Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the BX Options Pricing Schedule, 6700-6705 [2021-01403]

Download as PDF 6700 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2021–01341 Filed 1–21–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 1. Purpose [Release No. 34–90936; File No. SR–BX– 2021–001] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the BX Options Pricing Schedule January 15, 2021. 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 January 4, 2021, 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 BX Options Pricing Schedule at Options 7. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/bx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. jbell on DSKJLSW7X2PROD with 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. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 19:27 Jan 21, 2021 Jkt 253001 Today, Lead Market Makers (‘‘LMMs’’) 3 are assessed the same fees and rebates in Options 7, Section 2 as BX Options Market Makers.4 The purpose of the proposed rule change is to amend Options 7, Section 2 to (i) increase the LMM Rebate to Add Liquidity, (ii) decrease the LMM Fee to Add Liquidity, and (iii) restructure the existing pricing schedules to add separate pricing for LMMs, which will apply in each case to LMMs in their specifically appointed options classes. As described in detail below, while the Exchange is proposing to add separate pricing for LMMs in the existing schedules, LMMs will continue to be assessed the same BX Options Market Makers fees and rebates in their specifically allocated options classes under this proposal except with respect to the proposed LMM Rebate to Add Liquidity and proposed LMM Fee to Add Liquidity. The Exchange also proposes to amend its Opening Cross 5 pricing provisions in Options 7, Section 2(2) to correct an inadvertent omission. Lastly, the Exchange proposes various technical, non-substantive changes throughout Options 7, including to update cross-cites to obsolete rules. The proposed changes respond in part to the current competitive environment where market participants have a choice of where to direct order flow by incentivizing LMMs to increase their liquidity provision on the Exchange. LMM Rebate To Add Liquidity Today, as set forth in Options 7, Section 2(1), LMMs are provided the $0.10 per contract BX Options Market Maker Rebate to Add Liquidity in Penny Symbols in their specifically allocated options classes. This rebate is provided only when the LMM is contra to a Non3 The term ‘‘Lead Market Maker’’ or (‘‘LMM’’) applies to a registered BX Options Market Maker that is approved pursuant to Options 2, Section 3 to be the LMM in an options class (options classes). 4 The term ‘‘BX Options Market Maker’’ or (‘‘M’’) is a Participant that has registered as a Market Maker on BX Options pursuant to Options 2, Section 1, and must also remain in good standing pursuant to Options 2, Section 9. In order to receive Market Maker pricing in all securities, the Participant must be registered as a BX Options Market Maker in at least one security. 5 See Options 3, Section 8. PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 Customer,6 Firm,7 or BX Options Market Maker (including LMMs).8 The Exchange now proposes to increase this rebate to $0.11 per contract for LMMs only. This rebate will apply to LMMs in their specifically allocated options classes, and will have the same qualifications as the existing BX Options Market Maker rebate in that the incentive will only be provided to LMMs that are contra to Non-Customers, Firms, BX Options Market Makers, or LMMs. To effect this change, the Exchange proposes to set forth the LMM Rebate to Add Liquidity in Penny Symbols in a separate pricing column in Options 7, Section 2(1). The Exchange will also amend the rebate qualifications in note 2 of Options 7, Section 2(1) to include LMMs. As amended, note 2 will provide that the Rebate to Add Liquidity will be paid to a BX Options Market Maker or a Lead Market Maker only when the BX Options Market Maker or Lead Market Maker is contra to a NonCustomer, Firm, BX Options Market Maker, or Lead Market Maker. LMM Fee To Add Liquidity Today, as set forth in Options 7, Section 2(1), LMMs are charged the $0.39 per contract BX Options Market Maker Fee to Add Liquidity in Penny Symbols in their specifically allocated options classes. Pursuant to note 3 of Options 7, Section 2(1), this fee is assessed only when the LMM is contra to a Customer.9 The Exchange now proposes to decrease this fee to $0.38 per contract for LMMs only. This fee will apply to LMMs in their specifically allocated options classes, and will have the same qualifications as the existing BX Options Market Maker fee in that the fee only will be assessed to LMMs that are contra to Customers. To effect this change, the Exchange proposes to set forth the LMM Fee to Add Liquidity in Penny Symbols in a separate pricing column in Options 7, Section 2(1). The Exchange will also amend the fee qualifications in note 3 of Options 7, Section 2(1) to include LMMs. As amended, note 3 will provide that the Fee to Add Liquidity will be assessed to a BX Options Market Maker or a Lead 6 A Non-Customer includes a Professional, Broker-Dealer and Non-BX Options Market Maker. 7 The term ‘‘Firm’’ or (‘‘F’’) applies to any transaction that is identified by a Participant for clearing in the Firm range at OCC. 8 See Options 7, Section 2(1), note 2. 9 The term ‘‘Customer’’ or (‘‘C’’) applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Options 1, Section 1(a)(48)). E:\FR\FM\22JAN1.SGM 22JAN1 6701 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices Market Maker only when the BX Options Market Maker or Lead Market Maker is contra to a Customer. Separate LMM Pricing The Exchange also proposes to restructure the existing pricing schedules to add separate pricing for LMMs. As noted above, while the Exchange is proposing to add separate pricing for LMMs, LMMs will continue to be assessed the same BX Options Market Makers fees and rebates in their specifically allocated options classes under this proposal except with respect to the new LMM Rebate to Add Liquidity and new LMM Fee to Add Liquidity discussed above. To effect this change, the Exchange first proposes to amend the fees and rebates for Penny and Non-Penny Symbols in Options 7, Section 2(1) by adding a separate column for LMM pricing. In the Penny Symbol and Non- Penny Symbol Tier Schedules within Options 7, Section 2(1), the Exchange also proposes to add LMMs next to each instance of BX Options Market Maker. The Exchange will make similar changes to note 4 of Options 7, Section 2(1) to add ‘‘or a Lead Market Maker’’ after each instance of BX Options Market Maker. As amended, the pricing schedules and accompanying notes for Penny and Non-Penny Symbols will be as follows: FEES AND REBATES [Per executed contract] Lead market maker Customer Penny Symbols: Rebate to Add Liquidity ................................................ Fee to Add Liquidity ............................................................. Rebate to Remove Liquidity ................................................ Fee to Remove Liquidity ...................................................... Non-Penny Symbols: ........................................................... Rebate to Add Liquidity ....................................................... Fee to Add Liquidity ............................................................. Rebate to Remove Liquidity ................................................ Fee to Remove Liquidity ...................................................... BX options market maker # 2 $0.11 2 $0.10 # 3 0.38 3 0.39 # N/A N/A N/A ........................ * * * N/A # # ........................ N/A 4 0.50/0.95 N/A * ........................ N/A 4 0.50/0.95 N/A * Noncustomer 1 Firm N/A 0.45 N/A 0.46 ........................ N/A 0.98 N/A 0.89 N/A 0.45 N/A 0.46 ........................ N/A 0.98 N/A 0.89 1A Non-Customer includes a Professional, Broker-Dealer and Non-BX Options Market Maker. Rebate to Add Liquidity will be paid to a BX Options Market Maker or a Lead Market Maker only when the BX Options Market Maker or Lead Market Maker is contra to a Non-Customer, Firm, BX Options Market Maker, or Lead Market Maker. 3 The Fee to Add Liquidity will be assessed to a BX Options Market Maker or a Lead Market Maker only when the BX Options Market Maker or Lead Market Maker is contra to a Customer. 4 The higher Fee to Add Liquidity will be assessed to a BX Options Market Maker or a Lead Market Maker only when the BX Options Market Maker or Lead Market Maker is contra to a Customer. # Penny Symbols Tier Schedule 2 The When: Rebate to add liquidity Fee to add liquidity Rebate to remove liquidity Fee to remove liquidity Fee to remove liquidity Customer Customer Customer Lead market maker or BX options market maker Customer Non-customer, lead market maker, BX options market maker, customer, or firm Lead market maker or BX options market maker Customer Non-customer, lead market maker, BX options market maker, or firm Non-customer, lead market maker, BX options market maker, or firm Trading with: Tier 1: Participant executes less than 0.05% of total industry customer equity and ETF option ADV contracts per month ........................................... Tier 2: Participant executes 0.05% to less than 0.15% of total industry customer equity and ETF option ADV contracts per month ........................... Tier 3: Participant executes 0.15% or more of total industry customer equity and ETF option ADV contracts per month ................................................. $0.00 $0.39 $0.00 $0.39 $0.46 0.10 0.39 0.25 0.39 0.46 0.20 0.39 0.35 0.30 0.46 jbell on DSKJLSW7X2PROD with NOTICES * Non-Penny Symbols Tier Schedule Tier 1: Participant executes less than 0.05% of total industry customer equity and ETF option ADV contracts per month ........................................... Tier 2: Participant executes 0.05% to less than 0.15% of total industry customer equity and ETF option ADV ..... contracts per month ............................... VerDate Sep<11>2014 19:27 Jan 21, 2021 Jkt 253001 PO 00000 0.00 0.85 0.80 0.89 0.89 0.10 0.85 0.80 0.89 0.89 Sfmt 4703 E:\FR\FM\22JAN1.SGM Frm 00090 Fmt 4703 22JAN1 6702 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices When: Rebate to add liquidity Fee to add liquidity Rebate to remove liquidity Fee to remove liquidity Fee to remove liquidity Customer Customer Customer Lead market maker or BX options market maker Customer Non-customer, lead market maker, BX options market maker, customer, or firm Lead market maker or BX options market maker Customer Non-customer, lead market maker, BX options market maker, or firm Non-customer, lead market maker, BX options market maker, or firm Trading with: Tier 3: Participant executes 0.15% or more of total industry customer equity and ETF option ADV contracts per month ................................................. 0.20 As shown above, the only fee changes relate to the proposed LMM Rebate to Add Liquidity in Penny Symbols and the proposed LMM Fee to Add Liquidity in Penny Symbols. Otherwise, LMMs will continue to be charged at the same rate for Penny and Non-Penny Symbols 0.85 0.80 0.60 0.89 mechanism,10 the Exchange proposes to add a separate pricing column for LMMs that will set forth the same fees and rebates that LMMs are assessed today (i.e., the same as BX Options Market Makers). As amended, the pricing schedule for exposure orders in Section 2(4) will be as follows: under this proposal (i.e., the same as BX Options Market Makers). The Exchange also proposes to make similar changes in Options 7, Section 2(4) and Section 2(5) to add separate pricing for LMMs. In Section 2(4), which sets forth pricing for orders executed in the Exchange’s exposure FEES AND REBATES [Per executed contract] Penny Symbols: Rebate for Order triggering order exposure alert ..................................... Fee for Order responding to order exposure alert ................................... Non-Penny Symbols ................................................................................. Rebate for Order triggering order exposure alert ..................................... Fee for Order responding to order exposure alert ................................... In Section 2(5), which sets forth pricing for orders executed in the Exchange’s Price Improvement Mechanism (‘‘PRISM’’),11 the Exchange Customer Lead market maker BX options market maker Non-customer $0.34 0.39 ........................ 0.70 0.85 $0.00 0.39 ........................ 0.00 0.85 $0.00 0.39 ........................ 0.00 0.85 $0.00 0.45 ........................ 0.00 0.89 proposes to add a separate pricing row for LMMs that will set forth the same fees and rebates that LMMs are assessed today (i.e., the same as BX Options Market Makers). As amended, the pricing schedule for PRISM orders in Section 2(5) will be as follows: FEES AND REBATES [Per contact] Submitted PRISM order Responded to PRISM auction PRISM order traded with PRISM response Fee Type of market participants Agency order Fee Rebate Contra-side order Customer .................................................. Lead Market Maker .................................. BX Options Market Maker ....................... Non-Customer .......................................... $0.00 0.30 0.30 0.30 jbell on DSKJLSW7X2PROD with NOTICES Opening Cross The Exchange proposes to amend its Opening Cross pricing provisions in Options 7, Section 2(2) to correct an 10 See 11 See Options 5, Section 4. Options 3, Section 13. VerDate Sep<11>2014 19:27 Jan 21, 2021 Penny classes $0.00 0.05 0.05 0.05 Non-penny classes $0.49 0.49 0.49 0.49 inadvertent omission. Specifically, the Exchange submitted a rule filing effective on July 3, 2012 to adopt fees and rebates for BX Options, which, $0.94 0.94 0.94 0.94 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 $0.35 0.00 0.00 0.00 Non-penny classes $0.70 0.00 0.00 0.00 among other things, adopted the pricing for market participants during the Opening Cross (‘‘2012 Filing’’).12 As discussed in the 2012 Filing, BX’s 12 See Securities Exchange Act Release No. 67339 (July 3, 2012), 77 FR 40688 (July 10, 2012) (SR–BX– 2012–043). Jkt 253001 Penny classes E:\FR\FM\22JAN1.SGM 22JAN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices Opening Cross pricing was intended to be similar to the Opening Cross pricing on its affiliate, The Nasdaq Options Market (‘‘NOM’’), in that BX would similarly assess a Fee to Remove Liquidity on all market participants, other than a Customer, during the Opening Cross. Indeed, NOM’s Pricing Schedule specifically states that ‘‘Broker-Dealers, Professionals, Firms, Non-NOM Market Makers and NOM Market Makers will be assessed the Fee for Removing Liquidity during the Exchange’s Opening Cross.’’ 