Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX Options 7, Section 2 Regarding Fees and Rebates, 83189-83199 [2023-26112]
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Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
with the protection of investors and the
public interest. As described above,
BOX’s system reduces complex QOO
and multi-leg QOO orders submitted to
the Exchange to their simplest form to
avoid populating the Exchange’s
Complex Order Book with multiple
versions of economically equivalent
strategies. When this process results in
a net price for a Complex QOO Order or
multi-leg QOO Order that exceeds three
decimal places, the Exchange’s system
currently rejects the Complex QOO
Order or multi-leg QOO Order back to
the submitting Participant. Under the
proposal, the Exchange will round the
net price of such an order to the third
decimal place with the advantage to the
initiating side. This process will allow
the Exchange to accept Complex QOO
and multi-leg QOO Orders that the
Exchange’s system currently rejects,
which will provide investors with an
additional venue for trading these
orders. The system will calculate the
quantities and prices, in $0.01
increments, of the component legs
necessary to achieve the net price of a
Complex QOO Order or multi-leg QOO
Order, and the component legs of the
orders will execute in $0.01 increments,
with their priority based on their
execution prices.35 A Complex QOO
Order or multi-leg QOO Order that has
been reduced to its simplest form will
be executed pursuant to Exchange Rule
7600, including Exchange Rule
7600(c).36 As described above, the
process for calculating the quantities
and execution prices of the component
legs of a Complex QOO Order or multileg QOO Order is consistent with the
process that the Exchange currently uses
for executing split price transactions on
the Exchange’s trading floor.37 For these
reasons, the Commission designates the
proposal operative upon filing.38
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
35 See
proposed BOX IM–7600–8.
id.
37 See supra note 21 and accompanying text.
38 For purposes only of accelerating the operative
date of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
36 See
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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:
• 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–
BOX–2023–28.
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–BOX–2023–22. 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–BOX–2023–28 and should be
submitted on or before December 19,
2023.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023–26111 Filed 11–27–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
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[Release No. 34–99008; File No. SR–BX–
2023–031]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend BX Options 7,
Section 2 Regarding Fees and Rebates
November 21, 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 November
17, 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
39 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange initially filed the proposed
pricing changes on November 14, 2023 (SR–BX–
2023–029). On November 16, 2023, the Exchange
withdrew that filing and submitted this filing.
1 15
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Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices
Section 2, BX Options Market-Fees and
Rebates. Specifically, BX proposes to (i)
amend BX’s fees and rebates for
execution of contracts at Options 7,
Section 2(1) including note 1, and
reserve note 2; (ii) amend fees for
routing contracts to markets other than
the Exchange at Options 7, Section 2(3);
(iii) amend fees and rebates for
execution of contracts on the Exchange
that generate an order exposure alert at
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
BX’s Pricing Schedule at Options 7,
Options 7, Section 2(4); and (iv) amend
fees and rebates for BX Price
Improvement Auction (‘‘PRISM’’) at
Options 7, Section 2(5). Each change
will be described below.
Options 7, Section 2(1)
Today, the Exchange assesses the
following Penny Symbols and NonPenny Symbols Maker Rebates and
Taker Fees:
PENNY SYMBOLS
Maker
rebate
Market participant
Lead Market Maker ..................................................................................................................................................
Market Maker ...........................................................................................................................................................
Non-Customer ..........................................................................................................................................................
Firm ..........................................................................................................................................................................
Customer .................................................................................................................................................................
2 (0.29)
2 (0.25)
(0.12)
(0.12)
(0.30)
Taker
fee
$0.50
0.50
0.50
0.50
1 0.46
NON-PENNY SYMBOLS
Maker
rebate /
fee
Market participant
Lead Market Maker ..................................................................................................................................................
Market Maker ...........................................................................................................................................................
Non-Customer ..........................................................................................................................................................
Firm ..........................................................................................................................................................................
Customer .................................................................................................................................................................
lotter on DSK11XQN23PROD with NOTICES1
At this time, the Exchange proposes to
reduce certain Penny Symbol Maker
Rebates and Taker Fees and increase
certain Non-Penny Symbol Maker
Rebates and Taker Fees. With respect to
the Penny Symbols, the Exchange
proposes to decrease the Maker Rebates
for Lead Market Makers 4 from $0.29 to
$0.24 per contract and decrease the
Maker Rebates for Market Makers 5 from
$0.25 to $0.20 per contract. While the
Exchange is reducing these Penny
Symbol Maker Rebates for Lead Market
Makers and Market Makers, the
Exchange will continue to offer the
rebates to incentivize market
participants to direct order flow to BX.
Additionally, the Exchange proposes to
reduce the Customer 6 Penny Symbol
4 The term ‘‘Lead Market Maker’’ or (‘‘LMM’’)
applies to a registered BX Options Market Maker
that is approved pursuant to Options 2, Section 3
to be the LMM in an options class (options classes).
See BX Options 7, Section 1(a).
5 The term ‘‘BX Options Market Maker’’ or (‘‘M’’)
is a Participant that has registered as a Market
Maker on BX Options pursuant to Options 2,
Section 1, and must also remain in good standing
pursuant to Options 2, Section 9. In order to receive
Market Maker pricing in all securities, the
Participant must be registered as a BX Options
Market Maker in at least one security. See BX
Options 7, Section 1(a).
6 The term ‘‘Customer’’ or (‘‘C’’) applies to any
transaction that is identified by a Participant for
clearing in the Customer range at The Options
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Taker Fee from $0.46 to $0.40 per
contract. The Exchange believes
reducing this Penny Symbol Taker Fee
will attract more Customer order flow to
BX.7
With respect to Non-Penny Symbols,
the Exchange proposes to increase the
Maker Rebates for Customers from $0.90
to $1.10 per contract and increase the
Taker Fees for all Non-Customers 8 from
$1.10 to $1.25 per contract. The
Exchange believes the increase to the
Non-Penny Symbol Customer Maker
Rebate will attract more Customer order
flow to BX. With respect to the NonPenny Symbol Taker Fee for NonCustomers, while the Exchange is
increasing these fees, the Exchange
believes that these fees will continue to
draw participants seeking liquidity to
BX because BX is increasing its NonPenny Customer Maker Rebate to
enhance its market quality and provide
Clearing Corporation (‘‘OCC’’) which is not for the
account of broker or dealer or for the account of a
‘‘Professional’’ (as that term is defined in Options
1, Section 1(a)(48)). See BX Options 7, Section 1(a).
7 The Exchange is proposing to add dollar signs
in a few places in the table in Options 7, Section
2(1) where the dollar sign is missing.
8 The term ‘‘Non-Customer’’ shall include a
Professional, Broker-Dealer and Non-BX Options
Market Maker. See BX Options 7, Section 1(a).
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(0.45)
(0.40)
0.45
0.45
3 (0.90)
Taker
fee
$1.10
1.10
1.10
1.10
0.79
more trading opportunities, which
benefits all market participants.
The Exchange proposes to amend note
1 of Options 7, Section 2(1) which
currently reduces the Customer Penny
Symbol Taker Fee from $0.46 to $0.33
per contract for trades which remove
liquidity in SPDR S&P 500 ETF (‘‘SPY’’).
With the proposed changes to the
Customer Penny Symbol Taker Fee
noted herein, note 1 of Options 7,
Section 2(1) would reduce the Customer
Penny Symbol Taker Fee from $0.40 to
$0.33 per contract for trades which
remove liquidity in SPY. Additionally,
the Exchange proposes to extend this
Customer Penny Symbol discount to
transactions that remove liquidity in
Invesco QQQ Trust Series 1 (‘‘QQQ’’)
and iShares Russell 2000 ETF (‘‘IWM’’).
The proposed rule text would provide,
‘‘Customer Taker Fee will be $0.33 per
contract for trades which remove
liquidity in SPY, QQQ, and IWM.’’ The
Exchange believes that note 1 will
continue to attract Customer Penny
Symbol SPY transactions that remove
liquidity as the Exchange will continue
to discount these fees for SPY. The
addition of Taker Fee discounts for
QQQ and IWM will attract additional
QQQ and IWM transactions that remove
liquidity to BX.
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Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices
The Exchange also proposes to reserve
note 2 of Options 7, Section 2(1) which
currently provides, ‘‘The Maker Rebate
for Lead Market Makers and Market
Makers in SPY will be $0.22 per
contract. The Maker Rebate for Lead
Market Makers and Market Makers in
AAPL and QQQ will be $0.42 per
contract.’’ Today, the Penny Symbol
Maker Rebates for Lead Market Makers
and Market Makers in SPY is reduced to
$0.22 per contract with this note 2. The
Exchange would no longer reduce the
Penny Symbol Maker Rebates for Lead
Market Makers and Market Makers in
SPY to $0.22, rather SPY would be paid
the same Maker Rebates (a $0.24 per
contract Lead Market Maker Penny
Symbol Maker Rebate and a $0.20 per
contract Market Maker Penny Symbol
Maker Rebate) as all other options
symbols. Additionally, AAPL and QQQ
would no longer be paid a $0.42 per
contract Penny Symbol Maker Rebate
for Lead Market Makers and Market
Makers, rather AAPL and QQQ would
be paid the same Maker Rebates (a $0.24
per contract Lead Market Maker Penny
Symbol Maker Rebate and a $0.20 per
contract Market Maker Penny Symbol
Maker Rebate) as all other options
symbols. With this proposal, the
Exchange would uniformly pay the
proposed Lead Market Maker and
Market Maker Penny Symbol Maker
Rebates on all options symbols.
Options 7, Section 2(3)
Currently, BX assesses a NonCustomer routing fee of $0.99 per
contract and a Customer routing fee of
$0.23 per contract, in addition to the
actual transaction fee assessed by the
away market, for routing contracts to
markets other than The Nasdaq Options
Market LLC (‘‘NOM’’) and Nasdaq Phlx
LLC (‘‘Phlx’’). Currently, if the away
market pays a rebate, the Exchange
assesses a Customer a Routing Fee of
$0.13 per contract for markets other
than NOM and Phlx. Currently, BX
assesses a Customer a $0.13 per contract
Fixed Fee in addition to the actual
transaction fee assessed when routing to
NOM and Phlx.
At this time, the Exchange proposes to
assess a Non-Customer an increased
routing fee to route to any options
exchange of $1.20 per contract. The
Exchange also proposes to assess a
Customer a Fixed Fee of $0.23 per
contract, in addition to the actual
transaction fee assessed by the away
market, for routing contracts to any
options exchange. The Exchange would
no longer assess the lower routing of
$0.13 per contract, in addition to the
actual transaction fee assessed, when
routing to NOM and Phlx. The Exchange
will continue to assess a $0.13 per
contract routing fee if the away market
pays a rebate, including NOM and Phlx.
The purpose of the proposed routing
fees is to recoup costs incurred by the
Exchange when routing orders to other
options exchanges on behalf of options
Participants. In determining its
proposed routing fees, the Exchange
took into account transaction fees
Customer
Lead market
maker
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Penny Symbols:
Rebate for Order triggering order exposure alert .....................................
Fee for Order responding to order exposure alert ...................................
Non-Penny Symbols:
Rebate for Order triggering order exposure alert .....................................
Fee for Order responding to order exposure alert ...................................
At this time, the Exchange proposes to
amend its pricing related to execution of
contracts on BX that generate an order
exposure alert. With respect to
Customer fees and rebates, the Exchange
proposes to increase the Penny Symbol
rebate for an order triggering an order
exposure alert from $0.34 to $0.47 per
contract. The Exchange proposes to
increase the Customer Penny Symbol
fee for orders that respond to an order
exposure alert from $0.39 to $0.47 per
contract. The Exchange proposes to
9 See
BX Options 3, Section 7(c).
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assessed by other options exchanges, the
Exchange’s projected clearing costs, and
the projected administrative, regulatory,
and technical costs associated with
routing orders to other options
exchanges. The Exchange will continue
to use its affiliated broker-dealer,
Nasdaq Execution Services, to route
orders to other options exchanges.
Routing services offered by the
Exchange are completely optional and
market participants can readily select
between various providers of routing
services, including other exchanges and
broker-dealers. Also, the Exchange notes
that market participants may elect to
mark their orders as ‘‘Do Not Route’’ to
avoid any routing fees.9 The Exchange
believes that the proposed Routing Fees
would enable the Exchange to recover
the costs it incurs to route orders to
away markets after taking into account
the other costs associated with routing
orders to other options exchanges. Also,
the Exchange’s proposal would
uniformly assess the same Customer
routing fees, regardless of the away
venue, of $0.23 per contract, in addition
to the actual transaction fee assessed, or
$0.13 per contract if the away market
pays a rebate.
Options 7, Section 2(4)
Today, the Exchange assesses the
below fees and pays the below rebates
for execution of contracts on BX that
generate an order exposure alert 10
pursuant to Options 5, Section 4.
