Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend BX Pricing at Options 7, Section 3 Titled BX Options Market-Ports and Other Services, 37931-37933 [2019-16481]
Download as PDF
<![CDATA[
Federal Register / Vol. 84, No. 149 / Friday, August 2, 2019 / Notices
reached any conclusions with respect to
any of the issues involved. Rather, the
Commission seeks and encourages
interested persons to comment on the
issues presented by the proposed rule
change and provide the Commission
with arguments to support the
Commission’s analysis as to whether to
approve or disapprove the proposed
rule change, as modified by Partial
Amendment No. 1.
Pursuant to Section 19(b)(2)(B) of the
Exchange,152 the Commission is
providing notice of the grounds for
disapproval under consideration. The
Commission is instituting proceedings
to allow for additional analysis of the
proposal’s consistency with Section
15A(b)(9) of the Act,153 which requires
that FINRA’s rules be designed to,
among other things, promote just and
equitable principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. As summarized above,
commenters raised, and sought
clarification regarding, a number of
issues. In response, FINRA recently
submitted Partial Amendment No. 1 and
response to comments. Accordingly, the
Commission believes it is appropriate to
institute proceedings to allow additional
consideration and comments by both
commenters and the Commission, and
any potential response to comments or
supplemental information by FINRA.
jbell on DSK3GLQ082PROD with NOTICES
V. Request for Written Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
raised by the proposed rule change, as
modified by Partial Amendment No. 1.
In particular, the Commission invites
the written views of interested persons
on whether the proposed rule change, as
modified by Partial Amendment No. 1,
is inconsistent with Section 15A(b)(6),
or any other provision, of the Exchange
Act, or the rules and regulations
thereunder.
Although there do not appear to be
any issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.154
152 15
U.S.C. 78s(b)(2)(B).
U.S.C. 78o–3(b)(6).
154 Exchange Act Section 19(b)(2), as amended by
the Securities Acts Amendments of 1975, Public
Law 94–29, 89 Stat. 97 (1975), grants the
Commission flexibility to determine what type of
proceedings—either oral or notice and opportunity
153 15
VerDate Sep<11>2014
18:02 Aug 01, 2019
Jkt 247001
Interested persons are invited to
submit written data, views, and
arguments by August 23, 2019
concerning whether the proposed rule
change should be approved or
disapproved. Any person who wishes to
file a rebuttal to any other person’s
submission must file that rebuttal by
September 16, 2019. In light of the
concerns raised by the proposed rule
change, as modified by Partial
Amendment No. 1, as discussed above,
the Commission invites additional
comment on the proposed rule change,
as modified by Partial Amendment No.
1, as the Commission continues its
analysis of whether the proposed rule
change, as modified by Partial
Amendment No. 1, is consistent with
Section 15A(b)(6), or any other
provision of the Exchange Act, or the
rules and regulations thereunder.
Comments may be submitted by any
of the following methods:
37931
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. All comments received will be
posted without change. The
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–FINRA–2019–012 and
should be submitted on or before
August 23, 2019. If comments are
received, any rebuttal comments should
be submitted by September 16,2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.155
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–16483 Filed 8–1–19; 8:45 am]
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–
FINRA–2019–012 on the subject line.
BILLING CODE 8011–01–P
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–FINRA–2019–012. 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,
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend BX Pricing at
Options 7, Section 3 Titled BX Options
Market—Ports and Other Services
for written comments—is appropriate for
consideration of a particular proposal by a selfregulatory organization. See Securities Acts
Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs
to Accompany S. 249, S. Rep. No. 75, 94th Cong.,
1st Sess. 30 (1975).
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86508; File No. SR–BX–
2019–027]
July 29, 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 July 15,
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 BX
pricing at Options 7, Section 3 titled
‘‘BX Options Market—Ports and Other
Services.’’ The amendment will describe
the pricing with respect to an upcoming
technology infrastructure migration.
155 17 CFR 200.30–3(a)(12); 17 CFR 200.30–
3(a)(57).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
E:\FR\FM\02AUN1.SGM
02AUN1
37932
Federal Register / Vol. 84, No. 149 / Friday, August 2, 2019 / Notices
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
jbell on DSK3GLQ082PROD with NOTICES
The Exchange proposes to amend BX
pricing at Options 7, Section 3 titled
‘‘BX Options Market—Ports and Other
Services.’’ During the month of August
2019, BX Participants will be required
to transition from current FIX Ports,3
CTI Ports 4 and FIX DROP Ports 5 to new
FIX Ports, CTI Ports and FIX DROP
Ports in connection with an upcoming
technology infrastructure migration.
