Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 2, BX Options Market-Fees and Rebates, 12999-13003 [2023-04124]

Download as PDF ddrumheller on DSK120RN23PROD with NOTICES Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Notices Investment Advisers Act of 1940 (‘‘Advisers Act’’) is the application that investment advisers use to request a hardship exemption from making Advisers Act filings electronically with the Investment Adviser Registration Depository (‘‘IARD’’). There are two types of hardship exemptions from making Advisers Act filings through IARD: a temporary hardship exemption and a continuing hardship exemption. Advisers Act rule 203–3 (17 CFR 275.203–3) sets forth requirements for both temporary hardship exemptions and continuing hardship exemptions for advisers registered or registering with the Commission. Advisers Act rule 204–4(e) (17 CFR 275.204–4(e)) sets forth requirements for temporary hardship exemptions for exempt reporting advisers. A temporary hardship exemption is available to advisers registered or registering with the Commission, as well as exempt reporting advisers, if the adviser has unanticipated technical difficulties that prevent it from submitting a filing to the IARD system. To apply for a temporary hardship exemption, the adviser must file Form ADV–H in paper format no later than one business day after the subject filing was due, and submit the subject filing electronically through IARD no later than seven business days after the subject filing was due. The temporary hardship exemption is granted when the adviser files the completed Form ADV–H. A continuing hardship exemption provides an exemption from electronic filing for no more than one year. It is available to certain advisers registered or registering with the Commission; it is not available to exempt reporting advisers. Such adviser must be a small business and be able to demonstrate that the electronic filing requirements are prohibitively burdensome or expensive. To apply for a continuing hardship exemption, an adviser must file Form ADV–H at least ten business days before a filing is due. The Commission will grant or deny the application within ten business days after the adviser files Form ADV–H. If the Commission approves the application, the adviser may submit filings to FINRA in paper format for the period of time for which the exemption is granted. The purpose of the collection of information is to enable the Commission to process requests for temporary hardship exemptions and to determine whether to grant a continuing hardship exemption from the requirement for advisers to make Advisers Act filings electronically through IARD. VerDate Sep<11>2014 18:10 Feb 28, 2023 Jkt 259001 Respondents are investment advisers registered or registering with the Commission, as well as exempt reporting advisers. Based on our experience and data, we estimate that there are 20,926 respondents, consisting of 15,414 registered investment advisers and 5,512 exempt reporting advisers. Of those respondents, we estimate that we would receive one response annually, and each response would take approximately one hour to complete. Therefore, we estimate an annual aggregate burden of one hour for this collection of information. The collection of information does not require recordkeeping or records retention. The collection of information requirements are mandatory. The information collected is a filing with the Commission, and is not kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by May 1, 2023. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. Please direct your written comments to: David Bottom, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Dated: February 23, 2023. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–04210 Filed 2–28–23; 8:45 am] BILLING CODE 8011–01–P PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 12999 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96968; File No. SR–BX– 2023–005] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 2, BX Options Market-Fees and Rebates February 23, 2023. 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 February 10, 2023, 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 its Pricing Schedule at Options 7, Section 2.3 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. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Exchange originally filed SR–BX–2023–001 on January 3, 2023. On January 12, 2023, the Exchange withdrew SR–BX–2023–001 and replaced that filing with SR–BX–2023–002. On January 24, 2023, the Exchange withdrew SR–BX–2023–002 and replaced that filing with SR–BX–2023–003. On January 30, 2023, the Exchange withdrew SR–BX– 2023–003 and replaced that filing with SR–BX– 2023–004. On February 10, 2023, the Exchange is withdrawing SR–BX–2023–004 and replacing it with the instant filing. 2 17 E:\FR\FM\01MRN1.SGM 01MRN1 13000 Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose ddrumheller on DSK120RN23PROD with NOTICES The Exchange proposes to amend BX’s Pricing Schedule at Options 7, Section 2, BX Options Market-Fees and Rebates. BX proposes to adopt pricing for BX Participants that utilize the Request for PRISM feature. Today, a BX Participant may elect to utilize FIX 4 to send a message and PRISM Order,5 as defined within Options 3, Section 13, to all BX Participants that opt in to receive Requests for PRISM requesting that it submit the sender’s PRISM Order with responder’s Initiating Order,6 as defined within Options 3, Section 13, into the BX Price Improvement Auction (‘‘PRISM’’),7 pursuant to Options 3, Section 13 (‘‘Request for PRISM’’).8 A Request for PRISM permits a BX Participant to solicit the Initiating Order side of a PRISM Auction Order.9 4 ‘‘Financial Information eXchange’’ or ‘‘FIX’’ is an interface that allows members and their Sponsored Customers to connect, send, and receive messages related to orders and auction orders and responses to and from the Exchange. Features include the following: (1) execution messages; (2) order messages; and (3) risk protection triggers and cancel notifications. See Options 3, Section 7(a)(i)(A). 5 A PRISM Order is a one-sided order entered into the PRISM Auction that represents an agency order on behalf a Public Customer, broker-dealer of other entity. 6 An Initiating Order is one-sided order entered into the PRISM Auction that represents principal interest or other agency order. 7 A Participant may electronically submit for execution an order it represents as agent on behalf of a Public Customer, broker dealer, or any other entity (‘‘PRISM Order’’) against principal interest or against any other order (except as provided in subparagraph (i)(F) to Options 3, Section 13) it represents as agent (an ‘‘Initiating Order’’) provided it submits the PRISM Order for electronic execution into the PRISM Auction (‘‘Auction’’) pursuant to Options 3, Section 13. 