Document ID: SEC-2014-2183-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2014-12-29T05:00Z

[Federal Register Volume 79, Number 248 (Monday, December 29, 2014)]
[Notices]
[Pages 78119-78121]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30275]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73894; File No. SR-BX-2014-060]

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

December 19, 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 December 15, 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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[[Page 78120]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend chapter XV, section 3 entitled ``BX 
Options Market--Access Services.'' Specifically, the Exchange is 
proposing to adopt additional port fees.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments become operative on January 2, 
2015.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The purpose of this filing is to adopt Port Fees for the following 
ports: Order Entry Ports,\3\ CTI Ports,\4\ BX Depth Ports,\5\ BX TOP 
Ports,\6\ and Order Entry DROP Ports,\7\ (collectively ``BX Ports''). 
The Exchange proposes to assess a $200 Port Fee for each of the BX 
Ports on a per port, per month, per mnemonic basis. The Exchange would 
also note that BX Depth and BX Top Port Fees will be assessed to non-BX 
Participants and BX Participants. Additionally, the Exchange will note 
that it will continue to assess no fee for SQF Ports \8\ by placing the 
SQF Port Fee in new chapter XV, section 3(b) along with the new BX Port 
Fees.
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    \3\ The Order Entry Port Fee is a connectivity fee in connection 
with routing orders to the Exchange via an external order entry 
port. BX Participants access the Exchange's network through order 
entry ports. A BX Participant may have more than one order entry 
port.
    \4\ CTI offers real-time clearing trade updates. A real-time 
clearing trade update is a message that is sent to a member after an 
execution has occurred and contains trade details. The message 
containing the trade details is also simultaneously sent to The 
Options Clearing Corporation. The trade messages are routed to a 
member's connection containing certain information. The 
administrative and market event messages include, but are not 
limited to: system event messages to communicate operational-related 
events; options directory messages to relay basic option symbol and 
contract information for options traded on the Exchange; complex 
strategy messages to relay information for those strategies traded 
on the Exchange; trading action messages to inform market 
participants when a specific option or strategy is halted or 
released for trading on the Exchange; and an indicator which 
distinguishes electronic and non-electronically delivered orders.
    \5\ BX Depth is a data feed that provides quotation information 
for individual orders on the BX book, last sale information for 
trades executed on BX, and Order Imbalance Information as set forth 
in BX Rules chapter VI, section 8. BX Depth is the options 
equivalent of the BX TotalView/ITCH data feed that BX offers under 
BX Rule 7023 with respect to equities traded on BX. As with 
TotalView, members use BX Depth to ``build'' their view of the BX 
book by adding individual orders that appear on the feed, and 
subtracting individual orders that are executed. See chapter VI, 
section 1 at subsection (a)(3)(A).
    \6\ BX TOP Port is a data feed that provides the BX Best Bid and 
Offer (``BBO'') and last sale information for trades executed on BX. 
The BBO and last sale information are identical to the information 
that BX sends to the Options Price Regulatory Authority (``OPRA'') 
and which OPRA disseminates via the consolidated data feed for 
options. BX TOP Port is the options equivalent of the BX Basic data 
feed offered for equities under BX Rule 7047. See chapter VI, 
section 1 at subsection (a)(3)(B).
    \7\ The DROP interface provides real time information regarding 
orders sent to BX and executions that occurred on BX. The DROP 
interface is not a trading interface and does not accept order 
messages.
    \8\ SQF ports are ports that receive inbound quotes at any time 
within that month. The SQF Port allows a BX Participant to access 
information such as execution reports and other relevant data 
through a single feed. For example, this data would show which 
symbols are trading on BX and the current state of an options symbol 
(i.e., open for trading, trading, halted or closed). Auction 
notifications and execution reports are also available. BX Market 
Makers rely on data available through the SQF Port to provide them 
the necessary information to perform market making activities.
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    Each BX Options Participant is assigned a Market Participant 
Identifier or ``mnemonic'' \9\ and in some cases, certain BX 
Participants request multiple mnemonics for purposes of accounting for 
trading activity. These mnemonics identify users at a particular BX 
Participant. The Exchange bills its Port Fees based on the number of 
mnemonics configured for each port. By way of example, if a BX 
Participant, ABC, requested 2 ports from the Exchange and further 
requested that each port be configured to be accessed by 4 mnemonics or 
in some cases account numbers,\10\ the BX Participant would be billed 
for 8 ports at the rate of $550 [sic] per port for that month. All 
billing is captured at the Participant level. BX Participants may 
choose to have multiple mnemonics or in some case multiple account 
numbers for the convenience of conducting their business, however only 
one mnemonic and one account number is required to conduct business on 
BX.
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    \9\ A mnemonic is a unique identifier consisting of a four 
character alpha code.
    \10\ Account numbers are assigned by the Exchange and associated 
with particular BX Participants.
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    Today, the NASDAQ Options Market LLC (``NOM'') assesses port fees 
for similar ports, with the exception of SQF. The Exchange desires to 
commence assessing such fees on BX at this time, with the exception of 
SQF as it desires to continue to encourage BX Market Makers to 
participate in this market.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of section 6 of the Act,\11\ in general, and with section 
6(b)(4) and 6(b)(5) of the Act,\12\ 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.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that adopting Port Fees for the BX Ports at 
$200 per port, per month, per mnemonic is reasonable because it would 
allow the Exchange to recoup fees associated with offering the BX 
Ports. The BX Port Fees reflect a portion of the costs that the 
Exchange bears with respect to offering and maintaining the BX Ports. 
The Port Fees are reasonable because they enable the Exchange to 
offset, in part, its connectivity costs associated with making such 
ports available, including costs based on gateway software and hardware 
enhancements and resources dedicated to gateway development, quality 
assurance, and support. The Exchanges port fees are lower than the 
costs for ports at other options exchanges \13\ as BX Options is a 
relatively new market and the Exchange seeks to remain competitive with 
more mature options markets.
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    \13\ Miami International Securities Exchange LLC (``MIAX'') 
assesses ports fees that range from $1,000 to $5,000 depending on 
connectivity levels. See MIAX's Fee Schedule. ISE Gemini, LLC (``ISE 
Gemini'') assesses port fees that range from $750-$12,500 depending 
on connectivity levels. See ISE Gemini's Fee Schedule. Finally, C2 
Options Exchange, Incorporated (``C2'') assesses port fees that 
range from $500-$1,000 depending on connectivity levels. See C2's 
Fee Schedule.
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    The Exchange believes that Port Fees for the BX Ports at $200 per 
port, per month, per mnemonic is equitable and not unfairly 
discriminatory because the