3 Financial Information eXchange’’ or ’’ FIX’’ is an
interface that allows Participants and their
Sponsored Customers to connect, send, and receive
messages related to orders to and from the
Exchange. Features include the following: (1)
Execution messages; (2) order messages; and (3) risk
protection triggers and cancel notifications. See
Chapter VI, Section 21(a)(i)(A).
4 Clearing Trade Interface (‘‘CTI’’) is a real-time
clearing trade update message that is sent to a
Participant after an execution has occurred and
contains trade details specific to that Participant.
The information includes, among other things, the
following: (i) The Clearing Member Trade
Agreement or ‘‘CMTA’’ or The Options Clearing
Corporation or ‘‘OCC’’ number; (ii) Exchange badge
or house number; (iii) the Exchange internal firm
identifier; (iv) an indicator which will distinguish
electronic and non-electronically delivered orders;
(v) liquidity indicators and transaction type for
billing purposes; and (vi) capacity. See Chapter VI,
Section 19(b)(1).
5 FIX DROP is a real-time order and execution
update message that is sent to a Participant after an
order been received/modified or an execution has
occurred and contains trade details specific to that
Participant. The information includes, among other
things, the following: (i) Executions; (ii)
cancellations; (iii) modifications to an existing
order; and (iv) busts or post-trade corrections. See
Chapter VI, Section 19(b)(3).
VerDate Sep<11>2014
18:02 Aug 01, 2019
Jkt 247001
Description of Migration and Pricing
Impact
In connection with this migration,
Participants will request new FIX Ports,
CTI Ports and FIX DROP Ports during
the month of August, which are
duplicative of the type and quantity of
their current ports, at no additional cost
to allow for testing of the new ports and
allow for continuous connection to the
match engine during the transition
period.6 For example, a BX Participant
with 3 FIX Ports, 1 CTI Port and 1 FIX
DROP Port on August 1, 2019 could
request 3 new FIX Ports, 1 CTI Port and
1 FIX DROP Port for the month of
August 2019 at no additional cost. The
BX Participant would be assessed only
for the legacy market ports, in this case
3 FIX Ports, 1 CTI Port and 1 FIX DROP
Port, for the month of August 2019 and
would not be assessed for the new ports,
which are duplicative of the current
ports. A Participant may acquire any
additional legacy ports during the
month of August 2019 and would be
assessed the charges indicated in the
current Pricing Schedule. The migration
does not require a Participant to acquire
any additional ports, rather the
migration requires a new port to replace
any existing ports provided the
Participant desired to maintain the same
number of ports.7 A Participant desiring
to enter orders into BX is required to
obtain 1 FIX Port. A Participant may
also obtain order and execution ports,
such as a CTI Port and/or a FIX DROP
Port, to receive clearing and execution
messages. The number of additional FIX
or order and execution ports obtained
by a Participant is dependent on the
Participant’s business needs.
Applicability to and Impact on
Participants 8
The proposal is not intended to
impose any additional fees on any BX
6 Participants would contact Market Operations to
acquire new duplicative FIX Ports, CTI Ports and
FIX DROP Ports. See Options Technical Update
#2019–3.
7 The migration is 1:1 and therefore would not
require a Participant to acquire new ports, nor
would it reduce the number of ports needed to
connect.
8 On May 21, 2019, the SEC Division of Trading
and Markets (the ‘‘Division’’) issued fee filing
guidance titled ‘‘Staff Guidance on SRO Rule
Filings Relating to Fees’’ (‘‘Guidance’’). Within the
Guidance, the Division noted, among other things,
that the purpose discussion should address ‘‘how
the fee may apply differently (e.g., additional cost
vs. additional discount) to different types of market
participants (e.g., market makers, institutional
brokers, retail brokers, vendors, etc.) and different
sizes of market participants.’’ See Guidance
(available at https://www.sec.gov/tm/staff-guidancesro-rule-filings-fees). The Guidance also suggests
that the purpose discussion should include
numerical examples. Where possible, the Exchange
is including numerical examples. In addition, the
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
Participants. All Participants may enter
orders on BX. As noted above, a BX
Participant may enter all orders on BX
through one FIX Port. The Exchange
does not require a BX Participant to
obtain more than one FIX Port, however,
a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to
meet its individual business needs. This
proposal is intended to permit a BX
Participant to migrate its current FIX
Ports, CTI Ports and FIX DROP Ports at
no additional costs during the month of
August 2019 to allow for continuous
connection to the Exchange.