8 See Options 3, Section 7(e)(1)(A)(1)(b). The Exchange will set a certain time period up to one second within which a recipient of a Request for PRISM may utilize FIX to submit the sender’s PRISM Order, along with an Initiating Order (a ‘‘response’’) into the System for execution into PRISM pursuant to Options 3, Section 13. The System will permit the first responder to start a PRISM Auction and will send a reject message to subsequent responders. A response must match the PRISM Order and may not improve the price, or the response will be rejected. A response may be configured to improve the PRISM Order stop price pursuant to Options 3, Section 13(ii)(A)(1)(c); the configuration would apply if this response initiated a PRISM auction. If no BX Participant responds to the Request for PRISM, the PRISM Order would be placed on the Order Book as a Limit Order or cancelled, consistent with the sending Participant’s instruction. 9 A PRISM Auction Order is a two-sided order comprised of a PRISM Order and Initiating Order. VerDate Sep<11>2014 18:10 Feb 28, 2023 Jkt 259001 Defined Terms The Exchange proposes to define a ‘‘Request for PRISM’’ as a mechanism to submit orders into a PRISM Auction as described within Options 3, Section 7(e)(1)(A)(1)(b). The Exchange also proposes to define certain terms related to the PRISM Auction within Options 7, Section 2(5) pricing. The Exchange proposes to define a ‘‘PRISM Order’’ as one-side of a PRISM Auction Order that represents an agency order on behalf a Public Customer, broker-dealer or other entity which is paired with an Initiating Order. The Exchange proposes to define an ‘‘Initiating Order’’ as one-side of a PRISM Auction Order that represents principal or other interest which is paired with a PRISM Order. The Exchange proposes to define a ‘‘PRISM Auction Order’’ as a two-sided, paired order comprised of a PRISM Order and an Initiating Order. Finally, the Exchange proposes to define a ‘‘PRISM Response’’ as interest that executed against the PRISM Order pursuant to Options 3, Section 13. The Exchange proposes to amend Options 7, Section 2(5) to utilize these terms instead of the terms ‘‘Agency Order’’ or ‘‘Contra-Side.’’ Also the Exchange proposes to utilize the new term ‘‘PRISM Auction Order’’ instead of ‘‘PRISM Order’’ where the Exchange refers to the paired order entered into PRISM. Finally, the Exchange proposes to amend the title ‘‘Responded to PRISM Auction’’ to ‘‘Response to PRISM Auction’’ within Options 7, Section 2(5) for clarity. The Exchange believes these defined terms will make the pricing within Options 7, Section 2(5) more transparent. Request for PRISM Pricing At this time, the Exchange proposes to adopt pricing, in lieu of Options 7, Section 2(5) pricing, for PRISM Auction Orders which commenced as a Request for PRISM pursuant to Options 3, Section 7(e)(1)(A)(1)(b) and executed in the PRISM Auction. The pricing described below applies regardless of capacity. With respect to a PRISM Order, the Exchange proposes to pay a rebate to a PRISM Order that was submitted as a Request for PRISM seeking another BX Participant who would respond to the Request for PRISM Order by submitting the Initiating Order to initiate a PRISM Auction.10 The Exchange would pay a rebate of $0.35 per contract for a Penny Class and $0.70 per contract for a NonPenny Class to the PRISM Order when a BX Participant responds to a Request for PRISM with an Initiating Order, provided the PRISM Order trades with an Initiating Order or the PRISM Order trades with a PRISM Response. With respect to an Initiating Order, the Exchange proposes to assess a fee to the Initiating Order that was submitted in response to the Request for PRISM along with the PRISM Order. The Exchange would assess a fee of $0.49 per contract fee for a Penny Class and $0.94 per contract fee for a Non-Penny Class to the Initiating Order when a BX Participant responds to a Request for PRISM with an Initiating Order, provided the PRISM Order traded with an Initiating Order.11 The Exchange proposes to assess responses to a PRISM Auction a fee of $0.49 per contract for Penny Classes and $0.94 per contract for Non-Penny Classes. Today, the Exchange does not assess a fee or pay a rebate to a BX Participant who submitted a PRISM Order into a Request for PRISM or the BX Participant who responded with an Initiating Order within the Request for PRISM mechanism. Today, the fees and rebates for two-sided orders entered into PRISM are codified within Options 7, Section 2(5). Pursuant to Options 7, Section 2(5), a BX Participant who entered a paired PRISM Auction pays no fee if a Customer were on either or both sides of the PRISM Auction Order, and pays a $0.30 per contract for the PRISM Order and $0.05 per contract for the Initiating Order for Non-Customer orders. Responders to a PRISM Auction pay a $0.49 per contract fee for a Penny Class and a $0.94 per contract fee for a Non-Penny Class. A Customer PRISM Order that traded with a PRISM Response receives a rebate of $0.35 per contract for a Penny Class and a $0.70 per contract for a Non-Penny Class. Non-Customer PRISM Orders that traded with a PRISM Response do not receive a rebate. The Exchange proposes to incentivize BX Participants to submit PRISM Orders through the Request for PRISM mechanism. With this proposal, a PRISM Order that was submitted as a Request for PRISM and trades with an Initiating Order or a PRISM Response would receive a rebate of $0.35 per contract for Penny Classes and $0.70 per 10 A recipient of a Request for PRISM may utilize FIX to submit the sender’s PRISM Order, along with an Initiating Order (a ‘‘response’’) into the System for execution into PRISM pursuant to Options 3, Section 13. Requests for PRISM are sent to BX Participants that ‘‘opt in’’ to receive Requests for PRISM. See Options 3, Section 7(e)(A)(1)(a). 11 If the PRISM Order trades entirely with a PRISM Response, the Initiating Order would not be assessed a fee because the Initiating Order did not execute as part of the PRISM Order. If the PRISM Order trades partially with a PRISM Response, the Initiating Order would be subject to fees only for contracts traded with the PRISM Order. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 E:\FR\FM\01MRN1.SGM 01MRN1 Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES contract for Non-Penny Classes, regardless of capacity, instead of paying a fee of $0.30 per contract pursuant to Options 7, Section 2(5), provided the order was for a Non-Customer.12 If the PRISM Order was for a Customer, the rebate of $0.35 per contract for Penny Classes and $0.70 per contract for NonPenny Classes remains unchanged pursuant to Options 7, Section 2(5). The BX Participant submitting an Initiating Order through the Request for PRISM mechanism would be assessed a fee of $0.49 per contract for Penny Class and $0.94 per contract for Non-Penny Classes if the PRISM Order trades with the Initiating Order instead of a $0.05 per contract fee pursuant to Options 7, Section 2(5), provided the order was for a Non-Customer.13 Responders to a PRISM Auction would pay the same fee of $0.49 per contract fee for Penny Classes and $0.94 per contract fee for Non-Penny Classes regardless of whether the Request for PRISM mechanism was utilized to initiate a PRISM Auction or the PRISM Auction Order was entered directly into the PRISM Auction as a paired order. The proposed pricing is intended to incentivize BX Participants to utilize the Request for PRISM feature to obtain liquidity, potential price improvement for the PRISM Order, as well as a rebate. Any BX Participant may respond to a PRISM Auction and all BX Participants benefit from the ability to interact with the PRISM Auction Order. The proposed fee to Initiating Orders, who respond to a Request for PRISM and where the PRISM Order traded with an Initiating Order, would enable the Exchange to offer rebates to attract BX Participants to enter PRISM Orders as a Request for PRISM. This proposal does not amend pricing for PRISM Auctions. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,14 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,15 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 proposed changes to its Pricing Schedule are reasonable in several respects. As a threshold matter, the Exchange is subject to significant 12 Today, Customers pays no PRISM Order fee. 13 Today, Customers pays no Initiating Order fee. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(4) and (5). VerDate Sep<11>2014 18:10 Feb 28, 2023 Jkt 259001 competitive forces in the market for options 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 16 (‘‘NetCoalition’’), the D.C. Circuit stated, ‘‘[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’. . . .’’ 17 Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for options 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. Within the foregoing context, the proposal represents a reasonable attempt by the Exchange to attract additional order flow to the Exchange and increase its market share relative to its competitors. The Exchange’s proposal to define a ‘‘PRISM Order’’, an ‘‘Initiating Order’’, a ‘‘PRISM Auction Order’’, a ‘‘PRISM Response’’, and a ‘‘Request for PRISM’’ for the purpose of Options 7, Section 2(5) pricing and utilize these terms within Options 7, Section 2(5) is reasonable, equitable and not unfairly discriminatory. The Exchange believes that these terms, which align more closely to the terms utilized in Options 3, Section 13 related to PRISM, will make the Options 7, Section 2(5) PRISM pricing more transparent. The Exchange’s proposal to amend Options 7, Section 2(5) to adopt specific pricing for BX Participants that utilize the Request for PRISM mechanism is reasonable because the Exchange believes the proposed pricing will incentivize BX Participants to utilize the Request for PRISM feature to obtain liquidity, potential price improvement, 16 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). 17 Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782–83 (December 9, 2008) (SR– NYSEArca–2006–21)). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 13001 as well as a rebate for the PRISM Order. The proposed pricing for PRISM Auction Orders which commenced as a Request for PRISM and executed in the PRISM Auction would apply in lieu of Options 7, Section 2(5) pricing and regardless of capacity. With respect to a PRISM Order, the Exchange proposes to pay a rebate to a PRISM Order that was submitted as a Request for PRISM seeking another BX Participant who would respond to the Request for PRISM Order by submitting the Initiating Order to initiate a PRISM Auction.18 With this proposal, a PRISM Order that was submitted as a Request for PRISM and trades with an Initiating Order or a PRISM Response, would receive a rebate of $0.35 per contract for Penny Classes and $0.70 per contract for Non-Penny Classes, regardless of capacity, instead of paying a fee of $0.30 per contract pursuant to Options 7, Section 2(5), provided the order was for a Non-Customer.19 If the PRISM Order was for a Customer, the rebate of $0.35 per contract for Penny Classes and $0.70 per contract for Non-Penny Classes remains unchanged pursuant to Options 7, Section 2(5). The Exchange believes the proposed PRISM Order rebate is reasonable because it is intended to attract BX Participants to utilize the Request for PRISM mechanism. The BX Participant submitting an Initiating Order through the Request for PRISM mechanism would be assessed a fee of $0.49 per contract for Penny Class and $0.94 per contract for Non-Penny Classes if the PRISM Order trades with the Initiating Order, instead of a $0.05 per contract fee pursuant to Options 7, Section 2(5), provided the order was for a Non-Customer.20 The Exchange believes it is reasonable to assess a higher fee for the Initiating Order that was submitted with the Request for PRISM mechanism, where fees are the same as those assessed to responders in the PRISM Auction, because BX Participants are able to obtain immediate liquidity. The Request for PRISM mechanism is utilized by Participants as a liquidity seeking tool that if not available would require a BX Participant to source liquidity from third parties, expending time and potential additional cost. The Request for PRISM mechanism offers Participants the opportunity to 18 A recipient of a Request for PRISM may utilize FIX to submit the sender’s PRISM Order, along with an Initiating Order (a ‘‘response’’) into the System for execution into PRISM pursuant to Options 3, Section 13. Requests for PRISM are sent to BX Participants that ‘‘opt in’’ to receive Requests for PRISM. See Options 3, Section 7(e)(A)(1)(a). 19 Today, Customers pays no PRISM Order fee. 20 Today, Customers pays no Initiating Order fee. E:\FR\FM\01MRN1.SGM 01MRN1 ddrumheller on DSK120RN23PROD with NOTICES 13002 Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Notices immediately commence a PRISM Auction without the need to source liquidity. Liquidity providers that enter orders directly into PRISM and do not utilize the Request for PRISM mechanism have expended time sourcing liquidity with third parties outside of the Exchange. The Exchange believes that BX Participants benefit from the liquidity seeking mechanism that is being offered by the Exchange to allow certain market participants to compete with other market participants whose business model is designed to source liquidity. The proposed fee for Initiating Orders who respond to a Request for PRISM, when the PRISM Order trades with an Initiating Order, would enable the Exchange to offer rebates to BX Participants submitting PRISM Orders into the Request for PRISM mechanism. The Exchange believes the fees for responders are reasonable because responders to a PRISM Auction would pay the same fee of $0.49 per contract fee for Penny Classes and $0.94 per contract fee for Non-Penny Classes regardless of whether the Request for PRISM mechanism was utilized to initiate a PRISM Auction or the PRISM Auction Order was entered directly into PRISM as a paired order. The Exchange’s proposal to amend Options 7, Section 2(5) to adopt specific pricing for BX Participants that utilize the Request for PRISM mechanism is equitable and not unfairly discriminatory because any BX Participant may utilize the Request for PRISM feature. Also, any BX Participant may respond to a PRISM Auction and all BX Participants benefit from the ability to interact with additional order flow.21 The Request for PRISM mechanism provides greater flexibility for Participants submitting orders into PRISM, specifically providing an avenue for BX Participants desiring to send orders to the PRISM mechanism to locate an Initiating Order to pair their PRISM Order with and participate in a PRISM Auction. All Participants that enter a PRISM Order into the Request for PRISM mechanism are uniformly entitled to a rebate if the PRISM Order trades with the Initiating Order or if the PRISM Order trades with a PRISM Response. Also, all Participants that enter Initiating Orders into the Request for PRISM mechanism are uniformly assessed a fee provided the PRISM Order trades with the Initiating Order. The proposed fees for an Initiating Order entered into the Request for PRISM mechanism that trade with a 21 The identity of the sender and the recipients are not known to any party. VerDate Sep<11>2014 18:10 Feb 28, 2023 Jkt 259001 PRISM Response are equivalent to the pricing for responders pursuant to Options 7, Section 2(5) because BX Participants benefit from the liquidity seeking mechanism that is being offered. The mechanism allows certain market participants to compete with other market participants whose business model is designed to source liquidity. 