Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX Options 7, Section 1, “General Provisions,” and Options 7, Section 2, “BX Options Market-Fees and Rebates”, 18562-18570 [2021-07271]
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<![CDATA[
18562
Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices
Aeronautics and Space Administration.
The prospective partially exclusive
license will comply with the
requirements of 35 U.S.C. 209 and 37
CFR 404.7.
Information about other NASA
inventions available for licensing can be
found online at https://
technology.nasa.gov.
Helen M. Galus,
Agency Counsel for Intellectual Property.
[FR Doc. 2021–07026 Filed 4–8–21; 8:45 am]
BILLING CODE 7510–13–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91473; File No. SR–BX–
2021–009]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend BX Options 7,
Section 1, ‘‘General Provisions,’’ and
Options 7, Section 2, ‘‘BX Options
Market-Fees and Rebates’’
April 5, 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 March 22,
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 and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend BX
Options 7, Section 1, ‘‘General
Provisions,’’ and Options 7, Section 2,
‘‘BX Options Market-Fees and Rebates.’’
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
Section 1, ‘‘General Provisions,’’ and
Options 7, Section 2, ‘‘BX Options
Market-Fees and Rebates.’’ The
Exchange proposes to remove the
current fees, rebates and tier schedules
applicable to Penny Symbols and NonPenny Symbols. Today, the Penny and
Non-Penny fees and rebates are based
on volume tiers and consider contraparties to a transaction. With this
proposal, BX’s pricing will no longer be
tiered and will not consider the contraparty, unless otherwise specified.
Further, the proposed changes will
replace the existing pricing schedule
with a new maker/taker fee structure
where market participants are assessed
a rebate or lower fee for adding liquidity
to the market, or charged a higher fee for
removing liquidity from the market.
This new pricing model is intended to
reward Participants that bring order
flow to the Exchange and thereby
increase liquidity and trading
opportunities for all market
participants. BX believes that the
proposed pricing model will encourage
additional order flow to be sent to the
Exchange, and contribute to a more
active and quality market in BX-listed
options to the benefit of all market
participants that trade on the Exchange.
The current pricing schedule for
Penny and Non-Penny Symbols is as
follows:
1. Purpose
The Exchange proposes to amend
BX’s Pricing Schedule at Options 7,
FEES AND REBATES
[per executed contract]
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 ..............................................................................
For purposes of the above fees and
rebates, a Non-Customer includes a
Professional, Broker-Dealer and Non-BX
Options Market Maker.3 The Rebate to
Add Liquidity is paid to a BX Options
Market Maker or a Lead Market Maker
only when the BX Options Market
1
2
15 U.S.C. 78s(b)(1).
17 CFR 240.19b–4.
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(#)
(#)
(#)
N/A
(*)
(*)
(*)
N/A
4
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See note 1 within Options 7, Section 2.
See note 2 within Options 7, Section 2.
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BX options
market maker
2 $0.11
2 $0.10
3 0.38
3 0.39
N/A
(#)
N/A
(#)
N/A
N/A
4 0.50/0.95
4 0.50/0.95
N/A
(*)
N/A
(*)
Maker or Lead Market Maker is contra
to a Non-Customer, Firm, BX Options
Market Maker, or Lead Market Maker.4
The Fee to Add Liquidity is assessed to
a BX Options Market Maker or a Lead
Market Maker only when the BX
Options Market Maker or Lead Market
3
Jkt 253001
Lead market
maker
Non-customer 1
Firm
N/A
$0.45
N/A
0.46
N/A
$0.45
N/A
0.46
N/A
0.98
N/A
0.89
N/A
0.98
N/A
0.89
Maker is contra to a Customer.5 Finally,
the higher Fee to Add Liquidity is
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.6
5
6
See note 3 within Options 7, Section 2.
See note 4 within Options 7, Section 2.
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18563
Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices
The current Penny Symbol tier
schedule is as follows:
# PENNY SYMBOLS TIER SCHEDULE
When:
Trading with:
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
Lead Market
Maker or BX
Options Market
Maker
Non-Customer,
Lead Market
Maker, BX
Options Market
Maker, or firm
Customer
Non-Customer,
Lead Market
Maker, BX
Options Market
Maker, or firm
Customer
Non-Customer,
Lead Market
Maker, BX
Options Market
Maker, or firm
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
The current Non-Penny Symbol tier
schedule is as follows:
* NON-PENNY SYMBOLS TIER SCHEDULE
When:
Trading with:
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
Lead Market
Maker or BX
Options Market
Maker
Non-Customer,
Lead Market
Maker, BX
Options Market
Maker, or firm
Customer
Non-Customer,
Lead Market
Maker, BX
Options Market
Maker, or firm
Customer
Non-Customer,
Lead Market
Maker, BX
Options Market
Maker, or firm
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
The Exchange now proposes to
remove the above-referenced current
fees, rebates and tier schedules. The
Exchange proposes to amend the
introductory paragraph which states,
‘‘The following charges shall apply to
the use of the order execution and
routing services of the BX Options
market for all securities’’ by replacing
$0.00
$0.85
$0.80
$0.89
$0.89
0.10
0.85
0.80
0.89
0.89
0.20
0.85
0.80
0.60
0.89
the term ‘‘charges’’ with the term
‘‘pricing.’’ The Exchange also proposes
to amend Options 7, Section 2(1) which
states, ‘‘Fees for Execution of Contracts
on the BX Options Market.’’ The
Exchange proposes to instead provide,
‘‘Fees and Rebates for Execution of
Contracts on the BX Options Market.’’
Both of these changes are to account for
rebates that are also offered to BX
Participants.
The Exchange proposes to adopt the
following Penny and Non-Penny
Symbol fees and rebates in Options 7,
Section 2(1):
(1) Fees and Rebates for Execution of
Contracts on the BX Options Market
Market participant
Maker Rebate
Penny Symbols:
Lead Market Maker ..........................................................................................................................................
Market Maker ....................................................................................................................................................
Non-Customer ..................................................................................................................................................
Firm ...................................................................................................................................................................
Customer ..........................................................................................................................................................
Non-Penny Symbols:
Lead Market Maker ..........................................................................................................................................
Market Maker ....................................................................................................................................................
Non-Customer ..................................................................................................................................................
Firm ...................................................................................................................................................................
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09APN1
Taker Fee
$(0.29)
(0.25)
(0.12)
(0.12)
(0.30)
$0.46
0.46
0.46
0.46
0.46
(0.45)
(0.40)
0.45
0.45
1.10
1.10
1.10
1.10
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Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices
Market participant
Maker Rebate
Customer ..........................................................................................................................................................
The Exchange proposes to reduce the
Customer Taker Fee to $0.26 per
contract for trades which remove
liquidity in SPY.7 Also, the Exchange
proposes to offer a Maker Rebate for
Lead Market Makers and Market Makers
in SPY of $0.22 per contract. Finally,
the Exchange proposes to offer a Maker
Rebate for Lead Market Makers and
Market Makers in AAPL, IWM, GLD,
QQQ, SLV, and TSLA of $0.42 per
contract.8 The proposed fees and rebates
are described in greater detail below.
Penny Symbols
With respect to the impact on pricing
for Penny Symbols, the Exchange notes
the below changes in pricing.
Lead Market Makers
Today, Lead Market Makers receive a
Penny Symbol Rebate to Add Liquidity
of $0.11 per contract only when the
Lead Market Maker is contra to a NonCustomer, Firm, BX Options Market
Maker, or Lead Market Maker. Today,
Lead Market Makers receive no Penny
Symbol Rebates to Remove Liquidity.
Today, Lead Market Makers pay a $0.38
per contract Penny Symbol Fee to Add
Liquidity only when the Lead Market
Maker is contra to a Customer. Today,
Lead Market Makers pay a Penny
Symbol Fee to Remove Liquidity when
trading against a Customer which ranges
from $0.39 to $0.30 per contract.9
Today, Lead Market Makers pay a Penny
Symbol Fee to Remove Liquidity when
trading against a Non-Customer, Lead
Market Maker, BX Options Market
Maker or Firm of $0.46 per contract,
regardless of tier.10
With this proposal, Lead Market
Maker orders would receive a Maker
Rebate of $0.29 per contract in all Penny
Symbols, except SPY which would pay
a Maker Rebate of $0.22 per contract,
and except AAPL, IWM, GLD, QQQ,
SLV, and TSLA which would pay a
See note 4 within Options 7, Section 2.
See proposed note 1 to Options 7, Section 2.
8 See proposed note 2 within Options 7, Section
6
Maker Rebate of $0.42 per contract.
With this proposal, Lead Market Maker
orders would pay a Penny Symbol Taker
Fee of $0.46 per contract.
The proposed Penny Symbol Maker
Rebates for Lead Market Maker orders,
for all Penny Symbols, are higher than
the current Lead Market Maker Penny
Symbol Rebate to Add Liquidity of
$0.11 per contract when trading against
Non-Customer, Firm, BX Options
Market Maker or Lead Market Maker.
Also, the proposed Penny Symbol
Maker Rebates for Lead Market Maker
orders do not consider the contra-party.
The proposed Penny Symbol Taker Fee
for Lead Market Maker orders of $0.46
per contract is higher than the current
Lead Market Maker tiered Penny
Symbol Fees to Remove Liquidity when
trading against a Customer which range
from $0.39 to $0.30 per contract 11 and
is the same as the current Lead Market
Maker tiered Penny Symbol Fee to
Remove Liquidity when trading against
a Non-Customer, Lead Market Maker,
BX Options Market Maker or Firm of
$0.46 per contract regardless of tier.12
BX would no longer assess a fee to add
liquidity for Lead Market Maker orders,
rather Participants would obtain the
Maker Rebate regardless of contra-party.
Market Maker
Today, BX Options Market Makers
receive a Penny Symbol Rebate to Add
Liquidity of $0.10 per contract only
when the BX Options Market Maker is
contra to a Non-Customer, Firm, or BX
Options Market Maker. Today, BX
Options Market Makers receive no
Penny Symbol Rebate to Remove
Liquidity. Today, BX Options Market
Makers pay a $0.39 per contract Penny
Symbol Fee to Add Liquidity only when
the BX Options Market Maker is contra
to a Customer. Today, BX Options
Market Makers pay a Penny Symbol Fee
to Remove Liquidity when trading
against a Customer which ranges from
$0.39 to $0.30 per contract.13 Today, BX
7
2.
9 Participants that executes less than 0.05% of
total industry customer equity and ETF option ADV
contracts per month pay a Penny Symbol Fee to
Remove Liquidity of $0.39 per contract in Tier 1.
Participants that execute 0.05% to less than 0.15%
of total industry customer equity and ETF option
ADV contracts per month pay a Penny Symbol Fee
to Remove Liquidity of $0.39 per contract in Tier
2. Participants that execute 0.15% or more of total
industry customer equity and ETF option ADV
contracts per month pay a Penny Symbol Fee to
Remove Liquidity of $0.30 per contract in Tier 3.
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10 Participants that executes less than 0.05% of
total industry customer equity and ETF option ADV
contracts per month pay a Penny Symbol Fee to
Remove Liquidity of $0.46 per contract in Tier 1.
Participants that execute 0.05% to less than 0.15%
of total industry customer equity and ETF option
ADV contracts per month pay a Penny Symbol Fee
to Remove Liquidity of $0.46 per contract in Tier
2. Participants that execute 0.15% or more of total
industry customer equity and ETF option ADV
contracts per month pay a Penny Symbol Fee to
Remove Liquidity of $0.46 per contract in Tier 3.