[[Page 78121]]

Exchange will assess the same fees for all BX Ports to all BX 
Participants.
    The Exchange believes that continuing to assess no fee for SQF 
Ports, while assessing fees for other BX Ports, is reasonable because 
the Exchange desires to incentivize more BX Market Makers to engage in 
market marking activities on the Exchange. The proposal would provide 
all BX Market Makers with the opportunity to maintain lower costs while 
also obtaining and utilizing the appropriate number of SQF to conduct 
their business.
    The Exchange believes that continuing to assess no fee for SQF 
Ports, while assessing fees for other BX Ports, is equitable and not 
unfairly discriminatory because SQF Ports are utilized particularly by 
BX Market Makers in connection with their market making activities. 
Unlike other BX Participants, BX Market Makers add value to the market 
through continuous quoting \14\ and a commitment of capital. The 
Exchange has traditionally assessed BX Market Makers lower transaction 
fees as compared to other BX Participants because BX Market Makers have 
obligations to make continuous markets, engage in a course of dealings 
reasonably calculated to contribute to the maintenance of a fair and 
orderly market, and not make bids or offers or enter into transactions 
that are inconsistent with a course of dealings.\15\ Also, because of 
the volume of message traffic, BX Market Makers that utilize SQF Ports 
require more technology infrastructure and more ports than BX 
Participants that are not engaged in market making.
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    \14\ Pursuant to chapter VII (Market Participants), section 5 
(Obligations of Market Makers), in registering as a market maker, an 
Options Participant commits himself to various obligations. 
Transactions of a Market Maker in its market making capacity must 
constitute a course of dealings reasonably calculated to contribute 
to the maintenance of a fair and orderly market, and Market Makers 
should not make bids or offers or enter into transactions that are 
inconsistent with such course of dealings. See chapter VII, section 
5.
    \15\ See chapter VII, section 5.
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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 the proposed BX Port 
fees are fair and equitable, and therefore, will not unduly burden any 
particular group of market participants trading on the Exchange. The 
Exchange's proposal to adopt fees for the BX Ports would be applied in 
a uniform manner to all BX Participants. The proposed fees are designed 
to ensure a fair and reasonable use of Exchange resources by allowing 
the Exchange to recoup a certain portion of connectivity costs, while 
continuing to offer competitive rates to BX Participants given the 
market is not a mature market.
    With respect to the SQF Port Fee, the Exchange believes that 
continuing to assess no fee for SQF Ports, while assessing fees for 
other BX Ports, does not impose an undue burden on competition because 
SQF Ports are utilized particularly by BX Market Makers that add value 
to the market through continuous quoting \16\ and a commitment of 
capital. The Exchange has traditionally assessed BX Market Makers lower 
transaction fees as compared to other BX Participants because BX Market 
Makers have obligations to make continuous markets, engage in a course 
of dealings reasonably calculated to contribute to the maintenance of a 
fair and orderly market, and not make bids or offers or enter into 
transactions that are inconsistent with a course of dealings.\17\
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    \16\ See note 14.
    \17\ See note 15.
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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.\18\ 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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    \18\ 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-2014-060 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2014-060. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BX-2014-060 and should be 
submitted on or before January 20, 2015.\19\
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2014-30275 Filed 12-24-14; 8:45 am]
BILLING CODE 8011-01-P