BX options
market maker
Non-customer
$0.34
0.39
$0.00
0.39
$0.00
0.39
$0.00
0.45
0.70
0.85
0.00
0.85
0.00
0.85
0.00
0.89
increase the Customer Non-Penny
Symbol rebate for an order triggering an
order exposure alert from $0.70 to $1.10
per contract. The Exchange proposes to
increase the Customer Non-Penny
Symbol fee for orders that respond to an
order exposure alert from $0.85 to $1.25
per contract.
With respect to Lead Market Maker
fees and rebates, the Exchange proposes
to increase the Penny Symbol rebate for
an order triggering an order exposure
alert from $0.00 to $0.10 per contract.
The Exchange proposes to increase the
Lead Market Maker Penny Symbol fee
for orders that respond to an order
exposure alert from $0.39 to $0.50 per
contract. The Exchange proposes to
increase the Lead Market Maker NonPenny Symbol rebate for an order
triggering an order exposure alert from
$0.00 to $0.25 per contract. The
Exchange proposes to increase the Lead
Market Maker Non-Penny Symbol fee
for orders that respond to an order
exposure alert from $0.85 to $1.25 per
contract.
10 An order exposure alert provides marketable
orders on BX’s order book an additional
opportunity for execution on BX when it is not part
of the national best bid or offer (‘‘NBBO’’) contra to
the order and the order locks or crosses the away
best bid or offer (‘‘ABBO’’).
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Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices
With respect to Market Maker fees
and rebates, the Exchange proposes to
increase the Penny Symbol rebate for an
order triggering an order exposure alert
from $0.00 to $0.10 per contract. The
Exchange proposes to increase the
Market Maker Penny Symbol fee for
orders that respond to an order exposure
alert from $0.39 to $0.50 per contract.
The Exchange proposes to increase the
Market Maker Non-Penny Symbol rebate
for an order triggering an order exposure
alert from $0.00 to $0.25 per contract.
The Exchange proposes to increase the
Market Maker Non-Penny Symbol fee
for orders that respond to an order
exposure alert from $0.85 to $1.25 per
contract.
With respect to Non-Customer fees
and rebates, the Exchange proposes to
increase the Penny Symbol rebate for an
order triggering an order exposure alert
from $0.00 to $0.10 per contract. The
Exchange proposes to increase the NonCustomer Penny Symbol fee for orders
that respond to an order exposure alert
from $0.45 to $0.50 per contract. The
Exchange proposes to increase the NonCustomer Non-Penny Symbol rebate for
an order triggering an order exposure
alert from $0.00 to $0.25 per contract.
The Exchange proposes to increase the
Non-Customer Non-Penny Symbol fee
for orders that respond to an order
exposure alert from $0.89 to $1.25 per
contract.
While the Exchange is increasing fees
to respond to an order exposure alert, it
is also increasing rebates that trigger an
order exposure alert. The Exchange
believes that this pricing will continue
to provide incentives to Participants to
utilize the order exposure functionality
which facilitates the ability of the
Exchange to bring together participants
and encourage more robust competition
for orders.
Options 7, Section 2(5)
Currently, the Exchange assesses the
below fees and pays the below rebates
for orders executed in its PRISM
Auction.
FEES AND REBATES
[Per contract]
Submitted PRISM auction order
fee
Type of market participants
PRISM order
Customer ..................................................
Lead Market Maker ..................................
BX Options Market Maker .......................
Non-Customer ..........................................
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11 A PRISM Auction Order is a two-sided, paired
order comprised of a PRISM Order and an Initiating
Order. See BX Options 7, Section 2(5).
12 A PRISM Order is 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. See BX
Options 7, Section 2(5).
13 An Initiating Order is one-side of a PRISM
Auction Order that represents principal or other
interest which is paired with a PRISM Order. See
BX Options 7, Section 2(5).
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Initiating order
Penny classes
$0.00
0.05
0.05
0.05
$0.49
0.49
0.49
0.49
$0.00
0.00
0.00
0.00
The Exchange proposes to amend its
PRISM pricing to delineate PRISM
Auction Orders 11 in Penny and NonPenny Classes. Today, the Exchange
assesses no PRISM Order 12 fee to any
Participant in Penny or Non-Penny
Classes and assesses Non-Customers a
$0.05 per contract Initiating Order 13 fee
in Penny and Non-Penny Classes. With
respect to PRISM Auction Orders
submitted in Penny Classes, the
Exchange proposes to continue to assess
no PRISM Order fee to any Participant
and also proposes to amend the NonCustomer Initiating Order Fees from
$0.05 to $0.00 per contract. Today,
Customers are not assessed an Initiating
Order Fee in either Penny or Non-Penny
Classes. With this proposed change, no
Participant will be assessed an Initiating
Order fee in Penny Classes.
With respect to PRISM Auction
Orders submitted in Non-Penny Classes,
the Exchange proposes to adopt new
pricing. The Exchange proposes to pay
Response to PRISM auction fee
a Non-Penny Class PRISM Order rebate
to a Customer of $0.12 per contract.
Similar to Penny Classes, the Exchange
proposes to assess no Non-Penny Class
PRISM Order fees or Initiating Order
fees to any Participant. The Exchange
believes that the proposed pricing will
encourage BX Participants to submit a
greater amount of PRISM Orders to BX
as the Exchange will not assess PRISM
Order or Initiating Order fees to any BX
Participant (Penny or Non-Penny Class)
and it will pay a Non-Penny Class
Customer PRISM Order rebate of $0.12
per contract.
With respect to a PRISM Response 14
to a PRISM Auction 15 the Exchange
proposes to increase the $0.49 per
contract fee for Penny Classes, which is
currently assessed to all Participants
(Customer, Lead Market Maker, BX
Options Market Maker, and NonCustomer), to $0.50 per contract for
Lead Market Makers, BX Options
Market Makers and Non-Customers. The
Exchange proposes to assess a Customer
a $0.40 per contract PRISM Response
fee for Penny Classes. Additionally, the
Exchange proposes to increase the $0.94
14 A PRISM Response is interest that executed
against the PRISM Order pursuant to Options 3,
Section 13. See BX Options 7, Section 2(5).
15 The Exchange proposes to add the word
‘‘PRISM’’ before ‘‘Response’’ in Options 7, Section
2(5) of the Pricing Schedule to utilize the defined
term in the description of the column header.
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Non-penny
classes
PRISM order traded with
PRISM response rebate
Penny classes
$0.94
0.94
0.94
0.94
$0.35
0.00
0.00
0.00
Non-penny
classes
$0.70
0.00
0.00
0.00
per contract fee for Non-Penny Classes,
which is currently assessed to all
Participants (Customer, Lead Market
Maker, BX Options Market Maker, and
Non-Customer), to $1.25 per contract for
Lead Market Makers, BX Options
Market Makers and Non-Customers. The
Exchange proposes to assess a Customer
a $0.79 per contract PRISM Response
fee for Non-Penny Classes. These
proposes fees are the same as the Taker
Fees assessed to the same Participants
when removing liquidity from the order
book. The Exchange is not amending the
rebates paid to a PRISM Order when
that order trades with a PRISM
Response. The Exchange believes that
the increased PRISM Response fees will
continue to attract order flow to BX
since the Exchange is no longer
assessing any fees to submit PRISM
Orders and Initiating Orders and is now
offering a Customer Non-Penny rebate to
submit a PRISM Order with this
proposal.
Unrelated Market or Marketable Interest
The Exchange assesses fees and pays
rebates with respect to unrelated market
or marketable interest received prior to
the commencement of a PRISM Auction
and during a PRISM Auction. Today,
when a PRISM Order is a Customer
order and executes against unrelated
market or marketable interest received
during a PRISM Auction, the Customer
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order receives a rebate of $0.35 per
contract for Penny Classes and $0.70 per
contract for Non-Penny Classes, which
represents the pricing within Options 7,
Section 2(5). In this case, the unrelated
market or marketable interest received
during a PRISM Auction is assessed a
$0.49 per contract fee for Penny Classes
or a $0.94 per contract fee for NonPenny Classes as described in Options
7, Section 2(5).
Likewise, today, when a PRISM Order
is a Lead Market Maker, BX Options
Market Maker or Non-Customer order
and executes against unrelated market
or marketable interest received during a
PRISM Auction, the Lead Market Maker,
BX Options Market Maker or NonCustomer order pays no fee, which
represents the pricing within Options 7,
Section 2(5). In this case, the unrelated
market or marketable interest received
during a PRISM Auction is assessed a
$0.49 per contract fee for Penny Classes
or a $0.94 per contract fee for NonPenny Classes as described in Options
7, Section 2(5). In contrast, today, when
a PRISM Order is a Customer, Lead
Market Maker, BX Options Market
Maker or Non-Customer order and
executes against unrelated market or
marketable interest received prior to a
PRISM Auction, the Customer, Lead
Market Maker, BX Options Market
Maker or Non-Customer order is subject
to the Taker Fee within Options 7,
Section 2(1).16 The Exchange applies
the order book pricing within Options 7,
Section 2(1) to interest received prior to
the PRISM Auction, which is
considered unrelated market or
marketable interest for purposes of the
PRISM Auction. In contrast, the
Exchange applies PRISM pricing within
Options 7, Section 2(5) to the unrelated
market or marketable interest when
interest arrived during a PRISM
Auction.
At this time, the Exchange proposes to
amend the unrelated market or
marketable interest rule text in Options
7, Section 2(5) to reflect the
amendments proposed herein to
Options 7, Section 2(1) order book
pricing and Options 7, Section 2(5)
PRISM pricing. The Exchange believes
this pricing will continue to attract
liquidity to BX and reward Participants
differently for the order flow.
16 Today, BX assesses the following Penny
Symbol Taker Fees: $0.50 per contract for a Lead
Market Maker, Market Maker, Non-Customer, and
Firm and $0.46 per contract for a Customer. BX
assesses the following Non-Penny Symbol Taker
Fees: $1.10 per contract for a Lead Market Maker,
Market Maker, Non-Customer, and Firm and $0.79
per contract for a Customer. The Exchange is
proposing changes to these fees as described herein.
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Request for PRISM
With respect to Request for PRISM 17
Pricing, today, in lieu of Options 7,
Section 2(5) pricing, different pricing is
assessed and paid to 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. With respect to
PRISM Orders, today, a rebate of $0.35
per contract for Penny Classes and $0.70
per contract for Non-Penny Classes is
paid to a 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. Also, today, a rebate
of $0.35 per contract for Penny Classes
and $0.70 per contract for Non-Penny
Classes is paid to the PRISM Order
when the PRISM Order trades with a
PRISM Response. This pricing is not
being amended.
With respect to Initiating Orders,
today, a fee of $0.49 per contract for
Penny Classes and $0.94 per contract fee
for Non-Penny Classes is assessed to the
Initiating Order when a BX Participant
responds to a Request for PRISM with
an Initiating Order, provided the PRISM
Order trades with an Initiating Order.
This pricing is being amended such that
a fee of $0.50 per contract for Penny
Classes and $1.25 per contract fee for
Non-Penny Classes will be assessed to
the Initiating Order when a BX
Participant responds to a Request for
PRISM with an Initiating Order,
provided the PRISM Order trades with
an Initiating Order.
With respect to Responses to a PRISM
Auction, today, Responses to a PRISM
Auction is assessed $0.49 per contract
fee for Penny Classes and a $0.94 per
contract fee for Non-Penny Classes. This
pricing is being amended such that
Responses to a PRISM Auction will be
assessed $0.50 per contract fee for
Penny Classes and a $1.25 per contract
fee for Non-Penny Classes.
While the Exchange is increasing the
pricing to Initiating Orders and
Responses to a PRISM Auction, the
Exchange believes that this pricing
remains competitive and will continue
to attract PRISM Auction order flow to
BX.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,18 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
83193
of the Act,19 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
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 20
(‘‘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’. . . .’’ 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 seventeen 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.
Options 7, Section 2(1)
The Exchange’s proposal to reduce
the Lead Market Maker and Market
Maker Penny Symbol Maker Rebates
and the Customer Penny Symbol Taker
Fee is reasonable. Despite the reduction
of these Penny Symbol Maker Rebates
for Lead Market Makers and Market
Makers, the Exchange will continue to
19 15
U.S.C. 78f(b)(4) and (5).
v. SEC, 615 F.3d 525 (D.C. Cir.
20 NetCoalition
17 A Request for PRISM is a mechanism to submit
orders into a PRISM Auction as described within
Options 3, Section 7(e)(1)(A)(1)(b). See BX Options
7, Section 2(5).
18 15 U.S.C. 78f(b).
PO 00000
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2010).
21 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)).
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offer these rebates to incentivize
Participants to continue to direct order
flow to BX. The reduction of the
Customer Penny Symbol Taker Fee from
$0.46 to $0.40 per contract will attract
more Customer order flow to BX to take
advantage of the lower rate.
