Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees and Credits at Equity 7, Section 118(a), 24834-24839 [2019-11106]
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Federal Register / Vol. 84, No. 103 / Wednesday, May 29, 2019 / Notices
mechanism of, a free and open market
and a national market system. The
proposed rule amendments would also
provide internal consistency within
Exchange rules and operate to protect
investors and the investing public by
making the Exchange rules easier to
navigate and comprehend.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change adds price
protection mechanisms for option
orders of all ATP Holders submitted to
the Exchange to help further prevent
potentially erroneous executions, which
benefits all market participants. The
Price Checks apply in same manner to
all ATP Holders that submit orders that
are subject to the Price Checks. The
Exchange believes the proposed rule
change would provide market
participants with additional protection
from anomalous or erroneous
executions.
The Exchange does not believe that
the proposed enhancement to the
existing price protections would impose
a burden on competing options
exchanges. Rather, it provides ATP
Holders with the opportunity to avail
themselves of similar protections that
are currently available on the Exchange
for Market Maker quotes and on another
exchange for orders.25
Finally, the Exchange does not believe
that the proposed clarifications to Limit
Order Filter would impose any burden
on competition that is not necessary or
appropriate in furtherance of the
purposes of the Act as these changes are
not intended to address any competitive
issues and would instead add more
specificity, clarity and transparency
regarding this functionality.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 26 and Rule 19b–
4(f)(6) thereunder.27
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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–
NYSEAMER–2019–19 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–NYSEAMER–2019–19. 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 the
supra nn. 8, 11, 15, 19–20, 24.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11236 Filed 5–28–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85912; File No. SR–BX–
2019–013]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Transaction Fees and
Credits at Equity 7, Section 118(a)
May 22, 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 May 10,
2019, 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.
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 and credits
at Equity 7, Section 118(a), as described
further below.
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.
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
26 15
25 See
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–NYSEAMER–2019–19 and
should be submitted on or before June
19, 2019.
U.S.C. 78s(b)(3)(A).
27 17 CFR 240.19b–4(f)(6).
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Federal Register / Vol. 84, No. 103 / Wednesday, May 29, 2019 / Notices
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
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1. Purpose
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 has a
schedule, at Equity 7, Section 118(a),
which consists of several different
credits that it provides for orders in
securities priced at $1 or more per share
that access liquidity on the Exchange
and several different charges that it
assesses for orders in such securities
that add liquidity on the Exchange.
With limited exceptions, the Exchange’s
system of credits and charges presently
applies to orders in securities in all
Tapes.
The purpose of the proposed rule
change is to amend the Exchange’s
schedule of fees and credits with the
objective of increasing net incentives for
members to remove liquidity from the
Exchange in securities in Tape B, where
the Exchange has seen less activity than
it has in Tape A and C securities.
Tape B Credits
The Exchange proposes to achieve its
objective of increasing removal activity
in securities in Tape B, in part, by
establishing a new series of credits for
orders in securities in Tape B that
remove liquidity from the Exchange
(‘‘Tape B Credits’’). As is explained
below, the proposed Tape B Credits will
apply in lieu of most of the existing
generally applicable liquidity removal
credits. The existing credits will
continue to apply, but only as to orders
in securities in Tapes A and C (the
‘‘Tape A and C Credits’’). The proposed
Tape B Credits will generally be higher
than the Tape A and C Credits, which
again the Exchange proposes as a means
of targeting an increase in liquidity
removal activity in securities in Tape B.
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The availability of the proposed Tape B
Credits will also be tied to the level of
a member’s liquidity adding activity in
Tape B securities as a means of
incentivizing liquidity adding activity
even as the Exchange proposes to
increase its charges for orders that add
liquidity in Tape B.
Specifically, the Exchange proposes to
adopt the following Tape B Credits:
• $0.0026 per share executed 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) entered by a member
that adds liquidity in Tape B securities
equal to or exceeding 0.025% of total
Consolidated Volume 3 during a month;
and
• $0.0024 per share executed 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) entered by a member
that adds liquidity equal to or exceeding
an average daily volume of 50,000
shares during a month.
The Exchange also proposes to
eliminate the following two existing
credits, which apply specifically to
orders in securities in Tape B, insofar as
the Exchange will replace these existing
credits with the higher proposed Tape B
Credits:
• $0.0019 per share executed 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) entered by a member
that: (i) Accesses liquidity equal to or
exceeding 0.15% of total Consolidated
Volume during a month; and (ii)
accesses 20% more liquidity as a
percentage of Consolidated Volume than
the member accessed in December 2018;
and
• $0.0019 per share executed 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) entered by a member
that, during a given month: (i) Has a
total volume (accessing and adding
liquidity) equal to or exceeding 0.40%
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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24835
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 December 2018; and (iii) of
the 20% or more increase in total
volume described in (ii) herein, at least
30% is attributable to adding liquidity.
Lastly, as noted above, the proposed
Tape B Credits will not supplant all of
the existing credits. Instead, the
Exchange proposes that the following
existing credits will continue to apply to
orders in securities in Tape B (as well
as to orders in Tapes A and C):
• $0.0000 per share executed for an
order that receives price improvement
and executes against an order with a
Non-displayed price; and
• $0.0000 per share executed for an
order with Midpoint pegging that
removes liquidity.
Change to Tape A and C Credit
Additionally, the Exchange proposes
to amend its existing $0.0001 per share
executed ‘‘catch-all’’ credit that applies
to ‘‘all other orders’’ that remove
liquidity from the Exchange. The
Exchange proposes to amend the credit
so that it applies to an order in
securities in Tapes A and C (excluding
an order with midpoint pegging and
excluding an order that receives price
improvement and execute against an
order with a non-displayed price) that
remove liquidity from the Exchange that
are entered by a member that adds at
least an average daily volume of 50,000
shares to the Exchange during a month.