13 Accordingly, the 2012 Filing should have likewise reflected that BX Options Market Makers would be assessed the Fee to Remove Liquidity during the Exchange’s Opening Cross. However, the 2012 Filing inadvertently omitted these market participants in the Exhibit 5 rule text. As a result of this drafting error, the current rule in Options 7, Section 2(2) incorrectly indicates that only Professionals, Firms, BrokerDealers and Non-BX Options Market Makers will be assessed the Fee to Remove Liquidity during the Opening Cross. Therefore, the Exchange proposes to add that BX Options Market Makers will be assessed the Fee to Remove Liquidity during the Exchange’s Opening Cross. The Exchange notes that this change is corrective in nature and does not change any rates that are currently applied to BX Options Market Makers during the Opening Cross. The Exchange also proposes a nonsubstantive change in this section to replace Professionals, Broker-Dealers, and Non-BX Options Market Makers with the term ‘‘Non-Customers,’’ which encompasses those market participant types. Finally, in light of the proposed changes to separately provide for LMM pricing throughout Options 7, Section 2 by adding LMMs next to each instance of BX Options Market Makers, the Exchange proposes to add LMMs to the Opening Cross pricing provisions in Section 2(2). As discussed above, LMMs are currently charged the same rates as BX Options Market Makers, including during the Opening Cross (i.e., the Fee to Remove Liquidity), and the Exchange is not proposing to amend the current rates applied to LMMs during the Opening Cross. With the proposed changes, the last sentence of Options 7, Section 2(2) will now provide: ‘‘Lead Market Makers, BX Options Market Makers, Non-Customers, and Firms will be assessed the Fee to Remove Liquidity during the Exchange’s Opening Cross.’’ 13 See NOM Options 7, Section 2(2) (emphasis added). VerDate Sep<11>2014 19:27 Jan 21, 2021 Jkt 253001 Technical Changes The Exchange proposes a number of technical, non-substantive changes in Options 7. The Exchange first proposes to add ‘‘Section 1 General Provisions’’ at the beginning of the Pricing Schedule. The Exchange will also remove ‘‘Section 1’’ before the title ‘‘Collection of Exchange Fees and Other Claims-BX Options’’ and incorporate those provisions within the new Section 1, which will include other provisions such as the Pricing Schedule definitions. This change will assist Participants when citing to these defined terms, which currently has no section reference. The Exchange also proposes to update obsolete rule citations within proposed Section 1 to reflect the current rules.14 The Exchange previously relocated the Rulebook and certain cross-cites were not updated.15 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,16 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,17 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 Exchange’s proposed changes to its schedule of credits are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for options securities 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, 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 14 In particular, the Exchange will update obsolete cross-cites in the definitions of ‘‘Customer,’’ ‘‘BX Options Market Maker,’’ ‘‘Lead Market Maker,’’ ‘‘Professional,’’ and ‘‘Joint Back Office.’’ Similarly, the Exchange will also update the obsolete crosscite in current Section 1 (Collection of Exchange Fees and Other Claims-BX Options). 15 See Securities Exchange Act Release No. 84326 (October 1, 2018), 83 FR 50414 (October 5, 2018) (SR–BX–2018–046). 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 6703 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’. . . .’’ 18 The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 19 Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for options security transaction services. The Exchange is only one of sixteen options exchanges to which market participants may direct their order flow. Competing options exchanges offer similar pricing structures to that of the Exchange, including schedules of rebates and fees that differentiate between LMMs and other market participants.20 Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. As such, the proposal represents a reasonable attempt by the Exchange to increase its liquidity and market share relative to its competitors. LMM Rebate To Add Liquidity The Exchange believes that the proposed LMM Rebate to Add Liquidity in Penny Symbols is reasonable, equitable, and not unfairly discriminatory. The proposal will offer a higher $0.11 per contract rebate to qualifying LMMs in their specifically allocated options classes along the same lines as the existing $0.10 per contract BX Options Market Maker Rebate to Add Liquidity in Penny Symbols (i.e., only if the order is contra to NonCustomers, Firms, BX Options Market Makers, or LMMs). The Exchange 18 NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782–83 (December 9, 2008) (SR–NYSEArca–2006–21)). 19 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). 20 See, e.g., NYSE Arca Options Fees and Charges, Trade-Related Charges for Standard Options. E:\FR\FM\22JAN1.SGM 22JAN1 6704 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices believes that the proposed rebate will incentivize LMMs to increase their liquidity provision on the Exchange, which will ultimately benefit all market participants through the quality of order interaction. The Exchange further believes that the proposed differentiation between LMMs and other market participants through the higher $0.11 per contract Rebate to Add Liquidity recognizes the differing contributions made to the liquidity and trading environment on the Exchange by LMMs through their quoting obligations and their commitment of capital, unlike other market participants. In addition, LMMs are subject to heightened quoting obligations compared to BX Options Market Makers.21 Accordingly, the Exchange believes that offering a higher rebate to LMMs is equitable and not unfairly discriminatory. jbell on DSKJLSW7X2PROD with NOTICES LMM Fee To Add Liquidity The Exchange believes that the proposed LMM Fee to Add Liquidity in Penny Symbols is reasonable, equitable and not unfairly discriminatory. The proposal will assess a lower $0.38 per contract fee to LMMs in their specifically allocated options classes along the same lines as the existing $0.39 per contract BX Options Market Maker Fee to Add Liquidity in Penny Symbols (i.e., only if the order is contra to Customers). The Exchange believes that the proposed fee remains competitive and will continue to attract order flow to BX to the benefit of all market participants. As described above, the proposed fee is lower than the current fee assessed to LMMs when trading against a Customer. The Exchange believes that the lower fee will incentivize LMMs to increase their liquidity provision on the Exchange, which will ultimately benefit all market participants through the quality of order interaction. The Exchange further believes that the proposed differentiation between LMMs and other market participants through the lower $0.38 per contract Fee to Add Liquidity recognizes the differing contributions made to the liquidity and trading environment on the Exchange by LMMs through their quoting obligations and their commitment of capital, unlike other market participants. In addition, LMMs are subject to heightened quoting obligations compared to BX Options Market Makers.22 Accordingly, the Exchange believes that offering a lower 21 See Options 2, Section 4(j) (setting forth the 90% or higher quoting requirements for LMMs) and Section 5(d) (setting forth the 60% or higher quoting obligations for BX Options Market Makers). 