The Exchange’s proposal to reduce
the Lead Market Maker and Market
Maker Penny Symbol Maker Rebates
and the Customer Penny Symbol Taker
Fee is equitable and not unfairly
discriminatory. With respect to the
amendments to the Lead Market Maker
and Market Maker Penny Symbol Maker
Rebates, the Exchange notes that unlike
other market participants, Lead Market
Makers and Market Makers add value
through continuous quoting and the
commitment of capital.22 Further,
differentiating Lead Market Makers and
Market Makers is equitable and not
unfairly discriminatory because Lead
Market Makers are subject to heightened
quoting obligations 23 as compared to
Market Makers. The higher rebate
therefore recognizes the differing
contributions made to the liquidity and
trading environment on the Exchange by
Lead Market Makers. Overall, the
Exchange believes that incentivizing
both Lead Market Makers and Market
Makers to provide greater liquidity
benefits all market participants through
the quality of order interaction. The
reduction of the Customer Penny
Symbol Taker Fee from $0.46 to $0.40
per contract is equitable and not
unfairly discriminatory because
Customers will continue to receive
favorable pricing as compared to other
market participants because Customer
liquidity enhances market quality on the
Exchange by providing more trading
opportunities, which benefits all market
participants.
The Exchange’s proposal to
increase 24 the Customer Non-Penny
Symbol Maker Rebate and NonCustomer Non-Penny Symbol Taker
Fees is reasonable. Increasing the
Customer Maker Rebate from $0.90 to
$1.10 per contract will attract more
Customer order flow to BX. With respect
to increasing the Taker Fees for all NonCustomers from $1.10 to $1.25 per
contract, the Exchange believes that
these fees will continue to draw
participants seeking liquidity to BX
because BX is increasing its Non-Penny
Customer Maker Rebate to enhance its
market quality and provide more trading
22 See
BX Options 2, Section 4.
23 Id.
24 The Exchange proposes to increase the Maker
Rebates for Customer from $0.90 to $1.10 per
contract and increase the Taker Fees for all NonCustomers from $1.10 to $1.25 per contract.
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opportunities, which benefits all market
participants.
The Exchange’s proposal to increase
the Customer Non-Penny Symbol Maker
Rebate and Non-Customer Non-Penny
Symbol Taker Fees is equitable and not
unfairly discriminatory. The increase in
the Customer Non-Penny Symbol Maker
Rebate from $0.90 to $1.10 is equitable
and not unfairly discriminatory because
Customers will continue to receive
favorable pricing as compared to other
market participants because Customer
liquidity enhances market quality on the
Exchange by providing more trading
opportunities, which benefits all market
participants. The increase in the NonPenny Symbol Taker Fees for all NonCustomers from $1.10 to $1.25 per
contract, is equitable and not unfairly
discriminatory because the Exchange
will uniformly assess the Non-Penny
Taker Fees to all Non-Customers.
With respect to note 1 of Options 7,
Section 2(1), the Exchange’s proposal to
reduce the Customer Penny Symbol
Taker Fee from the proposed $0.40 per
contract to $0.33 per contract for trades
which remove liquidity in SPY, the
Exchange believes that this is reasonable
because note 1 will continue to attract
Customer Penny Symbol SPY
transactions that remove liquidity as the
Exchange will continue to offer this
discount, albeit a lesser discount as
proposed. Also, Customers will
continue to receive favorable pricing in
SPY as compared to Non-Customers.
Additionally, the Exchange’s proposal
to extend this discount to Customer
Penny Symbol transactions that remove
liquidity in QQQ and IWM will attract
QQQ and IWM transactions that remove
liquidity to BX. In addition, the
Exchange believes that it is reasonable
to pay lower fees in SPY, QQQ and IWM
as compared to other options symbols
because the Exchange is seeking to
incentivize greater order flow in these
highly liquid Penny Symbols which are
subject to greater competition among
options exchanges. Finally, the
Exchange’s proposal to reserve note 2 of
Options 7, Section 2(1) is reasonable
because the Exchange would assess the
Penny Symbol Maker Rebate for Lead
Market Makers and Market Makers in
SPY, AAPL and QQQ the same fees as
it assesses to all other options symbols.
With respect to note 1 of Options 7,
Section 2(1), the Exchange’s proposal to
reduce the Customer Penny Symbol
Taker Fee from $0.40 to $0.33 per
contract for trades which remove
liquidity in SPY and also extend this
discount to Customer Penny Symbol
Taker Fees that remove liquidity in
QQQ and IWM is equitable and not
unfairly discriminatory because
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
Customer liquidity enhances market
quality on the Exchange by providing
more trading opportunities, which
benefits all market participants.
Additionally, the Exchange will assess
the lower Taker Fee uniformly to all
Customer Penny Symbol Taker Fees in
SPY, QQQ and IWM. Finally, the
Exchange’s proposal to reserve note 2 of
Options 7, Section 2(1) is equitable and
not unfairly discriminatory because the
Exchange would pay the same Penny
Symbol Maker Rebates to Lead Market
Makers and Market Makers for all other
options symbols.
Options 7, Section 2(3)
The Exchange’s proposal to assess a
Non-Customer an increased routing fee
of $1.20 to route to another options
exchange and a Customer a Fixed Fee of
$0.23 per contract, in addition to the
actual transaction fee assessed by the
away market, for routing contracts to
any options exchange 25 is reasonable
because the proposed Routing Fees
would enable the Exchange to recover
the costs it incurs to route orders to
away markets after taking into account
the other costs associated with routing
orders to other options exchanges. In
determining its proposed routing fees,
the Exchange took into account
transaction fees assessed by other
options exchanges, the Exchange’s
projected clearing costs, and the
projected administrative, regulatory,
and technical costs associated with
routing orders to other options
exchanges. While the Exchange is no
longer offering a discounted Routing Fee
to route to NOM and Phlx, the Exchange
notes that the Routing Fee will be $0.13
for these markets, similar to other
options markets, if they pay a rebate.26
Routing services offered by the
Exchange are completely optional and
market participants can readily select
between various providers of routing
services, including other exchanges and
broker-dealers. Also, the Exchange notes
that market participants may elect to
mark their orders as ‘‘Do Not Route’’ to
avoid any routing fees.27
The Exchange’s proposal to assess a
Non-Customer an increased routing fee
of $1.20 to route to another options
exchange and a Customer a Fixed Fee of
$0.23 per contract, in addition to the
actual transaction fee assessed by the
away market, for routing contracts to
25 The Exchange would no longer assess the lower
routing of $0.13 per contract, in addition to the
actual transaction fee assessed, when routing to
NOM and Phlx.
26 Both NOM and Phlx offer rebates. See NOM’s
Pricing Schedule at Options 7, Section 2 and Phlx’s
Pricing Schedule at Options 7, Sections 2 and 4.
27 See BX Options 3, Section 7(c).
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any options exchange is equitable and
not unfairly discriminatory as all NonCustomers would be assessed a uniform
routing fee. Additionally, Customers
will be uniformly assessed the same fee,
regardless of the destination market.
Customers will continue to receive
favorable pricing as compared to other
market participants because Customer
liquidity enhances market quality on the
Exchange by providing more trading
opportunities, which benefits all market
participants. Finally, the Exchange
notes that market participants may elect
to market orders as Do Not Route to
avoid any routing fees.
Options 7, Section 2(4)
The Exchange’s proposal to amend its
pricing related to execution of contracts
on BX that generate an order exposure
alert is reasonable. While the Exchange
is increasing fees to respond to an order
exposure alert, it is also increasing
rebates that trigger an order exposure
alert. The Exchange believes that this
pricing will continue to provide
incentives to Participants to utilize the
order exposure functionality which
facilitates the ability of the Exchange to
bring together participants and
encourage more robust competition for
orders. For Penny Symbols and NonPenny Symbols, increasing the
Customer rebate for orders triggering
order exposure alert, and offering higher
Customer rebates as compared to NonCustomer rebates is reasonable because
it encourages the desired Customer
behavior by attracting Customer interest
to the Exchange. Increasing the
Customer, Lead Market Maker, Market
Maker, and Non-Customer fees for
orders responding to order exposure
alerts in Penny Symbols and Non-Penny
Symbols is reasonable because the
associated revenue will allow the
Exchange to maintain and enhance its
services. Additionally, for Penny
Symbols, Customers would pay the
lowest fee for responding to order
exposure alert while all Participants are
assessed the same fee for Non-Penny
Symbols.
The Exchange’s proposal to amend its
pricing related to execution of contracts
on BX that generate an order exposure
alert is equitable and not unfairly
discriminatory. Customers are being
paid higher Penny Symbol and NonPenny Symbol rebates and lower Penny
Symbols fees as compared to NonCustomers because Customer activity
enhances liquidity on the Exchange for
the benefit of all market participants
and benefits all market participants by
providing more trading opportunities,
which attracts market makers. An
increase in the activity of these market
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participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow
from other market participants. The
Exchange also is assessing the same
Non-Penny Symbol fees uniformly to all
Participants.
Options 7, Section 2(5)
The Exchange’s proposal to amend its
PRISM pricing is reasonable because the
Exchange proposes to not assess an
Initiating Order fee in Penny and NonPenny Classes. Today, the Exchange
assesses no PRISM Order fee to any
Participant in Penny or Non-Penny
Classes and assesses Non-Customers a
$0.05 per contract Initiating Order fee in
Penny and Non-Penny Classes. The
Exchange proposes to continue to assess
no PRISM Order fee and also proposes
to amend the Non-Customer Initiating
Order Fees from $0.05 to $0.00 per
contract. Today, Customers are not
assessed an Initiating Order Fee in
either Penny or Non-Penny Classes.
With this proposed change, no
Participant will be assessed an Initiating
Order fee in Penny Classes and NonPenny Classes. Further, the Exchange
proposes to pay a Non-Penny Class
PRISM Order rebate to a Customer of
$0.12 per contract. The Exchange
believes that the proposed pricing will
encourage BX Participants to submit a
greater amount of PRISM Orders to BX
as the Exchange will not assess PRISM
Order or Initiating Order fees to any BX
Participant and it will pay a Non-Penny
Class PRISM Order rebate to a Customer
of $0.12 per contract. With respect to a
PRISM Response to a PRISM Auction
the Exchange’s proposal to increase the
$0.49 per contract fee for Penny Classes,
which is currently assessed to all
Participants to $0.50 per contract and
the proposal to increase the $0.94 per
contract fee for Non-Penny Classes,
which is currently assessed to all
Participants, to $1.25 per contract is
reasonable because despite these
increases, the Exchange believes that the
pricing will continue to encourage
Participants to send order to BX’s
PRISM Auction. Additionally, the
proposed PRISM Response fees would
be equivalent to the Penny Symbol
Taker Fees in Options 7, Section 2(1) of
$0.50 per contract for Lead Market
Makers, BX Options Market Makers and
Non-Customers and $0.40 per contract
for Customers. Additionally, the
proposed PRISM Response Fees would
be equivalent to the Non-Penny Symbol
Taker Fees in Options 7, Section 2(1) of
$1.25 per contract for Lead Market
Makers, BX Options Market Makers and
Non-Customers and $0.79 per contract
for Customers. The Exchange’s proposal
PO 00000
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83195
harmonizes the PRISM Response fees
for Penny and Non-Penny Classes so
that they are the same as the Taker Fees
assessed to each market participant
when they remove liquidity from the
order book. The Exchange believes that
it is reasonable to assess Penny and
Non-Penny Class PRISM Response Fees
that are equivalent to those Taker Fees
assessed to Participants for removing
liquidity from the order book because
orders resting on the order book may
respond to PRISM Auctions similar to
PRISM Responses entered during a
PRISM Auction. The Exchange believes
that despite the increase in these PRISM
Response Fees, the fees remain
competitive with the pricing to remove
liquidity from the order book.
The Exchange’s proposal to amend its
PRISM pricing is equitable and not
unfairly discriminatory. The Exchange
will uniformly not assess a Penny Class
or Non-Penny Class PRISM Order fee or
Initiating Order Fee to any Participant.
While Customers will receive a Penny
Symbol PRISM Order rebate, the
Exchange notes that Customer activity
enhances liquidity on the Exchange for
the benefit of all market participants
and benefits all market participants by
providing more trading opportunities,
which attracts market makers. The
proposed PRISM Response Fees would
be equivalent to the Penny Symbol
Taker Fees in Options 7, Section 2(1) of
$0.50 per contract for Lead Market
Makers, Market Makers and NonCustomers and $0.40 per contract for
Customers. Additionally, the proposed
PRISM Response Fees would be
equivalent to the Non-Penny Symbol
Taker Fees in Options 7, Section 2(1) of
$1.25 per contract for Lead Market
Makers, Market Makers and NonCustomers and $0.79 per contract for
Customers. Assessing Customers a lower
Response Fee as compared to NonCustomers is equitable and not unfairly
discriminatory because Customer
activity enhances liquidity on the
Exchange for the benefit of all market
participants and benefits all market
participants by providing more trading
opportunities, which attracts market
makers. Further, assessing no fee to the
Initiating Order and assessing Response
Fees as described above to Participants
that respond to the PRISM Auction is
equitable and not unfairly
discriminatory because the Exchange
desires to encourage Participants to
submit PRISM Orders to BX.
