Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Equity 7, Section 118, 38915-38917 [2023-12660]
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Federal Register / Vol. 88, No. 114 / Wednesday, June 14, 2023 / Notices
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–BOX–2023–13 and should be
submitted on or before July 5, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–12664 Filed 6–13–23; 8:45 am]
BILLING CODE 8011–01–P
The Exchange operates on the ‘‘takermaker’’ model, whereby it generally
pays credits to members that take
liquidity and charges fees to members
that provide liquidity. Currently, the
Exchange has a schedule, at Equity 7,
section 118(e), which consists of several
different credits and fees for Retail
Orders 3 and Retail Price Improvement
Orders 4 under Rule 4780 (Retail Price
Improvement Program).
Currently, the Exchange charges a fee
of $0.0018 per share executed for RPI
Orders entered by a member that (i)
quotes Retail Price Improvement Orders
in at least 1,200 symbols on average per
day and (ii) provides liquidity through
Retail Price Improvement Orders equal
to or exceeding an average daily volume
of 2,500,000 shares. The Exchange
currently charges a fee of $0.0025 per
share executed for all other RPI Orders
that provide liquidity. The Exchange
proposes to adopt a new fee of $0.0020
per share executed for RPI Orders
entered by a member that (i) quotes
Retail Price Improvement Orders in at
least 1,200 symbols on average per day;
(ii) provides liquidity through Retail
Price Improvement Orders equal to or
exceeding an average daily volume of
1,000,000 shares; and (iii) increases its
average daily volume of liquidity
provided in Retail Price Improvement
Orders at least 10% relative to the
month of March 2023. The Exchange
hopes that the proposed fee will
encourage members to increase liquidity
providing activity in RPI Orders on the
Exchange relative to March 2023. If the
proposal is effective in achieving this
purpose, then the quality of the
Exchange’s market will improve,
particularly with respect to RPI and
Retail Orders to the benefit of all
participants, especially those who
submit RPI and Retail Orders.
At this time, the Exchange proposes to
sunset the proposed fee of $0.0020 per
share executed. The fee will be available
through September 30, 2023.5 Despite
only offering this incentive for four
months (i.e., June 2023 through
September 2023), the Exchange believes
that it may continue to encourage
members to earn lower fees by
increasing liquidity providing activity
in RPI Orders on the Exchange. The
Exchange will use this time period to
evaluate the appropriate parameters
going forward to encourage increasing
liquidity providing activity in RPI
Orders on the Exchange.
3 Retail Orders shall mean an order type with a
Non-Display Order Attribute submitted to the
Exchange by a Retail Member Organization (as
defined in Rule 4780). A Retail Order must be an
agency Order, or riskless principal Order that
satisfies the criteria of FINRA Rule 5320.03. The
Retail Order must reflect trading interest of a
natural person with no change made to the terms
of the underlying order of the natural person with
respect to price (except in the case of a market order
that is changed to a marketable limit order) or side
of market and that does not originate from a trading
algorithm or any other computerized methodology.
See Rule 4702(b)(6).
4 Retail Price Improving (‘‘RPI’’) Orders shall
mean an Order Type with a Non-Display Order
Attribute that is held on the Exchange Book in order
to provide liquidity at a price at least $0.001 better
than the NBBO through a special execution process
described in Rule 4780. A Retail Price Improving
Order may be entered in price increments of $0.001.
RPI Orders collectively may be referred to as ‘‘RPI
Interest.’’ See Rule 4702(b)(5).
5 The proposed $0.0020 per share executed fee
will be available through September 30, 2023 but
would not be available thereafter. For example, as
of October 1, 2023, the Exchange would no longer
offer the incentive.
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s transaction fees at Equity 7,
section 118(e), as described further
below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/bx/rules, at the principal office
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97667; File No. SR–BX–
2023–015]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Transaction Fees at Equity
7, Section 118
ddrumheller on DSK120RN23PROD with NOTICES1
June 8, 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 June 1,
2023, Nasdaq BX, Inc. (‘‘BX’’ or
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 88, No. 114 / Wednesday, June 14, 2023 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
2. Statutory Basis
The Exchange believes that its
proposal is consistent with section 6(b)
of the Act,6 in general, and furthers the
objectives of sections 6(b)(4) and 6(b)(5)
of the Act,7 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 schedule of credits are reasonable in
several respects. As a threshold matter,
the Exchange is subject to significant
competitive forces in the market for
equity securities transaction services
that constrain its pricing determinations
in that market. The fact that this market
is competitive has long been recognized
by the courts. In NetCoalition v.