22 Id. VerDate Sep<11>2014 19:27 Jan 21, 2021 Jkt 253001 fee to LMMs is equitable and not unfairly discriminatory. Separate LMM Pricing The Exchange believes that its proposal to restructure the pricing schedules in Options 7, Section 2 to add separate pricing for LMMs is reasonable, equitable, and not unfairly discriminatory. While the Exchange is proposing to add separate pricing for LMMs, LMMs will continue to be assessed the same BX Options Market Makers fees and rebates in their specifically allocated options classes under this proposal except with respect to the higher LMM Rebate to Add Liquidity in Penny Symbols and lower LMM Fee to Add Liquidity in Penny Symbols, as discussed above. The Exchange believes that separately providing for LMMs throughout the pricing schedules in Options 7, Section 2 will provide greater clarity and transparency as to what fees and rebates are assessed to this type of market participant. Opening Cross The Exchange believes that the proposed changes to the Opening Cross pricing provisions in Options 7, Section 2(2) is reasonable, equitable, and not unfairly discriminatory as it does not change the pricing currently assessed by the Exchange during the Opening Cross, but rather corrects an inadvertent omission by the 2012 Filing to include BX Options Market Makers within Options 7, Section 2(2). As discussed above, the Exchange intended to follow the Opening Cross pricing on NOM such that BX would similarly assess a Fee to Remove Liquidity on all market participants, other than a Customer, during the Opening Cross. The Exchange believes that the proposed correction to add BX Options Market Makers will help ensure that the Pricing Schedule more accurately represents the rates assessed currently during the Opening Cross and in the manner as originally intended by the 2012 Filing, thereby avoiding any potential confusion among market participants. The Exchange again notes that this proposed change is merely corrective in nature and does not change any rates that are currently applied during the Opening Cross. The proposed changes to add LMMs to the Opening Cross pricing provisions likewise do not change any rates that are currently applied to market participants during the Opening Cross. LMMs will continue to be assessed the same rates as BX Options Market Makers, including during the Opening Cross (i.e., the Fee to Remove Liquidity). Lastly, the PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 proposed change to replace Professionals, Broker-Dealers, and NonBX Options Market Makers with the term ‘‘Non-Customers,’’ which encompasses those market participant types, is non-substantive in nature. Accordingly, the Exchange believes that foregoing modifications are reasonable, equitable, and not unfairly discriminatory. Technical Changes The Exchange believes that the proposed technical changes described above are reasonable, equitable, and not unfairly discriminatory as they are all non-substantive changes intended to promote greater clarity and transparency to the Exchange’s Pricing Schedule. 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 intra-market competition, the proposed pricing changes are designed to attract additional order flow to the Exchange. The Exchange believes that the proposed higher LMM Rebate to Add Liquidity and lower LMM Fee to Add Liquidity will continue to incentivize LMMs to direct their order flow to the Exchange. Greater liquidity benefits all market participants on the Exchange by providing more trading opportunities and encourages LMMs to send orders to the Exchange, thereby contributing to robust levels of liquidity to the benefit of all market participants. 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 options 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 does not believe that its proposed fee change will impose any burden on intermarket competition. Furthermore, as noted above, competing options exchanges offer similar pricing structures to that of the Exchange, including schedules of rebates and fees that differentiate between LMMs and other market participants.23 23 See E:\FR\FM\22JAN1.SGM supra note 20. 22JAN1 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices 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.24 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: jbell on DSKJLSW7X2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BX–2021–001 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–2021–001. 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 (http://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–2021–001 and should be submitted on or before February 12, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–01403 Filed 1–21–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90929; File No. SR–CBOE– 2021–002] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend the Silexx Trading Platform Fees Schedule January 14, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 4, 2021, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (the ‘‘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 Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 24 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Sep<11>2014 19:27 Jan 21, 2021 Jkt 253001 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 6705 the Silexx trading platform (‘‘Silexx’’ or the ‘‘platform’’) Fees Schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (http://www.cboe.com/ AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, 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 adopt ‘‘drop copy’’ and order routing fees for a recently adopted Silexx platform (‘‘Cboe Silexx’’), effective January 4, 2021. By way of background, the Silexx platform consists of a ‘‘front-end’’ order entry and management trading platform (also referred to as the ‘‘Silexx terminal’’) for listed stocks and options that supports both simple and complex orders,3 and a ‘‘back-end’’ platform which provides a connection to the infrastructure network. From the Silexx platform (i.e., the collective front-end and back-end platform), a Silexx user has the capability to send option orders to U.S. options exchanges, send stock orders to U.S. stock exchanges (and other trading centers), input parameters to control the size, timing, and other variables of their trades, and also includes access to real-time options and stock market data, as well as access to certain historical data. The Silexx platform is designed so that a user may enter orders into the platform to send to 3 The platform also permits users to submit orders for commodity futures, commodity options and other non-security products to be sent to designated contract markets, futures commission merchants, introducing brokers or other applicable destinations of the users’ choice. E:\FR\FM\22JAN1.SGM 22JAN1

