Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Tiers Related to SPY Options, 51258-51264 [2016-18313]

Download as PDF asabaliauskas on DSK3SPTVN1PROD with NOTICES 51258 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices common members. Furthermore, because IEX and FINRA will coordinate their regulatory functions in accordance with the Plan, the Plan should promote investor protection. The Commission notes that, under the Plan, IEX and FINRA have allocated regulatory responsibility for those IEX rules, set forth in the Certification, that are substantially similar to the applicable FINRA rules in that examination for compliance with such provisions and rules would not require FINRA to develop one or more new examination standards, modules, procedures, or criteria in order to analyze the application of the rule, or a common member’s activity, conduct, or output in relation to such rule. In addition, under the Plan, FINRA would assume regulatory responsibility for certain provisions of the federal securities laws and the rules and regulations thereunder that are set forth in the Certification. The Common Rules covered by the Plan are specifically listed in the Certification, as may be amended by the Parties from time to time. According to the Plan, IEX will review the Certification, at least annually, or more frequently if required by changes in either the rules of IEX or FINRA, and, if necessary, submit to FINRA an updated list of Common Rules to add IEX rules not included on the then-current list of Common Rules that are substantially similar to FINRA rules; delete IEX rules included in the then-current list of Common Rules that are no longer substantially similar to FINRA rules; and confirm that the remaining rules on the list of Common Rules continue to be IEX rules that are substantially similar to FINRA rules.15 FINRA will then confirm in writing whether the rules listed in any updated list are Common Rules as defined in the Plan. Under the Plan, IEX will also provide FINRA with a current list of common members and shall update the list no less frequently than once each quarter.16 The Commission believes that these provisions are designed to provide for continuing communication between the Parties to ensure the continued accuracy of the scope of the proposed allocation of regulatory responsibility. The Commission is hereby declaring effective a Plan that, among other things, allocates regulatory responsibility to FINRA for the oversight and enforcement of all IEX rules that are substantially similar to the rules of FINRA for common members of IEX and FINRA. Therefore, 15 See 16 See paragraph 2 of the Plan. paragraph 3 of the Plan. VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 modifications to the Certification need not be filed with the Commission as an amendment to the Plan, provided that the Parties are only adding to, deleting from, or confirming changes to IEX rules in the Certification in conformance with the definition of Common Rules provided in the Plan. However, should the Parties decide to add an IEX rule to the Certification that is not substantially similar to a FINRA rule; delete an IEX rule from the Certification that is substantially similar to a FINRA rule; or leave on the Certification an IEX rule that is no longer substantially similar to a FINRA rule, then such a change would constitute an amendment to the Plan, which must be filed with the Commission pursuant to Rule 17d–2 under the Act.17 IV. Conclusion This Order gives effect to the Plan filed with the Commission in File No. 4–700. The Parties shall notify all members affected by the Plan of their rights and obligations under the Plan. IT IS THEREFORE ORDERED, pursuant to Section 17(d) of the Act, that the Plan in File No. 4–700, between FINRA and IEX, filed pursuant to Rule 17d–2 under the Act, is approved and declared effective. IT IS FURTHER ORDERED that IEX is relieved of those responsibilities allocated to FINRA under the Plan in File No. 4–700. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–18316 Filed 8–2–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78431; File No. SR–BX– 2016–045] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Tiers Related to SPY Options Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 17 The Commission also notes that the addition to or deletion from the Certification of any federal securities laws, rules, and regulations for which FINRA would bear responsibility under the Plan for examining, and enforcing compliance by, common members, also would constitute an amendment to the Plan. 18 17 CFR 200.30–3(a)(34). Frm 00085 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 fees and rebates (per executed contract) for certain Penny Pilot 3 Options to: (a) Delete SPY Options from the Select Symbols Options Tier Schedule; and (b) adopt a SPY Options Tier Schedule.4 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. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Penny Pilot was established in June 2012 and extended through 2016. 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 78036 (June 10, 2016), 81 FR 39308 (June 16, 2016) (SR–BX–2016–021) (notice of filing and immediate effectiveness extending the Penny Pilot through December 31, 2016). 4 SPY, Select Symbols Options Tier Schedule, and SPY Options Tier Schedule are discussed below. 2 17 July 28, 2016. PO 00000 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that, on July 14, 2016, NASDAQ BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. Fmt 4703 Sfmt 4703 E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices 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 Chapter XV, Section 2 to modify fees and rebates 5 for certain Penny Pilot Options to: (a) Delete SPY 6 Options from the Select Symbols Options Tier Schedule; and (b) adopt a SPY Options Tier Schedule with explanatory notes. The proposed SPY Options Tier Schedule would apply to Customers 7 that remove liquidity from Customers, Non-Customers,8 BX Options Market Makers,9 and Firms.10 Currently, Chapter XV, Section 2 subsection (1) has a Select Symbols Options Tier Schedule that includes SPY,11 but it does not have a SPY Options Tier Schedule. Both of these issues are addressed in the current filing and each specific change is described in detail below. Change 1—Penny Pilot Options: Remove SPY Options From Select Symbols Options Tier Schedule asabaliauskas on DSK3SPTVN1PROD with NOTICES In Change 1, under Penny Pilot Options, the Exchange proposes to remove SPY Options from the Select Symbols Options Tier Schedule. The Exchange simultaneously proposes to establish a new SPY Options Tier Schedule. BX Options Select Symbol List 5 Fees and rebates are per executed contract. Chapter XV, Section 2(1). 6 ‘‘SPY’’ or Standard and Poor’s Depositary Receipts/SPDRs options are Penny Pilot Options that are based on the SPDR exchange-traded fund (‘‘ETF’’), which is designed to track the performance of the S&P 500. Options on SPY (‘‘SPY Options’’) are among the highest volume options traded on the Exchange. 7 The term ‘‘Customer’’ or (‘‘C’’) applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Chapter I, Section 1(a)(48)). BX Chapter XV. This is known as being marked in the Customer range. 8 Note 1 to Chapter XV, Section 2 states: ‘‘1A NonCustomer includes a Professional, Broker-Dealer and Non-BX Options Market Maker.’’ 9 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. 10 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. 11 See Securities Exchange Act Release No. 77339 (March 10, 2016), 81 FR 14155 (March 16, 2016) (SR–BX–2016–016) (notice of filing and immediate effectiveness to adopt Select Symbols Options Tier Schedule). VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 Specifically, the Exchange proposes, commensurate with establishing the SPY Options Tier Schedule, to delete SPY from the BX Options Select Symbol List. The Select Symbols on this list represent, similarly to SPY, some of the highest volume Penny Pilot Options traded on the Exchange and in the U.S. The following are currently 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. The Select Symbol List is similar to that of other options exchanges (e.g., the MIAX Options Exchange (‘‘MIAX’’).12 Whereas the current Select Symbols Options Tier Schedule has four Tiers, the proposed SPY Options Tier Schedule will have three Tiers. Moreover the SPY Options Tier requirements as well as the proposed fees and rebates are, as described below, very similar to those currently applicable to Select Symbols. As proposed, the BX Options Select Symbol List in Chapter XV, Section 2 subsection (1) will not include SPY and will read as follows: 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, 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. Change 2—Penny Pilot Options: Add SPY Options Tier Schedule For Penny Pilot Options, in Change 2 the Exchange is proposing to modify fees and rebates for Customer and BX Options Market Maker in respect of SPY Options.13 Specifically, the Exchange is proposing to add a SPY Options Tier Schedule. This schedule will have three Tiers for Rebate to Remove Liquidity for Customer and several notes. The three new Tiers, described below along with several proposed notes, together make up the ‘‘SPY Options Tier Schedule’’. Proposed Tier 1 in the SPY Options Tier Schedule, which is similar in structure to current Tier 1 in the Select Symbols Options Tier Schedule Rebate 12 See MIAX fee schedule at https:// www.miaxoptions.com/content/fees. 13 The Non- Penny Pilot Options pricing will remain unchanged. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 51259 to Remove Liquidity,14 states that a BX Participant (‘‘Participant’’) may earn a rebate if he removes less than 1500 SPY Options contracts per day in the Customer range.15 Proposed Tier 1 offers a $0.10 rebate when a Customer trades with Non-Customer, BX Options Market Maker, Customer, or Firm. The proposed $0.10 rebate is a modest increase from the current $0.00 rebate in the Select Symbols Options Tier Schedule now applicable to SPY Options. This increase is, as further discussed, reasonable because it incentivizes Participants to bring SPY Options volume to the Exchange. Whereas the Select Symbols Options Tier Schedule takes into account total industry Customer volume per month including equity and ETF options ADV contracts, in order to incentivize Participants to transact more SPY Options volume on the Exchange, proposed Tier 1 looks only at the amount of daily SPY Options volume in the Customer range that is removed by the Participant. Proposed Tier 2 in the SPY Options Tier Schedule, which is similar in structure to current Tier 2 in the Select Symbols Options Tier Schedule Rebate to Remove Liquidity, states that a Participant may earn a rebate if he removes 1500 to not more than 2999 SPY Options contracts per day in the Customer range. Proposed Tier 2 offers a $0.42 rebate when a Customer trades with Non-Customer, BX Options Market Maker, Customer, or Firm. The proposed $0.42 rebate is a modest increase from the current $0.25 rebate in the Select Symbols Options Tier Schedule now applicable to SPY Options. This increase is, as further discussed, reasonable because it incentivizes Participants to bring SPY Options volume to the Exchange. Whereas the Select Symbols Options Tier Schedule takes into account total industry Customer volume per month including equity and ETF options ADV contracts, in order to incentivize Participants to transact more SPY Options volume on the Exchange, proposed Tier 2 looks only at the amount of daily SPY Options volume in the Customer range that is removed by the Participant. The highest proposed Tier 3 in the SPY Options Tier Schedule, which is similar in structure to current Tier 3 in 14 Current Select Symbols Options Tiers use industry customer equity and ETF Option ADV to determine tier level. Rather than industry ADV, proposed SPY Options Tier 1 looks only at how many SPY Options contracts Participant removes in a day. 15 For a discussion of Customer range, see note 7 above. E:\FR\FM\03AUN1.SGM 03AUN1 51260 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices the Select Symbols Options Tier Schedule Rebate to Remove Liquidity, states that a Participant may earn a rebate if he removes more than 2999 SPY Options contracts per day in the customer range. Proposed Tier 3 offers a $0.51 rebate when a Customer trades with Non-Customer, BX Options Market Maker, Customer, or Firm. The proposed $0.51 rebate is a modest increase from the current $0.37 rebate in the Select Symbols Options Tier Schedule now applicable to SPY Options. This increase is, as further discussed, reasonable because it incentivizes Participants to bring SPY Options volume to the Exchange. Whereas the Select Symbols Options Tier Schedule takes into account total industry Customer volume per month including equity and ETF options ADV contracts, in order to incentivize Participants to transact more SPY Options volume on the Exchange, proposed Tier 3 looks only at the amount of daily SPY Options volume in the Customer range that is removed by the Participant. As part of the new SPY Options Tier Schedule the Exchange proposes six notes regarding certain fees to add liquidity and fees to remove liquidity. The first four proposed notes are taken directly from the Select Symbols Options Tier Schedule and use the same language except that these proposed notes refer to SPY Options rather than Select Symbols. The Exchange is also adding a sentence to the fourth note to state: There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer.16 The Exchange also proposes two additional notes. Proposed note 5 would state that BX Options Market Maker fee to add liquidity and BX Options Market Maker fee to remove liquidity in SPY Options will each be $0.44 per contract when trading with Customer. Proposed note 6 would state that BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when trading with Firm, BX Options Market Maker or Non Customer. Today, when BX Options Market Maker trades in SPY Options with Customer, the fee to add liquidity is between $0.29 and $0.44 per contract and the fee to remove liquidity is between $0.25 and $0.42 per contract, according to Tiers. Going forward, per proposed note 5, both the fee to add liquidity in SPY Options and the fee to remove liquidity in SPY Options when BX Options Market Maker trades with Customer will be $0.44 per contract. Today the fee to add liquidity when BX Options Market maker trades in SPY Options with Non-Customer or BX Options Market Maker, or Firm is between $0.14 and $0.00 per contract, according to Tiers. Going forward per proposed note 6 the BX Options Market Maker fee to add liquidity will be $0.10 per contract when trading SPY Options with Firm, BX Options Market Maker or Non Customer. The Exchange believes that it is reasonable to normalize the fees discussed in note 5 and in note 6 so that they are the same for BX Options Market Makers when trading such SPY Options. As proposed, the SPY Options Tier Schedule in Chapter XV, Section 2 subsection (1) will read as follows: SPY Options Tier Schedule REBATE TO REMOVE LIQUIDITY [per contract] Applied to: Customer Trading with: Non-Customer, BX Options Market Maker, Customer, or Firm Tier 1 .............................. Tier 2 .............................. Tier 3 .............................. Participant removes less than 1500 SPY Options contracts per day in the customer range ................ Participant removes 1500 to not more than 2999 SPY Options contracts per day in the customer range. Participant removes more than 2999 SPY Options contracts per day in the customer range .............. $0.10 0.42 0.51 asabaliauskas on DSK3SPTVN1PROD with NOTICES • Note 1: Firm fee to add liquidity and fee to remove liquidity in SPY Options will be $0.33 per contract, regardless of counterparty. • Note 2: Non-Customer fee to add liquidity and fee to remove liquidity in SPY Options will be $0.46 per contract, regardless of counterparty. • Note 3: BX Options Market Maker fee to remove liquidity in SPY Options will be $0.46 per contract when trading with Firm, Non-Customer, or BX Options Market Maker. • Note 4: Customer fee to add liquidity in SPY Options when contra to another Customer will be $0.33 per contract. There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer. • Note 5: BX Options Market Maker fee to add liquidity and BX Options Market Maker fee to remove liquidity in SPY Options will each be $0.44 per contract when trading with Customer. • Note 6: BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when trading with Firm, BX Options Market Maker or Non Customer. The Exchange is adopting a separate SPY Options Tier Schedule because it believes that it will provide even greater incentives for execution of SPY Options contracts on the BX Options Market. The Exchange believes that its proposal should provide increased opportunities for participation in SPY Options executions on the Exchange, facilitating the ability of the Exchange to bring together participants and encourage more robust competition for orders. 16 The Exchange believes that while the fourth note applicable to Select Symbols Options now states that Customer fee to add liquidity in when contra to another Customer is $0.33 per contract, VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Act,17 in general, and with Section 6(b)(4) and 6(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 the proposed change is reasonable in light of the overall Exchange efforts to incentivize Participants to bring SPY Options liquidity to the Exchange. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 discrimination between customers, issuers, brokers, or dealers. Attracting order flow to the Exchange benefits all Participants who have the opportunity to interact with this order flow. 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 17 15 18 15 E:\FR\FM\03AUN1.SGM U.S.C. 78f. U.S.C. 78f (b) (4) and (5). 03AUN1 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES 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 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 believes that its proposal should provide increased opportunities for participation in SPY Options executions on the Exchange, facilitating the ability of the Exchange to bring together participants and encourage more robust competition for orders. The Exchange believes that the proposed change is reasonable, equitable and not unfairly discriminatory for the following reasons. 19 Securities Exchange Act Release No. 51808 (June 29, 2005), 70 FR 37496 at 37499 (File No. S7– 10–04) (‘‘Regulation NMS Adopting Release’’). 20 Net Coalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). 21 See id. At 534–535. 22 See id. At 537. 