Document ID: SEC-2009-0164-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2009-02-04T05:00Z

[Federal Register: February 4, 2009 (Volume 74, Number 22)]
[Notices]               
[Page 6069-6071]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe09-88]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59307; File No. SR-BX-2009-005]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing of Proposed Rule Change To Establish New Fees for Services 
Available to Members and Non-Members

January 28, 2009.
    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 14, 2009, NASDAQ OMX BX, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to adopt fees applicable to members and non-
members in connection with the resumption of its cash equities trading 
business. The text of the proposed rule change is available from the 
principal office of the Exchange and from the Commission, and is also 
available at http://www.nasdaqtrader.com/
Trader.aspx?id=BSEPendingRules. The Exchange proposes to implement the 
proposed rule change as soon as practicable following Commission 
approval.

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
    On August 29, 2008, the Exchange was acquired by The NASDAQ OMX 
Group, Inc. (``NASDAQ OMX''). At the time of this acquisition, the 
Exchange was not operating a venue for trading cash equities. Pursuant 
to SR-BSE-2008-48, the Exchange has adopted a new rulebook with rules 
governing membership, the regulatory obligations of members, listing, 
and equities trading.\3\ The new rules, which are designated as the 
``Equity Rules,'' are based to a substantial extent on the rules of The 
NASDAQ Stock Market LLC (the ``NASDAQ Exchange''). The Equity Rules 
leave in effect the Exchange's pre-existing rules (the ``Options 
Rules'') for the purpose of governing trading on the Exchange's Boston 
Options Exchange facility (``BOX''). In addition, in SR-BX-2009-004, 
which was immediately effective pursuant to Section 19(b)(3)(A) of the 
Act,\4\ the Exchange adopted new fees applicable solely to its members.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 59154 (December 23, 
2008), 73 FR 80468 (SR-BSE-2008-48).
    \4\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

    In this filing, the Exchange is proposing new fees to be charged to 
members and non-members in connection with the resumption of its cash 
equities trading business. The fee schedules are structurally similar 
to those of the NASDAQ Exchange, but with the omission of many fees 
that are not pertinent to the Exchange's planned business and with 
several differences in the level of certain fees.
Market Data
    The Exchange proposes to establish fees for its BX TotalView data 
product. Like NASDAQ TotalView, BX TotalView will provide all displayed 
quotes and orders in the market, with attribution to the relevant 
market participant, at every price level, as well as total displayed 
anonymous interest at every price level. In recognition of the start-up 
nature of the new market, the data feed will be provided free of charge 
to subscribers and distributors for the first year of operation.
    After the initial free period, subscribers to BX TotalView will pay 
a monthly charge of $20; however, new subscribers receiving BX 
TotalView for the first time after the expiration of the one-year 
introductory period will be able to use the product free of charge for 
an individual 30-day trial period.\5\ Distributors of BX TotalView will 
pay a $1,000 monthly fee to receive the data directly from the 
Exchange, since the Exchange incurs costs to support the connection to 
each direct distributor; indirect distributors (i.e., those receiving 
data from a direct distributor) would not pay this charge.\6\ 
Distributors will also pay a $500 monthly fee to distribute the data 
feed internally (i.e., to employees) and a $1,250 monthly fee to 
distribute to external customers.\7\
---------------------------------------------------------------------------

    \5\ See proposed Equity Rule 7023.
    \6\ See proposed Equity Rule 7019.
    \7\ Id.
---------------------------------------------------------------------------

    All of the foregoing fees will be waived during the initial free 
period.
    Upon approval of this filing, however, the Exchange will begin to 
assess a limited number of fees in connection with data provision. 
Specifically, extranet providers that connect to the Exchange to 
provide direct access connectivity to market data will be charged a 
monthly access fee of $750 for each technical configuration used to 
provide a connection to a recipient's site.\8\ In addition, data 
distributors will pay an annual administrative fee of $500 for delayed 
distribution of data, and $1,000 for real-time distribution.\9\
---------------------------------------------------------------------------

    \8\ See proposed Equity Rule 7025.
    \9\ See proposed Equity Rule 7035. These annual administrative 
fees can be waived for colleges and universities receiving the data 
for research and educational purposes.
---------------------------------------------------------------------------

    The foregoing fee structure is similar to the structure for NASDAQ 
TotalView, but the overall level of fees will be lower than for NASDAQ 
TotalView. These fee levels reflect the start-up nature of the 
Exchange's new equities trading platform, and will help to promote 
competition among exchanges with respect to the quoting and trading 
services. Specifically, the Exchange believes that the fees it sets for 
BX TotalView will help to attract order flow to the Exchange. At 
inception, the Exchange will have zero market share and therefore must 
set its fees, including data fees, with a view to attracting order 
flow. Moreover, the alternatives that exist for market participants to 
determine market depth--such as other depth of book products that may 
be associated with markets with more liquidity, or order routing 
strategies designed to ascertain market depth--provide incentives for 
the Exchange to

