Document ID: SEC-2023-1373-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq BX, Inc.
Posted Date: 2023-11-28T05:00Z

[Federal Register Volume 88, Number 227 (Tuesday, November 28, 2023)]
[Notices]
[Pages 83189-83199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26112]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99008; File No. SR-BX-2023-031]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend BX Options 
7, Section 2 Regarding Fees and Rebates

November 21, 2023.
    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 November 17, 2023, 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 its Pricing Schedule at Options 7, 
Section 2.\3\
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    \3\ The Exchange initially filed the proposed pricing changes on 
November 14, 2023 (SR-BX-2023-029). On November 16, 2023, the 
Exchange withdrew that filing and submitted this filing.
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    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

[[Page 83190]]

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, BX 
proposes to (i) amend BX's fees and rebates for execution of contracts 
at Options 7, Section 2(1) including note 1, and reserve note 2; (ii) 
amend fees for routing contracts to markets other than the Exchange at 
Options 7, Section 2(3); (iii) amend fees and rebates for execution of 
contracts on the Exchange that generate an order exposure alert at 
Options 7, Section 2(4); and (iv) amend fees and rebates for BX Price 
Improvement Auction (``PRISM'') at Options 7, Section 2(5). Each change 
will be described below.
Options 7, Section 2(1)
    Today, the Exchange assesses the following Penny Symbols and Non-
Penny Symbols Maker Rebates and Taker Fees:

                              Penny Symbols
------------------------------------------------------------------------
           Market participant              Maker rebate      Taker fee
------------------------------------------------------------------------
Lead Market Maker.......................      \2\ (0.29)           $0.50
Market Maker............................      \2\ (0.25)            0.50
Non-Customer............................          (0.12)            0.50
Firm....................................          (0.12)            0.50
Customer................................          (0.30)        \1\ 0.46
------------------------------------------------------------------------

                            Non-Penny Symbols
------------------------------------------------------------------------
                                          Maker rebate /
           Market participant                   fee          Taker fee
------------------------------------------------------------------------
Lead Market Maker.......................          (0.45)           $1.10
Market Maker............................          (0.40)            1.10
Non-Customer............................            0.45            1.10
Firm....................................            0.45            1.10
Customer................................      \3\ (0.90)            0.79
------------------------------------------------------------------------

    At this time, the Exchange proposes to reduce certain Penny Symbol 
Maker Rebates and Taker Fees and increase certain Non-Penny Symbol 
Maker Rebates and Taker Fees. With respect to the Penny Symbols, the 
Exchange proposes to decrease the Maker Rebates for Lead Market Makers 
\4\ from $0.29 to $0.24 per contract and decrease the Maker Rebates for 
Market Makers \5\ from $0.25 to $0.20 per contract. While the Exchange 
is reducing these Penny Symbol Maker Rebates for Lead Market Makers and 
Market Makers, the Exchange will continue to offer the rebates to 
incentivize market participants to direct order flow to BX. 
Additionally, the Exchange proposes to reduce the Customer \6\ Penny 
Symbol Taker Fee from $0.46 to $0.40 per contract. The Exchange 
believes reducing this Penny Symbol Taker Fee will attract more 
Customer order flow to BX.\7\
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    \4\ 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). See BX Options 7, Section 1(a).
    \5\ 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. 
See BX Options 7, Section 1(a).
    \6\ 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).
    \7\ The Exchange is proposing to add dollar signs in a few 
places in the table in Options 7, Section 2(1) where the dollar sign 
is missing.
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    With respect to Non-Penny Symbols, the Exchange proposes to 
increase the Maker Rebates for Customers from $0.90 to $1.10 per 
contract and increase the Taker Fees for all Non-Customers \8\ from 
$1.10 to $1.25 per contract. The Exchange believes the increase to the 
Non-Penny Symbol Customer Maker Rebate will attract more Customer order 
flow to BX. With respect to the Non-Penny Symbol Taker Fee for Non-
Customers, while the Exchange is increasing these fees, the Exchange 
believes that these fees will continue to draw participants seeking 
liquidity to BX because BX is increasing its Non-Penny Customer Maker 
Rebate to enhance its market quality and provide more trading 
opportunities, which benefits all market participants.
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    \8\ 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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    The Exchange proposes to amend note 1 of Options 7, Section 2(1) 
which currently reduces the Customer Penny Symbol Taker Fee from $0.46 
to $0.33 per contract for trades which remove liquidity in SPDR S&P 500 
ETF (``SPY''). With the proposed changes to the Customer Penny Symbol 
Taker Fee noted herein, note 1 of Options 7, Section 2(1) would reduce 
the Customer Penny Symbol Taker Fee from $0.40 to $0.33 per contract 
for trades which remove liquidity in SPY. Additionally, the Exchange 
proposes to extend this Customer Penny Symbol discount to transactions 
that remove liquidity in Invesco QQQ Trust Series 1 (``QQQ'') and 
iShares Russell 2000 ETF (``IWM''). The proposed rule text would 
provide, ``Customer Taker Fee will be $0.33 per contract for trades 
which remove liquidity in SPY, QQQ, and IWM.'' The Exchange believes 
that note 1 will continue to attract Customer Penny Symbol SPY 
transactions that remove liquidity as the Exchange will continue to 
discount these fees for SPY. The addition of Taker Fee discounts for 
QQQ and IWM will attract additional QQQ and IWM transactions that 
remove liquidity to BX.

[[Page 83191]]