The Exchange proposes these changes to
incentivize members to engage in
meaningful liquidity adding activity
during a month.
New Fee for Removing Liquidity From
the Exchange
As explained above, the Exchange
presently operates on the taker-maker
model, such that it currently does not
charge a fee for executions on the
Exchange of orders that remove
liquidity from the Exchange. However,
the Exchange now proposes to establish
such a fee for members that do not add
a meaningful amount of liquidity to the
Exchange during a month. The purpose
of the fee is to help ensure that, as the
Exchange seeks to establish new Tape B
Credits to incentivize liquidity removal
in Tape B securities, and also seeks to
offset the costs of those Tape B Credits
by increasing fees for adding Tape B
liquidity, the Exchange continues to
provide incentives to members to add
meaningful amounts of liquidity to the
Exchange each month.
Specifically, the Exchange proposes to
charge a fee of $0.0003 per share
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executed for an order in securities in
any Tape (excluding an order with
midpoint pegging and excluding an
order that receives price improvement
and execute against an order with a nondisplayed price) that removes liquidity
from the Exchange and that is entered
by a member that does not add at least
an average daily volume of 50,000
shares to the Exchange during a month.
The fee would apply unless a member’s
liquidity adding activity on the
Exchange qualifies it for a liquidity
removal credit.
As an example of the operation of the
proposed liquidity removal fee, a
member that adds an average daily
volume of 49,000 shares in any Tape to
the Exchange would pay a $0.0003 fee
per share executed for all of its orders
that remove liquidity from the Exchange
during that month. If in the subsequent
month, however, the member increases
its average daily volume of shares added
to the Exchange to 50,000 shares, then
it would no longer pay that $0.0003 fee,
but it would instead qualify for the
$0.0001 per share executed credit on its
orders in securities in Tapes A and C
that remove liquidity from the Exchange
and the $0.0024 per share executed
credit on its orders in securities in Tape
B that remove liquidity from the
Exchange during that month (excluding
orders with Midpoint pegging and
excluding orders that receive price
improvement and execute against an
order with a Non-displayed price).
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Tape B Charges
As a means of offsetting the costs of
providing the Tape B Credits, the
Exchange proposes to establish a new
series of charges for displayed and nondisplayed orders in securities in Tape B
that add liquidity to the Exchange
(‘‘Tape B Charges’’). As is explained
below, the proposed Tape B Charges
will apply in lieu of most of the existing
generally applicable liquidity adding
charges. The existing charges will
continue to apply, but only as to orders
in securities in Tapes A and C (the
‘‘Tape A and C Charges’’). The proposed
Tape B Charges are similarly structured
to the existing Tape A and C Charges,
which are also tied to liquidity adding
activity, except that the Tape B charges
will generally be higher than the Tape
A and C Charges. Again, the Exchange
proposes higher Tape B Charges as a
means of offsetting the costs of its efforts
to increase liquidity removal activity in
securities in Tape B. However, relative
to each other, the new displayed order
charges will be lower for members that
add higher volumes of Tape B liquidity
during a month.
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Specifically, the Exchange proposes to
adopt the following Tape B Charges:
• $0.0026 per share executed for a
displayed order in securities in Tape B
entered by a member that adds Tape B
liquidity equal to or exceeding 0.025%
total Consolidated Volume during a
month;
• $0.0028 per share executed for a
displayed order in securities in Tape B
entered by a member that adds Tape B
liquidity that is less than 0.025% total
Consolidated Volume during a month;
and
• $0.0028 per share executed for a
non-displayed order in securities in
Tape B (other than orders with
Midpoint pegging) entered by a member
that adds Tape B liquidity equal to or
exceeding 0.025% total Consolidated
Volume during a month.
Lastly, as noted above, the proposed
Tape B Charges will not supplant all of
the existing charges. Instead, the
Exchange proposes that following
existing charges will continue to apply
to orders in securities in Tape B (as well
as to orders in Tapes A and C):
• $0.0005 per share executed for an
order with Midpoint pegging entered by
a member that adds 0.02% of total
Consolidated Volume of non-displayed
liquidity excluding a buy (sell) order
that receives an execution price that is
lower (higher) than the midpoint of the
NBBO;
• $0.0015 per share executed for an
order with Midpoint pegging entered by
entered by other member excluding a
buy (sell) order that receives an
execution price that is lower (higher)
than the midpoint of the NBBO;
• $0.0024 per share executed for a
buy (sell) order with Midpoint pegging
that receives an execution price that is
lower (higher) than the midpoint of the
NBBO;
• $0.0030 per share executed for all
other non-displayed orders; and
• charges for BSTG, BSCN, BMOP,
BTFY, BCRT, BDRK, and BCST orders
that execute in a venue other than the
Nasdaq BX Equities System.
Change to Tape A & C Charge
The Exchange presently charges a
$0.0017 per share executed fee for
displayed orders entered by a member
that adds liquidity equal to or exceeding
0.15% of total Consolidated Volume
during a month as well as a $0.0014 per
share executed fee for displayed orders
entered by a member that adds liquidity
equal to or exceeding 0.25% of total
Consolidated Volume during a month.4
The Exchange proposes to increase the
4 Going forward, these charges will apply only to
securities in Tapes A and C.