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)). VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 Change 1—Penny Pilot Options: Remove SPY Options From Select Symbols Options Tier Schedule For Penny Pilot Options, in Change 1, the Exchange proposes modifications to remove SPY Options from the Select Symbols Options Tier Schedule. The Exchange simultaneously proposes to establish a new SPY Options Tier Schedule. Deleting SPY Options from the Select Symbols Options Tier Schedule of rebates and fees is reasonable because SPY Options are proposed to have their own new Tier structure to further incentivize Participants to send SPY Options order flow to the Exchange. The Exchange believes it is equitable and not unfairly discriminatory to delete SPY Options from Select Symbols and establish the SPY Options Tier Schedule because this schedule will be applied uniformly to all similarly situated Participants. This is further discussed below. Change 2—Penny Pilot Options: Add SPY Options Tier Schedule For Penny Pilot Options, in Change 2 the Exchange is proposing to modify fees and rebates for Customer and BX Options Market Maker in respect of SPY Options.24 Specifically, the Exchange is proposing to add a SPY Options Tier Schedule as discussed. In adding the new Tiers in the SPY Options Tier Schedule, the current SPY Options pricing in the Select Symbols Options Tier Schedule will be replaced with the proposed SPY Options Tier Schedule specifically applicable to SPY Options, which are among the very highest volume options traded on the Exchange. The proposed SPY Options Tier Schedule will have three Tiers for Rebate to Remove Liquidity for Customer as well as several notes. The three new Tiers, which make up the ‘‘SPY Options Tier Schedule,’’ are similar in structure to the current Select Symbols Options Tier Schedule Rebate to Remove Liquidity.25 The Exchange believes that it is reasonable to establish separate SPY Options Tiers to attract SPY Options volume to the Exchange while separately setting forth fees and rebates related to SPY Options. The Exchange believes that the proposed Tiers in the SPY Options Tier Schedule are reasonable in that they reflect a 24 Fees and rebates, as well as Tiers, for all other Select Symbols options will remain unchanged. 25 Unlike the Select Symbols Options Tier Schedule, in the SPY Options Tier Schedule there is no tier 4, which in the Select Symbols Options Tier Schedule for a rebate requires an even higher amount of volume or volume associated with the Price Improvement Mechanism Auction (‘‘PRISM’’). PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 51261 structure that is not novel in the options markets but rather is similar to that of other options markets and competitive with what is offered by other exchanges.26 In addition, the Exchange believes that making changes to add Tiers applicable to the Customer in terms of Rebate to Remove Liquidity is reasonable because it encourages the desired Customer behavior by attracting Customer interest to the Exchange. Customer activity 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 in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Establishing SPY Option Tiers for Rebate to Remove Liquidity is reasonable because it encourages market participant behavior through progressive tiered fees and rebates using an accepted methodology among options exchanges.27 The proposed Tiers in the SPY Options Tier Schedule clearly reflect the progressively increasing nature of Participant executions structured for the purpose of attracting order flow to the Exchange. That is, as discussed if a Participant removes more SPY Options contracts per day in the customer range he can earn higher rebates. For example, in the highest proposed SPY Options Tier 3 Rebate to Remove Liquidity, for which Participant must remove more than 2999 SPY Options contracts per day in the customer range, the Participant can earn the highest $0.51 rebate (per contract). And in the lowest proposed SPY Options Tier 1 Rebate to Remove Liquidity, for which Participant must remove less than 1500 SPY Options contracts per day in the customer range, the Participant can earn the lowest $0.10 rebate (per contract). For Penny Pilot Options, establishing the Customer-related and BX Options Market Maker-related fee and rebate changes in respect of SPY Options, which includes the new SPY Options Tiers with notes, is equitable and not unfairly discriminatory because the Exchange’s proposal to assess fees and pay rebates according to the SPY 26 See, e.g., the MIAX fee schedule at https:// www.miaxoptions.com/content/fees and the BOX fee schedule at https://boxoptions.com/feeschedule/. 27 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’’). E:\FR\FM\03AUN1.SGM 03AUN1 51262 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Options Tier Schedule will apply uniformly to all similarly situated Participants. Thus, for example, certain Participants would earn a Rebate to Remove Liquidity according to the same Tiers per the SPY Options Tier Schedule. 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, and notes that unlike others (e.g. Non-Customers) some market participants like BX Options Market Makers commit to various obligations. Despite the fact that certain BX Options Market Maker fees to add and remove liquidity are proposed to be increased as discussed, the BX Options Market Maker fees to add and remove will be lower as compared to other nonCustomer market participants. Unlike other non-Customer market participants, BX Options MMs have obligations to the market and regulatory requirements, which normally do not apply to other market participants.28 A BX Options Market Maker has the obligation to make continuous markets, engage in course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with course [sic] of dealings. Customers will continue to be assessed the lowest fees because Customer liquidity benefits all market participants by providing more trading opportunities, which attracts market makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. As part of the new SPY Options Tier Schedule the Exchange proposes six notes regarding certain fees to add liquidity and fees to remove liquidity. The Exchange believes that this is reasonable. The first four proposed notes are taken directly from the Select Symbols Options Tier Schedule and use the same language except that these 28 Pursuant to Chapter VII (Market Participants), Section 5 (Obligations of Market Makers), in registering as a Market Maker, an Options Participant commits himself to various obligations. Transactions of a Market Maker in its market making capacity must constitute a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and Market Makers should not make bids or offers or enter into transactions that are inconsistent with such course of dealings. Further, all Market Makers are designated as specialists on BX for all purposes under the Act or rules thereunder. See Chapter VII, Section 5.’’ VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 proposed notes refer to SPY Options rather than Select Symbols; and note four has one proposed added sentence.29 Proposed note 4 would state that Customer fee to add liquidity in SPY Options when contra to another Customer will be $0.33 per contract. There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer.30 The Exchange also proposes two additional notes. Proposed note 5 would state that BX Options Market Maker fee to add liquidity and the BX Options Market Maker fee to remove liquidity in SPY Options will each be $0.44 per contract when trading with Customer. Proposed note 6 would state that BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when trading with Firm, BX Options Market Maker or Non Customer. Today, when BX Options Market Maker trades in SPY Options with Customer, the fee to add liquidity is between $0.29 and $0.44 per contract and the fee to remove liquidity is between $0.25 and $0.42 per contract, according to Tiers. Going forward, per proposed note 5, both the fee to add liquidity in SPY Options and the fee to remove liquidity in SPY Options when BX Options Market Maker trades with Customer will be $0.44 per contract. Today the fee to add liquidity when BX Options Market maker trades in SPY Options with Non-Customer or BX Options Market Maker, or Firm is between $0.14 and $0.00 per contract, according to Tiers. Going forward per proposed note 6 the BX Options Market Maker fee to add liquidity will be $0.10 per contract when trading SPY Options with Firm, BX Options Market Maker or Non Customer.31 The Exchange believes 29 The sentence proposed to be added to the fourth note would state: There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer. 30 Previously, as part of the Select Symbol Tier Schedule, a Customer, when trading with Firm, BX Options Market Maker or Non Customer could receive a Rebate to add liquidity ($0.00 to $0.25 rebate); and now there is no fee or rebate when a Customer adds liquidity in SPY Options when trading with Firm, BX Options Market Maker or Non Customer. The Exchange believes this change is reasonable and not inequitable or unfairly discriminatory in light of the overall Exchange efforts to incentivize Participants to bring SPY Options liquidity to the Exchange. 31 Previously, as part of the Select Symbol Tier Schedule, BX Options Market Maker when trading with Customer would be assessed a fee to remove liquidity in SPY Options ($0.25 to $0.42), and BX Options Market Maker when trading with Customer would be assessed a fee to add liquidity ($0.29 to $0.44); and as proposed there will be a $0.44 fee to remove liquidity and a $0.44 fee to add liquidity PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 that it is reasonable to normalize the fees discussed in note 5 and in note 6 so that they are the same for BX Options Market Makers when trading such SPY Options. The Exchange believes that to incentivize bringing SPY Options liquidity to the Exchange it is reasonable to make the proposed change in notes 1, 2, 3, and 4 (with the added sentence in note 4 as noted) to refer to SPY Options rather than the Select Symbol Tier Schedule. The Exchange believes that to incentivize bringing SPY Options liquidity to the Exchange it is reasonable to normalize note 5 and note 6 fees so that they are the same under all circumstances for BX Options Market Makers when trading such SPY Options.32 For Penny Pilot Options, establishing the Customer-related and BX Options Market Maker-related fee and rebate changes in respect of SPY Options, which includes the new SPY Options Tiers with notes, is equitable and not unfairly discriminatory. This is because the Exchange’s proposal to assess fees and pay rebates according to the SPY Options Tier Schedule will apply uniformly to all similarly situated Participants. Thus, for example, Participants would earn a Rebate to Remove Liquidity according to the same Tiers per the SPY Options Tier Schedule. It is equitable and not unfairly discriminatory to assess the same fee and rebate in respect of SPY Options regardless of industry trade volume where this is applied uniformly to all similarly situated Participants. The Exchange believes that by making the proposed changes it is incentivizing Participants to bring more SPY Options volume to 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, in SPY Options for all Tiers. The Exchange believes this change is reasonable and not inequitable or unfairly discriminatory in light of the overall Exchange efforts to incentivize Participants to bring SPY Options liquidity to the Exchange. 