Responders, similar to Participants that
remove liquidity from the order book,
may interact with the PRISM Order and
receive an allocation. Of note, any BX
Participant may respond to a PRISM
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Auction. Similar to the manner in
which the Exchange assesses fees to
takers of liquidity in Options 7, Section
2(1), Participants who remove liquidity
are assessed fees to interact with the
liquidity. The Exchange incentivizes
Participants that add liquidity on our
markets by assessing lower fees and/or
rebates to encourage order flow to be
sent to BX. The Exchange believes that
creating a similar model to encourage
Participants to bring two-sided orders
into the PRISM Auction and assessing
higher fees for the Participants that
interact with those orders is equitable
and not unfairly discriminatory as well
as consistent with the fee structure in
place on BX today. Finally, BX
Participants may elect not to utilize the
PRISM Auction and only transact
options on the order book, in which
case they would not incur the
Responder Fees.
market or marketable interest which
rested on the order book prior to the
commencement of a PRISM Auction in
the same manner as other BX
Participants who posted liquidity on the
order book as they would both be
considered makers of liquidity. Further,
all Participants who submitted a PRISM
Order that executed against the
unrelated market or marketable interest
that posted to the order book prior to the
commencement of a PRISM Auction
would be uniformly assessed a Taker
Fee. The Exchange’s proposal would
treat BX Participants who submitted
PRISM Order that executed against the
unrelated market or marketable interest
that posted to the order book prior to the
commencement of a PRISM Auction in
the same manner as other BX
Participants who removed liquidity
from the order book as they would both
be considered takers of liquidity.
Unrelated Market or Marketable Interest
The Exchange’s proposal to amend
the unrelated market or marketable
interest rule text in Options 7, Section
2(5) to reflect the proposed changes to
Options 7, Section 2(1) order book
pricing and Options 7, Section 2(5)
PRISM pricing is reasonable because the
Exchange seeks to incentivize
Participants to submit PRISM Auction
Orders to receive a guaranteed
execution, potential price improvement,
and Customer rebates. The Exchange’s
PRISM pricing assesses fees to PRISM
Responses and unrelated market or
marketable interest that allocated in the
PRISM Auction and rewards those BX
Participants with a guaranteed
execution and potential price
improvement. The response fees
assessed by the Exchange are intended
to fund the Customer rebates paid by the
Exchange which seek to incentivize
increased Customer order flow to the
PRISM Auction. While the Exchange’s
proposal increases these fees, the
Exchange believes this pricing will
continue to attract liquidity to BX and
reward Participants differently for the
order flow.
The Exchange’s proposal to amend
the unrelated market or marketable
interest rule text in Options 7, Section
2(5) to reflect the proposed changes to
Options 7, Section 2(1) order book
pricing and Options 7, Section 2(5)
PRISM pricing is equitable and not
unfairly discriminatory. All BX
Participants who submitted unrelated
market or marketable interest which
rested on the order book prior to the
commencement of a PRISM Auction
will be uniformly paid a Maker Rebate.
The Exchange’s proposal would treat BX
Participants who submitted unrelated
Request for PRISM
The Exchange’s proposal to amend
pricing for PRISM Orders submitted via
a Request for PRISM is reasonable.
While the Exchange is increasing the
Initiating order fees in Penny and NonPenny Classes as well as the Responses
to a PRISM Auction in Penny and NonPenny Classes, the Exchange believes
that this pricing will continue to
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.
Further, the Exchange notes that it will
continue to offer certain rebates to
attract BX Participants to utilize the
Request for PRISM mechanism. Further,
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
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
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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 $0.50 per contract fee for Penny
Classes and $1.25 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
pricing for PRISM Orders submitted via
a Request for PRISM 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.28 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.
28 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.
lotter on DSK11XQN23PROD with NOTICES1
Intramarket Competition
Options 7, Section 2(1)
The Exchange’s proposal to reduce
certain Penny Symbol Maker Rebates
and Taker Fees and increase certain
Non-Penny Symbol Maker Rebates and
Taker Fees does not impose an undue
burden on competition. With respect to
the amendments to the Lead Market
Maker and Market Maker Penny Symbol
Maker Rebates, the Exchange notes that
unlike other market participants, Lead
Market Makers and Market Makers add
value through continuous quoting and
the commitment of capital.29 Further,
differentiating Lead Market Makers and
Market Makers is equitable and not
unfairly discriminatory because Lead
Market Makers are subject to heightened
quoting obligations 30 as compared to
Market Makers. The higher rebate
therefore recognizes the differing
contributions made to the liquidity and
trading environment on the Exchange by
Lead Market Makers. Overall, the
Exchange believes that incentivizing
both Lead Market Makers and Market
Makers to provide greater liquidity
benefits all market participants through
the quality of order interaction. The
29 See
BX Options 2, Section 4.
30 Id.
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reduction of the Customer Penny
Symbol Taker Fee from $0.46 to $0.40
per contract and the increase in the
Non-Penny Symbol Maker Rebates for
Customers from $0.90 to $1.10 does not
impose an undue burden on
competition because Customers will
continue to receive favorable pricing as
compared to other market participants
because Customer liquidity enhances
market quality on the Exchange by
providing more trading opportunities,
which benefits all market participants.
The Exchange’s proposal to increase the
Non-Penny Symbol Taker Fees for all
Non-Customers from $1.10 to $1.25 per
contract does not impose an undue
burden on competition because the
Exchange will uniformly assess the
Non-Penny Taker Fees to all NonCustomers.
With respect to note 1 of Options 7,
Section 2(1), the Exchange’s proposal to
reduce the Customer Penny Symbol
Taker Fee from $0.40 to $0.33 per
contract for trades which remove
liquidity in SPY and also extend this
discount to Customer Penny Symbol
Taker Fees that remove liquidity in
QQQ and IWM does not impose an
undue burden on competition because
Customer liquidity enhances market
quality on the Exchange by providing
more trading opportunities, which
benefits all market participants.
Additionally, the Exchange will assess
the lower Taker Fee uniformly to all
Customer Penny Symbol Taker Fees in
SPY, QQQ and IWM. Finally, the
Exchange’s proposal to reserve note 2 of
Options 7, Section 2(1) does not impose
an undue burden on competition
because the Exchange would pay the
same Penny Symbol Maker Rebates to
Lead Market Makers and Market Makers
for all other options symbols.
Options 7, Section 2(3)
The Exchange’s proposal to assess a
Non-Customer an increased routing fee
of $1.20 to route to another options
exchange and a Customer a Fixed Fee of
$0.23 per contract, in addition to the
actual transaction fee assessed by the
away market, for routing contracts to
any options exchange does not impose
an undue burden on competition
because all Non-Customers would be
assessed a uniform routing fee.
Additionally, all Customers will be
uniformly assessed the same fee,
regardless of the destination market.
Customers will continue to receive
favorable pricing as compared to other
market participants because Customer
liquidity enhances market quality on the
Exchange by providing more trading
opportunities, which benefits all market
participants. Finally, the Exchange
PO 00000
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83197
notes that market participants may elect
to market orders as Do Not Route to
avoid any routing fees.
Options 7, Section 2(4)
The Exchange’s proposal to amend its
pricing related to execution of contracts
on BX that generate an order exposure
alert does not impose an undue burden
on competition. Customers are being
paid higher Penny Symbol and NonPenny Symbol rebates and lower Penny
Symbols fees as compared to NonCustomers because Customer activity
enhances liquidity on the Exchange for
the benefit of all market participants
and benefits all market participants by
providing more trading opportunities,
which attracts market makers. An
increase in the activity of these market
participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow
from other market participants. The
Exchange also is assessing the same
Non-Penny Symbol fees uniformly to all
Participants.
Options 7, Section 2(5)
The Exchange’s proposal to amend its
PRISM pricing does not impose an
undue burden on competition. The
Exchange will uniformly not assess a
Penny Class or Non-Penny Class PRISM
Order fee or Initiating Order Fee to any
Participant. While Customers will
receive a Penny Symbol PRISM Order
rebate, the Exchange notes that
Customer activity enhances liquidity on
the Exchange for the benefit of all
market participants and benefits all
market participants by providing more
trading opportunities, which attracts
market makers. Additionally, the
Exchange will uniformly assess the
PRISM Response fee to all Participants.
The proposed PRISM Response Fees
would be equivalent to the Penny
Symbol Taker Fees in Options 7,
Section 2(1) of $0.50 per contract for
Lead Market Makers, Market Makers
and Non-Customers and $0.40 per
contract for Customers. Additionally,
the proposed PRISM Response Fees
would be equivalent to the Non-Penny
Symbol Taker Fees in Options 7,
Section 2(1) of $1.25 per contract for
Lead Market Makers, Market Makers
and Non-Customers and $0.79 per
contract for Customers. Assessing
Customers a lower Response Fee as
compared to Non-Customers is equitable
and not unfairly discriminatory because
Customer activity enhances liquidity on
the Exchange for the benefit of all
market participants and benefits all
market participants by providing more
trading opportunities, which attracts
market makers. Further, assessing no fee
E:\FR\FM\28NON1.SGM
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Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
to the Initiating Order and assessing
Response Fees as described above to
Participants that respond to the PRISM
Auction is equitable and not unfairly
discriminatory because the Exchange
desires to encourage Participants to
submit PRISM Orders to BX.
Responders, similar to Participants that
remove liquidity from the order book,
may interact with the PRISM Order and
receive an allocation. Of note, any BX
Participant may respond to a PRISM
Auction. Similar to the manner in
which the Exchange assesses fees to
takers of liquidity in Options 7, Section
2(1), Participants who remove liquidity
are assessed fees to interact with the
liquidity. The Exchange incentivizes
Participants that add liquidity on our
markets by assessing lower fees and/or
rebates to encourage order flow to be
sent to BX. The Exchange believes that
creating a similar model to encourage
Participants to bring two-sided orders
into the PRISM Auction and assessing
higher fees for the Participants that
interact with those orders is equitable
and not unfairly discriminatory as well
as consistent with the fee structure in
place on BX today. Finally, BX
Participants may elect not to utilize the
PRISM Auction and only transact
options on the order book, in which
case they would not incur the
Responder Fees.
Unrelated Market or Marketable Interest
The Exchange’s proposal to amend
the unrelated market or marketable
interest rule text in Options 7, Section
2(5) to reflect the proposed changes to
Options 7, Section 2(1) order book
pricing and Options 7, Section 2(5)
PRISM pricing does not impose an
undue burden on competition. All BX
Participants who submitted unrelated
market or marketable interest which
rested on the order book prior to the
commencement of a PRISM Auction
will be uniformly paid a Maker Rebate.
The Exchange’s proposal would treat BX
Participants who submitted unrelated
market or marketable interest which
rested on the order book prior to the
commencement of a PRISM Auction in
the same manner as other BX
Participants who posted liquidity on the
order book as they would both be
considered makers of liquidity. Further,
all Participants who submitted a PRISM
Order that executed against the
unrelated market or marketable interest
that posted to the order book prior to the
commencement of a PRISM Auction
would be uniformly assessed a Taker
Fee. The Exchange’s proposal would
treat BX Participants who submitted
PRISM Order that executed against the
unrelated market or marketable interest
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17:19 Nov 27, 2023
Jkt 262001
that posted to the order book prior to the
commencement of a PRISM Auction in
the same manner as other BX
Participants who removed liquidity
from the order book as they would both
be considered takers of liquidity.
Request for PRISM
The Exchange’s proposal to amend
pricing for PRISM Orders submitted via
a Request for PRISM 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.31 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.32
At any time within 60 days of the
filing of the proposed rule change, the
31 The identity of the sender and the recipients
are not known to any party.
32 15 U.S.C. 78s(b)(3)(A)(ii).
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
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–2023–031 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–2023–031. 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
E:\FR\FM\28NON1.SGM
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Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–BX–2023–031 and should be
submitted on or before December 19,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023–26112 Filed 11–27–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
35053; 812–15509]
CAZ Strategic Opportunities Fund and
CAZ Investments Registered Adviser
LLC
November 21, 2023.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
lotter on DSK11XQN23PROD with NOTICES1
AGENCY:
Notice of an application for an order
pursuant to section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
18(a)(2), 18(c), and 18(i) of the Act,
pursuant to sections 6(c) and 23(c) of
the Act for an exemption from rule 23c–
3 under the Act, and pursuant to section
17(d) of the Act and rule 17d–1
thereunder.
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
registered closed-end investment
companies to issue multiple classes of
shares and to impose early withdrawal
charges and asset-based distribution
and/or service fees.
APPLICANTS: CAZ Strategic
Opportunities Fund and CAZ
Investments Registered Adviser LLC.