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level of total Consolidated Volume that
triggers the $0.0014 per share executed
fee from 0.25% to 0.35%. The Exchange
believes that increasing the volume
threshold for a member to qualify for the
lower $0.0014 per share executed fee
would incentivize firms to add
additional liquidity to the Exchange.
Reorganization of Schedule
To effectuate the foregoing changes in
a way that is readily comprehensible to
members, the Exchange proposes to
reorganize and re-format Equity 7,
Section 118(a). Specifically, the
Exchange proposes to indicate in a chart
the applicability of each credit and
charge to securities in Tapes A, B, and
C. Where a credit or charge does not
apply to securities in a particular Tape,
the chart will so indicate with the term
‘‘N/A.’’
The Exchange also proposes to reformat and emphasize in bold type the
headings for the credits and fees that
comprise the schedule so that members
can distinguish these sections more
easily. Finally, the Exchange proposes
to insert a new heading—‘‘Other charges
for entering orders in the Nasdaq BX
Equities System’’—that will apply to
charges for BSTG, BSCN, BMOP, BTFY,
BCRT, BDRK, and BCST orders that
execute in a venue other than the
Nasdaq BX Equities System.
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
5 15
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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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
and the SEC were discussing the cash
equities markets, the Exchange believes
that these views apply with equal force
to the options markets.
Tape B Credits and Charges
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The Exchange believes that it is
reasonable to establish a new system of
Tape B Credits and Tape B Charges,
which will largely supplant the
schedule of credits and charges that
applies presently to orders in Tape B
securities. The Exchange has designed
this new system of Tape B Credits and
Tape B Charges to provide new
incentives to members to increase their
liquidity removal activity in Tape B
securities, while also maintaining
significant levels of liquidity adding
activity on the Exchange.
The Exchange believes that the
proposed Tape B Credits are reasonable
because they are structured similarly to
existing liquidity removal credits in that
they apply only when members achieve
certain thresholds of participation on
the Exchange. Increased participation
on the Exchange will help to improve
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
74770, 74782–83 (December 9, 2008) (SR–
NYSEArca–2006–21)).
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transparency and price discovery and
will enhance execution opportunities
for members on the Exchange. In
particular, it is reasonable for the
Exchange to propose to tie the
availability of Tape B Credits to a
member achieving certain thresholds of
liquidity addition, rather than certain
levels of liquidity removal (as is the case
with existing credits), because the
Exchange seeks to ensure that as it
provides higher removal credits for
orders in securities in Tape B, it also
maintains adequate incentives for
members to continue to add liquidity to
the Exchange.
Moreover, the Exchange believes that
is reasonable, equitable, and not
unfairly discriminatory to propose
higher credits to members that remove
Tape B liquidity than it does to
members that remove liquidity 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 believes that its
proposals are equitable and not unfairly
discriminatory because they will apply
to all similarly situated member firms.
That is, any member may qualify for
receipt of the higher credits by
achieving the requisite volume of
liquidity adding activity during a
month.12 Moreover, the proposed
change is equitable because it will
incentivize members to engage in
market-improving behavior.
Likewise, the Exchange believes it is
reasonable, equitable, and not unfairly
discriminatory to establish new charges
for displayed and non-displayed orders
in securities in Tape B entered by
members that add liquidity to the
Exchange. The Exchange formulated the
Tape B Charges similarly to the existing
Tape A and C Charges in that they
trigger when members add liquidity
equal to or exceeding certain threshold
volumes. Moreover, it is equitable and
not unfairly discriminatory for the
Exchange to charge higher fees to
members that add Tape B liquidity than
it does to members that add liquidity in
securities in Tapes A and C because
these new Tape B Charges will help the
Exchange to specifically offset the costs
of the new, higher Tape B Credits. The
Exchange notes that it will also offset
12 Additionally, the Exchange believes that it is
reasonable and equitable for it to eliminate its two
existing $0.0019 per share executed credits for
orders in Tape B securities entered by members that
increase their levels of participation on the
Exchange over time because these credits will be
replaced by substantially higher Tape B Credits that
will be easier for members to achieve.
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24837
some of the added costs of the Tape B
Charges by tying the availability of the
Tape B Credits to members that achieve
or maintain certain monthly levels of
liquidity adding activity.
The Exchange also believes that these
proposals are not unfairly
discriminatory because they will apply
to all similarly situated member firms.
Any member will be entitled to receive
the new credits or incur the new fees if
they add certain minimum levels of
liquidity in a month. Conversely, any
member may avoid imposition of the
new fees by reducing or avoiding
liquidity-adding activity.
Liquidity Removal Fee
The Exchange believes it is reasonable
to charge its members a fee for removing
liquidity from the Exchange even
though the Exchange otherwise operates
on a taker-maker model. Although the
concept of a liquidity removal fee is
new to the Exchange, it is not novel on
taker-maker exchanges. Indeed, the
Exchange notes that the proposed fee is
similar to a liquidity removal fee that
NYSE National recently imposed on its
members.13
Additionally, the Exchange believes
that the proposed fee is reasonable
because it is intended to incentivize
members that engage primarily in
liquidity removal activity on the
Exchange to also maintain a meaningful
level of liquidity adding activity as well.
In particular, the Exchange believes that
its members would seek to avoid
incurring the proposed fee, and instead
qualify for a liquidity removal credit, by
increasing the extent to which it adds
liquidity to the Exchange.
