80 FR 75157 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees and Rebates Related to BX Price Improvement Auction (PRISM)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 230 (December 1, 2015)
Federal Register Volume 80, Issue 230 (December 1, 2015)
| Page Range | 75157-75161 | |
| FR Document | 2015-30386 |
[Federal Register Volume 80, Number 230 (Tuesday, December 1, 2015)] [Notices] [Pages 75157-75161] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-30386] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76520; File No. SR-BX-2015-071] Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees and Rebates Related to BX Price Improvement Auction (PRISM) November 24, 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 November 12, 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. --------------------------------------------------------------------------- \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 amend its Options Pricing at Chapter XV, Section 2, entitled ``BX Options Market--Fees and Rebates,'' which governs pricing for BX members using the BX Options Market (``BX Options''). The Exchange proposes to adopt new subsection (5) to add fees and rebates for BX Price Improvement Auction (``PRISM''), which is a mechanism for price improvement on BX Options (``Price Improvement Mechanism''). While the changes proposed herein are effective upon filing, the Exchange has designated that the amendments be operative on November 16, 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 Exchange proposes to amend its Chapter XV, Section 2 to adopt new subsection (5) to add fees and rebates for PRISM. Effective on or about November 16, 2015, BX Options is introducing PRISM, which is codified in BX Chapter VI, Section 9 (also known as the ``PRISM Rule'').\3\ PRISM is a Price Improvement Mechanism for all- electronic BX Options whereby a buy and sell order may be submitted in one order message to initiate an auction at a `stop price' and seek potential price improvement. Options are traded electronically on BX Options, and all options participants may respond to a PRISM Auction,\4\ the duration of which will be set at 200 milliseconds.\5\ PRISM includes auto-match functionality in which a Participant (an ``Initiating Participant'') may electronically submit for execution an order it represents as agent on behalf of a Public Customer,\6\ Professional customer, broker dealer, or any other entity (``PRISM Order'') against principal interest or against any other order it represents as agent (an ``Initiating Order'') provided it submits the PRISM Order for electronic execution into the PRISM Auction pursuant to Chapter VI, Section 9.\7\ The PRISM Rule describes the circumstances under which an Initiating Participant may initiate an Auction. A PRISM Order that is for a Non-Customer (account of a broker-dealer or any other person or entity that is not a Public Customer) is always required to improve the same side of the BX BBO even if there is no resting limit order on the book. PRISM Orders that do not comply with the [[Page 75158]] requirements set forth in the PRISM Rule are not eligible to initiate an Auction and will be immediately cancelled. Also, PRISM Orders submitted at or before the opening of trading are not eligible to initiate an Auction and will be rejected. PRISM Orders submitted during the final two seconds of the trading session in the affected series are not eligible to initiate an Auction and will be immediately cancelled. Finally, an Initiating Order may not be a solicited order for the account of any BX Options Market Maker assigned in the affected series.\8\ --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release Nos. 76301 (October 29, 2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032) (approval order) (``PRISM Approval''); and 75827 (September 3, 2015), 80 FR 54601 (September 10, 2015) (SR-BX-2015-032) (``PRISM Filing''). In the PRISM Approval the Exchange noted that it will file a rule change separately with the Commission to remove Price Improving and Post-Only Order types from its Rules. The Exchange will not commence offering BX PRISM until such time as it has an effective and operative rule in place from the Commission to remove Price Improving and Post-Only Orders and removes the ability to submit Price Improving and Post-Only Orders into the auction. In the event the Exchange determines to amend its order types to allow the entry of non-displayed order types, e.g. Price Improving or Post-Only Orders, the Exchange will file a proposed rule change pursuant to Section 19(b)(2) with the Commission to seek approval for such rule change. See also Options Technical Update #2015-6. \4\ PRISM Auction eligibility requirements and the early conclusion of the PRISM Auction are, with certain other PRISM features, subject to a pilot program scheduled to expire July 18, 2016. See BX Chapter VI, Section 9. \5\ Other exchanges that have price improvement auctions have developed different durations. See, e.g., CBOE Rule 6.74A(b)(1)(C) (CBOE's AIM auction has a duration of one second); and BOX Rule 7150(f)(1) (BOX's PIP auction has a duration of one hundred milliseconds, commencing on the dissemination of the PIP broadcast). \6\ For purposes of the PRISM Rule in Chapter XV, Section 2, a Public Customer order does not include a Professional order, and therefore a Professional would not be entitled to Public Customer priority as described herein. A Public Customer means a person that is not a broker or dealer in securities. See BX Options Rules at Chapter I, Section 1(a)(50). A Public Customer order does not include a Professional order for purposes of BX Rule at Chapter VI, Section 10(a)(C)(1)(a), which governs allocation priority. A ``Professional'' means any person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). A Participant or a Public Customer may, without limitation, be a Professional. All Professional orders shall be appropriately marked by Participants. See BX Rules at Chapter I, Section 1(a)(49). \7\ BX PRISM will only conduct an auction for simple (non- complex) Orders. \8\ See Chapter VI, Section 9(i)(C) through (G). --------------------------------------------------------------------------- The Exchange believes that the PRISM Auction will be beneficial to market participants, and in particular will encourage BX Market Makers\9\ to quote at the National Best Bid or Offer (``NBBO'') with additional size and thereby result in tighter and deeper markets, resulting in more liquidity on BX. Specifically, by offering BX Market Makers the ability to receive priority in the proposed allocation during the PRISM Auction up to the size of their quote, a BX Market Maker will be encouraged to quote with additional size outside of the PRISM Auction at the best and most aggressive prices. BX believes that this incentive may result in a narrowing of quotes and thus further enhance BX's market quality. BX believes that PRISM will encourage BX Market Makers to compete vigorously to provide the opportunity for price improvement in a competitive auction process.