FILING DATE: The application was filed
on September 29, 2023 and amended on
November 15, 2023.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing on any application by
emailing the SEC’s Secretary at
Secretarys-Office@sec.gov and serving
the Applicants with a copy of the
request by email, if an email address is
listed for the relevant Applicant below,
or personally or by mail, if a physical
address is listed for the relevant
Applicant below. Hearing requests
should be received by the Commission
33 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:19 Nov 27, 2023
Jkt 262001
by 5:30 p.m. on December 18, 2023, and
should be accompanied by proof of
service on the Applicants, in the form
of an affidavit, or, for lawyers, a
certificate of service. Pursuant to rule 0–
5 under the Act, hearing requests should
state the nature of the writer’s interest,
any facts bearing upon the desirability
of a hearing on the matter, the reason for
the request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
Christopher Alan Zook, CAZ Strategic
Opportunities Fund, caz@
cazinvestments.com; with a copy to
Thomas Friedmann, Dechert LLP,
thomas.friedmann@dechert.com;
Matthew Carter, Dechert LLP,
matthew.carter@dechert.com; and
Alexander Karampatsos, Dechert LLP,
alexander.karampatsos@dechert.com.
FOR FURTHER INFORMATION CONTACT:
Trace W. Rakestraw, Senior Special
Counsel, at (202) 551–6825 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: For
Applicants’ representations, legal
analysis, and conditions, please refer to
Applicants’ application, dated
November 15, 2023, which may be
obtained via the Commission’s website
by searching for the file number at the
top of this document, or for an
Applicant using the Company name
search field on the SEC’s EDGAR
system. The SEC’s EDGAR system may
be searched at https://www.sec.gov/
edgar/searchedgar/legacy/
companysearch.html.
You may also call the SEC’s Public
Reference Room at (202) 551–8090.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–26116 Filed 11–27–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
35052; File No. 812–15467]
Oxford Park Income Fund, Inc. and
Oxford Park Management, LLC
November 21, 2023.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
AGENCY:
PO 00000
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83199
Notice of an application for an order
pursuant to section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
18(a)(2), 18(c), and 18(i) of the Act,
pursuant to sections 6(c) and 23(c) of
the Act for certain exemptions from rule
23c–3 under the Act, and pursuant to
section 17(d) of the Act and rule 17d–
1 thereunder.
Summary of Application: Applicants
request an order to permit certain
registered closed-end management
investment companies to issue multiple
classes of shares and to impose early
withdrawal charges and asset-based
distribution and/or service fees.
Applicants: Oxford Park Income
Fund, Inc. and Oxford Park
Management, LLC.
Filing Dates: The application was
filed on May 16, 2023, and amended on
June 14, 2023 and October 4, 2023.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing on any application by
emailing the SEC’s Secretary at
Secretarys-Office@sec.gov and serving
the Applicants with a copy of the
request by email, if an email address is
listed for the relevant Applicant below,
or personally or by mail, if a physical
address is listed for the relevant
Applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on December 18, 2023, and
should be accompanied by proof of
service on Applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary at
Secretarys-Office@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
Jonathan H. Cohen, Oxford Park Income
Fund. Inc., 8 Sound Shore Drive, Suite
255, Greenwich, CT 06830; Harry S.
Pangas, Dechert LLP, harry.pangas@
dechert.com; Philip T. Hinkle, Dechert
LLP, philip.hinkle@dechert.com.
FOR FURTHER INFORMATION CONTACT:
Chris Chase, Senior Counsel, or Lisa
Reid Ragen, Branch Chief, at (202) 551–
6825 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: For
Applicants’ representations, legal
analysis, and conditions, please refer to
Applicants’ second amended and
E:\FR\FM\28NON1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 227 (Tuesday, November 28, 2023)]
[Notices]
[Pages 83189-83199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26112]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99008; File No. SR-BX-2023-031]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options
7, Section 2 Regarding Fees and Rebates
November 21, 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 November 17, 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 its Pricing Schedule at Options 7,
Section 2.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed pricing changes on
November 14, 2023 (SR-BX-2023-029). On November 16, 2023, the
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------
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
[[Page 83190]]
forth in sections A, B, and C below, of the most significant aspects of
such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend BX's Pricing Schedule at Options 7,
Section 2, BX Options Market-Fees and Rebates. Specifically, BX
proposes to (i) amend BX's fees and rebates for execution of contracts
at Options 7, Section 2(1) including note 1, and reserve note 2; (ii)
amend fees for routing contracts to markets other than the Exchange at
Options 7, Section 2(3); (iii) amend fees and rebates for execution of
contracts on the Exchange that generate an order exposure alert at
Options 7, Section 2(4); and (iv) amend fees and rebates for BX Price
Improvement Auction (``PRISM'') at Options 7, Section 2(5). Each change
will be described below.
Options 7, Section 2(1)
Today, the Exchange assesses the following Penny Symbols and Non-
Penny Symbols Maker Rebates and Taker Fees:
Penny Symbols
------------------------------------------------------------------------
Market participant Maker rebate Taker fee
------------------------------------------------------------------------
Lead Market Maker....................... \2\ (0.29) $0.50
Market Maker............................ \2\ (0.25) 0.50
Non-Customer............................ (0.12) 0.50
Firm.................................... (0.12) 0.50
Customer................................ (0.30) \1\ 0.46
------------------------------------------------------------------------
Non-Penny Symbols
------------------------------------------------------------------------
Maker rebate /
Market participant fee Taker fee
------------------------------------------------------------------------
Lead Market Maker....................... (0.45) $1.10
Market Maker............................ (0.40) 1.10
Non-Customer............................ 0.45 1.10
Firm.................................... 0.45 1.10
Customer................................ \3\ (0.90) 0.79
------------------------------------------------------------------------
At this time, the Exchange proposes to reduce certain Penny Symbol
Maker Rebates and Taker Fees and increase certain Non-Penny Symbol
Maker Rebates and Taker Fees. With respect to the Penny Symbols, the
Exchange proposes to decrease the Maker Rebates for Lead Market Makers
\4\ from $0.29 to $0.24 per contract and decrease the Maker Rebates for
Market Makers \5\ from $0.25 to $0.20 per contract. While the Exchange
is reducing these Penny Symbol Maker Rebates for Lead Market Makers and
Market Makers, the Exchange will continue to offer the rebates to
incentivize market participants to direct order flow to BX.
Additionally, the Exchange proposes to reduce the Customer \6\ Penny
Symbol Taker Fee from $0.46 to $0.40 per contract. The Exchange
believes reducing this Penny Symbol Taker Fee will attract more
Customer order flow to BX.\7\
---------------------------------------------------------------------------
\4\ The term ``Lead Market Maker'' or (``LMM'') applies to a
registered BX Options Market Maker that is approved pursuant to
Options 2, Section 3 to be the LMM in an options class (options
classes). See BX Options 7, Section 1(a).
\5\ The term ``BX Options Market Maker'' or (``M'') is a
Participant that has registered as a Market Maker on BX Options
pursuant to Options 2, Section 1, and must also remain in good
standing pursuant to Options 2, Section 9. In order to receive
Market Maker pricing in all securities, the Participant must be
registered as a BX Options Market Maker in at least one security.
See BX Options 7, Section 1(a).
\6\ The term ``Customer'' or (``C'') applies to any transaction
that is identified by a Participant for clearing in the Customer
range at The Options Clearing Corporation (``OCC'') which is not for
the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(a)(48)). See BX Options 7, Section 1(a).
\7\ The Exchange is proposing to add dollar signs in a few
places in the table in Options 7, Section 2(1) where the dollar sign
is missing.
---------------------------------------------------------------------------
With respect to Non-Penny Symbols, the Exchange proposes to
increase the Maker Rebates for Customers from $0.90 to $1.10 per
contract and increase the Taker Fees for all Non-Customers \8\ from
$1.10 to $1.25 per contract. The Exchange believes the increase to the
Non-Penny Symbol Customer Maker Rebate will attract more Customer order
flow to BX. With respect to the Non-Penny Symbol Taker Fee for Non-
Customers, while the Exchange is increasing these fees, the Exchange
believes that these fees will continue to draw participants seeking
liquidity to BX because BX is increasing its Non-Penny Customer Maker
Rebate to enhance its market quality and provide more trading
opportunities, which benefits all market participants.
---------------------------------------------------------------------------
\8\ The term ``Non-Customer'' shall include a Professional,
Broker-Dealer and Non-BX Options Market Maker. See BX Options 7,
Section 1(a).
---------------------------------------------------------------------------
The Exchange proposes to amend note 1 of Options 7, Section 2(1)
which currently reduces the Customer Penny Symbol Taker Fee from $0.46
to $0.33 per contract for trades which remove liquidity in SPDR S&P 500
ETF (``SPY''). With the proposed changes to the Customer Penny Symbol
Taker Fee noted herein, note 1 of Options 7, Section 2(1) would reduce
the Customer Penny Symbol Taker Fee from $0.40 to $0.33 per contract
for trades which remove liquidity in SPY. Additionally, the Exchange
proposes to extend this Customer Penny Symbol discount to transactions
that remove liquidity in Invesco QQQ Trust Series 1 (``QQQ'') and
iShares Russell 2000 ETF (``IWM''). The proposed rule text would
provide, ``Customer Taker Fee will be $0.33 per contract for trades
which remove liquidity in SPY, QQQ, and IWM.'' The Exchange believes
that note 1 will continue to attract Customer Penny Symbol SPY
transactions that remove liquidity as the Exchange will continue to
discount these fees for SPY. The addition of Taker Fee discounts for
QQQ and IWM will attract additional QQQ and IWM transactions that
remove liquidity to BX.
[[Page 83191]]
The Exchange also proposes to reserve note 2 of Options 7, Section
2(1) which currently provides, ``The Maker Rebate for Lead Market
Makers and Market Makers in SPY will be $0.22 per contract. The Maker
Rebate for Lead Market Makers and Market Makers in AAPL and QQQ will be
$0.42 per contract.'' Today, the Penny Symbol Maker Rebates for Lead
Market Makers and Market Makers in SPY is reduced to $0.22 per contract
with this note 2. The Exchange would no longer reduce the Penny Symbol
Maker Rebates for Lead Market Makers and Market Makers in SPY to $0.22,
rather SPY would be paid the same Maker Rebates (a $0.24 per contract
Lead Market Maker Penny Symbol Maker Rebate and a $0.20 per contract
Market Maker Penny Symbol Maker Rebate) as all other options symbols.
Additionally, AAPL and QQQ would no longer be paid a $0.42 per contract
Penny Symbol Maker Rebate for Lead Market Makers and Market Makers,
rather AAPL and QQQ would be paid the same Maker Rebates (a $0.24 per
contract Lead Market Maker Penny Symbol Maker Rebate and a $0.20 per
contract Market Maker Penny Symbol Maker Rebate) as all other options
symbols. With this proposal, the Exchange would uniformly pay the
proposed Lead Market Maker and Market Maker Penny Symbol Maker Rebates
on all options symbols.
Options 7, Section 2(3)
Currently, BX assesses a Non-Customer routing fee of $0.99 per
contract and a Customer routing fee of $0.23 per contract, in addition
to the actual transaction fee assessed by the away market, for routing
contracts to markets other than The Nasdaq Options Market LLC (``NOM'')
and Nasdaq Phlx LLC (``Phlx''). Currently, if the away market pays a
rebate, the Exchange assesses a Customer a Routing Fee of $0.13 per
contract for markets other than NOM and Phlx. Currently, BX assesses a
Customer a $0.13 per contract Fixed Fee in addition to the actual
transaction fee assessed when routing to NOM and Phlx.
At this time, the Exchange proposes to assess a Non-Customer an
increased routing fee to route to any options exchange of $1.20 per
contract. The Exchange also proposes to assess a Customer a Fixed Fee
of $0.23 per contract, in addition to the actual transaction fee
assessed by the away market, for routing contracts to any options
exchange. The Exchange would no longer assess the lower routing of
$0.13 per contract, in addition to the actual transaction fee assessed,
when routing to NOM and Phlx. The Exchange will continue to assess a
$0.13 per contract routing fee if the away market pays a rebate,
including NOM and Phlx. The purpose of the proposed routing fees is to
recoup costs incurred by the Exchange when routing orders to other
options exchanges on behalf of options Participants. In determining its
proposed routing fees, the Exchange took into account transaction fees
assessed by other options exchanges, the Exchange's projected clearing
costs, and the projected administrative, regulatory, and technical
costs associated with routing orders to other options exchanges. The
Exchange will continue to use its affiliated broker-dealer, Nasdaq
Execution Services, to route orders to other options exchanges. Routing
services offered by the Exchange are completely optional and market
participants can readily select between various providers of routing
services, including other exchanges and broker-dealers. Also, the
Exchange notes that market participants may elect to mark their orders
as ``Do Not Route'' to avoid any routing fees.\9\ The Exchange believes
that the proposed Routing Fees would enable the Exchange to recover the
costs it incurs to route orders to away markets after taking into
account the other costs associated with routing orders to other options
exchanges. Also, the Exchange's proposal would uniformly assess the
same Customer routing fees, regardless of the away venue, of $0.23 per
contract, in addition to the actual transaction fee assessed, or $0.13
per contract if the away market pays a rebate.
