Document ID: SEC-2011-1113-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-08-03T04:00Z

[Federal Register Volume 76, Number 149 (Wednesday, August 3, 2011)]
[Notices]
[Pages 46858-46860]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19563]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64981; File No. SR-BX-2011-046]

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

July 28, 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 July 15, 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 change from 
interested persons.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Fee Schedule of the Boston 
Options Exchange Group, LLC (``BOX''). While changes to the BOX Fee 
Schedule pursuant to this proposal will be effective upon filing, the 
changes will become operative on August 1, 2011. The text of the 
proposed rule change is available from the principal office of the 
Exchange, at the Commission's Public Reference Room, on the Exchange's 
Internet Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings and on the Commission's Web site at http://www.sec.gov.

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
Fees and Credits in Section 7
    Currently, Section 7d of the BOX Fee Schedule specifies a $0.30 
credit and fee for transactions in the BOX Price Improvement Period 
(``PIP''). These credits and fees apply equally to all account types, 
whether Public Customer, Broker Dealer or Market Maker, and across 
options classes, both those within the Penny Pilot program and those 
not in the Penny Pilot program (``Non-Penny classes''), and are in 
addition to any applicable trading fees, as described in Sections 1 
through 3 of the BOX Fee Schedule.
    The Exchange proposes to increase the existing credits and fees 
within Section 7d for PIP transactions in Non-Penny classes, and in 
Penny Pilot classes (other than QQQQ, SPY, and IWM) where the trade 
price is equal to or greater than $3.00, from $0.30 to $0.75. Further, 
the Exchange proposes to add corresponding provisions and clarifying 
language to Section 7d of the BOX Fee Schedule to specify that the fee 
and credit for all PIP transactions will remain $0.30: (1) In QQQQ, 
SPY, and IWM; and (2) in all other Penny Pilot Classes where the trade 
price is less than $3.00.\5\
---------------------------------------------------------------------------

    \5\ See BOX Trading Rules Chapter V, Section 6(b). For the 
QQQQs, SPR, and IWM, the minimum trading increment for all options 
contracts will be one cent, and that for all classes in the Penny 
Pilot trading at less than $3.00 per option, the minimum trading 
increment shall be one cent.
---------------------------------------------------------------------------

    The proposed increase in credits and fees for the specified PIP 
transactions is designed to provide all BOX market participants an 
additional incentive to submit their customer orders to the PIP and 
allow those orders the opportunity to benefit from its potential price 
improvement. BOX believes that the change to PIP transaction fees and 
credits are competitive, fair and reasonable, and non-discriminatory in 
that they apply to all categories of participants and across all 
account types. Additionally, BOX believes the

[[Page 46859]]

