Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the BX Pricing Schedule at Options 7, Section 2, 3625-3628 [2022-01221]

Download as PDF Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices jspears on DSK121TN23PROD with NOTICES1 Summary of the Application 1. The Adviser will serve as the investment adviser to each Sub-Advised Fund pursuant to an investment advisory agreement with the Trust (the ‘‘Investment Management Agreement’’).1 Under the terms of each Investment Management Agreement, the Adviser, subject to the supervision of the board of trustees of the Trust (the ‘‘Board’’) will provide continuous investment management of the assets of each Sub-Advised Fund. Consistent with the terms of each Investment Management Agreement, the Adviser may, subject to the approval of the Board, delegate portfolio management responsibilities of all or a portion of the assets of a Sub-Advised Fund to one or more Sub-Advisers.2 The Adviser will continue to have overall responsibility for the management and investment of the assets of each Sub-Advised Fund. The Adviser will evaluate, select and recommend Sub-Advisers to manage the assets of a Sub-Advised Fund and will oversee, monitor, and review the SubAdvisers and their performance and recommend the removal or replacement of Sub-Advisers. 2. Applicants request an order to permit the Adviser, subject to Board approval, to enter into investment subadvisory agreements with the SubAdvisers (each, a ‘‘Sub-Advisory Agreement’’) and materially amend such Sub-Advisory Agreements without obtaining the shareholder approval required under section 15(a) of the Act and rule 18f–2 under the Act.3 1 Applicants request relief with respect to the named Applicants, including the Existing Funds, as well as to any future series of the Trust and any other registered open-end management investment company or series thereof that: (a) Is advised by the Adviser or any entity controlling, controlled by or under common control with the Adviser or its successors (each, an ‘‘Adviser’’); (b) uses the multimanager structure described in the application; and (c) complies with the terms and conditions set forth in the application (each, a ‘‘Sub-Advised Fund’’). For purposes of the requested order, ‘‘successor’’ is limited to an entity that results from a reorganization into another jurisdiction or a change in the type of business organization. 2 A ‘‘Sub-Adviser’’ for a Sub-Advised Fund is (1) an indirect or direct ‘‘wholly-owned subsidiary’’ (as such term is defined in the Act) of the Adviser for that Sub-Advised Fund, or (2) a sister company of the Adviser for that Sub-Advised Fund that is an indirect or direct ‘‘wholly-owned subsidiary’’ of the same company that, indirectly or directly, wholly owns the Adviser (each of (1) and (2) a ‘‘WhollyOwned Sub-Adviser’’ and collectively, the ‘‘Wholly-Owned Sub-Advisers’’), or (3) not an ‘‘affiliated person’’ (as such term is defined in section 2(a)(3) of the Act) of the Sub-Advised Fund, the Trust, or the Adviser, except to the extent that an affiliation arises solely because the Sub-Adviser serves as a sub-adviser to a Sub-Advised Fund (‘‘Non-Affiliated Sub-Adviser’’). 3 The requested relief will not extend to any subadviser, other than a Wholly-Owned Sub-Adviser, who is an affiliated person, as defined in section VerDate Sep<11>2014 18:11 Jan 21, 2022 Jkt 256001 Applicants also seek an exemption from the Disclosure Requirements to permit a Sub-Advised Fund to disclose (as both a dollar amount and a percentage of the Sub-Advised Fund’s net assets): (a) The aggregate fees paid to the Adviser and any Wholly-Owned Sub-Adviser; (b) the aggregate fees paid to Non-Affiliated Sub-Advisers; and (c) the fee paid to each Affiliated Sub-Adviser (collectively, ‘‘Aggregate Fee Disclosure’’). 3. Applicants agree that any order granting the requested relief will be subject to the terms and conditions stated in the application. Such terms and conditions provide for, among other safeguards, appropriate disclosure to Sub-Advised Fund shareholders and notification about sub-advisory changes and enhanced Board oversight to protect the interests of the Sub-Advised Fund’s shareholders. 4. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provisions of the Act, or any rule thereunder, if such relief is necessary or appropriate in the public interest and consistent with the protection of investors and purposes fairly intended by the policy and provisions of the Act. Applicants believe that the requested relief meets this standard because, as further explained in the application, the Investment Management Agreements will remain subject to shareholder approval while the role of the SubAdvisers is substantially equivalent to that of individual portfolio managers, so that requiring shareholder approval of Sub-Advisory Agreements would impose unnecessary delays and expenses on the Sub-Advised Funds. Applicants believe that the requested relief from the Disclosure Requirements meets this standard because it will improve the Adviser’s ability to negotiate fees paid to the Sub-Advisers that are more advantageous for the SubAdvised Funds. For the Commission, by the Division of Investment Management, under delegated authority. Dated: January 19, 2022. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–01293 Filed 1–21–22; 8:45 am] BILLING CODE 8011–01–P 2(a)(3) of the Act, of the Sub-Advised Fund or of the Adviser, other than by reason of serving as a sub-adviser to one or more of the Sub-Advised Funds (‘‘Affiliated Sub-Adviser’’). PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 3625 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93989; File No. SR–BX– 2022–001] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the BX Pricing Schedule at Options 7, Section 2 January 18, 2022. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on January 3, 2022, Nasdaq BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the BX Pricing Schedule at Options 7, Section 2, 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 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 purpose of the proposed rule change is to amend the BX Pricing Schedule at Options 7, Section 2. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 E:\FR\FM\24JAN1.SGM 24JAN1 3626 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices Specifically, the Exchange proposes to: (1) Increase the Taker Fees in Penny Symbols for all market participants except Customers 4 from $0.46 to $0.50 per contract, (2) increase the Customer Taker Fee in SPY from $0.26 to $0.31 per contract, and (3) remove the higher Maker Rebate of $0.42 per contract currently offered to Lead Market Makers 5 and Market Makers 6 for IWM, GLD, SLV, and TSLA. Penny Taker Fee Today, the Exchange charges LMM, Market Maker, Non-Customer,7 Firm,8 and Customer orders in Penny Symbols a Taker Fee of $0.46 per contract. For Customer orders in SPY, the Exchange charges a reduced Taker Fee of $0.26 per contract. The Exchange now proposes to increase the Penny Taker Fees for all market participants except Customers from $0.46 to $0.50 per contract. The Exchange also proposes to increase the Customer Taker Fee in SPY from $0.26 to $0.31 per contract. Penny Maker Rebate jspears on DSK121TN23PROD with NOTICES1 The Exchange currently offers LMMs and Market Makers a Maker Rebate in Penny Symbols that is $0.29 per contract (LMMs) and $0.25 per contract (Market Makers). For AAPL, IWM, GLD, QQQ, SLV, and TSLA, both LMMs and Market Makers are currently offered a higher Maker Rebate of $0.42 per contract. The Exchange now proposes to remove IWM, GLD, SLV, and TSLA from the list of Penny Symbols eligible to receive the higher $0.42 per contract Maker Rebate. While the Exchange will no longer offer the higher rebate for IWM, GLD, SLV, and TSLA, Participants will still receive the Penny Maker Rebate in these Penny Symbols, albeit at 4 The term ‘‘Customer’’ or (‘‘C’’) applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Options 1, Section 1(a)(48)). 5 The term ‘‘Lead Market Maker’’ or (‘‘LMM’’) applies to a registered BX Options Market Maker that is approved pursuant to Options 2, Section 3 to be the LMM in an options class (options classes). 6 The term ‘‘BX Options Market Maker’’ or (‘‘M’’) is a Participant that has registered as a Market Maker on BX Options pursuant to Options 2, Section 1, and must also remain in good standing pursuant to Options 2, Section 9. In order to receive Market Maker pricing in all securities, the Participant must be registered as a BX Options Market Maker in at least one security. 7 The term ‘‘Non-Customer’’ shall include a Professional, Broker-Dealer and Non-BX Options Market Maker. 8 The term ‘‘Firm’’ or (‘‘F’’) applies to any transaction that is identified by a Participant for clearing in the Firm range at OCC. VerDate Sep<11>2014 18:11 Jan 21, 2022 Jkt 256001 a lower rate of $0.29 per contract (for LMMs) and $0.25 per contract (for Market Makers). Furthermore, LMMs and Market Makers will continue to be provided the higher $0.42 Maker Rebate for AAPL and QQQ orders under this proposal. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,9 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,10 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’. . . .’’ 11 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 9 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 11 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)). 10 15 PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 broader forms that are most important to investors and listed companies.’’ 12 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 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. Penny Taker Fee The Exchange believes that its proposal to increase the Penny Taker Fees for all market participants except Customers from $0.46 to $0.50 per contract is reasonable. While the Penny Taker Fees are increasing in this manner, the Exchange believes that its fees remain competitive with other options exchanges.13 Accordingly, the Exchange believes that the proposed fees will continue to attract order flow to BX to the benefit of all market participants. The Exchange further believes that increasing the Penny Taker Fees from $0.46 to $0.50 per contract is equitable and not unfairly discriminatory because the proposed changes will apply uniformly to all similarly situated Participants. The Exchange believes that its proposal to increase the Customer Taker Fee in SPY from $0.26 to $0.31 per contract is reasonable. While the Customer Taker Fee in SPY is increasing, Customers will continue to receive favorable pricing compared to all other market participants on BX. In particular, no other market participants except Customers are currently eligible to receive this reduced Taker Fee in SPY. These market participants are instead assessed the Penny Taker Fee of $0.46 per contract today (which is increasing to $0.50 per contract under this proposal). The Exchange believes that offering the reduced Taker Fee in 12 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). 