Document ID: SEC-2014-0409-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2014-03-13T04:00Z

[Federal Register Volume 79, Number 49 (Thursday, March 13, 2014)]
[Notices]
[Pages 14319-14321]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05453]

[[Page 14319]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71662; File No. SR-NSX-2014-06]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Fee and Rebate Schedule To Reduce a Fee for Orders Routed to 
Other Trading Centers

March 7, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on February 28, 2014, National Stock Exchange, Inc. 
(``NSX[supreg]'' or the ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change, as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its Fee and Rebate Schedule (the 
``Fee Schedule'') issued pursuant to Exchange Rule 16.1. Specifically, 
the Exchange is seeking to amend Section II. (Other Services), 
subsection A. (Order Routing--All Tapes) \3\ to reduce the per share 
fee charged to Exchange Equity Trading Permit (``ETP'') \4\ Holders for 
orders in securities priced at $1.00 or greater that are routed away 
to, and executed on, another Trading Center \5\ from the current rate 
of $0.0030 to the proposed rate of $0.0025.
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    \3\ The term ``Tapes'' refers to the designation assigned in the 
Consolidated Tape Association (``CTA'') Plan for reporting trades 
with respect to securities in Networks A, B and C. Tape A securities 
are those listed on the New York Stock Exchange, Inc.; Tape B 
securities are listed on NYSE MKT, formerly NYSE Amex, and regional 
exchanges. Tape C securities are those listed on the NASDAQ Stock 
Market LLC.
    \4\ Exchange Rule 1.5 defines ``ETP'' as the Equity Trading 
Permit issued by the Exchange for effecting approved securities 
transactions on the Exchange's trading facilities.
    \5\ Exchange Rule 2.11(a) describes ``Trading Centers'' as other 
securities exchanges, facilities of securities exchanges, automated 
trading systems, electronic communications networks, or other 
brokers or dealers.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.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 parts 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 is proposing to amend the current Fee Schedule, 
Section II.A. to reduce the per share fee charged to ETP Holders for 
orders routed to, and executed on, other Trading Centers from the 
current rate of $0.0030 to the proposed rate of $0.0025. As proposed, 
this rate will apply only to transactions in securities priced at $1.00 
or greater. Consistent with this proposed reduction in the transaction 
fee for routed order [sic], the Exchange proposes to amend Section 
II.A. with respect to the fees applicable to Double Play Orders.\6\ An 
ETP Holder that enters a Double Play Order will not be charged a 
routing fee under Section II. for the initial routing to a designated 
away Trading Center and any unexecuted portion of a Double Play Order 
in a security priced at $1.00 and above that is returned and executed 
on the Exchange shall be subject to either Section I of the Fee 
Schedule, or a fee of $0.0025 per share if the order is subsequently 
routed to an away Trading Center in accordance with Exchange Rule 
11.15(a)(ii).\7\
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    \6\ Exchange Rule 11.11(c)(10) defines a Double Play Order as 
``[a] market or limit order for which the ETP Holder instructs the 
System to route to designated away Trading Centers which are 
approved by the Exchange from time to time without first exposing 
the order to the NSX Book. A Double Play Order that is not executed 
in full after routing away receives a new timestamp upon return to 
the Exchange and is ranked and maintained in the NSX Book in 
accordance with Rule 11.14(a).''
    \7\ Exchange Rule 11.15 (Order Execution), subparagraph (a)(ii), 
Routing to Away Trading Centers, describes the Exchange's process 
for routing eligible orders to away Trading Centers.
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    The Exchange states that it is making these changes to Section 
II.A. of the Fee Schedule as part of its ongoing assessment of the U.S. 
equity securities markets and the competitive environment in which it 
operates. The Exchange submits that the proposed reduction in the 
transaction fee for routed orders in securities priced at $1.00 or 
greater from $0.0030 to $0.0025 aligns with the changes to the Fee 
Schedule that the Exchange filed with the Commission for effectiveness 
as of February 25, 2014.\8\ Specifically, the Exchange believes that 
the instant proposal will increase opportunities to enhance the 
execution quality experienced by ETP Holders through improved 
interaction between liquidity providers and liquidity removers 
(respectively described as ``Makers'' and ``Takers'' of liquidity in 
the current Fee Schedule). The Exchange believes that, by reducing the 
transaction fee per executed share for routed orders in securities 
priced at $1.00 or greater, it will further incentivize liquidity 
removers to access the Exchange to remove liquidity at lower cost. In 
seeking to draw more liquidity, the Exchange aspires to improve the 
price discovery process, improve execution quality, and lower costs for 
ETP Holders. The Exchange notes that the proposed change will be 
available to all ETP Holders with the anticipated result of better 
execution quality at lower costs.
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    \8\ See SR-NSX-2014-05. The Exchange filed with the Commission 
amendments to the Fee Schedule effective as of February 25, 2014 
that, among other changes, adopted a new pricing model that provided 
for fees for adding liquidity and rebates for removing liquidity (a 
``taker/maker'' pricing model) and made certain other conforming 
amendments. These included eliminating the separate fee and rebate 
structure for the Automatic Execution and Order Delivery modes of 
order interaction and eliminating certain execution-based rebates 
available in some instances.
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    The Exchange submits that the instant proposal furthers its goals 
of maximizing the effectiveness of its business model, offering 
economic incentives to ETP Holders to access the Exchange and providing 
a high-quality and cost-effective execution venue.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\9\ in general and, in 
particular, Section 6(b)(4) of the Act,\10\ which requires that the 
rules of a national securities exchange provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities, and with 
Section 6(b)(5) of the Act,\11\ which requires, among other things, 
that the rules of a national securities exchange not permit

