Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section 7018(a) of the Exchange's Rules, 41121-41124 [2018-17742]

Download as PDF Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions. Moreover, as noted above, the proposed rule change resulted from a request by CPs for ICC to confirm it treats Mark-to-Market Margin as settlement payments. CPs therefore may hesitate to post Mark-to-Market Margin if ICC does not consistently treat such margin as settlement payments. Thus, the Commission believes the proposed rule change would help ICC enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions. Therefore, for the above reasons the Commission finds that the proposed rule change is consistent with Rule 17Ad–22(b)(2).35 C. Consistency With Rule 17Ad–22(d)(1) Rule 17Ad–22(d)(1) requires that ICC establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for a well-founded, transparent, and enforceable legal framework for each aspect of its activities in all relevant jurisdictions.36 As discussed above, the proposed rule change would revise Chapters 4, 8, and 20 of the ICC Rules to more clearly characterize Mark-to-Market Margin payments as settlement payments rather than collateral. The proposed rule change would also revise terminology to further clarify the legal characterization that payments of Mark-to-Market Margin represent settlement rather than collateral payments. These clarifying changes are the result of ICC’s analysis of the legal characterization of Mark-toMarket Margin payments, at the request of its CPs. Thus, ICC intends to treat Mark-toMarket Margin payments as settled rather than collateral, and the Commission believes that the proposed rule change’s clarifications and additions would help ensure that ICC’s margin system operates consistently with this intention. The Commission further believes that the proposed rule change would help ensure that the margin system is operating consistently for all CPs by confirming that all Markto-Market Margin would be treated as settlement payments. In ensuring the consistent treatment of Mark-to-Market Margin, the Commission believes that the proposed rule change would help 35 17 36 17 CFR 240.17Ad–22(b)(2). CFR 240.17Ad–22(d)(1). VerDate Sep<11>2014 17:17 Aug 16, 2018 Jkt 244001 ensure that the policies and procedures underlying ICC’s margin system provide a well-founded, transparent, and enforceable legal framework. Therefore, for the above reasons the Commission finds that the proposed rule change is consistent with Rule 17Ad–22(d)(1).37 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(F) of the Act 38 and Rules 17Ad–22(b)(2) and 17Ad–22(d)(1) thereunder.39 It is therefore ordered pursuant to Section 19(b)(2) of the Act 40 that the proposed rule change (SR–ICC–2018– 006) be, and hereby is, approved.41 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.42 Robert W. Errett, Deputy Secretary. [FR Doc. 2018–17741 Filed 8–16–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83833; File No. SR–BX– 2018–037] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section 7018(a) of the Exchange’s Rules August 13, 2018. 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 31, 2018, 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. 37 17 CFR 240.17Ad–22(d)(1). U.S.C. 78q–1(b)(3)(F). 39 17 CFR 240.17Ad–22(b)(2), (d)(1). 40 15 U.S.C. 78s(b)(2). 41 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 42 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 38 15 PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 41121 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s transaction fees at Rule 7018(a), as described further below. While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on August 1, 2018. The text of the proposed rule change is available on the Exchange’s website at https://nasdaqbx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the Exchange’s transaction fees at Rule 7018 to (i) adjust the volume threshold for a credit associated with orders that access liquidity that are entered by members that access liquidity equal to or in excess of a certain percentage of their [sic] total Consolidated Volume 3 for a month; and (ii) adding two credit tiers for orders entered by members that, during a given month, have a total volume (accessing and providing liquidity) equal to or exceeding 0.50% of total Consolidated Volume, at least 20% more volume during that month (as a percentage of Consolidated Volume) than the member’s total volume in July 2018, and where at least 30% of that 20% increase in volume arises from adding liquidity. 3 Pursuant to Rule 7018(a), the term ‘‘Consolidated Volume’’ means the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month in equity securities, excluding executed orders with a size of less than one round lot. E:\FR\FM\17AUN1.SGM 17AUN1 41122 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices First Change The Exchange operates on the ‘‘takermaker’’ model, whereby it pays credits to members that take liquidity and charges fees to members that provide liquidity. Currently, the Exchange offers several different credits for orders that access liquidity on the Exchange. Among these credits, the Exchange pays a credit of $0.0015 per share executed for an order that accesses liquidity (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) entered by a member that accesses liquidity equal to or exceeding 0.075% of total Consolidated Volume during a month. The Exchange proposes to decrease the Consolidated Volume threshold applicable to this credit to 0.065% of total Consolidated Volume during a month. The Exchange recently had increased this threshold to 0.075%,4 but it has since determined that this level is too high. It now proposes to recalibrate the threshold downward to make it easier for firms to reach the Consolidated Volume threshold necessary to qualify for the credit. amozie on DSK3GDR082PROD with NOTICES1 Second Change The Exchange presently offers several credits for members whose orders remove liquidity from the Exchange. Among these credits, the Exchange offers a $0.0018 per share executed credit for orders that access liquidity in securities in Tapes A and C (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) that are entered by a member that: (i) Accesses liquidity equal to or exceeding 0.20% of total Consolidated Volume during a month; and (ii) accesses 20% more liquidity as a percentage of Consolidated Volume than the member accessed in May 2018. The Exchange also offers a $0.0019 per share executed credit for orders that access liquidity in securities in Tape B (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) that are entered by a member that: (i) Accesses liquidity equal to or exceeding 0.20% of total Consolidated Volume during a month; and (ii) accesses 20% more liquidity as a percentage of Consolidated Volume than the member accessed in May 2018. 