\10\ --------------------------------------------------------------------------- \9\ BX Options Market Makers may also be referred to as ``Market Makers''. The term ``BX Options Market Maker'' means a Participant that has registered as a Market Maker on BX Options pursuant to Chapter VII, Section 2, and must also remain in good standing pursuant to Chapter VII, Section 4. In order to receive Market Maker pricing in all securities, the Participant must be registered as a BX Options Market Maker in at least one security. \10\ For purposes of brevity, the Exchange does not endeavor to describe all the nuances of PRISM within this fee proposal. Additional detail regarding PRISM can be found in PRISM Approval, PRISM Filing, and PRISM FAQs at http://nasdaqtrader.com/content/productsservices/trading/PRISMFAQs.pdf. --------------------------------------------------------------------------- This proposal establishes the fee and rebate structure for PRISM (per contract), in particular two new fees and one new rebate. These would apply to Customers,\11\ BX Options Market Makers,\12\ and Non- Customers: --------------------------------------------------------------------------- \11\ The term ``Customer'' means a Public Customer or a broker- dealer. BX Chapter 1, Section 1(a)(22). The term ``Broker-Dealer'' applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. \12\ BX Options Market Makers may also be referred to as ``Market Makers''. The term ``BX Options Market Maker'' or (``M'') means a Participant that has registered as a Market Maker on BX Options pursuant to Chapter VII, Section 2, and must also remain in good standing pursuant to Chapter VII, Section 4. In order to receive Market Maker pricing in all securities, the Participant must be registered as a BX Options Market Maker in at least one security. --------------------------------------------------------------------------- Change 1. The Exchange proposes to establish fees for Submitted PRISM Order\13\ (Agency Order and Contra-Side Order). --------------------------------------------------------------------------- \13\ This relates to a market participant submitting an order into the PRISM auction. --------------------------------------------------------------------------- Change 2. The Exchange proposes to establish fees for Responded to PRISM Auction \14\ (Penny Classes \15\ and non-Penny Classes). --------------------------------------------------------------------------- \14\ This relates to a market participant responding to a PRISM Auction. \15\ Penny Classes are options listed pursuant to the Penny Pilot, which was established in June 2012 and extended in 2015. See Securities Exchange Act Release Nos. 67256 (June 26, 2012), 77 FR 39277 (July 2, 2012) (SR-BX-2012-030) (order approving BX option rules and establishing Penny Pilot); and 75326 (June 29, 2015), 80 FR 38481 (July 6, 2015) (SR-BX-2015-037) (notice of filing and immediate effectiveness extending the Penny Pilot through June 30, 2016). --------------------------------------------------------------------------- Change 3. The Exchange proposes to establish rebates for PRISM Order Traded With PRISM Response.\16\ --------------------------------------------------------------------------- \16\ This relates to a market participant submitting a PRISM Order pursuant to a PRISM Auction and the PRISM Order trading with PRISM Response. --------------------------------------------------------------------------- Each specific change is described in detail below. Change 1--Fees for Submitted PRISM Order: Agency Order and Contra-Side Order For Submitted PRISM Order the Exchange is proposing to establish fees for Agency Order (per contract), and fees for Contra-Side Order (per contract). Currently, the Exchange has no such fees. The fees for Submitted PRISM Order will range from $0.00 to $0.30 for Agency Order. The fees for Submitted PRISM Order will range from $0.00 to $0.05 for Contra-Side Order. Specifically, for Submitted PRISM Order proposed Chapter XV, Section 2 subsection (5) will state that for Customer there will be no fee ($0.00) for Agency Order and no fee ($0.00) for Contra-Side Order. Subsection (5) will state that for BX Options Market Maker there will be a $0.30 fee for Agency Order and a $0.05 fee for Contra-Side Order. Subsection (5) will state that for Non-Customer there will be a $0.30 fee for Agency Order and a $0.05 fee for Contra-Side Order. Change 2--Fees for Responded to PRISM Auction: Penny Classes and Non- Penny Classes For Responded to PRISM Auction the Exchange is proposing to establish fees for Penny Classes (per contract), and fees for non-Penny Classes (per contract). Currently, the Exchange has no such fees. The fees for Responded to PRISM Auction will be $0.49 (per executed contract) for Penny Classes. The fees for Responded to PRISM Auction will be $0.94 (per executed contract) for non-Penny Classes. Specifically, for Responded to PRISM Auction proposed Chapter XV, Section 2 subsection (5) will state that for Customer there will be a $0.49 fee for Penny Classes and a $0.94 fee for non-Penny Classes. Subsection (5) will state that for BX Options Market Maker there will be a $0.49 fee for Penny Classes and a $0.94 fee for non-Penny Classes. Subsection (5) will state that for Non-Customer there will be a $0.49 fee for Penny Classes and a $0.94 fee for non-Penny Classes. Change 3--Rebates for PRISM Order Traded With PRISM Response: Penny Classes and Non-Penny Classes For PRISM Order Traded with PRISM Response the Exchange is proposing to establish rebates for Penny Classes (per contract), and rebates for non-Penny Classes (per contract). Currently, the Exchange has no such rebates. These rebates would be applied in conjunction with the Agency Order fees that the Submitted PRISM Order is assessed. The rebates for PRISM Order Traded with PRISM Response will range from $0.00 to $0.35 for Penny Classes. The rebates for PRISM Order Traded with PRISM Response will range from $0.00 to $0.70 