Document ID: SEC-2014-1194-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2014-07-16T04:00Z

[Federal Register Volume 79, Number 136 (Wednesday, July 16, 2014)]
[Notices]
[Pages 41610-41612]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16648]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72584; File No. SR-BX-2014-036]

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

July 10, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 1, 2014, 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 Options Rules, Chapter XV, 
Section 2 entitled ``BX Options Market--Fees and Rebates'' to amend 
fees and rebates for various options.
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    BX proposes to amend certain rebates and fees in Chapter XV, 
Section 2(1), Fees for Execution of Contracts on the BX Options Market. 
Specifically, the Exchange proposes to: (i) Increase the BX Options Fee 
to Remove Liquidity for BX Options Market Makers as well as Non-
Customers in Penny Pilot \3\ Options and Non-Penny Pilot Options; and 
(ii) increase the BX Options Customer Rebate to Remove Liquidity in 
certain Penny Pilot Options from $0.32 to $0.35 per contract, as 
explained further below.
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    \3\ The Penny Pilot on BX Options was established in June 2012, 
and was expanded and extended through December 31, 2014. See 
Securities Exchange Act Release Nos. 67256 (June 26, 2012), 77 FR 
39277 (July 2, 2012) (SR-BX-2012-030) (order approving BX Options 
rules and establishing Penny Pilot); 67342 (July 3, 2012), 77 FR 
40666 (July 10, 2012) (SR-BX-2012-046) (notice of filing and 
immediate effectiveness expanding and extending Penny Pilot); 68518 
(December 21, 2012), 77 FR 77152 (December 31, 2012) (SR-BX-2012-
076) (notice of filing and immediate effectiveness expanding and 
extending Penny Pilot); 69784 (June 18, 2013), 78 FR 37873 (June 24, 
2013) (SR-BX-2013-039); 71107 (December 12, 2013), 78 FR 77528 
(December 23, 2013) (SR-BX-2013-061) (notice of filing and immediate 
effectiveness expanding and extending Penny Pilot); and 72246 (May 
23, 2014), 79 FR 31160 (May 30, 2014) SR-BX-2014-027) (notice of 
filing and immediate effectiveness expanding and extending Penny 
Pilot).
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    First, the BX Options Fee to Remove Liquidity for BX Options Market 
Makers and Non-Customers will increase from $0.45 per contract to $0.46 
per contract in all Penny Pilot Options. Penny Pilot Options include 
two categories of options that are part of the Penny Pilot: (i) Certain 
options that are specified on the Exchange's pricing schedule \4\ and 
(ii) all other Penny Pilot Options. Accordingly, this proposal raises 
the BX Options Fee to Remove Liquidity for BX Options Market Makers and 
Non-Customers for all Penny Pilot Options; the fee is currently the 
same ($0.45 per contract) and will continue to be the same $0.46 per 
contract) for all Penny Pilot Options. The Exchange is similarly 
proposing to increase the Fee for Removing Liquidity for BX Options 
Market Makers and Non-Customers in Non-Penny Pilot Options from $0.88 
to $0.89 per contract. Non-Customers

[[Page 41611]]

include a Professional, Firm, Broker-Dealer and Non-BX Options Market 
Maker. These modest increases are intended to defray the cost of the 
proposed increased rebate, which is described below.
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    \4\ These include options on Bank of America Corporation 
(``BAC''), iShares Russell 2000 Index (``IWM''), PowerShares QQQ 
(``QQQ''), SPDR S&P 500 (``SPY''), and iPath S&P 500 VIX St Futures 
ETN (``VXX'') (together, ``Specified Penny Pilot Options'').
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    Second, the Exchange proposes to increase the BX Options Customer 
Rebate to Remove Liquidity in Penny Pilot Options from $0.32 per 
contract to $0.35 per contract. This change does not apply to Penny 
Pilot Options overlying the following stocks: BAC, IWM, QQQ and SPY, 
because there is no rebate in those particular options.
    The Exchange believes that the proposed amended BX Options fees are 
competitive and should encourage BX members to transact business on the 
Exchange.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(4) and 6(b)(5) of the Act,\6\ 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 BX operates or controls, and is not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers, 
as explained further below.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed increase in the Fee to Remove Liquidity for BX Options 
Market Makers and Non-Customers from $0.45 per contract to $0.46 per 
contract in all Penny Pilot Options is reasonable, because it is a very 
modest increase. In addition, it is similar to the fees charged by The 
NASDAQ Stock Market LLC's NASDAQ Options Market (``NOM'') (which is 
$0.48 per contract for xxx [sic]) and NASDAQ OMX PHLX (which charges 
$0.48 per contract). Similarly, the increase in the Fee for Removing 
Liquidity for BX Options Market Makers and Non-Customers in Non-Penny 
Pilot Options from $0.88 to $0.89 per contract is also reasonable, 
because it is a very modest increase, and would result in the same fee 
as NOM currently charges. These proposed increases are equitable and 
not unfairly discriminatory, because they apply to all BX Options 
Market Makers and Non-Customers in Penny Pilot Options equally.\7\
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    \7\ Customers do not pay a Fee for Removing Liquidity in any 
options.
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    The proposal to increase the Customer Rebate to Remove Liquidity in 
Penny Pilot Options from $0.32 per contract to $0.35 per contract is 
intended to attract additional customer business to BX Options. This, 
in turn, should bring more liquidity to the BX Options marketplace, 
which should benefit all market participants. The Exchange believes 
that the increase in the rebate is reasonable, because it is modest. 
The rebate has been $0.32 since it was first established in 2012.\8\ 
The Exchange pays the Rebate to Add Liquidity to a Customer only when 
the Customer is contra to a Non-Customer or BX Options Market Maker.
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    \8\ See Securities Exchange Act Release No. 67339 (July 3, 
2012), 77 FR 40688 (July 10, 2012) (SR-BX-2012-043) (notice of 
filing and immediate effectiveness of proposed rule change to adopt 
transaction and routing fees).
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    The Exchange believes the proposed Customer Rebate to Remove 
Liquidity in Penny Pilot Options is equitable and not unfairly 
discriminatory, because it is available to all Customers. In addition, 
the Exchange believes the proposal is equitable and not unfairly 
discriminatory, because the Exchange desires to incentivize 
participants to transact Customer orders on the Exchange and obtain 
this rebate. The Exchange believes that this rebate will incentivize 
members to bring order flow and increase the liquidity on the Exchange 
to the benefit of all market participants. Further, the Exchange also 
believes that it continues to be reasonable, equitable and not unfairly 
discriminatory to only offer the Rebate to Remove Liquidity to 
Customers and not to other market participants as an incentive to 
attract Customer order flow to the Exchange. As the Exchange stated 
when adopting this rebate,\9\ it is an important Exchange function to 
provide an opportunity to all market participants to trade against 
Customer orders.
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    \9\ Id.
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    Customer order flow benefits all market participants by improving 
liquidity, the quality of order interaction and executions at the 
Exchange.

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 operates in a highly competitive market 
comprised of twelve 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 
program discussed herein is competitive. 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.

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\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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.

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-2014-036 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-2014-036. 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

[[Page 41612]]

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-2014-036, and should be 
submitted on or before August 6, 2014.

    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. 2014-16648 Filed 7-15-14; 8:45 am]
BILLING CODE 8011-01-P