[[Page 14320]]

unfair discrimination between customers, issuers, brokers, or dealers, 
and be designed to promote just and equitable principles of trade, and 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78(f)(b)(4).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange submits that its proposal to reduce the per share fee 
for transactions in routed orders in securities priced at $1.00 or 
greater from $0.0030 to $0.0025 is consistent with Section 6(b)(4) of 
the Act in that it is equitably allocated. The reduced fee will be 
available to all ETP Holders entering orders in securities priced at 
$1.00 or greater that result in a route to another Trading Center and a 
subsequent transaction. The Exchange believes that the proposal also 
meets the requirement under Section 6(b)(4) of the Act that fees 
assessed by the Exchange be reasonable. Specifically, the Exchange 
proposes to lower the current fee from $0.0030 to $0.0025 as a means to 
incentivize increased activity by ETP Holders. The Exchange submits 
that the proposed reduction of $0.0005 in the fee for shares routed 
away and executed on another Trading Center and the adoption of a new 
fee of $0.0025 constitutes a reasonable fee that aspires to encourage 
more activity by liquidity providers, which in turn will result in more 
ETP Holders accessing the Exchange to remove liquidity. As noted by the 
Exchange, the reduced fee will apply to all ETP Holders that enter an 
order on the Exchange in a security priced at $1.00 or greater that is 
subsequently routed, in whole or in part, and results in a transaction 
on another Trading Center. The Exchange proposes a parallel change to 
the fee applicable to any unexecuted portion of a Double Play Order in 
a security priced at or above $1.00 that is returned to the Exchange 
after the initial route to the designated away Trading Center, and 
subsequently routed out to another Trading Center for purposes of 
compliance with trading rules. Such an order will be subject to the 
proposed fee of $0.0025 per executed share. This pricing change with 
respect to Double Play Orders will be equitably applied to all ETP 
Holders entering Double Play Orders and is reasonable to assure that 
such orders do not receive disparate pricing.
    The Exchange further submits that its proposal meets the 
requirements of Section 6(b)(5) of the Act. By seeking to attract more 
liquidity to the NSX market through the proposed amendment, the 
Exchange is seeking to improve execution quality, price discovery and 
cost-effectiveness. The Exchange believes that this amendment will, 
therefore, further the purposes of Section 6(b)(5) in that it does not 
permit unfair competition between customers, issuers, brokers or 
dealers and is designed to promote just and equitable principles of 
trade, and remove impediments to and perfect the mechanism of a free 
and open market and a national market system.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act. The Exchange 
believes, in fact, that the proposed change will operate to enhance 
rather than burden competition by aspiring to increase liquidity and 
improve execution quality on the Exchange through an equitable 
allocation of a reasonable economic incentive. The Exchange submits 
that its belief that the instant change will enhance competition is 
supported by the fact that the proposed fee rate of $0.0025 per 
executed share for orders routed by the Exchange to other Trading 
Centers is within the range of fees assessed by other national 
securities exchanges for executions in routed orders.\12\
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    \12\ See, e.g., NASDAQ OMX Price List at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2; BATS BZX 
Exchange Fee Schedule at http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited or received written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has taken effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \13\ and subparagraph (f)(2) of Rule 
19b-4.\14\ At any time within 60 days of the filing of such 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.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR.240.19b-4.
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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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml ); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NSX-2014-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSX-2014-06. 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-NSX-2014-06 and should be 
submitted on or before April 3, 2014.

[[Page 14321]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05453 Filed 3-12-14; 8:45 am]
BILLING CODE 8011-01-P