The Exchange believes that the
proposed fee is equitable and not
unfairly discriminatory because it
would apply to all similarly situated
members and because any member may
avoid imposition of the fee by adding
the requisite level of liquidity to the
Exchange during a month.14
Changes to Tape A and C Fees and
Charges
The Exchange believes that it is
reasonable to amend its existing $0.0001
per share executed ‘‘catch-all’’ credit so
that it applies only to orders in
13 See Securities Exchange Act Release No. 34–
85674 (Apr. 17, 2019); 84 FR 16903 (Apr. 23, 2019)
(SR–NYSENAT–2019–09) (imposing fee for ETP
Holders that remove liquidity from the Exchange
unless a better tiered credit or fee applies).
14 Relatedly, the Exchange believes that it is
reasonable to amend its existing $0.0001 per share
executed catch all credit so that it applies (i) only
to orders in securities in Tapes A and C and (ii)
only to members that add at least an average daily
volume of 50,000 shares to the Exchange in a
month.
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29MYN1
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24838
Federal Register / Vol. 84, No. 103 / Wednesday, May 29, 2019 / Notices
securities in Tapes A and C that remove
liquidity from the Exchange and only to
the extent that members add at least an
average daily volume of 50,000 shares to
the Exchange during a month. The
Exchange intends for the proposed
change to parallel the new $0.0024 per
share executed catch-all credit that it
proposes for orders that remove
liquidity in Tape B securities entered by
members that add at least an average
daily volume of 50,000 shares to the
Exchange during a month. The
Exchange intends for both of these
credits to incentivize members to engage
in a meaningful baseline volume of
liquidity adding activity during a
month. As noted above, the Exchange
believes that it is equitable and nondiscriminatory for the Exchange to
provide a higher catch-all remove credit
to orders in Tape B securities than it
does to orders in Tapes A and C
securities as a means of targeting an
increase in Tape B removal activity. The
proposed change is equitable and nondiscriminatory because the amended
credit will be available to all similarly
situated members and any member may
qualify for the amended credit by
satisfying its liquidity addition criteria.
Moreover, the proposed change is
equitable because it will incentivize
members to engage in market-improving
behavior.
The Exchange believes that it is
reasonable to increase the total
Consolidated Volume threshold
necessary to trigger its existing $0.0014
per share executed fee that the Exchange
charges for a displayed order (going
forward, in securities in Tapes A and C
only) that adds liquidity entered by a
member that adds liquidity equal to or
exceeding 0.25% of total Consolidated
Volume during a month. The proposed
increase in qualifying total Consolidated
Volume will increase member
incentives to add liquidity to the
Exchange. The Exchange notes that the
fee remains unchanged and therefore
continues to be reasonable. The
Exchange believes that increase to the
total Consolidated Volume requirement
is an equitable allocation and is not
unfairly discriminatory because the
Exchange will apply the same fee to all
similarly situated members. Any
member may choose to avoid the fee by
adding less than the level of
Consolidated Volume that will trigger it.
Moreover, the proposed change is
equitable because it will incentivize
members to engage in market-improving
behavior.
Reorganization of Schedule
The Exchange believes that it is
reasonable to reorganize and re-format
VerDate Sep<11>2014
17:45 May 28, 2019
Jkt 247001
Equity 7, Section 118(a) so that it
implements the foregoing changes in a
manner that is readily comprehensible
to readers. The Exchange believes that
the proposed reorganization is equitable
and non-discriminatory in that the
proposal changes will render the fee
schedule easier to read and understand
for all 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 to remain
competitive with other exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to exchanges. Because competitors are
free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
In this instance, the proposed changes
to the Exchange’s charges assessed and
credits available to member firms for
execution of securities in Tape B do not
impose a burden on competition
because the Exchange’s execution
services are completely voluntary and
subject to extensive competition both
from other exchanges and from offexchange venues.
The Exchange intends for the
proposed changes, in the aggregate, to
increase member incentives to remove
Tape B liquidity from the Exchange
while maintaining adequate incentives
for members to continue to add
meaningful levels of liquidity to the
Exchange. The Exchange proposes to
achieve these objectives by adding a
new system of Tape B Credits that are
significantly higher than the credits
presently available to members with
orders that remove Tape B liquidity
from the Exchange. It also intends to
establish new and higher Tape B
Charges to offset the costs of the new
Tape B Credits, but it proposes to offset
the costs of the new Tape B Charges, in
part, by tying the availability of the new
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
Tape B Credits to members adding
certain threshold volumes of liquidity to
the Exchange.
The Exchange’s efforts to incentivize
market-improving activity are not
limited to orders in securities in Tape B.
Indeed, the Exchange proposes to
modify the $0.001 ‘‘catch-all’’ credit
applicable to orders that remove
liquidity in securities in Tapes A and C
so that it is available only to firms that
also make meaningful contributions to
liquidity on the Exchange, and it
proposes to establish a liquidity removal
fee for orders in securities in all Tapes
for members that fail to make baseline
contributions to liquidity. Finally, the
Exchange proposes to increase the total
Consolidated Volume threshold that
triggers a $0.0014 per share executed fee
for a displayed order in securities in
Tapes A and C entered by a member that
adds liquidity to the Exchange.
In the aggregate, all of these changes
are procompetitive and reflective of the
Exchange’s efforts to make it an
attractive and vibrant venue to market
participants.
In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
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.15
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.
15 15
E:\FR\FM\29MYN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
29MYN1
Federal Register / Vol. 84, No. 103 / Wednesday, May 29, 2019 / Notices
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:
• 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–2019–013 on the subject line.
Paper Comments
khammond on DSKBBV9HB2PROD with NOTICES
• 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–2019–013. 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 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–2019–013 and should
be submitted on or before June 19, 2019.
17:45 May 28, 2019
[FR Doc. 2019–11106 Filed 5–28–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
VerDate Sep<11>2014
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Deputy Secretary.