Securities and Exchange Commission,
the D.C. Circuit stated as follows: ‘‘[n]o
one disputes that competition for order
flow is ‘fierce.’ . . . As the SEC
explained, ‘[i]n the U.S. national market
system, buyers and sellers of securities,
and the broker-dealers that act as their
order-routing agents, have a wide range
of choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker
dealers’. . . .’’ 8
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.’’ 9
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for equity
security transaction services. The
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
8 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)).
9 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
7 15
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19:24 Jun 13, 2023
Jkt 259001
Exchange is only one of several equity
venues to which market participants
may direct their order flow. Competing
equity exchanges offer similar tiered
pricing structures to that of the
Exchange, including schedules of
rebates and fees that apply based upon
members achieving certain volume
thresholds.
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.
The Exchange believes it is reasonable
and equitable to adopt a new $0.0020
per share executed fee for RPI Orders
entered by a member that (i) quotes
Retail Price Improvement Orders in at
least 1,200 symbols on average per day;
(ii) provides liquidity through Retail
Price Improvement Orders equal to or
exceeding an average daily volume of
1,000,000 shares; and (iii) increases its
average daily volume of liquidity
provided in Retail Price Improvement
Orders at least 10% relative to the
month of March 2023. As discussed
above, the Exchange’s goal is to increase
liquidity adding activity in RPI Orders
on its platform, particularly relative to
March 2023. It is reasonable and
equitable to address this need by
providing a lower fee to members that
meet the proposed thresholds as an
incentive for them to increase their
liquidity activity in RPI Orders on the
Exchange relative to March 2023. If the
proposal is effective in achieving this
purpose, then the quality of the
Exchange’s market will improve,
particularly with respect to RPI and
Retail Orders to the benefit of all
participants, especially those who
submit RPI and Retail Orders. The
Exchange’s proposal to sunset the
$0.0020 fee is also reasonable because
the Exchange believes that despite only
offering this fee for four months, the
incentive may continue to encourage
members to earn lower fees by
increasing liquidity providing activity
in RPI Orders on the Exchange.
The Exchange believes that the
proposal is not unfairly discriminatory.
The Exchange intends for its proposal to
improve market quality for all members
that submit RPI and Retail Orders on the
Exchange and by extension attract more
liquidity to the market, improving
market wide quality and price
discovery. Although net adders of
liquidity for RPI Orders will benefit
most from the proposal, this result is
fair insofar as increased liquidity adding
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
activity in RPI Orders will help to
improve market quality and the
attractiveness of the Nasdaq BX market
to all existing and prospective retail
participants. The Exchange’s proposal to
sunset the incentive is equitable and not
unfairly discriminatory because the fee
will be available to all members during
the four months it is offered.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition
The Exchange does not believe that its
proposal will place any category of
Exchange participant at a competitive
disadvantage.
As noted above, all members of the
Exchange will benefit from any increase
in market activity that the proposal
effectuates. Members may modify their
businesses so that they can meet the
required thresholds and pay lower
charges. The Exchange’s proposal to
sunset the fee does not impose an undue
burden on competition because any
member can qualify for the fee during
the four months it is offered. The
Exchange notes that its members are free
to trade on other venues to the extent
they believe that the proposal is not
attractive. As one can observe by
looking at any market share chart, price
competition between exchanges is
fierce, with liquidity and market share
moving freely between exchanges in
reaction to fee and credit changes.
Intermarket Competition
In terms of inter-market competition,
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
credits and fees to remain competitive
with other exchanges and with
alternative trading systems that have
been exempted from compliance with
the statutory standards applicable to
exchanges. Because competitors are free
to modify their own credits and fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which credit
or fee changes in this market may
impose any burden on competition is
E:\FR\FM\14JNN1.SGM
14JNN1
Federal Register / Vol. 88, No. 114 / Wednesday, June 14, 2023 / Notices
extremely limited. The proposal is
reflective of this competition.
Even as one of the largest U.S.
equities exchanges by volume, the
Exchange has less than 20% market
share, which in most markets could
hardly be categorized as having enough
market power to burden competition.
Moreover, as noted above, price
competition between exchanges is
fierce, with liquidity and market share
moving freely between exchanges in
reaction to fee and credit changes. This
is in addition to free flow of order flow
to and among off-exchange venues,
which comprises upwards of 50% of
industry volume.