32 As part of the Select Symbol Tier Schedule a BX Options Market Maker, when trading with a Customer, would be assessed a fee to add liquidity between $0.29 to $0.44 depending on tier; and as proposed in note 5 there will be a $0.44 fee to add liquidity in SPY options for all Tiers. As part of the Select Symbol Tier Schedule a BX Options Market Maker, when trading with a Non-Customer or BX Options Market Maker, or Firm, would be assessed a fee to add liquidity between $0.00 to $0.14 depending on tier, and as proposed in note 5 [sic] there will be a $0.10 fee to add liquidity in SPY options for all Tiers. E:\FR\FM\03AUN1.SGM 03AUN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices the Exchange does not believe that its proposal to make changes to its Penny Pilot Options fees and rebates and to establish the SPY Options Tier Schedule with notes for such fees and rebates 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 and establishing separate Tiers for SPY Options 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, BX Options Market Maker, and Non-Customer) 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 VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 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 (e.g., Non-Customers) 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 Market Makers should not make bids or offers or enter into transactions that are inconsistent with such course of dealings. In this instance, the proposed changes to the fees and rebates for execution of contracts on the Exchange, and establishing SPY Options Tiers with notes for such fees and rebates, do 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 The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.33 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 33 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00090 Fmt 4703 Sfmt 4703 51263 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–2016–045 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–2016–045. 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 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–BX– 2016–045, and should be submitted on or before August 24, 2016. E:\FR\FM\03AUN1.SGM 03AUN1 51264 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–18313 Filed 8–2–16; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice: 9660] International Telecommunication Advisory Committee; Solicitation of Membership ACTION: [Public Notice: 9658] Notice of Renewal of the Charter of the International Telecommunication Advisory Committee (ITAC) This notice announces the renewal of the Charter for the International Telecommunication Advisory Committees (ITAC). In accordance with the provisions of the Federal Advisory Committee Act (Pub. L. 92–463, 5 U.S.C. Appendix) and the general authority of the Secretary of State and the Department of State set forth in Title 22 of the United States code, in particular Sections 2656 and 2707, the charter of the International Telecommunication Advisory Committee has been extended until July 22, 2016. The ITAC primarily consists of members of the telecommunications industry, ranging from network operators and service providers to equipment vendors, members of academia, members of civil society, and officials of interested government agencies. The ITAC provides views and advice to the Department of State on positions on international telecommunications and information policy matters. This advice has been a major factor in ensuring that the United States is well prepared to participate effectively in the international telecommunications and information policy arena. SUMMARY: FOR FURTHER INFORMATION CONTACT: asabaliauskas on DSK3SPTVN1PROD with NOTICES Please contact Franz Zichy at 202–647– 5778, zichyfj@state.gov. Dated: July 26, 2016. Julie N. Zoller, Senior Deputy Coordinator, International Communications and Information Policy, U.S. State Department. [FR Doc. 2016–18369 Filed 8–2–16; 8:45 am] BILLING CODE P CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:21 Aug 02, 2016 The U.S. Coordinator for International Communications and Information Policy (‘‘the Coordinator’’), in the U.S. Department of State Bureau of Economic and Business Affairs, is accepting applications for membership on the International Telecommunication Advisory Committee (ITAC). DATES: Applications must be received by the Department of State (at the email addresses at the end of this Notice) not later than August 26, 2016. SUPPLEMENTARY INFORMATION: The Department of State is soliciting applications from subject matter experts who are U.S. citizens or legal permanent residents and representatives of scientific or industrial organizations that are engaged in the study of telecommunications or in the design or manufacture of equipment intended for telecommunication services, representatives of civil society organizations and academia, and individuals of any other corporation or organization engaged in telecommunications and information policy matters. Applicants should include experience participating in international organizations addressing telecommunications and information technical and policy issues, participating in U.S. preparatory activities for conferences and meetings of international organizations addressing technical and policy issues, and serving on U.S. delegations. The ITAC is a federal advisory committee under the authority of 22 U.S.C. 2651a and 2656 and the Federal Advisory Committee Act, 5 U.S.C. Appendix. (‘‘FACA’’). The purpose of the ITAC is to advise the Coordinator and the Department of State with respect to, and provide strategic recommendations on, communication and information policy matters related to U.S. participation in the work of the International Telecommunication Union (ITU), the Organization of American States Inter-American Telecommunication Commission (CITEL), the Organization for Economic Cooperation and Development (OECD), the Asia Pacific Economic Cooperation Telecommunications & Information Working Group (APEC TEL) and other international bodies addressing SUMMARY: DEPARTMENT OF STATE 34 17 Department of State. Notice. AGENCY: Jkt 238001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 communications and information policy issues. Members are appointed by the Coordinator and must be U.S. citizens or legal permanent residents of the United States, appointed as representative of U.S. organizations. To ensure diversity in advice, ITAC membership will include not more than one representative from any affiliated agency or organization so long as the threshold of no fewer than 30 members is met. Membership in subcommittees is not limited to a prescribed number, and there may be more than one member designated to a subcommittee for each affiliated agency or organization. The ITAC charter calls for representative members; therefore, a prospective member must represent a company or organization. Solo members (who ‘‘represent themselves’’) will not be selected. ITAC members must be versed in the complexity of international communications and information policy issues and must be able to advise the Coordinator and the Department of State on these matters. Members are expected to use their expertise and provide candid advice. Please note that ITAC members will not be reimbursed for travel, per diem, nor other expenses incurred in connection with their duties as ITAC members. For those interested in applying, the ITAC currently intends to hold a meeting on or about October 12, 2016. A separate Federal Register notice will be published to announce the details of that meeting. How to Apply: Email applications in response to this notice to the addresses at the end of this notice. Applications must contain the following information: (1) Name of applicant; (2) citizenship of the applicant; (3) organizational affiliation and title, as appropriate; (4) mailing address; (5) work telephone ´ ´ number; (6) email address; (7) resume; (8) summary of qualifications for ITAC membership and (9) confirmation that your organization or company expects you to represent their interests. This information should be emailed to: zichyfj@state.gov, gadsdensf@ state.gov, and jacksonln@state.gov. FOR FURTHER INFORMATION CONTACT: Please contact Franz Zichy at 202–647– 5778, zichyfj@state.gov . Dated: July 27, 2016. Julie N. Zoller, Senior Deputy Coordinator, International Communications and Information Policy, U.S. State Department. [FR Doc. 2016–18378 Filed 8–2–16; 8:45 am] BILLING CODE 4710–AE–P E:\FR\FM\03AUN1.SGM 03AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 149 (Wednesday, August 3, 2016)]
[Notices]
[Pages 51258-51264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18313]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78431; File No. SR-BX-2016-045]

Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Regarding Tiers
Related to SPY Options

July 28, 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 July 14, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------

\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 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 fees and rebates (per
executed contract) for certain Penny Pilot \3\ Options to: (a) Delete
SPY Options from the Select Symbols Options Tier Schedule; and (b)
adopt a SPY Options Tier Schedule.\4\
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\3\ The Penny Pilot was established in June 2012 and extended
through 2016. 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 78036
(June 10, 2016), 81 FR 39308 (June 16, 2016) (SR-BX-2016-021)
(notice of filing and immediate effectiveness extending the Penny
Pilot through December 31, 2016).
\4\ SPY, Select Symbols Options Tier Schedule, and SPY Options
Tier Schedule are discussed below.
---------------------------------------------------------------------------

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.

[[Page 51259]]

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 Chapter XV, Section 2 to modify fees
and rebates \5\ for certain Penny Pilot Options to: (a) Delete SPY \6\
Options from the Select Symbols Options Tier Schedule; and (b) adopt a
SPY Options Tier Schedule with explanatory notes. The proposed SPY
Options Tier Schedule would apply to Customers \7\ that remove
liquidity from Customers, Non-Customers,\8\ BX Options Market
Makers,\9\ and Firms.\10\
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\5\ Fees and rebates are per executed contract. Chapter XV,
Section 2(1).
\6\ ``SPY'' or Standard and Poor's Depositary Receipts/SPDRs
options are Penny Pilot Options that are based on the SPDR exchange-
traded fund (``ETF''), which is designed to track the performance of
the S&P 500. Options on SPY (``SPY Options'') are among the highest
volume options traded on the Exchange.
\7\ The term ``Customer'' or (``C'') applies to any transaction
that is identified by a Participant for clearing in the Customer
range at The Options Clearing Corporation (``OCC'') which is not for
the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Chapter I, Section
1(a)(48)). BX Chapter XV. This is known as being marked in the
Customer range.
\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 ``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.
\10\ 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) has a Select
Symbols Options Tier Schedule that includes SPY,\11\ but it does not
have a SPY Options Tier Schedule. Both of these issues are addressed in
the current filing and each specific change is described in detail
below.
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\11\ See Securities Exchange Act Release No. 77339 (March 10,
2016), 81 FR 14155 (March 16, 2016) (SR-BX-2016-016) (notice of
filing and immediate effectiveness to adopt Select Symbols Options
Tier Schedule).
---------------------------------------------------------------------------

Change 1--Penny Pilot Options: Remove SPY Options From Select Symbols
Options Tier Schedule
In Change 1, under Penny Pilot Options, the Exchange proposes to
remove SPY Options from the Select Symbols Options Tier Schedule. The
Exchange simultaneously proposes to establish a new SPY Options Tier
Schedule.
Specifically, the Exchange proposes, commensurate with establishing
the SPY Options Tier Schedule, to delete SPY from the BX Options Select
Symbol List. The Select Symbols on this list represent, similarly to
SPY, some of the highest volume Penny Pilot Options traded on the
Exchange and in the U.S. The following are currently 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.
The Select Symbol List is similar to that of other options exchanges
(e.g., the MIAX Options Exchange (``MIAX'').\12\ Whereas the current
Select Symbols Options Tier Schedule has four Tiers, the proposed SPY
Options Tier Schedule will have three Tiers. Moreover the SPY Options
Tier requirements as well as the proposed fees and rebates are, as
described below, very similar to those currently applicable to Select
Symbols.
---------------------------------------------------------------------------

