Notice2022-01221
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the BX Pricing Schedule at Options 7, Section 2
Primary source
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Published
January 24, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 15 (Monday, January 24, 2022)</title>
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[Federal Register Volume 87, Number 15 (Monday, January 24, 2022)]
[Notices]
[Pages 3625-3628]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-01221]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93989; File No. SR-BX-2022-001]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the BX
Pricing Schedule at Options 7, Section 2
January 18, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 3, 2022, Nasdaq BX, Inc. (``BX'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the BX Pricing Schedule at Options
7, Section 2, as described further below.
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 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 purpose of the proposed rule change is to amend the BX Pricing
Schedule at Options 7, Section 2.
[[Page 3626]]
Specifically, the Exchange proposes to: (1) Increase the Taker Fees in
Penny Symbols for all market participants except Customers \4\ from
$0.46 to $0.50 per contract, (2) increase the Customer Taker Fee in SPY
from $0.26 to $0.31 per contract, and (3) remove the higher Maker
Rebate of $0.42 per contract currently offered to Lead Market Makers
\5\ and Market Makers \6\ for IWM, GLD, SLV, and TSLA.
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\4\ 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)).
\5\ 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).
\6\ 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.
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Penny Taker Fee
Today, the Exchange charges LMM, Market Maker, Non-Customer,\7\
Firm,\8\ and Customer orders in Penny Symbols a Taker Fee of $0.46 per
contract. For Customer orders in SPY, the Exchange charges a reduced
Taker Fee of $0.26 per contract.
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\7\ The term ``Non-Customer'' shall include a Professional,
Broker-Dealer and Non-BX Options Market Maker.
\8\ The term ``Firm'' or (``F'') applies to any transaction that
is identified by a Participant for clearing in the Firm range at
OCC.
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The Exchange now proposes to increase the Penny Taker Fees for all
market participants except Customers from $0.46 to $0.50 per contract.
The Exchange also proposes to increase the Customer Taker Fee in SPY
from $0.26 to $0.31 per contract.
Penny Maker Rebate
The Exchange currently offers LMMs and Market Makers a Maker Rebate
in Penny Symbols that is $0.29 per contract (LMMs) and $0.25 per
contract (Market Makers). For AAPL, IWM, GLD, QQQ, SLV, and TSLA, both
LMMs and Market Makers are currently offered a higher Maker Rebate of
$0.42 per contract.
The Exchange now proposes to remove IWM, GLD, SLV, and TSLA from
the list of Penny Symbols eligible to receive the higher $0.42 per
contract Maker Rebate. While the Exchange will no longer offer the
higher rebate for IWM, GLD, SLV, and TSLA, Participants will still
receive the Penny Maker Rebate in these Penny Symbols, albeit at a
lower rate of $0.29 per contract (for LMMs) and $0.25 per contract (for
Market Makers). Furthermore, LMMs and Market Makers will continue to be
provided the higher $0.42 Maker Rebate for AAPL and QQQ orders under
this proposal.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its Pricing Schedule are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options
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'. . . .'' \11\
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\11\ 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.'' \12\
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\12\ 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
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.
Penny Taker Fee
The Exchange believes that its proposal to increase the Penny Taker
Fees for all market participants except Customers from $0.46 to $0.50
per contract is reasonable. While the Penny Taker Fees are increasing
in this manner, the Exchange believes that its fees remain competitive
with other options exchanges.\13\ Accordingly, the Exchange believes
that the proposed fees will continue to attract order flow to BX to the
benefit of all market participants. The Exchange further believes that
increasing the Penny Taker Fees from $0.46 to $0.50 per contract is
equitable and not unfairly discriminatory because the proposed changes
will apply uniformly to all similarly situated Participants.
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\13\ For example, Nasdaq MRX, LLC (``MRX'') currently charges
all market participants except Priority Customers a Penny Taker Fee
of $0.50 per contract. See MRX Options 7, Section 3. In addition,
NYSE Arca Options similarly charges all market participants except
Customers a take liquidity fee in Penny Issues of $0.50 per
contract. See NYSE Arca Options Fees and Charges, Transaction Fee
for Electronic Executions--Per Contract.