    The Exchange also proposes to reserve note 2 of Options 7, Section 
2(1) which currently provides, ``The Maker Rebate for Lead Market 
Makers and Market Makers in SPY will be $0.22 per contract. The Maker 
Rebate for Lead Market Makers and Market Makers in AAPL and QQQ will be 
$0.42 per contract.'' Today, the Penny Symbol Maker Rebates for Lead 
Market Makers and Market Makers in SPY is reduced to $0.22 per contract 
with this note 2. The Exchange would no longer reduce the Penny Symbol 
Maker Rebates for Lead Market Makers and Market Makers in SPY to $0.22, 
rather SPY would be paid the same Maker Rebates (a $0.24 per contract 
Lead Market Maker Penny Symbol Maker Rebate and a $0.20 per contract 
Market Maker Penny Symbol Maker Rebate) as all other options symbols. 
Additionally, AAPL and QQQ would no longer be paid a $0.42 per contract 
Penny Symbol Maker Rebate for Lead Market Makers and Market Makers, 
rather AAPL and QQQ would be paid the same Maker Rebates (a $0.24 per 
contract Lead Market Maker Penny Symbol Maker Rebate and a $0.20 per 
contract Market Maker Penny Symbol Maker Rebate) as all other options 
symbols. With this proposal, the Exchange would uniformly pay the 
proposed Lead Market Maker and Market Maker Penny Symbol Maker Rebates 
on all options symbols.
Options 7, Section 2(3)
    Currently, BX assesses a Non-Customer routing fee of $0.99 per 
contract and a Customer routing fee of $0.23 per contract, in addition 
to the actual transaction fee assessed by the away market, for routing 
contracts to markets other than The Nasdaq Options Market LLC (``NOM'') 
and Nasdaq Phlx LLC (``Phlx''). Currently, if the away market pays a 
rebate, the Exchange assesses a Customer a Routing Fee of $0.13 per 
contract for markets other than NOM and Phlx. Currently, BX assesses a 
Customer a $0.13 per contract Fixed Fee in addition to the actual 
transaction fee assessed when routing to NOM and Phlx.
    At this time, the Exchange proposes to assess a Non-Customer an 
increased routing fee to route to any options exchange of $1.20 per 
contract. The Exchange also proposes to assess a Customer a Fixed Fee 
of $0.23 per contract, in addition to the actual transaction fee 
assessed by the away market, for routing contracts to any options 
exchange. The Exchange would no longer assess the lower routing of 
$0.13 per contract, in addition to the actual transaction fee assessed, 
when routing to NOM and Phlx. The Exchange will continue to assess a 
$0.13 per contract routing fee if the away market pays a rebate, 
including NOM and Phlx. The purpose of the proposed routing fees is to 
recoup costs incurred by the Exchange when routing orders to other 
options exchanges on behalf of options Participants. In determining its 
proposed routing fees, the Exchange took into account transaction fees 
assessed by other options exchanges, the Exchange's projected clearing 
costs, and the projected administrative, regulatory, and technical 
costs associated with routing orders to other options exchanges. The 
Exchange will continue to use its affiliated broker-dealer, Nasdaq 
Execution Services, to route orders to other options exchanges. Routing 
services offered by the Exchange are completely optional and market 
participants can readily select between various providers of routing 
services, including other exchanges and broker-dealers. Also, the 
Exchange notes that market participants may elect to mark their orders 
as ``Do Not Route'' to avoid any routing fees.\9\ The Exchange believes 
that the proposed Routing Fees would enable the Exchange to recover the 
costs it incurs to route orders to away markets after taking into 
account the other costs associated with routing orders to other options 
exchanges. Also, the Exchange's proposal would uniformly assess the 
same Customer routing fees, regardless of the away venue, of $0.23 per 
contract, in addition to the actual transaction fee assessed, or $0.13 
per contract if the away market pays a rebate.
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    \9\ See BX Options 3, Section 7(c).
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Options 7, Section 2(4)
    Today, the Exchange assesses the below fees and pays the below 
rebates for execution of contracts on BX that generate an order 
exposure alert \10\ pursuant to Options 5, Section 4.
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    \10\ An order exposure alert provides marketable orders on BX's 
order book an additional opportunity for execution on BX when it is 
not part of the national best bid or offer (``NBBO'') contra to the 
order and the order locks or crosses the away best bid or offer 
(``ABBO'').

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Customer                                             Lead market      BX options
                                                           maker    market maker           Non-customer
----------------------------------------------------------------------------------------------------------------
Penny Symbols:
    Rebate for Order triggering order exposure             $0.34           $0.00           $0.00           $0.00
     alert......................................
    Fee for Order responding to order exposure              0.39            0.39            0.39            0.45
     alert......................................
Non-Penny Symbols:
    Rebate for Order triggering order exposure              0.70            0.00            0.00            0.00
     alert......................................
    Fee for Order responding to order exposure              0.85            0.85            0.85            0.89
     alert......................................
----------------------------------------------------------------------------------------------------------------

    At this time, the Exchange proposes to amend its pricing related to 
execution of contracts on BX that generate an order exposure alert. 
With respect to Customer fees and rebates, the Exchange proposes to 
increase the Penny Symbol rebate for an order triggering an order 
exposure alert from $0.34 to $0.47 per contract. The Exchange proposes 
to increase the Customer Penny Symbol fee for orders that respond to an 
order exposure alert from $0.39 to $0.47 per contract. The Exchange 
proposes to increase the Customer Non-Penny Symbol rebate for an order 
triggering an order exposure alert from $0.70 to $1.10 per contract. 
The Exchange proposes to increase the Customer Non-Penny Symbol fee for 
orders that respond to an order exposure alert from $0.85 to $1.25 per 
contract.
    With respect to Lead Market Maker fees and rebates, the Exchange 
proposes to increase the Penny Symbol rebate for an order triggering an 
order exposure alert from $0.00 to $0.10 per contract. The Exchange 
proposes to increase the Lead Market Maker Penny Symbol fee for orders 
that respond to an order exposure alert from $0.39 to $0.50 per 
contract. The Exchange proposes to increase the Lead Market Maker Non-
Penny Symbol rebate for an order triggering an order exposure alert 
from $0.00 to $0.25 per contract. The Exchange proposes to increase the 
Lead Market Maker Non-Penny Symbol fee for orders that respond to an 
order exposure alert from $0.85 to $1.25 per contract.

[[Page 83192]]

    With respect to Market Maker fees and rebates, the Exchange 
proposes to increase the Penny Symbol rebate for an order triggering an 
order exposure alert from $0.00 to $0.10 per contract. The Exchange 
proposes to increase the Market Maker Penny Symbol fee for orders that 
respond to an order exposure alert from $0.39 to $0.50 per contract. 
The Exchange proposes to increase the Market Maker Non-Penny Symbol 
rebate for an order triggering an order exposure alert from $0.00 to 
$0.25 per contract. The Exchange proposes to increase the Market Maker 
Non-Penny Symbol fee for orders that respond to an order exposure alert 
from $0.85 to $1.25 per contract.
    With respect to Non-Customer fees and rebates, the Exchange 
proposes to increase the Penny Symbol rebate for an order triggering an 
order exposure alert from $0.00 to $0.10 per contract. The Exchange 
proposes to increase the Non-Customer Penny Symbol fee for orders that 
respond to an order exposure alert from $0.45 to $0.50 per contract. 
The Exchange proposes to increase the Non-Customer Non-Penny Symbol 
rebate for an order triggering an order exposure alert from $0.00 to 
$0.25 per contract. The Exchange proposes to increase the Non-Customer 
Non-Penny Symbol fee for orders that respond to an order exposure alert 
from $0.89 to $1.25 per contract.
    While the Exchange is increasing fees to respond to an order 
exposure alert, it is also increasing rebates that trigger an order 
exposure alert. The Exchange believes that this pricing will continue 
to provide incentives to Participants to utilize the order exposure 
functionality which facilitates the ability of the Exchange to bring 
together participants and encourage more robust competition for orders.
Options 7, Section 2(5)
    Currently, the Exchange assesses the below fees and pays the below 
rebates for orders executed in its PRISM Auction.