4 See Securities Exchange Act Release No. 34– 83680 (July 20, 2018), 83 FR 35502 (July 26, 2018) (SR–BX–2018–032). VerDate Sep<11>2014 17:17 Aug 16, 2018 Jkt 244001 The Exchange now plans to add two new tiers that will also entitle members to receive credits of $0.0018 and $0.0019 per share executed. The first of these new tiers will offer a member a $0.0018 per share executed credit for its orders that access liquidity in securities in Tapes A and C (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Nondisplayed price) to the extent that the member, during a given month: (i) Has a total volume (including both providing and accessing liquidity) that is equal to or exceeds 0.20% [sic] of total Consolidated Volume during that month; (ii) has a total volume that is at least 20% greater (as a percentage of Consolidated Volume) than its total volume in July 2018; and (iii) of the 20% or more increase in total volume described above, at least 30% is attributable to adding liquidity. The second tier will offer a member a $0.0019 per share executed credit for orders that access liquidity in securities in Tape B (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Nondisplayed price) to members that satisfy these same three conditions. An example of how these two new credits will work is as follows. Firm X adds and removes 0.60% of total Consolidated Volume in securities in Tape A in July 2018. In August 2018, Firm X adds and removes 0.72% of total Consolidated Volume in securities in the same Tape. The increase in total volume as a percentage of total Consolidated Volume from July to August is 0.12%—which is an increase of approximately [sic] 20%. If at least 30% of that 0.12% increase (0.036%) is attributable to Firm X adding liquidity, then Firm X will qualify for a $0.0018 per share executed credit for its orders that access liquidity in securities in Tape A (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price). The Exchange proposes to add these credits to provide new and stronger incentive for members to increase their total volume of activity on the Exchange, provided that at least a certain percentage of that increase in total volume arises from adding liquidity. The Exchange also proposes a higher credit for increasing volume in Tape B than it does in Tapes A or C to specifically target Tape B securities, where the Exchange has seen less activity than it has in Tape A and C securities. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,5 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,6 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 7 Likewise, in NetCoalition v. Securities and Exchange Commission 8 (‘‘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.9 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.’’ 10 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’. . . .’’ 11 Although the court 5 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 7 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). 8 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). 9 See NetCoalition, at 534–535. 10 Id. at 537. 11 Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 6 15 E:\FR\FM\17AUN1.SGM 17AUN1 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. amozie on DSK3GDR082PROD with NOTICES1 First Change The Exchange believes that it is reasonable to decrease the Consolidated Volume threshold on its credit for orders that access liquidity (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with Midpoint pegging [sic]) entered by members that access liquidity equal to or exceeding 0.075% of total Consolidated Volume during a month. The Exchange must, from time to time, assess the effectiveness of its credits in achieving their intended objectives and adjust the levels of such credits based on the Exchange’s observations of market participant behavior. In this instance, the Exchange recently had increased the Consolidated Volume threshold to provide a stronger incentive to market participants to improve the market, but the Exchange has since determined that this increase was too high and that the threshold needs to be recalibrated downward to 0.065% to ensure that firms can continue to qualify for the credit. The Exchange believes that the proposed decrease is equitable and is not unfairly discriminatory because it will apply to all similarly situated member firms. Second Change Likewise, the Exchange believes that its proposal is reasonable to add new credits for orders that access liquidity (excluding orders with Midpoint pegging and those that receive price improvement and execute against an order with a non-displayed price) that are entered by members that, in a given month, remove and access [sic] liquidity equal to or in excess of 0.50% of Consolidated Volume during the month, have a total volume (as a percentage of Consolidated Volume) that is 20% greater than it was in July 2018, and where at least 30% of the 20% increase in total volume (as a percentage of Consolidated Volume) arises from adding liquidity. This proposal is reasonable because it will provide new and stronger incentive for members to improve the market by both adding and removing liquidity from the Exchange. It will also incent them to increase the extent of this activity on the Exchange relative to their activity levels as of July 2018. The Exchange believes it is reasonable, equitable, and not unfairly 74770, 74782–83 (December 9, 2008) (SR– NYSEArca–2006–21)). VerDate Sep<11>2014 17:17 Aug 16, 2018 Jkt 244001 discriminatory to propose a higher credit to members that increase volume in securities in Tape B than those that do so in securities in Tapes A and C because the Exchange has experienced less activity in Tape B securities relative to Tapes A and C securities and it wishes to specifically target increased activity with respect to Tape B securities. The Exchange also believes that these proposals are equitable and not unfairly discriminatory because they will apply to all similarly situated member firms. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and credits 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 and credits in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee or credit changes in this market may impose any burden on competition is extremely limited. In this instance, the Exchange’s proposals to add to or modify its credits do not impose a burden on competition because these proposals are reflective of the Exchange’s overall efforts to provide greater incentives to market participants that it believes will improve the market, to the benefit of all participants. The Exchange does not believe that any of the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Moreover, because there are numerous competitive alternatives to the use of the Exchange, it is likely that BX will lose market share as a result of the changes if they are unattractive to market participants. Likewise, the Exchange’s proposed credits and credit amendments do not impose a burden on competition because the Exchange’s execution services are completely voluntary and PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 41123 subject to extensive competition both from other exchanges and from offexchange venues. Again, if the proposed credits 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 proposal will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.12 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–2018–037 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2018–037. This file number should be included on the subject line if email is used. To help the Commission process and review your 12 15 E:\FR\FM\17AUN1.SGM U.S.C. 78s(b)(3)(A)(ii). 17AUN1 41124 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (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 website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX–2018–037 and should be submitted on or before September 7, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Robert W. Errett, Deputy Secretary. [FR Doc. 2018–17742 Filed 8–16–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83830; File No. SR–ISE– 2018–66] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Schedule of Fees Relating to Crossing Orders and Responses to Crossing Orders in Index Options on the Nasdaq 100 Reduced Value Index August 13, 2018. 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 August 1, 2018, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s Schedule of Fees to provide further explanation on how the Exchange charges Crossing Orders and Responses to Crossing Orders in index options on the Nasdaq 100 Reduced Value Index (‘‘NQX’’). The text of the proposed rule change is available on the Exchange’s website at https://ise.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange recently adopted transaction fees and rebates for adding or removing liquidity from ISE (i.e., maker/taker fees and rebates) in NQX options, which apply to executions in both the regular and complex order book, according to the following schedule: 3 Maker fee/rebate Market participant Market Maker ........................................................................................................................................................... Market Maker (for orders sent by Electronic Access Members) ............................................................................. Non-Nasdaq ISE Market Maker (FarMM) ............................................................................................................... Firm Proprietary/Broker-Dealer ................................................................................................................................ Professional Customer ............................................................................................................................................ Priority Customer ..................................................................................................................................................... amozie on DSK3GDR082PROD with NOTICES1 In SR–ISE–2018–61, the Exchange stated that the above pricing would apply to all executions in NQX, including Non-Priority Customer 4 Crossing Orders 5 in NQX. The Exchange now proposes to clarify that 13 17 VerDate Sep<11>2014 17:17 Aug 16, 2018 Jkt 244001 $0.00 0.00 0.25 0.25 0.25 0.00 the taker fee applies to Crossing Orders (i.e., both the originating and contra side of the order) in NQX as well as responses to such orders by noting the following in Section III.B: ‘‘Fee will also apply to the originating and contra side CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 83639 (July 16, 2018) (SR–ISE–2018–61). 4 ‘‘Non-Priority Customers’’ include Market Makers, Non-Nasdaq ISE Market Makers, Firm 1 15 ($0.25) (0.25) 0.25 0.25 0.25 0.00 Taker fee/rebate of Crossing Orders, and to Responses to Crossing Orders.’’ 6 The Exchange does not seek to amend the manner in which Crossing Orders in NQX and responses thereto are currently charged, rather the Exchange Proprietary/Broker-Dealers, and Professional Customers. 5 A ‘‘Crossing Order’’ is an order executed in the Exchange’s Facilitation Mechanism, Solicited Order Mechanism, Price Improvement Mechanism (PIM) or submitted as a Qualified Contingent Cross order. For purposes of the fee schedule, orders executed in the Block Order Mechanism are also considered Crossing Orders. 6 ‘‘Responses to Crossing Order’’ is any contraside interest submitted after the commencement of an auction in the Exchange’s Facilitation Mechanism, Solicited Order Mechanism, Block Order Mechanism or PIM. PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1

