Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees Under Rule 7018, 46126-46129 [2016-16719]

Download as PDF 46126 Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices sradovich on DSK3GMQ082PROD with NOTICES of operation during ETH, this program may result in additional order flow and liquidity during ETH, which creates greater trading opportunities and benefits all market participants trading during ETH. The Exchange believes limiting the program to TPHs conducting executing agent operations willing to accept orders from all customers is equitable and not unfairly discriminatory due to the additional risks and potential costs (including those related to staffing and clearing) associated with this type of business, as well as the benefits this type of operation may provide during ETH (including increased customer accessibility to the ETH trading session). All TPHs that conduct this type of operation during ETH have an opportunity to become a designated ETH executing agent and thus eligible for the monthly subsidy. The Exchange believes the amount of the subsidy is reasonable based on its understanding of the additional costs and risks associated with the executing agent operation during ETH. Additionally, the Exchange believes the 1,000 contract volume threshold is reasonable based on current ETH volumes. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. All TPHs that conduct executing agent operations willing to accept orders from all customers have an opportunity to be eligible for the program, and thus the monthly subsidy. The Exchange believes limiting the program to TPHs conducting this type of operation is equitable and not unfairly discriminatory due to the additional risks and potential costs (including those related to staffing and clearing) associated with this type of business, as well as the benefits this type of operation may provide during ETH (including increased customer accessibility to the ETH trading session). All designated ETH executing agents must meet the same volume threshold to qualify for the same monthly subsidy. The subsidy is designed to provide opportunities for more customers to submit orders during ETH, which generates more order flow and liquidity during that trading session and benefits all market participants. As CBOE is the only Exchange currently offering an ETH session, the Exchange does not believe the proposed rule change will impose any burden on VerDate Sep<11>2014 19:03 Jul 14, 2016 Jkt 238001 intermarket competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes, should this program make CBOE more attractive for trading, market participants can always elect to become TPHs and take part in this program, and take advantage of potential increased trading volume and opportunities during ETH that may result from the program. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and paragraph (f) of Rule 19b–4 11 thereunder. 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 will institute proceedings to determine whether the proposed rule change 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– CBOE–2016–041 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–CBOE–2016–041. This file number should be included on the PO 00000 subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CBOE– 2016–041, and should be submitted on or before August 5, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–16717 Filed 7–14–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78278; File No. SR–BX– 2016–041] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Fees Under Rule 7018 July 11, 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 June 30, 2016, NASDAQ BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b–4(f). Frm 00083 Fmt 4703 1 15 Sfmt 4703 E:\FR\FM\15JYN1.SGM 15JYN1 Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices 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 the Exchange’s transaction fees at Rule 7018 to: (i) Eliminate a $0.0017 per share executed credit tier that is provided for an order that accesses liquidity; and (ii) eliminate a $0.0019 per share executed fee tier charged for providing liquidity to the System. While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on July 1, 2016. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaqbx.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 sradovich on DSK3GMQ082PROD with NOTICES 1. Purpose The purpose of the proposed rule change is to: (i) Eliminate a credit tier provided for an order that accesses liquidity; and (ii) eliminate a fee tier charged for providing liquidity to the System. First Change The purpose of the first proposed change is to eliminate a $0.0017 per share executed credit tier provided for an order that accesses liquidity. The Exchange currently provides a $0.0017 per share executed credit for an order that accesses liquidity (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with VerDate Sep<11>2014 19:03 Jul 14, 2016 Jkt 238001 Midpoint pegging) entered by a member that accesses liquidity equal to or exceeding 0.20% of total Consolidated Volume 3 during a month. The Exchange also has two other credit tiers based on Consolidated Volume. Specifically, the Exchange provides a $0.0016 and a $0.0015 per share executed credit for an order that accesses liquidity (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with Midpoint pegging) entered by a member that accesses liquidity equal to or exceeding 0.10% or 0.05% of total Consolidated Volume during a month, respectively. All other orders that remove liquidity (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with Midpoint pegging) receive a credit of $0.0006 per share executed. The Exchange has observed that very few members qualify for the $0.0017 per share executed credit tier and it has not been effective at providing incentive to market participants to achieve the level of Consolidated Volume needed to qualify for the credit. Accordingly, the Exchange is proposing to eliminate the $0.0017 per share executed credit tier. Second Change The purpose of the second proposed change is to eliminate a $0.0019 per share executed fee tier charged for providing liquidity to the System. The Exchange currently assesses a fee of $0.0019 per share executed for