Notice2021-12032
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX Options 7, Section 1, “General Provisions” and Section 2, “BX Options Market-Fees and Rebates”
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 9, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 109 (Wednesday, June 9, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 109 (Wednesday, June 9, 2021)]
[Notices]
[Pages 30661-30663]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-12032]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92103; File No. SR-BX-2021-025]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options
7, Section 1, ``General Provisions'' and Section 2, ``BX Options
Market-Fees and Rebates''
June 3, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 24, 2021, 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 BX Options 7, Section 1, ``General
Provisions'' and Section 2, ``BX Options Market-Fees and Rebates.''
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/bx/rules">https://listingcenter.nasdaq.com/rulebook/bx/rules</a>, 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
[[Page 30662]]
the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend BX's Pricing Schedule at BX Options
7, Section 1, ``General Provisions'' and Section 2, ``BX Options
Market-Fees and Rebates.'' Each change will be described below.
Options 7, Section 1
The Exchange proposes to relocate rule text, without change,
related to the Removal of Days for Purposes of Pricing Tiers within
Options 7, Section 2(6) into Options 7, Section 1, General Provisions.
This proposed change is non-substantive. The Exchange believes that
this rule text is more appropriate for Section 1 which describes
general provisions.
Options 7, Section 2
The Exchange will begin offering its Block Order Mechanism \3\ and
Customer Cross Order \4\ on June 1, 2021.\5\ The Exchange proposes to
assess no fees and pay no rebates for orders entered into the Block
Order Mechanism or Customer Cross Orders. Specifically, the Exchange
proposes to create a header within Options 7, Section 2(6) [sic] which
states, ``Block Order Mechanism per Options 3, Section 11 and Customer
Cross Orders per to Options 3, Section 12'' and note that ``Orders
executed in the Block Order Mechanism and Customer Cross Orders are not
subject to fees or rebates.''
---------------------------------------------------------------------------
\3\ The Block Order Mechanism is for single leg transactions
only. Block Orders are orders for fifty (50) contracts or more. See
Securities Release Act No. 89759 (September 3, 2020), 85 FR 55877
(September 3, 2020) [sic] (SR-BX-2020-023).
\4\ See Options Technical Update #2021-2.
\5\ A Customer Cross Order is an order type within Options 3,
Section 7(a)(10). A Customer Cross Order is comprised of two Public
Customer Orders automatically executed upon entry provided that the
execution is at or between the best bid and offer on the Exchange
and (i) is not at the same price as a Public Customer Order on the
Exchange's limit order book and (ii) will not trade through the
NBBO. See Securities Release Act No. 89476 (August 4, 2020), 85 FR
48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------
Also, the Exchange proposes to amend the rule text within Options
7, Section 2(1), which directs Participants to applicable pricing, to
also provide that ``Orders executed in the Block Order Mechanism and
Customer Cross Orders are not subject to the pricing in Options 7,
Section 2(1), instead, these orders are subject to the pricing within
Options 7, Section 2(6).'' The addition of this rule text will serve as
a guidepost to Participants to easily locate the pricing for the Block
Order Mechanism.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among members and issuers and other persons using any facility,
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78 f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The proposed changes to BX's Pricing Schedule 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'. . . .'' \8\
---------------------------------------------------------------------------
\8\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \9\
---------------------------------------------------------------------------
\9\ See 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
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. Within this environment, market participants can freely and
often do shift their order flow among the Exchange and competing venues
in response to changes in their respective pricing schedules. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
Options 7, Section 1
The Exchange's proposal to relocate rule text related to the
Removal of Days for Purposes of Pricing Tiers within Options 7, Section
2(6) into Options 7, Section 1, General Provisions, without change, is
reasonable as the Exchange is simply relocating the rule text within a
section which describes general provisions.
The Exchange's proposal to relocate rule text related to the
Removal of Days for Purposes of Pricing Tiers within Options 7, Section
2(6) into Options 7, Section 1, General Provisions, without change, is
equitable and not unfairly discriminatory as the rule text will
continue to apply uniformly to all Participants.
Options 7, Section 2
The Exchange's proposal to adopt Block Order Mechanism and Customer
Cross Order pricing is reasonable. On June 1, 2021, the Exchange will
begin offering the Block Order Mechanism and Customer Cross Orders to
Participants and assess no fees and not pay any rebates for orders
entered into the Block Order Mechanism or Customer Cross Orders. The
Exchange's proposal will provide Participants notification of its Block
Order and Customer Cross Order pricing. The proposal to add rule text
within Options 7, Section 2(1) will serve as a guidepost to
Participants to easily locate the pricing for the Block Order Mechanism
and Customer Cross Orders.
The Exchange's proposal to adopt Block Order Mechanism and Customer
Cross Order pricing is equitable and not unfairly discriminatory as no
Participant would be subject to any fees or be paid any rebates for
orders executed into the Block Order Mechanism or Customer Cross
Orders.
[[Page 30663]]
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.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. 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.
Intra-Market Competition
Options 7, Section 1
The Exchange's proposal to relocate rule text related to the
Removal of Days for Purposes of Pricing Tiers within Options 7, Section
2(6) into Options 7, Section 1, General Provisions, without change,
does not impose an undue burden on competition as the rule text will
continue to apply uniformly to all Participants.
Options 7, Section 2
The Exchange's proposal to adopt Block Order Mechanism and Customer
Cross Order pricing does not impose an undue burden on competition as
no Participant would be subject to any fees or be paid any rebates for
orders executed into the Block Order Mechanism or Customer Cross
Orders.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\10\ 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a4d6d1c8c189c7cbc9c9c1cad0d7e4d7c1c78ac3cbd2"><span class="__cf_email__" data-cfemail="6b191e070e46080406060e051f182b180e08450c041d">[email protected]</span></a>. Please include
File Number SR-BX-2021-025 on the subject line.
Paper Comments
<bullet> 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-2021-025. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
All submissions should refer to File Number SR-BX-2021-025 and
should be submitted on or before June 30, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-12032 Filed 6-8-21; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on June 9, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.