In sum, the Exchange intends for the
proposed change to its fees for RPI
Orders, in the aggregate, to increase
member incentives to engage in the
addition of liquidity on the Exchange. If
the change proposed herein is
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed change will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
ddrumheller on DSK120RN23PROD with NOTICES1
The foregoing rule change has become
effective pursuant to section
19(b)(3)(A)(ii) of the Act.10
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–2023–15 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–2023–015. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–BX–2023–15 and should be
submitted on or before July 5, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–12660 Filed 6–13–23; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97675; File No. SR–
CboeBZX–2023–036]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing of
a Proposed Rule Change To Revise
Certain of the Exchange’s Initial
Listing Standards
June 8, 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 May 26,
2023, Cboe BZX Exchange, Inc. filed
with the Securities and Exchange
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
Cboe BZX Exchange, Inc. (‘‘BZX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a proposed
rule change to revise certain of the
Exchange’s initial listing standards. The
text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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.
BILLING CODE 8011–01–P
1 15
10 15
U.S.C. 78s(b)(3)(A)(ii).
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38917
2 17
E:\FR\FM\14JNN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
14JNN1
]]>Agencies
[Federal Register Volume 88, Number 114 (Wednesday, June 14, 2023)]
[Notices]
[Pages 38915-38917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12660]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97667; File No. SR-BX-2023-015]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Transaction Fees at Equity 7, Section 118
June 8, 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 June 1, 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's transaction fees at
Equity 7, section 118(e), as described further below.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange operates on the ``taker-maker'' model, whereby it
generally pays credits to members that take liquidity and charges fees
to members that provide liquidity. Currently, the Exchange has a
schedule, at Equity 7, section 118(e), which consists of several
different credits and fees for Retail Orders \3\ and Retail Price
Improvement Orders \4\ under Rule 4780 (Retail Price Improvement
Program).
---------------------------------------------------------------------------
\3\ Retail Orders shall mean an order type with a Non-Display
Order Attribute submitted to the Exchange by a Retail Member
Organization (as defined in Rule 4780). A Retail Order must be an
agency Order, or riskless principal Order that satisfies the
criteria of FINRA Rule 5320.03. The Retail Order must reflect
trading interest of a natural person with no change made to the
terms of the underlying order of the natural person with respect to
price (except in the case of a market order that is changed to a
marketable limit order) or side of market and that does not
originate from a trading algorithm or any other computerized
methodology. See Rule 4702(b)(6).
\4\ Retail Price Improving (``RPI'') Orders shall mean an Order
Type with a Non-Display Order Attribute that is held on the Exchange
Book in order to provide liquidity at a price at least $0.001 better
than the NBBO through a special execution process described in Rule
4780. A Retail Price Improving Order may be entered in price
increments of $0.001. RPI Orders collectively may be referred to as
``RPI Interest.'' See Rule 4702(b)(5).
---------------------------------------------------------------------------
Currently, the Exchange charges a fee of $0.0018 per share executed
for RPI Orders entered by a member that (i) quotes Retail Price
Improvement Orders in at least 1,200 symbols on average per day and
(ii) provides liquidity through Retail Price Improvement Orders equal
to or exceeding an average daily volume of 2,500,000 shares. The
Exchange currently charges a fee of $0.0025 per share executed for all
other RPI Orders that provide liquidity. The Exchange proposes to adopt
a new fee of $0.0020 per share executed for RPI Orders entered by a
member that (i) quotes Retail Price Improvement Orders in at least
1,200 symbols on average per day; (ii) provides liquidity through
Retail Price Improvement Orders equal to or exceeding an average daily
volume of 1,000,000 shares; and (iii) increases its average daily
volume of liquidity provided in Retail Price Improvement Orders at
least 10% relative to the month of March 2023. The Exchange hopes that
the proposed fee will encourage members to increase liquidity providing
activity in RPI Orders on the Exchange relative to March 2023. If the
proposal is effective in achieving this purpose, then the quality of
the Exchange's market will improve, particularly with respect to RPI
and Retail Orders to the benefit of all participants, especially those
who submit RPI and Retail Orders.
At this time, the Exchange proposes to sunset the proposed fee of
$0.0020 per share executed. The fee will be available through September
30, 2023.\5\ Despite only offering this incentive for four months
(i.e., June 2023 through September 2023), the Exchange believes that it
may continue to encourage members to earn lower fees by increasing
liquidity providing activity in RPI Orders on the Exchange. The
Exchange will use this time period to evaluate the appropriate
parameters going forward to encourage increasing liquidity providing
activity in RPI Orders on the Exchange.
---------------------------------------------------------------------------
\5\ The proposed $0.0020 per share executed fee will be
available through September 30, 2023 but would not be available
thereafter. For example, as of October 1, 2023, the Exchange would
no longer offer the incentive.
