Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, Section 118, 3486-3487 [2024-00852]

Download as PDF 3486 Federal Register / Vol. 89, No. 12 / Thursday, January 18, 2024 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99330; File No. SR–BX– 2024–001] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, Section 118 January 11, 2024. 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 January 2, 2024, Nasdaq BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s transaction fees at Equity 7, Section 118(b), as described further below. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/bx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. khammond on DSKJM1Z7X2PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend a transaction fee at Equity 7, Section 118(b). Currently, the 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 17:32 Jan 17, 2024 Jkt 262001 Exchange has a schedule at Equity 7, Section 118(a), which consists of charges and credits that apply to orders in securities priced at $1 or more per share. The Exchange has a schedule at Equity 7, Section 118(b), which consists of charges that apply for securities priced at less than $1 per share. The Exchange proposes to amend Equity 7, Section 118(b) to adjust an existing charge for securities priced at less than $1 per share. Specifically, the Exchange proposes to adjust the charge to members for accessing liquidity on the Exchange in securities priced at less than $1 per share from the current rate of 0.10% of the total transaction cost to 0.30% of the total transaction cost. The Exchange wishes to streamline such charge with that of its sister exchanges, The Nasdaq Stock Market LLC and Nasdaq PHLX LLC. The Nasdaq Stock Market LLC and Nasdaq PHLX LLC currently charge 0.30% of the total transaction cost to members for accessing liquidity on the exchange in securities priced at less than $1 per share.3 In addition, the Exchange has limited resources available to it to offer its members market-improving incentives, and it allocates those limited resources to those segments of the market where it perceives the need to be greatest and/or where it determines that the incentive is likely to achieve its intended objective. Accordingly, the Exchange proposes to adjust the charge for accessing liquidity on the Exchange in securities priced at less than $1 per share, as noted above. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,4 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,5 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange’s proposed changes to its schedule of credits are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for equity securities transaction services that constrain its pricing determinations in that market. The fact that this market is competitive has long been recognized 3 See The Nasdaq Stock Market LLC Rulebook, Equity 7, Section 118(b); Nasdaq PHLX LLC Rulebook, Equity 7, Section 3(b). 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’ 6 The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 7 Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for equity security transaction services. The Exchange is only one of several equity venues to which market participants may direct their order flow. Competing equity exchanges offer similar tiered pricing structures to that of the Exchange, including schedules of rebates and fees that apply based upon members achieving certain volume thresholds. Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. The Exchange believes it is reasonable, equitable, and not unfairly discriminatory to amend Equity 7, Section 118(b) to adjust an existing charge for securities priced at less than $1 per share as the Exchange has limited resources to devote to incentive programs, and it is appropriate for the Exchange to periodically adjust its fees 6 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782–83 (December 9, 2008) (SR–NYSEArca–2006–21)). 7 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). E:\FR\FM\18JAN1.SGM 18JAN1 Federal Register / Vol. 89, No. 12 / Thursday, January 18, 2024 / Notices and incentives in a manner that best achieves the Exchange’s overall mix of objectives. In addition, the proposed revision would streamline the charge to members for accessing liquidity on the Exchange in securities priced at less than $1 with that of its sister exchanges. Those participants that are dissatisfied with the change to the Exchange’s fee schedule are free to shift their order flow to competing venues that provide more generous pricing or less stringent qualifying criteria. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Intramarket Competition The Exchange does not believe that its proposals will place any category of Exchange participant at a competitive disadvantage. The Exchange intends for its proposed fee change to streamline its charge to members for accessing liquidity on the Exchange in securities priced at less than $1 with that of its sister exchanges and align its limited resources with the Exchange’s overall mix of objectives. The Exchange notes that its members are free to trade on other venues to the extent they believe that its proposal is not attractive. As one can observe by looking at any market share chart, price competition between exchanges is fierce, with liquidity and market share moving freely between exchanges in reaction to fee and credit changes. khammond on DSKJM1Z7X2PROD with NOTICES Intermarket Competition In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its credits and fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own credits and fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which credit or fee changes in this market may VerDate Sep<11>2014 17:32 Jan 17, 2024 Jkt 262001 impose any burden on competition is extremely limited. The proposed change is reflective of this competition because, as a threshold issue, the Exchange is a relatively small market so its ability to burden intermarket competition is limited. In this regard, even the largest U.S. equities exchange by volume has less than 20% market share, which in most markets could hardly be categorized as having enough market power to burden competition. Moreover, as noted above, price competition between exchanges is fierce, with liquidity and market share moving freely between exchanges in reaction to fee and credit changes. This is in addition to free flow of order flow to and among off-exchange venues which comprises more than 40% of industry volume. In sum, if the change proposed herein is unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed change will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.8 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. 8 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00118 Fmt 4703 Sfmt 4703 3487 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–2024–001 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–BX–2024–001. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–BX–2024–001 and should be submitted on or before February 8, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–00852 Filed 1–17–24; 8:45 am] BILLING CODE 8011–01–P 9 17 E:\FR\FM\18JAN1.SGM CFR 200.30–3(a)(12). 18JAN1

