Document ID: SEC-2016-1742-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc
Posted Date: 2016-09-30T04:00Z

[Federal Register Volume 81, Number 190 (Friday, September 30, 2016)]
[Notices]
[Pages 67412-67414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23610]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78931; File No. SR-NSX-2016-11]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Fee and Rebate Schedule To Create a Liquidity-Adding Volume 
Threshold To Benefit From the Current Liquidity Taking Fee in 
Securities Priced $1.00 or Greater

September 26, 2016.
    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 September 20, 2016, National Stock Exchange, Inc. (``NSX'' 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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, to: (1) 
Create a monthly, liquidity-adding volume threshold that Equity Trading 
Permit (``ETP'') Holders \3\ will be required to meet to continue to 
pay for [sic] the current liquidity-taking fee in securities priced 
$1.00 or greater and establish a different, higher liquidity-taking fee 
for ETP Holders that do not meet the new volume threshold; and (2) make 
ministerial changes to the Fee Schedule.
---------------------------------------------------------------------------

    \3\ Exchange Rule 1.5E(1) defines ``ETP'' as the Equity Trading 
Permit issued by the Exchange for effecting approved securities 
transactions on the Exchange's trading facilities.
---------------------------------------------------------------------------

    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 proposes to amend its Fee Schedule, issued pursuant to 
Rule 16.1, with the goal of maximizing the effectiveness of its 
business model and continuing to provide ETP Holders a cost-effective 
execution venue. To further incentivize ETP Holders to post liquidity 
on the NSX Book,\4\ the Exchange is proposing to create a monthly, 
liquidity-adding volume threshold that an ETP Holder must reach to 
continue to pay the current liquidity-taking fee for securities priced 
$1.00 or greater. The Exchange proposes to adopt a different, higher 
liquidity-taking fee for ETP Holders that do not meet the new 
liquidity-adding volume threshold.
---------------------------------------------------------------------------

    \4\ Exchange Rule 1.5N(1) defines ``NSX Book'' as the trading 
systems' electronic file of orders.
---------------------------------------------------------------------------

    Currently, the Exchange charges ETP Holders $0.0003 per share 
executed for liquidity-taking orders in symbols priced at $1.00 or 
greater. The Exchange proposes to amend its fee schedule to add 
language in the Transaction Fees and Rebates section of the Fee 
Schedule and an Explanatory Note 1 which will create two different 
price structures depending on the amount of liquidity that an ETP 
Holder adds on the Exchange. Specifically, the Exchange will charge the 
current ``taker'' fee of $0.0003 per executed share for any marketable 
liquidity-removing order in securities priced at $1.00 or greater to 
any ETP Holder that executes at least 50,000 shares of liquidity-adding 
volume during a calendar month. An ETP Holder that does not execute at 
least 50,000 shares of liquidity-adding volume during a calendar month 
will be charged $0.0030 per executed share for any liquidity-removing 
order in securities priced at $1.00 or greater. After each calendar 
month, the Exchange will calculate the number of shares of liquidity-
adding volume that each ETP Holder executed and apply the appropriate 
fee for the ETP Holder's liquidity-taking executions that calendar 
month.
    The Exchange also proposes to make the ministerial change of 
adjusting the numbering for Explanatory Notes in light of the addition 
of proposed Explanatory Note 1.
    Pursuant to Exchange Rule 16.1(c), the Exchange will ``provide ETP 
Holders with notice of all relevant dues, fees, assessments and charges 
of the Exchange'' through the issuance of an Information Circular and 
will post the Fee Schedule and the instant rule filing on the 
Exchange's Web site, www.nsx.com.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\5\ in general and, in 
particular, Section 6(b)(4) of the Act,\6\ 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. The 
proposed rule change is also consistent with Section 6(b)(5) of the 
Act,\7\ which requires, among other things, that the rules of a 
national securities exchange not permit unfair discrimination between 
customers, issuers, brokers, or dealers, and be designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange submits that the proposed liquidity-adding volume