13 For example, Nasdaq MRX, LLC (‘‘MRX’’) currently charges all market participants except Priority Customers a Penny Taker Fee of $0.50 per contract. See MRX Options 7, Section 3. In addition, NYSE Arca Options similarly charges all market participants except Customers a take liquidity fee in Penny Issues of $0.50 per contract. See NYSE Arca Options Fees and Charges, Transaction Fee for Electronic Executions—Per Contract. E:\FR\FM\24JAN1.SGM 24JAN1 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices jspears on DSK121TN23PROD with NOTICES1 SPY of $0.31 per contract to Customers is equitable and not unfairly discriminatory because the proposed pricing will apply uniformly to all similarly situated Participants. Customer liquidity benefits all market participants by providing more trading opportunities which attracts market makers. An increase in the activity of these market participants in turn facilitates tighter spreads and may cause an additional corresponding increase in order flow from other market participants. Penny Maker Rebate The Exchange believes that its proposal to remove IWM, GLD, SLV, and TSLA from the list of Penny Symbols eligible to receive the higher $0.42 per contract Maker Rebate is reasonable. While the Exchange will no longer offer the higher rebate, Participants will still receive a Maker Rebate in these Penny Symbols, albeit at a lower rate of $0.29 per contract (for LMMs) and $0.25 per contract (for Market Makers). Other than the $0.30 Penny Maker Rebate currently provided to Customers, these are still the highest Penny Maker Rebates provided to market participants today.14 Accordingly, the Exchange believes that its rebate program for Penny Symbols will remain attractive for LMMs and Market Makers, 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 as the changes will apply uniformly to all similarly situated Participants. With the proposed changes, the Exchange will still provide LMMs and Market Makers some of the highest Penny Maker Rebates in IWM, GLD, SLV, and TSLA compared to other market participants.15 Further, the Exchange believes that offering more favorable pricing for LMMs and Market Makers is equitable and not unfairly discriminatory. Unlike other market participants, LMMs and Market Makers add value through continuous quoting and the commitment of capital. As it relates to the higher Penny Maker Rebate provided to LMMs compared to Market Makers, the Exchange believes that this differentiation is equitable and not unfairly discriminatory given that LMMs are subject to heightened quoting obligations compared to Market Makers.16 The higher rebate therefore 14 As a comparison, Non-Customers and Firms are currently provided a Penny Maker Rebate of $0.12 per contract. 15 See supra note 13 with accompanying text. 16 See Options 2, Section 4(j) (setting forth the 90% or higher quoting obligations for LMMs) and VerDate Sep<11>2014 18:11 Jan 21, 2022 Jkt 256001 recognizes the differing contributions made to the liquidity and trading environment on the Exchange by LMMs. Overall, the Exchange believes that incentivizing both LMMs and Market Makers to provide greater liquidity benefits all market participants through the quality of order interaction. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of intra-market competition, all pricing would be uniformly assessed to similarly situated market participants. Customers will continue to receive favorable pricing as compared to other market participants because Customer liquidity enhances market quality on the Exchange by providing more trading opportunities, which benefits all market participants. Furthermore, the proposed changes to the Penny Maker Rebate program for LMMs and Market Makers are designed to incentivize these market participants to provide greater liquidity, which benefits all market participants through the quality of order interaction. In terms of inter-market competition, the Exchange believes that with the proposed changes, its pricing 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. In sum, if the changes proposed herein are 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 Participants or competing order execution venues to Section 5(d) (setting forth the 60% or higher quoting obligations for Market Makers). PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 3627 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.17 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–2022–001 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2022–001. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written 17 15 E:\FR\FM\24JAN1.SGM U.S.C. 78s(b)(3)(A)(ii). 24JAN1 3628 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices 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–2022–001, and should be submitted on or before February 14, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–01221 Filed 1–21–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93991; SR–CboeEDGX– 2022–003] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 20.6 To Improve the Operation of the Rule jspears on DSK121TN23PROD with NOTICES1 January 18, 2022. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 11, 2022, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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 Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 18:11 Jan 21, 2022 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX Options’’) proposes to amend Rule 20.6 to improve the operation of the Rule. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Rules of Cboe EDGX Exchange, Inc. * * * * * Rule 20.6. Nullification and Adjustment of Option Transactions Including Obvious Errors * * * * * (b) Theoretical Price. Upon receipt of a request for review and prior to any review of a transaction execution price, the ‘‘Theoretical Price’’ for the option must be determined. For purposes of this Rule, if the applicable option series is traded on at least one other options exchange, then the Theoretical Price of an option series is the last NBB just prior to the trade in question with respect to an erroneous sell transaction or the last NBO just prior to the trade in question with respect to an erroneous buy transaction unless one of the exceptions in sub-paragraphs (b)(1) through (3) below exists. For purposes of this provision, when a single order received by the Exchange is executed at multiple price levels, the last NBB and last NBO just prior to the trade in question would be the last NBB and last NBO just prior to the Exchange’s receipt of the order. The Exchange will rely on this paragraph (b) and Interpretation and Policy .03 of this Rule when determining Theoretical Price. (1)–(2) No change. (3) Wide Quotes. (A) The Exchange will determine the Theoretical Price if the bid/ask differential of the NBB and NBO for the affected series just prior to the erroneous transaction was equal to or greater than the Minimum Amount set forth below and there was a bid/ask differential less than the Minimum Amount during the 10 seconds prior to the transaction. If there was no bid/ask differential less than the Minimum Amount during the 10 seconds prior to the transaction then the Theoretical Price of an option series is the last NBB or NBO just prior to the transaction in question, as set forth in paragraph (b) above. Minimum amount Bid price at time of trade Below $2.00 ............................................ $2.00 to $5.00 ......................................... Above $5.00 to $10.00 ............................ 18 17 VerDate Sep<11>2014 thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 4 17 Jkt 256001 PO 00000 CFR 240.19b–4(f)(6). Frm 00134 Fmt 4703 Sfmt 4703 $0.75 1.25 1.50 Bid price at time of trade Above Above Above Above $10.00 to $20.00 .......................... $20.00 to $50.00 .......................... $50.00 to $100.00 ........................ $100.00 ........................................ Minimum amount 2.50 3.00 4.50 6.00 (B) Customer Transactions Occurring Within 10 Seconds or Less After an Opening or Reopening (i) The Exchange will determine the Theoretical Price if the bid/ask differential of the NBB and NBO for the affected series just prior to the Customer’s erroneous transaction was equal to or greater than the Minimum Amount set forth in subparagraph (A) above and there was a bid/ask differential less than the Minimum Amount during the 10 seconds prior to the transaction. (ii) If there was no bid/ask differential less than the Minimum Amount during the 10 seconds prior to the transaction, then the Exchange will determine the Theoretical Price if the bid/ask differential of the NBB and NBO for the affected series just prior to the Customer’s erroneous transaction was equal to or greater than the Minimum Amount set forth in subparagraph (A) above and there was a bid/ask differential less than the Minimum Amount anytime during the 10 seconds after an opening or re-opening. (iii) If there was no bid/ask differential less than the Minimum Amount during the 10 seconds following an opening or reopening, then the Theoretical Price of an option series is the last NBB or NBO just prior to the Customer transaction in question, as set forth in paragraph (b) above. (iv) Customer transactions occurring more than 10 seconds after an opening or reopening are subject to subparagraph (A) above. (c) Obvious Errors (1)–(3) No change. (4) Adjust or Bust. If it is determined that an Obvious Error has occurred, the Exchange shall take one of the actions listed below. Upon taking final action, the Exchange shall promptly notify both parties to the trade electronically or via telephone. (A) No change. (B) Customer Transactions. Where at least one party to the Obvious Error is a Customer, the execution price of the transaction will be adjusted by the Official pursuant to the table immediately above. Any Customer Obvious Error exceeding 50 contracts will be subject to the Size Adjustment Modifier defined in subparagraph (a)(4) above. However, if such adjustment(s) would result in an execution price higher (for buy transactions) or lower (for sell transactions) than the Customer’s limit price, the trade will be nullified, subject to sub-paragraph (C) below. * * * * * The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. E:\FR\FM\24JAN1.SGM 24JAN1