                                                                    Fees and Rebates
                                                                     [Per contract]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Submitted PRISM auction order   Response to PRISM auction fee   PRISM order traded with PRISM
---------------------------------------------------------               fee              --------------------------------         response rebate
                                                         --------------------------------                                -------------------------------
               Type of market participants                                  Initiating     Penny classes     Non-penny                       Non-penny
                                                            PRISM order        order                          classes      Penny classes      classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Customer................................................           $0.00           $0.00           $0.49           $0.94           $0.35           $0.70
Lead Market Maker.......................................            0.00            0.05            0.49            0.94            0.00            0.00
BX Options Market Maker.................................            0.00            0.05            0.49            0.94            0.00            0.00
Non-Customer............................................            0.00            0.05            0.49            0.94            0.00            0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange proposes to amend its PRISM pricing to delineate PRISM 
Auction Orders \11\ in Penny and Non-Penny Classes. Today, the Exchange 
assesses no PRISM Order \12\ fee to any Participant in Penny or Non-
Penny Classes and assesses Non-Customers a $0.05 per contract 
Initiating Order \13\ fee in Penny and Non-Penny Classes. With respect 
to PRISM Auction Orders submitted in Penny Classes, the Exchange 
proposes to continue to assess no PRISM Order fee to any Participant 
and also proposes to amend the Non-Customer Initiating Order Fees from 
$0.05 to $0.00 per contract. Today, Customers are not assessed an 
Initiating Order Fee in either Penny or Non-Penny Classes. With this 
proposed change, no Participant will be assessed an Initiating Order 
fee in Penny Classes.
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    \11\ 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).
    \12\ 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).
    \13\ 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).
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    With respect to PRISM Auction Orders submitted in Non-Penny 
Classes, the Exchange proposes to adopt new pricing. The Exchange 
proposes to pay a Non-Penny Class PRISM Order rebate to a Customer of 
$0.12 per contract. Similar to Penny Classes, the Exchange proposes to 
assess no Non-Penny Class PRISM Order fees or Initiating Order fees to 
any Participant. The Exchange believes that the proposed pricing will 
encourage BX Participants to submit a greater amount of PRISM Orders to 
BX as the Exchange will not assess PRISM Order or Initiating Order fees 
to any BX Participant (Penny or Non-Penny Class) and it will pay a Non-
Penny Class Customer PRISM Order rebate of $0.12 per contract.
    With respect to a PRISM Response \14\ to a PRISM Auction \15\ the 
Exchange proposes to increase the $0.49 per contract fee for Penny 
Classes, which is currently assessed to all Participants (Customer, 
Lead Market Maker, BX Options Market Maker, and Non-Customer), to $0.50 
per contract for Lead Market Makers, BX Options Market Makers and Non-
Customers. The Exchange proposes to assess a Customer a $0.40 per 
contract PRISM Response fee for Penny Classes. Additionally, the 
Exchange proposes to increase the $0.94 per contract fee for Non-Penny 
Classes, which is currently assessed to all Participants (Customer, 
Lead Market Maker, BX Options Market Maker, and Non-Customer), to $1.25 
per contract for Lead Market Makers, BX Options Market Makers and Non-
Customers. The Exchange proposes to assess a Customer a $0.79 per 
contract PRISM Response fee for Non-Penny Classes. These proposes fees 
are the same as the Taker Fees assessed to the same Participants when 
removing liquidity from the order book. The Exchange is not amending 
the rebates paid to a PRISM Order when that order trades with a PRISM 
Response. The Exchange believes that the increased PRISM Response fees 
will continue to attract order flow to BX since the Exchange is no 
longer assessing any fees to submit PRISM Orders and Initiating Orders 
and is now offering a Customer Non-Penny rebate to submit a PRISM Order 
with this proposal.
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    \14\ A PRISM Response is interest that executed against the 
PRISM Order pursuant to Options 3, Section 13. See BX Options 7, 
Section 2(5).
    \15\ The Exchange proposes to add the word ``PRISM'' before 
``Response'' in Options 7, Section 2(5) of the Pricing Schedule to 
utilize the defined term in the description of the column header.
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Unrelated Market or Marketable Interest
    The Exchange assesses fees and pays rebates with respect to 
unrelated market or marketable interest received prior to the 
commencement of a PRISM Auction and during a PRISM Auction. Today, when 
a PRISM Order is a Customer order and executes against unrelated market 
or marketable interest received during a PRISM Auction, the Customer

[[Page 83193]]

