[Federal Register Volume 86, Number 109 (Wednesday, June 9, 2021)]
[Notices]
[Pages 30661-30663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12032]


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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.
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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 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 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

[[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.''
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    \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).
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    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.
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    \6\ 15 U.S.C. 78 f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    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\
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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\ See 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.
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.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 (http://www.sec.gov/rules/sro.shtml); 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 (http://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 10:00 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\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-12032 Filed 6-8-21; 8:45 am]
BILLING CODE 8011-01-P


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