Participants would only be assessed a
fee for their current FIX Ports, CTI Ports
and FIX DROP Ports and not be assessed
a fee for any new duplicative ports they
acquire in connection with the
technology infrastructure migration.
This proposal is not intended to have a
pricing impact.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,9 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,10 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
proposal is also consistent with Section
11A of the Act relating to the
establishment of the national market
system for securities. Moreover, the
Exchange believes that its proposal
complies with Commission guidance on
SRO fee filings that the Commission
Staff issued on May 21, 2019.11
The Proposal Is Reasonable
The Exchange’s proposal is reasonable
in several respects. As a threshold
matter, the Exchange is subject to
significant competitive forces in the
market for options transaction services
that constrain its pricing determinations
in that market. The fact that this market
is competitive has long been recognized
by the courts. In NetCoalition v.
Securities and Exchange Commission,
Exchange is providing data to the Commission in
support of its arguments herein. The Guidance
covers all aspects of a fee filing, which the
Exchange has addressed throughout this filing.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4) and (5).
11 See Guidance, supra note 8. Although the
Exchange believes that this filing complies with the
Guidance, the Exchange does not concede that the
standards set forth in the Guidance are consistent
with the Exchange Act and reserves its right to
challenge those standards through administrative
and judicial review, as appropriate.
E:\FR\FM\02AUN1.SGM
02AUN1
Federal Register / Vol. 84, No. 149 / Friday, August 2, 2019 / Notices
the D.C. Circuit stated as follows: ‘‘[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’. . . .’’ 12
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
transaction services. The Exchange is
one of several options venues to which
market participants may direct their
order flow, and it represents a small
percentage of the overall market. The
Exchange believes its proposal is
reasonable because it will not cause a
pricing impact on any BX Participant,
rather the proposal is intended to permit
BX Participants to migrate their FIX
Ports, CTI Ports and FIX DROP Ports to
new technology at no additional cost
during the month of August 2019. This
proposal, which offers new duplicative
ports to Participants at no cost, will
allow Participants to test and maintain
continuous connection to the Exchange
during the month of August 2019.
The Proposal Represents an Equitable
Allocation and Is Not Unfairly
Discriminatory
The Exchange believes its proposal
allocates its fees fairly among its market
participants. The proposal is equitable
and not unfairly discriminatory. All
Participants may enter orders on BX. As
noted above, a BX Participant may enter
all orders on BX through one FIX Port.
The Exchange does not require a BX
Participant to obtain more than one FIX
Port, however, a Participant may obtain
multiple FIX Ports, a CTI Port or a FIX
DROP Port to meet its individual
business needs. This proposal is not
intended to have a pricing impact to any
BX Participant.
jbell on DSK3GLQ082PROD with NOTICES
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.
12 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
VerDate Sep<11>2014
18:02 Aug 01, 2019
Jkt 247001
Inter-Market Competition
The proposal does not impose an
undue burden on inter-market
competition. This proposal does not
amend pricing or functionality. Rather,
this technology migration will enable
BX Participants to continue to connect
to BX, as is the case today, for the entry
of orders.
Intra-Market Competition
The proposal does not impose an
undue burden on intra-market
competition. All Participants may enter
orders on BX. As noted above, a BX
Participant may enter all orders on BX
through one FIX Port. The Exchange
does not require a BX Participant to
obtain more than one FIX Port, however,
a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to
meet its individual business needs. This
proposal is not intended to have a
pricing impact to any BX Participant.
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.13
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–2019–027 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–2019–027. 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–2019–027 and should
be submitted on or before August 23,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–16481 Filed 8–1–19; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
13 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00109
Fmt 4703
Sfmt 9990
37933
14 17
E:\FR\FM\02AUN1.SGM
CFR 200.30–3(a)(12).