order receives a rebate of $0.35 per contract for Penny Classes and 
$0.70 per contract for Non-Penny Classes, which represents the pricing 
within Options 7, Section 2(5). In this case, the unrelated market or 
marketable interest received during a PRISM Auction is assessed a $0.49 
per contract fee for Penny Classes or a $0.94 per contract fee for Non-
Penny Classes as described in Options 7, Section 2(5).
    Likewise, today, when a PRISM Order is a Lead Market Maker, BX 
Options Market Maker or Non-Customer order and executes against 
unrelated market or marketable interest received during a PRISM 
Auction, the Lead Market Maker, BX Options Market Maker or Non-Customer 
order pays no fee, which represents the pricing within Options 7, 
Section 2(5). In this case, the unrelated market or marketable interest 
received during a PRISM Auction is assessed a $0.49 per contract fee 
for Penny Classes or a $0.94 per contract fee for Non-Penny Classes as 
described in Options 7, Section 2(5). In contrast, today, when a PRISM 
Order is a Customer, Lead Market Maker, BX Options Market Maker or Non-
Customer order and executes against unrelated market or marketable 
interest received prior to a PRISM Auction, the Customer, Lead Market 
Maker, BX Options Market Maker or Non-Customer order is subject to the 
Taker Fee within Options 7, Section 2(1).\16\ The Exchange applies the 
order book pricing within Options 7, Section 2(1) to interest received 
prior to the PRISM Auction, which is considered unrelated market or 
marketable interest for purposes of the PRISM Auction. In contrast, the 
Exchange applies PRISM pricing within Options 7, Section 2(5) to the 
unrelated market or marketable interest when interest arrived during a 
PRISM Auction.
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    \16\ Today, BX assesses the following Penny Symbol Taker Fees: 
$0.50 per contract for a Lead Market Maker, Market Maker, Non-
Customer, and Firm and $0.46 per contract for a Customer. BX 
assesses the following Non-Penny Symbol Taker Fees: $1.10 per 
contract for a Lead Market Maker, Market Maker, Non-Customer, and 
Firm and $0.79 per contract for a Customer. The Exchange is 
proposing changes to these fees as described herein.
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    At this time, the Exchange proposes to amend the unrelated market 
or marketable interest rule text in Options 7, Section 2(5) to reflect 
the amendments proposed herein to Options 7, Section 2(1) order book 
pricing and Options 7, Section 2(5) PRISM pricing. The Exchange 
believes this pricing will continue to attract liquidity to BX and 
reward Participants differently for the order flow.
Request for PRISM
    With respect to Request for PRISM \17\ Pricing, today, in lieu of 
Options 7, Section 2(5) pricing, different pricing is assessed and paid 
to PRISM Auction Orders which commenced as a Request for PRISM pursuant 
to Options 3, Section 7(e)(1)(A)(1)(b) and executed in the PRISM 
Auction. With respect to PRISM Orders, today, a rebate of $0.35 per 
contract for Penny Classes and $0.70 per contract for Non-Penny Classes 
is paid to a PRISM Order when a BX Participant responds to a Request 
for PRISM with an Initiating Order, provided the PRISM Order trades 
with an Initiating Order. Also, today, a rebate of $0.35 per contract 
for Penny Classes and $0.70 per contract for Non-Penny Classes is paid 
to the PRISM Order when the PRISM Order trades with a PRISM Response. 
This pricing is not being amended.
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    \17\ A Request for PRISM is a mechanism to submit orders into a 
PRISM Auction as described within Options 3, Section 
7(e)(1)(A)(1)(b). See BX Options 7, Section 2(5).
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    With respect to Initiating Orders, today, a fee of $0.49 per 
contract for Penny Classes and $0.94 per contract fee for Non-Penny 
Classes is assessed to the Initiating Order when a BX Participant 
responds to a Request for PRISM with an Initiating Order, provided the 
PRISM Order trades with an Initiating Order. This pricing is being 
amended such that a fee of $0.50 per contract for Penny Classes and 
$1.25 per contract fee for Non-Penny Classes will be assessed to the 
Initiating Order when a BX Participant responds to a Request for PRISM 
with an Initiating Order, provided the PRISM Order trades with an 
Initiating Order.
    With respect to Responses to a PRISM Auction, today, Responses to a 
PRISM Auction is assessed $0.49 per contract fee for Penny Classes and 
a $0.94 per contract fee for Non-Penny Classes. This pricing is being 
amended such that Responses to a PRISM Auction will be assessed $0.50 
per contract fee for Penny Classes and a $1.25 per contract fee for 
Non-Penny Classes.
    While the Exchange is increasing the pricing to Initiating Orders 
and Responses to a PRISM Auction, the Exchange believes that this 
pricing remains competitive and will continue to attract PRISM Auction 
order flow to BX.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\18\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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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    \18\ 15 U.S.C. 78f(b).
    \19\ 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 \20\ 
(``NetCoalition''), the D.C. Circuit stated, ``[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'. . . .'' \21\
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    \20\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \21\ 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)).
---------------------------------------------------------------------------

    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.
Options 7, Section 2(1)
    The Exchange's proposal to reduce the Lead Market Maker and Market 
Maker Penny Symbol Maker Rebates and the Customer Penny Symbol Taker 
Fee is reasonable. Despite the reduction of these Penny Symbol Maker 
Rebates for Lead Market Makers and Market Makers, the Exchange will 
continue to

[[Page 83194]]

offer these rebates to incentivize Participants to continue to direct 
order flow to BX. The reduction of the Customer Penny Symbol Taker Fee 
from $0.46 to $0.40 per contract will attract more Customer order flow 
to BX to take advantage of the lower rate.
    The Exchange's proposal to reduce the Lead Market Maker and Market 
Maker Penny Symbol Maker Rebates and the Customer Penny Symbol Taker 
Fee is equitable and not unfairly discriminatory. With respect to the 
amendments to the Lead Market Maker and Market Maker Penny Symbol Maker 
Rebates, the Exchange notes that unlike other market participants, Lead 
Market Makers and Market Makers add value through continuous quoting 
and the commitment of capital.\22\ Further, differentiating Lead Market 
Makers and Market Makers is equitable and not unfairly discriminatory 
because Lead Market Makers are subject to heightened quoting 
obligations \23\ as compared to Market Makers. The higher rebate 
therefore recognizes the differing contributions made to the liquidity 
and trading environment on the Exchange by Lead Market Makers. Overall, 
the Exchange believes that incentivizing both Lead Market Makers and 
Market Makers to provide greater liquidity benefits all market 
participants through the quality of order interaction. The reduction of 
the Customer Penny Symbol Taker Fee from $0.46 to $0.40 per contract is 
equitable and not unfairly discriminatory because 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.
---------------------------------------------------------------------------

    \22\ See BX Options 2, Section 4.
    \23\ Id.
---------------------------------------------------------------------------

    The Exchange's proposal to increase \24\ the Customer Non-Penny 
Symbol Maker Rebate and Non-Customer Non-Penny Symbol Taker Fees is 
reasonable. Increasing the Customer Maker Rebate from $0.90 to $1.10 
per contract will attract more Customer order flow to BX. With respect 
to increasing the Taker Fees for all Non-Customers from $1.10 to $1.25 
per contract, the Exchange believes that these fees will continue to 
draw participants seeking liquidity to BX because BX is increasing its 
Non-Penny Customer Maker Rebate to enhance its market quality and 
provide more trading opportunities, which benefits all market 
participants.
---------------------------------------------------------------------------