a displayed order entered by a member that adds liquidity equal to or exceeding 0.10% of total Consolidated Volume during a month. The Exchange also has two other fee tiers based on Consolidated Volume. Specifically, the Exchange assesses a $0.0017 per share executed and $0.0014 per share executed charge for a displayed order entered by a member that adds liquidity equal to or exceeding 0.15% or 0.25% of total Consolidated Volume during a month, respectively. All other displayed orders that provide liquidity are assessed a fee of $0.0020 per share executed. The Exchange has observed 3 Consolidated Volume is defined as the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. For purposes of calculating Consolidated Volume and the extent of a member’s trading activity the date of the annual reconstitution of the Russell Investments Indexes shall be excluded from both total Consolidated Volume and the member’s trading activity. As used in this rule, ‘‘price improvement’’ shall mean instances when the accepted price of an order differs from the executed price of an order. See Rule 7018. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 46127 that few members qualify for the $0.0019 per share executed fee. Thus, the $0.0019 per share executed fee tier has been ineffective at providing incentive to members to provide the level of Consolidated Volume needed to qualify for the reduced fee and the Exchange believes that removing the tier from the fee schedule is appropriate. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 4 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act 5 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, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. First Change The Exchange believes that eliminating the $0.0017 per share executed credit tier provided for an order that accesses liquidity is reasonable because it is not providing adequate incentive to market participants to remove liquidity from the Exchange. The Exchange must, from time to time, assess the effectiveness of the criteria it applies in providing reduced charges and credits, including the nature of the market improving behavior required to receive the reduced charge or credit. The Exchange will modify or eliminate such criteria when it believes the criteria are ineffective, which in turn may allow the Exchange to offer other incentives instead. The Exchange may also adjust the level or reduced charge or credit based on its observations of market participant behavior. In this instance, the Exchange believes that both the criteria for the $0.0017 per share executed credit and the level of the credit itself were ineffective at providing meaningful incentive to market participants to improve the market appreciably. The Exchange is limited in terms of the levels of reduced fees and credits that it can offer, and has consequently determined that it should eliminate the credit tier at this juncture. The Exchange notes that it is continuing to provide other opportunities for members to receive credits, including credit tiers that are based on Consolidated Volume. Eliminating the credit tier will apply to all market participants equally, and will impact only a small number of members that, 4 15 5 15 E:\FR\FM\15JYN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 15JYN1 46128 Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices in any given month, qualify for the credit. Such members will continue to have opportunity to qualify for the lower Consolidated Volume-based credit tiers. Thus, the Exchange believes that the proposed elimination of the $0.0017 per share executed credit tier is an equitable allocation and is not unfairly discriminatory. sradovich on DSK3GMQ082PROD with NOTICES Second Change The Exchange believes that elimination of the $0.0019 per share executed fee tier charged for providing liquidity to the System is reasonable because it is not providing adequate incentive to market participants to remove liquidity from the Exchange. As discussed above, the Exchange must, from time to time, assess the effectiveness of the criteria it applies in providing reduced charges and credits, including the nature of the market improving behavior required to receive the reduced charge or credit. The Exchange has observed that very few members qualify for the $0.0019 per share executed fee, with more members qualifying for the lower fee tiers. The Exchange believes that both the criteria for the $0.0019 per share executed fee and the level of the reduced fee itself were ineffective at providing meaningful incentive to market participants to improve the market appreciably. As a consequence, the Exchange has determined to eliminate the fee tier at this juncture. The Exchange notes that it is continuing to provide other opportunities for members to receive reduced fees, including reduced fee tiers that are based on Consolidated Volume. Eliminating the fee tier will apply to all market participants equally, and will impact only a small number of members that in any given month qualify for the reduced fee. All members, including the small number that currently would qualify for the eliminated fee tier, will continue to have opportunity to qualify for the lower Consolidated Volumebased fee tiers. Thus, the Exchange believes that elimination of the $0.0019 per share executed fee tier is an equitable allocation and is not unfairly discriminatory. 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. 