Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Equity 7, Section 118(a), 2593-2596 [2019-01420]
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Federal Register / Vol. 84, No. 26 / Thursday, February 7, 2019 / Notices
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February 1, 2019.
Eduardo A. Aleman,
Deputy Secretary.
BILLING CODE 8011–01–P
[Release No. 34–85042; File No. SR–BX–
2018–069]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Transaction Fees at Equity
7, Section 118(a)
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The Exchange proposes to amend the
Exchange’s transaction fees at Equity 7,
Section 118(a), as described further
below.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on January 2, 2018 [sic].
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.
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2019–01373 Filed 2–6–19; 8:45 am]
February 1, 2019.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
21, 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.
The purpose of the proposed rule
change is to amend the Exchange’s
transaction fees at Rule 7018(a) [sic] to:
(1) Adjust the qualifying terms for
certain existing credits it offers to
members with orders that access
liquidity on the Exchange; (2) offer a
new credit for members with orders that
access liquidity on the Exchange; and
(3) eliminate a fee for members with
orders that add liquidity on the
Exchange.
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00107
Fmt 4703
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2593
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
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 3
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.
For these two credits, the Exchange
proposes to decrease the applicable
volume threshold from 0.20% to 0.15%
of total Consolidated Volume during a
month. The Exchange proposes to
recalibrate the threshold downward to
make it easier for firms to reach the
Consolidated Volume threshold
necessary to qualify for these credits.
The Exchange also proposes to change
the benchmark month that it uses to
determine whether a member, in a given
month, has achieved the requisite 20%
increase in liquidity accessed as a
percentage of Consolidated Volume to
qualify for the credits. Whereas the
benchmark month presently is May
2018, the Exchange proposes to change
it to December 2018. This change in
benchmark month is intended to
incentivize market participants to trade
on the Exchange by making it easier for
a member to qualify for these credits.
Volumes in May 2018 were generally
higher than they were in December
2018, such that a 20% increase in
3 Pursuant to Equity 7, Section 118(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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Federal Register / Vol. 84, No. 26 / Thursday, February 7, 2019 / Notices
liquidity accessed as a percentage of
Consolidated Volume will be easier to
achieve relative to December 2018 than
it would be relative to May 2018.
Second Change
In addition to the credits above, the
Exchange also offers other credits for
orders that access liquidity on the
Exchange. First, the Exchange offers 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 0.50% 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. Second, the Exchange
offers 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.
For these two credits, the Exchange
proposes to decrease—from 0.50% to
0.40%—the requisite percentage of total
Consolidated Volume that a member’s
total volume must equal for a member
to qualify for each of the credits, The
Exchange proposes to recalibrate the
threshold downward to make it easier
for a member to qualify for these credits.
The Exchange also proposes to change
the benchmark month that it will use to
determine whether, in a given month, a
member has achieved a 20% or more
increase in total volume so as to qualify
for each of the credits. Whereas the
benchmark date presently is July 2018
for both credits, the Exchange proposes
to change it to December 2018. This
change in benchmark month is intended
to incentivize market participants to
trade on the Exchange by making it
easier for a member to qualify for these
credits. Total volumes in July 2018 were
generally higher than they were in
December 2018, such that a 20%
increase in total volumes relative to
December 2018 will be easier for a
member to achieve than it would a 20%
increase relative to July 2018.
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Third Change
Next, the Exchange proposes to offer
a new credit for a member that accesses
liquidity in any Tape. Specifically, the
Exchange proposes to pay a credit of
$0.0018 per share executed to a member
with orders that access liquidity in
securities in any Tape (excluding orders
with Midpoint pegging and excluding
orders that receive price improvement
and execute against an order with a
Non-displayed price) where the member
accesses liquidity equal to or exceeding
0.50% of total Consolidated Volume
during a month.