Agencies

[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Notices]
[Pages 6700-6705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01403]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90936; File No. SR-BX-2021-001]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the BX 
Options Pricing Schedule

January 15, 2021.
    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 January 4, 2021, 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 BX Options Pricing Schedule at 
Options 7.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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
    Today, Lead Market Makers (``LMMs'') \3\ are assessed the same fees 
and rebates in Options 7, Section 2 as BX Options Market Makers.\4\ The 
purpose of the proposed rule change is to amend Options 7, Section 2 to 
(i) increase the LMM Rebate to Add Liquidity, (ii) decrease the LMM Fee 
to Add Liquidity, and (iii) restructure the existing pricing schedules 
to add separate pricing for LMMs, which will apply in each case to LMMs 
in their specifically appointed options classes. As described in detail 
below, while the Exchange is proposing to add separate pricing for LMMs 
in the existing schedules, LMMs will continue to be assessed the same 
BX Options Market Makers fees and rebates in their specifically 
allocated options classes under this proposal except with respect to 
the proposed LMM Rebate to Add Liquidity and proposed LMM Fee to Add 
Liquidity. The Exchange also proposes to amend its Opening Cross \5\ 
pricing provisions in Options 7, Section 2(2) to correct an inadvertent 
omission. Lastly, the Exchange proposes various technical, non-
substantive changes throughout Options 7, including to update cross-
cites to obsolete rules.
---------------------------------------------------------------------------

    \3\ The term ``Lead Market Maker'' or (``LMM'') applies to a 
registered BX Options Market Maker that is approved pursuant to 
Options 2, Section 3 to be the LMM in an options class (options 
classes).
    \4\ The term ``BX Options Market Maker'' or (``M'') is a 
Participant that has registered as a Market Maker on BX Options 
pursuant to Options 2, Section 1, and must also remain in good 
standing pursuant to Options 2, Section 9. In order to receive 
Market Maker pricing in all securities, the Participant must be 
registered as a BX Options Market Maker in at least one security.
    \5\ See Options 3, Section 8.
---------------------------------------------------------------------------

    The proposed changes respond in part to the current competitive 
environment where market participants have a choice of where to direct 
order flow by incentivizing LMMs to increase their liquidity provision 
on the Exchange.
LMM Rebate To Add Liquidity
    Today, as set forth in Options 7, Section 2(1), LMMs are provided 
the $0.10 per contract BX Options Market Maker Rebate to Add Liquidity 
in Penny Symbols in their specifically allocated options classes. This 
rebate is provided only when the LMM is contra to a Non-Customer,\6\ 
Firm,\7\ or BX Options Market Maker (including LMMs).\8\
---------------------------------------------------------------------------

    \6\ A Non-Customer includes a Professional, Broker-Dealer and 
Non-BX Options Market Maker.
    \7\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
    \8\ See Options 7, Section 2(1), note 2.
---------------------------------------------------------------------------

    The Exchange now proposes to increase this rebate to $0.11 per 
contract for LMMs only. This rebate will apply to LMMs in their 
specifically allocated options classes, and will have the same 
qualifications as the existing BX Options Market Maker rebate in that 
the incentive will only be provided to LMMs that are contra to Non-
Customers, Firms, BX Options Market Makers, or LMMs. To effect this 
change, the Exchange proposes to set forth the LMM Rebate to Add 
Liquidity in Penny Symbols in a separate pricing column in Options 7, 
Section 2(1). The Exchange will also amend the rebate qualifications in 
note 2 of Options 7, Section 2(1) to include LMMs. As amended, note 2 
will provide that the Rebate to Add Liquidity will be paid to a BX 
Options Market Maker or a Lead Market Maker only when the BX Options 
Market Maker or Lead Market Maker is contra to a Non-Customer, Firm, BX 
Options Market Maker, or Lead Market Maker.
LMM Fee To Add Liquidity
    Today, as set forth in Options 7, Section 2(1), LMMs are charged 
the $0.39 per contract BX Options Market Maker Fee to Add Liquidity in 
Penny Symbols in their specifically allocated options classes. Pursuant 
to note 3 of Options 7, Section 2(1), this fee is assessed only when 
the LMM is contra to a Customer.\9\
---------------------------------------------------------------------------

    \9\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(48)).
---------------------------------------------------------------------------

    The Exchange now proposes to decrease this fee to $0.38 per 
contract for LMMs only. This fee will apply to LMMs in their 
specifically allocated options classes, and will have the same 
qualifications as the existing BX Options Market Maker fee in that the 
fee only will be assessed to LMMs that are contra to Customers. To 
effect this change, the Exchange proposes to set forth the LMM Fee to 
Add Liquidity in Penny Symbols in a separate pricing column in Options 
7, Section 2(1). The Exchange will also amend the fee qualifications in 
note 3 of Options 7, Section 2(1) to include LMMs. As amended, note 3 
will provide that the Fee to Add Liquidity will be assessed to a BX 
Options Market Maker or a Lead

[[Page 6701]]

Market Maker only when the BX Options Market Maker or Lead Market Maker 
is contra to a Customer.
Separate LMM Pricing
    The Exchange also proposes to restructure the existing pricing 
schedules to add separate pricing for LMMs. As noted above, while the 
Exchange is proposing to add separate pricing for LMMs, LMMs will 
continue to be assessed the same BX Options Market Makers fees and 
rebates in their specifically allocated options classes under this 
proposal except with respect to the new LMM Rebate to Add Liquidity and 
new LMM Fee to Add Liquidity discussed above.
    To effect this change, the Exchange first proposes to amend the 
fees and rebates for Penny and Non-Penny Symbols in Options 7, Section 
2(1) by adding a separate column for LMM pricing. In the Penny Symbol 
and Non-Penny Symbol Tier Schedules within Options 7, Section 2(1), the 
Exchange also proposes to add LMMs next to each instance of BX Options 
Market Maker. The Exchange will make similar changes to note 4 of 
Options 7, Section 2(1) to add ``or a Lead Market Maker'' after each 
instance of BX Options Market Maker. As amended, the pricing schedules 
and accompanying notes for Penny and Non-Penny Symbols will be as 
follows:

