Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX Options 7, Section 2, 83743-83748 [2024-23900]
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ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices
that choose to use Dedicated Cores. As
discussed above, Dedicated Cores are
optional and Users may choose to
utilize Dedicated Cores, or not, based on
their views of the additional benefits
and added value provided by utilizing
a Dedicated Core. The Exchange
believes the proposed fee will be
assessed proportionately to the potential
value or benefit received by Users with
a greater number of Dedicated Cores and
notes that Users may determine at any
time to cease using Dedicated Cores. As
discussed, Users can also continue to
access the Exchange through shared
CPU Cores at no additional cost. Finally,
all Users will be entitled to two
Dedicated Cores at no additional cost.
Next, the Exchange believes the
proposed rule change does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market,
including competition for exchange
memberships. Market Participants have
numerous alternative venues that they
may participate on, including 15 other
equities exchanges, as well as offexchange venues, where competitive
products are available for trading.
Indeed, participants can readily choose
to submit their order flow to other
exchange and off-exchange venues if
they deem fee levels at those other
venues to be more favorable. Moreover,
the Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets.
Specifically, in Regulation NMS, 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.’’ 20 The
fact that this market is competitive has
also 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 brokerdealers 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
20 See
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’.21 Accordingly, the
Exchange does not believe its proposed
change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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)
of the Act 22 and paragraph (f) of Rule
19b–4 23 thereunder. 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 will institute proceedings
to determine whether the proposed rule
change 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–
CboeBYX–2024–036 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–CboeBYX–2024–036. This
file number should be included on the
21 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)).
22 15 U.S.C. 78s(b)(3)(A).
23 17 CFR 240.19b–4(f).
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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–CboeBYX–2024–036 and should be
submitted on or before November 7,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–23902 Filed 10–16–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101300; File No. SR–BX–
2024–038]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend BX Options 7,
Section 2
October 10, 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
September 27, 2024, Nasdaq BX, Inc.
(‘‘BX’’ or ‘‘Exchange’’) filed with the
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices
Securities and Exchange Commission
(‘‘Commission’’) a 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 Pricing Schedule at Options
7, Section 2(1).
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on October 1, 2024.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/bx/rules, at the principal office
of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend a
number of incentives for Lead Market
Makers (‘‘LMMs’’),3 Market Makers
(‘‘MMs’’),4 and Customers 5 at BX
Options 7, Section 2(1).
ddrumheller on DSK120RN23PROD with NOTICES1
3 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 Options 7, Section 1(c).
4 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 Options
7, Section 1(c).
5 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
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Today, in Penny Symbols, the
Exchange pays the following Maker
Rebates: Lead Market Makers a Maker
Rebate of $0.24 per contract; Market
Makers a Maker Rebate of $0.20 per
contract; Non-Customer 6 and Firm 7 a
Maker Rebate of $0.12 per contract; and
Customer a Maker Rebate of $0.30 per
contract. Today, in Penny Symbols, the
Exchange pays the following Taker Fees:
Lead Market Makers, Market Makers,
Non-Customer and Firm a Taker Fee of
$0.50 per contract; and Customer a
Taker Fee of $0.40 per contract.
Today, in Non-Penny Symbols, the
Exchange pays the following Maker
Rebates/Fees: Lead Market Makers a
Maker Rebate of $0.45 per contract;
Market Makers a Maker Rebate of $0.40
per contract; Non-Customer and Firm a
Maker Fee of $0.45 per contract; and
Customer a Maker Rebate of $1.10 per
contract. Today, in Non-Penny Symbols,
the Exchange pays the following Taker
Fees: Lead Market Makers, Market
Makers, Non-Customer and Firm a
Taker Fee of $1.25 per contract; and
Customer a Taker Fee of $0.79 per
contract.
Note 2 Incentive
The Exchange proposes to amend the
incentives in note 2 of Options 7,
Section 2(1) that currently provide:
Lead Market Makers and Market Makers
that either (1) execute more than 0.45%
Customer Total Consolidated Volume
(‘‘TCV’’) per day which adds liquidity in a
given month (excluding Lead Market Maker
and Market Maker volume which adds
liquidity in SPY), or (2) increase their
combined Lead Market Maker and Market
Maker volume which adds liquidity in a
given month by at least 70% above their
March 2024 volume as measured by a
percentage of TCV (excluding Lead Market
Maker and Market Maker volume which adds
liquidity in SPY), will receive the following
incentives: (i) an additional $0.05 per
contract Maker Rebate in Penny Symbols
excluding SPY, (ii) an additional $0.01 per
contract Maker Rebate in SPY, and (iii) an
additional $0.24 per contract Maker Rebate in
Non-Penny Symbols. Lead Market Makers
and Market Makers with no volume in the
add liquidity segment for the month of March
2024 may qualify for the additional Maker
Rebates by having any new volume
(excluding SPY volume) considered as added
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 Options 7, Section 1(c).
6 The term ‘‘Non-Customer’’ applies to
transactions for the accounts of Lead Market
Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs. See Options 7, Section
1(c).
7 The term ‘‘Firm’’ applies to any transaction that
is identified by a member or member organization
for clearing in the Firm range at OCC. See Options
7, Section 1(c).
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volume. This note 2 incentive will be
available through September 30, 2024.
Proposed note 2 provides LMMs and
MMs two separate paths to receive the
additional Maker Rebates described
above. The first path is based on
liquidity adding volume on BX as a
percentage of Customer Total
Consolidated Volume, which is defined
as the total national volume cleared at
The Options Clearing Corporation in the
Customer range in equity and ETF
options in that month.8 The first path is
based on a percentage of industry
volume in recognition of the fact that
the volume executed by a Member may
rise or fall with industry volume.
The second path is a growth incentive
aimed at rewarding LMMs and MMs to
grow the extent of their liquidity adding
activity on the Exchange over time,
relative to a benchmark month.