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 VerDate Sep<11>2014 19:03 Jul 14, 2016 Jkt 238001 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 this instance, the proposed changes to the charges assessed and credits available to member firms for execution of securities in securities of all three Tapes do not impose a burden on competition because the Exchange’s execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. The proposed changes to the charges assessed and credits provided to members for execution of orders do not impose a burden on competition because the Exchange’s execution services are completely voluntary and subject to extensive competition both from other exchanges and from offexchange venues. The proposed changes are reflective of this competition and the Exchange’s desire to offer lower fees and credits in return for market-improving liquidity, which is ultimately limited by the Exchange’s need to cover costs and make a profit. Thus, the Exchange must carefully adjust its fees and credits with the understanding that if the proposed changes are unattractive to market participants, it is likely that the Exchange will lose market share to other exchanges and off-exchange venues as a result. In this proposal, the Exchange is eliminating a credit tier and a fee tier, neither of which have proved effective at providing market participants with incentive to provide the marketimproving behavior required to qualify for the two tiers. Accordingly, the Exchange is eliminating the tiers, and may offer other tiers in the future better designed to provide incentive to market participants to improve the market. The Exchange believes that the changes are pro-competitive, since any other market is free to provide similar, if not better, incentives fees and credits should they choose to do so, which may attract market participants to those markets to the detriment of the Exchange. For these PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 reasons, 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.6 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 • Send an email to rule-comments@ sec.gov. Please include File Number SR– BX–2016–041 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2016–041. 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 6 15 E:\FR\FM\15JYN1.SGM U.S.C. 78s(b)(3)(A)(ii). 15JYN1 Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices 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– 2016–041 and should be submitted on or before August 5, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–16719 Filed 7–14–16; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–78280; File No. SR– NYSEArca–2016–91] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Rule 3.3 To Delete an Outdated Reference sradovich on DSK3GMQ082PROD with NOTICES July 11, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’ or ‘‘Exchange Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on June 28, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A) CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 19:03 Jul 14, 2016 Jkt 238001 I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Rule 3.3 (Board Committees) to delete an outdated reference. The proposed rule change is available on the Exchange’s Web site at www.nyse.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 self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 7 17 of the Act 4 and Rule 19b–4(f)(6)(iii) thereunder,5 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1. Purpose The Exchange proposes to amend NYSE Arca Rule 3.3(a)(1)(B) to delete an outdated reference to ‘‘a director of NYSE Regulation, Inc. that satisfies the Public Director requirements set forth in Section 3.02(a) of the Bylaws of the Exchange.’’ In 2015, the Exchange amended, among other rules, Rule 3.3 in order to establish a Regulatory Oversight Committee (‘‘ROC’’) as a committee of the SRO Board.6 At the time, the Exchange’s regulatory functions were performed by NYSE Regulation, Inc. (‘‘NYSE Regulation’’), a former subsidiary of the Exchange’s affiliate New York Stock Exchange LLC (‘‘NYSE’’), pursuant to an intercompany Regulatory Service Agreement (‘‘RSA’’).7 When the Exchange’s ROC U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6)(iii). 6 See Securities Exchange Act Release No. 75155 (June 11, 2015), 80 FR 34744 (June 17, 2015) (SR– NYSEArca–2015–29) (‘‘NYSE Arca ROC Approval Order’’). 7 See id., at 34744 & n.7; see also Securities Exchange Act Release No. 75991 (September 28, PO 00000 4 15 5 17 Frm 00086 Fmt 4703 Sfmt 4703 46129 was created, Rule 3.3(a)(1)(B) was amended to provide that the ROC would consist of at least three members, each of whom would be a director of either the Exchange or of NYSE Regulation and who satisfied the independence requirements of the Exchange.8 The intercompany RSA terminated on February 16, 2016. As of that date, NYSE Regulation ceased to provide regulatory services to the Exchange, which re-integrated its regulatory functions. NYSE Regulation has also since been merged out of existence. The reference to a director of NYSE Regulation in Rule 3.3 is thus obsolete. The ROC currently consists of Exchange directors that satisfy the Exchange’s independence requirements.9 To effectuate the proposed change, the Exchange would delete the phrase ‘‘or a director of NYSE Regulation, Inc. that satisfies the Public Director requirements set forth in Section 3.02(a) of the Bylaws of the Exchange’’ in Rule 3.3(a)(1)(B). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Exchange Act 10 in general, and with Section 6(b)(5) 11 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, and to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, help to protect investors and the public interest. Specifically, the Exchange believes that replacing the reference to a director of NYSE 2015), 80 FR 59837 (October 2, 2015) (SR–NYSE– 2015–27). 8 See NYSE Arca ROC Approval Order, 80 FR at 34744. Article III, Section 3.02(a) of the Exchange’s Bylaws requires that at least 50% of the Exchange’s directors be public directors, defined as ‘‘persons from the public and [who] will not be, or be affiliated with, a broker-dealer in securities or employed by, or involved in any material business relationship with, the Exchange or its affiliates.’’ The Exchange believes that the Bylaw requirements for ‘‘public directors’’ establish the Exchange’s criteria for director independence, and therefore serve the same purpose as the NYSE and NYSE MKT Independence Policies. See Securities Exchange Act Release Nos. 74824 (April 28, 2015), 80 FR 25347, 25348 n.6 (May 4, 2015) (SR– NYSEArca–2015–29) (‘‘Notice’’); NYSE Arca ROC Approval Order, 80 FR at 34744. See also Securities Exchange Act Release No. 67564 (August 1, 2012), 77 FR 47161 (August 7, 2012) (SR–NYSE–2012–17); SR–NYSEArca–2012–59; SR–NYSEMKT–2012–07) (approving NYSE’s and NYSE MKT’s director independence policy). 9 See note 8, supra. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). E:\FR\FM\15JYN1.SGM 15JYN1

