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]

Download as PDF 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 http:// 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. VerDate Sep<11>2014 21:30 Apr 08, 2021 (#) (#) (#) N/A (*) (*) (*) N/A 4 PO 00000 See note 1 within Options 7, Section 2. See note 2 within Options 7, Section 2. Frm 00069 Fmt 4703 Sfmt 4703 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. E:\FR\FM\09APN1.SGM 09APN1 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 ................................................................................................................................................................... VerDate Sep<11>2014 17:45 Apr 08, 2021 Jkt 253001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\09APN1.SGM 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 18564 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. VerDate Sep<11>2014 17:45 Apr 08, 2021 Jkt 253001 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. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 (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. E:\FR\FM\09APN1.SGM 09APN1 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. VerDate Sep<11>2014 17:45 Apr 08, 2021 Jkt 253001 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. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 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. E:\FR\FM\09APN1.SGM 09APN1 18566 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 VerDate Sep<11>2014 17:45 Apr 08, 2021 Jkt 253001 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 PO 00000 See note 19 above. Frm 00073 Fmt 4703 Sfmt 4703 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 E:\FR\FM\09APN1.SGM 09APN1 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices 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 VerDate Sep<11>2014 17:45 Apr 08, 2021 Jkt 253001 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 Frm 00074 Fmt 4703 Sfmt 4703 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 E:\FR\FM\09APN1.SGM 09APN1 18568 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices 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 VerDate Sep<11>2014 17:45 Apr 08, 2021 Jkt 253001 33 34 PO 00000 See note 17 above. See note 19 above. Frm 00075 Fmt 4703 Sfmt 4703 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. E:\FR\FM\09APN1.SGM 09APN1 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices 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 VerDate Sep<11>2014 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 Jkt 253001 PO 00000 note 36 above. note 36 above. Frm 00076 Fmt 4703 Sfmt 4703 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. E:\FR\FM\09APN1.SGM 09APN1 18570 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Notices 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 (http://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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549–1090, 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\
---------------------------------------------------------------------------

    \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)).
---------------------------------------------------------------------------

    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'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \44\ See Options 2, Sections 4 and 5.
    \45\ See Options 2, Section 4.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \47\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2021-009 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 (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549-1090, 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.
---------------------------------------------------------------------------

    \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