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[[Page 38916]]
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\6\ in general, and furthers the objectives of sections
6(b)(4) and 6(b)(5) of the Act,\7\ 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.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposed changes to its schedule of credits are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for equity
securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \8\
---------------------------------------------------------------------------
\8\ 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.'' \9\
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\9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
equity security transaction services. The Exchange is only one of
several equity venues to which market participants may direct their
order flow. Competing equity exchanges offer similar tiered pricing
structures to that of the Exchange, including schedules of rebates and
fees that apply based upon members achieving certain volume thresholds.
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.
The Exchange believes it is reasonable and equitable to adopt a new
$0.0020 per share executed fee for RPI Orders entered by a member that
(i) quotes Retail Price Improvement Orders in at least 1,200 symbols on
average per day; (ii) provides liquidity through Retail Price
Improvement Orders equal to or exceeding an average daily volume of
1,000,000 shares; and (iii) increases its average daily volume of
liquidity provided in Retail Price Improvement Orders at least 10%
relative to the month of March 2023. As discussed above, the Exchange's
goal is to increase liquidity adding activity in RPI Orders on its
platform, particularly relative to March 2023. It is reasonable and
equitable to address this need by providing a lower fee to members that
meet the proposed thresholds as an incentive for them to increase their
liquidity activity in RPI Orders on the Exchange relative to March
2023. If the proposal is effective in achieving this purpose, then the
quality of the Exchange's market will improve, particularly with
respect to RPI and Retail Orders to the benefit of all participants,
especially those who submit RPI and Retail Orders. The Exchange's
proposal to sunset the $0.0020 fee is also reasonable because the
Exchange believes that despite only offering this fee for four months,
the incentive may continue to encourage members to earn lower fees by
increasing liquidity providing activity in RPI Orders on the Exchange.
The Exchange believes that the proposal is not unfairly
discriminatory. The Exchange intends for its proposal to improve market
quality for all members that submit RPI and Retail Orders on the
Exchange and by extension attract more liquidity to the market,
improving market wide quality and price discovery. Although net adders
of liquidity for RPI Orders will benefit most from the proposal, this
result is fair insofar as increased liquidity adding activity in RPI
Orders will help to improve market quality and the attractiveness of
the Nasdaq BX market to all existing and prospective retail
participants. The Exchange's proposal to sunset the incentive is
equitable and not unfairly discriminatory because the fee will be
available to all members during the four months it is offered.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intramarket Competition
The Exchange does not believe that its proposal will place any
category of Exchange participant at a competitive disadvantage.
As noted above, all members of the Exchange will benefit from any
increase in market activity that the proposal effectuates. Members may
modify their businesses so that they can meet the required thresholds
and pay lower charges. The Exchange's proposal to sunset the fee does
not impose an undue burden on competition because any member can
qualify for the fee during the four months it is offered. The Exchange
notes that its members are free to trade on other venues to the extent
they believe that the proposal is not attractive. As one can observe by
looking at any market share chart, price competition between exchanges
is fierce, with liquidity and market share moving freely between
exchanges in reaction to fee and credit changes.
Intermarket Competition
In terms of inter-market competition, 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 credits and fees to remain competitive with
other exchanges and with alternative trading systems that have been
exempted from compliance with the statutory standards applicable to
exchanges. Because competitors are free to modify their own credits and
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which credit or fee changes in this market may impose any burden on
competition is
[[Page 38917]]
extremely limited. The proposal is reflective of this competition.
Even as one of the largest U.S. equities exchanges by volume, the
Exchange has less than 20% market share, which in most markets could
hardly be categorized as having enough market power to burden
competition. Moreover, as noted above, price competition between
exchanges is fierce, with liquidity and market share moving freely
between exchanges in reaction to fee and credit changes. This is in
addition to free flow of order flow to and among off-exchange venues,
which comprises upwards of 50% of industry volume.
In sum, the Exchange intends for the proposed change to its fees
for RPI Orders, in the aggregate, to increase member incentives to
engage in the addition of liquidity on the Exchange. If the change
proposed herein is unattractive to market participants, it is likely
that the Exchange will lose market share as a result. Accordingly, the
Exchange does not believe that the proposed change will impair the
ability of members or competing order execution venues to maintain
their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act.\10\
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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-BX-2023-15 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-2023-015. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-BX-2023-15 and should be
submitted on or before July 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12660 Filed 6-13-23; 8:45 am]
BILLING CODE 8011-01-P