Currently, LMMs and MMs who did not
have any combined Lead Market Maker
and Market Maker add liquidity volume
for the month of March 2024 (and
therefore lack March 2024 baseline
volume against which to measure
subsequent growth) would meet the
proposed growth requirement through
whatever volume of LMM and MM add
liquidity activity (excluding in SPY)
during the first month of use.9 Growth
incentives in general are designed to
further encourage Members to increase
their order flow to the Exchange, which
contributes to a deeper, more liquid
market and provides even more
execution opportunities for market
participants. Increased overall order
flow benefits all market participants by
contributing towards a robust and wellbalanced market ecosystem. Other
options exchanges have utilized
substantially similar growth
incentives.10 The Exchange notes that it
excludes LMM and MM liquidity
adding volume in SPY from both paths
because SPY is the most actively traded
symbol on BX, and the Exchange
believes that LMMs and MMs are
incentivized to bring SPY liquidity
8 See
Options 7, Section 1(a).
discussed below, the note 2 incentives sunset
on September 30, 2024 (including the growth
incentive). Today, the Exchange uses this time
period to evaluate the proposed growth incentive
criteria to determine whether the parameters are
appropriately designed to incentivize LMMs and
MMs in the intended manner.
10 See, e.g., Securities Exchange Act Release Nos.
97148 (March 15, 2023), 88 FR 17068 (March 21,
2023) (SR–MRX–2023–07) (establishing growth
incentive for MRX Market Makers); and 97440 (May
5, 2023), 88 FR 30370 (May 11, 2023) (SR–MRX–
2023–08) (adding an expiration date for the MRX
growth incentive). MRX subsequently eliminated
this growth incentive upon reaching the expiration
date. See Securities Exchange Act Release No.
97800 (June 26, 2023), 88 FR 42409 (June 30, 2023)
(SR–MRX–2023–11).
9 As
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adding volume on BX despite the
exclusion of SPY volume from the note
2 qualifications. Further, today, the
Exchange is encouraging SPY liquidity
adding volume separately through the
proposed additional $0.01 per contract
Maker Rebate in SPY described above.
Currently, the proposed note 2
incentives are through September 30,
2024. The Exchange believes that this
ensures that the note 2 incentives—
notably the growth incentive using the
benchmark month (i.e., March 2024)
against which LMM and MM growth
would be measured—are timely and
meet the intended purpose of
encouraging increased order flow and
liquidity adding activity.
At this time, the Exchange proposes to
amend note 2 to change the March 2024
baseline volume against which to
measure subsequent growth to
September 2024. Similar to the prior
note incentive, the Exchange will sunset
the proposed note 2 incentives after six
months, in this case April 30, 2025. The
Exchange believes that the note 2
incentives will continue to encourage
Members to send order flow to BX.
Note 4 Incentive
The Exchange proposes to amend the
incentives in note 4 in Options 7,
Section 2(1) that currently provide:
ddrumheller on DSK120RN23PROD with NOTICES1
Participants that increase their executed
Customer volume which removes liquidity in
a given month by at least 70% above their
March 2024 volume as measured by a
percentage of TCV will receive a Taker Fee
discount of $0.05 per contract in Penny
Symbols excluding AAPL, SPY, QQQ, and
IWM. Participants with no Customer volume
in the remove liquidity segment for the
month of March 2024 may qualify for the
Taker Fee discount by having any new
volume considered as added volume. This
note 4 incentive will be available through
April 30, 2025.
Currently, the growth incentives in
note 4 of Options 7, Section 2(1) have
similar qualifications as the growth
incentive in note 2 in that Members are
measured relative to a benchmark
month. Specifically, Members that
increase their executed Customer
volume which removes liquidity in a
given month by at least 70% above their
March 2024 volume as measured by a
percentage of TCV receive a Taker Fee
discount of $0.05 per contract in Penny
Symbols excluding AAPL, SPY, QQQ,
and IWM. Accordingly, qualifying
Members are paid a Customer Taker Fee
of $0.35 (instead of $0.40) per contract
in Penny Symbols. The Exchange
excludes AAPL, SPY, QQQ, and IWM
from the note 4 incentive because
Members are already paying lower
Customer Taker Fees of $0.33 per
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contract for those symbols today.11 The
note 4 incentive Members to grow the
extent of their Customer liquidity
removing activity on the Exchange over
time, relative to a benchmark month.
Members with no Customer volume in
the remove liquidity segment for the
month of March 2024 may qualify for
the Taker Fee discount by having any
new volume considered as added
volume. Similar to the note 2 incentive
proposed above, Members who did not
have the requisite volume for the month
of March 2024 (and therefore lack
March 2024 baseline volume against
which to measure subsequent growth)
would meet the proposed growth
requirement through whatever volume
in the required segment during the first
month of use. The Exchange believes
that the growth incentive in note 4
encourages increased Customer order
flow to the Exchange, which contributes
to a deeper, more liquid market and
provides even more execution
opportunities for market participants.
Similar to the note 2 incentive above,
the note 4 incentive sunsets on
September 30, 2024.
At this time, the Exchange proposes to
amend note 4 to change the March 2024
baseline volume against which to
measure subsequent growth to
September 2024. Similar to the prior
note incentive, the Exchange will sunset
the proposed note 4 incentives after six
months, in this case April 30, 2025. The
Exchange believes that the note 4
incentives, as amended, would ensure
that the proposed growth incentive is
timely and meets the intended purpose
of encouraging increased order flow and
Customer liquidity removing activity.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,12 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,13 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
options securities transaction services
that constrain its pricing determinations
in that market. The fact that this market
11 See
Options 7, Section 2(1), note 1.
U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(4) and (5).
12 15
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83745
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’. . . .’’ 14
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.’’ 15
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of eighteen
options exchanges to which market
participants may direct their order flow.