for non-Penny Classes. Only Customers will get rebates. Specifically, for PRISM Order Traded with PRISM Response proposed Chapter XV, Section 2 subsection (5) will state that for Customer there will be a $0.35 rebate for Penny Classes and a $0.70 rebate for non-Penny Classes. Subsection (5) will state that for BX Options Market Maker and for Non-Customer there will be no rebate ($0.00) for Penny Classes and no rebate ($0.00) for non- Penny Classes. Example 1 A Customer PRISM Agency Order in a Penny Class (one contract) trades against a PRISM Response in a Penny Class (one contract). The Customer Agency Order is assessed a fee of $0.00 and given a rebate of $0.35 for a total rebate of $0.35 (fee $0.00 + rebate $0.35). The market participant that Responded to PRISM Auction will be assessed a fee of $0.49. Example 2 A Non-Customer PRISM Agency Order in a Penny Class (one contract) trades against a PRISM Response in a Penny Class (one contract). The Non-Customer Agency Order is assessed a fee of $0.30 and given a rebate of $0.00 for a total fee of $0.30 (fee $0.30 + [[Page 75159]] rebate $0.00). The market participant that Responded to PRISM Auction will be assessed a fee of $0.49. As proposed, Chapter XV, Section 2 subsection (5) will read as follows: (5) Fees and rebates for BX Price Improvement Auction (``PRISM'') Fees and Rebates (per Contact) -------------------------------------------------------------------------------------------------------------------------------------------------------- Submitted PRISM order fee Responded to PRISM auction PRISM order traded with PRISM -------------------------------- fee response rebate Type of market participants --------------------------------------------------------------- Agency order Contra-side Non-penny Non-penny order Penny classes classes Penny classes classes -------------------------------------------------------------------------------------------------------------------------------------------------------- Customer................................................ $0.00 $0.00 $0.49 $0.94 $0.35 $0.70 BX Options Market Maker................................. 0.30 0.05 0.49 0.94 0.00 0.00 Non-Customer............................................ 0.30 0.05 0.49 0.94 0.00 0.00 -------------------------------------------------------------------------------------------------------------------------------------------------------- BX will apply the rebate to market participants that submitted a PRISM Order pursuant to a PRISM Auction and the PRISM Order Traded with PRISM Response. The Agency Order fee for Submitted PRISM Order will be applicable to any contract(s) for which a rebate is provided for PRISM Order Traded with PRISM Response. The Exchange is adopting these fees and rebates at this time because it believes that they will allow the Exchange to recoup some of the costs associated with PRISM, which promotes price improvement to the benefit of market participants, while also incentivizing the use of PRISM. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,\17\ in general, and with Section 6(b)(4) and 6(b)(5) of the Act,\18\ 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 not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f. \18\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, for example, the Commission indicated that market forces should generally determine the price of non-core market data because national market system regulation ``has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.'' \19\ Likewise, in NetCoalition v. NYSE Arca, Inc., 615 F.3d 525 (D.C. Cir. 2010), the DC Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\20\ As the court emphasized, the Commission ``intended in Regulation NMS that `market forces, rather than regulatory requirements' play a role in determining the market data . . . to be made available to investors and at what cost.'' \21\ --------------------------------------------------------------------------- \19\ Exchange Act Release No. 34-51808 (June 9, 2005) (``Regulation NMS Adopting Release''). \20\ See NetCoalition, 615 F.3d at 534. \21\ Id., at 537. --------------------------------------------------------------------------- Further, ``[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers' . . . .'' \22\ Although the Court and the SEC were discussing the cash equities markets, the Exchange believes that, as discussed above, these views apply with equal force to the options markets. --------------------------------------------------------------------------- \22\ NetCoalition I, 615 F.3d at 539 (quoting ArcaBook Order, 73 FR at 74782-74783). --------------------------------------------------------------------------- The Exchange's proposal establishes fees and rebates regarding PRISM, which promotes price improvement to the benefit of market participants. The Exchange believes that PRISM will encourage market participants, and in particular BX Market Makers, to compete vigorously to provide the opportunity for price improvement in a competitive auction process. The Exchange believes that its proposal will allow the Exchange to recoup costs associated with PRISM while also incentivizing its use. Change 1--Fees for Submitted PRISM Order: Agency Order and Contra-Side Order For Submitted PRISM Order, establishing that there will be no fee for Customer for Agency Order, while establishing a $0.30 fee per contract for BX Options Market Maker for Agency Order and a $0.30 fee per contract for Non-Customer for Agency Order, is reasonable because it encourages the desired Customer behavior. The fee is also reasonable because the associated revenue will allow the Exchange to maintain and enhance its services. For Submitted PRISM Order, establishing no Customer fee, while establishing a $0.05 fee per contract for BX Options Market Maker for Contra-Side Order and a $0.05 fee per contract fee for Non-Customer for Contra-Side Order, is reasonable because it encourages the desired Customer behavior. The fee is also reasonable because the associated revenue will allow the Exchange to maintain and enhance its services. Customer activity enhances liquidity on the Exchange for the benefit of all market participants and benefits all market participants by providing more trading opportunities, which attracts market makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. For Submitted PRISM Order, establishing no fee for Customer (Agency Order and Contra-Side Order) and a fee for BX Market Maker and Non- Customer (Agency Order and Contra-Side Order) is equitable and not