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. Intermarket Competition The proposal does not impose an undue burden on inter-market competition. The Exchange believes its proposal remains competitive with other options markets and will offer market participants with another choice to initiate a price improvement auction. 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. 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 Exchange’s Request for PRISM pricing would allow the Exchange to compete for order flow by incentivizing BX Participants to utilize the Request for PRISM to seek liquidity. Intramarket Competition The Exchange’s proposal to define a ‘‘PRISM Order’’, an ‘‘Initiating Order’’, a ‘‘PRISM Auction Order’’, a ‘‘PRISM Response’’, and a ‘‘Request for PRISM’’ for the purpose of Options 7, Section 2(5) pricing and utilize these terms within Options 7, Section 2(5) does not impose an undue burden on competition because the defined terms will more closely align the pricing within Options 7, Section 2(5) to the terms utilized in Options 3, Section 13 related to PRISM. The Exchange’s proposal to amend Options 7, Section 2(5) to adopt specific pricing for BX Participants that utilize the Request for PRISM mechanism does not impose an undue burden on PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 competition because any BX Participant may utilize the Request for PRISM feature. Also, any BX Participant may respond to a PRISM Auction and all BX Participants benefit from the ability to interact with additional order flow.22 The Request for PRISM mechanism provides greater flexibility for Participants submitting orders into PRISM, specifically providing an avenue for BX Participants desiring to send orders to the PRISM mechanism to locate an Initiating Order to pair their PRISM Order with and participate in a PRISM Auction. All Participants that enter a PRISM Order into the Request for PRISM mechanism are uniformly entitled to a rebate if the PRISM Order trades with the Initiating Order or if the PRISM Order trades with a PRISM Response. Also, all Participants that enter Initiating Orders into the Request for PRISM mechanism are uniformly assessed a fee provided the PRISM Order trades with the Initiating Order. The proposed fees for an Initiating Order entered into the Request for PRISM mechanism that trade with a PRISM Response are equivalent to the pricing for responders pursuant to Options 7, Section 2(5) because BX Participants benefit from the liquidity seeking mechanism that is being offered. The mechanism allows certain market participants to compete with other market participants whose business model is designed to source liquidity. 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.23 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. 22 The identity of the sender and the recipients are not known to any party. 23 15 U.S.C. 78s(b)(3)(A)(ii). E:\FR\FM\01MRN1.SGM 01MRN1 Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Notices 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–2023–005 on the subject line. Paper Comments ddrumheller on DSK120RN23PROD with NOTICES • 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–2023–005. 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–2023–005 and should be submitted on or before March 22, 2023. VerDate Sep<11>2014 18:10 Feb 28, 2023 Jkt 259001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–04124 Filed 2–28–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96969; File No. SR– NASDAQ–2022–077] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Amend Rule 4702 To Establish New ‘‘Contra Midpoint Only’’ and ‘‘Contra Midpoint Only With PostOnly’’ Order Types 13003 2023. The Commission is extending this 45-day time period. The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and comment received. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,6 designates April 11, 2023 as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR– NASDAQ–2022–077). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–04125 Filed 2–28–23; 8:45 am] BILLING CODE 8011–01–P February 23, 2023. On December 22, 2022, The Nasdaq Stock Market LLC (‘‘Nasdaq’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Rule 4702 to establish new ‘‘Contra Midpoint Only’’ and ‘‘Contra Midpoint Only with Post-Only’’ order types. The proposed rule change was published for comment in the Federal Register on January 11, 2023.3 The Commission received comment on the proposed rule change.4 Section 19(b)(2) of the Act 5 provides that within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is February 25, 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 96601 (Jan. 5, 2023), 88 FR 1616. 4 Comment received by the Commission on the proposed rule change is available on the Commission’s website at: https://www.sec.gov/ comments/sr-nasdaq-2022-077/ srnasdaq2022077.htm. 5 15 U.S.C. 78s(b)(2). 1 15 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 34841; File No. 812–15411] Tidal Trust II, et al. February 23, 2023. Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’). ACTION: Notice. AGENCY: Notice of an application under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1) and 22(d) of the Act and rule 22c–1 under the Act and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act. SUMMARY OF APPLICATION: Applicants request an order (‘‘Order’’) that permits: (a) ActiveShares ETFs (as described in the Reference Order (as defined below)) to issue shares (‘‘Shares’’) redeemable in large aggregations only (‘‘creation units’’); (b) secondary market transactions in Shares to occur at negotiated market prices rather than at net asset value; and (c) certain affiliated persons of an ActiveShares ETF to deposit securities into, and receive securities from, the ActiveShares ETF in connection with the purchase and redemption of creation units. The relief in the Order would incorporate by reference terms and conditions of the same relief of a previous order granting the same relief sought by applicants, as 6 Id. 7 17 CFR 200.30–3(a)(31). E:\FR\FM\01MRN1.SGM 01MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 40 (Wednesday, March 1, 2023)]
[Notices]
[Pages 12999-13003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04124]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96968; File No. SR-BX-2023-005]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, 
Section 2, BX Options Market-Fees and Rebates

