Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees, at Equity 7, Section 118(e), 34074-34077 [2021-13657]
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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices
calendar year 2021 inspections. This
proposed supplementary material does
not relieve firms from meeting the core
regulatory obligation to establish and
maintain a system to supervise the
activities of each associated person that
is reasonably designed to achieve
compliance with applicable securities
laws and regulations, and with
applicable IEX rules that directly serve
investor protection. In a time when
faced with unique challenges resulting
from the COVID–19 pandemic, IEX
believes that the proposed rule change
provides sensibly tailored relief that
will afford firms the ability to observe
the recommendations of public health
officials to provide for the health and
safety of their personnel, while
continuing to serve and promote the
protection of investors and the public
interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issue but to
align the Exchange’s rules with those of
FINRA, which will assist FINRA in its
oversight work done pursuant to a
regulatory services agreement with IEX.
The proposed rule change will also
provide for consistent application of the
Exchange’s supervision rules with those
of FINRA, on which they are based.
Consequently, the Exchange does not
believe that the proposed change
implicates competition at all.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments on the proposed
rule change were neither solicited nor
received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 31 of the Act and
Rule 19b–4(f)(6) 32 thereunder. Because
the proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
U.S.C. 78s(b)(3)(A).
32 17 CFR 240.19b–4(f)(6).
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.
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 necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 33 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2021–09 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–IEX–2021–09. This file
number should be included in the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Section, 100 F Street NE,
Washington, DC 20549, on official
31 15
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business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also be available for
inspection and copying at the IEX’s
principal office and on its internet
website at www.iextrading.com. 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–IEX–2021–09 and
should be submitted on or before July
19, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13652 Filed 6–25–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92230; File No. SR–BX–
2021–028]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Transaction Fees, at
Equity 7, Section 118(e)
June 22, 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 June 10,
2021, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s transaction fees, at Equity 7,
Section 118(e), as described further
below.
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
34 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
33 15
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U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices
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
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1. Purpose
The Exchange operates on the ‘‘takermaker’’ model, whereby it generally
pays credits to members that take
liquidity and charges fees to members
that provide liquidity. Currently, the
Exchange has a schedule, at Equity 7,
Section 118(e), which consists of several
different credits and fees for Retail
Orders 3 and Retail Price Improvement
Orders 4 under Rule 4780 (Retail Price
Improvement Program).
Currently, the Exchange charges a fee
of $0.0025 per share executed for RPI
Orders that provide liquidity. The
Exchange proposes to adopt a new fee
of $0.0018 per share executed for RPI
Orders entered by a member that (i)
quotes Retail Price Improvement Orders
in at least 2,500 symbols on average per
day and (ii) provides liquidity through
Retail Price Improvement Orders equal
to or exceeding an average daily volume
of 2,500,000 shares. The Exchange will
continue to charge a fee of $0.0025 per
3 Retail Orders shall mean an order type with a
Non-Display Order Attribute submitted to the
Exchange by a Retail Member Organization (as
defined in Rule 4780). A Retail Order must be an
agency Order, or riskless principal Order that
satisfies the criteria of FINRA Rule 5320.03. The
Retail Order must reflect trading interest of a
natural person with no change made to the terms
of the underlying order of the natural person with
respect to price (except in the case of a market order
that is changed to a marketable limit order) or side
of market and that does not originate from a trading
algorithm or any other computerized methodology.
See Rule 4702(b)(6).
4 Retail Price Improving (‘‘RPI’’) Orders shall
mean an Order Type with a Non-Display Order
Attribute that is held on the Exchange Book in order
to provide liquidity at a price at least $0.001 better
than the NBBO through a special execution process
described in Rule 4780. A Retail Price Improving
Order may be entered in price increments of $0.001.
RPI Orders collectively may be referred to as ‘‘RPI
Interest.’’ See Rule 4702(b)(5).
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share executed for all other RPI Orders
that provide liquidity. The Exchange
hopes that the proposed lower fee will
encourage member organizations to
increase liquidity providing activity on
RPI Orders on the Exchange. If the
proposal is effective in achieving this
purpose, then the quality of the
Exchange’s market will improve,
particularly with respect to RPI and
retail orders to the benefit of all
participants, especially those who
submit RPI and Retail Orders.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,5 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,6 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers. The
proposal is also consistent with Section
11A of the Act relating to the
establishment of the national market
system for securities.