Agencies

[Federal Register Volume 83, Number 160 (Friday, August 17, 2018)]
[Notices]
[Pages 41121-41124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17742]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83833; File No. SR-BX-2018-037]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Section 
7018(a) of the Exchange's Rules

August 13, 2018.
    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 31, 2018, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Rule 7018(a), as described further below.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on August 1, 2018.
    The text of the proposed rule change is available on the Exchange's 
website at https://nasdaqbx.cchwallstreet.com/, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
transaction fees at Rule 7018 to (i) adjust the volume threshold for a 
credit associated with orders that access liquidity that are entered by 
members that access liquidity equal to or in excess of a certain 
percentage of their [sic] total Consolidated Volume \3\ for a month; 
and (ii) adding two credit tiers for orders entered by members that, 
during a given month, have a total volume (accessing and providing 
liquidity) equal to or exceeding 0.50% of total Consolidated Volume, at 
least 20% more volume during that month (as a percentage of 
Consolidated Volume) than the member's total volume in July 2018, and 
where at least 30% of that 20% increase in volume arises from adding 
liquidity.
---------------------------------------------------------------------------

    \3\ Pursuant to Rule 7018(a), the term ``Consolidated Volume'' 
means the total consolidated volume reported to all consolidated 
transaction reporting plans by all exchanges and trade reporting 
facilities during a month in equity securities, excluding executed 
orders with a size of less than one round lot.

