Document ID: SEC-2015-0719-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2015-04-27T04:00Z

[Federal Register Volume 80, Number 80 (Monday, April 27, 2015)]
[Notices]
[Pages 23312-23318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09628]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74773; File No. SR-BX-2015-022]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rules 7001, 7003 and 7018

April 21, 2015.
    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 April 10, 2015, 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 BX Rule 7001 trading rights fees and 
to no longer waive certain membership and trading rights fees for BX 
members seeking to participate solely in the BX Options Market, to 
eliminate the Equities Regulatory Fee in BX Rule 7003, as well as to 
amend the fee schedule under Exchange Rule 7018 and to correct a 
typographical error in the rule.
    The text of the proposed rule change is also 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.

[[Page 23313]]

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 trading rights fee \3\ and 
to no longer waive certain membership and trading rights fees for BX 
members seeking to participate solely in the BX Options Market in BX 
Rule 7001(a), to eliminate the Equities Regulatory Fee in BX Rule 
7003(b), as well as to amend the fee schedule under Exchange Rule 7018.
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    \3\ The Trading Rights Fee is assessed on all persons that are 
Exchange members as of a date determined by the Exchange in each 
month. This fee is not refundable in the event that a person ceases 
to be an Exchange member following the date on which the fee is 
assessed. See Rule 7001.
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    Specifically, the Exchange proposes to amend BX Rule 7001(a) to 
increase the trading rights fee each Exchange member is assessed from 
$500 per month to $1,000 per month. Additionally, the Exchange will no 
longer waive the membership fee and the trading rights fee for BX 
members who solely conduct an options business. These fee changes and 
elimination of fee waivers reflect that this market is now better 
established and BX no longer needs to rely on such waivers to attract 
market participants.
    The Exchange also proposes to eliminate the Equities Regulatory Fee 
(``ERF'') set forth in BX Rule 7003(b). The ERF is a tier-based fee 
assessed annually at the beginning of the calendar year that covers, in 
part, the regulatory costs of the Exchange. The ERF uses a member 
firm's historical average daily orders entered on the Exchange over the 
prior calendar year as a measure of the member's expected current 
year's Exchange activity. The purpose of the ERF is to more closely 
allocate the regulatory expenses incurred by the Exchange to the member 
firms responsible for those expenses. The Exchange now proposes to 
eliminate this fee because the Exchange believes it is no longer 
necessary to cover regulatory costs based on historic volume.\4\
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    \4\ Despite eliminating the ERF, the Exchange represents that it 
will continue to have adequate resources to fund its regulatory 
program and to fulfill its responsibilities as a self-regulatory 
organization.
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    The Exchange is proposing to amend BX Rule 7018(a) to decrease the 
credits and charges for orders that access or provide liquidity in the 
NASDAQ OMX BX Equities System (the ``System'').
    Specifically, both for orders that receive price improvement and 
execute against an order with Midpoint pegging and those with Midpoint 
pegging that remove liquidity, the credit is being reduced from $0.0005 
per share executed to $0.0000 per share executed.
    For orders that access liquidity (excluding orders with Midpoint 
pegging and excluding orders that receive price improvement and execute 
against an order with Midpoint pegging) entered by a member that 
accesses liquidity equal to or exceeding 0.1% of total Consolidated 
Volume \5\ during a month the credit is being reduced from $0.0015 per 
share executed to $0.0010 per share executed.
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    \5\ Consolidated Volume is defined as the total consolidated 
volume reported to all consolidated transaction reporting plans by 
all exchanges and trade reporting facilities during a month in 
equity securities, excluding executed orders with a size of less 
than one round lot. For purposes of calculating Consolidated Volume 