    \24\ The Exchange proposes to increase the Maker Rebates for 
Customer from $0.90 to $1.10 per contract and increase the Taker 
Fees for all Non-Customers from $1.10 to $1.25 per contract.
---------------------------------------------------------------------------

    The Exchange's proposal to increase the Customer Non-Penny Symbol 
Maker Rebate and Non-Customer Non-Penny Symbol Taker Fees is equitable 
and not unfairly discriminatory. The increase in the Customer Non-Penny 
Symbol Maker Rebate from $0.90 to $1.10 is equitable and not unfairly 
discriminatory because 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. The 
increase in the Non-Penny Symbol Taker Fees for all Non-Customers from 
$1.10 to $1.25 per contract, is equitable and not unfairly 
discriminatory because the Exchange will uniformly assess the Non-Penny 
Taker Fees to all Non-Customers.
    With respect to note 1 of Options 7, Section 2(1), the Exchange's 
proposal to reduce the Customer Penny Symbol Taker Fee from the 
proposed $0.40 per contract to $0.33 per contract for trades which 
remove liquidity in SPY, the Exchange believes that this is reasonable 
because note 1 will continue to attract Customer Penny Symbol SPY 
transactions that remove liquidity as the Exchange will continue to 
offer this discount, albeit a lesser discount as proposed. Also, 
Customers will continue to receive favorable pricing in SPY as compared 
to Non-Customers. Additionally, the Exchange's proposal to extend this 
discount to Customer Penny Symbol transactions that remove liquidity in 
QQQ and IWM will attract QQQ and IWM transactions that remove liquidity 
to BX. In addition, the Exchange believes that it is reasonable to pay 
lower fees in 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. Finally, the Exchange's proposal 
to reserve note 2 of Options 7, Section 2(1) is reasonable because the 
Exchange would assess the Penny Symbol Maker Rebate for Lead Market 
Makers and Market Makers in SPY, AAPL and QQQ the same fees as it 
assesses to all other options symbols.
    With respect to note 1 of Options 7, Section 2(1), the Exchange's 
proposal to reduce the Customer Penny Symbol Taker Fee from $0.40 to 
$0.33 per contract for trades which remove liquidity in SPY and also 
extend this discount to Customer Penny Symbol Taker Fees that remove 
liquidity in QQQ and IWM 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 uniformly to all Customer Penny Symbol Taker Fees in SPY, QQQ and 
IWM. Finally, the Exchange's proposal to reserve note 2 of Options 7, 
Section 2(1) is equitable and not unfairly discriminatory because the 
Exchange would pay the same Penny Symbol Maker Rebates to Lead Market 
Makers and Market Makers for all other options symbols.
Options 7, Section 2(3)
    The Exchange's proposal to assess a Non-Customer an increased 
routing fee of $1.20 to route to another options exchange and a 
Customer a Fixed Fee of $0.23 per contract, in addition to the actual 
transaction fee assessed by the away market, for routing contracts to 
any options exchange \25\ is reasonable because the proposed Routing 
Fees would enable the Exchange to recover the costs it incurs to route 
orders to away markets after taking into account the other costs 
associated with routing orders to other options exchanges. In 
determining its proposed routing fees, the Exchange took into account 
transaction fees assessed by other options exchanges, the Exchange's 
projected clearing costs, and the projected administrative, regulatory, 
and technical costs associated with routing orders to other options 
exchanges. While the Exchange is no longer offering a discounted 
Routing Fee to route to NOM and Phlx, the Exchange notes that the 
Routing Fee will be $0.13 for these markets, similar to other options 
markets, if they pay a rebate.\26\ Routing services offered by the 
Exchange are completely optional and market participants can readily 
select between various providers of routing services, including other 
exchanges and broker-dealers. Also, the Exchange notes that market 
participants may elect to mark their orders as ``Do Not Route'' to 
avoid any routing fees.\27\
---------------------------------------------------------------------------

    \25\ The Exchange would no longer assess the lower routing of 
$0.13 per contract, in addition to the actual transaction fee 
assessed, when routing to NOM and Phlx.
    \26\ Both NOM and Phlx offer rebates. See NOM's Pricing Schedule 
at Options 7, Section 2 and Phlx's Pricing Schedule at Options 7, 
Sections 2 and 4.
    \27\ See BX Options 3, Section 7(c).
---------------------------------------------------------------------------

    The Exchange's proposal to assess a Non-Customer an increased 
routing fee of $1.20 to route to another options exchange and a 
Customer a Fixed Fee of $0.23 per contract, in addition to the actual 
transaction fee assessed by the away market, for routing contracts to

[[Page 83195]]