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[[Page 41122]]

First Change
    The Exchange operates on the ``taker-maker'' model, whereby it pays 
credits to members that take liquidity and charges fees to members that 
provide liquidity. Currently, the Exchange offers several different 
credits for orders that access liquidity on the Exchange. Among these 
credits, the Exchange pays a credit of $0.0015 per share executed for 
an order that accesses liquidity (excluding orders with Midpoint 
pegging and excluding orders that receive price improvement and execute 
against an order with a Non-displayed price) entered by a member that 
accesses liquidity equal to or exceeding 0.075% of total Consolidated 
Volume during a month. The Exchange proposes to decrease the 
Consolidated Volume threshold applicable to this credit to 0.065% of 
total Consolidated Volume during a month. The Exchange recently had 
increased this threshold to 0.075%,\4\ but it has since determined that 
this level is too high. It now proposes to recalibrate the threshold 
downward to make it easier for firms to reach the Consolidated Volume 
threshold necessary to qualify for the credit.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 34-83680 (July 20, 
2018), 83 FR 35502 (July 26, 2018) (SR-BX-2018-032).
---------------------------------------------------------------------------

Second Change
    The Exchange presently offers several credits for members whose 
orders remove liquidity from the Exchange. Among these credits, the 
Exchange offers a $0.0018 per share executed credit for orders that 
access liquidity in securities in Tapes A and C (excluding orders with 
Midpoint pegging and excluding orders that receive price improvement 
and execute against an order with a Non-displayed price) that are 
entered by a member that: (i) Accesses liquidity equal to or exceeding 
0.20% of total Consolidated Volume during a month; and (ii) accesses 
20% more liquidity as a percentage of Consolidated Volume than the 
member accessed in May 2018. The Exchange also offers a $0.0019 per 
share executed credit for orders that access liquidity in securities in 
Tape B (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with a Non-
displayed price) that are entered by a member that: (i) Accesses 
liquidity equal to or exceeding 0.20% of total Consolidated Volume 
during a month; and (ii) accesses 20% more liquidity as a percentage of 
Consolidated Volume than the member accessed in May 2018.
    The Exchange now plans to add two new tiers that will also entitle 
members to receive credits of $0.0018 and $0.0019 per share executed. 
The first of these new tiers will offer a member a $0.0018 per share 
executed credit for its orders that access liquidity in securities in 
Tapes A and C (excluding orders with Midpoint pegging and excluding 
orders that receive price improvement and execute against an order with 
a Non-displayed price) to the extent that the member, during a given 
month: (i) Has a total volume (including both providing and accessing 
liquidity) that is equal to or exceeds 0.20% [sic] of total 
Consolidated Volume during that month; (ii) has a total volume that is 
at least 20% greater (as a percentage of Consolidated Volume) than its 
total volume in July 2018; and (iii) of the 20% or more increase in 
total volume described above, at least 30% is attributable to adding 
liquidity. The second tier will offer a member a $0.0019 per share 
executed credit for orders that access liquidity in securities in Tape 
B (excluding orders with Midpoint pegging and excluding orders that 
receive price improvement and execute against an order with a Non-
displayed price) to members that satisfy these same three conditions.
    An example of how these two new credits will work is as follows. 
Firm X adds and removes 0.60% of total Consolidated Volume in 
securities in Tape A in July 2018. In August 2018, Firm X adds and 
removes 0.72% of total Consolidated Volume in securities in the same 
Tape. The increase in total volume as a percentage of total 
Consolidated Volume from July to August is 0.12%--which is an increase 
of approximately [sic] 20%. If at least 30% of that 0.12% increase 
(0.036%) is attributable to Firm X adding liquidity, then Firm X will 
qualify for a $0.0018 per share executed credit for its orders that 
access liquidity in securities in Tape A (excluding orders with 
Midpoint pegging and excluding orders that receive price improvement 
and execute against an order with a Non-displayed price).
    The Exchange proposes to add these credits to provide new and 
stronger incentive for members to increase their total volume of 
activity on the Exchange, provided that at least a certain percentage 
of that increase in total volume arises from adding liquidity. The 
Exchange also proposes a higher credit for increasing volume in Tape B 
than it does in Tapes A or C to specifically target Tape B securities, 
where the Exchange has seen less activity than it has in Tape A and C 
securities.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\6\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 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 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.'' \7\
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Likewise, in NetCoalition v. Securities and Exchange Commission \8\ 
(``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.\9\ 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.'' \10\
---------------------------------------------------------------------------