Agencies

[Federal Register Volume 81, Number 136 (Friday, July 15, 2016)]
[Notices]
[Pages 46126-46129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16719]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78278; File No. SR-BX-2016-041]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Fees Under 
Rule 7018

July 11, 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 June 30, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule

[[Page 46127]]

change as described in Items I, II, and III, below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Rule 7018 to: (i) Eliminate a $0.0017 per share executed credit tier 
that is provided for an order that accesses liquidity; and (ii) 
eliminate a $0.0019 per share executed fee tier charged for providing 
liquidity to the System.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on July 1, 2016.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaqbx.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 purpose of the proposed rule change is to: (i) Eliminate a 
credit tier provided for an order that accesses liquidity; and (ii) 
eliminate a fee tier charged for providing liquidity to the System.
First Change
    The purpose of the first proposed change is to eliminate a $0.0017 
per share executed credit tier provided for an order that accesses 
liquidity. The Exchange currently provides a $0.0017 per share executed 
credit for an order that accesses liquidity (excluding orders with 
Midpoint pegging and excluding orders that receive price improvement 
and execute against an order with Midpoint pegging) entered by a member 
that accesses liquidity equal to or exceeding 0.20% of total 
Consolidated Volume \3\ during a month. The Exchange also has two other 
credit tiers based on Consolidated Volume. Specifically, the Exchange 
provides a $0.0016 and a $0.0015 per share executed credit for an order 
that accesses liquidity (excluding orders with Midpoint pegging and 
excluding orders that receive price improvement and execute against an 
order with Midpoint pegging) entered by a member that accesses 
liquidity equal to or exceeding 0.10% or 0.05% of total Consolidated 
Volume during a month, respectively. All other orders that remove 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with 
Midpoint pegging) receive a credit of $0.0006 per share executed. The 
Exchange has observed that very few members qualify for the $0.0017 per 
share executed credit tier and it has not been effective at providing 
incentive to market participants to achieve the level of Consolidated 
Volume needed to qualify for the credit. Accordingly, the Exchange is 
proposing to eliminate the $0.0017 per share executed credit tier.
---------------------------------------------------------------------------

    \3\ Consolidated Volume is defined as the total consolidated 
volume reported to all consolidated transaction reporting plans by 
all exchanges and trade reporting facilities during a month in 
equity securities, excluding executed orders with a size of less 
than one round lot. For purposes of calculating Consolidated Volume 
and the extent of a member's trading activity the date of the annual 
reconstitution of the Russell Investments Indexes shall be excluded 
from both total Consolidated Volume and the member's trading 
activity. As used in this rule, ``price improvement'' shall mean 
instances when the accepted price of an order differs from the 
executed price of an order. See Rule 7018.
---------------------------------------------------------------------------

Second Change
    The purpose of the second proposed change is to eliminate a $0.0019 
per share executed fee tier charged for providing liquidity to the 
System. The Exchange currently assesses a fee of $0.0019 per share 
executed for a displayed order entered by a member that adds liquidity 
equal to or exceeding 0.10% of total Consolidated Volume during a 
month. The Exchange also has two other fee tiers based on Consolidated 
Volume. Specifically, the Exchange assesses a $0.0017 per share 
executed and $0.0014 per share executed charge for a displayed order 
entered by a member that adds liquidity equal to or exceeding 0.15% or 
0.25% of total Consolidated Volume during a month, respectively. All 
other displayed orders that provide liquidity are assessed a fee of 
$0.0020 per share executed. The Exchange has observed that few members 
qualify for the $0.0019 per share executed fee. Thus, the $0.0019 per 
share executed fee tier has been ineffective at providing incentive to 
members to provide the level of Consolidated Volume needed to qualify 
for the reduced fee and the Exchange believes that removing the tier 
from the fee schedule is appropriate.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \4\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act \5\ 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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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First Change
    The Exchange believes that eliminating the $0.0017 per share 
executed credit tier provided for an order that accesses liquidity is 
reasonable because it is not providing adequate incentive to market 
participants to remove liquidity from the Exchange. The Exchange must, 
from time to time, assess the effectiveness of the criteria it applies 
in providing reduced charges and credits, including the nature of the 
market improving behavior required to receive the reduced charge or 
credit. The Exchange will modify or eliminate such criteria when it 
believes the criteria are ineffective, which in turn may allow the 
Exchange to offer other incentives instead. The Exchange may also 
adjust the level or reduced charge or credit based on its observations 
of market participant behavior. In this instance, the Exchange believes 
that both the criteria for the $0.0017 per share executed credit and 
the level of the credit itself were ineffective at providing meaningful 
incentive to market participants to improve the market appreciably. The 
Exchange is limited in terms of the levels of reduced fees and credits 
that it can offer, and has consequently determined that it should 
eliminate the credit tier at this juncture. The Exchange notes that it 
is continuing to provide other opportunities for members to receive 
credits, including credit tiers that are based on Consolidated Volume. 
Eliminating the credit tier will apply to all market participants 
equally, and will impact only a small number of members that,