unfairly discriminatory. This is because the Exchange's proposal to assess such fee will apply the same to all similarly situated participants. Change 2--Fees for Responded to PRISM Auction: Penny Classes and Non- Penny Classes For Responded to PRISM Auction, establishing that there will be a $0.49 fee per contract for Customer for Agency Order, and the same fee for BX Options Market Maker and for Non-Customer for Agency Order, is reasonable because the [[Page 75160]] associated revenue will allow the Exchange to maintain and enhance its services. For Responded to PRISM Auction, establishing that there will be a $0.94 fee per contract for Customer for Contra-Side Order, and the same fee for BX Options Market Maker and for Non-Customer for Contra-Side Order, is reasonable because the associated revenue will allow the Exchange to maintain and enhance its services. For Responded to PRISM Auction, establishing a fee for Customer, BX Market Maker and Non-Customer (Agency Order and Contra-Side Order) is equitable and not unfairly discriminatory. This is because the Exchange's proposal to assess such fee will apply the same to all similarly situated participants. Change 3--Rebates for PRISM Order Traded With PRISM Response: Penny Classes and Non-Penny Classes For PRISM Order Traded with PRISM Response, establishing that there will be no rebate for BX Options Market Maker and Non-Customer for Penny Classes, while establishing a $0.35 rebate per contract for Customer for Penny Classes and a $0.70 rebate per contract for Customer for non-Penny Pilot Classes, is reasonable because it encourages the desired Customer behavior. The rebate is also reasonable because paying the rebate only to Customers will allow the Exchange to maintain and enhance its services. For PRISM Order Traded with PRISM Response, establishing that there will be no rebate for BX Options Market Maker and Non-Customer for non-Penny Classes, while establishing a $0.70 rebate per contract for Customer for non-Penny, is reasonable because it encourages the desired Customer behavior. The rebate is also reasonable because paying the rebate only to Customers will allow the Exchange to maintain and enhance its services.\23\ Customer activity enhances liquidity on the Exchange for the benefit of all market participants and benefits all market participants by providing more trading opportunities, which attracts market makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \23\ As noted, such rebate would be applied in conjunction with any Agency Order fee that the Submitted PRISM Order is assessed. --------------------------------------------------------------------------- For PRISM Order Traded with PRISM Response, establishing a rebate for Customer (Penny Classes and non-Penny Classes) and no rebate for BX Market Maker and Non-Customer (Penny Classes and non-Penny Classes) is equitable and not unfairly discriminatory. This is because the Exchange's proposal to pay such rebate will apply the same to all similarly situated participants. The Exchange is adopting the proposed fees and rebates at this time because it believes that the associated revenue will allow it to continue and enhance PRISM, which is beneficial to market participants. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange 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. Specifically, the Exchange does not believe that its proposal to establish fees and rebates for PRISM will impose any burden on competition, as discussed below. The Exchange operates in a highly competitive market in which many sophisticated and knowledgeable market participants can readily and do send order flow to competing exchanges if they deem fee levels or rebate incentives at a particular exchange to be excessive or inadequate. Additionally, new competitors have entered the market and still others are reportedly entering the market shortly. These market forces ensure that the Exchange's fees and rebates remain competitive with the fee structures at other trading platforms. In that sense, the Exchange's proposal is actually pro-competitive because the Exchange is simply establishing rebates and fees in order to remain competitive in the current environment. The Exchange 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. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues 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, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In this instance, the proposed changes to the charges assessed and credits available to member firms in respect of PRISM do not impose a burden on competition because the Exchange's execution and routing services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Additionally, the changes proposed herein are pro-competitive to the extent that they continue to allow the Exchange to promote and maintain PRISM, which has the potential to result in more efficient, price improved executions to the benefit of market participants. 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 Pursuant to Section 19(b)(3)(A)(ii) of the Act,\24\ the Exchange has designated this proposal as establishing or changing a due, fee, or other charge imposed by the self-regulatory organization on any person, whether or not the person is a member of the self-regulatory organization, which renders the proposed rule change effective upon filing. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- 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 [[Page 75161]] 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-BX-2015-071 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-2015-071. 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-2015-071 and should be submitted on or before December 22, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\25\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \25\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2015-30386 Filed 11-30-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 230 / Tuesday, December 1, 2015 / Notices 75157
communications relating to the I. Self-Regulatory Organization’s Mechanism for all-electronic BX
proposed rule change between the Statement of the Terms of Substance of Options whereby a buy and sell order
Commission and any person, other than the Proposed Rule Change may be submitted in one order message
those that may be withheld from the The Exchange proposes to amend its to initiate an auction at a ‘stop price’
public in accordance with the Options Pricing at Chapter XV, Section and seek potential price improvement.