February 23, 2023.
    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 February 10, 2023, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 its Pricing Schedule at Options 7, 
Section 2.\3\
---------------------------------------------------------------------------

    \3\ The Exchange originally filed SR-BX-2023-001 on January 3, 
2023. On January 12, 2023, the Exchange withdrew SR-BX-2023-001 and 
replaced that filing with SR-BX-2023-002. On January 24, 2023, the 
Exchange withdrew SR-BX-2023-002 and replaced that filing with SR-
BX-2023-003. On January 30, 2023, the Exchange withdrew SR-BX-2023-
003 and replaced that filing with SR-BX-2023-004. On February 10, 
2023, the Exchange is withdrawing SR-BX-2023-004 and replacing it 
with the instant filing.
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    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.

[[Page 13000]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend BX's Pricing Schedule at Options 7, 
Section 2, BX Options Market-Fees and Rebates. BX proposes to adopt 
pricing for BX Participants that utilize the Request for PRISM feature.
    Today, a BX Participant may elect to utilize FIX \4\ to send a 
message and PRISM Order,\5\ as defined within Options 3, Section 13, to 
all BX Participants that opt in to receive Requests for PRISM 
requesting that it submit the sender's PRISM Order with responder's 
Initiating Order,\6\ as defined within Options 3, Section 13, into the 
BX Price Improvement Auction (``PRISM''),\7\ pursuant to Options 3, 
Section 13 (``Request for PRISM'').\8\ A Request for PRISM permits a BX 
Participant to solicit the Initiating Order side of a PRISM Auction 
Order.\9\
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    \4\ ``Financial Information eXchange'' or ``FIX'' is an 
interface that allows members and their Sponsored Customers to 
connect, send, and receive messages related to orders and auction 
orders and responses to and from the Exchange. Features include the 
following: (1) execution messages; (2) order messages; and (3) risk 
protection triggers and cancel notifications. See Options 3, Section 
7(a)(i)(A).
    \5\ A PRISM Order is a one-sided order entered into the PRISM 
Auction that represents an agency order on behalf a Public Customer, 
broker-dealer of other entity.
    \6\ An Initiating Order is one-sided order entered into the 
PRISM Auction that represents principal interest or other agency 
order.
    \7\ A Participant may electronically submit for execution an 
order it represents as agent on behalf of a Public Customer, broker 
dealer, or any other entity (``PRISM Order'') against principal 
interest or against any other order (except as provided in sub-
paragraph (i)(F) to Options 3, Section 13) it represents as agent 
(an ``Initiating Order'') provided it submits the PRISM Order for 
electronic execution into the PRISM Auction (``Auction'') pursuant 
to Options 3, Section 13.
    \8\ See Options 3, Section 7(e)(1)(A)(1)(b). The Exchange will 
set a certain time period up to one second within which a recipient 
of a Request for PRISM may utilize FIX to submit the sender's PRISM 
Order, along with an Initiating Order (a ``response'') into the 
System for execution into PRISM pursuant to Options 3, Section 13. 
The System will permit the first responder to start a PRISM Auction 
and will send a reject message to subsequent responders. A response 
must match the PRISM Order and may not improve the price, or the 
response will be rejected. A response may be configured to improve 
the PRISM Order stop price pursuant to Options 3, Section 
13(ii)(A)(1)(c); the configuration would apply if this response 
initiated a PRISM auction. If no BX Participant responds to the 
Request for PRISM, the PRISM Order would be placed on the Order Book 
as a Limit Order or cancelled, consistent with the sending 
Participant's instruction.
    \9\ A PRISM Auction Order is a two-sided order comprised of a 
PRISM Order and Initiating Order.
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Defined Terms
    The Exchange proposes to define a ``Request for PRISM'' as a 
mechanism to submit orders into a PRISM Auction as described within 
Options 3, Section 7(e)(1)(A)(1)(b). The Exchange also proposes to 
define certain terms related to the PRISM Auction within Options 7, 
Section 2(5) pricing. The Exchange proposes to define a ``PRISM Order'' 
as one-side of a PRISM Auction Order that represents an agency order on 
behalf a Public Customer, broker-dealer or other entity which is paired 
with an Initiating Order. The Exchange proposes to define an 
``Initiating Order'' as one-side of a PRISM Auction Order that 
represents principal or other interest which is paired with a PRISM 
Order. The Exchange proposes to define a ``PRISM Auction Order'' as a 
two-sided, paired order comprised of a PRISM Order and an Initiating 
Order. Finally, the Exchange proposes to define a ``PRISM Response'' as 
interest that executed against the PRISM Order pursuant to Options 3, 
Section 13. The Exchange proposes to amend Options 7, Section 2(5) to 
utilize these terms instead of the terms ``Agency Order'' or ``Contra-
Side.'' Also the Exchange proposes to utilize the new term ``PRISM 
Auction Order'' instead of ``PRISM Order'' where the Exchange refers to 
the paired order entered into PRISM. Finally, the Exchange proposes to 
amend the title ``Responded to PRISM Auction'' to ``Response to PRISM 
Auction'' within Options 7, Section 2(5) for clarity. The Exchange 
believes these defined terms will make the pricing within Options 7, 
Section 2(5) more transparent.
Request for PRISM Pricing
    At this time, the Exchange proposes to adopt pricing, in lieu of 
Options 7, Section 2(5) pricing, for PRISM Auction Orders which 
commenced as a Request for PRISM pursuant to Options 3, Section 
7(e)(1)(A)(1)(b) and executed in the PRISM Auction. The pricing 
described below applies regardless of capacity.
    With respect to a PRISM Order, the Exchange proposes to pay a 
rebate to a PRISM Order that was submitted as a Request for PRISM 
seeking another BX Participant who would respond to the Request for 
PRISM Order by submitting the Initiating Order to initiate a PRISM 
Auction.\10\ The Exchange would pay a rebate of $0.35 per contract for 
a Penny Class and $0.70 per contract for a Non-Penny Class to the PRISM 
Order when a BX Participant responds to a Request for PRISM with an 
Initiating Order, provided the PRISM Order trades with an Initiating 
Order or the PRISM Order trades with a PRISM Response.
---------------------------------------------------------------------------