Within this environment, market
participants can freely and often do shift
their order flow among the Exchange
and competing venues in response to
changes in their respective pricing
schedules. As such, the proposal
represents a reasonable attempt by the
Exchange to increase its liquidity and
market share relative to its competitors.
Note 2 Incentive
The Exchange believes that the
amended note 2 incentives are
reasonable for several reasons. As
discussed above, note 2 would continue
to provide LMMs and MMs two separate
paths to receive the proposed additional
Maker Rebates of (i) $0.05 per contract
14 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)).
15 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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ddrumheller on DSK120RN23PROD with NOTICES1
in Penny Symbols excluding SPY,16 (ii)
$0.01 per contract in SPY,17 and (iii)
$0.24 per contract in Non-Penny
Symbols.18 The first path would be
based on liquidity adding volume on BX
as a percentage of Customer Total
Consolidated Volume (i.e., TCV).19 The
Exchange believes that the total industry
percentage threshold is reasonable in
order to align with increasing LMM and
MM activity on BX over time. The
Exchange is proposing to base the first
path on a percentage of industry volume
in recognition of the fact that the
volume executed by a Member may rise
or fall with industry volume. A
percentage of industry volume
calculation allows the proposed
qualifications in note 2 to be calibrated
to current market volumes rather than
requiring a static amount of volume
regardless of market conditions. The
proposed threshold of 0.45% Customer
Total Consolidated Volume is generally
intended to reward LMMs and MMs for
executing more liquidity adding volume
on BX. To the extent such activity is
increased by this proposal, market
participants may increasingly compete
for the opportunity to trade on Exchange
to the benefit of all market participants.
As noted above, total industry
percentage thresholds are established
concepts within the Pricing Schedules
of BX’s affiliates.20
As discussed above, the second path
would continue to be a growth incentive
that would provide LMMs and MMs
with the additional Maker Rebates
outlined above if they increase their
combined LMM and MM volume which
adds liquidity in a given month by at
least 70% above their September 2024
volume as measured by a percentage of
TCV (excluding LMM and MM volume
which adds liquidity in SPY). The
Exchange believes that its proposal is
reasonable because it will provide extra
incentives to LMMs and MMs to engage
in substantial amounts of liquidity
adding activity on the Exchange, as well
as to substantially grow the extent to
which they do so relative to a recent
benchmark month. The Exchange
16 Accordingly, qualifying LMMs and MMs would
receive a total of $0.29 per contract (LMMs) and
$0.25 per contract (MMs) in Penny Symbols
excluding SPY.
17 Accordingly, qualifying LMMs and MMs would
receive a total of $0.25 per contract (LMMs) and
$0.21 per contract (MMs) in SPY.
18 Accordingly, qualifying LMMs and MMs would
receive a total of $0.69 per contract (LMMs) and
$0.64 per contract (MMs) in Non-Penny Symbols.
19 In particular, LMMs and MMs that execute
more than 0.45% Customer Total Consolidated
Volume (‘‘TCV’’) per day which adds liquidity in
a given month (excluding Lead Market Maker and
Market Maker volume which adds liquidity in SPY)
would receive the proposed note 2 incentives.
20 See supra note 10.
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believes that if the proposed growth
incentive is effective, any ensuing
increase in liquidity adding activity on
BX will improve the quality of the
market overall, to the benefit of all
market participants. The Exchange also
believes that it is reasonable to consider
any new add liquidity volume
(excluding SPY volume) for LMMs and
MMs with no such volume for the
month of September 2024 in order for
those market participants to receive the
proposed additional Maker Rebates in
note 2. The proposed growth incentive
is designed to attract additional
liquidity from new LMMs and MMs as
well as existing LMMs and MMs who
may not have a large footprint on BX
today. To the extent this proposal
attracts such LMM and MM add
liquidity volume to BX, all market
participants should benefit through
more trading opportunities and tighter
spreads. An overall increase in activity
would deepen the Exchange’s liquidity
pool, support the quality of price
discovery, promote market transparency
and improve market quality for all
investors. As discussed above, the
Exchange intends for the proposed note
2 incentives, including the growth
incentive, to sunset on April 30, 2025,
and will use this time to evaluate
suitable parameters for such market
participants in the targeted segment.
The Exchange believes that this will
ensure that the proposed incentives are
timely and meet the intended purpose
of encouraging increased order flow and
liquidity adding activity. As noted
above, other options exchanges
(including the Exchange’s affiliate) have
previously adopted substantially similar
growth incentives.21
The Exchange further believes that it
is reasonable to exclude LMM and MM
liquidity adding volume in SPY from
both paths because SPY is the most
actively traded symbol on BX, and
Exchange believes that LMMs and MMs
will continue to be incentivized to bring
SPY liquidity adding volume on BX
despite the exclusion of SPY volume
from the note 2 qualifications. Further,
the Exchange is encouraging SPY
liquidity adding volume separately
through the proposed additional $0.01
per contract Maker Rebate in SPY
described above.
The Exchange believes that the
proposed note 2 incentives are equitable
and not unfairly discriminatory for the
reasons that follow. As a general matter,
the Exchange believes that it is equitable
and not unfairly discriminatory to
provide the note 2 incentives to only
LMMs and MMs because these market
21 See
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supra note 10.
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Sfmt 4703
participants have different requirements
and additional obligations to the
Exchange that other market participants
do not (such as quoting requirements).
As noted above, LMMs would
ultimately receive higher Maker Rebates
than MMs when combining the current
base rebates with the proposed
additional rebates.22 Nevertheless, the
Exchange continues to believe that it is
equitable and not unfairly
discriminatory to provide more
favorable pricing to LMMs compared to
MMs given that LMMs are subject to
heightened quoting obligations
compared to Market Makers.23 The
higher rebates therefore recognize the
differing contributions made to the
liquidity and trading environment on
the Exchange by LMMs. Overall, the
Exchange believes that incentivizing
both LMMs and MMs to provide greater
liquidity benefits all market participants
through the quality of order interaction.
