[Federal Register Volume 79, Number 214 (Wednesday, November 5, 2014)]
[Notices]
[Pages 65733-65735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26227]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73469; File No. SR-BX-2014-052]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Routing Fees

October 30, 2014.
    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 October 23, 2014, NASDAQ OMX 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 Chapter XV, Section 2 entitled ``BX 
Options Market--Fees and Rebates.'' Specifically, the Exchange is 
proposing to amend Routing Fees.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments be operative on November 3, 
2014.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.com, 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 this filing is to amend the Routing Fees in Chapter 
XV, Section 2(3) to recoup costs incurred by the Exchange to route 
orders to away markets.
    Today, the Exchange assesses a Non-Customer a $0.97 per contract 
Routing Fee to any options exchange. The Customer \3\ Routing Fee for 
option orders routed to The NASDAQ Options Market LLC (``NOM'') and 
NASDAQ OMX PHLX LLC (``PHLX'') is a $0.12 per contract Fixed Fee in 
addition to the actual transaction fee assessed. The Customer Routing 
Fee for option orders routed to all other options exchanges \4\ 
(excluding NOM and PHLX) is a fixed fee of $0.22 per contract (``Fixed 
Fee'') in addition to the actual transaction fee assessed. If the away 
market pays a rebate, the Routing Fee is $0.12 per contract.
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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 Chapter I, Section 
1(a)(48)).
    \4\ Including BATS Exchange, Inc. (``BATS''), BOX Options 
Exchange LLC (``BOX''), the Chicago Board Options Exchange, 
Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''), 
International Securities Exchange, LLC (``ISE''), the Miami 
International Securities Exchange, LLC (``MIAX''), NYSE Arca, Inc. 
(``NYSE Arca''), NYSE MKT LLC (``NYSE Amex'') and ISE Gemini, LLC 
(``Gemini'').
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    With respect to the fixed costs, the Exchange incurs a fee when it 
utilizes Nasdaq Execution Services LLC (``NES''), a member of the 
Exchange and the Exchange's affiliated broker-dealer exclusive order 
router.\5\ Each time NES routes an order to an away market, NES is 
charged a clearing fee \6\ and, in the case of certain exchanges, a 
transaction fee is also charged in certain symbols, which fees are 
passed through to the Exchange. The Exchange currently recoups clearing 
and transaction charges incurred by the Exchange as well as certain 
other costs incurred by the Exchange when routing to away markets, such 
as administrative and technical costs associated with operating NES, 
membership fees at away markets, Options Regulatory Fees (``ORFs''), 
staffing and technical costs associated with routing options. The 
Exchange assesses the actual away market fee at the time that the order 
was entered into the Exchange's trading system. This transaction fee is 
calculated on an order-by-order basis since different away markets 
charge different amounts.
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    \5\ See Securities Exchange Act Release No. 71420 (January 28, 
2014), 79 FR 6256 (February 3, 2014) (SR-BX-2014-004) (an 
immediately effective rule change to utilize NES for outbound order 
routing from BX).
    \6\ The Options Clearing Corporation (``OCC'') assesses $0.01 
per contract side.
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    The Exchange is proposing to increase its Non-Customer Routing Fees 
from $0.97 to $0.99 per contract to any options exchange. The Exchange 
is proposing to increase its Customer Routing Fixed Fees to NOM and 
PHLX from $0.12 to $0.13 per contract, in addition to the actual 
transaction fee assessed to recoup an additional portion of the costs 
incurred by the Exchange for routing these orders. The Exchange is 
proposing to increase its Customer Routing Fixed Fees to all other 
options exchanges (excluding NOM and PHLX) from $0.22 to $0.23 per 
contract, in addition to actual transaction fees assessed. The Exchange 
would also increase the Customer Routing Fee to all other options 
exchanges if the away market pays a rebate from a fee of $0.12 to $0.13 
per contract, because the Exchange would continue to retain the rebate 
to offset the cost to route orders to offset the cost to route orders 
to these away markets. The Exchange desires to recoup additional costs 
at this time.
2. Statutory Basis
    BX believes that its proposal to amend its fees is consistent with 
Section 6(b) of the Act \7\ in general, and furthers the objectives of 
Section 6(b)(4) and (b)(5) of the Act \8\ 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 or system which BX operates or controls, and is not designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes that amending the Non-Customer Routing Fee 
for orders routed to any options exchange from a fee of $0.97 to $0.99 
per contract, is reasonable because the Exchange desires to recoup an 
additional portion of the cost it incurs when routing Non-Customer 
orders. The Exchange is proposing to increase the Fixed Fee to recoup 
additional costs that are incurred by the Exchange in connection with 
routing these orders on behalf of its members.
    The Exchange believes that amending the Customer Routing Fee for 
orders routed to NOM and PHLX from a Fixed Fee of $0.12 to $0.13 per 
contract, in addition to the actual transaction fee, is