---------------------------------------------------------------------------
\9\ See BX Options 3, Section 7(c).
---------------------------------------------------------------------------
Options 7, Section 2(4)
Today, the Exchange assesses the below fees and pays the below
rebates for execution of contracts on BX that generate an order
exposure alert \10\ pursuant to Options 5, Section 4.
---------------------------------------------------------------------------
\10\ An order exposure alert provides marketable orders on BX's
order book an additional opportunity for execution on BX when it is
not part of the national best bid or offer (``NBBO'') contra to the
order and the order locks or crosses the away best bid or offer
(``ABBO'').
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Customer Lead market BX options
maker market maker Non-customer
----------------------------------------------------------------------------------------------------------------
Penny Symbols:
Rebate for Order triggering order exposure $0.34 $0.00 $0.00 $0.00
alert......................................
Fee for Order responding to order exposure 0.39 0.39 0.39 0.45
alert......................................
Non-Penny Symbols:
Rebate for Order triggering order exposure 0.70 0.00 0.00 0.00
alert......................................
Fee for Order responding to order exposure 0.85 0.85 0.85 0.89
alert......................................
----------------------------------------------------------------------------------------------------------------
At this time, the Exchange proposes to amend its pricing related to
execution of contracts on BX that generate an order exposure alert.
With respect to Customer fees and rebates, the Exchange proposes to
increase the Penny Symbol rebate for an order triggering an order
exposure alert from $0.34 to $0.47 per contract. The Exchange proposes
to increase the Customer Penny Symbol fee for orders that respond to an
order exposure alert from $0.39 to $0.47 per contract. The Exchange
proposes to increase the Customer Non-Penny Symbol rebate for an order
triggering an order exposure alert from $0.70 to $1.10 per contract.
The Exchange proposes to increase the Customer Non-Penny Symbol fee for
orders that respond to an order exposure alert from $0.85 to $1.25 per
contract.
With respect to Lead Market Maker fees and rebates, the Exchange
proposes to increase the Penny Symbol rebate for an order triggering an
order exposure alert from $0.00 to $0.10 per contract. The Exchange
proposes to increase the Lead Market Maker Penny Symbol fee for orders
that respond to an order exposure alert from $0.39 to $0.50 per
contract. The Exchange proposes to increase the Lead Market Maker Non-
Penny Symbol rebate for an order triggering an order exposure alert
from $0.00 to $0.25 per contract. The Exchange proposes to increase the
Lead Market Maker Non-Penny Symbol fee for orders that respond to an
order exposure alert from $0.85 to $1.25 per contract.
[[Page 83192]]
With respect to Market Maker fees and rebates, the Exchange
proposes to increase the Penny Symbol rebate for an order triggering an
order exposure alert from $0.00 to $0.10 per contract. The Exchange
proposes to increase the Market Maker Penny Symbol fee for orders that
respond to an order exposure alert from $0.39 to $0.50 per contract.
The Exchange proposes to increase the Market Maker Non-Penny Symbol
rebate for an order triggering an order exposure alert from $0.00 to
$0.25 per contract. The Exchange proposes to increase the Market Maker
Non-Penny Symbol fee for orders that respond to an order exposure alert
from $0.85 to $1.25 per contract.
With respect to Non-Customer fees and rebates, the Exchange
proposes to increase the Penny Symbol rebate for an order triggering an
order exposure alert from $0.00 to $0.10 per contract. The Exchange
proposes to increase the Non-Customer Penny Symbol fee for orders that
respond to an order exposure alert from $0.45 to $0.50 per contract.
The Exchange proposes to increase the Non-Customer Non-Penny Symbol
rebate for an order triggering an order exposure alert from $0.00 to
$0.25 per contract. The Exchange proposes to increase the Non-Customer
Non-Penny Symbol fee for orders that respond to an order exposure alert
from $0.89 to $1.25 per contract.
While the Exchange is increasing fees to respond to an order
exposure alert, it is also increasing rebates that trigger an order
exposure alert. The Exchange believes that this pricing will continue
to provide incentives to Participants to utilize the order exposure
functionality which facilitates the ability of the Exchange to bring
together participants and encourage more robust competition for orders.
Options 7, Section 2(5)
Currently, the Exchange assesses the below fees and pays the below
rebates for orders executed in its PRISM Auction.
Fees and Rebates
[Per contract]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Submitted PRISM auction order Response to PRISM auction fee PRISM order traded with PRISM
--------------------------------------------------------- fee -------------------------------- response rebate
-------------------------------- -------------------------------
Type of market participants Initiating Penny classes Non-penny Non-penny
PRISM order order classes Penny classes classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Customer................................................ $0.00 $0.00 $0.49 $0.94 $0.35 $0.70
Lead Market Maker....................................... 0.00 0.05 0.49 0.94 0.00 0.00
BX Options Market Maker................................. 0.00 0.05 0.49 0.94 0.00 0.00
Non-Customer............................................ 0.00 0.05 0.49 0.94 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange proposes to amend its PRISM pricing to delineate PRISM
Auction Orders \11\ in Penny and Non-Penny Classes. Today, the Exchange
assesses no PRISM Order \12\ fee to any Participant in Penny or Non-
Penny Classes and assesses Non-Customers a $0.05 per contract
Initiating Order \13\ fee in Penny and Non-Penny Classes. With respect
to PRISM Auction Orders submitted in Penny Classes, the Exchange
proposes to continue to assess no PRISM Order fee to any Participant
and also proposes to amend the Non-Customer Initiating Order Fees from
$0.05 to $0.00 per contract. Today, Customers are not assessed an
Initiating Order Fee in either Penny or Non-Penny Classes. With this
proposed change, no Participant will be assessed an Initiating Order
fee in Penny Classes.
---------------------------------------------------------------------------
\11\ A PRISM Auction Order is a two-sided, paired order
comprised of a PRISM Order and an Initiating Order. See BX Options
7, Section 2(5).
\12\ A PRISM Order is 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. See
BX Options 7, Section 2(5).
\13\ An Initiating Order is one-side of a PRISM Auction Order
that represents principal or other interest which is paired with a
PRISM Order. See BX Options 7, Section 2(5).
---------------------------------------------------------------------------
With respect to PRISM Auction Orders submitted in Non-Penny
Classes, the Exchange proposes to adopt new pricing. The Exchange
proposes to pay a Non-Penny Class PRISM Order rebate to a Customer of
$0.12 per contract. Similar to Penny Classes, the Exchange proposes to
assess no Non-Penny Class PRISM Order fees or Initiating Order fees to
any Participant. The Exchange believes that the proposed pricing will
encourage BX Participants to submit a greater amount of PRISM Orders to
BX as the Exchange will not assess PRISM Order or Initiating Order fees
to any BX Participant (Penny or Non-Penny Class) and it will pay a Non-
Penny Class Customer PRISM Order rebate of $0.12 per contract.
With respect to a PRISM Response \14\ to a PRISM Auction \15\ the
Exchange proposes to increase the $0.49 per contract fee for Penny
Classes, which is currently assessed to all Participants (Customer,
Lead Market Maker, BX Options Market Maker, and Non-Customer), to $0.50
per contract for Lead Market Makers, BX Options Market Makers and Non-
Customers. The Exchange proposes to assess a Customer a $0.40 per
contract PRISM Response fee for Penny Classes. Additionally, the
Exchange proposes to increase the $0.94 per contract fee for Non-Penny
Classes, which is currently assessed to all Participants (Customer,
Lead Market Maker, BX Options Market Maker, and Non-Customer), to $1.25
per contract for Lead Market Makers, BX Options Market Makers and Non-
Customers. The Exchange proposes to assess a Customer a $0.79 per
contract PRISM Response fee for Non-Penny Classes. These proposes fees
are the same as the Taker Fees assessed to the same Participants when
removing liquidity from the order book. The Exchange is not amending
the rebates paid to a PRISM Order when that order trades with a PRISM
Response. The Exchange believes that the increased PRISM Response fees
will continue to attract order flow to BX since the Exchange is no
longer assessing any fees to submit PRISM Orders and Initiating Orders
and is now offering a Customer Non-Penny rebate to submit a PRISM Order
with this proposal.
---------------------------------------------------------------------------
\14\ A PRISM Response is interest that executed against the
PRISM Order pursuant to Options 3, Section 13. See BX Options 7,
Section 2(5).
\15\ The Exchange proposes to add the word ``PRISM'' before
``Response'' in Options 7, Section 2(5) of the Pricing Schedule to
utilize the defined term in the description of the column header.
---------------------------------------------------------------------------
Unrelated Market or Marketable Interest
The Exchange assesses fees and pays rebates with respect to
unrelated market or marketable interest received prior to the
commencement of a PRISM Auction and during a PRISM Auction. Today, when
a PRISM Order is a Customer order and executes against unrelated market
or marketable interest received during a PRISM Auction, the Customer
[[Page 83193]]
order receives a rebate of $0.35 per contract for Penny Classes and
$0.70 per contract for Non-Penny Classes, which represents the pricing
within Options 7, Section 2(5). In this case, the unrelated market or
marketable interest received during a PRISM Auction is assessed a $0.49
per contract fee for Penny Classes or a $0.94 per contract fee for Non-
Penny Classes as described in Options 7, Section 2(5).
Likewise, today, when a PRISM Order is a Lead Market Maker, BX
Options Market Maker or Non-Customer order and executes against
unrelated market or marketable interest received during a PRISM
Auction, the Lead Market Maker, BX Options Market Maker or Non-Customer
order pays no fee, which represents the pricing within Options 7,
Section 2(5). In this case, the unrelated market or marketable interest
received during a PRISM Auction is assessed a $0.49 per contract fee
for Penny Classes or a $0.94 per contract fee for Non-Penny Classes as
described in Options 7, Section 2(5). In contrast, today, when a PRISM
Order is a Customer, Lead Market Maker, BX Options Market Maker or Non-
Customer order and executes against unrelated market or marketable
interest received prior to a PRISM Auction, the Customer, Lead Market
Maker, BX Options Market Maker or Non-Customer order is subject to the
Taker Fee within Options 7, Section 2(1).\16\ The Exchange applies the
order book pricing within Options 7, Section 2(1) to interest received
prior to the PRISM Auction, which is considered unrelated market or
marketable interest for purposes of the PRISM Auction. In contrast, the
Exchange applies PRISM pricing within Options 7, Section 2(5) to the
unrelated market or marketable interest when interest arrived during a
PRISM Auction.
---------------------------------------------------------------------------
\16\ Today, BX assesses the following Penny Symbol Taker Fees:
$0.50 per contract for a Lead Market Maker, Market Maker, Non-
Customer, and Firm and $0.46 per contract for a Customer. BX
assesses the following Non-Penny Symbol Taker Fees: $1.10 per
contract for a Lead Market Maker, Market Maker, Non-Customer, and
Firm and $0.79 per contract for a Customer. The Exchange is
proposing changes to these fees as described herein.
---------------------------------------------------------------------------
At this time, the Exchange proposes to amend the unrelated market
or marketable interest rule text in Options 7, Section 2(5) to reflect
the amendments proposed herein to Options 7, Section 2(1) order book
pricing and Options 7, Section 2(5) PRISM pricing. The Exchange
believes this pricing will continue to attract liquidity to BX and
reward Participants differently for the order flow.
Request for PRISM
With respect to Request for PRISM \17\ Pricing, today, in lieu of
Options 7, Section 2(5) pricing, different pricing is assessed and paid
to 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. With respect to PRISM Orders, today, a rebate of $0.35 per
contract for Penny Classes and $0.70 per contract for Non-Penny Classes
is paid to a 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. Also, today, a rebate of $0.35 per contract
for Penny Classes and $0.70 per contract for Non-Penny Classes is paid
to the PRISM Order when the PRISM Order trades with a PRISM Response.
This pricing is not being amended.
---------------------------------------------------------------------------
\17\ A Request for PRISM is a mechanism to submit orders into a
PRISM Auction as described within Options 3, Section
7(e)(1)(A)(1)(b). See BX Options 7, Section 2(5).
---------------------------------------------------------------------------
With respect to Initiating Orders, today, a fee of $0.49 per
contract for Penny Classes and $0.94 per contract fee for Non-Penny
Classes is assessed to the Initiating Order when a BX Participant
responds to a Request for PRISM with an Initiating Order, provided the
PRISM Order trades with an Initiating Order. This pricing is being
amended such that a fee of $0.50 per contract for Penny Classes and
$1.25 per contract fee for Non-Penny Classes will be assessed to the
Initiating Order when a BX Participant responds to a Request for PRISM
with an Initiating Order, provided the PRISM Order trades with an
Initiating Order.