The Exchange also believes that it is
equitable and not unfairly
discriminatory to consider any new add
liquidity volume (excluding SPY
volume) for LMMs and MMs with no
such volume in September 2024 in
order for those market participants to
receive the proposed additional Maker
Rebates because this is designed to
attract additional liquidity and order
flow from new and existing LMMs and
MMs to the Exchange, as discussed
above. In turn, this additional liquidity
should benefit all market participants
through increased liquidity and order
interaction. Furthermore, the proposed
growth incentive will be temporary and
sunset on April 30, 2025, to ensure that
the incentive is timely and meets the
intended purpose of encouraging
increased order flow and liquidity
adding activity.
Note 4 Incentive
The Exchange believes that the
proposed growth incentive in new note
4 of Options 7, Section 2(1) is
reasonable for the reasons that follow.
As discussed above, Members that
increase their executed Customer
volume which removes liquidity in a
given month by at least 70% above their
September 2024 volume as measured by
a percentage of TCV will receive a Taker
Fee discount of $0.05 per contract in
Penny Symbols excluding AAPL, SPY,
QQQ, and IWM. Accordingly, qualifying
Members would pay a Customer Taker
Fee of $0.35 (instead of $0.40) per
contract in Penny Symbols excluding
22 See
supra notes 16–18.
Options 2, Section 4(j) (setting forth the
90% or higher quoting obligations for LMMs) and
Section 5(d) (setting forth the 60% or higher
quoting obligations for MMs).
23 See
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AAPL, SPY, QQQ, and IWM. The
Exchange believes it is reasonable to
exclude AAPL, SPY, QQQ, and IWM
from the note 4 incentive because
Members are already paying lower
Customer Taker Fees of $0.33 per
contract for those symbols today.24
The Exchange believes that the
proposed growth incentive is reasonable
because it will provide extra incentives
to Members to engage in substantial
amounts of Customer liquidity removing
activity on the Exchange, as well as to
substantially grow the extent to which
they do so relative to a recent
benchmark month. The Exchange
believes that if the proposed growth
incentive is effective, any ensuing
increase in liquidity removing activity
on BX will increase trading
opportunities for all market
participants. The Exchange also believes
that it is reasonable to consider any new
Customer remove liquidity volume for
Members with no such volume for the
month of September 2024 in order for
those Members to receive the proposed
Taker Fee discount in note 4. The
proposed growth incentive is designed
to attract additional Customer order
flow from new Members as well as
existing Members who may not have a
large footprint on BX today. To the
extent this proposal attracts such order
flow to BX, all market participants
should benefit through more trading
opportunities. As discussed above, the
Exchange intends for the proposed
growth incentive in note 4 to sunset on
April 30, 2025, and will use this time to
evaluate suitable parameters for such
market participants in the targeted
segment. The Exchange believes that
this will ensure that the proposed
incentive is timely and meets the
intended purpose of encouraging
increased order flow and Customer
liquidity removing activity. As noted
above, other options exchanges
(including the Exchange’s affiliate) have
previously adopted similar growth
incentives.25
Further, the Exchange believes that
the proposed note 4 incentive is
equitable and not unfairly
discriminatory for the reasons that
follow. As a general matter, the
Exchange believes that it is equitable
and not unfairly discriminatory to
provide the note 4 incentive to only
Customer orders because the proposed
changes are intended to increase
Customer order follow, particularly
Customer remove liquidity order flow,
to BX. An increase in Customer order
flow enhances liquidity on the
24 See
25 See
Options 7, Section 2(1), note 1.
supra note 10.
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83747
Exchange to the benefit of all market
participants by providing more trading
opportunities, which in turn attracts
other market participants that may
interact with this order flow.
The Exchange also believes that it is
equitable and not unfairly
discriminatory to consider any new
Customer remove liquidity volume for
Members with no such volume in
September 2024 in order for those
Members to receive the proposed Taker
Fee discount because this is designed to
attract additional liquidity and order
flow from new and existing Members to
the Exchange, as discussed above. In
turn, this additional liquidity should
benefit all market participants through
increased liquidity and order
interaction. Furthermore, the proposed
growth incentive will be temporary and
sunset on April 30, 2025, to ensure that
the incentive is timely and meets the
intended purpose of encouraging
increased Customer order flow and
liquidity removing activity.
fees to remain competitive with other
options exchanges. Because competitors
are free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited. In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
In terms of intra-market competition,
the Exchange does not believe that its
proposal will place any category of
market participant at a competitive
disadvantage. As it relates to the
proposed note 2 incentives offered to
LMMs and MMs, the Exchange believes
that the additional Maker Rebates
should encourage the provision of
liquidity from both existing and new
LMMs and MMs that enhances the
quality of the Exchange’s market and
increases the number of trading
opportunities on the Exchange for all
market participants who will be able to
compete for such opportunities.
Similarly, for the proposed note 4
incentive offered to Customers, the
Exchange likewise believes that the
Taker Fee discount should encourage
additional Customer order flow from
both existing and new Members, which
would enhance BX’s market quality and
increase trading opportunities to the
benefit of all market participants.
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
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
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.
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.26
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
BX–2024–038 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
26 15
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Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–BX–2024–038. 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–2024–038 and should be
submitted on or before November 7,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–23900 Filed 10–16–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
ddrumheller on DSK120RN23PROD with NOTICES1
[Investment Company Act Release No.
35358; File No. 813–00403]
Edgar Street Capital, LLC, Elizabeth
Street Capital, LLC and Jane Street
Group, LLC
October 11, 2024.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
AGENCY:
27 17
CFR 200.30–3(a)(12).