[[Page 67413]]

threshold and associated fee are reasonable and equitable, as required 
by Section 6(b)(4) of the Act. The Exchange believes that the volume 
thresholds are reasonable because they have been set at achievable 
levels that will incentivize ETP Holders trading on the Exchange to add 
a greater amount of liquidity to the Exchange. This will result in 
greater price discovery and price improvement for ETP Holders and 
market participants. Further, the proposed ``taker'' fee of $0.0030 per 
share for securities priced $1.00 or greater is reasonable because it 
is within the range of fees that other exchanges charge per executed 
share for orders removing liquidity in securities priced $1.00 or 
greater.\8\
---------------------------------------------------------------------------

    \8\ See, e.g., Bats BZX Exchange, Inc. (``BZX'') Fee Schedule 
and the Fee Schedule of the Chicago Stock Exchange, Inc. (``CHX''). 
As of September 2016, both BZX and CHX charge a fee of $0.0030 per 
executed share for orders removing liquidity in securities priced 
$1.00 or greater.
---------------------------------------------------------------------------

    The liquidity-adding volume threshold is equitable because each ETP 
Holder has the same opportunity to post liquidity on the Exchange 
totaling 50,000 shares in order to continue to pay the current $0.0003 
per share ``taker'' fee, as opposed to the new, higher taker fee. Thus, 
the Fee Schedule provides for an equitable program which, the Exchange 
believes, will operate to encourage increased quoting and trading by 
ETP Holders on the Exchange. The Exchange notes that in the past it has 
offered, as a part of its Fee Schedule, a similar minimum, liquidity-
adding volume threshold to qualify for a more advantageous ``taker'' 
fee.\9\
---------------------------------------------------------------------------

    \9\ The Exchange has utilized a similar program as a part of its 
Fee Schedule in the past. That program provided that ``[e]ach ETP 
Holder will be charged $0.0030 per share for any marketable order 
that removes liquidity unless the ETP Holder executes at least 
50,000 shares of liquidity-adding volume in Auto-Ex Mode per 
month.'' See Securities Exchange Act Release No. 67816 (September 
10, 2012), 77 FR 56886 (September 14, 2012) SR-NSX-2012-14). The 
Exchange notes that, when this program was previously in effect, the 
majority of ETP Holders trading on the Exchange qualified for the 
lower fee tier.
---------------------------------------------------------------------------

    The Exchange further submits that its proposal that ETP Holders 
must attain at least 50,000 shares of executed liquidity-adding volume 
in a calendar month to benefit from the lower ``take'' fee of $0.0003 
satisfies the requirements of Section 6(b)(5) of the Act in that it 
does not permit unfair discrimination between customers, issuers, 
brokers, or dealers, is designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system. Under the 
proposed changes to the Fee Schedule, all ETP Holders executing orders 
on the Exchange will have the same opportunity to qualify for the lower 
priced fee tier through their trading activity adding liquidity on the 
Exchange, and such changes are thereby designed to meet the 
requirements of the Section 6(b)(5) that the rules of the Exchange not 
permit unfair discrimination among ETP Holders and their customers. The 
Exchange notes that, at present, approximately a dozen ETP Holders 
would meet the volume threshold of 50,000 shares of liquidity-adding 
volume to qualify for the current taker fee of $0.0003 per executed 
share.
    The Exchange submits that the proposal will promote just and 
equitable principles of trade by providing a reasonable and attainable 
volume threshold that will potentially attract more displayed volume on 
the Exchange. Incentivizing ETP Holders to add more liquidity on the 
Exchange would inure to the benefit of all market participants seeking 
additional execution opportunities. In this regard, the proposed Fee 
Schedule will promote just and equitable principles of trade and 
operate to remove impediments to and perfect the mechanism of a free 
and open market and a national market system under Section 6(b)(5).

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 proposed 
changes will enhance rather than burden competition by operating to 
incentivize increased liquidity and improve execution quality on the 
Exchange through reasonable and equitably allocated economic 
incentives.

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 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 \10\ and subparagraph (f)(2) of Rule 
19b-4.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    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.

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-2016-11 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-NSX-2016-11. 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-2016-11 and should be 
submitted on or before October 21, 2016.

[[Page 67414]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Brent J. Fields,
Secretary.
[FR Doc. 2016-23610 Filed 9-29-16; 8:45 am]
 BILLING CODE 8011-01-P