The Proposal Is Reasonable and Is an
Equitable Allocation of Charges
The Exchange’s proposed change to
its schedule of credits and charges is
reasonable in several respects. As a
threshold matter, the Exchange is
subject to significant competitive forces
in the market for equity 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 brokerdealers 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’ . . . .’’ 7
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
7 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)).
6 15
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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.’’ 8
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for equity
security transaction services. The
Exchange is only one of several equity
venues to which market participants
may direct their order flow, and it
represents a small percentage of the
overall market. It is also only one of
several taker-maker exchanges.
Competing equity exchanges offer
similar tiered pricing structures to that
of the Exchange, including schedules of
rebates and fees that apply based upon
members achieving certain volume
thresholds.9
Within this environment, market
participants can freely and often do shift
their order flow among the Exchange
and competing venues in response to
changes in their respective pricing
schedules.10 Within the foregoing
context, the proposal represents a
reasonable attempt by the Exchange to
increase its market share relative to its
competitors.
The Exchange believes it is reasonable
and equitable to adopt a new $0.0018
per share executed fee for RPI Orders
entered by a member that (i) quotes
Retail Price Improvement Orders in at
least 2,500 symbols on average per day
and (ii) provides liquidity through
Retail Price Improvement Orders equal
to or exceeding an average daily volume
of 2,500,000 shares. As discussed above,
the Exchange’s goal is to increase
liquidity adding activity in RPI Orders
on its platform. It is reasonable and
equitable to address this need by
8 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
9 See CBOE BYX Fee Schedule, at https://
markets.cboe.com/us/equities/membership/fee_
schedule/byx/; NYSE National Fee Schedule, at
https://www.nyse.com/publicdocs/nyse/regulation/
nyse/NYSE_National_Schedule_of_Fees.pdf.
10 The Exchange perceives no regulatory,
structural, or cost impediments to market
participants shifting order flow away from it. In
particular, the Exchange notes that these examples
of shifts in liquidity and market share, along with
many others, have occurred within the context of
market participants’ existing duties of Best
Execution and obligations under the Order
Protection Rule under Regulation NMS.
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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices
providing a lower fee to member
organizations that meet the proposed
thresholds as an incentive for them to
increase their liquidity activity in RPI
Orders on the Exchange. If the proposal
is effective in achieving this purpose,
then the quality of the Exchange’s
market will improve, particularly with
respect to RPI and Retail orders to the
benefit of all participants, especially
those who submit RPI and Retail Orders.
The Proposed Fee Is Not Unfairly
Discriminatory
The Exchange believes that the
proposal is not unfairly discriminatory.
As an initial matter, the Exchange
believes that nothing about its volumebased tiered pricing model is inherently
unfair; instead, it is a rational pricing
model that is well-established and
ubiquitous in today’s economy among
firms in various industries—from cobranded credit cards to grocery stores to
cellular telephone data plans—that use
it to reward the loyalty of their best
customers that provide high levels of
business activity and incent other
customers to increase the extent of their
business activity. It is also a pricing
model that the Exchange and its
competitors have long employed with
the assent of the Commission. It is fair
because it incentivizes customer activity
that increases liquidity, enhances price
discovery, and improves the overall
quality of the equity markets.
The Exchange intends for its proposal
to improve market quality for all
members that submit RPI and Retail
Orders on the Exchange and by
extension attract more liquidity to the
market, improving market wide quality
and price discovery. Although net
adders of liquidity for RPI Orders will
benefit most from the proposal, this
result is fair insofar as increased
liquidity adding activity in RPI Orders
will help to improve market quality and
the attractiveness of the Nasdaq BX
market to all existing and prospective
retail participants.
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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.
Intramarket Competition
The Exchange does not believe that its
proposal will place any category of
Exchange participant at a competitive
disadvantage. As noted above, all
member organizations of the Exchange
will benefit from any increase in market
activity that the proposal effectuates.
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Member organizations may modify their
businesses so that they can meet the
required thresholds and pay lower
charges. Moreover, members are free to
trade on other venues to the extent they
believe that the fees assessed, and
credits provided, are not attractive. As
one can observe by looking at any
market share chart, price competition
between exchanges is fierce, with
liquidity and market share moving
freely between exchanges in reaction to
fee and credit changes. The Exchange
notes that the tier structure is consistent
with broker-dealer fee practices as well
as the other industries, as described
above.
Intermarket Competition
The Exchange believes that its
proposed modifications to its schedule
of credits and charges will not impose
a burden on competition because the
Exchange’s execution services are
completely voluntary and subject to
extensive competition from the other
live exchanges and from off-exchange
venues, which include alternative
trading systems that trade national
market system stock. 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 exchanges and
with alternative trading systems that
have been exempted from compliance
with the statutory standards applicable
to 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.