Jkt 247001
[Release No. 34–85911; File No. SR–FINRA–
2019–008]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Designation
of a Longer Period for Commission
Action on a Proposed Rule Change To
Establish a Corporate Bond New Issue
Reference Data Service
May 22, 2019.
On March 27, 2019, Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to establish a new
issue reference data service for
corporate bonds. The proposed rule
change was published for comment in
the Federal Register on April 8, 2019.3
The Commission has received eleven
comment letters on the proposal.4
Section 19(b)(2) of the Act 5 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Act Release No. 85488 (April 2,
2019), 84 FR 13977.
4 See Letters from: (1) Cathy Scott, Director, Fixed
Income Forum, on behalf of The Credit Roundtable,
dated April 29, 2019; (2) Salman Banaei, Executive
Director, IHS Markit, dated April 29, 2019; (3)
David R. Burton, Senior Fellow in Economic Policy,
The Heritage Foundation, dated April 29, 2019; (4)
Tom Quaadman, Executive Vice President, U.S.
Chamber of Commerce, dated April 29, 2019; (5)
Lynn Martin, President and COO, ICE Data
Services, dated April 29, 2019; (6) Tyler Gellasch,
Executive Director, Healthy Markets Association,
dated April 29, 2019; (7) Greg Babyak, Global Head
of Regulatory Affairs, Bloomberg L.P. dated April
29, 2019; (8) Marshall Nicholson and Thomas S.
Vales, ICE Bonds dated April 29, 2019; (9)
Christopher B. Killian, Managing Director, SIFMA,
dated April 29, 2019; (10) Larry Tabb, TABB Group,
dated May 15, 2019; and (11) Larry Harris, Fred V.
Keenan Chair in Finance, U.S.C. Marshall School of
Business, dated May 17, 2019.
5 15 U.S.C. 78s(b)(2).
1 15
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24839
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is May 23, 2019.
The Commission is extending this 45day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider this proposed rule change
and the comments received.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,6
designates July 7, 2019, as the date by
which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–FINRA–2019–008).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11100 Filed 5–28–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday, June 5,
2019, at 10:00 a.m.
PLACE: The meeting will be held in
Auditorium LL–002 at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will begin at 10:00
a.m. (ET) and will be open to the public.
Seating will be on a first-come, firstserved basis. Visitors will be subject to
security checks. The meeting will be
webcast on the Commission’s website at
www.sec.gov.
MATTERS TO BE CONSIDERED: The subject
matters of the Open Meeting will be the
Commission’s consideration of:
1. Whether to adopt a new rule to
establish a standard of conduct for
broker-dealers and natural persons who
are associated persons of a broker-dealer
when making a recommendation to a
retail customer of any securities
TIME AND DATE:
6 Id.
7 17
CFR 200.30–3(a)(31).
E:\FR\FM\29MYN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 103 (Wednesday, May 29, 2019)]
[Notices]
[Pages 24834-24839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11106]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85912; File No. SR-BX-2019-013]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Transaction Fees and Credits at Equity 7, Section 118(a)
May 22, 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 May 10, 2019, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's transaction fees and
credits at Equity 7, Section 118(a), as described further below.
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.
[[Page 24835]]
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 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 has a schedule, at Equity 7,
Section 118(a), which consists of several different credits that it
provides for orders in securities priced at $1 or more per share that
access liquidity on the Exchange and several different charges that it
assesses for orders in such securities that add liquidity on the
Exchange. With limited exceptions, the Exchange's system of credits and
charges presently applies to orders in securities in all Tapes.
The purpose of the proposed rule change is to amend the Exchange's
schedule of fees and credits with the objective of increasing net
incentives for members to remove liquidity from the Exchange in
securities in Tape B, where the Exchange has seen less activity than it
has in Tape A and C securities.
Tape B Credits
The Exchange proposes to achieve its objective of increasing
removal activity in securities in Tape B, in part, by establishing a
new series of credits for orders in securities in Tape B that remove
liquidity from the Exchange (``Tape B Credits''). As is explained
below, the proposed Tape B Credits will apply in lieu of most of the
existing generally applicable liquidity removal credits. The existing
credits will continue to apply, but only as to orders in securities in
Tapes A and C (the ``Tape A and C Credits''). The proposed Tape B
Credits will generally be higher than the Tape A and C Credits, which
again the Exchange proposes as a means of targeting an increase in
liquidity removal activity in securities in Tape B. The availability of
the proposed Tape B Credits will also be tied to the level of a
member's liquidity adding activity in Tape B securities as a means of
incentivizing liquidity adding activity even as the Exchange proposes
to increase its charges for orders that add liquidity in Tape B.
Specifically, the Exchange proposes to adopt the following Tape B
Credits:
$0.0026 per share executed 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) entered by a member that
adds liquidity in Tape B securities equal to or exceeding 0.025% of
total Consolidated Volume \3\ during a month; and
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
$0.0024 per share executed 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) entered by a member that
adds liquidity equal to or exceeding an average daily volume of 50,000
shares during a month.
The Exchange also proposes to eliminate the following two existing
credits, which apply specifically to orders in securities in Tape B,
insofar as the Exchange will replace these existing credits with the
higher proposed Tape B Credits:
$0.0019 per share executed 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) entered by a member that:
(i) Accesses liquidity equal to or exceeding 0.15% of total
Consolidated Volume during a month; and (ii) accesses 20% more
liquidity as a percentage of Consolidated Volume than the member
accessed in December 2018; and
$0.0019 per share executed 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) entered by a member that,
during a given month: (i) Has a total volume (accessing and adding
liquidity) equal to or exceeding 0.40% 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
December 2018; and (iii) of the 20% or more increase in total volume
described in (ii) herein, at least 30% is attributable to adding
liquidity.
