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]
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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.
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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.
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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.
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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)).
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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
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* 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 ...............................
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PO 00000
0.00
0.85
0.80
0.89
0.89
0.10
0.85
0.80
0.89
0.89
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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
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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.
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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).
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Penny classes
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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).
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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
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Fmt 4703
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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.
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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.
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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.
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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 (https://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 (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–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 (https://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\
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\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).
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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.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) and (5).
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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\
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\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)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \19\
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\19\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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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\
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\20\ See, e.g., NYSE Arca Options Fees and Charges, Trade-
Related Charges for Standard Options.
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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.
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\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).
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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 (https://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 (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-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