11 See note 9 above.
12 See note 10 above.
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(0.90)
Taker Fee
0.65
Options Market Makers pay a Penny
Symbol Fee to Remove Liquidity when
trading against a Non-Customer, BX
Options Market Maker or Firm of $0.46
per contract, regardless of tier.14
With this proposal, the Exchange
would rename ‘‘BX Options Market
Maker’’ as ‘‘Market Maker.’’ With this
proposal, Market Maker orders would
receive a Maker Rebate of $0.25 per
contract in all Penny Symbols, except
SPY which would pay a Maker Rebate
of $0.22 per contract, and except AAPL,
IWM, GLD, QQQ, SLV, and TSLA which
would pay a Maker Rebate of $0.42 per
contract. With this proposal, Market
Maker orders would pay a Penny
Symbol Taker Fee of $0.46 per contract.
The proposed Maker Rebates for
Penny Symbol Market Maker orders, for
all Penny Symbols, are higher than the
current Market Maker Penny Symbol
Rebate to Add Liquidity of $0.10 per
contract when trading against NonCustomer, Firm, BX Options Market
Maker, or Lead Market Maker and the
proposed rebate does not consider the
contra-party. The proposed Penny
Symbol Taker Fee for Market Maker
orders is higher than the current Market
Maker tiered Penny Symbol Fee to
Remove Liquidity when trading against
a Customer which ranges from $0.39 to
$0.30 per contract 15 and is the same as
the current Market Maker tiered Penny
Symbol Fees to Remove Liquidity when
trading against a Non-Customer, Lead
Market Maker, BX Options Market
Maker or Firm of $0.46 per contract
regardless of tier.16 BX would no longer
assess a fee to add liquidity for Market
13 Participants that executes less than 0.05% of
total industry customer equity and ETF option ADV
contracts per month would pay a Penny Symbol Fee
to Remove Liquidity of $0.39 per contract in Tier
1. Participants that execute 0.05% to less than
0.15% of total industry customer equity and ETF
option ADV contracts per month would pay a
Penny Symbol Fee to Remove Liquidity of $0.39 per
contract in Tier 2. Participants that execute 0.15%
or more of total industry customer equity and ETF
option ADV contracts per month would pay a
Penny Symbol Fee to Remove Liquidity of $0.30 per
contract in Tier 3.
14 Participants that executes less than 0.05% of
total industry customer equity and ETF option ADV
contracts per month would pay a Penny Symbol Fee
to Remove Liquidity of $0.46 per contract in Tier
1. Participants that execute 0.05% to less than
0.15% of total industry customer equity and ETF
option ADV contracts per month would pay a
Penny Symbol Fee to Remove Liquidity of $0.46 per
contract in Tier 2. Participants that execute 0.15%
or more of total industry customer equity and ETF
option ADV contracts per month would pay a
Penny Symbol Fee to Remove Liquidity of $0.46 per
contract in Tier 3.
15 See note 13 above.
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Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices
Maker orders, rather Participants would
obtain the Maker Rebate regardless of
contra-party.
Non-Customers
Today, Non-Customers receive neither
a Penny Symbol Rebate to Add
Liquidity nor a Penny Symbol Rebate to
Remove Liquidity. Today, NonCustomers pay a Penny Symbol Fee to
Add Liquidity of $0.45 per contract.
Today, Non-Customers pay a Penny
Symbol Fee to Remove Liquidity of
$0.46 per contract.
With this proposal, Non-Customer
orders would receive a Maker Rebate of
$0.12 per contract in all Penny Symbols.
With this proposal, Non-Customer
orders would pay a Penny Symbol Taker
Fee of $0.46 per contract.
The Exchange would begin to pay a
Penny Symbol Maker Rebate for NonCustomer orders. Today, Non-Customer
Orders receive no rebates for adding
liquidity in Penny Symbols. The
proposed Non-Customer Penny Symbol
Taker Fee of $0.46 per contract is higher
than the Non-Customer Penny Symbol
Fee to Add Liquidity of $0.45 per
contract and is the same as the NonCustomer Penny Symbol Fee to Remove
Liquidity of $0.46 per contract.
Firms
Today, Firms receive neither a Penny
Symbol Rebate to Add Liquidity nor a
Penny Symbol Rebate to Remove
Liquidity. Today, Firms pay a Penny
Symbol Fee to Add Liquidity of $0.45
per contract. Today, Firms pay a Penny
Symbol Fee to Remove Liquidity of
$0.46 per contract.
With this proposal, Firm orders
would receive a Maker Rebate of $0.12
per contract in all Penny Symbols. With
this proposal, Firm orders would pay a
Penny Symbol Taker Fee of $0.46 per
contract.
The Exchange would begin to pay a
Penny Symbol Maker Rebate for Firm
orders. Today, Firm Orders receive no
rebates for adding liquidity in Penny
Symbols. The proposed Firm Penny
Symbol Taker Fee of $0.46 per contract
is higher than the Firm Penny Symbol
Fee to Add Liquidity of $0.45 per
contract and is the same as the Firm
Penny Symbol Fee to Remove Liquidity
of $0.46 per contract.
Customers
Today, Customers receive a Penny
Symbol Rebate to Add Liquidity when
trading against a Non-Customer, Lead
Market Maker, BX Options Market
Maker or Firm which ranges from $0.00
to $0.20 per contract.17 Today,
16
See note 14 above.
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Customers receive a Penny Symbol
Rebate to Remove Liquidity when
trading against a Non-Customer, Lead
Market Maker, BX Options Market
Maker, Customer or Firm which ranges
from $0.00 to $0.35 per contract.18
Today, Customers pay a Penny Symbol
Fee to Add Liquidity when trading
against a Customer of $0.39 per contract,
regardless of tier.19 Today, Customers
do not pay a Penny Symbol Fee to
Remove Liquidity.
With this proposal, Customer orders
would receive a $0.30 per contract
Penny Symbol Maker Rebate. With this
proposal, Customer orders would pay a
$0.46 per contract Penny Symbol Taker
Fee, unless the Customer order removes
liquidity in SPY, in which case the
Taker Fee would be $0.26 per contract.
The proposed new Penny Symbol
Customer Maker Rebate of $0.30 per
contract is higher than the current
Customer Rebates to Add Liquidity 20
and does not consider the contra-party.
This proposal would no longer pay a
Penny Symbol Customer rebate to
remove liquidity with this pricing
model. With this proposal, Customer
orders would be assessed a Customer
Taker Fee of $0.46 per contract, except
for SPY where a Customer order would
pay a Taker Fee of $0.26 per contract to
remove liquidity. Today, Customer
orders are not assessed a Penny Symbol
Fee to Remove Liquidity. With this
proposal, Customers would not pay to
add liquidity, a Customer order would
17 Participants that executes less than 0.05% of
total industry customer equity and ETF option ADV
contracts per month receive no Penny Symbol
Rebate to Add Liquidity in Tier 1. Participants that
execute 0.05% to less than 0.15% of total industry
customer equity and ETF option ADV contracts per
month receive a $0.10 per contract Penny Symbol
Rebate to Add Liquidity in Tier 2. Participants that
execute 0.15% or more of total industry customer
equity and ETF option ADV contracts per month
receive a $0.20 per contract Penny Symbol Rebate
to Add Liquidity in Tier 3.
18 Participants that executes less than 0.05% of
total industry customer equity and ETF option ADV
contracts per month would receive no Penny
Symbol Rebate to Remove Liquidity in Tier 1.
Participants that execute 0.05% to less than 0.15%
of total industry customer equity and ETF option
ADV contracts per month would receive a $0.25 per
contract Penny Symbol Rebate to Remove Liquidity
in Tier 2. Participants that execute 0.15% or more
of total industry customer equity and ETF option
ADV contracts per month will receive a $0.35 per
contract Penny Symbol Rebate to Remove Liquidity
in Tier 3.
19 Participants that executes less than 0.05% of
total industry customer equity and ETF option ADV
contracts per month would pay a $0.39 per contract
Penny Symbol Fee to Add Liquidity in Tier 1.
Participants that execute 0.05% to less than 0.15%
of total industry customer equity and ETF option
ADV contracts per month would pay a $0.39 per
contract Penny Symbol Fee to Add Liquidity in Tier
2. Participants that execute 0.15% or more of total
industry customer equity and ETF option ADV
contracts per month would pay a $0.39 per contract
Penny Symbol Fee to Add Liquidity in Tier 3.
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18565
instead receive a rebate. Today,
Customer orders are subject to the tiered
Penny Symbol Fee to Add Liquidity
when trading against a Customer of
$0.39 per contract, regardless of tier.21
Non-Penny Symbols
With respect to the impact on pricing
for Non-Penny Symbols, the Exchange
notes the below changes in pricing.
Lead Market Makers
Today, Lead Market Makers are
charged a $0.50 per contract Non-Penny
Fee to Add Liquidity when the Lead
Market Maker is trading with any
market participant other than a
Customer. If the contra-party is a
Customer, the Lead Market Maker is
charged a higher Fee to Add Liquidity
of $0.95 per contract instead. Lead
Market Makers are also currently
charged a $0.89 per contract Non-Penny
Fee to Remove Liquidity when the Lead
Market Maker is trading with any
market participant other than a
Customer. If the contra-party is a
Customer, the Lead Market Maker is
charged a Fee to Remove Liquidity
ranging from $0.89 to $0.60 per contract
depending on the volume tier achieved,
as described in the Non-Penny Symbols
Tier Schedule above. Lead Market
Makers are currently not offered any
rebates for adding or removing liquidity.
With this proposal, the Exchange will
eliminate the contra-party qualifications
and volume tiers for Lead Market Maker
pricing in Non-Penny Symbols. Lead
Market Makers would instead receive a
flat Maker Rebate of $0.45 per contract
for adding liquidity in Non-Penny
Symbols, regardless of contra-party.
They would receive the proposed Maker
Rebate for adding liquidity whereas
today, they would be charged a fee for
adding liquidity in Non-Penny Symbols.
As proposed, Lead Market Makers
would also be charged a flat Taker Fee
of $1.10 per contract for removing
liquidity in Non-Penny Symbols,
regardless of contra-party. The proposed
fee would be higher than the current fee
assessed to Lead Market Makers for
removing liquidity in Non-Penny
Symbols.
Market Makers
Today, Market Makers are charged a
$0.50 per contract Non-Penny Fee to
Add Liquidity when the Market Maker
is trading with any market participant
other than a Customer. If the contraparty is a Customer, the Market Maker
is charged a higher Fee to Add Liquidity
of $0.95 per contract instead. Market
Makers are also currently charged a
20
See note 17 above.
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Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices
$0.89 per contract Non-Penny Fee to
Remove Liquidity when the Market
Maker is trading with any market
participant other than a Customer. If the
contra-party is a Customer, the Market
Maker is charged a Fee to Remove
Liquidity ranging from $0.89 to $0.60
per contract depending on the volume
tier achieved, as described in the NonPenny Symbols Tier Schedule above.
Market Makers are currently not offered
any rebates for adding or removing
liquidity.
With this proposal, the Exchange will
eliminate the contra-party qualifications
and volume tiers for Market Maker
pricing in Non-Penny Symbols. Market
Makers would instead receive a flat
Maker Rebate of $0.40 per contract for
adding liquidity in Non-Penny Symbols,
regardless of contra-party. They would
receive this Maker Rebate for adding
liquidity whereas today, they would be
charged a fee for adding liquidity in
Non-Penny Symbols. As proposed,
Market Makers would also be charged a
flat Taker Fee of $1.10 per contract for
removing liquidity in Non-Penny
Symbols, regardless of contra-party. The
proposed fee would be higher than the
current fee assessed to Market Makers
for removing liquidity in Non-Penny
Symbols.
Non-Customers
Today, Non-Customers are charged a
$0.98 per contract Non-Penny Fee to
Add Liquidity. Non-Customers are also
currently charged a $0.89 per contract
Non-Penny Fee to Remove Liquidity.
Non-Customers are currently not offered
any rebates for adding or removing
liquidity.
With this proposal, Non-Customers
would be charged a Maker Fee of $0.45
per contract for adding liquidity in NonPenny Symbols, which is lower than the
current Fee to Add Liquidity. NonCustomers would also be charged a
Taker Fee of $1.10 per contract for
removing liquidity in Non-Penny
Symbols, which is higher than the
current Fee to Remove Liquidity.