With respect to Responses to a PRISM Auction, today, Responses to a
PRISM Auction is assessed $0.49 per contract fee for Penny Classes and
a $0.94 per contract fee for Non-Penny Classes. This pricing is being
amended such that Responses to a PRISM Auction will be assessed $0.50
per contract fee for Penny Classes and a $1.25 per contract fee for
Non-Penny Classes.
While the Exchange is increasing the pricing to Initiating Orders
and Responses to a PRISM Auction, the Exchange believes that this
pricing remains competitive and will continue to attract PRISM Auction
order flow to BX.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 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 \20\
(``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'. . . .'' \21\
---------------------------------------------------------------------------
\20\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\21\ 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 seventeen
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.
Options 7, Section 2(1)
The Exchange's proposal to reduce the Lead Market Maker and Market
Maker Penny Symbol Maker Rebates and the Customer Penny Symbol Taker
Fee is reasonable. Despite the reduction of these Penny Symbol Maker
Rebates for Lead Market Makers and Market Makers, the Exchange will
continue to
[[Page 83194]]
offer these rebates to incentivize Participants to continue to direct
order flow to BX. The reduction of the Customer Penny Symbol Taker Fee
from $0.46 to $0.40 per contract will attract more Customer order flow
to BX to take advantage of the lower rate.
The Exchange's proposal to reduce the Lead Market Maker and Market
Maker Penny Symbol Maker Rebates and the Customer Penny Symbol Taker
Fee is equitable and not unfairly discriminatory. With respect to the
amendments to the Lead Market Maker and Market Maker Penny Symbol Maker
Rebates, the Exchange notes that unlike other market participants, Lead
Market Makers and Market Makers add value through continuous quoting
and the commitment of capital.\22\ Further, differentiating Lead Market
Makers and Market Makers is equitable and not unfairly discriminatory
because Lead Market Makers are subject to heightened quoting
obligations \23\ as compared to Market Makers. The higher rebate
therefore recognizes the differing contributions made to the liquidity
and trading environment on the Exchange by Lead Market Makers. Overall,
the Exchange believes that incentivizing both Lead Market Makers and
Market Makers to provide greater liquidity benefits all market
participants through the quality of order interaction. The reduction of
the Customer Penny Symbol Taker Fee from $0.46 to $0.40 per contract is
equitable and not unfairly discriminatory because Customers will
continue to receive favorable pricing as compared to other market
participants because Customer liquidity enhances market quality on the
Exchange by providing more trading opportunities, which benefits all
market participants.
---------------------------------------------------------------------------
\22\ See BX Options 2, Section 4.
\23\ Id.
---------------------------------------------------------------------------
The Exchange's proposal to increase \24\ the Customer Non-Penny
Symbol Maker Rebate and Non-Customer Non-Penny Symbol Taker Fees is
reasonable. Increasing the Customer Maker Rebate from $0.90 to $1.10
per contract will attract more Customer order flow to BX. With respect
to increasing the Taker Fees for all Non-Customers from $1.10 to $1.25
per contract, the Exchange believes that these fees will continue to
draw participants seeking liquidity to BX because BX is increasing its
Non-Penny Customer Maker Rebate to enhance its market quality and
provide more trading opportunities, which benefits all market
participants.
---------------------------------------------------------------------------
\24\ The Exchange proposes to increase the Maker Rebates for
Customer from $0.90 to $1.10 per contract and increase the Taker
Fees for all Non-Customers from $1.10 to $1.25 per contract.
---------------------------------------------------------------------------
The Exchange's proposal to increase the Customer Non-Penny Symbol
Maker Rebate and Non-Customer Non-Penny Symbol Taker Fees is equitable
and not unfairly discriminatory. The increase in the Customer Non-Penny
Symbol Maker Rebate from $0.90 to $1.10 is equitable and not unfairly
discriminatory because Customers will continue to receive favorable
pricing as compared to other market participants because Customer
liquidity enhances market quality on the Exchange by providing more
trading opportunities, which benefits all market participants. The
increase in the Non-Penny Symbol Taker Fees for all Non-Customers from
$1.10 to $1.25 per contract, is equitable and not unfairly
discriminatory because the Exchange will uniformly assess the Non-Penny
Taker Fees to all Non-Customers.
With respect to note 1 of Options 7, Section 2(1), the Exchange's
proposal to reduce the Customer Penny Symbol Taker Fee from the
proposed $0.40 per contract to $0.33 per contract for trades which
remove liquidity in SPY, the Exchange believes that this is reasonable
because note 1 will continue to attract Customer Penny Symbol SPY
transactions that remove liquidity as the Exchange will continue to
offer this discount, albeit a lesser discount as proposed. Also,
Customers will continue to receive favorable pricing in SPY as compared
to Non-Customers. Additionally, the Exchange's proposal to extend this
discount to Customer Penny Symbol transactions that remove liquidity in
QQQ and IWM will attract QQQ and IWM transactions that remove liquidity
to BX. In addition, the Exchange believes that it is reasonable to pay
lower fees in SPY, QQQ and IWM as compared to other options symbols
because the Exchange is seeking to incentivize greater order flow in
these highly liquid Penny Symbols which are subject to greater
competition among options exchanges. Finally, the Exchange's proposal
to reserve note 2 of Options 7, Section 2(1) is reasonable because the
Exchange would assess the Penny Symbol Maker Rebate for Lead Market
Makers and Market Makers in SPY, AAPL and QQQ the same fees as it
assesses to all other options symbols.
With respect to note 1 of Options 7, Section 2(1), the Exchange's
proposal to reduce the Customer Penny Symbol Taker Fee from $0.40 to
$0.33 per contract for trades which remove liquidity in SPY and also
extend this discount to Customer Penny Symbol Taker Fees that remove
liquidity in QQQ and IWM is equitable and not unfairly discriminatory
because Customer liquidity enhances market quality on the Exchange by
providing more trading opportunities, which benefits all market
participants. Additionally, the Exchange will assess the lower Taker
Fee uniformly to all Customer Penny Symbol Taker Fees in SPY, QQQ and
IWM. Finally, the Exchange's proposal to reserve note 2 of Options 7,
Section 2(1) is equitable and not unfairly discriminatory because the
Exchange would pay the same Penny Symbol Maker Rebates to Lead Market
Makers and Market Makers for all other options symbols.
Options 7, Section 2(3)
The Exchange's proposal to assess a Non-Customer an increased
routing fee of $1.20 to route to another options exchange and a
Customer a Fixed Fee of $0.23 per contract, in addition to the actual
transaction fee assessed by the away market, for routing contracts to
any options exchange \25\ is reasonable because the proposed Routing
Fees would enable the Exchange to recover the costs it incurs to route
orders to away markets after taking into account the other costs
associated with routing orders to other options exchanges. In
determining its proposed routing fees, the Exchange took into account
transaction fees assessed by other options exchanges, the Exchange's
projected clearing costs, and the projected administrative, regulatory,
and technical costs associated with routing orders to other options
exchanges. While the Exchange is no longer offering a discounted
Routing Fee to route to NOM and Phlx, the Exchange notes that the
Routing Fee will be $0.13 for these markets, similar to other options
markets, if they pay a rebate.\26\ Routing services offered by the
Exchange are completely optional and market participants can readily
select between various providers of routing services, including other
exchanges and broker-dealers. Also, the Exchange notes that market
participants may elect to mark their orders as ``Do Not Route'' to
avoid any routing fees.\27\
---------------------------------------------------------------------------
\25\ The Exchange would no longer assess the lower routing of
$0.13 per contract, in addition to the actual transaction fee
assessed, when routing to NOM and Phlx.
\26\ Both NOM and Phlx offer rebates. See NOM's Pricing Schedule
at Options 7, Section 2 and Phlx's Pricing Schedule at Options 7,
Sections 2 and 4.
\27\ See BX Options 3, Section 7(c).
---------------------------------------------------------------------------
The Exchange's proposal to assess a Non-Customer an increased
routing fee of $1.20 to route to another options exchange and a
Customer a Fixed Fee of $0.23 per contract, in addition to the actual
transaction fee assessed by the away market, for routing contracts to
[[Page 83195]]
any options exchange is equitable and not unfairly discriminatory as
all Non-Customers would be assessed a uniform routing fee.
Additionally, Customers will be uniformly assessed the same fee,
regardless of the destination market. Customers will continue to
receive favorable pricing as compared to other market participants
because Customer liquidity enhances market quality on the Exchange by
providing more trading opportunities, which benefits all market
participants. Finally, the Exchange notes that market participants may
elect to market orders as Do Not Route to avoid any routing fees.
Options 7, Section 2(4)
The Exchange's proposal to amend its pricing related to execution
of contracts on BX that generate an order exposure alert is reasonable.
While the Exchange is increasing fees to respond to an order exposure
alert, it is also increasing rebates that trigger an order exposure
alert. The Exchange believes that this pricing will continue to provide
incentives to Participants to utilize the order exposure functionality
which facilitates the ability of the Exchange to bring together
participants and encourage more robust competition for orders. For
Penny Symbols and Non-Penny Symbols, increasing the Customer rebate for
orders triggering order exposure alert, and offering higher Customer
rebates as compared to Non-Customer rebates is reasonable because it
encourages the desired Customer behavior by attracting Customer
interest to the Exchange. Increasing the Customer, Lead Market Maker,
Market Maker, and Non-Customer fees for orders responding to order
exposure alerts in Penny Symbols and Non-Penny Symbols is reasonable
because the associated revenue will allow the Exchange to maintain and
enhance its services. Additionally, for Penny Symbols, Customers would
pay the lowest fee for responding to order exposure alert while all
Participants are assessed the same fee for Non-Penny Symbols.
The Exchange's proposal to amend its pricing related to execution
of contracts on BX that generate an order exposure alert is equitable
and not unfairly discriminatory. Customers are being paid higher Penny
Symbol and Non-Penny Symbol rebates and lower Penny Symbols fees as
compared to Non-Customers because Customer activity enhances liquidity
on the Exchange for the benefit of all market participants and benefits
all market participants by providing more trading opportunities, which
attracts market makers. An increase in the activity of these market
participants in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow from other market
participants. The Exchange also is assessing the same Non-Penny Symbol
fees uniformly to all Participants.
Options 7, Section 2(5)
The Exchange's proposal to amend its PRISM pricing is reasonable
because the Exchange proposes to not assess an Initiating Order fee in
Penny and Non-Penny Classes. Today, the Exchange assesses no PRISM
Order fee to any Participant in Penny or Non-Penny Classes and assesses
Non-Customers a $0.05 per contract Initiating Order fee in Penny and
Non-Penny Classes. The Exchange proposes to continue to assess no PRISM
Order fee and also proposes to amend the Non-Customer Initiating Order
Fees from $0.05 to $0.00 per contract. Today, Customers are not
assessed an Initiating Order Fee in either Penny or Non-Penny Classes.
With this proposed change, no Participant will be assessed an
Initiating Order fee in Penny Classes and Non-Penny Classes. Further,
the Exchange proposes to pay a Non-Penny Class PRISM Order rebate to a
Customer of $0.12 per contract. The Exchange believes that the proposed
pricing will encourage BX Participants to submit a greater amount of
PRISM Orders to BX as the Exchange will not assess PRISM Order or
Initiating Order fees to any BX Participant and it will pay a Non-Penny
Class PRISM Order rebate to a Customer of $0.12 per contract. With
respect to a PRISM Response to a PRISM Auction the Exchange's proposal
to increase the $0.49 per contract fee for Penny Classes, which is
currently assessed to all Participants to $0.50 per contract and the
proposal to increase the $0.94 per contract fee for Non-Penny Classes,
which is currently assessed to all Participants, to $1.25 per contract
is reasonable because despite these increases, the Exchange believes
that the pricing will continue to encourage Participants to send order
to BX's PRISM Auction. Additionally, the proposed PRISM Response fees
would be equivalent to the Penny Symbol Taker Fees in Options 7,
Section 2(1) of $0.50 per contract for Lead Market Makers, BX Options
Market Makers and Non-Customers and $0.40 per contract for Customers.
Additionally, the proposed PRISM Response Fees would be equivalent to
the Non-Penny Symbol Taker Fees in Options 7, Section 2(1) of $1.25 per
contract for Lead Market Makers, BX Options Market Makers and Non-
Customers and $0.79 per contract for Customers. The Exchange's proposal
harmonizes the PRISM Response fees for Penny and Non-Penny Classes so
that they are the same as the Taker Fees assessed to each market
participant when they remove liquidity from the order book. The
Exchange believes that it is reasonable to assess Penny and Non-Penny
Class PRISM Response Fees that are equivalent to those Taker Fees
assessed to Participants for removing liquidity from the order book
because orders resting on the order book may respond to PRISM Auctions
similar to PRISM Responses entered during a PRISM Auction. The Exchange
believes that despite the increase in these PRISM Response Fees, the
fees remain competitive with the pricing to remove liquidity from the
order book.