provisions of 5 U.S.C. 552, will be 2, entitled ‘‘BX Options Market—Fees Options are traded electronically on BX
available for Web site viewing and and Rebates,’’ which governs pricing for Options, and all options participants
printing in the Commission’s Public BX members using the BX Options may respond to a PRISM Auction,4 the
Reference Room, 100 F Street NE., Market (‘‘BX Options’’). The Exchange duration of which will be set at 200
milliseconds.5 PRISM includes auto-
Washington, DC 20549, on official proposes to adopt new subsection (5) to
match functionality in which a
business days between the hours of add fees and rebates for BX Price
Participant (an ‘‘Initiating Participant’’)
10:00 a.m. and 3:00 p.m. Copies of such Improvement Auction (‘‘PRISM’’),
may electronically submit for execution
filing also will be available for which is a mechanism for price
an order it represents as agent on behalf
inspection and copying at the principal improvement on BX Options (‘‘Price
of a Public Customer,6 Professional
office of FINRA. All comments received Improvement Mechanism’’).
customer, broker dealer, or any other
will be posted without change; the While the changes proposed herein
entity (‘‘PRISM Order’’) against
Commission does not edit personal are effective upon filing, the Exchange
principal interest or against any other
identifying information from has designated that the amendments be
order it represents as agent (an
submissions. You should submit only operative on November 16, 2015.
‘‘Initiating Order’’) provided it submits
The text of the proposed rule change
information that you wish to make the PRISM Order for electronic
is available on the Exchange’s Web site
publicly available. All submissions execution into the PRISM Auction
at http://nasdaqomxbx.cchwallstreet
should refer to File Number SR–FINRA– pursuant to Chapter VI, Section 9.7 The
.com/, at the principal office of the
2015–051 and should be submitted on PRISM Rule describes the circumstances
Exchange, and at the Commission’s
or before December 22, 2015. under which an Initiating Participant
Public Reference Room.
may initiate an Auction. A PRISM Order
For the Commission, by the Division of
II. Self-Regulatory Organization’s that is for a Non-Customer (account of
Trading and Markets, pursuant to delegated
Statement of the Purpose of, and a broker-dealer or any other person or
authority.18
Statutory Basis for, the Proposed Rule entity that is not a Public Customer) is
Robert W. Errett, Change always required to improve the same
Deputy Secretary. side of the BX BBO even if there is no
In its filing with the Commission, the
[FR Doc. 2015–30413 Filed 11–30–15; 8:45 am] resting limit order on the book. PRISM
Exchange included statements
BILLING CODE 8011–01–P Orders that do not comply with the
concerning the purpose of and basis for
the proposed rule change and discussed
remove Price Improving and Post-Only Orders and
any comments it received on the removes the ability to submit Price Improving and
SECURITIES AND EXCHANGE proposed rule change. The text of these Post-Only Orders into the auction. In the event the
COMMISSION statements may be examined at the Exchange determines to amend its order types to
allow the entry of non-displayed order types, e.g.
places specified in Item IV below. The Price Improving or Post-Only Orders, the Exchange
[Release No. 34–76520; File No. SR–BX– Exchange has prepared summaries, set will file a proposed rule change pursuant to Section
2015–071] forth in sections A, B, and C below, of 19(b)(2) with the Commission to seek approval for
the most significant aspects of such such rule change. See also Options Technical
Self-Regulatory Organizations; Update #2015–6.
statements. 4 PRISM Auction eligibility requirements and the
NASDAQ OMX BX, Inc.; Notice of Filing early conclusion of the PRISM Auction are, with
and Immediate Effectiveness of A. Self-Regulatory Organization’s
certain other PRISM features, subject to a pilot
Proposed Rule Change To Establish Statement of the Purpose of, and program scheduled to expire July 18, 2016. See BX
Fees and Rebates Related to BX Price Statutory Basis for, the Proposed Rule Chapter VI, Section 9.