The proposed charge for adding
liquidity is reflective of this competition
because, as a threshold issue, the
Exchange is a relatively small market so
its ability to burden intermarket
competition is limited. In this regard,
even the largest U.S. equities exchange
by volume has less than 17–18% market
share, which in most markets could
hardly be categorized as having enough
market power to burden competition.
Moreover, as noted above, price
competition between exchanges is
fierce, with liquidity and market share
moving freely between exchanges in
reaction to fee and credit changes. This
is in addition to free flow of order flow
PO 00000
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to and among off-exchange venues
which comprised more than 40% of
industry volume in recent months.
In sum, the Exchange intends for the
proposed change to its fees for RPI
Orders, in the aggregate, to increase
member incentives to engage in the
addition of liquidity on the Exchange. If
the additional fee proposed herein is
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
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.11
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2021–028 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.
11 15
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U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices
All submissions should refer to File
Number SR–BX–2021–028. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BX–2021–028 and should
be submitted on or before July 19, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13657 Filed 6–25–21; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92229; File No. SR–MRX–
2021–07]
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Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change to Options 2, Section 4
(Obligations of Market Makers)
June 22, 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 June 15,
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Options 2, Section 4, Obligations of
Market Makers. The Exchange also
proposes to add a new Options 4C.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/MRX/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
Options 2, Section 4, Obligations of
Market Makers. The Exchange also
proposes to add a new Options 4C.
BILLING CODE 8011–01–P
12 17
2021, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Options 2, Section 4(a)
The Exchange proposes to remove the
following rule text from Options 2,
Section 4(a), which has been in place
since MRX’s inception: 3
. . . Ordinarily, Market Makers are expected
to:
(1) Refrain from purchasing a call option or
a put option at a price more than $0.25 below
parity, although a larger amount may be
appropriate considering the particular market
conditions. In the case of calls, parity is
3 See Securities Exchange Act Release No. 70050
(July 26, 2013), 78 FR 46622 (August 1, 2013)
(Application of Topaz Exchange, LLC for
Registration as a National Securities Exchange;
Findings, Opinion, and Order of the Commission).
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34077
measured by the bid in the underlying
security, and in the case of puts, parity is
measured by the offer in the underlying
security.
(2) The $0.25 amount above may be
increased, or the provisions of this Rule may
be waived, by the Exchange on a series-byseries basis.
This proposed rule text also
previously existed on Cboe Exchange,
Inc. within prior Rule 8.7 4 and was
removed from Cboe’s Rulebook in
2019.5 The Exchange likewise desires to
remove this restriction on Market
Makers which does not exist on Cboe or
other Nasdaq affiliated markets.6 The
proposed rule text is currently waived
on MRX pursuant to Options 2, Section
4(a)(2). The Exchange proposes to
remove this rule text from Options 2,
Section 4 as the Exchange does not
desire to enforce this provision in the
future. The Exchange believes that this
market maker provision is no longer
necessary. Today, MRX incentivizes
Market Makers through allocation 7 to
quote tightly in their assigned options
series. Primary Market Makers and
Competitive Market Makers also have
other obligations with respect to market
making 8 in addition to other quoting
4 Prior Interpretation and Policy .02 to Rule 8.7
provided, ‘‘Market-Makers are expected ordinarily
to refrain from purchasing a call option or a put
option at a price more than $0.25 below parity,
although a larger amount may be appropriate
considering the particular market conditions. In the
case of calls, parity is measured by the bid in the
underlying security, and in the case of puts, parity
is measured by the offer in the underlying security.
The $0.25 amount above may be increased, or the
provisions of this Interpretation may be waived, by
the Exchange on a series-by-series basis.’’
5 Cboe’s rule change merely noted, with respect
to the removal of Cboe’s parity rule, that the filing
makes non-substantive changes to the rule
governing a Market-Maker’s general obligations
(current Rule 8.7, in part), most of which remove
redundant provisions that are already covered
under the umbrella of a Market-Maker’s obligation
to engage in dealing to maintain fair and orderly
markets. No specific argument is provided with
respect to removing this provision. See Securities
Exchange Act 87024 (September 19, 2019), 84 FR
50545 (September 25, 2019) (SR–CBOE–2019–059)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Certain Rules
Relating To Market-Makers Upon Migration to the
Trading System Used by Cboe Affiliated
Exchanges).