The Exchange proposes to add this
credit to provide a new and simple
incentive for members to access
liquidity in substantial volumes on the
Exchange. The Exchange notes that it
already offers members similar, albeit
lower, credits for accessing liquidity
equal to or exceeding lower threshold
percentages of total Consolidated
Volume during a given month ($0.0017
per share executed credit for accessing
liquidity equal to or greater than 0.12%
of total Consolidated Volume during a
month; $0.0015 per share executed
credit for accessing liquidity equal to or
greater than 0.065% of total
Consolidated Volume during a month.
The proposed credit will offer a member
a higher credit than these existing
credits for maintaining a higher volume
of liquidity accessing activity on the
Exchange.
Fourth Change
Finally, the Exchange proposes to
eliminate its $0.0013 per share executed
charge for displayed orders entered by
a member that adds liquidity equal to or
exceeding 0.55% of total Consolidated
Volume during a month. This fee tier
has not achieved its intended purpose of
attracting liquidity to the Exchange.
Accordingly, the Exchange proposes to
eliminate it.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,4 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,5 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
4 15
5 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
Frm 00108
Fmt 4703
Sfmt 4703
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.’’ 6
Likewise, in NetCoalition v. Securities
and Exchange Commission 7
(‘‘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.8 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.’’ 9
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’. . . .’’ 10 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.
First Change
The Exchange believes that it is
reasonable to decrease the Consolidated
Volume threshold and adjust the
benchmark month on its credits for
orders that access liquidity in securities
(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
6 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
7 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
8 See NetCoalition, at 534–535.
9 Id. at 537.
10 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)).
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Federal Register / Vol. 84, No. 26 / Thursday, February 7, 2019 / Notices
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. As
noted above, the Exchange proposes to
decrease the volume threshold for these
credits from .20% to .15% of total
Consolidated Volume and adjust the
benchmark month from May 2018 to
December 2018.
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
has observed that the credits are
becoming too difficult for members to
achieve. The Exchange proposes to
decrease the volume threshold for the
credits to make it easier for members to
qualify for the credits. Likewise, the
Exchange proposes to change the
benchmark month that it uses to
determine whether a member, in a given
month, has achieved the requisite 20%
increase in liquidity accessed as a
percentage of Consolidated Volume to
qualify for the credits. The change in
benchmark month will incentivize
trading on the Exchange by making it
easier for a member to qualify for these
credits. Volumes in May 2018 were
generally higher than they were in
December 2018, such that a 20%
increase in liquidity accessed as a
percentage of Consolidated Volume will
be easier to achieve relative to December
2018 than it would be relative to May
2018.
The Exchange believes that the
proposed change is equitable because it
will incentivize increased participation
on the Exchange. It is not unfairly
discriminatory because it will apply to
all similarly situated member firms.
increase in total volume described
above, at least 30% is attributable to
adding liquidity. As noted above, the
Exchange proposes to decrease—from
0.50% to 0.40%—the requisite
percentage of total Consolidated Volume
that a member’s total volume must equal
for a member to qualify for each of the
credits. It also proposes to change the
benchmark month from July 2018 to
December 2018.
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
has observed that the credits are
becoming too difficult for members to
achieve. The Exchange proposes to
decrease the volume threshold for the
credits to make it easier for members to
qualify for the credits. Likewise, the
Exchange proposes to change the
benchmark month that it uses to
determine whether a member, in a given
month, has achieved the requisite 20%
increase in total volume as a percentage
of Consolidated Volume to qualify for
the credits. The change in benchmark
month will incentivize trading on the
Exchange by making it easier for a
member to qualify for these credits.
Total volumes in July 2018 were
generally higher than they were in
December 2018, such that a 20%
increase in total volume as a percentage
of Consolidated Volume will be easier to
achieve relative to December 2018 than
it would be relative to July 2018.
The Exchange believes that the
proposed change is equitable because it
will incentivize increased participation
on the Exchange. It is not unfairly
discriminatory because it will apply to
all similarly situated member firms.