\12\ See MIAX fee schedule at https://www.miaxoptions.com/content/fees.
---------------------------------------------------------------------------

As proposed, the BX Options Select Symbol List in Chapter XV,
Section 2 subsection (1) will not include SPY and will read as follows:
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, 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.
Change 2--Penny Pilot Options: Add SPY Options Tier Schedule
For Penny Pilot Options, in Change 2 the Exchange is proposing to
modify fees and rebates for Customer and BX Options Market Maker in
respect of SPY Options.\13\ Specifically, the Exchange is proposing to
add a SPY Options Tier Schedule. This schedule will have three Tiers
for Rebate to Remove Liquidity for Customer and several notes. The
three new Tiers, described below along with several proposed notes,
together make up the ``SPY Options Tier Schedule''.
---------------------------------------------------------------------------

\13\ The Non- Penny Pilot Options pricing will remain unchanged.
---------------------------------------------------------------------------

Proposed Tier 1 in the SPY Options Tier Schedule, which is similar
in structure to current Tier 1 in the Select Symbols Options Tier
Schedule Rebate to Remove Liquidity,\14\ states that a BX Participant
(``Participant'') may earn a rebate if he removes less than 1500 SPY
Options contracts per day in the Customer range.\15\ Proposed Tier 1
offers a $0.10 rebate when a Customer trades with Non-Customer, BX
Options Market Maker, Customer, or Firm. The proposed $0.10 rebate is a
modest increase from the current $0.00 rebate in the Select Symbols
Options Tier Schedule now applicable to SPY Options. This increase is,
as further discussed, reasonable because it incentivizes Participants
to bring SPY Options volume to the Exchange. Whereas the Select Symbols
Options Tier Schedule takes into account total industry Customer volume
per month including equity and ETF options ADV contracts, in order to
incentivize Participants to transact more SPY Options volume on the
Exchange, proposed Tier 1 looks only at the amount of daily SPY Options
volume in the Customer range that is removed by the Participant.
---------------------------------------------------------------------------

\14\ Current Select Symbols Options Tiers use industry customer
equity and ETF Option ADV to determine tier level. Rather than
industry ADV, proposed SPY Options Tier 1 looks only at how many SPY
Options contracts Participant removes in a day.
\15\ For a discussion of Customer range, see note 7 above.
---------------------------------------------------------------------------

Proposed Tier 2 in the SPY Options Tier Schedule, which is similar
in structure to current Tier 2 in the Select Symbols Options Tier
Schedule Rebate to Remove Liquidity, states that a Participant may earn
a rebate if he removes 1500 to not more than 2999 SPY Options contracts
per day in the Customer range. Proposed Tier 2 offers a $0.42 rebate
when a Customer trades with Non-Customer, BX Options Market Maker,
Customer, or Firm. The proposed $0.42 rebate is a modest increase from
the current $0.25 rebate in the Select Symbols Options Tier Schedule
now applicable to SPY Options. This increase is, as further discussed,
reasonable because it incentivizes Participants to bring SPY Options
volume to the Exchange. Whereas the Select Symbols Options Tier
Schedule takes into account total industry Customer volume per month
including equity and ETF options ADV contracts, in order to incentivize
Participants to transact more SPY Options volume on the Exchange,
proposed Tier 2 looks only at the amount of daily SPY Options volume in
the Customer range that is removed by the Participant.
The highest proposed Tier 3 in the SPY Options Tier Schedule, which
is similar in structure to current Tier 3 in

[[Page 51260]]

the Select Symbols Options Tier Schedule Rebate to Remove Liquidity,
states that a Participant may earn a rebate if he removes more than
2999 SPY Options contracts per day in the customer range. Proposed Tier
3 offers a $0.51 rebate when a Customer trades with Non-Customer, BX
Options Market Maker, Customer, or Firm. The proposed $0.51 rebate is a
modest increase from the current $0.37 rebate in the Select Symbols
Options Tier Schedule now applicable to SPY Options. This increase is,
as further discussed, reasonable because it incentivizes Participants
to bring SPY Options volume to the Exchange. Whereas the Select Symbols
Options Tier Schedule takes into account total industry Customer volume
per month including equity and ETF options ADV contracts, in order to
incentivize Participants to transact more SPY Options volume on the
Exchange, proposed Tier 3 looks only at the amount of daily SPY Options
volume in the Customer range that is removed by the Participant.
As part of the new SPY Options Tier Schedule the Exchange proposes
six notes regarding certain fees to add liquidity and fees to remove
liquidity. The first four proposed notes are taken directly from the
Select Symbols Options Tier Schedule and use the same language except
that these proposed notes refer to SPY Options rather than Select
Symbols. The Exchange is also adding a sentence to the fourth note to
state: There will be no fee or rebate for Customer SPY Options that add
liquidity when contra to Firm, BX Options Market Maker or Non
Customer.\16\ The Exchange also proposes two additional notes. Proposed
note 5 would state that BX Options Market Maker fee to add liquidity
and BX Options Market Maker fee to remove liquidity in SPY Options will
each be $0.44 per contract when trading with Customer. Proposed note 6
would state that BX Options Market Maker fee to add liquidity in SPY
Options will be $0.10 per contract when trading with Firm, BX Options
Market Maker or Non Customer.
---------------------------------------------------------------------------

\16\ The Exchange believes that while the fourth note applicable
to Select Symbols Options now states that Customer fee to add
liquidity in when contra to another Customer is $0.33 per contract,
the proposed change is reasonable in light of the overall Exchange
efforts to incentivize Participants to bring SPY Options liquidity
to the Exchange.
---------------------------------------------------------------------------

Today, when BX Options Market Maker trades in SPY Options with
Customer, the fee to add liquidity is between $0.29 and $0.44 per
contract and the fee to remove liquidity is between $0.25 and $0.42 per
contract, according to Tiers. Going forward, per proposed note 5, both
the fee to add liquidity in SPY Options and the fee to remove liquidity
in SPY Options when BX Options Market Maker trades with Customer will
be $0.44 per contract. Today the fee to add liquidity when BX Options
Market maker trades in SPY Options with Non-Customer or BX Options
Market Maker, or Firm is between $0.14 and $0.00 per contract,
according to Tiers. Going forward per proposed note 6 the BX Options
Market Maker fee to add liquidity will be $0.10 per contract when
trading SPY Options with Firm, BX Options Market Maker or Non Customer.
The Exchange believes that it is reasonable to normalize the fees
discussed in note 5 and in note 6 so that they are the same for BX
Options Market Makers when trading such SPY Options.
As proposed, the SPY Options Tier Schedule in Chapter XV, Section 2
subsection (1) will read as follows:
SPY Options Tier Schedule