any options exchange is equitable and not unfairly discriminatory as 
all Non-Customers would be assessed a uniform routing fee. 
Additionally, Customers will be uniformly assessed the same fee, 
regardless of the destination market. 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. Finally, the Exchange notes that market participants may 
elect to market orders as Do Not Route to avoid any routing fees.
Options 7, Section 2(4)
    The Exchange's proposal to amend its pricing related to execution 
of contracts on BX that generate an order exposure alert is reasonable. 
While the Exchange is increasing fees to respond to an order exposure 
alert, it is also increasing rebates that trigger an order exposure 
alert. The Exchange believes that this pricing will continue to provide 
incentives to Participants to utilize the order exposure functionality 
which facilitates the ability of the Exchange to bring together 
participants and encourage more robust competition for orders. For 
Penny Symbols and Non-Penny Symbols, increasing the Customer rebate for 
orders triggering order exposure alert, and offering higher Customer 
rebates as compared to Non-Customer rebates is reasonable because it 
encourages the desired Customer behavior by attracting Customer 
interest to the Exchange. Increasing the Customer, Lead Market Maker, 
Market Maker, and Non-Customer fees for orders responding to order 
exposure alerts in Penny Symbols and Non-Penny Symbols is reasonable 
because the associated revenue will allow the Exchange to maintain and 
enhance its services. Additionally, for Penny Symbols, Customers would 
pay the lowest fee for responding to order exposure alert while all 
Participants are assessed the same fee for Non-Penny Symbols.
    The Exchange's proposal to amend its pricing related to execution 
of contracts on BX that generate an order exposure alert is equitable 
and not unfairly discriminatory. Customers are being paid higher Penny 
Symbol and Non-Penny Symbol rebates and lower Penny Symbols fees as 
compared to Non-Customers because 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. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. The Exchange also is assessing the same Non-Penny Symbol 
fees uniformly to all Participants.
Options 7, Section 2(5)
    The Exchange's proposal to amend its PRISM pricing is reasonable 
because the Exchange proposes to not assess an Initiating Order fee in 
Penny and Non-Penny Classes. Today, the Exchange assesses no PRISM 
Order fee to any Participant in Penny or Non-Penny Classes and assesses 
Non-Customers a $0.05 per contract Initiating Order fee in Penny and 
Non-Penny Classes. The Exchange proposes to continue to assess no PRISM 
Order fee and also proposes to amend the Non-Customer Initiating Order 
Fees from $0.05 to $0.00 per contract. Today, Customers are not 
assessed an Initiating Order Fee in either Penny or Non-Penny Classes. 
With this proposed change, no Participant will be assessed an 
Initiating Order fee in Penny Classes and Non-Penny Classes. Further, 
the Exchange proposes to pay a Non-Penny Class PRISM Order rebate to a 
Customer of $0.12 per contract. The Exchange believes that the proposed 
pricing will encourage BX Participants to submit a greater amount of 
PRISM Orders to BX as the Exchange will not assess PRISM Order or 
Initiating Order fees to any BX Participant and it will pay a Non-Penny 
Class PRISM Order rebate to a Customer of $0.12 per contract. With 
respect to a PRISM Response to a PRISM Auction the Exchange's proposal 
to increase the $0.49 per contract fee for Penny Classes, which is 
currently assessed to all Participants to $0.50 per contract and the 
proposal to increase the $0.94 per contract fee for Non-Penny Classes, 
which is currently assessed to all Participants, to $1.25 per contract 
is reasonable because despite these increases, the Exchange believes 
that the pricing will continue to encourage Participants to send order 
to BX's PRISM Auction. Additionally, the proposed PRISM Response fees 
would be equivalent to the Penny Symbol Taker Fees in Options 7, 
Section 2(1) of $0.50 per contract for Lead Market Makers, BX Options 
Market Makers and Non-Customers and $0.40 per contract for Customers. 
Additionally, the proposed PRISM Response Fees would be equivalent to 
the Non-Penny Symbol Taker Fees in Options 7, Section 2(1) of $1.25 per 
contract for Lead Market Makers, BX Options Market Makers and Non-
Customers and $0.79 per contract for Customers. The Exchange's proposal 
harmonizes the PRISM Response fees for Penny and Non-Penny Classes so 
that they are the same as the Taker Fees assessed to each market 
participant when they remove liquidity from the order book. The 
Exchange believes that it is reasonable to assess Penny and Non-Penny 
Class PRISM Response Fees that are equivalent to those Taker Fees 
assessed to Participants for removing liquidity from the order book 
because orders resting on the order book may respond to PRISM Auctions 
similar to PRISM Responses entered during a PRISM Auction. The Exchange 
believes that despite the increase in these PRISM Response Fees, the 
fees remain competitive with the pricing to remove liquidity from the 
order book.
    The Exchange's proposal to amend its PRISM pricing is equitable and 
not unfairly discriminatory. The Exchange will uniformly not assess a 
Penny Class or Non-Penny Class PRISM Order fee or Initiating Order Fee 
to any Participant. While Customers will receive a Penny Symbol PRISM 
Order rebate, 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 proposed PRISM 
Response Fees would be equivalent to the Penny Symbol Taker Fees in 
Options 7, Section 2(1) of $0.50 per contract for Lead Market Makers, 
Market Makers and Non-Customers and $0.40 per contract for Customers. 
Additionally, the proposed PRISM Response Fees would be equivalent to 
the Non-Penny Symbol Taker Fees in Options 7, Section 2(1) of $1.25 per 
contract for Lead Market Makers, Market Makers and Non-Customers and 
$0.79 per contract for Customers. Assessing Customers a lower Response 
Fee as compared to Non-Customers is equitable and not unfairly 
discriminatory because 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. Further, assessing no fee to the Initiating 
Order and assessing Response Fees as described above to Participants 
that respond to the PRISM Auction is equitable and not unfairly 
discriminatory because the Exchange desires to encourage Participants 
to submit PRISM Orders to BX. Responders, similar to Participants that 
remove liquidity from the order book, may interact with the PRISM Order 
and receive an allocation. Of note, any BX Participant may respond to a 
PRISM

[[Page 83196]]

Auction. Similar to the manner in which the Exchange assesses fees to 
takers of liquidity in Options 7, Section 2(1), Participants who remove 
liquidity are assessed fees to interact with the liquidity. The 
Exchange incentivizes Participants that add liquidity on our markets by 
assessing lower fees and/or rebates to encourage order flow to be sent 
to BX. The Exchange believes that creating a similar model to encourage 
Participants to bring two-sided orders into the PRISM Auction and 
assessing higher fees for the Participants that interact with those 
orders is equitable and not unfairly discriminatory as well as 
consistent with the fee structure in place on BX today. Finally, BX 
Participants may elect not to utilize the PRISM Auction and only 
transact options on the order book, in which case they would not incur 
the Responder Fees.