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18:31 Oct 16, 2024
Jkt 265001
Notice of application for an order
under sections 6(b) and 6(e) of the
Investment Company Act of 1940 (the
‘‘Act’’) granting an exemption from all
provisions of the Act, except sections 9,
17, 30, 36 through 53 and the rules and
regulations under the Act. With respect
to sections 17(a), (d), (e), (f), (g) and (j)
of the Act, sections 30(a), (b), (e), and (h)
of the Act and the Rules and
Regulations and rule 38a–1 under the
Act, Applicants (as defined below)
request a limited exemption as set forth
in the application.
SUMMARY OF APPLICATION: The requested
exemption would permit Applicants to
enter an order to exempt certain limited
liability companies, partnerships,
business trusts, or other entities
(‘‘Funds’’) formed for the benefit of
eligible employees of Jane Street Group,
LLC and its affiliates from certain
provisions of the Act. Each Fund will be
an ‘‘employees’ securities company’’
within the meaning of section 2(a)(13) of
the Act.
APPLICANTS: Jane Street Group, LLC;
Edgar Street Capital, LLC and Elizabeth
Street Capital, LLC.
FILING DATES: The application was filed
on December 28, 2021, and amended on
June 13, 2022, October 19, 2022, March
30, 2023, and July 17, 2024.
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 Commission’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 November 5, 2024, 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 at
Secretarys-Office@sec.gov.
ADDRESSES:
The Commission: Secretarys-Office@
sec.gov.
Applicants: James Dieterich, Jane
Street Group, LLC: 250 Vesey Street,
New York, NY 10281; John J. Mahon,
Esq., Proskauer Rose LLP: 1001
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
Pennsylvania Avenue, Suite 600,
Washington, DC 20004.
FOR FURTHER INFORMATION CONTACT:
Toyin Momoh, Senior Counsel, or Lisa
Reid Ragen, Branch Chief, at (202) 551–
5325 (Division of Investment
Management, Chief Counsel’s Office).
For
Applicants’ representations, legal
analysis, and conditions, please refer to
Applicants’ fourth amended and
restated application, dated July 17,
2024, 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.
SUPPLEMENTARY INFORMATION:
For the Commission, by the Division of
Investment Management, under delegated
authority.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–23980 Filed 10–16–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101304; File No. SR–
CboeEDGA–2024–039]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fees Schedule Regarding Dedicated
Cores
October 10, 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
September 30, 2024, Cboe EDGA
Exchange, Inc. (the ‘‘Exchange’’ or
‘‘EDGA’’) 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
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
17OCN1
]]>Agencies
[Federal Register Volume 89, Number 201 (Thursday, October 17, 2024)]
[Notices]
[Pages 83743-83748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23900]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101300; File No. SR-BX-2024-038]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options
7, Section 2
October 10, 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 September 27, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed
with the
[[Page 83744]]
Securities and Exchange Commission (``Commission'') a 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 Pricing Schedule at
Options 7, Section 2(1).
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on October 1,
2024.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend a number of incentives for Lead
Market Makers (``LMMs''),\3\ Market Makers (``MMs''),\4\ and Customers
\5\ at BX Options 7, Section 2(1).
---------------------------------------------------------------------------
\3\ 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 Options 7, Section 1(c).
\4\ 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 Options 7, Section 1(c).
\5\ 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 Options 7, Section 1(c).
---------------------------------------------------------------------------
Today, in Penny Symbols, the Exchange pays the following Maker
Rebates: Lead Market Makers a Maker Rebate of $0.24 per contract;
Market Makers a Maker Rebate of $0.20 per contract; Non-Customer \6\
and Firm \7\ a Maker Rebate of $0.12 per contract; and Customer a Maker
Rebate of $0.30 per contract. Today, in Penny Symbols, the Exchange
pays the following Taker Fees: Lead Market Makers, Market Makers, Non-
Customer and Firm a Taker Fee of $0.50 per contract; and Customer a
Taker Fee of $0.40 per contract.
---------------------------------------------------------------------------
\6\ The term ``Non-Customer'' applies to transactions for the
accounts of Lead Market Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs. See Options 7, Section 1(c).
\7\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at OCC. See Options 7, Section 1(c).
---------------------------------------------------------------------------
Today, in Non-Penny Symbols, the Exchange pays the following Maker
Rebates/Fees: Lead Market Makers a Maker Rebate of $0.45 per contract;
Market Makers a Maker Rebate of $0.40 per contract; Non-Customer and
Firm a Maker Fee of $0.45 per contract; and Customer a Maker Rebate of
$1.10 per contract. Today, in Non-Penny Symbols, the Exchange pays the
following Taker Fees: Lead Market Makers, Market Makers, Non-Customer
and Firm a Taker Fee of $1.25 per contract; and Customer a Taker Fee of
$0.79 per contract.
Note 2 Incentive
The Exchange proposes to amend the incentives in note 2 of Options
7, Section 2(1) that currently provide:
Lead Market Makers and Market Makers that either (1) execute
more than 0.45% Customer Total Consolidated Volume (``TCV'') per day
which adds liquidity in a given month (excluding Lead Market Maker
and Market Maker volume which adds liquidity in SPY), or (2)
increase their combined Lead Market Maker and Market Maker volume
which adds liquidity in a given month by at least 70% above their
March 2024 volume as measured by a percentage of TCV (excluding Lead
Market Maker and Market Maker volume which adds liquidity in SPY),
will receive the following incentives: (i) an additional $0.05 per
contract Maker Rebate in Penny Symbols excluding SPY, (ii) an
additional $0.01 per contract Maker Rebate in SPY, and (iii) an
additional $0.24 per contract Maker Rebate in Non-Penny Symbols.