Second Change
The Exchange believes that it is
reasonable to decrease the Consolidated
Volume threshold and adjust the
benchmark month on its credits for
orders that access liquidity in securities
(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,
during a given month: (i) Has a total
volume (including both providing and
accessing liquidity) that is equal to or
exceeds 0.50% 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
Third Change
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The Exchange believes that its
proposal is reasonable to add a new
credit 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 liquidity
equal to or in excess of 0.50% of
Consolidated Volume during the month.
This proposal is reasonable because it
will provide new and stronger incentive
for members to remove liquidity from
the Exchange. The Exchange believes
that these proposals are equitable and
not unfairly discriminatory because they
will apply to all similarly situated
member firms.
PO 00000
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2595
Fourth Change
The Exchange believes that its
proposal is reasonable to eliminate its
$0.0013 per share executed fee for
displayed orders entered by a member
that adds liquidity equal to or exceeding
0.55% of total Consolidated Volume
during a month. The Exchange believes
that eliminating this fee tier is
reasonable because this fee tier has not
been effective in achieving its intended
purpose of incentivizing participants to
add liquidity to the Exchange. The
Exchange has limited resources
available to it to devote to the operation
of special pricing programs and as such,
it is reasonable and equitable for the
Exchange to allocate those resources to
those programs that are effective and
away from those programs that are
ineffective. The proposal is also
equitable and not unfairly
discriminatory because tit will apply
uniformly to all similarly situated
members.
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 credits
and to eliminate fees 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
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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, credit amendments, and fee
eliminations 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 proposals 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.11
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:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2018–069 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–85036; File No. SR–IEX–
2019–01]
• 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–2018–069. 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 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 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.
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–2018–069, and should
be submitted on or before February 19,
2019.12
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Brent J. Fields,
Secretary.
[FR Doc. 2019–01420 Filed 2–6–19; 8:45 am]
BILLING CODE 8011–01–P
11 15
U.S.C. 78s(b)(3)(A)(ii).
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12 The Commission believes that a 10 day
comment period is reasonable, given the 60-day
suspension period under Exchange Act Section
19(b)(3). It will provide adequate time for comment.
13 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00110
Fmt 4703
February 1, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on January
28, 2019, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. 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
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule 19b–
4 thereunder,5 IEX is filing with the
Commission a proposed rule change to
reject market orders with a time-inforce 6 of DAY that are entered in the
Pre-Market Session 7 for non-IEX-listed
securities, including for the Opening
Process for non-IEX-listed securities
pursuant to Rule 11.231 (the ‘‘Opening
Process’’). The Exchange has designated
this rule change as ‘‘non-controversial’’
under Section 19(b)(3)(A) of the Act 8
and provided the Commission with the
notice required by Rule 19b–4(f)(6)
thereunder.9
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 15 U.S.C. 78s(b)(1).
5 17 CRF [sic] 240.19b–4.
6 See Rule 11.190(c).
7 See Rule 1.160(z).
8 15 U.S.C. 78s(b)(3)(A).
9 17 CFR 240.19b–4.
2 15
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Reject
Market Orders With a Time-in-Force of
DAY That Are Entered in the PreMarket Session for Non-IEX-Listed
Securities
Sfmt 4703
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]]>Agencies
[Federal Register Volume 84, Number 26 (Thursday, February 7, 2019)]
[Notices]
[Pages 2593-2596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01420]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85042; File No. SR-BX-2018-069]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Transaction Fees at Equity 7, Section 118(a)
February 1, 2019.
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 December 21, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's transaction fees at
Equity 7, Section 118(a), as described further below.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on January 2, 2018
[sic].
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(a) [sic] to: (1) Adjust the qualifying
terms for certain existing credits it offers to members with orders
that access liquidity on the Exchange; (2) offer a new credit for
members with orders that access liquidity on the Exchange; and (3)
eliminate a fee for members with orders that add liquidity on the
Exchange.
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 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 \3\ 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.