Firms
Today, Firms are charged a $0.98 per
contract Non-Penny Fee to Add
Liquidity. Firms are also currently
charged a $0.89 per contract Non-Penny
Fee to Remove Liquidity. Firms are
currently not offered any rebates for
adding or removing liquidity.
With this proposal, Firms would be
charged a Maker Fee of $0.45 per
contract for adding liquidity in NonPenny Symbols, which is lower than the
current Fee to Add Liquidity. Firms
would also be charged a Taker Fee of
$1.10 per contract for removing
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liquidity in Non-Penny Symbols, which
is higher than the current Fee to Remove
Liquidity.
Customers
Today, Customers trading with any
market participant other than another
Customer receive Non-Penny Rebates to
Add Liquidity ranging from $0.00 to
$0.20 per contract depending on the
volume tier achieved, as described in
the Non-Penny Symbols Tier Schedule
above. If the contra-party is another
Customer, the Customer is charged a
Non-Penny Fee to Add Liquidity of
$0.85 per contract instead, regardless of
tier. As described in the Non-Penny
Symbols Tier Schedule above,
Customers also currently receive a NonPenny Rebates to Remove Liquidity of
$0.80 per contract, regardless of tier.
This rebate is provided to Customers
regardless of contra-party.
With this proposal, the Exchange will
eliminate the contra-party qualifications
and volume tiers for Customer pricing
in Non-Penny Symbols. Customers
would instead receive a flat Maker
Rebate of $0.90 per contract for adding
liquidity in Non-Penny Symbols,
regardless of contra-party. Customers
would receive the proposed Maker
Rebate for adding liquidity whereas
today, they would either receive a lower
rebate or be charged a fee for adding
liquidity in Non-Penny Symbols,
depending on the contra-party. As
proposed, Customers would also be
charged a flat Taker Fee of $0.65 per
contract for removing liquidity in NonPenny Symbols, regardless of
counterparty. Customers would pay the
proposed Taker Fee for removing
liquidity whereas today, they would
receive a rebate for removing liquidity
in Non-Penny Symbols.
Non-Customer
The Exchange proposes to relocate
current note 1 of Options 7, Section 2,
which describes a Non-Customer, to
Options 7, Section 1 and provide, ‘‘The
term ‘Non-Customer’ shall include a
Professional, Broker-Dealer and Non-BX
Options Market Maker.’’ The defined
term as proposed within Options 7,
Section 1 is applicable to Options 7
pricing. Further, the Exchange proposes
to remove references to note 1 within
Options 7, Section 2(1), as described
above, as well as within Options 7,
Section 2(4).
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,22 in general, and furthers the
21
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Frm 00073
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objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,23 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 Pricing Schedule 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’. . . .’’ 24
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.’’ 25
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. 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
15 U.S.C. 78 f(b).
15 U.S.C. 78f(b)(4) and (5).
24 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
22
23
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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.
Generally, the Exchange’s proposal
will replace the existing fees and rebates
in Options 7, Section 2(1) applicable to
transactions in Penny and Non-Penny
Symbols with a new maker/taker fee
structure where market participants are
assessed a rebate or lower fee for adding
liquidity to the market, or charged a
higher fee for removing liquidity from
the market. As described above, the
proposed pricing will no longer be
tiered and will not consider the contraparty, unless otherwise specified,
thereby reducing complexity in the
Exchange’s Pricing Schedule. For the
reasons discussed in the following
paragraphs, the Exchange believes that
the proposed fee structure will be
beneficial to market participants and
will encourage an active and liquid
market in both Penny and Non-Penny
Symbols on BX.
Penny Symbols
Lead Market Makers
The proposal to amend Lead Market
Maker Penny Symbol pricing is
reasonable. The proposed Penny
Symbol Maker Rebates for Lead Market
Maker orders, for all Penny Symbols, are
higher than the current Lead Market
Maker Penny Symbol Rebate to Add
Liquidity of $0.11 per contract. Also, the
proposed Penny Symbol Maker Rebates
for Lead Market Maker orders do not
consider the contra-party. The Exchange
believes that these higher rebates will
attract a greater amount of liquidity in
all Penny Symbols to BX, which will
benefit all market participants in the
quality of order interaction. In addition,
the Exchange’s proposal to offer the
Maker Rebate for Lead Market Makers of
$0.22 per contract in SPY and offer the
Maker Rebate for Lead Market Makers of
$0.42 per contract in AAPL, IWM, GLD,
QQQ, SLV, and TSLA, is reasonable for
the reasons that follow. Today, BX
segments its pricing as between Penny
and Non-Penny Symbols. While the
Exchange would pay a lower Maker
Rebate of $0.22 per contract in SPY as
compared to the proposed Penny
Symbol Maker Rebate for Lead Market
Makers of $0.29 per contract, the
Exchange believes that the proposed
SPY rebate is reasonable because Lead
Market Makers would still be eligible to
receive rebates for such orders, albeit at
a lower amount than for other Penny
Symbols under this proposal.
Furthermore, the Exchange notes that
the proposed SPY rebate of $0.22 per
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contract will be significantly higher
than the current rebate of $0.11 per
contract. As such, the Exchange believes
that the proposed SPY rebate is set at an
appropriate level that would continue to
encourage Lead Market Makers to add
liquidity in SPY. In addition, the
Exchange believes that it is reasonable
to pay a higher Maker Rebate of $0.42
per contract in AAPL, IWM, GLD, QQQ,
SLV, and TSLA as compared to the
proposed Penny Symbol Maker Rebate
for Lead Market Makers of $0.29 per
contract as the Exchange is seeking to
incentivize greater order flow in these
symbols to BX. These highly liquid
Penny Symbols are subject to greater
competition among options exchanges
and, therefore, a higher rebate is
necessary to attract this order flow. The
proposed Penny Symbol Taker Fee for
Lead Market Maker orders of $0.46 per
contract is higher than the current Lead
Market Maker tiered Penny Symbol Fees
to Remove Liquidity when trading
against a Customer which range from
$0.39 to $0.30 per contract 26 and is the
same as the current Lead Market Maker
tiered Penny Symbol Fees to Remove
Liquidity when trading against a NonCustomer, Lead Market Maker, BX
Options Market Maker or Firm of $0.46
per contract regardless of tier.27 BX
would no longer assess a fee to add
liquidity for Lead Market Maker orders,
rather Participants would obtain the
Maker Rebate, notwithstanding the
contra-party. The Exchange believes that
the Taker Fee remains competitive and
will continue to attract order flow to BX
to the benefit of all market participants.
The proposal is equitable and not
unfairly discriminatory as all pricing
would be uniformly assessed to
similarly situated Participants for Penny
Symbols. The Exchange believes that
the proposed differentiation between
Lead Market Makers and other market
participants through the proposed
Maker Rebate recognizes the differing
contributions made to the liquidity and
trading environment on the Exchange by
Lead Market Makers through their
quoting obligations and their
commitment of capital, unlike other
market participants.28 Furthermore,
LMMs are subject to heightened quoting
obligations compared to Market
Makers.29 Incentivizing Lead Market
Makers to provide greater liquidity
benefits all market participants through
the quality of order interaction. The
See note 9 above.
See note 10 above.
28 See Options 2, Section 4.
29 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 Market Makers).
26
27
PO 00000
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18567
Exchange’s proposal to offer a lower
Maker Rebate for Lead Market Makers of
$0.22 per contract in SPY and offer a
higher Maker Rebate for Lead Market
Makers of $0.42 per contract in AAPL,
IWM, GLD, QQQ, SLV, and TSLA is
equitable and not unfairly
discriminatory as the Exchange’s
proposal would be applied uniformly to
similarly-situated Participants with
quoting obligations.
Market Maker
The proposal to amend Market Maker
Penny Symbol pricing is reasonable.
The proposed Maker Rebates for Penny
Symbol Market Maker orders, for all
Penny Symbols, are higher than the
current Market Maker Penny Symbol
Rebate to Add Liquidity of $0.10 and
the proposed rebate does not consider
the contra-party. The Exchange believes
that these higher rebates will attract a
greater amount of liquidity in all Penny
Symbols to BX, which will benefit all
market participants in the quality of
order interaction. In addition, the
Exchange’s proposal to offer the Maker
Rebate for Market Makers of $0.22 per
contract in SPY and offer the Maker
Rebate for Market Makers of $0.42 per
contract in AAPL, IWM, GLD, QQQ,
SLV, and TSLA, is reasonable for the
reasons that follow. Today, BX segments
its pricing as between Penny and NonPenny Symbols. While the Exchange
would pay a lower Maker Rebate of
$0.22 per contract in SPY as compared
to the proposed Penny Symbol Maker
Rebate for Market Makers of $0.25 per
contract, the Exchange believes that the
proposed SPY rebate is reasonable
because Market Makers would still be
eligible to receive rebates for such
orders, albeit at a lower amount than for
other Penny Symbols under this
proposal. Furthermore, the Exchange
notes that the proposed SPY rebate of
$0.22 per contract will be significantly
higher than the current rebate of $0.10
per contract. As such, the Exchange
believes that the proposed SPY rebate is
set at an appropriate level that would
continue to encourage Market Makers to
add liquidity in SPY. In addition, the
Exchange believes that it is reasonable
to pay a higher rebate of $0.42 per
contract in AAPL, IWM, GLD, QQQ,
SLV, and TSLA as compared to the
proposed Maker Rebate for Market
Makers of $0.25 per contract as the
Exchange is seeking to incentivize
greater order flow in these symbols to
BX. These highly liquid Penny Symbols
are subject to greater competition among
options exchanges and, therefore, a
higher rebate is necessary to attract this
order flow. The proposed Penny Symbol
Taker Fee for Market Maker orders is
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higher than the current Market Maker
tiered Penny Symbol Fee to Remove
Liquidity when trading against a
Customer which ranges from $0.39 to
$0.30 per contract 30 and is the same as
the current Market Maker tiered Penny
Symbol Fee to Remove Liquidity when
trading against a Non-Customer, Lead
Market Maker, BX Options Market
Maker or Firm of $0.46 per contract
regardless of tier.31 BX would no longer
assess a fee to add liquidity for Market
Maker orders, rather Participants would
obtain the Maker Rebate,
notwithstanding the contra-party. The
Exchange believes that the Taker Fee
remains competitive and will continue
to attract order flow to BX to the benefit
of all market participants.
The proposal is equitable and not
unfairly discriminatory as all pricing
would be uniformly assessed to
similarly situated Participants for Penny
Symbols. Market Makers add value
through continuous quoting and are
subject to additional requirements and
obligations unlike other market
participants.32 Incentivizing Market
Makers to provide greater liquidity
benefits all market participants through
the quality of order interaction. The
Exchange’s proposal to offer a lower
Maker Rebate for Market Makers of
$0.22 per contract in SPY and offer a
higher Maker Rebate for Market Makers
of $0.42 per contract in AAPL, IWM,
GLD, QQQ, SLV, and TSLA is equitable
and not unfairly discriminatory as the
Exchange’s proposal would be applied
uniformly to similarly-situated
Participants with quoting obligations.
Non-Customers
The proposal to amend Non-Customer
Penny Symbol pricing is reasonable.
The proposal would begin to pay a
Penny Symbol Maker Rebate for NonCustomer orders. Today, Non-Customer
Orders receive no rebates for adding
liquidity in Penny Symbols. The
Exchange believes that paying a rebate
will attract a greater amount of liquidity
to BX. The Non-Customer Penny
Symbol Taker Fee of $0.46 per contract
is higher than the Non-Customer Penny
Symbol Fee to Add Liquidity of $0.45
per contract and is the same as the NonCustomer Penny Symbol Fee to Remove
Liquidity of $0.46 per contract. The
Exchange believes that the Taker Fee
remains competitive and will continue
to attract order flow to BX to the benefit
of all market participants.