and the extent of a member's trading activity, expressed as a 
percentage of or ratio to Consolidated Volume, the date of the 
annual reconstitution of the Russell Investments Indexes shall be 
excluded from both total Consolidated Volume and the member's 
trading activitiy. See Rule 7018(a).
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    For an order that accesses liquidity (excluding orders with 
Midpoint pegging and excluding orders that receive price improvement 
and execute against an order with Midpoint pegging) entered by a member 
with a daily average volume of liquidity provided in all securities 
during the month of 1 million or more shares, the Exchange proposes to 
change the parameter that the daily average volume of liquidity 
provided in all securities during the month of 1 million or more shares 
entered by a member to a parameter whereby a member must instead add 
0.015% of total Consolidated Volume during a month. Additionally, the 
credit will be reduced from $0.0013 per share executed to $0.0008 per 
share executed.
    The Exchange proposes to reduce the credit for orders that access 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with 
Midpoint pegging) entered by a member that provides an average daily 
volume of at least 25,000, but less than 1 million, shares of liquidity 
during the month from $0.0011 per share executed to $0.0006 per share 
executed. The Exchange also proposes to also remove the ``but less than 
1 million'' shares cap parameter.
    BX proposes to reduce the credit for BSTG,\6\ BSCN,\7\ BMOP,\8\ 
BTFY,\9\ BCRT,\10\ BDRK \11\ or BCST \12\ orders that access liquidity 
in the System (excluding orders with Midpoint pegging and excluding 
orders that receive price improvement and execute against an order with 
Midpoint pegging) from $0.0011 per share executed to $0.0006 per share 
executed.
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    \6\ See BX Rule 4758(a)(1)(A)(iii).
    \7\ See BX Rule 4758(a)(1)(A)(iv).
    \8\ See BX Rule 4758(a)(1)(A)(vi).
    \9\ See BX Rule 4758(a)(1)(A)(v).
    \10\ See BX Rule 4758(a)(1)(A)(vii).
    \11\ See BX Rule 4758(a)(1)(A)(viii).
    \12\ See BX Rule 4758(a)(1)(A)(ix).
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    The Exchange next proposes to reduce the charges for providing 
liquidity through the System as well. Specifically, the charge for 
displayed orders entered by a Qualified Market Maker (``QMM'') (Tier 1) 
will be reduced from $0.0014 per share executed to $0.0009 per share 
executed and the charge for displayed orders entered by a QMM (Tier 2) 
will be eliminated, therefore, the parenthetical with ``Tier 1'' 
following ``Displayed order entered by a Qualified Market Maker'' will 
be eliminated as well since there will no longer be a Tier 2. For a 
displayed order entered by a member that adds liquidity equal to or 
exceeding 0.25% of total Consolidated Volume during a month the charge 
will be reduced from $0.00165 per share executed to $0.0012 per share 
executed.
    BX next proposes to reduce the charge for a displayed order entered 
by a member that provides an average daily volume of 2.5 million or 
more shares of liquidity during the month from $0.0018 per share 
executed to $0.0014 per share executed, but will change the parameter 
that a member provide an average daily volume of 2.5 million or more 
shares of liquidity during the month to the parameter that the member 
must add liquidity equal to or exceeding 0.04% of total Consolidated 
Volume during a month.
    The Exchange proposes to reduce the charge for an order with 
Midpoint pegging entered by a member that provides an average daily 
volume of 2 million or more shares of non-displayed liquidity during 
the month from $0.0005 per share executed to $0.0002 per share 
executed, but will replace the parameter that a member provide an 
average daily volume of 2 million or more shares of non-displayed 
liquidity during the month with the parameter that a member must add 
0.03% of total Consolidated Volume of non-displayed liquidity.
    BX also proposes to reduce the charge for an order with Midpoint 
pegging entered by a member that provides an average daily volume of 1 
million or more, but less than 2 million, shares of non-displayed 
liquidity from $0.0009 per share executed to $0.0004 per share 
executed, but will replace the parameter that the member provides an 
average daily volume of 1 million or more, but less than 2 million, 
shares of non-displayed liquidity with the parameter that a member must 
add 0.015% of total