02AUN1
]]>Agencies
[Federal Register Volume 84, Number 149 (Friday, August 2, 2019)]
[Notices]
[Pages 37931-37933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16481]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86508; File No. SR-BX-2019-027]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend BX
Pricing at Options 7, Section 3 Titled BX Options Market--Ports and
Other Services
July 29, 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 July 15, 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 BX pricing at Options 7, Section 3
titled ``BX Options Market--Ports and Other Services.'' The amendment
will describe the pricing with respect to an upcoming technology
infrastructure migration.
[[Page 37932]]
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 Exchange proposes to amend BX pricing at Options 7, Section 3
titled ``BX Options Market--Ports and Other Services.'' During the
month of August 2019, BX Participants will be required to transition
from current FIX Ports,\3\ CTI Ports \4\ and FIX DROP Ports \5\ to new
FIX Ports, CTI Ports and FIX DROP Ports in connection with an upcoming
technology infrastructure migration.
---------------------------------------------------------------------------
\3\ Financial Information eXchange'' or '' FIX'' is an interface
that allows Participants and their Sponsored Customers to connect,
send, and receive messages related to orders to and from the
Exchange. Features include the following: (1) Execution messages;
(2) order messages; and (3) risk protection triggers and cancel
notifications. See Chapter VI, Section 21(a)(i)(A).
\4\ Clearing Trade Interface (``CTI'') is a real-time clearing
trade update message that is sent to a Participant after an
execution has occurred and contains trade details specific to that
Participant. The information includes, among other things, the
following: (i) The Clearing Member Trade Agreement or ``CMTA'' or
The Options Clearing Corporation or ``OCC'' number; (ii) Exchange
badge or house number; (iii) the Exchange internal firm identifier;
(iv) an indicator which will distinguish electronic and non-
electronically delivered orders; (v) liquidity indicators and
transaction type for billing purposes; and (vi) capacity. See
Chapter VI, Section 19(b)(1).
\5\ FIX DROP is a real-time order and execution update message
that is sent to a Participant after an order been received/modified
or an execution has occurred and contains trade details specific to
that Participant. The information includes, among other things, the
following: (i) Executions; (ii) cancellations; (iii) modifications
to an existing order; and (iv) busts or post-trade corrections. See
Chapter VI, Section 19(b)(3).
---------------------------------------------------------------------------
Description of Migration and Pricing Impact
In connection with this migration, Participants will request new
FIX Ports, CTI Ports and FIX DROP Ports during the month of August,
which are duplicative of the type and quantity of their current ports,
at no additional cost to allow for testing of the new ports and allow
for continuous connection to the match engine during the transition
period.\6\ For example, a BX Participant with 3 FIX Ports, 1 CTI Port
and 1 FIX DROP Port on August 1, 2019 could request 3 new FIX Ports, 1
CTI Port and 1 FIX DROP Port for the month of August 2019 at no
additional cost. The BX Participant would be assessed only for the
legacy market ports, in this case 3 FIX Ports, 1 CTI Port and 1 FIX
DROP Port, for the month of August 2019 and would not be assessed for
the new ports, which are duplicative of the current ports. A
Participant may acquire any additional legacy ports during the month of
August 2019 and would be assessed the charges indicated in the current
Pricing Schedule. The migration does not require a Participant to
acquire any additional ports, rather the migration requires a new port
to replace any existing ports provided the Participant desired to
maintain the same number of ports.\7\ A Participant desiring to enter
orders into BX is required to obtain 1 FIX Port. A Participant may also
obtain order and execution ports, such as a CTI Port and/or a FIX DROP
Port, to receive clearing and execution messages. The number of
additional FIX or order and execution ports obtained by a Participant
is dependent on the Participant's business needs.
---------------------------------------------------------------------------
\6\ Participants would contact Market Operations to acquire new
duplicative FIX Ports, CTI Ports and FIX DROP Ports. See Options
Technical Update #2019-3.
\7\ The migration is 1:1 and therefore would not require a
Participant to acquire new ports, nor would it reduce the number of
ports needed to connect.
---------------------------------------------------------------------------
Applicability to and Impact on Participants \8\
---------------------------------------------------------------------------
\8\ On May 21, 2019, the SEC Division of Trading and Markets
(the ``Division'') issued fee filing guidance titled ``Staff
Guidance on SRO Rule Filings Relating to Fees'' (``Guidance'').
