Document ID: SEC-2011-1408-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-09-19T04:00Z

[Federal Register Volume 76, Number 181 (Monday, September 19, 2011)]
[Notices]
[Pages 58072-58074]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23975]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65337; File No. SR-BX-2011-064]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
BOX Fee Schedule

September 14, 2011.
    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 September 1, 2011, NASDAQ OMX BX, Inc. (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 self-regulatory organization. The Exchange 
filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) of 
the Act,\3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ OMX BX, Inc. (the ``Exchange'') proposes to amend the Fee 
Schedule of the Boston Options Exchange Group, LLC (``BOX''). The 
changes to the BOX Fee Schedule pursuant to this proposal will be 
effective upon filing and operative on September 1, 2011. The text of 
the proposed changes is attached as Exhibit 5. The text of the proposed 
rule change is available from the principal office of the Exchange, at 
the Commission's Public Reference Room and also on the Exchange's 
Internet Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.

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 self-regulatory organization 
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 self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to implement a routing fee structure that 
provides a discount to BOX Options Participants (``Participants'') that 
execute transactions on BOX.
    Public Customer Orders on BOX which are not executable against the 
BOX Book are routed to an away exchange for execution. Currently, BOX 
does not assess any fee to Participants for doing so. The Exchange, 
however, believes that exempting all outbound customer orders from 
routing fees will result in some Participants sending a substantial and 
increasing amount of non-executable orders to BOX so as to evade fees 
on other exchanges. In order to curtail this abusive use of BOX 
routing, the Exchange proposes to impose a routing fee structure that 
provides a volume discount to Participants that execute transactions on 
BOX. The proposed change will have no

[[Page 58073]]

effect on the billing of orders of non-Participants, including any 
orders routed to BOX from away exchanges.
    The Exchange proposes to continue to route up to 200,000 contracts 
per month of Participant customer orders to an away exchange without 
imposing any fee. For each contract thereafter, BOX will assess a fee 
based on each Participant's total monthly volume of contracts executed 
on BOX. Participants that execute less than 300,000 contracts on BOX 
per month will pay a routing fee of $0.50 per contract. BOX 
Participants that execute 300,000 or more contracts on BOX per month 
will pay a routing fee of $0.01 per contract.
    Instructing BOX to route orders away if they are non-executable on 
BOX is voluntary for BOX Participants. Participants may choose not to 
route their customer orders to another exchange. Participants may also 
avoid paying the proposed routing fee by choosing to designate their 
orders as Fill and Kill (``FAK''). FAK orders are not eligible for 
routing to away exchanges. FAK orders are executed on BOX, if possible, 
and then cancelled. Imposing a routing fee structure that provides a 
volume discount to Participants for trading on BOX will allow BOX to 
recoup a portion of its costs incurred in providing routing services 
and provide an incentive to Participants to trade on BOX to benefit 
from the potential discount on routing fees.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\5\ in general, and Section 
6(b)(4) of the Act,\6\ in particular, in that it provides for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and other persons using its facilities. The Exchange 
believes the changes proposed are an equitable allocation of reasonable 
fees and charges among BOX Options Participants.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that assessing a fee to Participants for 
routing orders to other market venues is reasonable, equitable, and 
non-discriminatory in that the fee will allow BOX to recoup a portion 
of its transactions costs attendant with offering routing services. BOX 
uses third-party broker-dealers to route orders to other exchanges and 
incurs charges for each order routed to an away market, in addition to 
the fees charged by other exchanges. BOX has been providing its routing 
services to Participants at no cost and has been able to cover such 
costs with revenue generated from transactions on BOX. In order to 
better recover costs for routing orders, the Exchange is proposing a 
routing fee structure to provide a discounted fee for Participants that 
trade a certain amount of volume on BOX.
    The Exchange believes the proposed volume discount being provided 
to Participants that execute orders on BOX is equitable and not 
unfairly discriminatory because they are open to all Participants on an 
equal basis. The Exchange believes it is equitable to provide 
Participants that trade on BOX a discount on fees for routing customer 
orders that may not be executed on BOX because transactions executed on 
BOX increase BOX market activity and market quality. Greater liquidity 
and additional volume executed on BOX aids the price and volume 
discovery process. The Exchange believes it is reasonable and equitable 
to provide incentives to Participants to trade on BOX. Participant 
trading on BOX also results in revenue that BOX is able to use to 
provide routing services at a discounted cost to Participants. 
Accordingly, the Exchange believes that the proposal is not unfairly 
discriminatory because it promotes enhancing BOX market quality. The 
changes proposed by this filing are intended to provide an incentive to 
BOX Participants to submit orders for execution on BOX and not engage 
in abusive and predatory practices to evade fees on other exchanges.
    Finally, the Exchange notes that although routing is available to 
BOX Participants for customer orders, Participants are not required to 
use the routing services, but instead, BOX routing services are 
completely optional. As discussed above, BOX Participants can manage 
their own routing to different options exchanges or can utilize a 
myriad of other routing solutions that are available to market 
participants.

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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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 Exchange Act \7\ and Rule 19b-4(f)(2) 
thereunder,\8\ because it establishes or changes a due, fee, or other 
charge applicable only to a member.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further the purposes of the Act.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2011-064 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-BX-2011-064. This file 
number should be included on the subject line if e-mail 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

[[Page 58074]]

printing in the Commission's Public Reference Room, 100 F Street, NW., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. The text of the proposed rule change is available on 
the Commission's Web site at http://www.sec.gov. Copies of such 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-2011-064 and should be submitted on or before October 11, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23975 Filed 9-16-11; 8:45 am]
BILLING CODE 8011-01-P