Document ID: SEC-2013-1029-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2013-06-06T04:00Z

[Federal Register Volume 78, Number 109 (Thursday, June 6, 2013)]
[Notices]
[Pages 34136-34138]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-13391]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69677; File No. SR-BX-2013-037]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Options Fees and Rebates

May 31, 2013.
    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 May 24, 2013, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Chapter XV, Section 2 entitled ``BX 
Options Market--Fees and Rebates'' to amend rebates and fees relating 
to various options and make technical corrections to this section.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated these changes to be operative on June 3, 2013.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    BX proposes to amend Chapter XV, Section 2(1) to add Bank of 
America Corporation (``BAC'') to the list of options overlying certain 
penny pilot options (the others include IWM, QQQ and SPY, collectively 
with BAC, the ``Specified Penny Pilot Options''). Additionally, the 
Exchange proposes to amend certain fees and rebates for Customers and 
BX Options Market Makers \3\ in the Specified Penny Pilot Options.
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    \3\ A BX Options Market Maker must be registered as such 
pursuant to Chapter VII, Section 2 of the BX Options Rules, and must 
also remain in good standing pursuant to Chapter VII, Section 4.
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    The Exchange proposes to increase the Rebate to Add Liquidity in 
the Specified Penny Pilot Options for BX Options Market Makers from 
$0.15 to $0.20 per executed contract. The Exchange also proposes to 
decrease the Fee to Add Liquidity in the Specified Penny Pilot Options 
for Customers and BX Options Market Makers from $0.18 to $0.10 per 
executed contract. Finally, the Exchange proposes to decrease the 
Rebate to Remove Liquidity in the Specified Penny Pilot Options for 
Customers from $0.12 to $0.00 per executed contract.
    The proposed rule change will reflect the fees and rebates as 
follows:

[[Page 34137]]

                                                Fees and Rebates
                                             [Per executed contract]
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                                                                                 BX Options       Non- customer
                                                                Customer        market maker           \1\
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BAC, IWM, QQQ and SPY:
    Rebate to Add Liquidity...............................         \2\ $0.00         \2\ $0.20               N/A
    Fee to Add Liquidity..................................          \3\ 0.10          \3\ 0.10              0.45
    Rebate to Remove Liquidity............................              0.00               N/A               N/A
    Fee to Remove Liquidity...............................               N/A              0.45              0.45
All Other Penny Pilot Options:
    Rebate to Add Liquidity...............................          \2\ 0.00          \2\ 0.10               N/A
    Fee to Add Liquidity..................................          \3\ 0.40          \3\ 0.40              0.45
    Rebate to Remove Liquidity............................              0.32               N/A               N/A
    Fee to Remove Liquidity...............................               N/A              0.45              0.45
Non-Penny Pilot Options:
    Fee to Add Liquidity..................................     \4\ 0.25/0.85     \4\ 0.50/0.85              0.88
    Rebate to Remove Liquidity............................              0.70               N/A               N/A
    Fee to Remove Liquidity...............................               N/A              0.88              0.88
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    The Exchange believes that the proposed amended fees and rebates 
for the Specified Penny Pilot Options, as well as including BAC to the 
list of Specified Penny Pilot Options, is competitive and will 
encourage BX members to transact business on the Exchange. Despite the 
reduction of the Customer Rebate to Remove Liquidity to $0.00, the 
Exchange believes that the increased Rebate to Add Liquidity for BX 
Options Market Makers coupled with the reduction of Fees to Add 
Liquidity for both Customers and BX Options Market Makers will enable 
the Exchange to remain competitive with other options exchanges by 
improving liquidity and that market participants will continue to send 
order flow to the Exchange.
 2. Statutory Basis
    BX believes that the proposed rule changes are consistent with the 
provisions of Section 6 of the Act,\4\ in general, and with Section 
6(b)(4) of the Act,\5\ in particular, in that they provide for the 
equitable allocation of reasonable dues, fees and other charges among 
members and issuers and other persons using any facility or system 
which BX operates or controls.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to include BAC in the list 
of Specified Penny Pilot Options and subject to the fees and rebates 
applicable thereto, is reasonable given the fact that certain symbols 
such as the Specified Penny Pilot Options are highly liquid as compared 
to other penny pilot options and pricing by symbol is not novel as 
other options exchanges differentiate pricing by security today.\6\ The 
Exchange believes that its proposal to assess different fees and 
rebates for BAC (as is the case for the other Specified Penny Pilot 
Options) as compared to all other penny pilot options is equitable and 
not unfairly discriminatory as described hereafter.
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    \6\ See NASDAQ OMX PHLX LLC's Pricing Schedule, which has 
different pricing for its Select Symbols and different pricing for 
other Multiply Listed Options. See also the NASDAQ Options Market 
LLC at Chapter XV, Section 2(1), which distinguishes pricing for NDX 
and MNX. See also the International Securities Exchange LLC's Fee 
Schedule, which distinguishes pricing for Special Non-Select Penny 
Pilot Symbols. See also the Chicago Board Options Exchange, 
Incorporated's Fees Schedule, which distinguishes index products.
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    The Exchange believes that for Specified Penny Pilot Options the 
proposed increase of the Rebate to Add Liquidity for BX Options Market 
Makers from $0.15 to $0.20 per executed contract (available only when 
they are contra to a Non-Customer or BX Options Marker Maker) along 
with the reduction in the Fee to Add Liquidity for both Customers and 
BX Options Market Makers from $0.18 to $0.10 per executed contract 
(available only when the Customer or BX Options Market Maker is contra 
to a Customer) is reasonable because these fee and rebate changes will 
help to attract order flow from BX Options Market Makers and Customers 
to the Exchange to the benefit of all market participants through 
increased liquidity.
    The Exchange believes that increasing Specified Penny Pilot Options 
Rebate to Add Liquidity for BX Options Market Makers from $0.15 to 
$0.20 per executed contract and offering the rebate only to BX Options 
Market Makers is equitable and not unfairly discriminatory because BX 
Options Market Makers have obligations to the market and regulatory 
requirements,\7\ which normally do not apply to other market 
participants. By continuing to incentivize BX Options Market Makers to 
add liquidity, by offering an increased rebate, will result in tighter 
markets and increased order interaction.
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    \7\ Pursuant to Chapter VII (Market Participants), Section 5 
(Obligations of Market Makers), in registering as a Market Maker, an 
Options Participant commits himself to various obligations. 
Transactions of a Market Maker in its market making capacity must 
constitute a course of dealings reasonably calculated to contribute 
to the maintenance of a fair and orderly market, and Market Makers 
should not make bids or offers or enter into transactions that are 
inconsistent with such course of dealings. Further, all Market 
Makers are designated as specialists on BX for all purposes under 
the Act or rules thereunder. See Chapter VII, Section 5.
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    Specifically, with respect to the Fee to Add Liquidity, the 
Exchange believes that assessing Customers and BX Options Market Makers 
a lower Fee to Add Liquidity, when they are not contra to a Customer, 
as compared to Non-Customers is reasonable because the Exchange seeks 
to incentivize these critical market participants to add liquidity. 
Increased liquidity benefits all market participants. The Exchange also 
believes that the lower Fees to Add Liquidity for Customers and BX 
Options Market Makers as compared to Non-Customers are equitable and 
not unfairly discriminatory because Customer order flow benefits all 
market participants by improving liquidity, the quality of order 
interaction and executions at the Exchange. Also, BX Options Market 
Makers have obligations to the market and regulatory requirements,\8\ 
which normally do not apply to other market participants. A BX Options 
Market Maker has the obligation to make continuous markets, engage in 
course of dealings reasonably calculated to contribute to the