Lastly, as noted above, the proposed Tape B Credits will not
supplant all of the existing credits. Instead, the Exchange proposes
that the following existing credits will continue to apply to orders in
securities in Tape B (as well as to orders in Tapes A and C):
$0.0000 per share executed for an order that receives
price improvement and executes against an order with a Non-displayed
price; and
$0.0000 per share executed for an order with Midpoint
pegging that removes liquidity.
Change to Tape A and C Credit
Additionally, the Exchange proposes to amend its existing $0.0001
per share executed ``catch-all'' credit that applies to ``all other
orders'' that remove liquidity from the Exchange. The Exchange proposes
to amend the credit so that it applies to an order in securities in
Tapes A and C (excluding an order with midpoint pegging and excluding
an order that receives price improvement and execute against an order
with a non-displayed price) that remove liquidity from the Exchange
that are entered by a member that adds at least an average daily volume
of 50,000 shares to the Exchange during a month. The Exchange proposes
these changes to incentivize members to engage in meaningful liquidity
adding activity during a month.
New Fee for Removing Liquidity From the Exchange
As explained above, the Exchange presently operates on the taker-
maker model, such that it currently does not charge a fee for
executions on the Exchange of orders that remove liquidity from the
Exchange. However, the Exchange now proposes to establish such a fee
for members that do not add a meaningful amount of liquidity to the
Exchange during a month. The purpose of the fee is to help ensure that,
as the Exchange seeks to establish new Tape B Credits to incentivize
liquidity removal in Tape B securities, and also seeks to offset the
costs of those Tape B Credits by increasing fees for adding Tape B
liquidity, the Exchange continues to provide incentives to members to
add meaningful amounts of liquidity to the Exchange each month.
Specifically, the Exchange proposes to charge a fee of $0.0003 per
share
[[Page 24836]]
executed for an order in securities in any Tape (excluding an order
with midpoint pegging and excluding an order that receives price
improvement and execute against an order with a non-displayed price)
that removes liquidity from the Exchange and that is entered by a
member that does not add at least an average daily volume of 50,000
shares to the Exchange during a month. The fee would apply unless a
member's liquidity adding activity on the Exchange qualifies it for a
liquidity removal credit.
As an example of the operation of the proposed liquidity removal
fee, a member that adds an average daily volume of 49,000 shares in any
Tape to the Exchange would pay a $0.0003 fee per share executed for all
of its orders that remove liquidity from the Exchange during that
month. If in the subsequent month, however, the member increases its
average daily volume of shares added to the Exchange to 50,000 shares,
then it would no longer pay that $0.0003 fee, but it would instead
qualify for the $0.0001 per share executed credit on its orders in
securities in Tapes A and C that remove liquidity from the Exchange and
the $0.0024 per share executed credit on its orders in securities in
Tape B that remove liquidity from the Exchange during that month
(excluding orders with Midpoint pegging and excluding orders that
receive price improvement and execute against an order with a Non-
displayed price).
Tape B Charges
As a means of offsetting the costs of providing the Tape B Credits,
the Exchange proposes to establish a new series of charges for
displayed and non-displayed orders in securities in Tape B that add
liquidity to the Exchange (``Tape B Charges''). As is explained below,
the proposed Tape B Charges will apply in lieu of most of the existing
generally applicable liquidity adding charges. The existing charges
will continue to apply, but only as to orders in securities in Tapes A
and C (the ``Tape A and C Charges''). The proposed Tape B Charges are
similarly structured to the existing Tape A and C Charges, which are
also tied to liquidity adding activity, except that the Tape B charges
will generally be higher than the Tape A and C Charges. Again, the
Exchange proposes higher Tape B Charges as a means of offsetting the
costs of its efforts to increase liquidity removal activity in
securities in Tape B. However, relative to each other, the new
displayed order charges will be lower for members that add higher
volumes of Tape B liquidity during a month.
Specifically, the Exchange proposes to adopt the following Tape B
Charges:
$0.0026 per share executed for a displayed order in
securities in Tape B entered by a member that adds Tape B liquidity
equal to or exceeding 0.025% total Consolidated Volume during a month;
$0.0028 per share executed for a displayed order in
securities in Tape B entered by a member that adds Tape B liquidity
that is less than 0.025% total Consolidated Volume during a month; and
$0.0028 per share executed for a non-displayed order in
securities in Tape B (other than orders with Midpoint pegging) entered
by a member that adds Tape B liquidity equal to or exceeding 0.025%
total Consolidated Volume during a month.
Lastly, as noted above, the proposed Tape B Charges will not
supplant all of the existing charges. Instead, the Exchange proposes
that following existing charges will continue to apply to orders in
securities in Tape B (as well as to orders in Tapes A and C):
$0.0005 per share executed for an order with Midpoint
pegging entered by a member that adds 0.02% of total Consolidated
Volume of non-displayed liquidity excluding a buy (sell) order that
receives an execution price that is lower (higher) than the midpoint of
the NBBO;
$0.0015 per share executed for an order with Midpoint
pegging entered by entered by other member excluding a buy (sell) order
that receives an execution price that is lower (higher) than the
midpoint of the NBBO;
$0.0024 per share executed for a buy (sell) order with
Midpoint pegging that receives an execution price that is lower
(higher) than the midpoint of the NBBO;
$0.0030 per share executed for all other non-displayed
orders; and
charges for BSTG, BSCN, BMOP, BTFY, BCRT, BDRK, and BCST
orders that execute in a venue other than the Nasdaq BX Equities
System.