proposed change to the PIP fees and credits is fair and reasonable as 
applied only to the specified classes and transactions because such 
options trade at minimum increments of $.05 or $.10, providing greater 
opportunity for market participants to offer additional price 
improvement. BOX believes that the opportunity for additional price 
improvement provided by these wider spreads merits offering more 
inducement for market participants to increase the price improvement 
for customer orders in these PIP transactions.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\6\ in general, and Section 
6(b)(4) of the Act,\7\ 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 proposal is an equitable allocation of reasonable fees and 
other charges among BOX Options Participants. The Exchange also 
believes that there is an equitable allocation of reasonable credits 
among BOX Options Participants.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that it is equitable to provide a credit to 
any Participant that removes liquidity through the PIP on behalf of its 
customer. The Exchange believes this credit will attract additional 
order flow to BOX and to the PIP in particular, to the benefit of all 
market participants. The Exchange believes that it is an equitable 
allocation of the fees and credits for PIP transactions because such 
fees and credits apply uniformly to all categories of participants and 
across all account types in the PIP. As stated above, the Exchange 
believes the proposed change to the PIP fees and credits is fair as 
applied only to the specified classes and transactions because such 
options trade at minimum increments of $.05 or $.10, providing greater 
opportunity for market participants to offer price improvement. The 
Exchange believes it is fair to offer an additional incentive to market 
participants to provide price improvement in these PIP transactions. 
These options classes trade at minimum increments of $.05 or $.10, 
providing greater opportunity for market participants to offer price 
improvement. BOX believes that the opportunity for additional price 
improvement provided by these wider spreads merits offering more 
inducement for market participants to increase the price improvement 
for customer orders in these PIP transactions. The Exchange believes 
that customer orders in these PIP transactions will benefit from this 
proposed change. All market participants that trade within the PIP, and 
all PIP transactions will continue to be subject to the fees and 
credits in Section 7 of the BOX Fee Schedule.
    Further, the Exchange believes the proposed fees and credits 
related to the specified PIP transactions to be reasonable. BOX 
operates within a highly competitive market in which market 
participants can readily direct order flow to any of eight other 
competing venues if they deem fee levels at a particular venue to be 
excessive. The changes to BOX credits and fees proposed by this filing 
are intended to attract order flow to BOX by offering incentives to all 
market participants to submit their orders to the PIP for potential 
price improvement. BOX notes that this proposed rule change will 
increase both the fees and credit for these PIP transactions. The 
result is that BOX will collect a $0.75 fee from Participants that add 
liquidity in Non-Penny classes and PIP transactions in Penny classes, 
other than QQQQ, SPY, and IWM, where the trade price is equal to or 
greater than $3.00 and credit another Participant $0.75 for removing 
liquidity in the same transactions. Stated otherwise, the fees 
collected will not necessarily result in additional revenue to BOX, but 
will simply allow BOX to provide the credit incentive to Participants 
to attract additional order flow to the PIP. BOX believes it is 
appropriate to provide incentives to market participants to use PIP, 
resulting in potential benefit to customers through potential price 
improvement, and to all market participants from greater liquidity.
    In particular, the proposed change will allow the fees charged on 
BOX to remain competitive with other exchanges as well as apply such 
fees in a manner which is equitable among all BOX Participants. The 
Exchange believes that the PIP transaction fees and credits it assesses 
are fair and reasonable and must be competitive with fees and credits 
in place on other exchanges. Further, the Exchange believes that this 
competitive marketplace impacts the fees and credits present on BOX 
today and influences the proposal set forth above.

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 \8\ and Rule 19b-4(f)(2) 
thereunder,\9\ because it establishes or changes a due, fee, or other 
charge applicable only to a member.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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 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. In addition, the Commission seeks 
comment generally on (1) whether the proposed increases to the fees and 
credits for specified PIP transactions are consistent with Section 
6(b)(8) of the Act, which requires that the rules of an exchange not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, and (2) whether the proposed 
fees are equitable as that term is used in Section 6(b)(4) of the Act, 
and not unfairly discriminatory as that term is used in Section 6(b)(5) 
of the Act. The Commission notes that a commenter on previous proposals 
by the Exchange relating to these same fees and credits argued that the 
Exchange's fee structure discriminates against PIP auction responders 
in favor of PIP auction initiators.\10\ According to this commenter, 
the net cost to a responder is much more than the net cost to a PIP 
initiator because initiators may receive

[[Page 46860]]

a credit for removing liquidity when a customer order is executed in 
the PIP, but no such credit is available to responders. As a result of 
these comparatively higher fees, according to this commenter, 
competitive responders will be less likely to participate in the PIP 
and will participate less aggressively when they do participate, thus 
burdening competition and reducing the likelihood and size of price 
improvement in the PIP. Do you agree with this commenter? Please 
explain why or why not.
---------------------------------------------------------------------------

    \10\ See Letters to Elizabeth M. Murphy, Secretary, Commission, 
from John C. Nagel, Managing Director and General Counsel, Asset 
Management and Markets, Citadel LLC, dated August 30, 2010 and May 
3, 2011.
---------------------------------------------------------------------------

    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-2011-046 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-2011-046. 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 
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. 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-2011-046 and should be 
submitted on or before August 24, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19563 Filed 8-2-11; 8:45 am]
BILLING CODE 8011-01-P