[[Page 34138]]

maintenance of a fair and orderly market, and not make bids or offers 
or enter into transactions that are inconsistent with course of 
dealings. The proposed differentiation as between Customers and BX 
Options Market Makers and Non-Customers recognizes the differing 
contributions made to the liquidity and trading environment on the 
Exchange by Customers and BX Options Market Makers, as well as the 
differing mix of orders entered.
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    \8\ Id.
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    The Exchange believes that for the Specified Penny Pilot Options 
the proposed reduction of the Customer Rebate to Remove Liquidity from 
$0.12 to $0.00 is reasonable because Customer orders will receive 
benefits in the form of increased liquidity and the $0.00 rate is the 
same rate that is assessed at other options exchanges.\9\ The Exchange 
believes that for the Specified Penny Pilot Options the proposed 
reduction of the Customer Rebate to Remove Liquidity from $0.12 to 
$0.00 is equitable and not unfairly discriminatory because Customers 
would still be assessed the lowest rates with respect to Non-Customers 
on BX Options.
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    \9\ See also the NYSE AMEX's Fees Schedule, which distinguishes 
index products.
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    The Exchange operates in a highly competitive market comprised of 
eleven U.S. options exchanges in which sophisticated and knowledgeable 
market participants can and do send order flow to competing exchanges 
if they deem fee levels at a particular exchange to be excessive. The 
Exchange believes that the proposed fee and rebate scheme discussed 
herein is competitive and similar to other fees and rebates in place on 
other exchanges. The Exchange believes that this competitive 
marketplace materially impacts the fees and rebates present on the 
Exchange today and substantially influences the proposal set forth 
above.

B. Self-Regulatory Organization's Statement on Burden on Competition

    BX does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. To the contrary, BX has designed its fees and 
rebates to compete effectively for the execution and routing of options 
contracts. The Exchange believes that the proposed amended fee/rebate 
pricing structure for the Specified Penny Pilot Options, including the 
addition of BAC to this list, would attract liquidity to and benefit 
order interaction at the Exchange to the benefit of all market 
participants.
    Additionally, since the fees and rebates are comparable to those 
present at other options venues, the Exchange believes the proposals 
discussed herein do not pose a burden on competition amongst Exchange 
participants.

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.\10\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     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-BX-2013-037 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-2013-037. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BX-2013-037 and should be 
submitted on or before June 27, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13391 Filed 6-5-13; 8:45 am]
BILLING CODE 8011-01-P