Within the Guidance, the Division noted, among other things, that
the purpose discussion should address ``how the fee may apply
differently (e.g., additional cost vs. additional discount) to
different types of market participants (e.g., market makers,
institutional brokers, retail brokers, vendors, etc.) and different
sizes of market participants.'' See Guidance (available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Guidance
also suggests that the purpose discussion should include numerical
examples. Where possible, the Exchange is including numerical
examples. In addition, the Exchange is providing data to the
Commission in support of its arguments herein. The Guidance covers
all aspects of a fee filing, which the Exchange has addressed
throughout this filing.
---------------------------------------------------------------------------
The proposal is not intended to impose any additional fees on any
BX Participants. All Participants may enter orders on BX. As noted
above, a BX Participant may enter all orders on BX through one FIX
Port. The Exchange does not require a BX Participant to obtain more
than one FIX Port, however, a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to meet its individual business
needs. This proposal is intended to permit a BX Participant to migrate
its current FIX Ports, CTI Ports and FIX DROP Ports at no additional
costs during the month of August 2019 to allow for continuous
connection to the Exchange. Participants would only be assessed a fee
for their current FIX Ports, CTI Ports and FIX DROP Ports and not be
assessed a fee for any new duplicative ports they acquire in connection
with the technology infrastructure migration. This proposal is not
intended to have a pricing impact.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ 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 proposal is also consistent with
Section 11A of the Act relating to the establishment of the national
market system for securities. Moreover, the Exchange believes that its
proposal complies with Commission guidance on SRO fee filings that the
Commission Staff issued on May 21, 2019.\11\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
\11\ See Guidance, supra note 8. Although the Exchange believes
that this filing complies with the Guidance, the Exchange does not
concede that the standards set forth in the Guidance are consistent
with the Exchange Act and reserves its right to challenge those
standards through administrative and judicial review, as
appropriate.
---------------------------------------------------------------------------
The Proposal Is Reasonable
The Exchange's proposal is reasonable in several respects. As a
threshold matter, the Exchange is subject to significant competitive
forces in the market for options transaction services that constrain
its pricing determinations in that market. The fact that this market is
competitive has long been recognized by the courts. In NetCoalition v.
Securities and Exchange Commission,
[[Page 37933]]
the D.C. Circuit stated as follows: ``[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'. . . .'' \12\
---------------------------------------------------------------------------
\12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is one of several options
venues to which market participants may direct their order flow, and it
represents a small percentage of the overall market. The Exchange
believes its proposal is reasonable because it will not cause a pricing
impact on any BX Participant, rather the proposal is intended to permit
BX Participants to migrate their FIX Ports, CTI Ports and FIX DROP
Ports to new technology at no additional cost during the month of
August 2019. This proposal, which offers new duplicative ports to
Participants at no cost, will allow Participants to test and maintain
continuous connection to the Exchange during the month of August 2019.
The Proposal Represents an Equitable Allocation and Is Not Unfairly
Discriminatory
The Exchange believes its proposal allocates its fees fairly among
its market participants. The proposal is equitable and not unfairly
discriminatory. All Participants may enter orders on BX. As noted
above, a BX Participant may enter all orders on BX through one FIX
Port. The Exchange does not require a BX Participant to obtain more
than one FIX Port, however, a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to meet its individual business
needs. This proposal is not intended to have a pricing impact to any BX
Participant.
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.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. This proposal does not amend pricing or functionality.
Rather, this technology migration will enable BX Participants to
continue to connect to BX, as is the case today, for the entry of
orders.
Intra-Market Competition
The proposal does not impose an undue burden on intra-market
competition. All Participants may enter orders on BX. As noted above, a
BX Participant may enter all orders on BX through one FIX Port. The
Exchange does not require a BX Participant to obtain more than one FIX
Port, however, a Participant may obtain multiple FIX Ports, a CTI Port
or a FIX DROP Port to meet its individual business needs. This proposal
is not intended to have a pricing impact to any BX Participant.
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.\13\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2019-027 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-2019-027. 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-2019-027 and should be submitted on
or before August 23, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-16481 Filed 8-1-19; 8:45 am]
BILLING CODE 8011-01-P