                                                Fees and Rebates
                                             [Per executed contract]
----------------------------------------------------------------------------------------------------------------
                                                    Lead market     BX options     Non- customer
                                     Customer          maker       market maker         \1\            Firm
----------------------------------------------------------------------------------------------------------------
Penny Symbols:
    Rebate to Add Liquidity.....                      \2\ $0.11       \2\ $0.10             N/A             N/A
Fee to Add Liquidity............                       \3\ 0.38        \3\ 0.39            0.45            0.45
Rebate to Remove Liquidity......                            N/A             N/A             N/A             N/A
Fee to Remove Liquidity.........             N/A                                          0.46            0.46
Non-Penny Symbols:..............  ..............  ..............  ..............  ..............  ..............
Rebate to Add Liquidity.........               *             N/A             N/A             N/A             N/A
Fee to Add Liquidity............               *   \4\ 0.50/0.95   \4\ 0.50/0.95            0.98            0.98
Rebate to Remove Liquidity......               *             N/A             N/A             N/A             N/A
Fee to Remove Liquidity.........             N/A               *               *            0.89            0.89
----------------------------------------------------------------------------------------------------------------
\1\ A Non-Customer includes a Professional, Broker-Dealer and Non-BX Options Market Maker.
\2\ The Rebate to Add Liquidity will be paid to a BX Options Market Maker or a Lead Market Maker only when the
  BX Options Market Maker or Lead Market Maker is contra to a Non-Customer, Firm, BX Options Market Maker, or
  Lead Market Maker.
\3\ The Fee to Add Liquidity will be assessed to a BX Options Market Maker or a Lead Market Maker only when the
  BX Options Market Maker or Lead Market Maker is contra to a Customer.
\4\ The higher Fee to Add Liquidity will be assessed to a BX Options Market Maker or a Lead Market Maker only
  when the BX Options Market Maker or Lead Market Maker is contra to a Customer.
 Penny Symbols Tier Schedule


--------------------------------------------------------------------------------------------------------------------------------------------------------
                          When:                              Rebate to add        Fee to add      Rebate to remove    Fee to remove      Fee to remove
----------------------------------------------------------     liquidity          liquidity          liquidity          liquidity          liquidity
                                                          ----------------------------------------------------------------------------------------------
                                                                Customer           Customer           Customer      Lead market maker  Lead market maker
                                                          ---------------------------------------------------------   or BX  options     or BX  options
                                                                                                                       market maker       market maker
                                                             Non-customer,                         Non-customer,   -------------------------------------
                      Trading with:                           lead market                           lead market                          Non-customer,
                                                           maker, BX options       Customer      maker, BX options                        lead market
                                                            market maker, or                       market maker,         Customer      maker, BX options
                                                                  firm                           customer, or firm                      market maker, or
                                                                                                                                              firm
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tier 1: Participant executes less than 0.05% of total                  $0.00              $0.39              $0.00              $0.39              $0.46
 industry customer equity and ETF option ADV contracts
 per month...............................................
Tier 2: Participant executes 0.05% to less than 0.15% of                0.10               0.39               0.25               0.39               0.46
 total industry customer equity and ETF option ADV
 contracts per month.....................................
Tier 3: Participant executes 0.15% or more of total                     0.20               0.39               0.35               0.30               0.46
 industry customer equity and ETF option ADV contracts
 per month...............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            * Non-Penny Symbols Tier Schedule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tier 1: Participant executes less than 0.05% of total                   0.00               0.85               0.80               0.89               0.89
 industry customer equity and ETF option ADV contracts
 per month...............................................
Tier 2: Participant executes 0.05% to less than 0.15% of                0.10               0.85               0.80               0.89               0.89
 total industry customer equity and ETF option ADV.......
contracts per month......................................

[[Page 6702]]

 
Tier 3: Participant executes 0.15% or more of total                     0.20               0.85               0.80               0.60               0.89
 industry customer equity and ETF option ADV contracts
 per month...............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As shown above, the only fee changes relate to the proposed LMM 
Rebate to Add Liquidity in Penny Symbols and the proposed LMM Fee to 
Add Liquidity in Penny Symbols. Otherwise, LMMs will continue to be 
charged at the same rate for Penny and Non-Penny Symbols under this 
proposal (i.e., the same as BX Options Market Makers).
    The Exchange also proposes to make similar changes in Options 7, 
Section 2(4) and Section 2(5) to add separate pricing for LMMs. In 
Section 2(4), which sets forth pricing for orders executed in the 
Exchange's exposure mechanism,\10\ the Exchange proposes to add a 
separate pricing column for LMMs that will set forth the same fees and 
rebates that LMMs are assessed today (i.e., the same as BX Options 
Market Makers). As amended, the pricing schedule for exposure orders in 
Section 2(4) will be as follows:
---------------------------------------------------------------------------

    \10\ See Options 5, Section 4.

                                                Fees and Rebates
                                             [Per executed contract]
----------------------------------------------------------------------------------------------------------------
                                                                    Lead market     BX options
                                                     Customer          maker       market maker    Non-customer
----------------------------------------------------------------------------------------------------------------
Penny Symbols:
    Rebate for Order triggering order exposure             $0.34           $0.00           $0.00           $0.00
     alert......................................
    Fee for Order responding to order exposure              0.39            0.39            0.39            0.45
     alert......................................
    Non-Penny Symbols...........................  ..............  ..............  ..............  ..............
    Rebate for Order triggering order exposure              0.70            0.00            0.00            0.00
     alert......................................
    Fee for Order responding to order exposure              0.85            0.85            0.85            0.89
     alert......................................
----------------------------------------------------------------------------------------------------------------

    In Section 2(5), which sets forth pricing for orders executed in 
the Exchange's Price Improvement Mechanism (``PRISM''),\11\ the 
Exchange proposes to add a separate pricing row for LMMs that will set 
forth the same fees and rebates that LMMs are assessed today (i.e., the 
same as BX Options Market Makers). As amended, the pricing schedule for 
PRISM orders in Section 2(5) will be as follows:
---------------------------------------------------------------------------

    \11\ See Options 3, Section 13.

