Notice2024-01861
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX Options 7, Section 2
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Published
January 31, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 21 (Wednesday, January 31, 2024)</title>
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[Federal Register Volume 89, Number 21 (Wednesday, January 31, 2024)]
[Notices]
[Pages 6157-6159]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01861]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99430; File No. SR-BX-2024-003]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options
7, Section 2
January 25, 2024.
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 12, 2024, Nasdaq BX, Inc. (``BX'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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 its Pricing Schedule at Options 7,
Section 2. While the changes proposed herein are effective upon filing,
the Exchange has designated the amendments become operative on February
1, 2024.
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 Exchange proposes to amend BX's Pricing Schedule at Options 7,
Section 2, BX Options Market-Fees and Rebates. Specifically, the
Exchange proposes to amend Options 7, Section 2(5) related to the BX
Price Improvement Auction (``PRISM'').
Currently, the Exchange assesses the below fees and pays the below
rebates for orders executed in its PRISM Auction.
Fees and Rebates (per contact)
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Submitted PRISM auction order Submitted PRISM auction order PRISM response to PRISM PRISM order traded with PRISM
in penny classes in non-penny classes rebate auction fee response rebate
Type of market participants -------------------------------------------------------------------------------------------------------------------------------
Initiating Initiating Non-penny Non-penny
PRISM order order PRISM order order Penny classes classes Penny classes classes
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Customer........................................................ $0.00 $0.00 $0.12 $0.00 $0.40 $0.79 $0.35 $0.70
Lead Market Maker............................................... 0.00 0.00 0.00 0.00 0.50 1.25 0.00 0.00
BX Options Market Maker......................................... 0.00 0.00 0.00 0.00 0.50 1.25 0.00 0.00
Non-Customer.................................................... 0.00 0.00 0.00 0.00 0.50 1.25 0.00 0.00
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Today, the Exchange assesses no PRISM Order \4\ fees in Penny and
Non-Penny Classes to any Participant. Today, the Exchange pays a $0.12
per contract rebate to Customers \5\ for PRISM Orders in Non-Penny
Classes. Today, the Exchange assesses no Initiating Order \6\ fees in
Penny and Non-Penny Classes to any Participant for PRISM Auction
Orders.\7\ Today, the Exchange assesses a $0.40 per contract PRISM
Response \8\ to Customers and a $0.50 per contract PRISM Response to
Non-Customers \9\ in Penny Classes. Today, the Exchange assesses a
$0.79 per contract PRISM Response to Customers and a $1.25 per contract
PRISM Response to Non-Customers in Non-Penny Classes. Today, if a PRISM
Order trades with a PRISM Response, the Exchange pays a rebate of $0.35
to Customers for Penny Classes and a rebate of $0.70 to Customers for
Non-Penny Classes. Non-Customers are not paid a rebate if a PRISM Order
trades with a PRISM Response.
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\4\ A PRISM Order is one-side of a PRISM Auction Order that
represents an agency order on behalf a Public Customer, broker-
dealer or other entity which is paired with an Initiating Order. See
BX Options 7, Section 2(5).
\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 BX Options 7, Section 1(a).
\6\ An Initiating Order is one-side of a PRISM Auction Order
that represents principal or other interest which is paired with a
PRISM Order. See BX Options 7, Section 2(5).
\7\ A PRISM Auction Order is a two-sided, paired order comprised
of a PRISM Order and an Initiating Order. See BX Options 7, Section
2(5).
\8\ A PRISM Response is interest that executed against the PRISM
Order pursuant to Options 3, Section 13. See BX Options 7, Section
2(5).
\9\ The term ``Non-Customer'' shall include a Professional,
Broker-Dealer and Non-BX Options Market Maker. See BX Options 7,
Section 1(a).
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Proposal
The Exchange proposes to amend its PRISM pricing to increase its
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers
\10\ from $0.00 to $0.05 per contract. Customers will continue to be
assessed no Initiating Order Fee in Penny and Non-Penny Classes. The
Exchange also proposes to decrease its pricing for Non-Penny PRISM
Responses for Non-Customers from $1.25 to $1.10 per contract. The
Exchange is not amending its Non-Penny PRISM Responses for Customers.
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\10\ The term ``Non-Customer'' shall include a Professional,
Broker-Dealer and Non-BX Options Market Maker. See BX Options 7,
Section 1(a).
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While the Exchange is increasing its Initiating Order fee from
$0.00 to $0.05 per contract in Penny and Non-Penny Classes for Non-
Customers, the Exchange believes the proposed pricing remains
competitive and will continue to encourage BX Participants to
participate in PRISM Orders on BX. Customers will continue to be
assessed no Initiating Order fee in a PIXL Auction in Penny and Non-
Penny Classes. The Exchange believes that the decreased Non-Penny Non-
Customer PRISM Response fees will encourage Participants to participate
in PRISM Orders on BX. Customers will continue
[[Page 6158]]
to be assessed a lower Non-Penny PRISM Response fee as compared to
other Participants.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to its Pricing Schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for options transaction
services that constrain its pricing determinations in that market. The
fact that this market is competitive has long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission \13\
(``NetCoalition''), the D.C. Circuit stated, ``[n]o one disputes that
competition for order flow is [revaps]fierce.' . . . As the SEC
explained, [revaps][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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\13\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\14\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is only one of seventeen
options exchanges to which market participants may direct their order
flow. Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. Within the
foregoing context, the proposal represents a reasonable attempt by the
Exchange to attract additional order flow to the Exchange and increase
its market share relative to its competitors.