Agencies

[Federal Register Volume 87, Number 15 (Monday, January 24, 2022)]
[Notices]
[Pages 3625-3628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01221]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93989; File No. SR-BX-2022-001]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the BX 
Pricing Schedule at Options 7, Section 2

January 18, 2022.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 3, 2022, Nasdaq BX, Inc. (``BX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 BX Pricing Schedule at Options 
7, Section 2, 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 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 purpose of the proposed rule change is to amend the BX Pricing 
Schedule at Options 7, Section 2.

[[Page 3626]]

Specifically, the Exchange proposes to: (1) Increase the Taker Fees in 
Penny Symbols for all market participants except Customers \4\ from 
$0.46 to $0.50 per contract, (2) increase the Customer Taker Fee in SPY 
from $0.26 to $0.31 per contract, and (3) remove the higher Maker 
Rebate of $0.42 per contract currently offered to Lead Market Makers 
\5\ and Market Makers \6\ for IWM, GLD, SLV, and TSLA.
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    \4\ The term ``Customer'' or (``C'') applies to any transaction 
that is identified by a Participant for clearing in the Customer 
range at The Options Clearing Corporation (``OCC'') which is not for 
the account of broker or dealer or for the account of a 
``Professional'' (as that term is defined in Options 1, Section 
1(a)(48)).
    \5\ The term ``Lead Market Maker'' or (``LMM'') applies to a 
registered BX Options Market Maker that is approved pursuant to 
Options 2, Section 3 to be the LMM in an options class (options 
classes).
    \6\ The term ``BX Options Market Maker'' or (``M'') is a 
Participant that has registered as a Market Maker on BX Options 
pursuant to Options 2, Section 1, and must also remain in good 
standing pursuant to Options 2, Section 9. In order to receive 
Market Maker pricing in all securities, the Participant must be 
registered as a BX Options Market Maker in at least one security.
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Penny Taker Fee
    Today, the Exchange charges LMM, Market Maker, Non-Customer,\7\ 
Firm,\8\ and Customer orders in Penny Symbols a Taker Fee of $0.46 per 
contract. For Customer orders in SPY, the Exchange charges a reduced 
Taker Fee of $0.26 per contract.
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    \7\ The term ``Non-Customer'' shall include a Professional, 
Broker-Dealer and Non-BX Options Market Maker.
    \8\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC.
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    The Exchange now proposes to increase the Penny Taker Fees for all 
market participants except Customers from $0.46 to $0.50 per contract. 
The Exchange also proposes to increase the Customer Taker Fee in SPY 
from $0.26 to $0.31 per contract.
Penny Maker Rebate
    The Exchange currently offers LMMs and Market Makers a Maker Rebate 
in Penny Symbols that is $0.29 per contract (LMMs) and $0.25 per 
contract (Market Makers). For AAPL, IWM, GLD, QQQ, SLV, and TSLA, both 
LMMs and Market Makers are currently offered a higher Maker Rebate of 
$0.42 per contract.
    The Exchange now proposes to remove IWM, GLD, SLV, and TSLA from 
the list of Penny Symbols eligible to receive the higher $0.42 per 
contract Maker Rebate. While the Exchange will no longer offer the 
higher rebate for IWM, GLD, SLV, and TSLA, Participants will still 
receive the Penny Maker Rebate in these Penny Symbols, albeit at a 
lower rate of $0.29 per contract (for LMMs) and $0.25 per contract (for 
Market Makers). Furthermore, LMMs and Market Makers will continue to be 
provided the higher $0.42 Maker Rebate for AAPL and QQQ orders under 
this proposal.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    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'. . . .'' \11\
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    \11\ 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.'' \12\
---------------------------------------------------------------------------