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\3\ Pursuant to Equity 7, Section 118(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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For these two credits, the Exchange proposes to decrease the
applicable volume threshold from 0.20% to 0.15% of total Consolidated
Volume during a month. The Exchange proposes to recalibrate the
threshold downward to make it easier for firms to reach the
Consolidated Volume threshold necessary to qualify for these credits.
The Exchange also proposes to change the benchmark month that it
uses to determine whether a member, in a given month, has achieved the
requisite 20% increase in liquidity accessed as a percentage of
Consolidated Volume to qualify for the credits. Whereas the benchmark
month presently is May 2018, the Exchange proposes to change it to
December 2018. This change in benchmark month is intended to
incentivize market participants to trade on the Exchange by making it
easier for a member to qualify for these credits. Volumes in May 2018
were generally higher than they were in December 2018, such that a 20%
increase in
[[Page 2594]]
liquidity accessed as a percentage of Consolidated Volume will be
easier to achieve relative to December 2018 than it would be relative
to May 2018.
Second Change
In addition to the credits above, the Exchange also offers other
credits for orders that access liquidity on the Exchange. First, the
Exchange offers 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 0.50% 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. Second, the Exchange offers 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.
For these two credits, the Exchange proposes to decrease--from
0.50% to 0.40%--the requisite percentage of total Consolidated Volume
that a member's total volume must equal for a member to qualify for
each of the credits, The Exchange proposes to recalibrate the threshold
downward to make it easier for a member to qualify for these credits.
The Exchange also proposes to change the benchmark month that it
will use to determine whether, in a given month, a member has achieved
a 20% or more increase in total volume so as to qualify for each of the
credits. Whereas the benchmark date presently is July 2018 for both
credits, the Exchange proposes to change it to December 2018. This
change in benchmark month is intended to incentivize market
participants to trade on the Exchange by making it easier for a member
to qualify for these credits. Total volumes in July 2018 were generally
higher than they were in December 2018, such that a 20% increase in
total volumes relative to December 2018 will be easier for a member to
achieve than it would a 20% increase relative to July 2018.
Third Change
Next, the Exchange proposes to offer a new credit for a member that
accesses liquidity in any Tape. Specifically, the Exchange proposes to
pay a credit of $0.0018 per share executed to a member with orders that
access liquidity in securities in any Tape (excluding orders with
Midpoint pegging and excluding orders that receive price improvement
and execute against an order with a Non-displayed price) where the
member accesses liquidity equal to or exceeding 0.50% of total
Consolidated Volume during a month.
The Exchange proposes to add this credit to provide a new and
simple incentive for members to access liquidity in substantial volumes
on the Exchange. The Exchange notes that it already offers members
similar, albeit lower, credits for accessing liquidity equal to or
exceeding lower threshold percentages of total Consolidated Volume
during a given month ($0.0017 per share executed credit for accessing
liquidity equal to or greater than 0.12% of total Consolidated Volume
during a month; $0.0015 per share executed credit for accessing
liquidity equal to or greater than 0.065% of total Consolidated Volume
during a month. The proposed credit will offer a member a higher credit
than these existing credits for maintaining a higher volume of
liquidity accessing activity on the Exchange.
Fourth Change
Finally, the Exchange proposes to eliminate its $0.0013 per share
executed charge for displayed orders entered by a member that adds
liquidity equal to or exceeding 0.55% of total Consolidated Volume
during a month. This fee tier has not achieved its intended purpose of
attracting liquidity to the Exchange. Accordingly, the Exchange
proposes to eliminate it.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\4\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\5\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4) and (5).
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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.'' \6\
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\6\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission \7\
(``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.\8\ 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.'' \9\
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\7\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\8\ See NetCoalition, at 534-535.
\9\ 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'. . . .'' \10\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
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\10\ 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)).
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First Change
The Exchange believes that it is reasonable to decrease the
Consolidated Volume threshold and adjust the benchmark month on its
credits for orders that access liquidity in securities (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
[[Page 2595]]
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. As noted above, the Exchange proposes
to decrease the volume threshold for these credits from .20% to .15% of
total Consolidated Volume and adjust the benchmark month from May 2018
to December 2018.
