Tiers 1
through 4 in the Select Symbols Options Tier Schedule.
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\24\ The current footnote states: BX Options Market
Maker fee to add liquidity in Select Symbols Options will be $0.04
when trading with Firm, Non-Customer, or BX Options Market Maker.
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Specifically, the Exchange proposes four graduated fees that range
from $0.14 for Tier 1 to $0.00 for Tier 4.
Tier 1 \25\ currently ranges from a $0.00 rebate to a $0.44 fee.
The Exchange is proposing in Tier 1 the largest $0.14 Fee to Add
Liquidity when BX Options Market Maker is trading with Non-Customer or
BX Options Market Maker, or Firm. Tier 2 currently ranges from a $0.25
rebate to a $0.44 fee. The Exchange is proposing in Tier 2 a $0.10 Fee
to Add Liquidity when BX Options Market Maker is trading with Non-
Customer or BX Options Market Maker, or Firm. Tier 3 ranges from a
$0.37 rebate to a $0.40 fee. The Exchange is proposing in Tier 3 a
$0.04 Fee to Add Liquidity when BX Options Market Maker is trading with
Non-Customer or BX Options Market Maker, or Firm. The proposed $0.04
Fee to Add Liquidity is the same as the fee in the current footnote,
except as proposed the fee is graduated according to the four Tiers.
Tier 4 currently ranges from a $0.37 rebate to a $0.29 fee. In Tier 4,
the Exchange is proposing the smallest $0.00 Fee to Add Liquidity when
BX Options Market Maker is trading with Non-Customer or BX Options
Market Maker, or Firm.
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\25\ Each of the four applicable Tiers, which do not change, are
described above.
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The proposed rule change is reasonable because it continues to
encourage market participant behavior through the fees and rebates
system, which is an accepted methodology among options exchanges.\26\
Converting the current footnote regarding Fee to Add Liquidity when BX
Options Market Maker is trading with Non-Customer or BX Options Market
Maker, or Firm to the graduated Fee to Add Liquidity is reasonable
because of the nature of Select Symbol options. These are the most
heavily traded options on the Exchange as well as in the industry. By
graduating the proposed Fee to Add Liquidity when BX Options Market
Maker is trading with Non-Customer or BX Options Market Maker, or Firm,
the Exchange is promoting transactions in Select Symbol Options and
further promoting options liquidity on the Exchange.
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\26\ See, e.g., fee and rebate schedules of other options
exchanges, including, but not limited to, NASDAQ Options Market
(``NOM''), NASDAQ PHLX LLC (``Phlx''), and Chicago Board Options
Exchange (``CBOE'').
---------------------------------------------------------------------------
The Exchange believes that the proposed Fee to Add Liquidity in the
Select Symbol Options Tier Schedule is reasonable because it is not a
novel, untested structure. Rather, the proposed Fee to Add Liquidity is
a graduated fees and rebate structure that is similar to what is
offered by other options markets \27\ and is similar to the Exchange's
existing Select Symbols Options Tier Schedule.\28\ The proposed fee
schedule is, as discussed, graduated according to four Tiers. Thus, the
highest proposed Fee to Add Liquidity is applicable to Tier 1, which
requires the least amount or [sic] liquidity, and the lowest proposed
Fee to Add Liquidity is applicable to Tier 4, which requires the
greatest amount of liquidity. The Exchange believes that the higher
fees in Tier 1 and 2 (as opposed to the footnote fee of $0.04, which is
proposed in Tier 3) are reasonable because they continue to incentivize
bringing liquidity to the Exchange while enabling the Exchange to
recoup some of its costs.
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\27\ See, e.g., MIAX Options Exchange (``MIAX'').
\28\ See, e.g., in the Exchange's current Select Symbols Options
Tier Schedule: The Fee to Add Liquidity when BX Options Market Maker
is trading with Customer, and the Rebate to Add Liquidity when
Customer is trading with Non-Customer or BX Options Market Maker, or
Firm. BX Chapter XV, Section 2(1).
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The proposed Fee to Add Liquidity that varies according to Tiers in
the Select Symbols Options Tier Schedule clearly reflects the
progressively increasing nature of Participant executions structured
for the purpose of attracting order flow to the Exchange. This
encourages market participant behavior through progressive tiered fees
and rebates using an accepted methodology among options exchanges.