[[Page 23314]]

Consolidated Volume of non-displayed liquidity.
    The Exchange proposes to also reduce the charge for an order with 
Midpoint pegging entered by other member from 0.0015 per share executed 
to 0.0010 per share executed.
    The Exchange proposes to reduce the charge for non-displayed orders 
(other than orders with Midpoint pegging) entered by a member that 
provides an average daily volume of 5 million or more shares of non-
displayed liquidity from $0.0019 per share executed to $0.0014 per 
share executed, but will replace the parameter that the member provides 
an average daily volume of 5 million or more shares of non-displayed 
liquidity with the parameter that a member must add 0.075% of total 
Consolidated Volume of non-displayed liquidity.
    The Exchange also proposes to reduce the charge for non-displayed 
orders (other than orders with Midpoint pegging) entered by a member 
that provides an average daily volume of 3.5 million or more shares 
(but less than 5 million shares) of non-displayed liquidity from 
$0.0024 per share executed to $0.0019 per share executed, but will 
replace the parameter that the member provides an average daily volume 
of 3.5 million or more shares (but less than 5 million shares) of non-
displayed liquidity with the parameter that a member must add 0.055% of 
total Consolidated Volume of non-displayed liquidity.
    BX also proposes to amend how a firm may become a QMM (Tier 1), in 
part, by eliminating two of these ways. Also, and as a result, the 
parenthetical with ``Tier 1'' following ``A Firm may become a Qualified 
Market Maker'' will be eliminated since there will no longer be a Tier 
2 as previously stated. The first option eliminated is by being a 
member with (i) shares of liquidity provided and (ii) total shares of 
liquidity accessed and provided in all securities through one or more 
of its System market maker participant identifier (``MPIDs'') that 
represent more than 0.40% and 0.50%, respectively, of Consolidated 
Volume. For a member qualifying under this method, the member must have 
at least one Qualified MPID, that is, an MPID through which, for at 
least 150 securities, the QMM quotes at the national best bid or offer 
(``NBBO'') an average of at least 25% of the time during regular market 
hours (9:30 a.m. through 4:00 p.m.) during the month. The second option 
eliminated is by being a member with (i) shares of liquidity provided 
and (ii) total shares of liquidity accessed and provided in all 
securities through one or more of its System MPIDs that represent more 
than 0.30% and 0.45%, respectively, of Consolidated Volume during the 
month. For a member qualifying under this method, the member must have 
at least one Qualified MPID, that is, an MPID through which, for at 
least 400 securities, the QMM quotes at the NBBO an average of at least 
25% of the time during regular market hours (9:30 a.m. through 4:00 
p.m.) during the month.
    The third option remains, but is being amended. Currently, this 
option states that a firm may become a QMM (Tier 1) by being a member 
with (i) shares of liquidity provided and (ii) total shares of 
liquidity accessed and provided in all securities through one or more 
of its System MPIDs that represent more than 0.20% and 0.30%, 
respectively, of Consolidated Volume during the month. For a member 
qualifying under this method, the member must have at least one 
Qualified MPID, that is, an MPID through which, for at least 200 
securities, the Qualified Market Maker quotes at the NBBO an average of 
at least 50% of the time during regular market hours (9:30 a.m. through 
4:00 p.m.) during the month. The member must also provide an average 
daily volume of 1.5M shares or more using orders with midpoint pegging 
during the month. BX proposes to amend the beginning of this 
requirement to say that a firm qualifies by being a member that 
provides through one or more of its System MPIDs more than 0.30% of 
Consolidated Volume during the month (the rest of the requirement 
remains unchanged).
    BX proposes to eliminate QMM (Tier 2) altogether.
    Finally, the Exchange proposes to reduce certain credits for retail 
orders in BX Rule 7018(e). Specifically, BX proposes to reduce the 
credit from $0.0005 per share executed to $0.0002 per share executed 
for a retail order that receives price improvement (when the accepted 
price of an order is different than the executed price of an order) and 
accesses a non-Retail Price Improvement order with Midpoint pegging. 
Also, ``that'' in the parenthetical above has been changed to ``than'' 
to reflect the correction to a typographical error in the corresponding 
rule text. Lastly, the Exchange proposes to reduce the credit from 
$0.0017 per share executed to $0.0012 per share executed for a retail 
order that accesses other liquidity on the Exchange book.
2. Statutory Basis
    BX believes that the proposed rule changes are consistent with the 
provisions of Section 6 of the Act,\13\ in general, and with Sections 
6(b)(4) and 6(b)(5) of the Act,\14\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which the Exchange operates or controls, and is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change to amend BX Rule 
7001(a) to increase the trading rights fee each Exchange member is 
assessed from $500 per month to $1,000 per month is reasonable because 
the Exchange desires to continue to cover the ongoing costs of 
operating the platform for the benefit of its members. BX also believes 
that the proposed change is consistent with an equitable allocation of 
fees and is not unfairly discriminatory because it affects all members 
equally in the same way.
    The Exchange believes that the proposed change to eliminate the 
waiver of the membership fee and the trading rights fee for BX members 
who solely conduct an options business is reasonable because the 
Exchange no longer believes it is necessary to waive these fees to 
attract market participants to the BX Options Market since this market 
is now better established and BX no longer needs to rely on such 
waivers to attract market participants. The Exchange believes that the 
proposed changes are equitable and not unfairly discriminatory because 
the elimination of the membership fee and trading rights fee waivers 
will uniformly apply to BX Options Participants that transact business 
solely on the BX Options Market.
    The Exchange believes that the proposed change to eliminate the ERF 
set forth in BX Rule 7003(b) is reasonable because it is no longer 
necessary to cover regulatory costs based on historic volume plus not 
all members pay this fee. The Exchange believes that the proposed 
change is