The proposal is equitable and not
unfairly discriminatory as all pricing
See note 13 above.
See note 14 above.
32 See Options 2, Sections 4 and 5.
would be uniformly assessed to
similarly situated Participants for Penny
Symbols.
Firms
The proposal to amend Firm Penny
Symbol pricing is reasonable. The
proposal would begin to pay a Penny
Symbol Maker Rebate for Firm orders.
Today, Firm Orders receive no rebates
for adding liquidity in Penny Symbols.
The Exchange believes that paying a
rebate will attract a greater amount of
liquidity to BX. The Firm Penny Symbol
Taker Fee of $0.46 per contract is higher
than the Firm Penny Symbol Fee to Add
Liquidity of $0.45 per contract and is
the same as the Firm Penny Symbol Fee
to Remove Liquidity of $0.46 per
contract. The Exchange believes that the
Taker Fee remains competitive and will
continue to attract order flow to BX to
the benefit of all market participants.
The proposal is equitable and not
unfairly discriminatory as all pricing
would be uniformly assessed to
similarly situated Participants for Penny
Symbols.
Customers
The proposal to amend Customer
Penny Symbol pricing is reasonable.
The proposed new Penny Symbol
Customer Maker Rebate of $0.30 per
contract is higher than the current
Customer Rebates to Add Liquidity 33
and does not consider the contra-party.
The Exchange believes that these higher
rebates will attract a greater amount of
liquidity to BX. This proposal would no
longer pay a Penny Symbol Customer
rebate to remove liquidity with this
pricing model. With this proposal,
Customer orders would be assessed a
Customer Taker Fee of $0.46 per
contract, except for SPY where a
Customer order would pay a Taker Fee
of $0.26 per contract to remove
liquidity. Today, Customer orders are
not assessed a Penny Symbol Fee to
Remove Liquidity. With this proposal,
Customers would not pay to add
liquidity, a Customer order would
instead receive a rebate. Today,
Customer orders are subject to the tiered
Penny Symbol Fee to Add Liquidity
when trading against a Customer of
$0.39 per contract, regardless of tier.34
The Exchange believes that the
Customer Taker Fee remains
competitive and will continue to attract
order flow to BX to the benefit of all
market participants. The Exchange notes
that the proposed Taker Fee for
30
31
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33
34
PO 00000
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See note 19 above.
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Customers remains below similar fees
assessed by another options exchange.35
The proposal is equitable and not
unfairly discriminatory as all pricing
would be uniformly assessed to
similarly situated Participants for Penny
Symbols. Customers would continue to
receive favorable pricing as compared to
other market participants because
Customer liquidity enhances liquidity
on the Exchange for the benefit of all
market participants. Specifically,
Customer liquidity benefits all market
participants by providing more trading
opportunities which attracts market
makers. An increase in the activity of
these market participants (particularly
in response to pricing) in turn facilitates
tighter spreads which may cause an
additional corresponding increase in
order flow from other market
participants.
Non-Penny Symbols
Lead Market Makers
The Exchange believes that the
proposed Lead Market Maker NonPenny Symbol pricing is reasonable. As
discussed above, Lead Market Makers
would receive the proposed flat Maker
Rebate of $0.45 per contract for adding
liquidity in Non-Penny Symbols
whereas today, they would be charged
a fee. The Exchange believes that the
proposed Maker Rebate will attract a
greater amount of liquidity to BX to the
benefit of all market participants. As
proposed, Lead Market Makers would
also be charged a flat Taker Fee of $1.10
per contract for removing liquidity in
Non-Penny Symbols. While the
proposed Taker Fee would be higher
than the current fees assessed to Lead
Market Makers for removing liquidity in
Non-Penny Symbols described above,
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.36
The Exchange believes that its
proposal is equitable and not unfairly
discriminatory because the proposed
pricing will apply uniformly to all
similarly situated Participants for Non35 NYSE Arca Options (‘‘Arca’’) currently assesses
Customers a Take Liquidity fee of $0.49 per contract
in Penny Issues. See Arca Fees and Charges,
Transaction Fee for Electronic Executions—Per
Contract.
36 The Exchange notes that the proposed Taker
Fee is within the range of similar fees charged by
other options exchanges. See, e.g., Arca Fees and
Charges, Transaction Fee for Electronic
Executions—Per Contract (assessing all market
participants except Customers a Take Liquidity fee
of $1.10 per contract in Non-Penny Issues); and
Nasdaq MRX (‘‘MRX’’) Pricing Schedule at Options
7, Section 3 (assessing all market participants
except Priority Customers a $1.10 per contract
Taker Fee in Non-Penny Symbols.
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Penny Symbols. The Exchange believes
that the proposed differentiation
between Lead Market Makers and other
market participants through the
proposed Maker Rebate recognizes the
differing contributions made to the
liquidity and trading environment on
the Exchange by Lead Market Makers
through their quoting obligations and
their commitment of capital, unlike
other market participants.37 In addition,
LMMs are subject to heightened quoting
obligations compared to Market
Makers.38 Incentivizing Lead Market
Makers to provide greater liquidity
benefits all market participants through
the quality of order interaction.
Market Makers
The Exchange believes that the
proposed Market Maker Non-Penny
Symbol pricing is reasonable. As
discussed above, Market Makers would
receive the proposed flat Maker Rebate
of $0.40 per contract for adding
liquidity in Non-Penny Symbols
whereas today, they would be charged
a fee. The Exchange believes that the
proposed Maker Rebate will attract a
greater amount of liquidity to BX to the
benefit of all market participants. As
proposed, Market Makers would also be
charged a flat Taker Fee of $1.10 per
contract for removing liquidity in NonPenny Symbols. While the proposed
Taker Fee would be higher than the
current fees assessed to Market Makers
for removing liquidity in Non-Penny
Symbols described above, 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.39
The Exchange believes that its
proposal is equitable and not unfairly
discriminatory because the proposed
pricing will apply uniformly to all
similarly situated Participants for NonPenny Symbols. Market Makers add
value through continuous quoting and
are subject to additional requirements
and obligations unlike other market
participants.40 Incentivizing Market
Makers to provide greater liquidity
benefits all market participants through
the quality of order interaction.
Non-Customers
The Exchange believes that the
proposed Non-Customer pricing in NonPenny Symbols is reasonable. As
discussed above, Non-Customers would
be charged a Maker Fee of $0.45 per
contract for adding liquidity in NonSee Options 2, Section 4.
38 See Options 2, Section 4.
39 See note 36 above.
40 See Options 2, Sections 4 and 5.
37
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17:45 Apr 08, 2021
Penny Symbols, which is significantly
lower than the current Fee to Add
Liquidity. As such, the Exchange
believes that the proposed Maker Fee
will continue to attract Non-Customer
order flow to BX to the benefit of all
market participants. As proposed, NonCustomers would also be charged a flat
Taker Fee of $1.10 per contract for
removing liquidity in Non-Penny
Symbols. While the proposed Taker Fee
would be higher than the current fee
assessed to Non-Customers for removing
liquidity in Non-Penny Symbols, 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.41
The Exchange believes that its
proposal is equitable and not unfairly
discriminatory because the proposed
pricing will apply uniformly to all
similarly situated Participants for NonPenny Symbols.
Firms
The Exchange believes that the
proposed Firm pricing in Non-Penny
Symbols is reasonable. As discussed
above, Firms would be charged a Maker
Fee of $0.45 per contract for adding
liquidity in Non-Penny Symbols, which
is significantly lower than the current
Fee to Add Liquidity. As such, the
Exchange believes that the proposed
Maker Fee will continue to attract Firm
order flow to BX to the benefit of all
market participants. As proposed, Firms
would also be charged a flat Taker Fee
of $1.10 per contract for removing
liquidity in Non-Penny Symbols. While
the proposed Taker Fee would be higher
than the current fee assessed to Firms
for removing liquidity in Non-Penny
Symbols, 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.42
The Exchange believes that its
proposal is equitable and not unfairly
discriminatory because the proposed
pricing will apply uniformly to all
similarly situated Participants for NonPenny Symbols.
Customers
The Exchange believes that the
proposed Customer pricing in NonPenny Symbols is reasonable. As
discussed above, Customers would
receive a flat Maker Rebate of $0.90 per
contract for adding liquidity whereas
today, they would either receive a lower
rebate or be charged a fee for adding
liquidity in Non-Penny Symbols,
41 See
42 See
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note 36 above.
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18569
depending on the contra-party. The
Exchange believes that these higher
rebates will attract a greater amount of
liquidity to BX. In addition, Customers
would no longer receive a rebate for
removing liquidity in Non-Penny
Symbols, and would instead be charged
a flat Taker Fee of $0.65 per contract
under this proposal. While Customers
would be assessed a fee, the Exchange
notes that this fee will be lower than the
$1.10 per contract Taker Fees assessed
to all other market participants under
this proposal. The Exchange further
notes that the proposed Customer Taker
Fee remains below similar fees assessed
by another options exchange.43
Accordingly, the Exchange believes that
the proposed Taker Fee remains
competitive and will continue to attract
order flow to BX to the benefit of all
market participants.
The Exchange believes that its
proposal is equitable and not unfairly
discriminatory because the proposed
pricing will apply uniformly to all
similarly situated Participants for NonPenny Symbols. Customers would
continue to receive favorable pricing as
compared to other market participants
because Customer liquidity enhances
liquidity on the Exchange for the benefit
of all market participants. Specifically,
Customer liquidity benefits all market
participants by providing more trading
opportunities which attracts market
makers. An increase in the activity of
these market participants (particularly
in response to pricing) in turn facilitates
tighter spreads which may cause an
additional corresponding increase in
order flow from other market
participants.
Non-Customer
The Exchange’s proposal to relocate
current note 1 of Options 7, Section 2
to Options 7, Section 1 and remove
references to note 1 within Options 7,
Section 2(1), as described above, as well
as within Options 7, Section 2(4) is
reasonable, equitable and not unfairly
discriminatory. The amendments will
bring greater clarity to the term NonCustomer throughout Options 7 pricing.
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.
43 Arca currently assesses Customers a Take
Liquidity fee of $0.85 per contract in Non-Penny
Issues (or $0.67 per contract if the Customer is
trading against an LMM). See Arca Fees and
Charges, Transaction Fee for Electronic
Executions—Per Contract.
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Inter-Market Competition
The proposal does not impose an
undue burden on inter-market
competition. The Exchange believes its
proposal remains competitive with
other options markets and will offer
market participants with another choice
of where to transact options. 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
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
Intra-Market Competition
The proposed pricing does not impose
an undue burden on intra-market
competition as all pricing would be
uniformly assessed to similarly situated
market participants. Customers would
continue to receive favorable pricing as
compared to other market participants
because Customer liquidity enhances
liquidity on the Exchange for the benefit
of all market participants. Specifically,
Customer liquidity benefits all market
participants by providing more trading
opportunities which attracts market
makers. An increase in the activity of
these market participants (particularly
in response to pricing) in turn facilitates
tighter spreads which may cause an
additional corresponding increase in
order flow from other market
participants. Lead Market Makers and
Market Makers add value through
continuous quoting 44 and are subject to
additional requirements and
obligations 45 unlike other market
participants. Incentivizing Lead Market
Makers and Market Makers to provide
greater liquidity benefits all market
participants through the quality of order
interaction.
Non-Customer
The Exchange’s proposal to relocate
current note 1 of Options 7, Section 2
to Options 7, Section 1 and remove
references to note 1 within Options 7,
Section 2(1), as described above, as well
as within Options 7, Section 2(4) does
not impose an undue burden on
competition. The amendments will
bring greater clarity to the term NonCustomer throughout Options 7 pricing.