Change 5 Other exchanges that have price improvement
Improvement Auction (PRISM) auctions have developed different durations. See,
1. Purpose e.g., CBOE Rule 6.74A(b)(1)(C) (CBOE’s AIM
November 24, 2015. auction has a duration of one second); and BOX
The Exchange proposes to amend its Rule 7150(f)(1) (BOX’s PIP auction has a duration
Pursuant to Section 19(b)(1) of the Chapter XV, Section 2 to adopt new of one hundred milliseconds, commencing on the
Securities Exchange Act of 1934 subsection (5) to add fees and rebates for dissemination of the PIP broadcast).
(‘‘Act’’) 1, and Rule 19b–4 thereunder,2 PRISM. 6 For purposes of the PRISM Rule in Chapter XV,
notice is hereby given that on November Section 2, a Public Customer order does not include
Effective on or about November 16, a Professional order, and therefore a Professional
12, 2015, NASDAQ OMX BX, Inc. (‘‘BX’’ 2015, BX Options is introducing PRISM, would not be entitled to Public Customer priority
or ‘‘Exchange’’) filed with the Securities which is codified in BX Chapter VI, as described herein. A Public Customer means a
and Exchange Commission (‘‘SEC’’ or Section 9 (also known as the ‘‘PRISM person that is not a broker or dealer in securities.
See BX Options Rules at Chapter I, Section 1(a)(50).
‘‘Commission’’) the proposed rule Rule’’).3 PRISM is a Price Improvement A Public Customer order does not include a
change as described in Items I, II, and Professional order for purposes of BX Rule at
3 See Securities Exchange Act Release Nos. 76301 Chapter VI, Section 10(a)(C)(1)(a), which governs
III, below, which Items have been
(October 29, 2015), 80 FR 68347 (November 4, 2015) allocation priority. A ‘‘Professional’’ means any
prepared by the Exchange. The (SR–BX–2015–032) (approval order) (‘‘PRISM person or entity that (i) is not a broker or dealer in
Commission is publishing this notice to Approval’’); and 75827 (September 3, 2015), 80 FR securities, and (ii) places more than 390 orders in
tkelley on DSK3SPTVN1PROD with NOTICES
solicit comments on the proposed rule 54601 (September 10, 2015) (SR–BX–2015–032) listed options per day on average during a calendar
(‘‘PRISM Filing’’). In the PRISM Approval the month for its own beneficial account(s). A
change from interested persons. Exchange noted that it will file a rule change Participant or a Public Customer may, without
separately with the Commission to remove Price limitation, be a Professional. All Professional orders
18 17
Improving and Post-Only Order types from its shall be appropriately marked by Participants. See
CFR 200.30–3(a)(12). BX Rules at Chapter I, Section 1(a)(49).
Rules. The Exchange will not commence offering
1 15 U.S.C. 78s(b)(1). BX PRISM until such time as it has an effective and 7 BX PRISM will only conduct an auction for
2 17 CFR 240.19b–4. operative rule in place from the Commission to simple (non-complex) Orders.
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![Federal Register / Vol. 80, No. 230 / Tuesday, December 1, 2015 / Notices 75159
rebate $0.00). The market participant that As proposed, Chapter XV, Section 2 (5) Fees and rebates for BX Price
Responded to PRISM Auction will be subsection (5) will read as follows: Improvement Auction (‘‘PRISM’’)
assessed a fee of $0.49.
FEES AND REBATES (PER CONTACT)
Submitted Responded to PRISM order traded with
PRISM order fee PRISM auction fee PRISM response rebate
Type of market
participants Agency Contra-side Penny Non-penny Penny Non-penny
order order classes classes classes classes
Customer .................................................. $0.00 $0.00 $0.49 $0.94 $0.35 $0.70
BX Options Market Maker ....................... 0.30 0.05 0.49 0.94 0.00 0.00
Non-Customer .......................................... 0.30 0.05 0.49 0.94 0.00 0.00
BX will apply the rebate to market participants that submitted a PRISM Order pursuant to a PRISM Auction and the PRISM Order Traded with
PRISM Response. The Agency Order fee for Submitted PRISM Order will be applicable to any contract(s) for which a rebate is provided for
PRISM Order Traded with PRISM Response.
The Exchange is adopting these fees the court emphasized, the Commission establishing a $0.30 fee per contract for
and rebates at this time because it ‘‘intended in Regulation NMS that BX Options Market Maker for Agency
believes that they will allow the ‘market forces, rather than regulatory Order and a $0.30 fee per contract for
Exchange to recoup some of the costs requirements’ play a role in determining Non-Customer for Agency Order, is
associated with PRISM, which promotes the market data . . . to be made reasonable because it encourages the
price improvement to the benefit of available to investors and at what desired Customer behavior. The fee is
market participants, while also cost.’’ 21 also reasonable because the associated
incentivizing the use of PRISM. Further, ‘‘[n]o one disputes that revenue will allow the Exchange to
competition for order flow is ‘fierce.’ maintain and enhance its services. For
2. Statutory Basis . . . As the SEC explained, ‘[i]n the U.S. Submitted PRISM Order, establishing no
The Exchange believes that the national market system, buyers and Customer fee, while establishing a $0.05
proposed rule change is consistent with sellers of securities, and the broker- fee per contract for BX Options Market
the provisions of Section 6 of the Act,17 dealers that act as their order-routing Maker for Contra-Side Order and a $0.05
in general, and with Section 6(b)(4) and agents, have a wide range of choices of fee per contract fee for Non-Customer
6(b)(5) of the Act,18 in particular, in that where to route orders for execution’; for Contra-Side Order, is reasonable
it provides for the equitable allocation [and] ‘no exchange can afford to take its because it encourages the desired
of reasonable dues, fees and other market share percentages for granted’ Customer behavior. The fee is also
charges among members and issuers and because ‘no exchange possesses a reasonable because the associated
other persons using any facility or monopoly, regulatory or otherwise, in revenue will allow the Exchange to
system which the Exchange operates or the execution of order flow from broker maintain and enhance its services.
controls, and is not designed to permit dealers’ . . . .’’ 22 Although the Court Customer activity enhances liquidity on
unfair discrimination between and the SEC were discussing the cash the Exchange for the benefit of all
customers, issuers, brokers, or dealers. equities markets, the Exchange believes market participants and benefits all
The Commission and the courts have that, as discussed above, these views market participants by providing more
repeatedly expressed their preference apply with equal force to the options trading opportunities, which attracts
for competition over regulatory markets. market makers. An increase in the
intervention in determining prices, The Exchange’s proposal establishes activity of these market participants in
products, and services in the securities fees and rebates regarding PRISM, turn facilitates tighter spreads, which
markets. In Regulation NMS, for which promotes price improvement to may cause an additional corresponding
example, the Commission indicated that the benefit of market participants. The increase in order flow from other market
market forces should generally Exchange believes that PRISM will participants.
determine the price of non-core market encourage market participants, and in For Submitted PRISM Order,
data because national market system particular BX Market Makers, to establishing no fee for Customer
regulation ‘‘has been remarkably compete vigorously to provide the (Agency Order and Contra-Side Order)
successful in promoting market opportunity for price improvement in a and a fee for BX Market Maker and Non-
competition in its broader forms that are competitive auction process. The Customer (Agency Order and Contra-
most important to investors and listed Exchange believes that its proposal will Side Order) is equitable and not unfairly
companies.’’ 19 Likewise, in allow the Exchange to recoup costs discriminatory. This is because the
NetCoalition v. NYSE Arca, Inc., 615 associated with PRISM while also Exchange’s proposal to assess such fee
F.3d 525 (D.C. Cir. 2010), the DC Circuit incentivizing its use. will apply the same to all similarly
upheld the Commission’s use of a situated participants.
Change 1—Fees for Submitted PRISM
market-based approach in evaluating the Order: Agency Order and Contra-Side Change 2—Fees for Responded to
fairness of market data fees against a Order PRISM Auction: Penny Classes and
challenge claiming that Congress Non-Penny Classes
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mandated a cost-based approach.20 As For Submitted PRISM Order,
establishing that there will be no fee for For Responded to PRISM Auction,
17 15 Customer for Agency Order, while establishing that there will be a $0.49
U.S.C. 78f.
18 15 U.S.C. 78f(b)(4) and (5).
fee per contract for Customer for Agency
19 Exchange Act Release No. 34–51808 (June 9, 21 Id., at 537. Order, and the same fee for BX Options
2005) (‘‘Regulation NMS Adopting Release’’). 22 NetCoalition
I, 615 F.3d at 539 (quoting Market Maker and for Non-Customer for
20 See NetCoalition, 615 F.3d at 534. ArcaBook Order, 73 FR at 74782–74783). Agency Order, is reasonable because the
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![Federal Register / Vol. 80, No. 230 / Tuesday, December 1, 2015 / Notices 75161
arguments concerning the foregoing, DEPARTMENT OF STATE • Respondents: United States Citizens
including whether the proposed rule and Nationals.
[Public Notice: 9366]
change is consistent with the Act. • Estimated Number of Respondents:
Comments may be submitted by any of 60-Day Notice of Proposed Information 1,010,389.
the following methods: Collection: Smart Traveler Enrollment • Estimated Number of Responses:
Electronic Comments Program 1,010,389.