6 See Nasdaq Phlx LLC, The Nasdaq Options
Market LLC and Nasdaq BX, Inc. at Options 2,
Section 4 (Obligations of Market Makers).
7 See Options 3, Section 10 (Priority of Quotes
and Orders). Primary Market Makers are offered an
enhanced allocation provided the Primary Market
Maker is quoting at same price as a non- Priority
Customer Order or Market Maker quote.
8 See Options 2, Section 4. MRX Market Makers
must for example: (1) Compete with other Market
Makers to improve the market in all series of
options classes to which the Market Maker is
appointed; (2) make markets that, absent changed
market conditions, will be honored for the number
of contracts entered into the Exchange’s System in
all series of options classes to which the Market
E:\FR\FM\28JNN1.SGM
Continued
28JNN1
]]>Agencies
[Federal Register Volume 86, Number 121 (Monday, June 28, 2021)]
[Notices]
[Pages 34074-34077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13657]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92230; File No. SR-BX-2021-028]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Transaction Fees, at Equity 7, Section 118(e)
June 22, 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 June 10, 2021, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's transaction fees, at
Equity 7, Section 118(e), as described further below.
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
[[Page 34075]]
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 operates on the ``taker-maker'' model, whereby it
generally pays credits to members that take liquidity and charges fees
to members that provide liquidity. Currently, the Exchange has a
schedule, at Equity 7, Section 118(e), which consists of several
different credits and fees for Retail Orders \3\ and Retail Price
Improvement Orders \4\ under Rule 4780 (Retail Price Improvement
Program).
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\3\ Retail Orders shall mean an order type with a Non-Display
Order Attribute submitted to the Exchange by a Retail Member
Organization (as defined in Rule 4780). A Retail Order must be an
agency Order, or riskless principal Order that satisfies the
criteria of FINRA Rule 5320.03. The Retail Order must reflect
trading interest of a natural person with no change made to the
terms of the underlying order of the natural person with respect to
price (except in the case of a market order that is changed to a
marketable limit order) or side of market and that does not
originate from a trading algorithm or any other computerized
methodology. See Rule 4702(b)(6).
\4\ Retail Price Improving (``RPI'') Orders shall mean an Order
Type with a Non-Display Order Attribute that is held on the Exchange
Book in order to provide liquidity at a price at least $0.001 better
than the NBBO through a special execution process described in Rule
4780. A Retail Price Improving Order may be entered in price
increments of $0.001. RPI Orders collectively may be referred to as
``RPI Interest.'' See Rule 4702(b)(5).
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Currently, the Exchange charges a fee of $0.0025 per share executed
for RPI Orders that provide liquidity. The Exchange proposes to adopt a
new fee of $0.0018 per share executed for RPI Orders entered by a
member that (i) quotes Retail Price Improvement Orders in at least
2,500 symbols on average per day and (ii) provides liquidity through
Retail Price Improvement Orders equal to or exceeding an average daily
volume of 2,500,000 shares. The Exchange will continue to charge a fee
of $0.0025 per share executed for all other RPI Orders that provide
liquidity. The Exchange hopes that the proposed lower fee will
encourage member organizations to increase liquidity providing activity
on RPI Orders on the Exchange. If the proposal is effective in
achieving this purpose, then the quality of the Exchange's market will
improve, particularly with respect to RPI and retail orders to the
benefit of all participants, especially those who submit RPI and Retail
Orders.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\6\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers. The proposal is also consistent with
Section 11A of the Act relating to the establishment of the national
market system for securities.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposal Is Reasonable and Is an Equitable Allocation of Charges
The Exchange's proposed change to its schedule of credits and
charges is reasonable in several respects. As a threshold matter, the
Exchange is subject to significant competitive forces in the market for
equity 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' . . . .'' \7\
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\7\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \8\
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\8\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
equity security transaction services. The Exchange is only one of
several equity venues to which market participants may direct their
order flow, and it represents a small percentage of the overall market.
It is also only one of several taker-maker exchanges. Competing equity
exchanges offer similar tiered pricing structures to that of the
Exchange, including schedules of rebates and fees that apply based upon
members achieving certain volume thresholds.\9\
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\9\ See CBOE BYX Fee Schedule, at https://markets.cboe.com/us/equities/membership/fee_schedule/byx/; NYSE National Fee Schedule,
at https://www.nyse.com/publicdocs/nyse/regulation/nyse/NYSE_National_Schedule_of_Fees.pdf.
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Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules.\10\ Within
the foregoing context, the proposal represents a reasonable attempt by
the Exchange to increase its market share relative to its competitors.