Unrelated Market or Marketable Interest

    The Exchange's proposal to amend the unrelated market or marketable 
interest rule text in Options 7, Section 2(5) to reflect the proposed 
changes to Options 7, Section 2(1) order book pricing and Options 7, 
Section 2(5) PRISM pricing is reasonable because the Exchange seeks to 
incentivize Participants to submit PRISM Auction Orders to receive a 
guaranteed execution, potential price improvement, and Customer 
rebates. The Exchange's PRISM pricing assesses fees to PRISM Responses 
and unrelated market or marketable interest that allocated in the PRISM 
Auction and rewards those BX Participants with a guaranteed execution 
and potential price improvement. The response fees assessed by the 
Exchange are intended to fund the Customer rebates paid by the Exchange 
which seek to incentivize increased Customer order flow to the PRISM 
Auction. While the Exchange's proposal increases these fees, the 
Exchange believes this pricing will continue to attract liquidity to BX 
and reward Participants differently for the order flow.
    The Exchange's proposal to amend the unrelated market or marketable 
interest rule text in Options 7, Section 2(5) to reflect the proposed 
changes to Options 7, Section 2(1) order book pricing and Options 7, 
Section 2(5) PRISM pricing is equitable and not unfairly 
discriminatory. All BX Participants who submitted unrelated market or 
marketable interest which rested on the order book prior to the 
commencement of a PRISM Auction will be uniformly paid a Maker Rebate. 
The Exchange's proposal would treat BX Participants who submitted 
unrelated market or marketable interest which rested on the order book 
prior to the commencement of a PRISM Auction in the same manner as 
other BX Participants who posted liquidity on the order book as they 
would both be considered makers of liquidity. Further, all Participants 
who submitted a PRISM Order that executed against the unrelated market 
or marketable interest that posted to the order book prior to the 
commencement of a PRISM Auction would be uniformly assessed a Taker 
Fee. The Exchange's proposal would treat BX Participants who submitted 
PRISM Order that executed against the unrelated market or marketable 
interest that posted to the order book prior to the commencement of a 
PRISM Auction in the same manner as other BX Participants who removed 
liquidity from the order book as they would both be considered takers 
of liquidity.
Request for PRISM
    The Exchange's proposal to amend pricing for PRISM Orders submitted 
via a Request for PRISM is reasonable. While the Exchange is increasing 
the Initiating order fees in Penny and Non-Penny Classes as well as the 
Responses to a PRISM Auction in Penny and Non-Penny Classes, the 
Exchange believes that this pricing will continue to incentivize BX 
Participants to utilize the Request for PRISM feature to obtain 
liquidity, potential price improvement, as well as a rebate for the 
PRISM Order. Further, the Exchange notes that it will continue to offer 
certain rebates to attract BX Participants to utilize the Request for 
PRISM mechanism. Further, the Exchange believes it is reasonable to 
assess a higher fee for the Initiating Order that was submitted with 
the Request for PRISM mechanism, where fees are the same as those 
assessed to responders in the PRISM Auction, because BX Participants 
are able to obtain immediate liquidity. The Request for PRISM mechanism 
is utilized by Participants as a liquidity seeking tool that if not 
available would require a BX Participant to source liquidity from third 
parties, expending time and potential additional cost. The Request for 
PRISM mechanism offers Participants the opportunity to immediately 
commence a PRISM Auction without the need to source liquidity. 
Liquidity providers that enter orders directly into PRISM and do not 
utilize the Request for PRISM mechanism have expended time sourcing 
liquidity with third parties outside of the Exchange. The Exchange 
believes that BX Participants benefit from the liquidity seeking 
mechanism that is being offered by the Exchange to allow certain market 
participants to compete with other market participants whose business 
model is designed to source liquidity. The proposed fee for Initiating 
Orders who respond to a Request for PRISM, when the PRISM Order trades 
with an Initiating Order, would enable the Exchange to offer rebates to 
BX Participants submitting PRISM Orders into the Request for PRISM 
mechanism. The Exchange believes the fees for responders are reasonable 
because responders to a PRISM Auction would pay the same fee of $0.50 
per contract fee for Penny Classes and $1.25 per contract fee for Non-
Penny Classes regardless of whether the Request for PRISM mechanism was 
utilized to initiate a PRISM Auction or the PRISM Auction Order was 
entered directly into PRISM as a paired order.
    The Exchange's proposal to amend pricing for PRISM Orders submitted 
via a Request for PRISM is equitable and not unfairly discriminatory 
because any BX Participant may utilize the Request for PRISM feature. 
Also, any BX Participant may respond to a PRISM Auction and all BX 
Participants benefit from the ability to interact with additional order 
flow.\28\ The Request for PRISM mechanism provides greater flexibility 
for Participants submitting orders into PRISM, specifically providing 
an avenue for BX Participants desiring to send orders to the PRISM 
mechanism to locate an Initiating Order to pair their PRISM Order with 
and participate in a PRISM Auction. All Participants that enter a PRISM 
Order into the Request for PRISM mechanism are uniformly entitled to a 
rebate if the PRISM Order trades with the Initiating Order or if the 
PRISM Order trades with a PRISM Response. Also, all Participants that 
enter Initiating Orders into the Request for PRISM mechanism are 
uniformly assessed a fee provided the PRISM Order trades with the 
Initiating Order. The proposed fees for an Initiating Order entered 
into the Request for PRISM mechanism that trade with a PRISM Response 
are equivalent to the pricing for responders pursuant to Options 7, 
Section 2(5) because BX Participants benefit from the liquidity seeking 
mechanism that is being offered. The mechanism allows certain market 
participants to compete with other market participants whose business 
model is designed to source liquidity.
---------------------------------------------------------------------------

    \28\ The identity of the sender and the recipients are not known 
to any party.

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[[Page 83197]]

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
Options 7, Section 2(1)
    The Exchange's proposal to reduce certain Penny Symbol Maker 
Rebates and Taker Fees and increase certain Non-Penny Symbol Maker 
Rebates and Taker Fees does not impose an undue burden on competition. 
With respect to the amendments to the Lead Market Maker and Market 
Maker Penny Symbol Maker Rebates, the Exchange notes that unlike other 
market participants, Lead Market Makers and Market Makers add value 
through continuous quoting and the commitment of capital.\29\ Further, 
differentiating Lead Market Makers and Market Makers is equitable and 
not unfairly discriminatory because Lead Market Makers are subject to 
heightened quoting obligations \30\ as compared to Market Makers. The 
higher rebate therefore recognizes the differing contributions made to 
the liquidity and trading environment on the Exchange by Lead Market 
Makers. Overall, the Exchange believes that incentivizing both Lead 
Market Makers and Market Makers to provide greater liquidity benefits 
all market participants through the quality of order interaction. The 
reduction of the Customer Penny Symbol Taker Fee from $0.46 to $0.40 
per contract and the increase in the Non-Penny Symbol Maker Rebates for 
Customers from $0.90 to $1.10 does not impose an undue burden on 
competition because 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. The 
Exchange's proposal to increase the Non-Penny Symbol Taker Fees for all 
Non-Customers from $1.10 to $1.25 per contract does not impose an undue 
burden on competition because the Exchange will uniformly assess the 
Non-Penny Taker Fees to all Non-Customers.
---------------------------------------------------------------------------

    \29\ See BX Options 2, Section 4.
    \30\ Id.
---------------------------------------------------------------------------