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The Exchange believes that its proposal to increase the Customer
Taker Fee in SPY from $0.26 to $0.31 per contract is reasonable. While
the Customer Taker Fee in SPY is increasing, Customers will continue to
receive favorable pricing compared to all other market participants on
BX. In particular, no other market participants except Customers are
currently eligible to receive this reduced Taker Fee in SPY. These
market participants are instead assessed the Penny Taker Fee of $0.46
per contract today (which is increasing to $0.50 per contract under
this proposal). The Exchange believes that offering the reduced Taker
Fee in
[[Page 3627]]
SPY of $0.31 per contract to Customers is equitable and not unfairly
discriminatory because the proposed pricing will apply uniformly to all
similarly situated Participants. Customer liquidity benefits all market
participants by providing more trading opportunities which attracts
market makers. An increase in the activity of these market participants
in turn facilitates tighter spreads and may cause an additional
corresponding increase in order flow from other market participants.
Penny Maker Rebate
The Exchange believes that its proposal to remove IWM, GLD, SLV,
and TSLA from the list of Penny Symbols eligible to receive the higher
$0.42 per contract Maker Rebate is reasonable. While the Exchange will
no longer offer the higher rebate, Participants will still receive a
Maker Rebate in these Penny Symbols, albeit at a lower rate of $0.29
per contract (for LMMs) and $0.25 per contract (for Market Makers).
Other than the $0.30 Penny Maker Rebate currently provided to
Customers, these are still the highest Penny Maker Rebates provided to
market participants today.\14\ Accordingly, the Exchange believes that
its rebate program for Penny Symbols will remain attractive for LMMs
and Market Makers, and will continue to attract order flow to BX to the
benefit of all market participants.
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\14\ As a comparison, Non-Customers and Firms are currently
provided a Penny Maker Rebate of $0.12 per contract.
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The Exchange believes that its proposal is equitable and not
unfairly discriminatory as the changes will apply uniformly to all
similarly situated Participants. With the proposed changes, the
Exchange will still provide LMMs and Market Makers some of the highest
Penny Maker Rebates in IWM, GLD, SLV, and TSLA compared to other market
participants.\15\ Further, the Exchange believes that offering more
favorable pricing for LMMs and Market Makers is equitable and not
unfairly discriminatory. Unlike other market participants, LMMs and
Market Makers add value through continuous quoting and the commitment
of capital. As it relates to the higher Penny Maker Rebate provided to
LMMs compared to Market Makers, the Exchange believes that this
differentiation is equitable and not unfairly discriminatory given that
LMMs are subject to heightened quoting obligations compared to Market
Makers.\16\ The higher rebate therefore recognizes the differing
contributions made to the liquidity and trading environment on the
Exchange by LMMs. Overall, the Exchange believes that incentivizing
both LMMs and Market Makers to provide greater liquidity benefits all
market participants through the quality of order interaction.
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\15\ See supra note 13 with accompanying text.
\16\ 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 Market Makers).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, all pricing would be
uniformly assessed to similarly situated market participants. Customers
will continue to receive favorable pricing as compared to other market
participants because Customer liquidity enhances market quality on the
Exchange by providing more trading opportunities, which benefits all
market participants. Furthermore, the proposed changes to the Penny
Maker Rebate program for LMMs and Market Makers are designed to
incentivize these market participants to provide greater liquidity,
which benefits all market participants through the quality of order
interaction.
In terms of inter-market competition, the Exchange believes that
with the proposed changes, its pricing 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. 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 Participants 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.\17\
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\17\ 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
<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#1b696e777e36787476767e756f685b687e78357c746d"><span class="__cf_email__" data-cfemail="fe8c8b929bd39d9193939b908a8dbe8d9b9dd0999188">[email protected]</span></a>. Please include
File Number SR-BX-2022-001 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-2022-001. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<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
[[Page 3628]]
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. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-BX-
2022-001, and should be submitted on or before February 14, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01221 Filed 1-21-22; 8:45 am]
BILLING CODE 8011-01-P
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