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 46 and
paragraph (f) of Rule 19b–4
thereunder.47
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2021–009 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–2021–009. 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 20549–1090, 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–2021–009 and should
be submitted on or before April 30,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.48
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–07271 Filed 4–8–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91478; File No. SR–MEMX–
2021–04]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Order
Granting Accelerated Approval of a
Proposed Rule Change To Amend the
Corporate Documents of the
Exchange’s Parent Company
April 5, 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 March 22,
2021, MEMX LLC (‘‘MEMX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
48 17
44 See
Options 2, Sections 4 and 5.
45 See Options 2, Section 4.
VerDate Sep<11>2014
17:45 Apr 08, 2021
46 15
U.S.C. 78s(b)(3)(A)(ii).
47 17 CFR 240.19b–4(f)(2).
Jkt 253001
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\09APN1.SGM
09APN1
]]>Agencies
[Federal Register Volume 86, Number 67 (Friday, April 9, 2021)]
[Notices]
[Pages 18562-18570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07271]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91473; File No. SR-BX-2021-009]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options
7, Section 1, ``General Provisions,'' and Options 7, Section 2, ``BX
Options Market-Fees and Rebates''
April 5, 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 March 22, 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 and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BX Options 7, Section 1, ``General
Provisions,'' and Options 7, Section 2, ``BX Options Market-Fees and
Rebates.''
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
The Exchange proposes to amend BX's Pricing Schedule at Options 7,
Section 1, ``General Provisions,'' and Options 7, Section 2, ``BX
Options Market-Fees and Rebates.'' The Exchange proposes to remove the
current fees, rebates and tier schedules applicable to Penny Symbols
and Non-Penny Symbols. Today, the Penny and Non-Penny fees and rebates
are based on volume tiers and consider contra-parties to a transaction.
With this proposal, BX's pricing will no longer be tiered and will not
consider the contra-party, unless otherwise specified. Further, the
proposed changes will replace the existing pricing schedule with a new
maker/taker fee structure where market participants are assessed a
rebate or lower fee for adding liquidity to the market, or charged a
higher fee for removing liquidity from the market. This new pricing
model is intended to reward Participants that bring order flow to the
Exchange and thereby increase liquidity and trading opportunities for
all market participants. BX believes that the proposed pricing model
will encourage additional order flow to be sent to the Exchange, and
contribute to a more active and quality market in BX-listed options to
the benefit of all market participants that trade on the Exchange.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See note 1 within Options 7, Section 2.
---------------------------------------------------------------------------
The current pricing schedule for Penny and Non-Penny Symbols is 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
----------------------------------------------------------------------------------------------------------------
For purposes of the above fees and rebates, a Non-Customer includes
a Professional, Broker-Dealer and Non-BX Options Market Maker.\3\ The
Rebate to Add Liquidity is 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.\4\ The Fee to Add Liquidity is 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.\5\ Finally, the
higher Fee to Add Liquidity is 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.\6\
---------------------------------------------------------------------------
\4\ See note 2 within Options 7, Section 2.
\5\ See note 3 within Options 7, Section 2.
\6\ See note 4 within Options 7, Section 2.
---------------------------------------------------------------------------
[[Page 18563]]
The current Penny Symbol tier schedule is as follows:
# Penny Symbols Tier Schedule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rebate to add Fee to add Rebate to remove Fee to remove Fee to remove
liquidity liquidity liquidity liquidity liquidity
--------------------------------------------------------------------------------------------------------------------------------------------------------
When: Customer Customer Customer Lead Market Maker Lead Market Maker
or BX Options or BX Options
Market Maker Market Maker
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trading with: Non-Customer, Customer Non-Customer, Customer Non-Customer,
Lead Market Lead Market Lead Market
Maker, BX Options Maker, BX Options Maker, BX Options
Market Maker, or Market Maker, or Market Maker, or
firm firm 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...............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
The current Non-Penny Symbol tier schedule is as follows:
* Non-Penny Symbols Tier Schedule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rebate to add Fee to add Rebate to remove Fee to remove Fee to remove
liquidity liquidity liquidity liquidity liquidity
--------------------------------------------------------------------------------------------------------------------------------------------------------
When: Customer Customer Customer Lead Market Maker Lead Market Maker
or BX Options or BX Options
Market Maker Market Maker
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trading with: Non-Customer, Customer Non-Customer, Customer Non-Customer,
Lead Market Lead Market Lead Market
Maker, BX Options Maker, BX Options Maker, BX Options
Market Maker, or Market Maker, or Market Maker, or
firm firm firm
--------------------------------------------------------------------------------------------------------------------------------------------------------
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.....................................
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...............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange now proposes to remove the above-referenced current
fees, rebates and tier schedules. The Exchange proposes to amend the
introductory paragraph which states, ``The following charges shall
apply to the use of the order execution and routing services of the BX
Options market for all securities'' by replacing the term ``charges''
with the term ``pricing.'' The Exchange also proposes to amend Options
7, Section 2(1) which states, ``Fees for Execution of Contracts on the
BX Options Market.'' The Exchange proposes to instead provide, ``Fees
and Rebates for Execution of Contracts on the BX Options Market.'' Both
of these changes are to account for rebates that are also offered to BX
Participants.
The Exchange proposes to adopt the following Penny and Non-Penny
Symbol fees and rebates in Options 7, Section 2(1):
(1) Fees and Rebates for Execution of Contracts on the BX Options
Market
------------------------------------------------------------------------
Market participant Maker Rebate Taker Fee
------------------------------------------------------------------------
Penny Symbols:
Lead Market Maker................... $(0.29) $0.46
Market Maker........................ (0.25) 0.46
Non-Customer........................ (0.12) 0.46
Firm................................ (0.12) 0.46
Customer............................ (0.30) 0.46
Non-Penny Symbols:
Lead Market Maker................... (0.45) 1.10
Market Maker........................ (0.40) 1.10
Non-Customer........................ 0.45 1.10
Firm................................ 0.45 1.10
[[Page 18564]]
Customer............................ (0.90) 0.65
------------------------------------------------------------------------
The Exchange proposes to reduce the Customer Taker Fee to $0.26 per
contract for trades which remove liquidity in SPY.\7\ Also, the
Exchange proposes to offer a Maker Rebate for Lead Market Makers and
Market Makers in SPY of $0.22 per contract. Finally, the Exchange
proposes to offer a Maker Rebate for Lead Market Makers and Market
Makers in AAPL, IWM, GLD, QQQ, SLV, and TSLA of $0.42 per contract.\8\
The proposed fees and rebates are described in greater detail below.
---------------------------------------------------------------------------
\7\ See proposed note 1 to Options 7, Section 2.
\8\ See proposed note 2 within Options 7, Section 2.
---------------------------------------------------------------------------
Penny Symbols
With respect to the impact on pricing for Penny Symbols, the
Exchange notes the below changes in pricing.
Lead Market Makers
Today, Lead Market Makers receive a Penny Symbol Rebate to Add
Liquidity of $0.11 per contract only when the Lead Market Maker is
contra to a Non-Customer, Firm, BX Options Market Maker, or Lead Market
Maker. Today, Lead Market Makers receive no Penny Symbol Rebates to
Remove Liquidity. Today, Lead Market Makers pay a $0.38 per contract
Penny Symbol Fee to Add Liquidity only when the Lead Market Maker is
contra to a Customer. Today, Lead Market Makers pay a Penny Symbol Fee
to Remove Liquidity when trading against a Customer which ranges from
$0.39 to $0.30 per contract.\9\ Today, Lead Market Makers pay a Penny
Symbol Fee to Remove Liquidity when trading against a Non-Customer,
Lead Market Maker, BX Options Market Maker or Firm of $0.46 per
contract, regardless of tier.\10\
---------------------------------------------------------------------------
\9\ Participants that executes less than 0.05% of total industry
customer equity and ETF option ADV contracts per month pay a Penny
Symbol Fee to Remove Liquidity of $0.39 per contract in Tier 1.
Participants that execute 0.05% to less than 0.15% of total industry
customer equity and ETF option ADV contracts per month pay a Penny
Symbol Fee to Remove Liquidity of $0.39 per contract in Tier 2.
Participants that execute 0.15% or more of total industry customer
equity and ETF option ADV contracts per month pay a Penny Symbol Fee
to Remove Liquidity of $0.30 per contract in Tier 3.
\10\ Participants that executes less than 0.05% of total
industry customer equity and ETF option ADV contracts per month pay
a Penny Symbol Fee to Remove Liquidity of $0.46 per contract in Tier
1. Participants that execute 0.05% to less than 0.15% of total
industry customer equity and ETF option ADV contracts per month pay
a Penny Symbol Fee to Remove Liquidity of $0.46 per contract in Tier
2. Participants that execute 0.15% or more of total industry
customer equity and ETF option ADV contracts per month pay a Penny
Symbol Fee to Remove Liquidity of $0.46 per contract in Tier 3.
---------------------------------------------------------------------------
With this proposal, Lead Market Maker orders would receive a Maker
Rebate of $0.29 per contract in all Penny Symbols, except SPY which
would pay a Maker Rebate of $0.22 per contract, and except AAPL, IWM,
GLD, QQQ, SLV, and TSLA which would pay a Maker Rebate of $0.42 per
contract. With this proposal, Lead Market Maker orders would pay a
Penny Symbol Taker Fee of $0.46 per contract.
The proposed Penny Symbol Maker Rebates for Lead Market Maker
orders, for all Penny Symbols, are higher than the current Lead Market
Maker Penny Symbol Rebate to Add Liquidity of $0.11 per contract when
trading against Non-Customer, Firm, BX Options Market Maker or Lead
Market Maker. Also, the proposed Penny Symbol Maker Rebates for Lead
Market Maker orders do not consider the contra-party. The proposed
Penny Symbol Taker Fee for Lead Market Maker orders of $0.46 per
contract is higher than the current Lead Market Maker tiered Penny
Symbol Fees to Remove Liquidity when trading against a Customer which
range from $0.39 to $0.30 per contract \11\ and is the same as the
current Lead Market Maker tiered Penny Symbol Fee to Remove Liquidity
when trading against a Non-Customer, Lead Market Maker, BX Options
Market Maker or Firm of $0.46 per contract regardless of tier.\12\ BX
would no longer assess a fee to add liquidity for Lead Market Maker
orders, rather Participants would obtain the Maker Rebate regardless of
contra-party.
---------------------------------------------------------------------------
\11\ See note 9 above.
\12\ See note 10 above.
---------------------------------------------------------------------------
Market Maker
Today, BX Options Market Makers receive a Penny Symbol Rebate to
Add Liquidity of $0.10 per contract only when the BX Options Market
Maker is contra to a Non-Customer, Firm, or BX Options Market Maker.
Today, BX Options Market Makers receive no Penny Symbol Rebate to
Remove Liquidity. Today, BX Options Market Makers pay a $0.39 per
contract Penny Symbol Fee to Add Liquidity only when the BX Options
Market Maker is contra to a Customer. Today, BX Options Market Makers
pay a Penny Symbol Fee to Remove Liquidity when trading against a
Customer which ranges from $0.39 to $0.30 per contract.\13\ Today, BX
Options Market Makers pay a Penny Symbol Fee to Remove Liquidity when
trading against a Non-Customer, BX Options Market Maker or Firm of
$0.46 per contract, regardless of tier.\14\
---------------------------------------------------------------------------
\13\ Participants that executes less than 0.05% of total
industry customer equity and ETF option ADV contracts per month
would pay a Penny Symbol Fee to Remove Liquidity of $0.39 per
contract in Tier 1. Participants that execute 0.05% to less than
0.15% of total industry customer equity and ETF option ADV contracts
per month would pay a Penny Symbol Fee to Remove Liquidity of $0.39
per contract in Tier 2. Participants that execute 0.15% or more of
total industry customer equity and ETF option ADV contracts per
month would pay a Penny Symbol Fee to Remove Liquidity of $0.30 per
contract in Tier 3.