• Use the Commission’s Internet Notice of request for public
ACTION: • Average Time per Response: 20
comment form (http://www.sec.gov/ comment. minutes.
rules/sro.shtml); or
• Total Estimated Burden Time:
• Send an email to rule-comments@ SUMMARY: The Department of State is
seeking Office of Management and 336,796 hours.
sec.gov. Please include File Number SR–
BX–2015–071 on the subject line. Budget (OMB) approval for the • Frequency: On Occasion.
Paper Comments
information collection described below. • Obligation to Respond: Voluntary.
In accordance with the Paperwork
We are soliciting public comments to
• Send paper comments in triplicate Reduction Act of 1995, we are
to Brent J. Fields, Secretary, Securities requesting comments on this collection permit the Department to:
and Exchange Commission, 100 F Street from all interested individuals and • Evaluate whether the proposed
NE., Washington, DC 20549–1090. organizations. The purpose of this information collection is necessary for
All submissions should refer to File notice is to allow 60 days for public the proper functions of the Department.
Number SR–BX–2015–071. This file comment preceding submission of the • Evaluate the accuracy of our
number should be included on the collection to OMB. estimate of the time and cost burden for
subject line if email is used. To help the DATES: The Department will accept this proposed collection, including the
Commission process and review your comments from the public up to validity of the methodology and
comments more efficiently, please use February 1, 2016. assumptions used.
only one method. The Commission will ADDRESSES: You may submit comments
post all comments on the Commission’s • Enhance the quality, utility, and
by any of the following methods: clarity of the information to be
Internet Web site (http://www.sec.gov/ • Web: Persons with access to the
rules/sro.shtml). collected.
Internet may comment on this notice by
Copies of the submission, all going to www.Regulations.gov. You can • Minimize the reporting burden on
subsequent amendments, all written search for the document by entering those who are to respond, including the
statements with respect to the proposed ‘‘Docket Number: DOS–2015–0050’’ in use of automated collection techniques
rule change that are filed with the the Search field. Then click the or other forms of information
Commission, and all written ‘‘Comment Now’’ button and complete technology.
communications relating to the the comment form. Please note that comments submitted
proposed rule change between the • Email: RiversDA@state.gov. in response to this Notice are public
Commission and any person, other than • Regular Mail: Send written record. Before including any detailed
those that may be withheld from the comments to: U.S. Department of State, personal information, you should be
public in accordance with the CA/OCS/PMO, SA–17, 10th Floor, aware that your comments as submitted,
provisions of 5 U.S.C. 552, will be Washington, DC 20036. including your personal information,
available for Web site viewing and • Fax: 202–736–9111. will be available for public review.
printing in the Commission’s Public • Hand Delivery or Courier: U.S.
Reference Room, 100 F Street NE., Department of State, CA/OCS/PMO, 600 Abstract of Proposed Collection
Washington, DC 20549, on official 19th St. NW., 10th Floor, Washington,
business days between the hours of DC 20036. The STEP makes it possible for U.S.
10:00 a.m. and 3:00 p.m. Copies of the You must include the DS form nationals to register on-line from
filing also will be available for number (if applicable), information anywhere in the world. In the event of
inspection and copying at the principal collection title, and the OMB control a family emergency, natural disaster or
office of the Exchange. All comments number in any correspondence. international crisis, U.S. embassies and
received will be posted without change; FOR FURTHER INFORMATION CONTACT:
consulates rely on this registration
the Commission does not edit personal Direct requests for additional information to provide critical
identifying information from information regarding the collection information and assistance to them. 22
submissions. You should submit only listed in this notice, including requests U.S.C. 2715 is one of the main legal
information that you wish to make for copies of the proposed collection authorities that deem the usage of this
available publicly. instrument and supporting documents, form necessary.
All submissions should refer to File to Derek Rivers, Bureau of Consular
Number SR–BX–2015–071 and should Methodology
Affairs, Overseas Citizens Services (CA/
be submitted on or before December 22, OCS/PMO), U.S. Department of State, 99% of responses are received via
2015. SA–17, 10th Floor, Washington, DC electronic submission on the Internet.
For the Commission, by the Division of 20036 or at RiversDA@state.gov. The service is available on the
Trading and Markets, pursuant to delegated SUPPLEMENTARY INFORMATION: Department of State, Bureau of Consular
authority.25
tkelley on DSK3SPTVN1PROD with NOTICES
• Title of Information Collection: Affairs Web site http://travel.state.gov at
Robert W. Errett, Smart Traveler Enrollment Program. https://step.state.gov/step/. The paper
Deputy Secretary. • OMB Control Number: 1405–0152. version of the collection permits
[FR Doc. 2015–30386 Filed 11–30–15; 8:45 am] • Type of Request: Revision of a respondents who do not have Internet
BILLING CODE 8011–01–P Currently Approved Collection. access to provide the information to the
• Originating Office: CA/OCS/PMO. U.S. embassy or consulate by fax, mail
25 17 CFR 200.30–3(a)(12). • Form Number: DS–4024, DS–4024e. or in person.
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Document Created: 2018-03-02 09:09:41
Document Modified: 2018-03-02 09:09:41
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