[[Page 23315]]

equitable and not unfairly discriminatory because the elimination of 
the ERF applies uniformly and it affects similarly situated members in 
the same way.
    The proposed reduction to the credits and charges in the fee 
schedule under Exchange Rule 7018 are reflective of BX's ongoing 
efforts to use pricing incentive programs to attract order flow to BX 
and improve market quality. The goal of these pricing incentives is to 
provide meaningful incentives for members to increase their 
participation on BX. Specifically, the Exchange believes that the 
reduction to the credits from $0.0005 per share executed to $0.0000 per 
share executed for both orders that receive price improvement and 
execute either against an order with Midpoint pegging or those with 
Midpoint pegging that remove liquidity, are reasonable because these 
reduced credits are aligned with the reduced charges BX is also putting 
in place through this filing. The Exchange also believes that the 
proposed changes are equitably allocated and not unfairly 
discriminatory because the credit reductions apply uniformly to all 
members that previously had qualified to receive such a credit.
    The Exchange believes that the reduction to the credit from $0.0015 
per share executed to $0.0010 per share executed for orders that 
accesses liquidity (excluding orders with Midpoint pegging and 
excluding orders that receive price improvement and execute against an 
order with Midpoint pegging) entered by a member that accesses 
liquidity equal to or exceeding 0.1% of total Consolidated Volume 
during a month is reasonable because the reduced credit aligns it more 
closely with the reduced charges BX is also putting in place through 
this filing. The Exchange also believes that the proposed change is 
equitably allocated and not unfairly discriminatory because the credit 
reduction applies uniformly to all members that qualify to receive such 
a credit.
    The Exchange believes that the reduction to the credit from $0.0013 
per share executed to $0.0008 per share executed for an order that 
accesses liquidity (excluding orders with Midpoint pegging and 
excluding orders that receive price improvement and execute against an 
order with Midpoint pegging) entered by a member with a daily average 
volume of liquidity provided in all securities during the month of 1 
million or more shares, and the change to the daily average volume of 
liquidity provided in all securities during the month of 1 million or 
more shares parameter, to a parameter that the member that [sic] must 
add 0.015% of total Consolidated Volume during a month is reasonable 
because the reduced credit aligns it more closely with the reduced 
charges BX is also putting in place through this filing. Also, the 
amended parameter switching to total Consolidated Volume will allow a 
member's target activity levels to adjust with overall market volumes 
making such targets easier to reach during low share volume months and 
more difficult to reach during higher share volume months. However, the 
percent of total Consolidated Volume requirement approximately 
represents a similar level of volume on average as the previous 
parameter did given the current Consolidated Volume requirement. 
Additionally, the Exchange further believes that the proposed change is 
equitably allocated and not unfairly discriminatory because the credit 
applies uniformly to all members that qualify to receive such a credit.
    The Exchange believes that the reduction to the credit from $0.0011 
per share executed to $0.0006 per share executed for orders that access 
liquidity (excluding orders with Midpoint pegging and excluding orders 
that receive price improvement and execute against an order with 
Midpoint pegging) entered by a member that provides an average daily 