[[Page 65734]]

reasonable because the Exchange desires to recoup an additional portion 
of the cost it incurs when routing Customer orders to NOM or PHLX. 
Today, the Exchange assesses orders routed to NOM and PHLX a lower 
Fixed Fee for routing Customer orders as compared to the Fixed Fee 
assessed to other options exchanges. The Exchange is proposing to 
increase the Fixed Fee to recoup additional costs that are incurred by 
the Exchange in connection with routing these orders on behalf of its 
members.
    The Exchange believes that continuing to assess lower Fixed Fees to 
route Customer orders to NOM and PHLX, as compared to other options 
exchanges, is reasonable as the Exchange is able to leverage certain 
infrastructure to offer those markets lower fees as explained further 
below.
    The Exchange believes that amending the Customer Routing Fee to 
other away markets, other than NOM and PHLX, from a Fixed Fee of $0.22 
to $0.23 per contract, in addition to the actual transaction fee, is 
reasonable because the Exchange desires to recoup an additional portion 
of the cost it incurs when routing orders to these away markets. The 
Fixed Fee for Customer orders is an approximation of the costs the 
Exchange will be charged for routing orders to away markets. While each 
destination market's transaction charge varies and there is a cost 
incurred by the Exchange when routing orders to away markets, 
including, OCC clearing costs, administrative and technical costs 
associated with operating NES, membership fees at away markets, ORFs 
and technical costs associated with routing options, the Exchange 
believes that the proposed Routing Fees will enable it to recover the 
costs it incurs to route Customer orders to away markets.
    The Exchange believes that amending the Customer Routing Fee to 
other away markets, other than NOM and PHLX, if the away market pays a 
rebate, from $0.12 to $0.13 per contract is reasonable because the 
Exchange desires to recoup an additional portion of the cost it incurs 
when routing Customer orders to away markets, similar to the amount of 
Fixed Fee it proposes to assess for orders routed to NOM and PHLX. The 
Exchange is proposing to assess a Fixed Fee to recoup additional costs 
that are incurred by the Exchange in connection with routing these 
orders on behalf of its members. While the Exchange would continue to 
retain any rebate paid by away markets, the Exchange does not assess 
the actual transaction fee that is charged by away markets for Customer 
orders. As a general matter, the Exchange believes that the proposed 
fees for Customer orders routed to markets which pay a rebate would 
allow it to recoup and cover a portion of the costs of providing 
optional routing services for Customer orders because it better 
approximates the costs incurred by the Exchange for routing such 
orders.
    The Exchange believes that amending the Non-Customer Routing Fee 
for orders routed to any options exchange from a fee of $0.97 to $0.99 
per contract, is equitable and not unfairly discriminatory because the 
Exchange would assess the same $0.99 per contract fee to all market 
participants utilizing routing for Non-Customer orders.
    The Exchange believes that amending the Customer Routing Fee for 
orders routed to NOM and PHLX from a Fixed Fee of $0.12 to $0.13 per 
contract, in addition to the actual transaction fee, is equitable and 
not unfairly discriminatory because the Exchange would assess the same 
Fixed Fee to all orders routed to NOM or PHLX in addition to the 
transaction fee assessed by that market.
    The Exchange would uniformly assess a $0.13 per contract Fixed Fee 
to orders routed to NASDAQ OMX exchanges because the Exchange is 
passing along the saving realized by leveraging NASDAQ OMX's 
infrastructure and scale to market participants when those orders are 
routed to NOM or PHLX and is providing those saving to all market 
participants. Furthermore, it is important to note that when orders are 
routed to an away market they are routed based on price first.\9\ The 
Exchange believes that it is equitable and not unfairly discriminatory 
to assess a fixed cost of $0.13 per contract to route orders to NOM and 
PHLX because the cost, in terms of actual cash outlays, to the Exchange 
to route to those markets is lower. For example, costs related to 
routing to NOM and PHLX are lower as compared to other away markets 
because NES is utilized by all three exchanges to route orders.\10\ NES 
and the three NASDAQ OMX options markets have a common data center and 
staff that are responsible for the day-to-day operations of NES. 
Because the three exchanges are in a common data center, Routing Fees 
are reduced because costly expenses related to, for example, 
telecommunication lines to obtain connectivity are avoided when routing 
orders in this instance. The costs related to connectivity to route 
orders to other NASDAQ OMX exchanges are lower than the costs to route 
to a non-NASDAQ OMX exchange. When routing orders to non-NASDAQ OMX 
exchanges, the Exchange incurs costly connectivity charges related to 
telecommunication lines, membership and access fees, and other related 
costs when routing orders.
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    \9\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
    \10\ See Chapter VI, Section 11 of NOM and BX Rules. See also 
PHLX Rule 1080(m)(iii)(A).
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    The Exchange believes that amending the Customer Routing Fee to 
other away markets, other than NOM and PHLX, from a Fixed Fee of $0.22 
to $0.23 per contract is equitable and not unfairly discriminatory 
because the Exchange would assess the same Fixed Fee to all orders 
routed to away markets other than NOM and PHLX in addition to the 
transaction fee, provided the away market does not pay a rebate.
    The Exchange's proposal to increase the Customer Routing Fee to all 
other options exchanges that pay a rebate, other than NOM and PHLX, 
from $0.12 to $0.13 per contract is equitable and not unfairly 
discriminatory because the Exchange would assess the same Fixed Fee 
that is proposed when routing Customer orders to a NASDAQ OMX exchange. 
All market participants that route an order to an away market, other 
than NOM or PHLX, would be assessed a uniform fee of $0.13 per contract 
if the away market (non-NASDAQ OMX exchange) pays a rebate. These 
proposals would apply uniformly to all market participants when routing 
to an away market that pays a rebate, other than NOM and PHLX.
    Finally, market participants may submit orders to the Exchange as 
ineligible for routing or ``DNR'' to avoid Routing Fees.\11\ Also, 
orders are routed to an away market based on price first.\12\
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    \11\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
    \12\ See Chapter VI, Section 11 of BX Rules.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    BX 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. The Exchange does not believe that the 
proposal creates a burden on intra-market competition because the 
Exchange is applying the same Routing Fees to all market participants 
in the same manner dependent on the routing venue, with the exception 
of Customers. The Exchange will continue to assess separate Customer 
Routing Fees. Customers will continue to receive the lowest fees as 
compared to non-Customers when routing orders, as is the case today. 
Other options exchanges also assess lower Routing Fees for