    \12\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow.
    Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their 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.
Penny Taker Fee
    The Exchange believes that its proposal to increase the Penny Taker 
Fees for all market participants except Customers from $0.46 to $0.50 
per contract is reasonable. While the Penny Taker Fees are increasing 
in this manner, the Exchange believes that its fees remain competitive 
with other options exchanges.\13\ Accordingly, the Exchange believes 
that the proposed fees will continue to attract order flow to BX to the 
benefit of all market participants. The Exchange further believes that 
increasing the Penny Taker Fees from $0.46 to $0.50 per contract is 
equitable and not unfairly discriminatory because the proposed changes 
will apply uniformly to all similarly situated Participants.
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    \13\ For example, Nasdaq MRX, LLC (``MRX'') currently charges 
all market participants except Priority Customers a Penny Taker Fee 
of $0.50 per contract. See MRX Options 7, Section 3. In addition, 
NYSE Arca Options similarly charges all market participants except 
Customers a take liquidity fee in Penny Issues of $0.50 per 
contract. See NYSE Arca Options Fees and Charges, Transaction Fee 
for Electronic Executions--Per Contract.
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    The Exchange believes that its proposal to increase the Customer 
Taker Fee in SPY from $0.26 to $0.31 per contract is reasonable. While 
the Customer Taker Fee in SPY is increasing, Customers will continue to 
receive favorable pricing compared to all other market participants on 
BX. In particular, no other market participants except Customers are 
currently eligible to receive this reduced Taker Fee in SPY. These 
market participants are instead assessed the Penny Taker Fee of $0.46 
per contract today (which is increasing to $0.50 per contract under 
this proposal). The Exchange believes that offering the reduced Taker 
Fee in

[[Page 3627]]

SPY of $0.31 per contract to Customers is equitable and not unfairly 
discriminatory because the proposed pricing will apply uniformly to all 
similarly situated Participants. Customer liquidity benefits all market 
participants by providing more trading opportunities which attracts 
market makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads and may cause an additional 
corresponding increase in order flow from other market participants.
Penny Maker Rebate
    The Exchange believes that its proposal to remove IWM, GLD, SLV, 
and TSLA from the list of Penny Symbols eligible to receive the higher 
$0.42 per contract Maker Rebate is reasonable. While the Exchange will 
no longer offer the higher rebate, Participants will still receive a 
Maker Rebate in these Penny Symbols, albeit at a lower rate of $0.29 
per contract (for LMMs) and $0.25 per contract (for Market Makers). 
Other than the $0.30 Penny Maker Rebate currently provided to 
Customers, these are still the highest Penny Maker Rebates provided to 
market participants today.\14\ Accordingly, the Exchange believes that 
its rebate program for Penny Symbols will remain attractive for LMMs 
and Market Makers, and will continue to attract order flow to BX to the 
benefit of all market participants.
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    \14\ As a comparison, Non-Customers and Firms are currently 
provided a Penny Maker Rebate of $0.12 per contract.
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    The Exchange believes that its proposal is equitable and not 
unfairly discriminatory as the changes will apply uniformly to all 
similarly situated Participants. With the proposed changes, the 
Exchange will still provide LMMs and Market Makers some of the highest 
Penny Maker Rebates in IWM, GLD, SLV, and TSLA compared to other market 
participants.\15\ Further, the Exchange believes that offering more 
favorable pricing for LMMs and Market Makers is equitable and not 
unfairly discriminatory. Unlike other market participants, LMMs and 
Market Makers add value through continuous quoting and the commitment 
of capital. As it relates to the higher Penny Maker Rebate provided to 
LMMs compared to Market Makers, the Exchange believes that this 
differentiation is equitable and not unfairly discriminatory given that 
LMMs are subject to heightened quoting obligations compared to Market 
Makers.\16\ The higher rebate therefore recognizes the differing 
contributions made to the liquidity and trading environment on the 
Exchange by LMMs. Overall, the Exchange believes that incentivizing 
both LMMs and Market Makers to provide greater liquidity benefits all 
market participants through the quality of order interaction.
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    \15\ See supra note 13 with accompanying text.
    \16\ See Options 2, Section 4(j) (setting forth the 90% or 
higher quoting obligations for LMMs) and Section 5(d) (setting forth 
the 60% or higher quoting obligations for Market Makers).
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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.
    In terms of intra-market competition, all pricing would be 
uniformly assessed to similarly situated market participants. Customers 
will continue to receive favorable pricing as compared to other market 
participants because Customer liquidity enhances market quality on the 
Exchange by providing more trading opportunities, which benefits all 
market participants. Furthermore, the proposed changes to the Penny 
Maker Rebate program for LMMs and Market Makers are designed to 
incentivize these market participants to provide greater liquidity, 
which benefits all market participants through the quality of order 
interaction.
    In terms of inter-market competition, the Exchange believes that 
with the proposed changes, its pricing 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. In sum, if the changes proposed herein are 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 Participants 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.\17\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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-2022-001 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2022-001. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written

[[Page 3628]]

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-
2022-001, and should be submitted on or before February 14, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01221 Filed 1-21-22; 8:45 am]
BILLING CODE 8011-01-P
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