Lead Market Makers and Market Makers with no volume in the add
liquidity segment for the month of March 2024 may qualify for the
additional Maker Rebates by having any new volume (excluding SPY
volume) considered as added volume. This note 2 incentive will be
available through September 30, 2024.
Proposed note 2 provides LMMs and MMs two separate paths to receive
the additional Maker Rebates described above. The first path is based
on liquidity adding volume on BX as a percentage of Customer Total
Consolidated Volume, which is defined as the total national volume
cleared at The Options Clearing Corporation in the Customer range in
equity and ETF options in that month.\8\ The first path is based on a
percentage of industry volume in recognition of the fact that the
volume executed by a Member may rise or fall with industry volume.
---------------------------------------------------------------------------
\8\ See Options 7, Section 1(a).
---------------------------------------------------------------------------
The second path is a growth incentive aimed at rewarding LMMs and
MMs to grow the extent of their liquidity adding activity on the
Exchange over time, relative to a benchmark month. Currently, LMMs and
MMs who did not have any combined Lead Market Maker and Market Maker
add liquidity volume for the month of March 2024 (and therefore lack
March 2024 baseline volume against which to measure subsequent growth)
would meet the proposed growth requirement through whatever volume of
LMM and MM add liquidity activity (excluding in SPY) during the first
month of use.\9\ Growth incentives in general are designed to further
encourage Members to increase their order flow to the Exchange, which
contributes to a deeper, more liquid market and provides even more
execution opportunities for market participants. Increased overall
order flow benefits all market participants by contributing towards a
robust and well-balanced market ecosystem. Other options exchanges have
utilized substantially similar growth incentives.\10\ The Exchange
notes that it excludes LMM and MM liquidity adding volume in SPY from
both paths because SPY is the most actively traded symbol on BX, and
the Exchange believes that LMMs and MMs are incentivized to bring SPY
liquidity
[[Page 83745]]
adding volume on BX despite the exclusion of SPY volume from the note 2
qualifications. Further, today, the Exchange is encouraging SPY
liquidity adding volume separately through the proposed additional
$0.01 per contract Maker Rebate in SPY described above. Currently, the
proposed note 2 incentives are through September 30, 2024. The Exchange
believes that this ensures that the note 2 incentives--notably the
growth incentive using the benchmark month (i.e., March 2024) against
which LMM and MM growth would be measured--are timely and meet the
intended purpose of encouraging increased order flow and liquidity
adding activity.
---------------------------------------------------------------------------
\9\ As discussed below, the note 2 incentives sunset on
September 30, 2024 (including the growth incentive). Today, the
Exchange uses this time period to evaluate the proposed growth
incentive criteria to determine whether the parameters are
appropriately designed to incentivize LMMs and MMs in the intended
manner.
\10\ See, e.g., Securities Exchange Act Release Nos. 97148
(March 15, 2023), 88 FR 17068 (March 21, 2023) (SR-MRX-2023-07)
(establishing growth incentive for MRX Market Makers); and 97440
(May 5, 2023), 88 FR 30370 (May 11, 2023) (SR-MRX-2023-08) (adding
an expiration date for the MRX growth incentive). MRX subsequently
eliminated this growth incentive upon reaching the expiration date.
See Securities Exchange Act Release No. 97800 (June 26, 2023), 88 FR
42409 (June 30, 2023) (SR-MRX-2023-11).
---------------------------------------------------------------------------
At this time, the Exchange proposes to amend note 2 to change the
March 2024 baseline volume against which to measure subsequent growth
to September 2024. Similar to the prior note incentive, the Exchange
will sunset the proposed note 2 incentives after six months, in this
case April 30, 2025. The Exchange believes that the note 2 incentives
will continue to encourage Members to send order flow to BX.
Note 4 Incentive
The Exchange proposes to amend the incentives in note 4 in Options
7, Section 2(1) that currently provide:
Participants that increase their executed Customer volume which
removes liquidity in a given month by at least 70% above their March
2024 volume as measured by a percentage of TCV will receive a Taker
Fee discount of $0.05 per contract in Penny Symbols excluding AAPL,
SPY, QQQ, and IWM. Participants with no Customer volume in the
remove liquidity segment for the month of March 2024 may qualify for
the Taker Fee discount by having any new volume considered as added
volume. This note 4 incentive will be available through April 30,
2025.
Currently, the growth incentives in note 4 of Options 7, Section
2(1) have similar qualifications as the growth incentive in note 2 in
that Members are measured relative to a benchmark month. Specifically,
Members that increase their executed Customer volume which removes
liquidity in a given month by at least 70% above their March 2024
volume as measured by a percentage of TCV receive a Taker Fee discount
of $0.05 per contract in Penny Symbols excluding AAPL, SPY, QQQ, and
IWM. Accordingly, qualifying Members are paid a Customer Taker Fee of
$0.35 (instead of $0.40) per contract in Penny Symbols. The Exchange
excludes AAPL, SPY, QQQ, and IWM from the note 4 incentive because
Members are already paying lower Customer Taker Fees of $0.33 per
contract for those symbols today.\11\ The note 4 incentive Members to
grow the extent of their Customer liquidity removing activity on the
Exchange over time, relative to a benchmark month. Members with no
Customer volume in the remove liquidity segment for the month of March
2024 may qualify for the Taker Fee discount by having any new volume
considered as added volume. Similar to the note 2 incentive proposed
above, Members who did not have the requisite volume for the month of
March 2024 (and therefore lack March 2024 baseline volume against which
to measure subsequent growth) would meet the proposed growth
requirement through whatever volume in the required segment during the
first month of use. The Exchange believes that the growth incentive in
note 4 encourages increased Customer order flow to the Exchange, which
contributes to a deeper, more liquid market and provides even more
execution opportunities for market participants. Similar to the note 2
incentive above, the note 4 incentive sunsets on September 30, 2024.
---------------------------------------------------------------------------
\11\ See Options 7, Section 2(1), note 1.
