Notice2024-10952
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
May 20, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 98 (Monday, May 20, 2024)</title>
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[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Notices]
[Pages 43933-43936]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-10952]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100136; File No. SR-BX-2024-015]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options
7, Section 2
May 14, 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 May 1, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``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\ 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 Exchange's Pricing Schedule at
Options 7, Section 2.
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 its Pricing Schedule at Options 7,
Section 2(1) to establish an additional incentive
[[Page 43934]]
for Participants with respect to Apple, Inc. (``AAPL'').
Today, the Exchange assesses the following fees and rebates in
Penny and Non-Penny Symbols:
Penny Symbols
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Market participant Maker rebate Taker fee
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Lead Market Maker....................... \2\ ($0.24) $0.50
Market Maker............................ \2\ ($0.20) $0.50
Non-Customer............................ ($0.12) $0.50
Firm.................................... ($0.12) $0.50
Customer................................ ($0.30) \1\ \4\ $0.40
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Non-Penny Symbols
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Maker rebate/
Market participant fee Taker fee
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Lead Market Maker....................... \2\ ($0.45) $1.25
Market Maker............................ \2\ ($0.40) $1.25
Non-Customer............................ $0.45 $1.25
Firm.................................... $0.45 $1.25
Customer................................ \3\ ($1.10) $0.79
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Today, the Exchange offers Participants two ways to reduce the
Penny Symbol Customer Taker Fee which is currently $0.40 per contract.
In note 1 of Options 7, Section 2, the Exchange offers Participants a
reduced Penny Symbol Customer \3\ Taker Fee of $0.33 per contract,
instead of $0.40 per contract, in SPDR S&P 500 ETF (``SPY''), Invesco
QQQ Trust Series 1 (``QQQ'') and iShares Russell 2000 ETF (``IWM'').
Further, in note 4 of Options 7, Section 2, the Exchange offers
Participants \4\ 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, a Taker Fee discount of
$0.05 per contract in Penny Symbols, excluding SPY, QQQ, and IWM.\5\
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\3\ 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(a).
\4\ The Exchange proposes to change the word ``Members'' to
Participants'' in note 4 of Options 7, Section 2 to conform with the
definition of options participants on BX in Options 1, Section
1(a)(40).
\5\ 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. The
note 4 incentive is available through September 30, 2024.
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At this time, the Exchange proposes to amend note 1 of Options 7,
Section 2 to extend the discounted Penny Symbol Customer Taker Fee of
$0.33 per contract to AAPL, in addition to SPY, QQQ, and IWM. Further,
the Exchange proposes to exclude AAPL from the Penny Taker Fee discount
in note 4 of Options 7, Section 2, similar to SPY, QQQ, and IWM. With
note 4, qualifying Participants pay a Customer Taker Fee of $0.35 per
contract (instead of $0.40 per contract) in Penny Symbols, however, BX
excludes SPY, QQQ, and IWM from the note 4 incentive because
Participants are entitled to a lower Penny Customer Taker Fees of $0.33
per contract for those symbols per note 1. Penny transactions in AAPL
that remove liquidity would similarly be entitled to the note 1
discount, but not the note 4 discount.
The Exchange believes that the proposed amendments will attract
additional AAPL Penny transactions that remove liquidity to BX similar
to SPY, QQQ and IWM.
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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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BX'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'. . . .'' \8\
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\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)).
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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.'' \9\
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\9\ 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
[[Page 43935]]
security 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. As such, the
proposal represents a reasonable attempt by the Exchange to increase
its liquidity and market share relative to its competitors.
The Exchange's proposal to reduce the Penny Symbol Customer Taker
Fee from $0.40 to $0.33 per contract for trades which remove liquidity
in AAPL in note 1 of Options 7, Section 2 is reasonable because it will
attract additional Customer Penny Symbol AAPL transactions that remove
liquidity to BX. The Exchange believes that it is reasonable to pay
lower fees in AAPL, similar to SPY, QQQ, and IWM, as compared to other
options symbols because the Exchange is seeking to incentivize greater
order flow in these highly liquid Penny Symbols which are subject to
greater competition among options exchanges.
The Exchange's proposal to reduce the Penny Symbol Customer Taker
Fee from $0.40 to $0.33 per contract for trades which remove liquidity
in AAPL in note 1 of Options 7, Section 2 is equitable and not unfairly
discriminatory because Customer liquidity enhances market quality on
the Exchange by providing more trading opportunities, which benefits
all market participants. Additionally, the Exchange will assess the
lower Taker Fee in AAPL uniformly to all Customer Penny Symbol Taker
Fee transactions similar to SPY, QQQ and IWM.
The Exchange's proposal to exclude AAPL Penny transactions that
remove liquidity from note 4 of Options 7, Section 2 is reasonable
because with the proposed change to note 1 of Options 7, Section 2,
Participants would be entitled to a lower Penny Customer Taker Fee of
$0.33 per contract in AAPL.
The Exchange's proposal to exclude AAPL Penny transactions that
remove liquidity from note 4 of Options 7, Section 2 is equitable and
not unfairly discriminatory because the Exchange would not permit any
transaction to remove liquidity in AAPL in Penny Symbols to receive the
discount in note 4 of Options 7, Section 2.
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. The Exchange's proposal to reduce the Penny
Symbol Customer Taker Fee from $0.40 to $0.33 per contract for trades
which remove liquidity in AAPL in note 1 of Options 7, Section 2 does
not impose an undue burden on competition because Customer liquidity
enhances market quality on the Exchange by providing more trading
opportunities, which benefits all market participants. Additionally,
the Exchange will assess the lower Taker Fee in AAPL uniformly to all
Customer Penny Symbol Taker Fee transactions similar to SPY, QQQ and
IWM. Also, the Exchange's proposal to exclude AAPL Penny transactions
that remove liquidity from note 4 of Options 7, Section 2 does not
impose an undue burden on competition because the Exchange would not
permit any transaction to remove liquidity in AAPL in Penny Symbols to
receive the discount in note 4 of Options 7, Section 2.
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.\10\
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\10\ 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="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#3341465f561e505c5e5e565d4740734056501d545c45"><span class="__cf_email__" data-cfemail="8ffdfae3eaa2ece0e2e2eae1fbfccffceaeca1e8e0f9">[email protected]</span></a>. Please include
file number SR-BX-2024-015 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-2024-015. 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,
[[Page 43936]]
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-2024-015 and should be
submitted on or before June 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10952 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P
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