The Exchange's proposal to amend its PRISM pricing is equitable and
not unfairly discriminatory. The Exchange will uniformly not assess a
Penny Class or Non-Penny Class PRISM Order fee or Initiating Order Fee
to any Participant. While Customers will receive a Penny Symbol PRISM
Order rebate, the Exchange notes that Customer activity enhances
liquidity on the Exchange for the benefit of all market participants
and benefits all market participants by providing more trading
opportunities, which attracts market makers. The proposed PRISM
Response Fees would be equivalent to the Penny Symbol Taker Fees in
Options 7, Section 2(1) of $0.50 per contract for Lead Market Makers,
Market Makers and Non-Customers and $0.40 per contract for Customers.
Additionally, the proposed PRISM Response Fees would be equivalent to
the Non-Penny Symbol Taker Fees in Options 7, Section 2(1) of $1.25 per
contract for Lead Market Makers, Market Makers and Non-Customers and
$0.79 per contract for Customers. Assessing Customers a lower Response
Fee as compared to Non-Customers is equitable and not unfairly
discriminatory because Customer activity enhances liquidity on the
Exchange for the benefit of all market participants and benefits all
market participants by providing more trading opportunities, which
attracts market makers. Further, assessing no fee to the Initiating
Order and assessing Response Fees as described above to Participants
that respond to the PRISM Auction is equitable and not unfairly
discriminatory because the Exchange desires to encourage Participants
to submit PRISM Orders to BX. Responders, similar to Participants that
remove liquidity from the order book, may interact with the PRISM Order
and receive an allocation. Of note, any BX Participant may respond to a
PRISM
[[Page 83196]]
Auction. Similar to the manner in which the Exchange assesses fees to
takers of liquidity in Options 7, Section 2(1), Participants who remove
liquidity are assessed fees to interact with the liquidity. The
Exchange incentivizes Participants that add liquidity on our markets by
assessing lower fees and/or rebates to encourage order flow to be sent
to BX. The Exchange believes that creating a similar model to encourage
Participants to bring two-sided orders into the PRISM Auction and
assessing higher fees for the Participants that interact with those
orders is equitable and not unfairly discriminatory as well as
consistent with the fee structure in place on BX today. Finally, BX
Participants may elect not to utilize the PRISM Auction and only
transact options on the order book, in which case they would not incur
the Responder Fees.
Unrelated Market or Marketable Interest
The Exchange's proposal to amend the unrelated market or marketable
interest rule text in Options 7, Section 2(5) to reflect the proposed
changes to Options 7, Section 2(1) order book pricing and Options 7,
Section 2(5) PRISM pricing is reasonable because the Exchange seeks to
incentivize Participants to submit PRISM Auction Orders to receive a
guaranteed execution, potential price improvement, and Customer
rebates. The Exchange's PRISM pricing assesses fees to PRISM Responses
and unrelated market or marketable interest that allocated in the PRISM
Auction and rewards those BX Participants with a guaranteed execution
and potential price improvement. The response fees assessed by the
Exchange are intended to fund the Customer rebates paid by the Exchange
which seek to incentivize increased Customer order flow to the PRISM
Auction. While the Exchange's proposal increases these fees, the
Exchange believes this pricing will continue to attract liquidity to BX
and reward Participants differently for the order flow.
The Exchange's proposal to amend the unrelated market or marketable
interest rule text in Options 7, Section 2(5) to reflect the proposed
changes to Options 7, Section 2(1) order book pricing and Options 7,
Section 2(5) PRISM pricing is equitable and not unfairly
discriminatory. All BX Participants who submitted unrelated market or
marketable interest which rested on the order book prior to the
commencement of a PRISM Auction will be uniformly paid a Maker Rebate.
The Exchange's proposal would treat BX Participants who submitted
unrelated market or marketable interest which rested on the order book
prior to the commencement of a PRISM Auction in the same manner as
other BX Participants who posted liquidity on the order book as they
would both be considered makers of liquidity. Further, all Participants
who submitted a PRISM Order that executed against the unrelated market
or marketable interest that posted to the order book prior to the
commencement of a PRISM Auction would be uniformly assessed a Taker
Fee. The Exchange's proposal would treat BX Participants who submitted
PRISM Order that executed against the unrelated market or marketable
interest that posted to the order book prior to the commencement of a
PRISM Auction in the same manner as other BX Participants who removed
liquidity from the order book as they would both be considered takers
of liquidity.
Request for PRISM
The Exchange's proposal to amend pricing for PRISM Orders submitted
via a Request for PRISM is reasonable. While the Exchange is increasing
the Initiating order fees in Penny and Non-Penny Classes as well as the
Responses to a PRISM Auction in Penny and Non-Penny Classes, the
Exchange believes that this pricing will continue to 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. Further, the Exchange notes that it will continue to offer
certain rebates to attract BX Participants to utilize the Request for
PRISM mechanism. Further, 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 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 $0.50
per contract fee for Penny Classes and $1.25 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 pricing for PRISM Orders submitted
via a Request for PRISM 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.\28\ 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.
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\28\ The identity of the sender and the recipients are not known
to any party.
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[[Page 83197]]
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.
Intramarket Competition
Options 7, Section 2(1)
The Exchange's proposal to reduce certain Penny Symbol Maker
Rebates and Taker Fees and increase certain Non-Penny Symbol Maker
Rebates and Taker Fees does not impose an undue burden on competition.
With respect to the amendments to the Lead Market Maker and Market
Maker Penny Symbol Maker Rebates, the Exchange notes that unlike other
market participants, Lead Market Makers and Market Makers add value
through continuous quoting and the commitment of capital.\29\ Further,
differentiating Lead Market Makers and Market Makers is equitable and
not unfairly discriminatory because Lead Market Makers are subject to
heightened quoting obligations \30\ as compared to Market Makers. The
higher rebate therefore recognizes the differing contributions made to
the liquidity and trading environment on the Exchange by Lead Market
Makers. Overall, the Exchange believes that incentivizing both Lead
Market Makers and Market Makers to provide greater liquidity benefits
all market participants through the quality of order interaction. The
reduction of the Customer Penny Symbol Taker Fee from $0.46 to $0.40
per contract and the increase in the Non-Penny Symbol Maker Rebates for
Customers from $0.90 to $1.10 does not impose an undue burden on
competition because Customers will continue to receive favorable
pricing as compared to other market participants because Customer
liquidity enhances market quality on the Exchange by providing more
trading opportunities, which benefits all market participants. The
Exchange's proposal to increase the Non-Penny Symbol Taker Fees for all
Non-Customers from $1.10 to $1.25 per contract does not impose an undue
burden on competition because the Exchange will uniformly assess the
Non-Penny Taker Fees to all Non-Customers.
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\29\ See BX Options 2, Section 4.
\30\ Id.
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With respect to note 1 of Options 7, Section 2(1), the Exchange's
proposal to reduce the Customer Penny Symbol Taker Fee from $0.40 to
$0.33 per contract for trades which remove liquidity in SPY and also
extend this discount to Customer Penny Symbol Taker Fees that remove
liquidity in QQQ and IWM does not impose an undue burden on competition
because Customer liquidity enhances market quality on the Exchange by
providing more trading opportunities, which benefits all market
participants. Additionally, the Exchange will assess the lower Taker
Fee uniformly to all Customer Penny Symbol Taker Fees in SPY, QQQ and
IWM. Finally, the Exchange's proposal to reserve note 2 of Options 7,
Section 2(1) does not impose an undue burden on competition because the
Exchange would pay the same Penny Symbol Maker Rebates to Lead Market
Makers and Market Makers for all other options symbols.
Options 7, Section 2(3)
The Exchange's proposal to assess a Non-Customer an increased
routing fee of $1.20 to route to another options exchange and a
Customer a Fixed Fee of $0.23 per contract, in addition to the actual
transaction fee assessed by the away market, for routing contracts to
any options exchange does not impose an undue burden on competition
because all Non-Customers would be assessed a uniform routing fee.
Additionally, all Customers will be uniformly assessed the same fee,
regardless of the destination market. Customers will continue to
receive favorable pricing as compared to other market participants
because Customer liquidity enhances market quality on the Exchange by
providing more trading opportunities, which benefits all market
participants. Finally, the Exchange notes that market participants may
elect to market orders as Do Not Route to avoid any routing fees.
Options 7, Section 2(4)
The Exchange's proposal to amend its pricing related to execution
of contracts on BX that generate an order exposure alert does not
impose an undue burden on competition. Customers are being paid higher
Penny Symbol and Non-Penny Symbol rebates and lower Penny Symbols fees
as compared to Non-Customers because Customer activity enhances
liquidity on the Exchange for the benefit of all market participants
and benefits all market participants by providing more trading
opportunities, which attracts market makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. The Exchange also is assessing the
same Non-Penny Symbol fees uniformly to all Participants.
Options 7, Section 2(5)
The Exchange's proposal to amend its PRISM pricing does not impose
an undue burden on competition. The Exchange will uniformly not assess
a Penny Class or Non-Penny Class PRISM Order fee or Initiating Order
Fee to any Participant. While Customers will receive a Penny Symbol
PRISM Order rebate, the Exchange notes that Customer activity enhances
liquidity on the Exchange for the benefit of all market participants
and benefits all market participants by providing more trading
opportunities, which attracts market makers. Additionally, the Exchange
will uniformly assess the PRISM Response fee to all Participants. The
proposed PRISM Response Fees would be equivalent to the Penny Symbol
Taker Fees in Options 7, Section 2(1) of $0.50 per contract for Lead
Market Makers, Market Makers and Non-Customers and $0.40 per contract
for Customers. Additionally, the proposed PRISM Response Fees would be
equivalent to the Non-Penny Symbol Taker Fees in Options 7, Section
2(1) of $1.25 per contract for Lead Market Makers, Market Makers and
Non-Customers and $0.79 per contract for Customers. Assessing Customers
a lower Response Fee as compared to Non-Customers is equitable and not
unfairly discriminatory because Customer activity enhances liquidity on
the Exchange for the benefit of all market participants and benefits
all market participants by providing more trading opportunities, which
attracts market makers. Further, assessing no fee
[[Page 83198]]
to the Initiating Order and assessing Response Fees as described above
to Participants that respond to the PRISM Auction is equitable and not
unfairly discriminatory because the Exchange desires to encourage
Participants to submit PRISM Orders to BX. Responders, similar to
Participants that remove liquidity from the order book, may interact
with the PRISM Order and receive an allocation. Of note, any BX
Participant may respond to a PRISM Auction. Similar to the manner in
which the Exchange assesses fees to takers of liquidity in Options 7,
Section 2(1), Participants who remove liquidity are assessed fees to
interact with the liquidity. The Exchange incentivizes Participants
that add liquidity on our markets by assessing lower fees and/or
rebates to encourage order flow to be sent to BX. The Exchange believes
that creating a similar model to encourage Participants to bring two-
sided orders into the PRISM Auction and assessing higher fees for the
Participants that interact with those orders is equitable and not
unfairly discriminatory as well as consistent with the fee structure in
place on BX today. Finally, BX Participants may elect not to utilize
the PRISM Auction and only transact options on the order book, in which
case they would not incur the Responder Fees.
Unrelated Market or Marketable Interest
The Exchange's proposal to amend the unrelated market or marketable
interest rule text in Options 7, Section 2(5) to reflect the proposed
changes to Options 7, Section 2(1) order book pricing and Options 7,
Section 2(5) PRISM pricing does not impose an undue burden on
competition. All BX Participants who submitted unrelated market or
marketable interest which rested on the order book prior to the
commencement of a PRISM Auction will be uniformly paid a Maker Rebate.
The Exchange's proposal would treat BX Participants who submitted
unrelated market or marketable interest which rested on the order book
prior to the commencement of a PRISM Auction in the same manner as
other BX Participants who posted liquidity on the order book as they
would both be considered makers of liquidity. Further, all Participants
who submitted a PRISM Order that executed against the unrelated market
or marketable interest that posted to the order book prior to the
commencement of a PRISM Auction would be uniformly assessed a Taker
Fee. The Exchange's proposal would treat BX Participants who submitted
PRISM Order that executed against the unrelated market or marketable
interest that posted to the order book prior to the commencement of a
PRISM Auction in the same manner as other BX Participants who removed
liquidity from the order book as they would both be considered takers
of liquidity.
Request for PRISM
The Exchange's proposal to amend pricing for PRISM Orders submitted
via a Request for PRISM 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.\31\ 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.
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\31\ The identity of the sender and the recipients are not known
to any party.
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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.\32\
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\32\ 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-2023-031 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-2023-031. 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
[[Page 83199]]
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-BX-2023-031 and should
be submitted on or before December 19, 2023.
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\33\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26112 Filed 11-27-23; 8:45 am]
BILLING CODE 8011-01-P