Change to Tape A & C Charge
The Exchange presently charges a $0.0017 per share executed fee for
displayed orders entered by a member that adds liquidity equal to or
exceeding 0.15% of total Consolidated Volume during a month as well as
a $0.0014 per share executed fee for displayed orders entered by a
member that adds liquidity equal to or exceeding 0.25% of total
Consolidated Volume during a month.\4\ The Exchange proposes to
increase the level of total Consolidated Volume that triggers the
$0.0014 per share executed fee from 0.25% to 0.35%. The Exchange
believes that increasing the volume threshold for a member to qualify
for the lower $0.0014 per share executed fee would incentivize firms to
add additional liquidity to the Exchange.
---------------------------------------------------------------------------
\4\ Going forward, these charges will apply only to securities
in Tapes A and C.
---------------------------------------------------------------------------
Reorganization of Schedule
To effectuate the foregoing changes in a way that is readily
comprehensible to members, the Exchange proposes to reorganize and re-
format Equity 7, Section 118(a). Specifically, the Exchange proposes to
indicate in a chart the applicability of each credit and charge to
securities in Tapes A, B, and C. Where a credit or charge does not
apply to securities in a particular Tape, the chart will so indicate
with the term ``N/A.''
The Exchange also proposes to re-format and emphasize in bold type
the headings for the credits and fees that comprise the schedule so
that members can distinguish these sections more easily. Finally, the
Exchange proposes to insert a new heading--``Other charges for entering
orders in the Nasdaq BX Equities System''--that will apply to charges
for BSTG, BSCN, BMOP, BTFY, BCRT, BDRK, and BCST orders that execute in
a venue other than the Nasdaq BX Equities System.
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.
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\5\ 15 U.S.C. 78f(b).
\6\ 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
[[Page 24837]]
broader forms that are most important to investors and listed
companies.'' \7\
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\7\ 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 \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\
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\8\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\9\ See NetCoalition, at 534-535.
\10\ 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'. . . .'' \11\ 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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\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)).
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Tape B Credits and Charges
The Exchange believes that it is reasonable to establish a new
system of Tape B Credits and Tape B Charges, which will largely
supplant the schedule of credits and charges that applies presently to
orders in Tape B securities. The Exchange has designed this new system
of Tape B Credits and Tape B Charges to provide new incentives to
members to increase their liquidity removal activity in Tape B
securities, while also maintaining significant levels of liquidity
adding activity on the Exchange.
The Exchange believes that the proposed Tape B Credits are
reasonable because they are structured similarly to existing liquidity
removal credits in that they apply only when members achieve certain
thresholds of participation on the Exchange. Increased participation on
the Exchange will help to improve transparency and price discovery and
will enhance execution opportunities for members on the Exchange. In
particular, it is reasonable for the Exchange to propose to tie the
availability of Tape B Credits to a member achieving certain thresholds
of liquidity addition, rather than certain levels of liquidity removal
(as is the case with existing credits), because the Exchange seeks to
ensure that as it provides higher removal credits for orders in
securities in Tape B, it also maintains adequate incentives for members
to continue to add liquidity to the Exchange.
Moreover, the Exchange believes that is reasonable, equitable, and
not unfairly discriminatory to propose higher credits to members that
remove Tape B liquidity than it does to members that remove liquidity
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 believes that its proposals are equitable and not
unfairly discriminatory because they will apply to all similarly
situated member firms. That is, any member may qualify for receipt of
the higher credits by achieving the requisite volume of liquidity
adding activity during a month.\12\ Moreover, the proposed change is
equitable because it will incentivize members to engage in market-
improving behavior.
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\12\ Additionally, the Exchange believes that it is reasonable
and equitable for it to eliminate its two existing $0.0019 per share
executed credits for orders in Tape B securities entered by members
that increase their levels of participation on the Exchange over
time because these credits will be replaced by substantially higher
Tape B Credits that will be easier for members to achieve.
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Likewise, the Exchange believes it is reasonable, equitable, and
not unfairly discriminatory to establish new charges for displayed and
non-displayed orders in securities in Tape B entered by members that
add liquidity to the Exchange. The Exchange formulated the Tape B
Charges similarly to the existing Tape A and C Charges in that they
trigger when members add liquidity equal to or exceeding certain
threshold volumes. Moreover, it is equitable and not unfairly
discriminatory for the Exchange to charge higher fees to members that
add Tape B liquidity than it does to members that add liquidity in
securities in Tapes A and C because these new Tape B Charges will help
the Exchange to specifically offset the costs of the new, higher Tape B
Credits. The Exchange notes that it will also offset some of the added
costs of the Tape B Charges by tying the availability of the Tape B
Credits to members that achieve or maintain certain monthly levels of
liquidity adding activity.
The Exchange also believes that these proposals are not unfairly
discriminatory because they will apply to all similarly situated member
firms. Any member will be entitled to receive the new credits or incur
the new fees if they add certain minimum levels of liquidity in a
month. Conversely, any member may avoid imposition of the new fees by
reducing or avoiding liquidity-adding activity.
Liquidity Removal Fee
The Exchange believes it is reasonable to charge its members a fee
for removing liquidity from the Exchange even though the Exchange
otherwise operates on a taker-maker model. Although the concept of a
liquidity removal fee is new to the Exchange, it is not novel on taker-
maker exchanges. Indeed, the Exchange notes that the proposed fee is
similar to a liquidity removal fee that NYSE National recently imposed
on its members.\13\
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\13\ See Securities Exchange Act Release No. 34-85674 (Apr. 17,
2019); 84 FR 16903 (Apr. 23, 2019) (SR-NYSENAT-2019-09) (imposing
fee for ETP Holders that remove liquidity from the Exchange unless a
better tiered credit or fee applies).