                                                                    Fees and Rebates
                                                                      [Per contact]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Submitted      Responded to PRISM auction     PRISM order traded with PRISM
                                                                            PRISM order  --------------------------------            response
                                                                         ----------------               Fee              -------------------------------
               Type of market participants                 Agency order         Fee      --------------------------------             Rebate
                                                                         ----------------                                -------------------------------
                                                                            Contra-side    Penny classes     Non-penny                       Non-penny
                                                                               order                          classes      Penny classes      classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Customer................................................           $0.00           $0.00           $0.49           $0.94           $0.35           $0.70
Lead Market Maker.......................................            0.30            0.05            0.49            0.94            0.00            0.00
BX Options Market Maker.................................            0.30            0.05            0.49            0.94            0.00            0.00
Non-Customer............................................            0.30            0.05            0.49            0.94            0.00            0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

Opening Cross
    The Exchange proposes to amend its Opening Cross pricing provisions 
in Options 7, Section 2(2) to correct an inadvertent omission. 
Specifically, the Exchange submitted a rule filing effective on July 3, 
2012 to adopt fees and rebates for BX Options, which, among other 
things, adopted the pricing for market participants during the Opening 
Cross (``2012 Filing'').\12\ As discussed in the 2012 Filing, BX's

[[Page 6703]]

Opening Cross pricing was intended to be similar to the Opening Cross 
pricing on its affiliate, The Nasdaq Options Market (``NOM''), in that 
BX would similarly assess a Fee to Remove Liquidity on all market 
participants, other than a Customer, during the Opening Cross. Indeed, 
NOM's Pricing Schedule specifically states that ``Broker-Dealers, 
Professionals, Firms, Non-NOM Market Makers and NOM Market Makers will 
be assessed the Fee for Removing Liquidity during the Exchange's 
Opening Cross.'' \13\ Accordingly, the 2012 Filing should have likewise 
reflected that BX Options Market Makers would be assessed the Fee to 
Remove Liquidity during the Exchange's Opening Cross. However, the 2012 
Filing inadvertently omitted these market participants in the Exhibit 5 
rule text. As a result of this drafting error, the current rule in 
Options 7, Section 2(2) incorrectly indicates that only Professionals, 
Firms, Broker-Dealers and Non-BX Options Market Makers will be assessed 
the Fee to Remove Liquidity during the Opening Cross. Therefore, the 
Exchange proposes to add that BX Options Market Makers will be assessed 
the Fee to Remove Liquidity during the Exchange's Opening Cross. The 
Exchange notes that this change is corrective in nature and does not 
change any rates that are currently applied to BX Options Market Makers 
during the Opening Cross.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 67339 (July 3, 
2012), 77 FR 40688 (July 10, 2012) (SR-BX-2012-043).
    \13\ See NOM Options 7, Section 2(2) (emphasis added).
---------------------------------------------------------------------------

    The Exchange also proposes a non-substantive change in this section 
to replace Professionals, Broker-Dealers, and Non-BX Options Market 
Makers with the term ``Non-Customers,'' which encompasses those market 
participant types. Finally, in light of the proposed changes to 
separately provide for LMM pricing throughout Options 7, Section 2 by 
adding LMMs next to each instance of BX Options Market Makers, the 
Exchange proposes to add LMMs to the Opening Cross pricing provisions 
in Section 2(2). As discussed above, LMMs are currently charged the 
same rates as BX Options Market Makers, including during the Opening 
Cross (i.e., the Fee to Remove Liquidity), and the Exchange is not 
proposing to amend the current rates applied to LMMs during the Opening 
Cross. With the proposed changes, the last sentence of Options 7, 
Section 2(2) will now provide: ``Lead Market Makers, BX Options Market 
Makers, Non-Customers, and Firms will be assessed the Fee to Remove 
Liquidity during the Exchange's Opening Cross.''
Technical Changes
    The Exchange proposes a number of technical, non-substantive 
changes in Options 7. The Exchange first proposes to add ``Section 1 
General Provisions'' at the beginning of the Pricing Schedule. The 
Exchange will also remove ``Section 1'' before the title ``Collection 
of Exchange Fees and Other Claims-BX Options'' and incorporate those 
provisions within the new Section 1, which will include other 
provisions such as the Pricing Schedule definitions. This change will 
assist Participants when citing to these defined terms, which currently 
has no section reference.
    The Exchange also proposes to update obsolete rule citations within 
proposed Section 1 to reflect the current rules.\14\ The Exchange 
previously relocated the Rulebook and certain cross-cites were not 
updated.\15\
---------------------------------------------------------------------------

    \14\ In particular, the Exchange will update obsolete cross-
cites in the definitions of ``Customer,'' ``BX Options Market 
Maker,'' ``Lead Market Maker,'' ``Professional,'' and ``Joint Back 
Office.'' Similarly, the Exchange will also update the obsolete 
cross-cite in current Section 1 (Collection of Exchange Fees and 
Other Claims-BX Options).
    \15\ See Securities Exchange Act Release No. 84326 (October 1, 
2018), 83 FR 50414 (October 5, 2018) (SR-BX-2018-046).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\16\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange's proposed changes to its schedule of credits are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities 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, 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'. . . .'' \18\
---------------------------------------------------------------------------

    \18\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \19\
---------------------------------------------------------------------------

    \19\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow. Competing options exchanges offer similar pricing 
structures to that of the Exchange, including schedules of rebates and 
fees that differentiate between LMMs and other market participants.\20\
---------------------------------------------------------------------------

    \20\ See, e.g., NYSE Arca Options Fees and Charges, Trade-
Related Charges for Standard Options.
---------------------------------------------------------------------------

    Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules. As such, the 
proposal represents a reasonable attempt by the Exchange to increase 
its liquidity and market share relative to its competitors.
LMM Rebate To Add Liquidity
    The Exchange believes that the proposed LMM Rebate to Add Liquidity 
in Penny Symbols is reasonable, equitable, and not unfairly 
discriminatory. The proposal will offer a higher $0.11 per contract 
rebate to qualifying LMMs in their specifically allocated options 
classes along the same lines as the existing $0.10 per contract BX 
Options Market Maker Rebate to Add Liquidity in Penny Symbols (i.e., 
only if the order is contra to Non-Customers, Firms, BX Options Market 
Makers, or LMMs). The Exchange