    \10\ A recipient of a Request for PRISM may utilize FIX to 
submit the sender's PRISM Order, along with an Initiating Order (a 
``response'') into the System for execution into PRISM pursuant to 
Options 3, Section 13. Requests for PRISM are sent to BX 
Participants that ``opt in'' to receive Requests for PRISM. See 
Options 3, Section 7(e)(A)(1)(a).
---------------------------------------------------------------------------

    With respect to an Initiating Order, the Exchange proposes to 
assess a fee to the Initiating Order that was submitted in response to 
the Request for PRISM along with the PRISM Order. The Exchange would 
assess a fee of $0.49 per contract fee for a Penny Class and $0.94 per 
contract fee for a Non-Penny Class to the Initiating Order when a BX 
Participant responds to a Request for PRISM with an Initiating Order, 
provided the PRISM Order traded with an Initiating Order.\11\
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    \11\ If the PRISM Order trades entirely with a PRISM Response, 
the Initiating Order would not be assessed a fee because the 
Initiating Order did not execute as part of the PRISM Order. If the 
PRISM Order trades partially with a PRISM Response, the Initiating 
Order would be subject to fees only for contracts traded with the 
PRISM Order.
---------------------------------------------------------------------------

    The Exchange proposes to assess responses to a PRISM Auction a fee 
of $0.49 per contract for Penny Classes and $0.94 per contract for Non-
Penny Classes.
    Today, the Exchange does not assess a fee or pay a rebate to a BX 
Participant who submitted a PRISM Order into a Request for PRISM or the 
BX Participant who responded with an Initiating Order within the 
Request for PRISM mechanism. Today, the fees and rebates for two-sided 
orders entered into PRISM are codified within Options 7, Section 2(5). 
Pursuant to Options 7, Section 2(5), a BX Participant who entered a 
paired PRISM Auction pays no fee if a Customer were on either or both 
sides of the PRISM Auction Order, and pays a $0.30 per contract for the 
PRISM Order and $0.05 per contract for the Initiating Order for Non-
Customer orders. Responders to a PRISM Auction pay a $0.49 per contract 
fee for a Penny Class and a $0.94 per contract fee for a Non-Penny 
Class. A Customer PRISM Order that traded with a PRISM Response 
receives a rebate of $0.35 per contract for a Penny Class and a $0.70 
per contract for a Non-Penny Class. Non-Customer PRISM Orders that 
traded with a PRISM Response do not receive a rebate.
    The Exchange proposes to incentivize BX Participants to submit 
PRISM Orders through the Request for PRISM mechanism. With this 
proposal, a PRISM Order that was submitted as a Request for PRISM and 
trades with an Initiating Order or a PRISM Response would receive a 
rebate of $0.35 per contract for Penny Classes and $0.70 per