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Additionally, the Exchange believes that the proposed fee is
reasonable because it is intended to incentivize members that engage
primarily in liquidity removal activity on the Exchange to also
maintain a meaningful level of liquidity adding activity as well. In
particular, the Exchange believes that its members would seek to avoid
incurring the proposed fee, and instead qualify for a liquidity removal
credit, by increasing the extent to which it adds liquidity to the
Exchange.
The Exchange believes that the proposed fee is equitable and not
unfairly discriminatory because it would apply to all similarly
situated members and because any member may avoid imposition of the fee
by adding the requisite level of liquidity to the Exchange during a
month.\14\
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\14\ Relatedly, the Exchange believes that it is reasonable to
amend its existing $0.0001 per share executed catch all credit so
that it applies (i) only to orders in securities in Tapes A and C
and (ii) only to members that add at least an average daily volume
of 50,000 shares to the Exchange in a month.
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Changes to Tape A and C Fees and Charges
The Exchange believes that it is reasonable to amend its existing
$0.0001 per share executed ``catch-all'' credit so that it applies only
to orders in
[[Page 24838]]
securities in Tapes A and C that remove liquidity from the Exchange and
only to the extent that members add at least an average daily volume of
50,000 shares to the Exchange during a month. The Exchange intends for
the proposed change to parallel the new $0.0024 per share executed
catch-all credit that it proposes for orders that remove liquidity in
Tape B securities entered by members that add at least an average daily
volume of 50,000 shares to the Exchange during a month. The Exchange
intends for both of these credits to incentivize members to engage in a
meaningful baseline volume of liquidity adding activity during a month.
As noted above, the Exchange believes that it is equitable and non-
discriminatory for the Exchange to provide a higher catch-all remove
credit to orders in Tape B securities than it does to orders in Tapes A
and C securities as a means of targeting an increase in Tape B removal
activity. The proposed change is equitable and non-discriminatory
because the amended credit will be available to all similarly situated
members and any member may qualify for the amended credit by satisfying
its liquidity addition criteria. Moreover, the proposed change is
equitable because it will incentivize members to engage in market-
improving behavior.
The Exchange believes that it is reasonable to increase the total
Consolidated Volume threshold necessary to trigger its existing $0.0014
per share executed fee that the Exchange charges for a displayed order
(going forward, in securities in Tapes A and C only) that adds
liquidity entered by a member that adds liquidity equal to or exceeding
0.25% of total Consolidated Volume during a month. The proposed
increase in qualifying total Consolidated Volume will increase member
incentives to add liquidity to the Exchange. The Exchange notes that
the fee remains unchanged and therefore continues to be reasonable. The
Exchange believes that increase to the total Consolidated Volume
requirement is an equitable allocation and is not unfairly
discriminatory because the Exchange will apply the same fee to all
similarly situated members. Any member may choose to avoid the fee by
adding less than the level of Consolidated Volume that will trigger it.
Moreover, the proposed change is equitable because it will incentivize
members to engage in market-improving behavior.
Reorganization of Schedule
The Exchange believes that it is reasonable to reorganize and re-
format Equity 7, Section 118(a) so that it implements the foregoing
changes in a manner that is readily comprehensible to readers. The
Exchange believes that the proposed reorganization is equitable and
non-discriminatory in that the proposal changes will render the fee
schedule easier to read and understand for all 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 to remain competitive with other exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to exchanges. Because
competitors are free to modify their own fees in response, and because
market participants may readily adjust their order routing practices,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited.
In this instance, the proposed changes to the Exchange's charges
assessed and credits available to member firms for execution of
securities in Tape B do not impose a burden on competition because the
Exchange's execution services are completely voluntary and subject to
extensive competition both from other exchanges and from off-exchange
venues.
The Exchange intends for the proposed changes, in the aggregate, to
increase member incentives to remove Tape B liquidity from the Exchange
while maintaining adequate incentives for members to continue to add
meaningful levels of liquidity to the Exchange. The Exchange proposes
to achieve these objectives by adding a new system of Tape B Credits
that are significantly higher than the credits presently available to
members with orders that remove Tape B liquidity from the Exchange. It
also intends to establish new and higher Tape B Charges to offset the
costs of the new Tape B Credits, but it proposes to offset the costs of
the new Tape B Charges, in part, by tying the availability of the new
Tape B Credits to members adding certain threshold volumes of liquidity
to the Exchange.
The Exchange's efforts to incentivize market-improving activity are
not limited to orders in securities in Tape B. Indeed, the Exchange
proposes to modify the $0.001 ``catch-all'' credit applicable to orders
that remove liquidity in securities in Tapes A and C so that it is
available only to firms that also make meaningful contributions to
liquidity on the Exchange, and it proposes to establish a liquidity
removal fee for orders in securities in all Tapes for members that fail
to make baseline contributions to liquidity. Finally, the Exchange
proposes to increase the total Consolidated Volume threshold that
triggers a $0.0014 per share executed fee for a displayed order in
securities in Tapes A and C entered by a member that adds liquidity to
the Exchange.
In the aggregate, all of these changes are procompetitive and
reflective of the Exchange's efforts to make it an attractive and
vibrant venue to market participants.
In sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
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.\15\
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\15\ 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.
[[Page 24839]]
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-2019-013 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-2019-013. 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 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-2019-013 and should be submitted on
or before June 19, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11106 Filed 5-28-19; 8:45 am]
BILLING CODE 8011-01-P