\14\ Participants that executes less than 0.05% of total
industry customer equity and ETF option ADV contracts per month
would pay a Penny Symbol Fee to Remove Liquidity of $0.46 per
contract in Tier 1. Participants that execute 0.05% to less than
0.15% of total industry customer equity and ETF option ADV contracts
per month would pay a Penny Symbol Fee to Remove Liquidity of $0.46
per contract in Tier 2. Participants that execute 0.15% or more of
total industry customer equity and ETF option ADV contracts per
month would pay a Penny Symbol Fee to Remove Liquidity of $0.46 per
contract in Tier 3.
---------------------------------------------------------------------------
With this proposal, the Exchange would rename ``BX Options Market
Maker'' as ``Market Maker.'' With this proposal, Market Maker orders
would receive a Maker Rebate of $0.25 per contract in all Penny
Symbols, except SPY which would pay a Maker Rebate of $0.22 per
contract, and except AAPL, IWM, GLD, QQQ, SLV, and TSLA which would pay
a Maker Rebate of $0.42 per contract. With this proposal, Market Maker
orders would pay a Penny Symbol Taker Fee of $0.46 per contract.
The proposed Maker Rebates for Penny Symbol Market Maker orders,
for all Penny Symbols, are higher than the current Market Maker Penny
Symbol Rebate to Add Liquidity of $0.10 per contract when trading
against Non-Customer, Firm, BX Options Market Maker, or Lead Market
Maker and the proposed rebate does not consider the contra-party. The
proposed Penny Symbol Taker Fee for Market Maker orders is higher than
the current Market Maker tiered Penny Symbol Fee to Remove Liquidity
when trading against a Customer which ranges from $0.39 to $0.30 per
contract \15\ and is the same as the current Market Maker tiered Penny
Symbol Fees to Remove Liquidity when trading against a Non-Customer,
Lead Market Maker, BX Options Market Maker or Firm of $0.46 per
contract regardless of tier.\16\ BX would no longer assess a fee to add
liquidity for Market
[[Page 18565]]
Maker orders, rather Participants would obtain the Maker Rebate
regardless of contra-party.
---------------------------------------------------------------------------
\15\ See note 13 above.
\16\ See note 14 above.
---------------------------------------------------------------------------
Non-Customers
Today, Non-Customers receive neither a Penny Symbol Rebate to Add
Liquidity nor a Penny Symbol Rebate to Remove Liquidity. Today, Non-
Customers pay a Penny Symbol Fee to Add Liquidity of $0.45 per
contract. Today, Non-Customers pay a Penny Symbol Fee to Remove
Liquidity of $0.46 per contract.
With this proposal, Non-Customer orders would receive a Maker
Rebate of $0.12 per contract in all Penny Symbols. With this proposal,
Non-Customer orders would pay a Penny Symbol Taker Fee of $0.46 per
contract.
The Exchange would begin to pay a Penny Symbol Maker Rebate for
Non-Customer orders. Today, Non-Customer Orders receive no rebates for
adding liquidity in Penny Symbols. The proposed Non-Customer Penny
Symbol Taker Fee of $0.46 per contract is higher than the Non-Customer
Penny Symbol Fee to Add Liquidity of $0.45 per contract and is the same
as the Non-Customer Penny Symbol Fee to Remove Liquidity of $0.46 per
contract.
Firms
Today, Firms receive neither a Penny Symbol Rebate to Add Liquidity
nor a Penny Symbol Rebate to Remove Liquidity. Today, Firms pay a Penny
Symbol Fee to Add Liquidity of $0.45 per contract. Today, Firms pay a
Penny Symbol Fee to Remove Liquidity of $0.46 per contract.
With this proposal, Firm orders would receive a Maker Rebate of
$0.12 per contract in all Penny Symbols. With this proposal, Firm
orders would pay a Penny Symbol Taker Fee of $0.46 per contract.
The Exchange would begin to pay a Penny Symbol Maker Rebate for
Firm orders. Today, Firm Orders receive no rebates for adding liquidity
in Penny Symbols. The proposed Firm Penny Symbol Taker Fee of $0.46 per
contract is higher than the Firm Penny Symbol Fee to Add Liquidity of
$0.45 per contract and is the same as the Firm Penny Symbol Fee to
Remove Liquidity of $0.46 per contract.
Customers
Today, Customers receive a Penny Symbol Rebate to Add Liquidity
when trading against a Non-Customer, Lead Market Maker, BX Options
Market Maker or Firm which ranges from $0.00 to $0.20 per contract.\17\
Today, Customers receive a Penny Symbol Rebate to Remove Liquidity when
trading against a Non-Customer, Lead Market Maker, BX Options Market
Maker, Customer or Firm which ranges from $0.00 to $0.35 per
contract.\18\ Today, Customers pay a Penny Symbol Fee to Add Liquidity
when trading against a Customer of $0.39 per contract, regardless of
tier.\19\ Today, Customers do not pay a Penny Symbol Fee to Remove
Liquidity.
---------------------------------------------------------------------------
\17\ Participants that executes less than 0.05% of total
industry customer equity and ETF option ADV contracts per month
receive no Penny Symbol Rebate to Add Liquidity in Tier 1.
Participants that execute 0.05% to less than 0.15% of total industry
customer equity and ETF option ADV contracts per month receive a
$0.10 per contract Penny Symbol Rebate to Add Liquidity in Tier 2.
Participants that execute 0.15% or more of total industry customer
equity and ETF option ADV contracts per month receive a $0.20 per
contract Penny Symbol Rebate to Add Liquidity in Tier 3.
\18\ Participants that executes less than 0.05% of total
industry customer equity and ETF option ADV contracts per month
would receive no Penny Symbol Rebate to Remove Liquidity in Tier 1.
Participants that execute 0.05% to less than 0.15% of total industry
customer equity and ETF option ADV contracts per month would receive
a $0.25 per contract Penny Symbol Rebate to Remove Liquidity in Tier
2. Participants that execute 0.15% or more of total industry
customer equity and ETF option ADV contracts per month will receive
a $0.35 per contract Penny Symbol Rebate to Remove Liquidity in Tier
3.
\19\ Participants that executes less than 0.05% of total
industry customer equity and ETF option ADV contracts per month
would pay a $0.39 per contract Penny Symbol Fee to Add Liquidity in
Tier 1. Participants that execute 0.05% to less than 0.15% of total
industry customer equity and ETF option ADV contracts per month
would pay a $0.39 per contract Penny Symbol Fee to Add Liquidity in
Tier 2. Participants that execute 0.15% or more of total industry
customer equity and ETF option ADV contracts per month would pay a
$0.39 per contract Penny Symbol Fee to Add Liquidity in Tier 3.
---------------------------------------------------------------------------
With this proposal, Customer orders would receive a $0.30 per
contract Penny Symbol Maker Rebate. With this proposal, Customer orders
would pay a $0.46 per contract Penny Symbol Taker Fee, unless the
Customer order removes liquidity in SPY, in which case the Taker Fee
would be $0.26 per contract.
The proposed new Penny Symbol Customer Maker Rebate of $0.30 per
contract is higher than the current Customer Rebates to Add Liquidity
\20\ and does not consider the contra-party. This proposal would no
longer pay a Penny Symbol Customer rebate to remove liquidity with this
pricing model. With this proposal, Customer orders would be assessed a
Customer Taker Fee of $0.46 per contract, except for SPY where a
Customer order would pay a Taker Fee of $0.26 per contract to remove
liquidity. Today, Customer orders are not assessed a Penny Symbol Fee
to Remove Liquidity. With this proposal, Customers would not pay to add
liquidity, a Customer order would instead receive a rebate. Today,
Customer orders are subject to the tiered Penny Symbol Fee to Add
Liquidity when trading against a Customer of $0.39 per contract,
regardless of tier.\21\
---------------------------------------------------------------------------
\20\ See note 17 above.
\21\ See note 19 above.
---------------------------------------------------------------------------
Non-Penny Symbols
With respect to the impact on pricing for Non-Penny Symbols, the
Exchange notes the below changes in pricing.
Lead Market Makers
Today, Lead Market Makers are charged a $0.50 per contract Non-
Penny Fee to Add Liquidity when the Lead Market Maker is trading with
any market participant other than a Customer. If the contra-party is a
Customer, the Lead Market Maker is charged a higher Fee to Add
Liquidity of $0.95 per contract instead. Lead Market Makers are also
currently charged a $0.89 per contract Non-Penny Fee to Remove
Liquidity when the Lead Market Maker is trading with any market
participant other than a Customer. If the contra-party is a Customer,
the Lead Market Maker is charged a Fee to Remove Liquidity ranging from
$0.89 to $0.60 per contract depending on the volume tier achieved, as
described in the Non-Penny Symbols Tier Schedule above. Lead Market
Makers are currently not offered any rebates for adding or removing
liquidity.
With this proposal, the Exchange will eliminate the contra-party
qualifications and volume tiers for Lead Market Maker pricing in Non-
Penny Symbols. Lead Market Makers would instead receive a flat Maker
Rebate of $0.45 per contract for adding liquidity in Non-Penny Symbols,
regardless of contra-party. They would receive the proposed Maker
Rebate for adding liquidity whereas today, they would be charged a fee
for adding liquidity in Non-Penny Symbols. As proposed, Lead Market
Makers would also be charged a flat Taker Fee of $1.10 per contract for
removing liquidity in Non-Penny Symbols, regardless of contra-party.
The proposed fee would be higher than the current fee assessed to Lead
Market Makers for removing liquidity in Non-Penny Symbols.
Market Makers
Today, Market Makers are charged a $0.50 per contract Non-Penny Fee
to Add Liquidity when the Market Maker is trading with any market
participant other than a Customer. If the contra-party is a Customer,
the Market Maker is charged a higher Fee to Add Liquidity of $0.95 per
contract instead. Market Makers are also currently charged a
[[Page 18566]]
$0.89 per contract Non-Penny Fee to Remove Liquidity when the Market
Maker is trading with any market participant other than a Customer. If
the contra-party is a Customer, the Market Maker is charged a Fee to
Remove Liquidity ranging from $0.89 to $0.60 per contract depending on
the volume tier achieved, as described in the Non-Penny Symbols Tier
Schedule above. Market Makers are currently not offered any rebates for
adding or removing liquidity.
With this proposal, the Exchange will eliminate the contra-party
qualifications and volume tiers for Market Maker pricing in Non-Penny
Symbols. Market Makers would instead receive a flat Maker Rebate of
$0.40 per contract for adding liquidity in Non-Penny Symbols,
regardless of contra-party. They would receive this Maker Rebate for
adding liquidity whereas today, they would be charged a fee for adding
liquidity in Non-Penny Symbols. As proposed, Market Makers would also
be charged a flat Taker Fee of $1.10 per contract for removing
liquidity in Non-Penny Symbols, regardless of contra-party. The
proposed fee would be higher than the current fee assessed to Market
Makers for removing liquidity in Non-Penny Symbols.
Non-Customers
Today, Non-Customers are charged a $0.98 per contract Non-Penny Fee
to Add Liquidity. Non-Customers are also currently charged a $0.89 per
contract Non-Penny Fee to Remove Liquidity. Non-Customers are currently
not offered any rebates for adding or removing liquidity.
With this proposal, Non-Customers would be charged a Maker Fee of
$0.45 per contract for adding liquidity in Non-Penny Symbols, which is
lower than the current Fee to Add Liquidity. Non-Customers would also
be charged a Taker Fee of $1.10 per contract for removing liquidity in
Non-Penny Symbols, which is higher than the current Fee to Remove
Liquidity.
Firms
Today, Firms are charged a $0.98 per contract Non-Penny Fee to Add
Liquidity. Firms are also currently charged a $0.89 per contract Non-
Penny Fee to Remove Liquidity. Firms are currently not offered any
rebates for adding or removing liquidity.