[[Page 6704]]

believes that the proposed rebate will incentivize LMMs to increase 
their liquidity provision on the Exchange, which will ultimately 
benefit all market participants through the quality of order 
interaction.
    The Exchange further believes that the proposed differentiation 
between LMMs and other market participants through the higher $0.11 per 
contract Rebate to Add Liquidity recognizes the differing contributions 
made to the liquidity and trading environment on the Exchange by LMMs 
through their quoting obligations and their commitment of capital, 
unlike other market participants. In addition, LMMs are subject to 
heightened quoting obligations compared to BX Options Market 
Makers.\21\ Accordingly, the Exchange believes that offering a higher 
rebate to LMMs is equitable and not unfairly discriminatory.
---------------------------------------------------------------------------

    \21\ See Options 2, Section 4(j) (setting forth the 90% or 
higher quoting requirements for LMMs) and Section 5(d) (setting 
forth the 60% or higher quoting obligations for BX Options Market 
Makers).
---------------------------------------------------------------------------

LMM Fee To Add Liquidity
    The Exchange believes that the proposed LMM Fee to Add Liquidity in 
Penny Symbols is reasonable, equitable and not unfairly discriminatory. 
The proposal will assess a lower $0.38 per contract fee to LMMs in 
their specifically allocated options classes along the same lines as 
the existing $0.39 per contract BX Options Market Maker Fee to Add 
Liquidity in Penny Symbols (i.e., only if the order is contra to 
Customers). The Exchange believes that the proposed fee remains 
competitive and will continue to attract order flow to BX to the 
benefit of all market participants. As described above, the proposed 
fee is lower than the current fee assessed to LMMs when trading against 
a Customer. The Exchange believes that the lower fee will incentivize 
LMMs to increase their liquidity provision on the Exchange, which will 
ultimately benefit all market participants through the quality of order 
interaction.
    The Exchange further believes that the proposed differentiation 
between LMMs and other market participants through the lower $0.38 per 
contract Fee to Add Liquidity recognizes the differing contributions 
made to the liquidity and trading environment on the Exchange by LMMs 
through their quoting obligations and their commitment of capital, 
unlike other market participants. In addition, LMMs are subject to 
heightened quoting obligations compared to BX Options Market 
Makers.\22\ Accordingly, the Exchange believes that offering a lower 
fee to LMMs is equitable and not unfairly discriminatory.
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    \22\ Id.
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Separate LMM Pricing
    The Exchange believes that its proposal to restructure the pricing 
schedules in Options 7, Section 2 to add separate pricing for LMMs is 
reasonable, equitable, and not unfairly discriminatory. While the 
Exchange is proposing to add separate pricing for LMMs, LMMs will 
continue to be assessed the same BX Options Market Makers fees and 
rebates in their specifically allocated options classes under this 
proposal except with respect to the higher LMM Rebate to Add Liquidity 
in Penny Symbols and lower LMM Fee to Add Liquidity in Penny Symbols, 
as discussed above. The Exchange believes that separately providing for 
LMMs throughout the pricing schedules in Options 7, Section 2 will 
provide greater clarity and transparency as to what fees and rebates 
are assessed to this type of market participant.
Opening Cross
    The Exchange believes that the proposed changes to the Opening 
Cross pricing provisions in Options 7, Section 2(2) is reasonable, 
equitable, and not unfairly discriminatory as it does not change the 
pricing currently assessed by the Exchange during the Opening Cross, 
but rather corrects an inadvertent omission by the 2012 Filing to 
include BX Options Market Makers within Options 7, Section 2(2). As 
discussed above, the Exchange intended to follow the Opening Cross 
pricing on NOM such that BX would similarly assess a Fee to Remove 
Liquidity on all market participants, other than a Customer, during the 
Opening Cross. The Exchange believes that the proposed correction to 
add BX Options Market Makers will help ensure that the Pricing Schedule 
more accurately represents the rates assessed currently during the 
Opening Cross and in the manner as originally intended by the 2012 
Filing, thereby avoiding any potential confusion among market 
participants. The Exchange again notes that this proposed change is 
merely corrective in nature and does not change any rates that are 
currently applied during the Opening Cross.
    The proposed changes to add LMMs to the Opening Cross pricing 
provisions likewise do not change any rates that are currently applied 
to market participants during the Opening Cross. LMMs will continue to 
be assessed the same rates as BX Options Market Makers, including 
during the Opening Cross (i.e., the Fee to Remove Liquidity). Lastly, 
the proposed change to replace Professionals, Broker-Dealers, and Non-
BX Options Market Makers with the term ``Non-Customers,'' which 
encompasses those market participant types, is non-substantive in 
nature. Accordingly, the Exchange believes that foregoing modifications 
are reasonable, equitable, and not unfairly discriminatory.
Technical Changes
    The Exchange believes that the proposed technical changes described 
above are reasonable, equitable, and not unfairly discriminatory as 
they are all non-substantive changes intended to promote greater 
clarity and transparency to the Exchange's Pricing Schedule.

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 intra-market 
competition, the proposed pricing changes are designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed higher LMM Rebate to Add Liquidity and lower LMM Fee to Add 
Liquidity will continue to incentivize LMMs to direct their order flow 
to the Exchange. Greater liquidity benefits all market participants on 
the Exchange by providing more trading opportunities and encourages 
LMMs to send orders to the Exchange, thereby contributing to robust 
levels of liquidity to the benefit of all market participants.
    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 
options 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 does not believe that its 
proposed fee change will impose any burden on intermarket competition. 
Furthermore, as noted above, competing options exchanges offer similar 
pricing structures to that of the Exchange, including schedules of 
rebates and fees that differentiate between LMMs and other market 
participants.\23\
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    \23\ See supra note 20.

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[[Page 6705]]

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.\24\
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    \24\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2021-001 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-2021-001. 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 (http://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-2021-001 and should be submitted on 
or before February 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01403 Filed 1-21-21; 8:45 am]
BILLING CODE 8011-01-P