The Exchange's proposal to amend its PRISM pricing to increase its
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers
from $0.00 to $0.05 per contract is reasonable. While the Exchange is
increasing its Initiating Order fee from $0.00 to $0.05 in Penny and
Non-Penny Classes for Non-Customers, the Exchange believes the proposed
pricing remains competitive and will continue to encourage BX
Participants to participate in PRISM Orders on BX. The Exchange's
proposal to decrease its pricing for Non-Penny PRISM Responses for Non-
Customers from $1.25 to $1.10 per contract is reasonable. The Exchange
believes that the decreased Non-Penny PRISM Response fees will
encourage Participants to attract order flow to BX since the Exchange
is no longer assessing any fees to participate in PRISM Orders on BX.
The proposed pricing is comparable to the spread between the agency
order and responses in a price improvement auction on another options
exchange.\15\
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\15\ BOX Exchange LLC (``BOX'') assesses customers no agency
order fee and assesses Non-Customers a $0.05 per contract agency
order fee in Penny and Non-Penny classes in BOX's Price Improvement
Period or ``PIP''. BOX assesses a Penny Response Fee of $0.49 per
contract for Customers and $0.50 per contract for Non-Customers in
PIP. BOX assesses a Non-Penny Response Fee of $0.96 per contract for
Customers and $1.15 per contract for Non-Customers in PIP.
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The Exchange's proposal to amend its PRISM pricing to increase its
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers
from $0.00 to $0.05 per contract is equitable and not unfairly
discriminatory. The Exchange will uniformly not assess a Penny or Non-
Penny Initiating Order fee to any Non-Customer. While Customers will
continue to not be assessed an Initiating Order fee in Penny and Non-
Penny Classes, the Exchange notes that Customer activity enhances
liquidity on the Exchange for the benefit of all market participants
and benefits all market participants by providing more trading
opportunities, which attracts market makers. The Initiating Order fee
is comparable to other options exchanges. The Exchange's proposal to
decrease its pricing for Non-Penny PRISM Responses for Non-Customers
from $1.25 to $1.10 per contract is equitable and not unfairly
discriminatory. The Exchange will uniformly assess the $1.10 per
contract Non-Penny PRISM Responses to Non-Customers. Customers will
continue to be assessed a lower Non-Penny PRISM Response fee of $0.79
per contract. Assessing Customers a lower Non-Penny PRISM Response fee
of $0.79 per contract as compared to $1.10 per contract for Non-
Customers is equitable and not unfairly discriminatory as Customer
activity enhances liquidity on the Exchange for the benefit of all
market participants and benefits all market participants by providing
more trading opportunities, which attracts market makers.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intermarket Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice to initiate a price improvement auction. The Exchange
notes that it operates in a highly competitive market in which market
participants can readily favor competing venues if they deem fee levels
at a particular venue to be excessive, or rebate opportunities
available at other venues to be more favorable. In such an environment,
the Exchange must continually adjust its fees to remain competitive
with other exchanges. Because competitors are free to modify their own
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited.
Intramarket Competition
The Exchange's proposal to amend its PRISM pricing to increase its
Initiating Order fees in Penny and Non-Penny Classes for Non-Customers
from $0.00 to $0.05 per contract does not impose an undue burden on
competition. The Exchange will uniformly not assess a Penny or Non-
Penny Initiating Order Fee to any Non-Customer. While Customers will
continue to not be assessed an Initiating Order fee in Penny and Non-
Penny Classes, the Exchange notes that Customer activity enhances
liquidity on the Exchange for the benefit of all market participants
and benefits all market participants by providing more trading
opportunities, which attracts market makers. The Exchange's proposal to
decrease its pricing for Non-Penny PRISM Responses for Non-Customers
from $1.25 to $1.10 per contract does not impose an undue burden on
[[Page 6159]]
competition. The Exchange will uniformly assess the $1.10 per contract
Non-Penny PRISM Responses to Non-Customers. Customers will continue to
be assessed a lower Non-Penny PRISM Response fee of $0.79 per contract.
Assessing Customers a lower Non-Penny PRISM Response fee of $0.79 per
contract as compared to $1.10 per contract for Non-Customers does not
impose an undue burden on competition as Customer activity enhances
liquidity on the Exchange for the benefit of all market participants
and benefits all market participants by providing more trading
opportunities, which attracts market makers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule
19b-4 \17\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(2).
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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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\18\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#6614130a034b05090b0b030812152615030548010910"><span class="__cf_email__" data-cfemail="2b595e474e06484446464e455f586b584e48054c445d">[email protected]</span></a>. Please include
file number SR-BX-2024-003 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-2024-003. 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="https://www.sec.gov/rules/sro.shtml">https://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
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-2024-003 and should be
submitted on or before February 21, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01861 Filed 1-30-24; 8:45 am]
BILLING CODE 8011-01-P
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