    With respect to note 1 of Options 7, Section 2(1), the Exchange's 
proposal to reduce the Customer Penny Symbol Taker Fee from $0.40 to 
$0.33 per contract for trades which remove liquidity in SPY and also 
extend this discount to Customer Penny Symbol Taker Fees that remove 
liquidity in QQQ and IWM 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 uniformly to all Customer Penny Symbol Taker Fees in SPY, QQQ and 
IWM. Finally, the Exchange's proposal to reserve note 2 of Options 7, 
Section 2(1) does not impose an undue burden on competition because the 
Exchange would pay the same Penny Symbol Maker Rebates to Lead Market 
Makers and Market Makers for all other options symbols.
Options 7, Section 2(3)
    The Exchange's proposal to assess a Non-Customer an increased 
routing fee of $1.20 to route to another options exchange and a 
Customer a Fixed Fee of $0.23 per contract, in addition to the actual 
transaction fee assessed by the away market, for routing contracts to 
any options exchange does not impose an undue burden on competition 
because all Non-Customers would be assessed a uniform routing fee. 
Additionally, all Customers will be uniformly assessed the same fee, 
regardless of the destination market. 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. Finally, the Exchange notes that market participants may 
elect to market orders as Do Not Route to avoid any routing fees.
Options 7, Section 2(4)
    The Exchange's proposal to amend its pricing related to execution 
of contracts on BX that generate an order exposure alert does not 
impose an undue burden on competition. Customers are being paid higher 
Penny Symbol and Non-Penny Symbol rebates and lower Penny Symbols fees 
as compared to Non-Customers because 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. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. The Exchange also is assessing the 
same Non-Penny Symbol fees uniformly to all Participants.
Options 7, Section 2(5)
    The Exchange's proposal to amend its PRISM pricing does not impose 
an undue burden on competition. The Exchange will uniformly not assess 
a Penny Class or Non-Penny Class PRISM Order fee or Initiating Order 
Fee to any Participant. While Customers will receive a Penny Symbol 
PRISM Order rebate, 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. Additionally, the Exchange 
will uniformly assess the PRISM Response fee to all Participants. The 
proposed PRISM Response Fees would be equivalent to the Penny Symbol 
Taker Fees in Options 7, Section 2(1) of $0.50 per contract for Lead 
Market Makers, Market Makers and Non-Customers and $0.40 per contract 
for Customers. Additionally, the proposed PRISM Response Fees would be 
equivalent to the Non-Penny Symbol Taker Fees in Options 7, Section 
2(1) of $1.25 per contract for Lead Market Makers, Market Makers and 
Non-Customers and $0.79 per contract for Customers. Assessing Customers 
a lower Response Fee as compared to Non-Customers is equitable and not 
unfairly discriminatory because 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. Further, assessing no fee

[[Page 83198]]

to the Initiating Order and assessing Response Fees as described above 
to Participants that respond to the PRISM Auction is equitable and not 
unfairly discriminatory because the Exchange desires to encourage 
Participants to submit PRISM Orders to BX. Responders, similar to 
Participants that remove liquidity from the order book, may interact 
with the PRISM Order and receive an allocation. Of note, any BX 
Participant may respond to a PRISM Auction. Similar to the manner in 
which the Exchange assesses fees to takers of liquidity in Options 7, 
Section 2(1), Participants who remove liquidity are assessed fees to 
interact with the liquidity. The Exchange incentivizes Participants 
that add liquidity on our markets by assessing lower fees and/or 
rebates to encourage order flow to be sent to BX. The Exchange believes 
that creating a similar model to encourage Participants to bring two-
sided orders into the PRISM Auction and assessing higher fees for the 
Participants that interact with those orders is equitable and not 
unfairly discriminatory as well as consistent with the fee structure in 
place on BX today. Finally, BX Participants may elect not to utilize 
the PRISM Auction and only transact options on the order book, in which 
case they would not incur the Responder Fees.
Unrelated Market or Marketable Interest
    The Exchange's proposal to amend the unrelated market or marketable 
interest rule text in Options 7, Section 2(5) to reflect the proposed 
changes to Options 7, Section 2(1) order book pricing and Options 7, 
Section 2(5) PRISM pricing does not impose an undue burden on 
competition. All BX Participants who submitted unrelated market or 
marketable interest which rested on the order book prior to the 
commencement of a PRISM Auction will be uniformly paid a Maker Rebate. 
The Exchange's proposal would treat BX Participants who submitted 
unrelated market or marketable interest which rested on the order book 
prior to the commencement of a PRISM Auction in the same manner as 
other BX Participants who posted liquidity on the order book as they 
would both be considered makers of liquidity. Further, all Participants 
who submitted a PRISM Order that executed against the unrelated market 
or marketable interest that posted to the order book prior to the 
commencement of a PRISM Auction would be uniformly assessed a Taker 
Fee. The Exchange's proposal would treat BX Participants who submitted 
PRISM Order that executed against the unrelated market or marketable 
interest that posted to the order book prior to the commencement of a 
PRISM Auction in the same manner as other BX Participants who removed 
liquidity from the order book as they would both be considered takers 
of liquidity.
Request for PRISM
    The Exchange's proposal to amend pricing for PRISM Orders submitted 
via a Request for PRISM does not impose an undue burden on competition 
because any BX Participant may utilize the Request for PRISM feature. 
Also, any BX Participant may respond to a PRISM Auction and all BX 
Participants benefit from the ability to interact with additional order 
flow.\31\ The Request for PRISM mechanism provides greater flexibility 
for Participants submitting orders into PRISM, specifically providing 
an avenue for BX Participants desiring to send orders to the PRISM 
mechanism to locate an Initiating Order to pair their PRISM Order with 
and participate in a PRISM Auction. All Participants that enter a PRISM 
Order into the Request for PRISM mechanism are uniformly entitled to a 
rebate if the PRISM Order trades with the Initiating Order or if the 
PRISM Order trades with a PRISM Response. Also, all Participants that 
enter Initiating Orders into the Request for PRISM mechanism are 
uniformly assessed a fee provided the PRISM Order trades with the 
Initiating Order. The proposed fees for an Initiating Order entered 
into the Request for PRISM mechanism that trade with a PRISM Response 
are equivalent to the pricing for responders pursuant to Options 7, 
Section 2(5) because BX Participants benefit from the liquidity seeking 
mechanism that is being offered. The mechanism allows certain market 
participants to compete with other market participants whose business 
model is designed to source liquidity.
---------------------------------------------------------------------------

    \31\ The identity of the sender and the recipients are not known 
to any party.
---------------------------------------------------------------------------

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.\32\
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BX-2023-031 on the subject line.

Paper Comments

     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-2023-031. 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 (https://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 
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

[[Page 83199]]

submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-BX-2023-031 and should 
be submitted on or before December 19, 2023.
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    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26112 Filed 11-27-23; 8:45 am]
BILLING CODE 8011-01-P