[[Page 13001]]

contract for Non-Penny Classes, regardless of capacity, instead of 
paying a fee of $0.30 per contract pursuant to Options 7, Section 2(5), 
provided the order was for a Non-Customer.\12\ If the PRISM Order was 
for a Customer, the rebate of $0.35 per contract for Penny Classes and 
$0.70 per contract for Non-Penny Classes remains unchanged pursuant to 
Options 7, Section 2(5). The BX Participant submitting an Initiating 
Order through the Request for PRISM mechanism would be assessed a fee 
of $0.49 per contract for Penny Class and $0.94 per contract for Non-
Penny Classes if the PRISM Order trades with the Initiating Order 
instead of a $0.05 per contract fee pursuant to Options 7, Section 
2(5), provided the order was for a Non-Customer.\13\
---------------------------------------------------------------------------

    \12\ Today, Customers pays no PRISM Order fee.
    \13\ Today, Customers pays no Initiating Order fee.
---------------------------------------------------------------------------

    Responders to a PRISM Auction would pay the same fee of $0.49 per 
contract fee for Penny Classes and $0.94 per contract fee for Non-Penny 
Classes regardless of whether the Request for PRISM mechanism was 
utilized to initiate a PRISM Auction or the PRISM Auction Order was 
entered directly into the PRISM Auction as a paired order.
    The proposed pricing is intended to incentivize BX Participants to 
utilize the Request for PRISM feature to obtain liquidity, potential 
price improvement for the PRISM Order, as well as a rebate. Any BX 
Participant may respond to a PRISM Auction and all BX Participants 
benefit from the ability to interact with the PRISM Auction Order. The 
proposed fee to Initiating Orders, who respond to a Request for PRISM 
and where the PRISM Order traded with an Initiating Order, would enable 
the Exchange to offer rebates to attract BX Participants to enter PRISM 
Orders as a Request for PRISM. This proposal does not amend pricing for 
PRISM Auctions.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The 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 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 \16\ 
(``NetCoalition''), the D.C. Circuit stated, ``[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'. . . .'' \17\
---------------------------------------------------------------------------

    \16\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \17\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options 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. Within the 
foregoing context, the proposal represents a reasonable attempt by the 
Exchange to attract additional order flow to the Exchange and increase 
its market share relative to its competitors.
    The Exchange's proposal to define a ``PRISM Order'', an 
``Initiating Order'', a ``PRISM Auction Order'', a ``PRISM Response'', 
and a ``Request for PRISM'' for the purpose of Options 7, Section 2(5) 
pricing and utilize these terms within Options 7, Section 2(5) is 
reasonable, equitable and not unfairly discriminatory. The Exchange 
believes that these terms, which align more closely to the terms 
utilized in Options 3, Section 13 related to PRISM, will make the 
Options 7, Section 2(5) PRISM pricing more transparent.
    The Exchange's proposal to amend Options 7, Section 2(5) to adopt 
specific pricing for BX Participants that utilize the Request for PRISM 
mechanism is reasonable because the Exchange believes the proposed 
pricing will incentivize BX Participants to utilize the Request for 
PRISM feature to obtain liquidity, potential price improvement, as well 
as a rebate for the PRISM Order. The proposed pricing for PRISM Auction 
Orders which commenced as a Request for PRISM and executed in the PRISM 
Auction would apply in lieu of Options 7, Section 2(5) pricing and 
regardless of capacity. With respect to a PRISM Order, the Exchange 
proposes to pay a rebate to a PRISM Order that was submitted as a 
Request for PRISM seeking another BX Participant who would respond to 
the Request for PRISM Order by submitting the Initiating Order to 
initiate a PRISM Auction.\18\ With this proposal, a PRISM Order that 
was submitted as a Request for PRISM and trades with an Initiating 
Order or a PRISM Response, would receive a rebate of $0.35 per contract 
for Penny Classes and $0.70 per contract for Non-Penny Classes, 
regardless of capacity, instead of paying a fee of $0.30 per contract 
pursuant to Options 7, Section 2(5), provided the order was for a Non-
Customer.\19\ If the PRISM Order was for a Customer, the rebate of 
$0.35 per contract for Penny Classes and $0.70 per contract for Non-
Penny Classes remains unchanged pursuant to Options 7, Section 2(5). 
The Exchange believes the proposed PRISM Order rebate is reasonable 
because it is intended to attract BX Participants to utilize the 
Request for PRISM mechanism. The BX Participant submitting an 
Initiating Order through the Request for PRISM mechanism would be 
assessed a fee of $0.49 per contract for Penny Class and $0.94 per 
contract for Non-Penny Classes if the PRISM Order trades with the 
Initiating Order, instead of a $0.05 per contract fee pursuant to 
Options 7, Section 2(5), provided the order was for a Non-Customer.\20\ 
The Exchange believes it is reasonable to assess a higher fee for the 
Initiating Order that was submitted with the Request for PRISM 
mechanism, where fees are the same as those assessed to responders in 
the PRISM Auction, because BX Participants are able to obtain immediate 
liquidity. The Request for PRISM mechanism is utilized by Participants 
as a liquidity seeking tool that if not available would require a BX 
Participant to source liquidity from third parties, expending time and 
potential additional cost. The Request for PRISM mechanism offers 
Participants the opportunity to