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 has observed that
the credits are becoming too difficult for members to achieve. The
Exchange proposes to decrease the volume threshold for the credits to
make it easier for members to qualify for the credits. Likewise, the
Exchange proposes to change the benchmark month that it uses to
determine whether a member, in a given month, has achieved the
requisite 20% increase in liquidity accessed as a percentage of
Consolidated Volume to qualify for the credits. The change in benchmark
month will incentivize trading on the Exchange by making it easier for
a member to qualify for these credits. Volumes in May 2018 were
generally higher than they were in December 2018, such that a 20%
increase in liquidity accessed as a percentage of Consolidated Volume
will be easier to achieve relative to December 2018 than it would be
relative to May 2018.
The Exchange believes that the proposed change is equitable because
it will incentivize increased participation on the Exchange. It is not
unfairly discriminatory because it will apply to all similarly situated
member firms.
Second Change
The Exchange believes that it is reasonable to decrease the
Consolidated Volume threshold and adjust the benchmark month on its
credits for orders that access liquidity in securities (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, during a given month: (i) Has a
total volume (including both providing and accessing liquidity) that is
equal to or exceeds 0.50% 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. As noted above, the
Exchange proposes to decrease--from 0.50% to 0.40%--the requisite
percentage of total Consolidated Volume that a member's total volume
must equal for a member to qualify for each of the credits. It also
proposes to change the benchmark month from July 2018 to December 2018.
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 has observed that
the credits are becoming too difficult for members to achieve. The
Exchange proposes to decrease the volume threshold for the credits to
make it easier for members to qualify for the credits. Likewise, the
Exchange proposes to change the benchmark month that it uses to
determine whether a member, in a given month, has achieved the
requisite 20% increase in total volume as a percentage of Consolidated
Volume to qualify for the credits. The change in benchmark month will
incentivize trading on the Exchange by making it easier for a member to
qualify for these credits. Total volumes in July 2018 were generally
higher than they were in December 2018, such that a 20% increase in
total volume as a percentage of Consolidated Volume will be easier to
achieve relative to December 2018 than it would be relative to July
2018.
The Exchange believes that the proposed change is equitable because
it will incentivize increased participation on the Exchange. It is not
unfairly discriminatory because it will apply to all similarly situated
member firms.
Third Change
The Exchange believes that its proposal is reasonable to add a new
credit 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 liquidity equal to or in excess of
0.50% of Consolidated Volume during the month. This proposal is
reasonable because it will provide new and stronger incentive for
members to remove liquidity from the Exchange. The Exchange believes
that these proposals are equitable and not unfairly discriminatory
because they will apply to all similarly situated member firms.
Fourth Change
The Exchange believes that its proposal is reasonable to eliminate
its $0.0013 per share executed fee for displayed orders entered by a
member that adds liquidity equal to or exceeding 0.55% of total
Consolidated Volume during a month. The Exchange believes that
eliminating this fee tier is reasonable because this fee tier has not
been effective in achieving its intended purpose of incentivizing
participants to add liquidity to the Exchange. The Exchange has limited
resources available to it to devote to the operation of special pricing
programs and as such, it is reasonable and equitable for the Exchange
to allocate those resources to those programs that are effective and
away from those programs that are ineffective. The proposal is also
equitable and not unfairly discriminatory because tit will apply
uniformly to all similarly situated members.
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
credits and to eliminate fees 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
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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, credit amendments, and
fee eliminations 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 proposals 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.\11\
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2018-069 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-2018-069. 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 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 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. 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-2018-069, and should be submitted on
or before February 19, 2019.\12\
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\12\ The Commission believes that a 10 day comment period is
reasonable, given the 60-day suspension period under Exchange Act
Section 19(b)(3). It will provide adequate time for comment.
\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Brent J. Fields,
Secretary.
[FR Doc. 2019-01420 Filed 2-6-19; 8:45 am]
BILLING CODE 8011-01-P