    \8\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \9\ See NetCoalition, at 534-535.
    \10\ Id. at 537.
---------------------------------------------------------------------------

    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'. . . .'' \11\ Although the court

[[Page 41123]]

and the SEC were discussing the cash equities markets, the Exchange 
believes that these views apply with equal force to the options 
markets.
---------------------------------------------------------------------------

    \11\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

First Change
    The Exchange believes that it is reasonable to decrease the 
Consolidated Volume threshold on its credit for orders that access 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with 
Midpoint pegging [sic]) entered by members that access liquidity equal 
to or exceeding 0.075% of total Consolidated Volume during a month. The 
Exchange must, from time to time, assess the effectiveness of its 
credits in achieving their intended objectives and adjust the levels of 
such credits based on the Exchange's observations of market participant 
behavior. In this instance, the Exchange recently had increased the 
Consolidated Volume threshold to provide a stronger incentive to market 
participants to improve the market, but the Exchange has since 
determined that this increase was too high and that the threshold needs 
to be recalibrated downward to 0.065% to ensure that firms can continue 
to qualify for the credit. The Exchange believes that the proposed 
decrease is equitable and is not unfairly discriminatory because it 
will apply to all similarly situated member firms.
Second Change
    Likewise, the Exchange believes that its proposal is reasonable to 
add new credits for orders that access liquidity (excluding orders with 
Midpoint pegging and those that receive price improvement and execute 
against an order with a non-displayed price) that are entered by 
members that, in a given month, remove and access [sic] liquidity equal 
to or in excess of 0.50% of Consolidated Volume during the month, have 
a total volume (as a percentage of Consolidated Volume) that is 20% 
greater than it was in July 2018, and where at least 30% of the 20% 
increase in total volume (as a percentage of Consolidated Volume) 
arises from adding liquidity. This proposal is reasonable because it 
will provide new and stronger incentive for members to improve the 
market by both adding and removing liquidity from the Exchange. It will 
also incent them to increase the extent of this activity on the 
Exchange relative to their activity levels as of July 2018. The 
Exchange believes it is reasonable, equitable, and not unfairly 
discriminatory to propose a higher credit to members that increase 
volume in securities in Tape B than those that do so in securities in 
Tapes A and C because the Exchange has experienced less activity in 
Tape B securities relative to Tapes A and C securities and it wishes to 
specifically target increased activity with respect to Tape B 
securities. The Exchange also believes that these proposals are 
equitable and not unfairly discriminatory because they will apply to 
all similarly situated member firms.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees and credits 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 and credits in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee or credit changes in this market may impose any burden on 
competition is extremely limited.
    In this instance, the Exchange's proposals to add to or modify its 
credits do not impose a burden on competition because these proposals 
are reflective of the Exchange's overall efforts to provide greater 
incentives to market participants that it believes will improve the 
market, to the benefit of all participants. The Exchange does not 
believe that any of the proposed changes will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets. Moreover, because there 
are numerous competitive alternatives to the use of the Exchange, it is 
likely that BX will lose market share as a result of the changes if 
they are unattractive to market participants.
    Likewise, the Exchange's proposed credits and credit amendments do 
not impose a burden on competition because the Exchange's execution 
services are completely voluntary and subject to extensive competition 
both from other exchanges and from off-exchange venues. Again, if the 
proposed credits 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 proposal will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\12\
---------------------------------------------------------------------------

    \12\ 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 [email protected]. Please include 
File Number SR-BX-2018-037 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BX-2018-037. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your

[[Page 41124]]

comments more efficiently, please use only one method. The Commission 
will post all comments on the Commission's internet website (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 website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-BX-
2018-037 and should be submitted on or before September 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-17742 Filed 8-16-18; 8:45 am]
 BILLING CODE 8011-01-P


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