The Exchange is proposing changes to its fees schedule and adopting
in the Select Symbols Options Tier Schedule a graduated Fee to Add
Liquidity when BX Options Market Maker is trading with Non-Customer or
BX Options Market Maker, or Firm. The Exchange believes that this will
provide incentives for execution of more contracts, and in particular
Select Symbols Options contracts, on the BX Options Market. The
proposed Fee to Add Liquidity incentivizes execution of Select Symbol
Options Contracts on the Exchange by such fee being lower for each
subsequent higher Tier.
The Exchange also believes that its proposal should provide
increased opportunities for participation in executions on the
Exchange, facilitating the ability of the Exchange to bring together
participants and encourage more robust competition for orders.
Establishing the proposed Fee to Add Liquidity when BX Options
Market Maker is trading with Non-Customer or BX Options Market Maker,
or Firm is equitable and not unfairly discriminatory. This is because
the Exchange's proposal to add the noted Fee to Add Liquidity in the
Select Symbols Options Tier Schedule will apply uniformly to all
similarly situated
[[Page 34418]]
Participants. The fee and rebate schedule as proposed continues to
reflect differentiation among different market participants. The
Exchange believes that the differentiation is equitable and not
unfairly discriminatory, as well as reasonable, because transactions of
a BX Options Market Maker must constitute a course of dealings
reasonably calculated to contribute to the maintenance of a fair and
orderly market, and BX Options Market Makers should not make bids or
offers or enter into transactions that are inconsistent with such
course of dealings. All Market Makers are designated as specialists on
BX Options for all purposes under the Exchange Act or Rules
thereunder.\29\
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\29\ See Chapter VII, Section 5, entitled ``Obligations of
Market Makers.'' See also Chapter VII, Section 2.
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The Exchange believes that by making the proposed changes it is
continuing to incentivize Participants to execute more volume on the
Exchange to further enhance liquidity in this market.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Exchange does
not believe that its proposal to make changes to its Select Symbols
Options Tiers Schedule to adopt the Fee to Add Liquidity when BX
Options Market Maker is trading with Non-Customer or BX Options Market
Maker, or Firm will impose any undue burden on competition, as
discussed below.
The Exchange operates in a highly competitive market in which many
sophisticated and knowledgeable market participants can readily and do
send order flow to competing exchanges if they deem fee levels or
rebate incentives at a particular exchange to be excessive or
inadequate. Additionally, new competitors have entered the market and
still others are reportedly entering the market shortly. These market
forces ensure that the Exchange's fees and rebates remain competitive
with the fee structures at other trading platforms. In that sense, the
Exchange's proposal is actually pro-competitive because the Exchange is
simply continuing its fees and rebates for Penny Pilot Options in the
Select Symbols Options Tier Schedule, and is establishing a graduated
Fee to Add Liquidity when BX Options Market Maker is trading with Non-
Customer or BX Options Market Maker, or Firm in [sic] in order to
remain competitive in the current environment.
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In terms of inter-market
competition, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive, or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In terms of intra-market competition, the Exchange notes that price
differentiation among different market participants operating on the
Exchange (e.g., Customer and BX Options Market Maker) is reasonable.
Customer activity, for example, enhances liquidity on the Exchange for
the benefit of all market participants and benefits all market
participants by providing more trading opportunities, which attracts
market makers. An increase in the activity of these market participants
(particularly in response to pricing) in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants.
Moreover, unlike others [sic] market participants each BX Options
Market Maker commits to various obligations. These obligations include,
for example, transactions of a BX Market Maker must constitute a course
of dealings reasonably calculated to contribute to the maintenance of a
fair and orderly market, and BX Market Makers should not make bids or
offers or enter into transactions that are inconsistent with such
course of dealings.\30\
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\30\ See Chapter VII, Section 5.
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In this instance, the proposed changes to the fees to establish a
Fee to Add Liquidity when BX Options Market Maker is trading with Non-
Customer or BX Options Market Maker, or Firm in the Select Symbols
Options Tiers Schedule, does not impose a burden on competition because
the Exchange's execution and routing services are completely voluntary
and subject to extensive competition both from other exchanges and from
off-exchange venues. If the changes proposed herein are unattractive to
market participants, it is likely that the Exchange will lose market
share as a result.
Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
Additionally, the changes proposed herein are pro-competitive to the
extent that they continue to allow the Exchange to promote and maintain
order executions.
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,\31\ 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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\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
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
[[Page 34419]]
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2016-027 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-2016-027. 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-2016-027 and should be
submitted on or before June 21, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12669 Filed 5-27-16; 8:45 am]
BILLING CODE 8011-01-P