volume of at least 25,000, but less than 1 million, shares of liquidity 
during the month and the removal of the ``but less than 1 million'' 
shares cap parameter is reasonable because it reduces confusion as to 
when the rate applies since the next tier is tied to the percent of 
total Consolidated Volume. The elimination of the 1 million share cap 
removes a restriction that allows more members to qualify for this 
credit. Additionally, the Exchange further believes that the proposed 
change is equitably allocated and not unfairly discriminatory because 
the credit applies uniformly to all members that qualify to receive 
such a credit.
    The Exchange believes that the reduction to the credit from $0.0011 
per share executed to $0.0006 per share executed for BSTG, BSCN, BMOP, 
BTFY, BCRT, BDRK or BCST orders that access liquidity in the System 
(excluding orders with Midpoint pegging and excluding orders that 
receive price improvement and execute against an order with Midpoint 
pegging) is reasonable because the reduced credit aligns it more 
closely with the reduced charges BX is also putting in place through 
this filing. Additionally, the Exchange further believes that the 
proposed change is equitably allocated and not unfairly discriminatory 
because the credit applies uniformly to all members that qualify to 
receive such a credit.
    BX also believes that the reduction to the charges from $0.0014 per 
share executed to $0.0009 per share executed for displayed orders 
entered by a QMM (Tier 1) and the elimination of the $0.0017 per share 
executed charge for displayed orders entered by a QMM (Tier 2) are 
reasonable because the reduced charge and elimination of another charge 
align them more closely with the reduced credits BX is also putting in 
place through this filing. Also, since the behavior required to qualify 
to become a QMM (Tier 2) has not been met by firms recently, and in 
light of the lack of interest by firms in meeting these requirements, 
the Exchange proposes to eliminate it and the associated rate from the 
fee schedule. Additionally, the Exchange further believes that the 
proposed changes are equitably allocated and not unfairly 
discriminatory because the reduced QMM (Tier 1) charge and eliminated 
QMM (Tier 2) charge apply uniformly to all members that display an 
order entered by a QMM (Tier 1) or previously displayed and order 
entered by a QMM (Tier 2). The parenthetical with ``Tier 1'' following 
``Displayed order entered by a Qualified Market Maker'' also will be 
eliminated since there will no longer be a Tier 2 and the Exchange 
believes that this change clarifies and eliminates the potential for 
confusion to the benefit of market participants. The Exchange believes 
that this clarification will promote market participants' understanding 
of the rule and its administration.
    The Exchange believes that the reduction to the charge from 
$0.00165 per share executed to $0.0012 per share executed for a 
displayed order entered by a member that adds liquidity equal to or 
exceeding 0.25% of total Consolidated Volume during a month is 
reasonable because the reduced charge is designed to encourage 
additional posted liquidity that, in turn, will enable the Exchange to 
provide a more liquid marketplace and attract contra order flow. 
Additionally, the Exchange further believes that the proposed change is 
equitably allocated and not unfairly discriminatory because all members 
can add liquidity to BX and the more liquidity a member adds the lower 
the charge because the member is improving the quality of the market by 
providing this additional liquidity.
    BX believes that the reduction to the charge from $0.0018 per share 
executed to $0.0014 per share executed coupled with the change to the 
parameter that a member provide an average daily