Rebate To Remove Liquidity
[per contract]
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Applied to: Customer
----------------------------------------------------------------------------------------------------------------
Trading with: Non-Customer, BX Options Market Maker, Customer, or Firm
----------------------------------------------------------------------------------------------------------------
Tier 1................................... Participant removes less than 1500 SPY Options $0.10
contracts per day in the customer range.
Tier 2................................... Participant removes 1500 to not more than 2999 SPY 0.42
Options contracts per day in the customer range.
Tier 3................................... Participant removes more than 2999 SPY Options 0.51
contracts per day in the customer range.
----------------------------------------------------------------------------------------------------------------
Note 1: Firm fee to add liquidity and fee to remove liquidity in SPY Options will be $0.33 per
contract, regardless of counterparty.
Note 2: Non-Customer fee to add liquidity and fee to remove liquidity in SPY Options will be $0.46 per
contract, regardless of counterparty.
Note 3: BX Options Market Maker fee to remove liquidity in SPY Options will be $0.46 per contract when
trading with Firm, Non-Customer, or BX Options Market Maker.
Note 4: Customer fee to add liquidity in SPY Options when contra to another Customer will be $0.33 per
contract. There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX
Options Market Maker or Non Customer.
Note 5: BX Options Market Maker fee to add liquidity and BX Options Market Maker fee to remove
liquidity in SPY Options will each be $0.44 per contract when trading with Customer.
Note 6: BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when
trading with Firm, BX Options Market Maker or Non Customer.

The Exchange is adopting a separate SPY Options Tier Schedule
because it believes that it will provide even greater incentives for
execution of SPY Options contracts on the BX Options Market. The
Exchange believes that its proposal should provide increased
opportunities for participation in SPY Options 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 the proposed rule change is consistent
with Section 6 of the Act,\17\ in general, and with Section 6(b)(4) and
6(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.
Attracting order flow to the Exchange benefits all Participants who
have the opportunity to interact with this order flow.
---------------------------------------------------------------------------

\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f (b) (4) and (5).
---------------------------------------------------------------------------

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

[[Page 51261]]

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'').
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

\20\ Net Coalition 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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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.
---------------------------------------------------------------------------

\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 believes that its proposal should provide increased
opportunities for participation in SPY Options executions on the
Exchange, facilitating the ability of the Exchange to bring together
participants and encourage more robust competition for orders.
The Exchange believes that the proposed change is reasonable,
equitable and not unfairly discriminatory for the following reasons.
Change 1--Penny Pilot Options: Remove SPY Options From Select Symbols
Options Tier Schedule
For Penny Pilot Options, in Change 1, the Exchange proposes
modifications to remove SPY Options from the Select Symbols Options
Tier Schedule. The Exchange simultaneously proposes to establish a new
SPY Options Tier Schedule.
Deleting SPY Options from the Select Symbols Options Tier Schedule
of rebates and fees is reasonable because SPY Options are proposed to
have their own new Tier structure to further incentivize Participants
to send SPY Options order flow to the Exchange. The Exchange believes
it is equitable and not unfairly discriminatory to delete SPY Options
from Select Symbols and establish the SPY Options Tier Schedule because
this schedule will be applied uniformly to all similarly situated
Participants. This is further discussed below.
Change 2--Penny Pilot Options: Add SPY Options Tier Schedule
For Penny Pilot Options, in Change 2 the Exchange is proposing to
modify fees and rebates for Customer and BX Options Market Maker in
respect of SPY Options.\24\ Specifically, the Exchange is proposing to
add a SPY Options Tier Schedule as discussed. In adding the new Tiers
in the SPY Options Tier Schedule, the current SPY Options pricing in
the Select Symbols Options Tier Schedule will be replaced with the
proposed SPY Options Tier Schedule specifically applicable to SPY
Options, which are among the very highest volume options traded on the
Exchange. The proposed SPY Options Tier Schedule will have three Tiers
for Rebate to Remove Liquidity for Customer as well as several notes.
The three new Tiers, which make up the ``SPY Options Tier Schedule,''
are similar in structure to the current Select Symbols Options Tier
Schedule Rebate to Remove Liquidity.\25\
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\24\ Fees and rebates, as well as Tiers, for all other Select
Symbols options will remain unchanged.
\25\ Unlike the Select Symbols Options Tier Schedule, in the SPY
Options Tier Schedule there is no tier 4, which in the Select
Symbols Options Tier Schedule for a rebate requires an even higher
amount of volume or volume associated with the Price Improvement
Mechanism Auction (``PRISM'').
---------------------------------------------------------------------------

The Exchange believes that it is reasonable to establish separate
SPY Options Tiers to attract SPY Options volume to the Exchange while
separately setting forth fees and rebates related to SPY Options. The
Exchange believes that the proposed Tiers in the SPY Options Tier
Schedule are reasonable in that they reflect a structure that is not
novel in the options markets but rather is similar to that of other
options markets and competitive with what is offered by other
exchanges.\26\ In addition, the Exchange believes that making changes
to add Tiers applicable to the Customer in terms of Rebate to Remove
Liquidity is reasonable because it encourages the desired Customer
behavior by attracting Customer interest to the Exchange. Customer
activity 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 in turn facilitates
tighter spreads, which may cause an additional corresponding increase
in order flow from other market participants.
---------------------------------------------------------------------------

\26\ See, e.g., the MIAX fee schedule at https://www.miaxoptions.com/content/fees and the BOX fee schedule at https://boxoptions.com/fee-schedule/ schedule/.
---------------------------------------------------------------------------

Establishing SPY Option Tiers for Rebate to Remove Liquidity is
reasonable because it encourages market participant behavior through
progressive tiered fees and rebates using an accepted methodology among
options exchanges.\27\ The proposed Tiers in the SPY Options Tier
Schedule clearly reflect the progressively increasing nature of
Participant executions structured for the purpose of attracting order
flow to the Exchange. That is, as discussed if a Participant removes
more SPY Options contracts per day in the customer range he can earn
higher rebates. For example, in the highest proposed SPY Options Tier 3
Rebate to Remove Liquidity, for which Participant must remove more than
2999 SPY Options contracts per day in the customer range, the
Participant can earn the highest $0.51 rebate (per contract). And in
the lowest proposed SPY Options Tier 1 Rebate to Remove Liquidity, for
which Participant must remove less than 1500 SPY Options contracts per
day in the customer range, the Participant can earn the lowest $0.10
rebate (per contract).
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\27\ 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'').
---------------------------------------------------------------------------

[[Page 51262]]

Options Tier Schedule will apply uniformly to all similarly situated
Participants. Thus, for example, certain Participants would earn a
Rebate to Remove Liquidity according to the same Tiers per the SPY
Options Tier Schedule.
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, and notes that unlike others
(e.g. Non-Customers) some market participants like BX Options Market
Makers commit to various obligations. Despite the fact that certain BX
Options Market Maker fees to add and remove liquidity are proposed to
be increased as discussed, the BX Options Market Maker fees to add and
remove will be lower as compared to other non-Customer market
participants. Unlike other non-Customer market participants, BX Options
MMs have obligations to the market and regulatory requirements, which
normally do not apply to other market participants.\28\ A BX Options
Market Maker has the obligation to make continuous markets, engage in
course of dealings reasonably calculated to contribute to the
maintenance of a fair and orderly market, and not make bids or offers
or enter into transactions that are inconsistent with course [sic] of
dealings. Customers will continue to be assessed the lowest fees
because Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts market makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
---------------------------------------------------------------------------