[[Page 46128]]

in any given month, qualify for the credit. Such members will continue 
to have opportunity to qualify for the lower Consolidated Volume-based 
credit tiers. Thus, the Exchange believes that the proposed elimination 
of the $0.0017 per share executed credit tier is an equitable 
allocation and is not unfairly discriminatory.
Second Change
    The Exchange believes that elimination of the $0.0019 per share 
executed fee tier charged for providing liquidity to the System is 
reasonable because it is not providing adequate incentive to market 
participants to remove liquidity from the Exchange. As discussed above, 
the Exchange must, from time to time, assess the effectiveness of the 
criteria it applies in providing reduced charges and credits, including 
the nature of the market improving behavior required to receive the 
reduced charge or credit. The Exchange has observed that very few 
members qualify for the $0.0019 per share executed fee, with more 
members qualifying for the lower fee tiers. The Exchange believes that 
both the criteria for the $0.0019 per share executed fee and the level 
of the reduced fee itself were ineffective at providing meaningful 
incentive to market participants to improve the market appreciably. As 
a consequence, the Exchange has determined to eliminate the fee tier at 
this juncture. The Exchange notes that it is continuing to provide 
other opportunities for members to receive reduced fees, including 
reduced fee tiers that are based on Consolidated Volume. Eliminating 
the fee tier will apply to all market participants equally, and will 
impact only a small number of members that in any given month qualify 
for the reduced fee. All members, including the small number that 
currently would qualify for the eliminated fee tier, will continue to 
have opportunity to qualify for the lower Consolidated Volume-based fee 
tiers. Thus, the Exchange believes that elimination of the $0.0019 per 
share executed fee tier is an equitable allocation and is not unfairly 
discriminatory.

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. 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 this instance, the proposed changes to the charges assessed and 
credits available to member firms for execution of securities in 
securities of all three Tapes do not impose a burden on competition 
because the Exchange's execution services are completely voluntary and 
subject to extensive competition both from other exchanges and from 
off-exchange venues. The proposed changes to the charges assessed and 
credits provided to members for execution of orders do not impose a 
burden on competition because the Exchange's execution services are 
completely voluntary and subject to extensive competition both from 
other exchanges and from off-exchange venues. The proposed changes are 
reflective of this competition and the Exchange's desire to offer lower 
fees and credits in return for market-improving liquidity, which is 
ultimately limited by the Exchange's need to cover costs and make a 
profit. Thus, the Exchange must carefully adjust its fees and credits 
with the understanding that if the proposed changes are unattractive to 
market participants, it is likely that the Exchange will lose market 
share to other exchanges and off-exchange venues as a result. In this 
proposal, the Exchange is eliminating a credit tier and a fee tier, 
neither of which have proved effective at providing market participants 
with incentive to provide the market-improving behavior required to 
qualify for the two tiers. Accordingly, the Exchange is eliminating the 
tiers, and may offer other tiers in the future better designed to 
provide incentive to market participants to improve the market. The 
Exchange believes that the changes are pro-competitive, since any other 
market is free to provide similar, if not better, incentives fees and 
credits should they choose to do so, which may attract market 
participants to those markets to the detriment of the Exchange. For 
these reasons, 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.

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\6\
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    \6\ 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: (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
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BX-2016-041 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2016-041. 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

[[Page 46129]]

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-2016-041 and should be submitted on or before August 
5, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16719 Filed 7-14-16; 8:45 am]
 BILLING CODE 8011-01-P
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