---------------------------------------------------------------------------
At this time, the Exchange proposes to amend note 4 to change the
March 2024 baseline volume against which to measure subsequent growth
to September 2024. Similar to the prior note incentive, the Exchange
will sunset the proposed note 4 incentives after six months, in this
case April 30, 2025. The Exchange believes that the note 4 incentives,
as amended, would ensure that the proposed growth incentive is timely
and meets the intended purpose of encouraging increased order flow and
Customer liquidity removing activity.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
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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 options
securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \14\
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\14\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \15\
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\15\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
eighteen options exchanges to which market participants may direct
their order flow. Within this environment, market participants can
freely and often do shift their order flow among the Exchange and
competing venues in response to changes in their respective pricing
schedules. As such, the proposal represents a reasonable attempt by the
Exchange to increase its liquidity and market share relative to its
competitors.
Note 2 Incentive
The Exchange believes that the amended note 2 incentives are
reasonable for several reasons. As discussed above, note 2 would
continue to provide LMMs and MMs two separate paths to receive the
proposed additional Maker Rebates of (i) $0.05 per contract
[[Page 83746]]
in Penny Symbols excluding SPY,\16\ (ii) $0.01 per contract in SPY,\17\
and (iii) $0.24 per contract in Non-Penny Symbols.\18\ The first path
would be based on liquidity adding volume on BX as a percentage of
Customer Total Consolidated Volume (i.e., TCV).\19\ The Exchange
believes that the total industry percentage threshold is reasonable in
order to align with increasing LMM and MM activity on BX over time. The
Exchange is proposing to base the first path on a percentage of
industry volume in recognition of the fact that the volume executed by
a Member may rise or fall with industry volume. A percentage of
industry volume calculation allows the proposed qualifications in note
2 to be calibrated to current market volumes rather than requiring a
static amount of volume regardless of market conditions. The proposed
threshold of 0.45% Customer Total Consolidated Volume is generally
intended to reward LMMs and MMs for executing more liquidity adding
volume on BX. To the extent such activity is increased by this
proposal, market participants may increasingly compete for the
opportunity to trade on Exchange to the benefit of all market
participants. As noted above, total industry percentage thresholds are
established concepts within the Pricing Schedules of BX's
affiliates.\20\
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\16\ Accordingly, qualifying LMMs and MMs would receive a total
of $0.29 per contract (LMMs) and $0.25 per contract (MMs) in Penny
Symbols excluding SPY.
\17\ Accordingly, qualifying LMMs and MMs would receive a total
of $0.25 per contract (LMMs) and $0.21 per contract (MMs) in SPY.
\18\ Accordingly, qualifying LMMs and MMs would receive a total
of $0.69 per contract (LMMs) and $0.64 per contract (MMs) in Non-
Penny Symbols.
\19\ In particular, LMMs and MMs that execute more than 0.45%
Customer Total Consolidated Volume (``TCV'') per day which adds
liquidity in a given month (excluding Lead Market Maker and Market
Maker volume which adds liquidity in SPY) would receive the proposed
note 2 incentives.
\20\ See supra note 10.
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As discussed above, the second path would continue to be a growth
incentive that would provide LMMs and MMs with the additional Maker
Rebates outlined above if they increase their combined LMM and MM
volume which adds liquidity in a given month by at least 70% above
their September 2024 volume as measured by a percentage of TCV
(excluding LMM and MM volume which adds liquidity in SPY). The Exchange
believes that its proposal is reasonable because it will provide extra
incentives to LMMs and MMs to engage in substantial amounts of
liquidity adding activity on the Exchange, as well as to substantially
grow the extent to which they do so relative to a recent benchmark
month. The Exchange believes that if the proposed growth incentive is
effective, any ensuing increase in liquidity adding activity on BX will
improve the quality of the market overall, to the benefit of all market
participants. The Exchange also believes that it is reasonable to
consider any new add liquidity volume (excluding SPY volume) for LMMs
and MMs with no such volume for the month of September 2024 in order
for those market participants to receive the proposed additional Maker
Rebates in note 2. The proposed growth incentive is designed to attract
additional liquidity from new LMMs and MMs as well as existing LMMs and
MMs who may not have a large footprint on BX today. To the extent this
proposal attracts such LMM and MM add liquidity volume to BX, all
market participants should benefit through more trading opportunities
and tighter spreads. An overall increase in activity would deepen the
Exchange's liquidity pool, support the quality of price discovery,
promote market transparency and improve market quality for all
investors. As discussed above, the Exchange intends for the proposed
note 2 incentives, including the growth incentive, to sunset on April
30, 2025, and will use this time to evaluate suitable parameters for
such market participants in the targeted segment. The Exchange believes
that this will ensure that the proposed incentives are timely and meet
the intended purpose of encouraging increased order flow and liquidity
adding activity. As noted above, other options exchanges (including the
Exchange's affiliate) have previously adopted substantially similar
growth incentives.\21\
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\21\ See supra note 10.
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The Exchange further believes that it is reasonable to exclude LMM
and MM liquidity adding volume in SPY from both paths because SPY is
the most actively traded symbol on BX, and Exchange believes that LMMs
and MMs will continue to be incentivized to bring SPY liquidity adding
volume on BX despite the exclusion of SPY volume from the note 2
qualifications. Further, the Exchange is encouraging SPY liquidity
adding volume separately through the proposed additional $0.01 per
contract Maker Rebate in SPY described above.
The Exchange believes that the proposed note 2 incentives are
equitable and not unfairly discriminatory for the reasons that follow.