\28\ Pursuant to Chapter VII (Market Participants), Section 5
(Obligations of Market Makers), in registering as a Market Maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Further, all Market
Makers are designated as specialists on BX for all purposes under
the Act or rules thereunder. See Chapter VII, Section 5.''
---------------------------------------------------------------------------

As part of the new SPY Options Tier Schedule the Exchange proposes
six notes regarding certain fees to add liquidity and fees to remove
liquidity. The Exchange believes that this is reasonable. The first
four proposed notes are taken directly from the Select Symbols Options
Tier Schedule and use the same language except that these proposed
notes refer to SPY Options rather than Select Symbols; and note four
has one proposed added sentence.\29\ Proposed note 4 would state that
Customer fee to add liquidity in SPY Options when contra to another
Customer will be $0.33 per contract. There will be no fee or rebate for
Customer SPY Options that add liquidity when contra to Firm, BX Options
Market Maker or Non Customer.\30\ The Exchange also proposes two
additional notes. Proposed note 5 would state that BX Options Market
Maker fee to add liquidity and the BX Options Market Maker fee to
remove liquidity in SPY Options will each be $0.44 per contract when
trading with Customer. Proposed note 6 would state that BX Options
Market Maker fee to add liquidity in SPY Options will be $0.10 per
contract when trading with Firm, BX Options Market Maker or Non
Customer.
---------------------------------------------------------------------------

\29\ The sentence proposed to be added to the fourth note would
state: There will be no fee or rebate for Customer SPY Options that
add liquidity when contra to Firm, BX Options Market Maker or Non
Customer.
\30\ Previously, as part of the Select Symbol Tier Schedule, a
Customer, when trading with Firm, BX Options Market Maker or Non
Customer could receive a Rebate to add liquidity ($0.00 to $0.25
rebate); and now there is no fee or rebate when a Customer adds
liquidity in SPY Options when trading with Firm, BX Options Market
Maker or Non Customer. The Exchange believes this change is
reasonable and not inequitable or unfairly discriminatory in light
of the overall Exchange efforts to incentivize Participants to bring
SPY Options liquidity to the Exchange.
---------------------------------------------------------------------------

Today, when BX Options Market Maker trades in SPY Options with
Customer, the fee to add liquidity is between $0.29 and $0.44 per
contract and the fee to remove liquidity is between $0.25 and $0.42 per
contract, according to Tiers. Going forward, per proposed note 5, both
the fee to add liquidity in SPY Options and the fee to remove liquidity
in SPY Options when BX Options Market Maker trades with Customer will
be $0.44 per contract. Today the fee to add liquidity when BX Options
Market maker trades in SPY Options with Non-Customer or BX Options
Market Maker, or Firm is between $0.14 and $0.00 per contract,
according to Tiers. Going forward per proposed note 6 the BX Options
Market Maker fee to add liquidity will be $0.10 per contract when
trading SPY Options with Firm, BX Options Market Maker or Non
Customer.\31\ The Exchange believes that it is reasonable to normalize
the fees discussed in note 5 and in note 6 so that they are the same
for BX Options Market Makers when trading such SPY Options. The
Exchange believes that to incentivize bringing SPY Options liquidity to
the Exchange it is reasonable to make the proposed change in notes 1,
2, 3, and 4 (with the added sentence in note 4 as noted) to refer to
SPY Options rather than the Select Symbol Tier Schedule. The Exchange
believes that to incentivize bringing SPY Options liquidity to the
Exchange it is reasonable to normalize note 5 and note 6 fees so that
they are the same under all circumstances for BX Options Market Makers
when trading such SPY Options.\32\
---------------------------------------------------------------------------

\31\ Previously, as part of the Select Symbol Tier Schedule, BX
Options Market Maker when trading with Customer would be assessed a
fee to remove liquidity in SPY Options ($0.25 to $0.42), and BX
Options Market Maker when trading with Customer would be assessed a
fee to add liquidity ($0.29 to $0.44); and as proposed there will be
a $0.44 fee to remove liquidity and a $0.44 fee to add liquidity in
SPY Options for all Tiers. The Exchange believes this change is
reasonable and not inequitable or unfairly discriminatory in light
of the overall Exchange efforts to incentivize Participants to bring
SPY Options liquidity to the Exchange.
\32\ As part of the Select Symbol Tier Schedule a BX Options
Market Maker, when trading with a Customer, would be assessed a fee
to add liquidity between $0.29 to $0.44 depending on tier; and as
proposed in note 5 there will be a $0.44 fee to add liquidity in SPY
options for all Tiers. As part of the Select Symbol Tier Schedule a
BX Options Market Maker, when trading with a Non-Customer or BX
Options Market Maker, or Firm, would be assessed a fee to add
liquidity between $0.00 to $0.14 depending on tier, and as proposed
in note 5 [sic] there will be a $0.10 fee to add liquidity in SPY
options for all Tiers.
---------------------------------------------------------------------------

For Penny Pilot Options, establishing the Customer-related and BX
Options Market Maker-related fee and rebate changes in respect of SPY
Options, which includes the new SPY Options Tiers with notes, is
equitable and not unfairly discriminatory. This is because the
Exchange's proposal to assess fees and pay rebates according to the SPY
Options Tier Schedule will apply uniformly to all similarly situated
Participants. Thus, for example, Participants would earn a Rebate to
Remove Liquidity according to the same Tiers per the SPY Options Tier
Schedule. It is equitable and not unfairly discriminatory to assess the
same fee and rebate in respect of SPY Options regardless of industry
trade volume where this is applied uniformly to all similarly situated
Participants.
The Exchange believes that by making the proposed changes it is
incentivizing Participants to bring more SPY Options volume to 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,

[[Page 51263]]

the Exchange does not believe that its proposal to make changes to its
Penny Pilot Options fees and rebates and to establish the SPY Options
Tier Schedule with notes for such fees and rebates 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 and establishing separate Tiers
for SPY Options 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, BX Options Market Maker, and Non-Customer) 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
(e.g., Non-Customers) 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 Market Makers should not make bids or offers or enter into
transactions that are inconsistent with such course of dealings.
In this instance, the proposed changes to the fees and rebates for
execution of contracts on the Exchange, and establishing SPY Options
Tiers with notes for such fees and rebates, do 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

The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\33\
---------------------------------------------------------------------------

\33\ 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
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2016-045 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-2016-045. 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 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-BX-2016-045, and should be
submitted on or before August 24, 2016.

[[Page 51264]]

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
---------------------------------------------------------------------------

\34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18313 Filed 8-2-16; 8:45 am]
BILLING CODE 8011-01-P

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