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\10\ The Exchange perceives no regulatory, structural, or cost
impediments to market participants shifting order flow away from it.
In particular, the Exchange notes that these examples of shifts in
liquidity and market share, along with many others, have occurred
within the context of market participants' existing duties of Best
Execution and obligations under the Order Protection Rule under
Regulation NMS.
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The Exchange believes it is reasonable and equitable to adopt a new
$0.0018 per share executed fee for RPI Orders entered by a member that
(i) quotes Retail Price Improvement Orders in at least 2,500 symbols on
average per day and (ii) provides liquidity through Retail Price
Improvement Orders equal to or exceeding an average daily volume of
2,500,000 shares. As discussed above, the Exchange's goal is to
increase liquidity adding activity in RPI Orders on its platform. It is
reasonable and equitable to address this need by
[[Page 34076]]
providing a lower fee to member organizations that meet the proposed
thresholds as an incentive for them to increase their liquidity
activity in RPI Orders on the Exchange. If the proposal is effective in
achieving this purpose, then the quality of the Exchange's market will
improve, particularly with respect to RPI and Retail orders to the
benefit of all participants, especially those who submit RPI and Retail
Orders.
The Proposed Fee Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. As an initial matter, the Exchange believes that
nothing about its volume-based tiered pricing model is inherently
unfair; instead, it is a rational pricing model that is well-
established and ubiquitous in today's economy among firms in various
industries--from co-branded credit cards to grocery stores to cellular
telephone data plans--that use it to reward the loyalty of their best
customers that provide high levels of business activity and incent
other customers to increase the extent of their business activity. It
is also a pricing model that the Exchange and its competitors have long
employed with the assent of the Commission. It is fair because it
incentivizes customer activity that increases liquidity, enhances price
discovery, and improves the overall quality of the equity markets.
The Exchange intends for its proposal to improve market quality for
all members that submit RPI and Retail Orders on the Exchange and by
extension attract more liquidity to the market, improving market wide
quality and price discovery. Although net adders of liquidity for RPI
Orders will benefit most from the proposal, this result is fair insofar
as increased liquidity adding activity in RPI Orders will help to
improve market quality and the attractiveness of the Nasdaq BX market
to all existing and prospective retail participants.
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.
Intramarket Competition
The Exchange does not believe that its proposal will place any
category of Exchange participant at a competitive disadvantage. As
noted above, all member organizations of the Exchange will benefit from
any increase in market activity that the proposal effectuates. Member
organizations may modify their businesses so that they can meet the
required thresholds and pay lower charges. Moreover, members are free
to trade on other venues to the extent they believe that the fees
assessed, and credits provided, are not attractive. As one can observe
by looking at any market share chart, price competition between
exchanges is fierce, with liquidity and market share moving freely
between exchanges in reaction to fee and credit changes. The Exchange
notes that the tier structure is consistent with broker-dealer fee
practices as well as the other industries, as described above.
Intermarket Competition
The Exchange believes that its proposed modifications to its
schedule of credits and charges will not impose a burden on competition
because the Exchange's execution services are completely voluntary and
subject to extensive competition from the other live exchanges and from
off-exchange venues, which include alternative trading systems that
trade national market system stock. 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 exchanges and with
alternative trading systems that have been exempted from compliance
with the statutory standards applicable to 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.
The proposed charge for adding liquidity is reflective of this
competition because, as a threshold issue, the Exchange is a relatively
small market so its ability to burden intermarket competition is
limited. In this regard, even the largest U.S. equities exchange by
volume has less than 17-18% market share, which in most markets could
hardly be categorized as having enough market power to burden
competition. Moreover, as noted above, price competition between
exchanges is fierce, with liquidity and market share moving freely
between exchanges in reaction to fee and credit changes. This is in
addition to free flow of order flow to and among off-exchange venues
which comprised more than 40% of industry volume in recent months.
In sum, the Exchange intends for the proposed change to its fees
for RPI Orders, in the aggregate, to increase member incentives to
engage in the addition of liquidity on the Exchange. If the additional
fee proposed herein is unattractive to market participants, it is
likely that the Exchange will lose market share as a result.
Accordingly, the Exchange does not believe that the proposed changes
will impair the ability of members or competing order execution venues
to maintain their competitive standing in the financial markets.
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.\11\
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2021-028 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.
[[Page 34077]]
All submissions should refer to File Number SR-BX-2021-028. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BX-2021-028 and should be submitted on
or before July 19, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-13657 Filed 6-25-21; 8:45 am]
BILLING CODE 8011-01-P