[[Page 6070]]

ensure that its fees for BX TotalView are set reasonably.
    The fees are not unreasonably discriminatory, since the fees for 
subscribers are uniform for all subscribers, and the fees for 
distributors are uniform except with respect to reasonable distinctions 
between internal and external distribution and direct and indirect 
receipt of data. The fees are fair and reasonable in that they compare 
favorably to fees charged by other exchanges for comparable products.
Port Fees
    In order to receive BX Total View, subscribers must establish 
connectivity to the Exchange through extranets, direct connection, and 
Internet-based virtual private networks. The Exchange proposes to 
charge fees for the ports required to establish these connections, just 
as it will charge for access ports used to enter orders into the 
market.\10\ A port used for order entry cannot also be used to receive 
data; thus, a member seeking to enter orders and receive data would 
require at least two port pairs. Prior to approval of this filing, the 
Exchange will provide data ports free of charge. Thereafter, the 
Exchange will generally charge the same fees for data ports that it 
charges for order entry ports: $400 per month per port pair, plus an 
additional $200 per month for each Internet port that requires 
additional bandwidth due to the demands of the particular subscriber. 
In addition, subscribers wishing to obtain data will also have the 
option of obtaining a Multicast ITCH[supreg] port pair at a fee of 
$1000 per month.\11\ The differences between these two options relate 
to speed and processes for verifying completeness of the data. The 
standard port pair option provides one copy of the data and uses 
procedures under which the system receiving the data communicates back 
to the Exchange to verify completeness of the information. Under the 
Multicast ITCH option, two copies of the data are provided without 
these verification processes, and consequently at a higher rate of 
speed. Because the recipient of the data receives two copies, it can, 
if it wishes, undertake its own verification by programming its systems 
to compare the two copies. The fees for data ports are identical to the 
comparable fees charged by the NASDAQ Exchange.
---------------------------------------------------------------------------

    \10\ See SR-BX-2009-004 (establishing Equity Rule 7015 to charge 
fees for ports used by members to enter orders).
    \11\ Equity Rule 7015.
---------------------------------------------------------------------------

Testing
    The Exchange proposes to establish fees for its testing facility, 
to be set at levels identical to the fees for the NASDAQ Exchange's 
testing facility.\12\ In general, the Exchange will charge $285 per 
hour for an active connection during the facility's normal operating 
hours and $333 per hour for an active connection at other times. 
Because the fees are waived for testing of new, enhanced, or modified 
services and/or software offered by the Exchange, as well as for 
modifications initiated by the Exchange and for a 30-day period for new 
subscribers to existing services, the testing fees will not be charged 
until the later of (i) approval of this filing, or (ii) 30 days after 
the launch of the NASDAQ OMX BX Equities System. Thereafter, as 
provided in the rule, the fees will be waived for a 30-day period for 
each new market participant.
---------------------------------------------------------------------------

    \12\ See proposed Equity Rule 7030(d).
---------------------------------------------------------------------------

Other Fees
    Other fee rules relate to special data requests \13\ and partial 
month charges \14\ and are comparable to corresponding NASDAQ Exchange 
rules.
---------------------------------------------------------------------------

    \13\ See proposed Equity Rule 7030(b). This provision allows the 
Exchange to recoup costs associated with responding to ad hoc 
requests for market data, such as requests that may be made by news 
reporters or academic researchers.
    \14\ See proposed Equity Rule 7031. This provision provides that 
market data distributors may elect to be billed on a prorated basis 
during the month of initiation or termination of service.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\15\ in general and with 
Section 6(b)(4) of the Act,\16\ as stated above, in that it provides an 
equitable allocation of reasonable dues, fees, and other charges among 
its members and other persons using the facilities. The Exchange makes 
all services and products subject to these fees available on a non-
discriminatory basis to similarly situated recipients. All fees are 
structured in manner comparable to corresponding fees of the NASDAQ 
Exchange already in effect, and are set at levels equal to or lower 
than the levels of the comparable NASDAQ Exchange fees. The proposed 
fees for BX TotalView are equitably allocated since the fees for 
subscribers are uniform for all subscribers, and the fees for 
distributors are uniform except with respect to reasonable distinctions 
between internal and external distribution and direct and indirect 
receipt of data. The fees are fair and reasonable in that they compare 
favorably to fees charged by other exchanges for comparable products. 
The proposed testing fees are uniformly applied to all testing facility 
users, except with respect to reasonable distinctions based on time of 
use and with respect to testing for new services.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. 
Despite its long history, the Exchange will effectively be entering the 
competitive markets for equities trading as a start-up venture. 
Accordingly, its fees must be set at a level that will promote 
competition in these markets, or potential users of its services will 
simply continue to obtain services from the Exchange's multiple 
competitors. Notably, with regard to market data, the Exchange must set 
fees for market data and transaction executions that promote the 
Exchange as a trading venue. If its fees are set at inappropriately 
high levels, market participants will seek to avoid using the Exchange, 
and the Exchange' market data will have little value to market 
participants. In light of the start-up nature of the Exchange's 
operations, the products and services introduced by the Exchange will 
promote competition if they succeed in providing market participants 
with viable and cost-effective alternatives to existing competitors. 
Conversely, they will have no effect on competition if they fail to 
provide such alternatives.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 6071]]

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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-BX-2009-005 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2009-005. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room, on official business 
days between the hours of 10 a.m. and 3 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-
2009-005 and should be submitted on or before February 25, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2251 Filed 2-3-09; 8:45 am]

BILLING CODE 8011-01-P