[[Page 23316]]

volume of 2.5 million or more shares of liquidity during the month to a 
parameter that the member add liquidity equal to or exceeding 0.04% of 
total Consolidated Volume during a month is reasonable because the 
reduced charge is designed to encourage additional posted liquidity 
that, in turn, will increase the liquidity of the market and attract 
contra order flow. Also, the amended parameter switching to total 
Consolidated Volume will allow a member's target activity levels to 
adjust with overall market volumes making such targets easier to reach 
during low share volume months and more difficult to reach during 
higher share volume months. However, the percent of total Consolidated 
Volume requirement approximately represents a similar level of volume 
on average as the previous parameter did given the current Consolidated 
Volume requirement. Additionally, the Exchange further believes that 
the proposed change is equitably allocated and not unfairly 
discriminatory because all members can add liquidity to BX and the more 
liquidity a member adds the lower the charge because the member is 
improving the quality of the market by providing this additional 
liquidity.
    The Exchange believes that the reduction to the charge from $0.0005 
per share executed to $0.0002 per share executed coupled with a change 
to the requirement for an order with Midpoint pegging entered by a 
member that provides an average daily volume of 2 million or more 
shares of non-displayed liquidity during the month to the requirement 
that a member adds 0.03% of total Consolidated Volume of non-displayed 
liquidity is reasonable because the reduced charge is designed to 
encourage additional posted liquidity that, in turn, will enable the 
Exchange to increase liquidity posted at the midpoint and provide 
additional price improvement opportunity for contra orders. Also, the 
amended parameter switching to total Consolidated Volume will allow a 
member's target activity levels to adjust with overall market volumes 
making such targets easier to reach during low share volume months and 
more difficult to reach during higher share volume months. However, the 
percent of total Consolidated Volume requirement approximately 
represents a similar level of volume on average as the previous 
parameter did given the current Consolidated Volume requirement. 
Additionally, the Exchange further believes that the proposed change is 
equitably allocated and not unfairly discriminatory because all members 
can add liquidity to BX and the more liquidity a member adds the lower 
the charge because the member is improving the quality of the market by 
providing this additional liquidity.
    The Exchange believes that the reduction to the charge from $0.0009 
per share executed to $0.0004 per share executed coupled with a change 
to the requirement that for an order with Midpoint pegging entered by a 
member that provides an average daily volume of 1 million or more, but 
less than 2 million, shares of non-displayed liquidity to that a member 
adds 0.015% of total Consolidated Volume of non-displayed liquidity is 
reasonable because the reduced charge is designed to encourage 
additional posted liquidity that, in turn, will increase midpoint 
liquidity and increase the chance of incoming orders to receive price 
improvement and thereby attract contra order flow. Also, the amended 
parameter switching to total Consolidated Volume will allow a member's 
target activity levels to adjust with overall market volumes making 
such targets easier to reach during low share volume months and more 
difficult to reach during higher share volume months. However, the 
percent of total Consolidated Volume requirement approximately 
represents a similar level of volume on average as the previous 
parameter did given the current Consolidated Volume requirement. 
Additionally, the Exchange further believes that the proposed change is 
equitably allocated and not unfairly discriminatory because all members 
can add liquidity to BX and the more liquidity a member adds the lower 
the charge because the member is improving the quality of the market by 
providing this additional liquidity.
    BX also believes that the reduction to the charges from $0.0015 per 
share executed to $0.0010 per share executed for an order with Midpoint 
pegging entered by other member is reasonable because the reduced 
charge is designed to encourage additional posted liquidity that, in 
turn, will increase midpoint liquidity and increase the chance of 
incoming orders to receive price improvement and thereby attract contra 
order flow. Additionally, the Exchange further believes that the 
proposed change is equitably allocated and not unfairly discriminatory 
because all members can add liquidity to BX and the more liquidity a 
member adds the lower the charge because the member is improving the 
quality of the market by providing this additional liquidity.
    The Exchange believes that the reduction to the charges from 
$0.0019 per share executed to $0.0014 per share executed for a non-
displayed order (other than orders with Midpoint pegging) entered by a 
member that provides an average daily volume of 5 million or more 
shares of non-displayed liquidity coupled with a change to the 
requirement that the member provides an average daily volume of 5 
million or more shares of non-displayed liquidity to a requirement that 
a member adds 0.075% of total Consolidated Volume of non-displayed 
liquidity is reasonable because the reduced charge is designed to 
encourage additional posted liquidity that, in turn, will enable the 
Exchange to collect additional fees to provide rebates and thereby 
attract contra order flow. Also, the amended parameter switching to 
total Consolidated Volume will allow a member's target activity levels 
to adjust with overall market volumes making such targets easier to 
reach during low share volume months and more difficult to reach during 
higher share volume months. However, the percent of total Consolidated 
Volume requirement approximately represents a similar level of volume 
on average as the previous parameter did given the current Consolidated 
Volume requirement. Additionally, the Exchange further believes that 
the proposed change is equitably allocated and not unfairly 
discriminatory because all members can add liquidity to BX and the more 
liquidity a member adds the lower the charge because the member is 
improving the quality of the market by providing this additional 
liquidity.
    The Exchange also believes that the reduction to the charges from 
$0.0024 per share executed to $0.0019 per share executed for non-
displayed orders (other than orders with Midpoint pegging) entered by a 
member that provides an average daily volume of 3.5 million or more 
shares (but less than 5 million shares) of non-displayed liquidity 
coupled with a change to the requirement that the member adds 0.055% of 
total Consolidated Volume of non-displayed liquidity is reasonable 
because the reduced charge is designed to encourage additional posted 
liquidity that, in turn, will enable the Exchange to collect additional 
fees to provide rebates and thereby attract contra order flow. Also, 
the amended parameter switching to total Consolidated Volume will allow 
a member's target activity levels to adjust with overall market volumes 
making such targets easier to reach during low share volume months and 
more difficult to reach during higher share volume months. However, the 
percent of total Consolidated Volume requirement approximately 
represents a similar level of volume on average as the previous 
parameter did

[[Page 23317]]

given the current Consolidated Volume requirement. Additionally, the 
Exchange further believes that the proposed change is equitably 
allocated and not unfairly discriminatory because all members can add 
liquidity to BX and the more liquidity a member adds the lower the 
charge because the member is improving the quality of the market by 
providing this additional liquidity.
    The Exchange believes that the proposed change as to how a firm may 
become a QMM (Tier 1) by eliminating two of the ways to qualify as 
such, amending the third option to qualify as a QMM (Tier 1), and 
eliminating the QMM (Tier 2), are reasonable because the amending of 
the QMM program refines the incentive to BX member firms to enhance the 
quality of the market by providing meaningful improvement, to the 
benefit of all market participants. The Exchange also believes that the 
proposed amended criteria of the qualification standard to become a QMM 
(Tier 1) and the elimination of the QMM (Tier 2) qualification standard 
are reasonable and an equitable allocation because the proposed changes 
help to clearly define how a firm can become a QMM and eliminates 
requirements that firms were not reaching. Additionally, the Exchange 
believes that the proposed change further perfects the mechanism of a 
free and open market by refining and making more effective the means by 
which a member firm may qualify for this beneficial, market improving 
program. Accordingly, to the extent that the amended standard increases 
the number of member firms that qualify under the tier, market quality 
will increase. Also, the parenthetical with ``Tier 1'' following ``A 
Firm may become a Qualified Market Maker'' also will be eliminated 
since there will no longer be a Tier 2 and the Exchange believes that 
this change clarifies and eliminates the potential for confusion to the 
benefit of market participants. The Exchange believes that this 
clarification will promote market participants' understanding of the 
rule and its administration.
    The Exchange also believes that the reduction to the credit from 
$0.0005 per share executed to $0.0002 per share executed for a retail 
order that receives price improvement (when the accepted price of an 
order is different than the executed price of an order) \15\ and 
accesses non-Retail Price Improvement order with Midpoint pegging, as 
well as the reduction to the credit from $0.0017 per share executed to 
$0.0012 per share executed for a retail order that accesses other 
liquidity on the Exchange book, are reasonable because these reduced 
credits align them with the reduced charges collected from non-retail 
price improvement orders BX is also putting in place through this 
filing. The Exchange also believes that the proposed changes are 
equitably allocated and not unfairly discriminatory because the credit 
reductions apply uniformly to all members that previously had qualified 
to receive such a credit. Lastly, the Exchange believes that the 
correction of the non-substantive typographical error in Rule 7018(e) 
(changing ``that'' to ``than'') clarifies and eliminates the potential 
for confusion to the benefit of market participants. The Exchange 
believes that this clarification will promote market participants' 
understanding of the rule and its administration.
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    \15\ As noted previously, the word ``that'' in the parenthetical 
has been changed to ``than'' to reflect the correction to a 
typographical error in the corresponding rule text.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.\16\ 
BX notes that it operates in a highly competitive market in which 
market participants can readily favor dozens of different competing 
exchanges and alternative trading systems if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, BX must 
continually adjust its fees to remain competitive with other exchanges. 
Because competitors are free to modify their own fees in response, and 
because market participants may readily adjust their order routing 
practices, BX believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
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    \16\ 15 U.S.C. 78f(b)(8).
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    In this instance, the changes to fees and credits, as well as 
changes to membership and trading rights fees and the ERF, do not 
impose a burden on competition because the Exchange membership is 
optional and is the subject of competition from other exchanges. The 
reduced credits and charges are reflective of the intent to increase 
the order flow on the Exchange. For these reasons, the Exchange does 
not believe that any of the proposed changes will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets. Moreover, because there 
are numerous competitive alternatives to the use of the Exchange, it is 
likely that BX will lose market share as a result of the changes if 
they are unattractive to market participants.
    Accordingly, BX does not believe that the proposed rule changes 
will impair the ability of members or competing order execution venues 
to maintain their competitive standing in the financial markets.

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 change has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 \18\ 
thereunder. 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.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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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-2015-022 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-BX-2015-022. 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

[[Page 23318]]

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 such filing also will be available for inspection 
and copying at the principal offices 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-2015-022, and should be 
submitted on or before May 18, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-09628 Filed 4-24-15; 8:45 am]
 BILLING CODE 8011-01-P