With this proposal, Firms would be charged a Maker Fee of $0.45 per
contract for adding liquidity in Non-Penny Symbols, which is lower than
the current Fee to Add Liquidity. Firms would also be charged a Taker
Fee of $1.10 per contract for removing liquidity in Non-Penny Symbols,
which is higher than the current Fee to Remove Liquidity.
Customers
Today, Customers trading with any market participant other than
another Customer receive Non-Penny Rebates to Add Liquidity ranging
from $0.00 to $0.20 per contract depending on the volume tier achieved,
as described in the Non-Penny Symbols Tier Schedule above. If the
contra-party is another Customer, the Customer is charged a Non-Penny
Fee to Add Liquidity of $0.85 per contract instead, regardless of tier.
As described in the Non-Penny Symbols Tier Schedule above, Customers
also currently receive a Non-Penny Rebates to Remove Liquidity of $0.80
per contract, regardless of tier. This rebate is provided to Customers
regardless of contra-party.
With this proposal, the Exchange will eliminate the contra-party
qualifications and volume tiers for Customer pricing in Non-Penny
Symbols. Customers would instead receive a flat Maker Rebate of $0.90
per contract for adding liquidity in Non-Penny Symbols, regardless of
contra-party. Customers would receive the proposed Maker Rebate for
adding liquidity whereas today, they would either receive a lower
rebate or be charged a fee for adding liquidity in Non-Penny Symbols,
depending on the contra-party. As proposed, Customers would also be
charged a flat Taker Fee of $0.65 per contract for removing liquidity
in Non-Penny Symbols, regardless of counterparty. Customers would pay
the proposed Taker Fee for removing liquidity whereas today, they would
receive a rebate for removing liquidity in Non-Penny Symbols.
Non-Customer
The Exchange proposes to relocate current note 1 of Options 7,
Section 2, which describes a Non-Customer, to Options 7, Section 1 and
provide, ``The term `Non-Customer' shall include a Professional,
Broker-Dealer and Non-BX Options Market Maker.'' The defined term as
proposed within Options 7, Section 1 is applicable to Options 7
pricing. Further, the Exchange proposes to remove references to note 1
within Options 7, Section 2(1), as described above, as well as within
Options 7, Section 2(4).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\22\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\23\ 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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78 f(b).
\23\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposed changes to its Pricing Schedule 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'. . . .'' \24\
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\24\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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.'' \25\
---------------------------------------------------------------------------
\25\ See 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. 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
[[Page 18567]]
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.
Generally, the Exchange's proposal will replace the existing fees
and rebates in Options 7, Section 2(1) applicable to transactions in
Penny and Non-Penny Symbols with a new maker/taker fee structure where
market participants are assessed a rebate or lower fee for adding
liquidity to the market, or charged a higher fee for removing liquidity
from the market. As described above, the proposed pricing will no
longer be tiered and will not consider the contra-party, unless
otherwise specified, thereby reducing complexity in the Exchange's
Pricing Schedule. For the reasons discussed in the following
paragraphs, the Exchange believes that the proposed fee structure will
be beneficial to market participants and will encourage an active and
liquid market in both Penny and Non-Penny Symbols on BX.
Penny Symbols
Lead Market Makers
The proposal to amend Lead Market Maker Penny Symbol pricing is
reasonable. The proposed Penny Symbol Maker Rebates for Lead Market
Maker orders, for all Penny Symbols, are higher than the current Lead
Market Maker Penny Symbol Rebate to Add Liquidity of $0.11 per
contract. Also, the proposed Penny Symbol Maker Rebates for Lead Market
Maker orders do not consider the contra-party. The Exchange believes
that these higher rebates will attract a greater amount of liquidity in
all Penny Symbols to BX, which will benefit all market participants in
the quality of order interaction. In addition, the Exchange's proposal
to offer the Maker Rebate for Lead Market Makers of $0.22 per contract
in SPY and offer the Maker Rebate for Lead Market Makers of $0.42 per
contract in AAPL, IWM, GLD, QQQ, SLV, and TSLA, is reasonable for the
reasons that follow. Today, BX segments its pricing as between Penny
and Non-Penny Symbols. While the Exchange would pay a lower Maker
Rebate of $0.22 per contract in SPY as compared to the proposed Penny
Symbol Maker Rebate for Lead Market Makers of $0.29 per contract, the
Exchange believes that the proposed SPY rebate is reasonable because
Lead Market Makers would still be eligible to receive rebates for such
orders, albeit at a lower amount than for other Penny Symbols under
this proposal. Furthermore, the Exchange notes that the proposed SPY
rebate of $0.22 per contract will be significantly higher than the
current rebate of $0.11 per contract. As such, the Exchange believes
that the proposed SPY rebate is set at an appropriate level that would
continue to encourage Lead Market Makers to add liquidity in SPY. In
addition, the Exchange believes that it is reasonable to pay a higher
Maker Rebate of $0.42 per contract in AAPL, IWM, GLD, QQQ, SLV, and
TSLA as compared to the proposed Penny Symbol Maker Rebate for Lead
Market Makers of $0.29 per contract as the Exchange is seeking to
incentivize greater order flow in these symbols to BX. These highly
liquid Penny Symbols are subject to greater competition among options
exchanges and, therefore, a higher rebate is necessary to attract this
order flow. The proposed Penny Symbol Taker Fee for Lead Market Maker
orders of $0.46 per contract is higher than the current Lead Market
Maker tiered Penny Symbol Fees to Remove Liquidity when trading against
a Customer which range from $0.39 to $0.30 per contract \26\ and is the
same as the current Lead Market Maker tiered Penny Symbol Fees to
Remove Liquidity when trading against a Non-Customer, Lead Market
Maker, BX Options Market Maker or Firm of $0.46 per contract regardless
of tier.\27\ BX would no longer assess a fee to add liquidity for Lead
Market Maker orders, rather Participants would obtain the Maker Rebate,
notwithstanding the contra-party. The Exchange believes that the Taker
Fee remains competitive and will continue to attract order flow to BX
to the benefit of all market participants.
---------------------------------------------------------------------------
\26\ See note 9 above.
\27\ See note 10 above.
---------------------------------------------------------------------------
The proposal is equitable and not unfairly discriminatory as all
pricing would be uniformly assessed to similarly situated Participants
for Penny Symbols. The Exchange believes that the proposed
differentiation between Lead Market Makers and other market
participants through the proposed Maker Rebate recognizes the differing
contributions made to the liquidity and trading environment on the
Exchange by Lead Market Makers through their quoting obligations and
their commitment of capital, unlike other market participants.\28\
Furthermore, LMMs are subject to heightened quoting obligations
compared to Market Makers.\29\ Incentivizing Lead Market Makers to
provide greater liquidity benefits all market participants through the
quality of order interaction. The Exchange's proposal to offer a lower
Maker Rebate for Lead Market Makers of $0.22 per contract in SPY and
offer a higher Maker Rebate for Lead Market Makers of $0.42 per
contract in AAPL, IWM, GLD, QQQ, SLV, and TSLA is equitable and not
unfairly discriminatory as the Exchange's proposal would be applied
uniformly to similarly-situated Participants with quoting obligations.
---------------------------------------------------------------------------
\28\ See Options 2, Section 4.
\29\ 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 Market Makers).
---------------------------------------------------------------------------
Market Maker
The proposal to amend Market Maker Penny Symbol pricing is
reasonable. The proposed Maker Rebates for Penny Symbol Market Maker
orders, for all Penny Symbols, are higher than the current Market Maker
Penny Symbol Rebate to Add Liquidity of $0.10 and the proposed rebate
does not consider the contra-party. The Exchange believes that these
higher rebates will attract a greater amount of liquidity in all Penny
Symbols to BX, which will benefit all market participants in the
quality of order interaction. In addition, the Exchange's proposal to
offer the Maker Rebate for Market Makers of $0.22 per contract in SPY
and offer the Maker Rebate for Market Makers of $0.42 per contract in
AAPL, IWM, GLD, QQQ, SLV, and TSLA, is reasonable for the reasons that
follow. Today, BX segments its pricing as between Penny and Non-Penny
Symbols. While the Exchange would pay a lower Maker Rebate of $0.22 per
contract in SPY as compared to the proposed Penny Symbol Maker Rebate
for Market Makers of $0.25 per contract, the Exchange believes that the
proposed SPY rebate is reasonable because Market Makers would still be
eligible to receive rebates for such orders, albeit at a lower amount
than for other Penny Symbols under this proposal. Furthermore, the
Exchange notes that the proposed SPY rebate of $0.22 per contract will
be significantly higher than the current rebate of $0.10 per contract.
As such, the Exchange believes that the proposed SPY rebate is set at
an appropriate level that would continue to encourage Market Makers to
add liquidity in SPY. In addition, the Exchange believes that it is
reasonable to pay a higher rebate of $0.42 per contract in AAPL, IWM,
GLD, QQQ, SLV, and TSLA as compared to the proposed Maker Rebate for
Market Makers of $0.25 per contract as the Exchange is seeking to
incentivize greater order flow in these symbols to BX. These highly
liquid Penny Symbols are subject to greater competition among options
exchanges and, therefore, a higher rebate is necessary to attract this
order flow. The proposed Penny Symbol Taker Fee for Market Maker orders
is
[[Page 18568]]
higher than the current Market Maker tiered Penny Symbol Fee to Remove
Liquidity when trading against a Customer which ranges from $0.39 to
$0.30 per contract \30\ and is the same as the current Market Maker
tiered Penny Symbol Fee to Remove Liquidity when trading against a Non-
Customer, Lead Market Maker, BX Options Market Maker or Firm of $0.46
per contract regardless of tier.\31\ BX would no longer assess a fee to
add liquidity for Market Maker orders, rather Participants would obtain
the Maker Rebate, notwithstanding the contra-party. The Exchange
believes that the Taker Fee remains competitive and will continue to
attract order flow to BX to the benefit of all market participants.
---------------------------------------------------------------------------
\30\ See note 13 above.
\31\ See note 14 above.
---------------------------------------------------------------------------
The proposal is equitable and not unfairly discriminatory as all
pricing would be uniformly assessed to similarly situated Participants
for Penny Symbols. Market Makers add value through continuous quoting
and are subject to additional requirements and obligations unlike other
market participants.\32\ Incentivizing Market Makers to provide greater
liquidity benefits all market participants through the quality of order
interaction. The Exchange's proposal to offer a lower Maker Rebate for
Market Makers of $0.22 per contract in SPY and offer a higher Maker
Rebate for Market Makers of $0.42 per contract in AAPL, IWM, GLD, QQQ,
SLV, and TSLA is equitable and not unfairly discriminatory as the
Exchange's proposal would be applied uniformly to similarly-situated
Participants with quoting obligations.
---------------------------------------------------------------------------
\32\ See Options 2, Sections 4 and 5.
---------------------------------------------------------------------------
Non-Customers
The proposal to amend Non-Customer Penny Symbol pricing is
reasonable. The proposal would begin to pay a Penny Symbol Maker Rebate
for Non-Customer orders. Today, Non-Customer Orders receive no rebates
for adding liquidity in Penny Symbols. The Exchange believes that
paying a rebate will attract a greater amount of liquidity to BX. The
Non-Customer Penny Symbol Taker Fee of $0.46 per contract is higher
than the Non-Customer Penny Symbol Fee to Add Liquidity of $0.45 per
contract and is the same as the Non-Customer Penny Symbol Fee to Remove
Liquidity of $0.46 per contract. The Exchange believes that the Taker
Fee remains competitive and will continue to attract order flow to BX
to the benefit of all market participants.
The proposal is equitable and not unfairly discriminatory as all
pricing would be uniformly assessed to similarly situated Participants
for Penny Symbols.
