80 FR 80408 - 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 247 (December 24, 2015)
Federal Register Volume 80, Issue 247 (December 24, 2015)
| Page Range | 80408-80414 | |
| FR Document | 2015-32389 |
[Federal Register Volume 80, Number 247 (Thursday, December 24, 2015)] [Notices] [Pages 80408-80414] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-32389] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76693; File No. SR-BX-2015-079] 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) December 18, 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 December 11, 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''). 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 customer,\6\ 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 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 [[Page 80409]] 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\ The term ``Customer'' is defined below for purposes of this fee proposal. \7\ BX PRISM will only conduct an auction for simple (non- complex) Orders. \8\ See BX 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'' or (``C'') applies to any transaction that is identified by a Participant for clearing in the Customer range at The Options Clearing Corporation (``OCC'') which is not for the account of broker or dealer or for the account of a ``Professional'' (as that term is defined in Chapter I, Section 1(a)(48)). \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 (or being ``contra to'') PRISM Response. The rebate discussed is similar to the Miami International Securities Exchange (``MIAX'') PRIME break-up rebate. MIAX PRIME is, as discussed, similar in in nature to PRISM. --------------------------------------------------------------------------- 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. 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. Moreover, the Agency Order fee for Submitted PRISM Order, which is discussed in Change 1 above, will be applicable to any contract(s) for which a rebate is provided (whether $0.00 or otherwise in the fees and rebates schedule) \17\ for PRISM Order Traded with PRISM Response. --------------------------------------------------------------------------- \17\ Also known as fee and rebate schedule. --------------------------------------------------------------------------- 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 [[Page 80410]] 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 + 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 Responded to PRISM PRISM order traded with fee 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 (whether $0.00 or otherwise in this fees and rebates schedule) 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,\18\ in general, and with Section 6(b)(4) and 6(b)(5) of the Act,\19\ 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. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78f. \19\ 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.'' \20\ Likewise, in NetCoalition v. NYSE Arca, Inc.\21\ (``NetCoalition'') the D.C. 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.\22\ 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.'' \23\ --------------------------------------------------------------------------- \20\ Securities Exchange Act Release No. 51808 at 37499 (June 9, 2005) (``Regulation NMS Adopting Release''). \21\ NetCoalition v. NYSE Arca, Inc. 615 F.3d 525 (D.C. Cir. 2010). \22\ See NetCoalition, at 534. \23\ 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'. . .'' \24\ Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. --------------------------------------------------------------------------- \24\ Id. 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. