Document ID: SEC-2013-0074-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2013-01-15T00:00Z

[Federal Register Volume 78, Number 10 (Tuesday, January 15, 2013)]
[Notices]
[Pages 3053-3055]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00662]

[[Page 3053]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68608; File No. SR-BX-2013-002]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating To 
Routing Fee

January 9, 2013.
    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 January 2, 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 various fees for routing 
options to away markets.
    The text of the proposed rule change is provided in Exhibit 5. 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.

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

1. Purpose
    The purpose of this filing is to recoup costs that the Exchange 
incurs for routing and executing certain orders in equity options to 
away markets. The Exchange proposes to amend Routing Fees for the 
following away markets: BATS Exchange, Inc. (``BATS''), BOX Options 
Exchange LLC (``BOX''), the Chicago Board Exchange Incorporated 
(``CBOE''), the International Securities Exchange LLC (``ISE''), the 
NASDAQ Options Market LLC (``NOM''), NYSE ARCA, Inc. (``NYSE Arca'') 
and NASDAQ OMX PHLX LLC (``Phlx''). These away markets amended their 
transaction fees and the Exchange desires to amend its Routing Fees to 
reflect the amended transaction cost for routing to these away markets. 
In addition, the Exchange proposes to adopt Routing Fees when routing 
orders to Miami International Securities Exchange, LLC (``MIAX'').
    BX Options Rules at Chapter XV, Section 2(4) included the following 
fees for routing Customer, Firm, Market Maker, Broker-Dealer and 
Professional orders:

 
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                                                                                    Firm/Market
                            Exchange                                 Customer      maker/Broker-   Professional
                                                                                      dealer
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BATS (Penny Pilot)..............................................           $0.55           $0.55           $0.55
BOX.............................................................           $0.11           $0.55           $0.11
CBOE............................................................           $0.11           $0.55           $0.31
CBOE orders greater than 99 contracts in ETFs, ETNs and HOLDRS).           $0.29             N/A           $0.31
C2..............................................................           $0.55           $0.55           $0.55
ISE (Standard)..................................................           $0.11           $0.55           $0.29
ISE (Select Symbols)............................................           $0.35           $0.55           $0.39
NOM.............................................................           $0.55           $0.55           $0.55
NYSE Arca (Penny Pilot).........................................           $0.55           $0.55           $0.55
NYSE Amex.......................................................           $0.11           $0.55           $0.31
PHLX (for all options other than PHLX Select Symbols)...........           $0.11           $0.55           $0.36
PHLX Select Symbols.............................................           $0.50           $0.55           $0.55
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    BX currently recoups clearing and transaction charges incurred by 
the Exchange as well as certain other costs incurred by the Exchange 
when routing to away markets, such as administrative and technical 
costs associated with operating the order router, membership fees at 
away markets, and technical costs associated with routing.\3\ For 
example, BX incurs costs related to the Nasdaq Options Services LLC 
(``NOS''), a member of the Exchange and the Exchange's exclusive order 
router.\4\ Each time NOS routes an order to an away market, NOS is 
charged a clearing fee \5\ and, in the case of certain exchanges, a 
transaction fee is also charged in certain symbols, which fees are 
passed through to the Exchange. The Exchange proposes to recoup a 
portion of the above costs along with the away market's routing fee 
when routing to an away market. The Exchange is proposing to amend 
various away market fees to account for amendments to fees to remove 
liquidity at those markets. The Exchange currently assesses an $0.11 
per contract fixed routing fee in addition to the away market's 
transaction fee.
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    \3\ In addition to membership fees and transaction fees, the 
Exchange also incurs an Options Regulatory Fee (``ORF'') when it 
routes to an away market that assesses an ORF.
    \4\ See BX Rules at Chapter VI, Section 11(e) (Order Routing).
    \5\ The Options Clearing Corporation (``OCC'') assesses $0.01 
per contract side.

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    BATS assesses the following fees for removing liquidity from the 
BATS Options order book in all other securities, or Non-Penny Pilot 
Securities: $0.84 per contract for a Professional, Firm or Market Maker 
order and $0.75 per contract for a Customer order.\6\ The Exchange is 
proposing to adopt a new category of Routing Fees entitled ``BATS (Non-
Penny Pilot)'' and assess the following Routing Fees: $0.94 per 
contract for a Firm/Market Maker/Broker-Dealer and $0.86 per contract 
for a Customer.\7\
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    \6\ See BATS BZX Exchange Fee Schedule.
    \7\ The Exchange computed the BATS Non-Penny Pilot Routing Fees 
by adding an $0.11 per contract fixed fee to the away market's 
transaction fee. The Exchange proposes to cap the Firm/Market Maker/
Broker-Dealer and Professional BATS Routing Fees at $0.94 per 
contract similar to NYSE Arca and BX Options Routing Fees.
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    BOX amended its Professional fees to assess a Professional non-
auction transaction fee of $0.20 per contact.\8\ The Exchange is 
proposing to increase the BOX Professional Routing Fee from $0.11 to 
$0.31 per contract.\9\
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    \8\ See BOX Options Exchange Fee Schedule.
    \9\ The Exchange computed the BOX Professional Routing Fee by 
adding an $0.11 per contract fixed fee to the away market's 
transaction fee.
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    CBOE amended its fees in Select Symbols to assess a Professional 
transaction fee of $0.30 per contract.\10\ The Exchange is proposing to 
increase the CBOE Professional Routing Fee from $0.31 to $0.41 per 
contract.\11\ In addition, the Exchange is proposing to amend the 
Professional Routing Fee for CBOE orders greater than 99 contracts in 
ETFs, ETNs and HOLDRs of $0.31 per contract to ``N/A.'' The Exchange 
noted a $0.31 per contract fee, which is the same fee for the 
Professional CBOE Routing Fee, at the time that the Exchange created 
the CBOE orders greater than 99 contracts Routing Fee category. This 
was an error because the Routing Fees for CBOE orders greater than 99 
contracts only apply to Customer orders and not Professional orders. 
The Exchange has never assessed the Professional Routing Fee for CBOE 
orders greater than 99 contracts on a Professional because it was only 
able to route Customer orders over 99 contracts to CBOE in this 
category. The Exchange proposes to amend the fee rate to display ``N/
A'' because a Professional would not qualify for this category. 
Additionally, the Exchange proposes to update the title of the Routing 
Fee to ``CBOE orders greater than 99 contracts in ETFs and ETNs'' to 
remove the HOLDRs product, which is no longer listed on CBOE.
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    \10\ See CBOE's Fees Schedule.
    \11\ The Exchange computed the CBOE Professional Routing Fee by 
adding an $0.11 per contract fixed fee to the away market's 
transaction fee.
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    ISE amended its Professional Customer Non-Select Symbols or 
``Standard'' fee to $0.20 per contract.\12\ The Exchange is proposing 
to increase the ISE (Standard) Professional Routing Fee from $0.29 to 
$0.31 per contract.\13\ Additionally, ISE amended its Professional 
Customer taker fee in Select Symbols to $0.33 per contract.\14\ The 
Exchange is proposing to increase the ISE (Select Symbols) Professional 
Routing Fee from $0.39 to $0.44 per contract.\15\
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    \12\ See ISE's Fee Schedule.
    \13\ The Exchange computed the ISE (Standard) Professional 
Routing Fee by adding an $0.11 per contract fixed fee to the away 
market's transaction fee.
    \14\ See ISE's Fee Schedule.
    \15\ The Exchange computed the ISE (Select Symbols) Professional 
Routing Fee by adding an $0.11 per contract fixed fee to the away 
market's transaction fee.
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    The Exchange proposes to rename the ``NOM'' Routing Fees as ``NOM 
(Penny Pilot)'' and adopt a new category of NOM Routing Fees entitled 
``NOM (Non-Penny Pilot).'' NOM assesses the following Non-Penny Pilot 
Fees for Removing Liquidity: $0.82 per contract for a Customer and NOM 
Market Maker and $0.89 per contract for a Professional, Firm and Non-
NOM Market Maker.\16\ The Exchange is proposing to adopt NOM Non-Penny 
Pilot Routing Fees as follows: $0.93 per contract for a Customer and 
$0.94 per contract for a Firm/Market Maker/Broker-Dealer and 
Professional.\17\
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    \16\ See NASDAQ Stock Market LLC Rules at Chapter XV, Section 2.
    \17\ The Exchange computed the NOM Non-Penny Pilot Customer 
Routing Fee by adding an $0.11 per contract fixed fee to the away 
market's transaction fee. With respect to the Firm/Market Maker/
Broker-Dealer and Professional Routing Fees, the Exchange determined 
to cap the fees at $0.94 per contract. The Exchange similarly capped 
Routing Fees for BATS and NYSE Arca.
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    NYSE Arca assesses the following take liquidity fees: $0.79 per 
contact for a Customer and $0.85 per contract for a Firm and Broker-
Dealer.\18\ The Exchange is proposing to adopt new Routing Fees for 
NYSE Arca entitled ``NYSE Arca (Non-Penny Pilot)'' Routing Fees as 
follows: $0.90 per contract for a Customer and Professional and $0.94 
for a Firm/Market Maker/Broker-Dealer Routing Fees.\19\
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    \18\ See NYSE ARCA General Options and Trading Permit (OTP) 
Fees.
    \19\ The Exchange computed the NYSE Arca Non-Penny Pilot 
Customer and Professional Routing Fees by adding an $0.11 per 
contract fixed fee to the away market's transaction fee. Because 
NYSE Arca does not have a Professional category, Professional orders 
would be routed as Customer to NYSE Arca. In light of this, the 
Professional Routing Fee was computed the same as the Customer 
Routing Fee. With respect to the Firm/Market Maker/Broker-Dealer 
Routing Fees, the Exchange added an $0.11 per contract fixed fee to 
the away market's transaction fee and determined to cap the Routing 
Fees at $0.94 per contract similar to BATS and BX Options.
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    Phlx recently amended its fees in Select Symbols to assess no 
Customer Fee to Remove Liquidity.\20\ The Exchange is proposing to 
decrease the Phlx Select Symbols Customer Routing Fee from $0.50 to 
$0.11 per contract.\21\
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    \20\ See SR-Phlx-2013-01 (not yet published). Phlx lists its 
Select Symbols in Section I of its Pricing Schedule.
    \21\ The Exchange is proposing to assess the $0.11 per contract 
fixed fee as there is no transaction fee when routing a Customer 
order to Phlx in Select Symbols.
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    MIAX recently filed to adopt transaction fees, which included the 
following fees applicable to all classes of options: $0.00 for a 
Priority Customer, $0.45 for a Non-MIAX Market Maker, $0.45 for a 
Broker-Dealer and $0.25 per contract for a Public Customer other than a 
Priority Customer.\22\ The Exchange is proposing to adopt MIAX Routing 
Fees, entitled ``MIAX,'' as follows: $0.11 per contract for a Customer 
and $0.36 for a Professional and $0.55 per contract for a Firm/Market 
Maker/Broker-Dealer.\23\
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    \22\ See MIAX's Fee Schedule.
    \23\ The Exchange computed the MIAX Customer and Professional 
Routing Fees by adding an $0.11 per contract fixed fee to the away 
market's transaction fee. With respect to the Firm, Market Maker and 
Broker-Dealer Routing Fees, the Exchange determined to cap the fees 
at $0.55 per contract similar to other Routing Fees.
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    The Exchange is not proposing to otherwise amend other Routing Fees 
not specifically mentioned. As with all fees, the Exchange may adjust 
these Routing Fees in response to competitive conditions by filing a 
new proposed rule change.
2. Statutory Basis
    BX believes that the proposed rule changes are consistent with the 
provisions of Section 6 of the Act,\24\ in general, and with Section 
6(b)(4) of the Act,\25\ 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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    \24\ 15 U.S.C. 78f.
    \25\ 15 U.S.C. 78f(b)(4).
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    The Exchange's amendments to the BATS, BOX, CBOE, ISE, NOM, NYSE 
Arca and Phlx Routing fees as well as the adoption of MIAX Routing Fees 
are reasonable because these fees are designed to recoup costs that are 
incurred by the Exchange when routing certain orders to these away 
markets on behalf of members. Each destination market's transaction 
charge varies and

[[Page 3055]]

there is a standard clearing charge for each transaction incurred by 
the Exchange along with other administrative and technical costs \26\ 
that are incurred by the Exchange. The Exchange believes that the 
proposed Routing Fees would enable the Exchange to recover the 
respective remove fee assessed to each market participant by the away 
market, plus clearing and other administrative and technical fees for 
the execution of orders routed to BX and executed on these away 
markets.
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    \26\ The Exchange utilizes the NOS a member of the Exchange and 
the Exchange's exclusive order router to route orders in options 
listed and open for trading on the BX to destination markets. See 
Securities Exchange Act Release No. 67256 (June 26, 2012) 77 FR 
39277 (July 2, 2012) (SR-BX-2012-030).
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    The Exchange also believes that the amended Routing Fees are 
equitable and not unfairly discriminatory because these fees would be 
uniformly applied to all market participant orders that are routed to 
the respective away market to cover the cost to route the order. The 
Exchange applied a similar methodology in calculating the routing fees 
for each market participant by adding not more than a $0.11 per 
contract fee to the away market's remove fee to determine the NOM 
Routing Fees.\27\
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    \27\ See NASDAQ Stock Market LLC Rules at Chapter XV, Section 
2(4).
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    The Exchange believes that the technical amendments to the titles 
of the Routing Fees are reasonable, equitable and not unfairly 
discriminatory as the amendments add clarity to the fee categories.

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. The Exchange believes that the rule change 
would allow the Exchange to recoup its costs when routing orders 
designated as available for routing by the market participant. Today, 
other options exchanges also assess similar fees to recoup costs 
incurred by the Exchange to route orders to away markets. Further, a BX 
Options Participant may designate an order as not available for routing 
to avoid Routing Fees.\28\ For these reasons, the Exchange does not 
believe that the proposed fees impose a burden on competition.
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    \28\ See BX Rules at Chapter VI, Section 11(e).
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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.\29\ 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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    \29\ 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-2013-002 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-2013-002. 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 20549-1090, 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 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-
2013-002, and should be submitted on or before February 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00662 Filed 1-14-13; 8:45 am]
BILLING CODE 8011-01-P