[[Page 65735]]

customer orders as compared to non-customer orders.\13\
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    \13\ BATS assesses lower customer routing fees as compared to 
non-customer routing fees per the away market. For example BATS 
assesses ISE customer routing fees of $0.52 per contract and an ISE 
non-customer routing fee of $ 0.65 per contract. See BATS BZX 
Exchange Fee Schedule.
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    The Exchange's proposal would allow the Exchange to continue to 
recoup its costs when routing Customer orders to PHLX or NOM as well as 
away markets that pay a rebate when such orders are designated as 
available for routing by the market participant. The Exchange continues 
to pass along savings realized by leveraging NASDAQ OMX's 
infrastructure and scale to market participants when Customer orders 
are routed to PHLX and NOM and is providing those savings to all market 
participants. Today, other options exchanges also assess fixed routing 
fees to recoup costs incurred by the exchange to route orders to away 
markets.\14\
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    \14\ See CBOE's Fees Schedule and ISE's Fee Schedule.
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    Market participants may submit orders to the Exchange as ineligible 
for routing or ``DNR'' to avoid Routing Fees.\15\ Also, orders are 
routed to an away market based on price first.\16\
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    \15\ See note 11.
    \16\ See note 12.
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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\ 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 to determine whether the 
proposed rule should be approved or disapproved.
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    \17\ 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#4e3c3b222b632d2123232b203a3d0e3d2b2d60292138"><span class="__cf_email__" data-cfemail="86f4f3eae3abe5e9ebebe3e8f2f5c6f5e3e5a8e1e9f0">[email protected]</span></a>. Please include 
File Number SR-BX-2014-052 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2014-052. 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 Web site (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 Web site 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-2014-052 and 
should be submitted on or before November 26, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-26227 Filed 11-4-14; 8:45 am]
BILLING CODE 8011-01-P


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