Agencies

[Federal Register Volume 89, Number 12 (Thursday, January 18, 2024)]
[Notices]
[Pages 3486-3487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00852]



[[Page 3486]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99330; File No. SR-BX-2024-001]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Equity 7, 
Section 118

January 11, 2024.
    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 January 2, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Equity 7, Section 118(b), as described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend a transaction 
fee at Equity 7, Section 118(b). Currently, the Exchange has a schedule 
at Equity 7, Section 118(a), which consists of charges and credits that 
apply to orders in securities priced at $1 or more per share. The 
Exchange has a schedule at Equity 7, Section 118(b), which consists of 
charges that apply for securities priced at less than $1 per share. The 
Exchange proposes to amend Equity 7, Section 118(b) to adjust an 
existing charge for securities priced at less than $1 per share.
    Specifically, the Exchange proposes to adjust the charge to members 
for accessing liquidity on the Exchange in securities priced at less 
than $1 per share from the current rate of 0.10% of the total 
transaction cost to 0.30% of the total transaction cost. The Exchange 
wishes to streamline such charge with that of its sister exchanges, The 
Nasdaq Stock Market LLC and Nasdaq PHLX LLC. The Nasdaq Stock Market 
LLC and Nasdaq PHLX LLC currently charge 0.30% of the total transaction 
cost to members for accessing liquidity on the exchange in securities 
priced at less than $1 per share.\3\ In addition, the Exchange has 
limited resources available to it to offer its members market-improving 
incentives, and it allocates those limited resources to those segments 
of the market where it perceives the need to be greatest and/or where 
it determines that the incentive is likely to achieve its intended 
objective. Accordingly, the Exchange proposes to adjust the charge for 
accessing liquidity on the Exchange in securities priced at less than 
$1 per share, as noted above.
---------------------------------------------------------------------------

    \3\ See The Nasdaq Stock Market LLC Rulebook, Equity 7, Section 
118(b); Nasdaq PHLX LLC Rulebook, Equity 7, Section 3(b).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\5\ 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.
---------------------------------------------------------------------------

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

    The Exchange's proposed changes to its schedule of credits are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for equity 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \6\
---------------------------------------------------------------------------

    \6\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \7\
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
equity security transaction services. The Exchange is only one of 
several equity venues to which market participants may direct their 
order flow. Competing equity exchanges offer similar tiered pricing 
structures to that of the Exchange, including schedules of rebates and 
fees that apply based upon members achieving certain volume thresholds.
    Within this environment, market participants can freely and often 
do shift their order flow among the Exchange and competing venues in 
response to changes in their respective pricing schedules.
    The Exchange believes it is reasonable, equitable, and not unfairly 
discriminatory to amend Equity 7, Section 118(b) to adjust an existing 
charge for securities priced at less than $1 per share as the Exchange 
has limited resources to devote to incentive programs, and it is 
appropriate for the Exchange to periodically adjust its fees

[[Page 3487]]

and incentives in a manner that best achieves the Exchange's overall 
mix of objectives. In addition, the proposed revision would streamline 
the charge to members for accessing liquidity on the Exchange in 
securities priced at less than $1 with that of its sister exchanges.
    Those participants that are dissatisfied with the change to the 
Exchange's fee schedule are free to shift their order flow to competing 
venues that provide more generous pricing or less stringent qualifying 
criteria.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intramarket Competition
    The Exchange does not believe that its proposals will place any 
category of Exchange participant at a competitive disadvantage.
    The Exchange intends for its proposed fee change to streamline its 
charge to members for accessing liquidity on the Exchange in securities 
priced at less than $1 with that of its sister exchanges and align its 
limited resources with the Exchange's overall mix of objectives. The 
Exchange notes that its members are free to trade on other venues to 
the extent they believe that its proposal is not attractive. As one can 
observe by looking at any market share chart, price competition between 
exchanges is fierce, with liquidity and market share moving freely 
between exchanges in reaction to fee and credit changes.
Intermarket Competition
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its credits and fees to remain competitive with 
other exchanges and with alternative trading systems that have been 
exempted from compliance with the statutory standards applicable to 
exchanges. Because competitors are free to modify their own credits and 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which credit or fee changes in this market may impose any burden on 
competition is extremely limited.
    The proposed change is reflective of this competition because, as a 
threshold issue, the Exchange is a relatively small market so its 
ability to burden intermarket competition is limited. In this regard, 
even the largest U.S. equities exchange by volume has less than 20% 
market share, which in most markets could hardly be categorized as 
having enough market power to burden competition. Moreover, as noted 
above, price competition between exchanges is fierce, with liquidity 
and market share moving freely between exchanges in reaction to fee and 
credit changes. This is in addition to free flow of order flow to and 
among off-exchange venues which comprises more than 40% of industry 
volume.
    In sum, if the change proposed herein is unattractive to market 
participants, it is likely that the Exchange will lose market share as 
a result. Accordingly, the Exchange does not believe that the proposed 
change will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\8\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BX-2024-001 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-BX-2024-001. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-BX-2024-001 and should be 
submitted on or before February 8, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00852 Filed 1-17-24; 8:45 am]
BILLING CODE 8011-01-P
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