As a general matter, the Exchange believes that it is equitable and not
unfairly discriminatory to provide the note 2 incentives to only LMMs
and MMs because these market participants have different requirements
and additional obligations to the Exchange that other market
participants do not (such as quoting requirements). As noted above,
LMMs would ultimately receive higher Maker Rebates than MMs when
combining the current base rebates with the proposed additional
rebates.\22\ Nevertheless, the Exchange continues to believe that it is
equitable and not unfairly discriminatory to provide more favorable
pricing to LMMs compared to MMs given that LMMs are subject to
heightened quoting obligations compared to Market Makers.\23\ The
higher rebates therefore recognize the differing contributions made to
the liquidity and trading environment on the Exchange by LMMs. Overall,
the Exchange believes that incentivizing both LMMs and MMs to provide
greater liquidity benefits all market participants through the quality
of order interaction.
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\22\ See supra notes 16-18.
\23\ See Options 2, Section 4(j) (setting forth the 90% or
higher quoting obligations for LMMs) and Section 5(d) (setting forth
the 60% or higher quoting obligations for MMs).
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The Exchange also believes that it is equitable and not unfairly
discriminatory to consider any new add liquidity volume (excluding SPY
volume) for LMMs and MMs with no such volume in September 2024 in order
for those market participants to receive the proposed additional Maker
Rebates because this is designed to attract additional liquidity and
order flow from new and existing LMMs and MMs to the Exchange, as
discussed above. In turn, this additional liquidity should benefit all
market participants through increased liquidity and order interaction.
Furthermore, the proposed growth incentive will be temporary and sunset
on April 30, 2025, to ensure that the incentive is timely and meets the
intended purpose of encouraging increased order flow and liquidity
adding activity.
Note 4 Incentive
The Exchange believes that the proposed growth incentive in new
note 4 of Options 7, Section 2(1) is reasonable for the reasons that
follow. As discussed above, Members that increase their executed
Customer volume which removes liquidity in a given month by at least
70% above their September 2024 volume as measured by a percentage of
TCV will receive a Taker Fee discount of $0.05 per contract in Penny
Symbols excluding AAPL, SPY, QQQ, and IWM. Accordingly, qualifying
Members would pay a Customer Taker Fee of $0.35 (instead of $0.40) per
contract in Penny Symbols excluding
[[Page 83747]]
AAPL, SPY, QQQ, and IWM. The Exchange believes it is reasonable to
exclude AAPL, SPY, QQQ, and IWM from the note 4 incentive because
Members are already paying lower Customer Taker Fees of $0.33 per
contract for those symbols today.\24\
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\24\ See Options 7, Section 2(1), note 1.
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The Exchange believes that the proposed growth incentive is
reasonable because it will provide extra incentives to Members to
engage in substantial amounts of Customer liquidity removing activity
on the Exchange, as well as to substantially grow the extent to which
they do so relative to a recent benchmark month. The Exchange believes
that if the proposed growth incentive is effective, any ensuing
increase in liquidity removing activity on BX will increase trading
opportunities for all market participants. The Exchange also believes
that it is reasonable to consider any new Customer remove liquidity
volume for Members with no such volume for the month of September 2024
in order for those Members to receive the proposed Taker Fee discount
in note 4. The proposed growth incentive is designed to attract
additional Customer order flow from new Members as well as existing
Members who may not have a large footprint on BX today. To the extent
this proposal attracts such order flow to BX, all market participants
should benefit through more trading opportunities. As discussed above,
the Exchange intends for the proposed growth incentive in note 4 to
sunset on April 30, 2025, and will use this time to evaluate suitable
parameters for such market participants in the targeted segment. The
Exchange believes that this will ensure that the proposed incentive is
timely and meets the intended purpose of encouraging increased order
flow and Customer liquidity removing activity. As noted above, other
options exchanges (including the Exchange's affiliate) have previously
adopted similar growth incentives.\25\
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\25\ See supra note 10.
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Further, the Exchange believes that the proposed note 4 incentive
is equitable and not unfairly discriminatory for the reasons that
follow. As a general matter, the Exchange believes that it is equitable
and not unfairly discriminatory to provide the note 4 incentive to only
Customer orders because the proposed changes are intended to increase
Customer order follow, particularly Customer remove liquidity order
flow, to BX. An increase in Customer order flow enhances liquidity on
the Exchange to the benefit of all market participants by providing
more trading opportunities, which in turn attracts other market
participants that may interact with this order flow.
The Exchange also believes that it is equitable and not unfairly
discriminatory to consider any new Customer remove liquidity volume for
Members with no such volume in September 2024 in order for those
Members to receive the proposed Taker Fee discount because this is
designed to attract additional liquidity and order flow from new and
existing Members to the Exchange, as discussed above. In turn, this
additional liquidity should benefit all market participants through
increased liquidity and order interaction. Furthermore, the proposed
growth incentive will be temporary and sunset on April 30, 2025, to
ensure that the incentive is timely and meets the intended purpose of
encouraging increased Customer order flow and liquidity removing
activity.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not believe
that its proposal will place any category of market participant at a
competitive disadvantage. As it relates to the proposed note 2
incentives offered to LMMs and MMs, the Exchange believes that the
additional Maker Rebates should encourage the provision of liquidity
from both existing and new LMMs and MMs that enhances the quality of
the Exchange's market and increases the number of trading opportunities
on the Exchange for all market participants who will be able to compete
for such opportunities. Similarly, for the proposed note 4 incentive
offered to Customers, the Exchange likewise believes that the Taker Fee
discount should encourage additional Customer order flow from both
existing and new Members, which would enhance BX's market quality and
increase trading opportunities to the benefit of all market
participants.
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 fees to remain competitive with other
options exchanges. Because competitors are free to modify their own
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will lose market share as a result. Accordingly, the Exchange does not
believe that the proposed changes will impair the ability of 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.\26\
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\26\ 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-2024-038 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 83748]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-BX-2024-038. 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-2024-038 and should be
submitted on or before November 7, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-23900 Filed 10-16-24; 8:45 am]
BILLING CODE 8011-01-P