[[Page 13002]]

immediately commence a PRISM Auction without the need to source 
liquidity. Liquidity providers that enter orders directly into PRISM 
and do not utilize the Request for PRISM mechanism have expended time 
sourcing liquidity with third parties outside of the Exchange. The 
Exchange believes that BX Participants benefit from the liquidity 
seeking mechanism that is being offered by the Exchange to allow 
certain market participants to compete with other market participants 
whose business model is designed to source liquidity. The proposed fee 
for Initiating Orders who respond to a Request for PRISM, when the 
PRISM Order trades with an Initiating Order, would enable the Exchange 
to offer rebates to BX Participants submitting PRISM Orders into the 
Request for PRISM mechanism. The Exchange believes the fees for 
responders are reasonable because responders to a PRISM Auction would 
pay the same fee of $0.49 per contract fee for Penny Classes and $0.94 
per contract fee for Non-Penny Classes regardless of whether the 
Request for PRISM mechanism was utilized to initiate a PRISM Auction or 
the PRISM Auction Order was entered directly into PRISM as a paired 
order.
---------------------------------------------------------------------------

    \18\ A recipient of a Request for PRISM may utilize FIX to 
submit the sender's PRISM Order, along with an Initiating Order (a 
``response'') into the System for execution into PRISM pursuant to 
Options 3, Section 13. Requests for PRISM are sent to BX 
Participants that ``opt in'' to receive Requests for PRISM. See 
Options 3, Section 7(e)(A)(1)(a).
    \19\ Today, Customers pays no PRISM Order fee.
    \20\ Today, Customers pays no Initiating Order fee.
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    The Exchange's proposal to amend Options 7, Section 2(5) to adopt 
specific pricing for BX Participants that utilize the Request for PRISM 
mechanism is equitable and not unfairly discriminatory because any BX 
Participant may utilize the Request for PRISM feature. Also, any BX 
Participant may respond to a PRISM Auction and all BX Participants 
benefit from the ability to interact with additional order flow.\21\ 
The Request for PRISM mechanism provides greater flexibility for 
Participants submitting orders into PRISM, specifically providing an 
avenue for BX Participants desiring to send orders to the PRISM 
mechanism to locate an Initiating Order to pair their PRISM Order with 
and participate in a PRISM Auction. All Participants that enter a PRISM 
Order into the Request for PRISM mechanism are uniformly entitled to a 
rebate if the PRISM Order trades with the Initiating Order or if the 
PRISM Order trades with a PRISM Response. Also, all Participants that 
enter Initiating Orders into the Request for PRISM mechanism are 
uniformly assessed a fee provided the PRISM Order trades with the 
Initiating Order. The proposed fees for an Initiating Order entered 
into the Request for PRISM mechanism that trade with a PRISM Response 
are equivalent to the pricing for responders pursuant to Options 7, 
Section 2(5) because BX Participants benefit from the liquidity seeking 
mechanism that is being offered. The mechanism allows certain market 
participants to compete with other market participants whose business 
model is designed to source liquidity.
---------------------------------------------------------------------------

    \21\ The identity of the sender and the recipients are not known 
to any party.
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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.
Intermarket Competition
    The proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants with 
another choice to initiate a price improvement auction. 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. 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 Exchange's Request for PRISM pricing would 
allow the Exchange to compete for order flow by incentivizing BX 
Participants to utilize the Request for PRISM to seek liquidity.
Intramarket Competition
    The Exchange's proposal to define a ``PRISM Order'', an 
``Initiating Order'', a ``PRISM Auction Order'', a ``PRISM Response'', 
and a ``Request for PRISM'' for the purpose of Options 7, Section 2(5) 
pricing and utilize these terms within Options 7, Section 2(5) does not 
impose an undue burden on competition because the defined terms will 
more closely align the pricing within Options 7, Section 2(5) to the 
terms utilized in Options 3, Section 13 related to PRISM.
    The Exchange's proposal to amend Options 7, Section 2(5) to adopt 
specific pricing for BX Participants that utilize the Request for PRISM 
mechanism does not impose an undue burden on competition because any BX 
Participant may utilize the Request for PRISM feature. Also, any BX 
Participant may respond to a PRISM Auction and all BX Participants 
benefit from the ability to interact with additional order flow.\22\ 
The Request for PRISM mechanism provides greater flexibility for 
Participants submitting orders into PRISM, specifically providing an 
avenue for BX Participants desiring to send orders to the PRISM 
mechanism to locate an Initiating Order to pair their PRISM Order with 
and participate in a PRISM Auction. All Participants that enter a PRISM 
Order into the Request for PRISM mechanism are uniformly entitled to a 
rebate if the PRISM Order trades with the Initiating Order or if the 
PRISM Order trades with a PRISM Response. Also, all Participants that 
enter Initiating Orders into the Request for PRISM mechanism are 
uniformly assessed a fee provided the PRISM Order trades with the 
Initiating Order. The proposed fees for an Initiating Order entered 
into the Request for PRISM mechanism that trade with a PRISM Response 
are equivalent to the pricing for responders pursuant to Options 7, 
Section 2(5) because BX Participants benefit from the liquidity seeking 
mechanism that is being offered. The mechanism allows certain market 
participants to compete with other market participants whose business 
model is designed to source liquidity.
---------------------------------------------------------------------------

    \22\ The identity of the sender and the recipients are not known 
to any party.
---------------------------------------------------------------------------

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.\23\
---------------------------------------------------------------------------

    \23\ 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.

[[Page 13003]]

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-2023-005 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-2023-005. 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-2023-005 and should be 
submitted on or before March 22, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04124 Filed 2-28-23; 8:45 am]
BILLING CODE 8011-01-P

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