Firms
The proposal to amend Firm Penny Symbol pricing is reasonable. The
proposal would begin to pay a Penny Symbol Maker Rebate for Firm
orders. Today, Firm Orders receive no rebates for adding liquidity in
Penny Symbols. The Exchange believes that paying a rebate will attract
a greater amount of liquidity to BX. The Firm Penny Symbol Taker Fee of
$0.46 per contract is higher than the Firm Penny Symbol Fee to Add
Liquidity of $0.45 per contract and is the same as the Firm Penny
Symbol Fee to Remove Liquidity of $0.46 per contract. The Exchange
believes that the Taker Fee remains competitive and will continue to
attract order flow to BX to the benefit of all market participants.
The proposal is equitable and not unfairly discriminatory as all
pricing would be uniformly assessed to similarly situated Participants
for Penny Symbols.
Customers
The proposal to amend Customer Penny Symbol pricing is reasonable.
The proposed new Penny Symbol Customer Maker Rebate of $0.30 per
contract is higher than the current Customer Rebates to Add Liquidity
\33\ and does not consider the contra-party. The Exchange believes that
these higher rebates will attract a greater amount of liquidity to BX.
This proposal would no longer pay a Penny Symbol Customer rebate to
remove liquidity with this pricing model. With this proposal, Customer
orders would be assessed a Customer Taker Fee of $0.46 per contract,
except for SPY where a Customer order would pay a Taker Fee of $0.26
per contract to remove liquidity. Today, Customer orders are not
assessed a Penny Symbol Fee to Remove Liquidity. With this proposal,
Customers would not pay to add liquidity, a Customer order would
instead receive a rebate. Today, Customer orders are subject to the
tiered Penny Symbol Fee to Add Liquidity when trading against a
Customer of $0.39 per contract, regardless of tier.\34\ The Exchange
believes that the Customer Taker Fee remains competitive and will
continue to attract order flow to BX to the benefit of all market
participants. The Exchange notes that the proposed Taker Fee for
Customers remains below similar fees assessed by another options
exchange.\35\
---------------------------------------------------------------------------
\33\ See note 17 above.
\34\ See note 19 above.
\35\ NYSE Arca Options (``Arca'') currently assesses Customers a
Take Liquidity fee of $0.49 per contract in Penny Issues. See Arca
Fees and Charges, Transaction Fee for Electronic Executions--Per
Contract.
---------------------------------------------------------------------------
The proposal is equitable and not unfairly discriminatory as all
pricing would be uniformly assessed to similarly situated Participants
for Penny Symbols. Customers would continue to receive favorable
pricing as compared to other market participants because Customer
liquidity enhances liquidity on the Exchange for the benefit of all
market participants. Specifically, Customer liquidity benefits all
market participants by providing more trading opportunities which
attracts market makers. An increase in the activity of these market
participants (particularly in response to pricing) in turn facilitates
tighter spreads which may cause an additional corresponding increase in
order flow from other market participants.
Non-Penny Symbols
Lead Market Makers
The Exchange believes that the proposed Lead Market Maker Non-Penny
Symbol pricing is reasonable. As discussed above, Lead Market Makers
would receive the proposed flat Maker Rebate of $0.45 per contract for
adding liquidity in Non-Penny Symbols whereas today, they would be
charged a fee. The Exchange believes that the proposed Maker Rebate
will attract a greater amount of liquidity to BX to the benefit of all
market participants. As proposed, Lead Market Makers would also be
charged a flat Taker Fee of $1.10 per contract for removing liquidity
in Non-Penny Symbols. While the proposed Taker Fee would be higher than
the current fees assessed to Lead Market Makers for removing liquidity
in Non-Penny Symbols described above, 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.\36\
---------------------------------------------------------------------------
\36\ The Exchange notes that the proposed Taker Fee is within
the range of similar fees charged by other options exchanges. See,
e.g., Arca Fees and Charges, Transaction Fee for Electronic
Executions--Per Contract (assessing all market participants except
Customers a Take Liquidity fee of $1.10 per contract in Non-Penny
Issues); and Nasdaq MRX (``MRX'') Pricing Schedule at Options 7,
Section 3 (assessing all market participants except Priority
Customers a $1.10 per contract Taker Fee in Non-Penny Symbols.
---------------------------------------------------------------------------
The Exchange believes that its proposal is equitable and not
unfairly discriminatory because the proposed pricing will apply
uniformly to all similarly situated Participants for Non-
[[Page 18569]]
Penny Symbols. The Exchange believes that the proposed differentiation
between Lead Market Makers and other market participants through the
proposed Maker Rebate recognizes the differing contributions made to
the liquidity and trading environment on the Exchange by Lead Market
Makers through their quoting obligations and their commitment of
capital, unlike other market participants.\37\ In addition, LMMs are
subject to heightened quoting obligations compared to Market
Makers.\38\ Incentivizing Lead Market Makers to provide greater
liquidity benefits all market participants through the quality of order
interaction.
---------------------------------------------------------------------------
\37\ See Options 2, Section 4.
\38\ See Options 2, Section 4.
---------------------------------------------------------------------------
Market Makers
The Exchange believes that the proposed Market Maker Non-Penny
Symbol pricing is reasonable. As discussed above, Market Makers would
receive the proposed flat Maker Rebate of $0.40 per contract for adding
liquidity in Non-Penny Symbols whereas today, they would be charged a
fee. The Exchange believes that the proposed Maker Rebate will attract
a greater amount of liquidity to BX to the benefit of all market
participants. As proposed, Market Makers would also be charged a flat
Taker Fee of $1.10 per contract for removing liquidity in Non-Penny
Symbols. While the proposed Taker Fee would be higher than the current
fees assessed to Market Makers for removing liquidity in Non-Penny
Symbols described above, 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.\39\
---------------------------------------------------------------------------
\39\ See note 36 above.
---------------------------------------------------------------------------
The Exchange believes that its proposal is equitable and not
unfairly discriminatory because the proposed pricing will apply
uniformly to all similarly situated Participants for Non-Penny Symbols.
Market Makers add value through continuous quoting and are subject to
additional requirements and obligations unlike other market
participants.\40\ Incentivizing Market Makers to provide greater
liquidity benefits all market participants through the quality of order
interaction.
---------------------------------------------------------------------------
\40\ See Options 2, Sections 4 and 5.
---------------------------------------------------------------------------
Non-Customers
The Exchange believes that the proposed Non-Customer pricing in
Non-Penny Symbols is reasonable. As discussed above, Non-Customers
would be charged a Maker Fee of $0.45 per contract for adding liquidity
in Non-Penny Symbols, which is significantly lower than the current Fee
to Add Liquidity. As such, the Exchange believes that the proposed
Maker Fee will continue to attract Non-Customer order flow to BX to the
benefit of all market participants. As proposed, Non-Customers would
also be charged a flat Taker Fee of $1.10 per contract for removing
liquidity in Non-Penny Symbols. While the proposed Taker Fee would be
higher than the current fee assessed to Non-Customers for removing
liquidity in Non-Penny Symbols, 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.\41\
---------------------------------------------------------------------------
\41\ See note 36 above.
---------------------------------------------------------------------------
The Exchange believes that its proposal is equitable and not
unfairly discriminatory because the proposed pricing will apply
uniformly to all similarly situated Participants for Non-Penny Symbols.
Firms
The Exchange believes that the proposed Firm pricing in Non-Penny
Symbols is reasonable. As discussed above, Firms would be charged a
Maker Fee of $0.45 per contract for adding liquidity in Non-Penny
Symbols, which is significantly lower than the current Fee to Add
Liquidity. As such, the Exchange believes that the proposed Maker Fee
will continue to attract Firm order flow to BX to the benefit of all
market participants. As proposed, Firms would also be charged a flat
Taker Fee of $1.10 per contract for removing liquidity in Non-Penny
Symbols. While the proposed Taker Fee would be higher than the current
fee assessed to Firms for removing liquidity in Non-Penny Symbols, 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.\42\
---------------------------------------------------------------------------
\42\ See note 36 above.
---------------------------------------------------------------------------
The Exchange believes that its proposal is equitable and not
unfairly discriminatory because the proposed pricing will apply
uniformly to all similarly situated Participants for Non-Penny Symbols.
Customers
The Exchange believes that the proposed Customer pricing in Non-
Penny Symbols is reasonable. As discussed above, Customers would
receive a flat Maker Rebate of $0.90 per contract for adding liquidity
whereas today, they would either receive a lower rebate or be charged a
fee for adding liquidity in Non-Penny Symbols, depending on the contra-
party. The Exchange believes that these higher rebates will attract a
greater amount of liquidity to BX. In addition, Customers would no
longer receive a rebate for removing liquidity in Non-Penny Symbols,
and would instead be charged a flat Taker Fee of $0.65 per contract
under this proposal. While Customers would be assessed a fee, the
Exchange notes that this fee will be lower than the $1.10 per contract
Taker Fees assessed to all other market participants under this
proposal. The Exchange further notes that the proposed Customer Taker
Fee remains below similar fees assessed by another options
exchange.\43\ Accordingly, the Exchange believes that the proposed
Taker Fee remains competitive and will continue to attract order flow
to BX to the benefit of all market participants.
---------------------------------------------------------------------------
\43\ Arca currently assesses Customers a Take Liquidity fee of
$0.85 per contract in Non-Penny Issues (or $0.67 per contract if the
Customer is trading against an LMM). See Arca Fees and Charges,
Transaction Fee for Electronic Executions--Per Contract.
---------------------------------------------------------------------------
The Exchange believes that its proposal is equitable and not
unfairly discriminatory because the proposed pricing will apply
uniformly to all similarly situated Participants for Non-Penny Symbols.
Customers would continue to receive favorable pricing as compared to
other market participants because Customer liquidity enhances liquidity
on the Exchange for the benefit of all market participants.
Specifically, Customer liquidity benefits all market participants by
providing more trading opportunities which attracts market makers. An
increase in the activity of these market participants (particularly in
response to pricing) in turn facilitates tighter spreads which may
cause an additional corresponding increase in order flow from other
market participants.
Non-Customer
The Exchange's proposal to relocate current note 1 of Options 7,
Section 2 to Options 7, Section 1 and remove references to note 1
within Options 7, Section 2(1), as described above, as well as within
Options 7, Section 2(4) is reasonable, equitable and not unfairly
discriminatory. The amendments will bring greater clarity to the term
Non-Customer throughout Options 7 pricing.
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.
[[Page 18570]]
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. 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 believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited.
Intra-Market Competition
The proposed pricing does not impose an undue burden on intra-
market competition as all pricing would be uniformly assessed to
similarly situated market participants. Customers would continue to
receive favorable pricing as compared to other market participants
because Customer liquidity enhances liquidity on the Exchange for the
benefit of all market participants. Specifically, Customer liquidity
benefits all market participants by providing more trading
opportunities which attracts market makers. An increase in the activity
of these market participants (particularly in response to pricing) in
turn facilitates tighter spreads which may cause an additional
corresponding increase in order flow from other market participants.
Lead Market Makers and Market Makers add value through continuous
quoting \44\ and are subject to additional requirements and obligations
\45\ unlike other market participants. Incentivizing Lead Market Makers
and Market Makers to provide greater liquidity benefits all market
participants through the quality of order interaction.
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\44\ See Options 2, Sections 4 and 5.
\45\ See Options 2, Section 4.
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Non-Customer
The Exchange's proposal to relocate current note 1 of Options 7,
Section 2 to Options 7, Section 1 and remove references to note 1
within Options 7, Section 2(1), as described above, as well as within
Options 7, Section 2(4) does not impose an undue burden on competition.
The amendments will bring greater clarity to the term Non-Customer
throughout Options 7 pricing.
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 \46\ and paragraph (f) of Rule 19b-4
thereunder.\47\
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\46\ 15 U.S.C. 78s(b)(3)(A)(ii).
\47\ 17 CFR 240.19b-4(f)(2).
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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-2021-009 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-2021-009. 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
20549-1090, 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-2021-009 and
should be submitted on or before April 30, 2021.
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\48\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\48\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07271 Filed 4-8-21; 8:45 am]
BILLING CODE 8011-01-P
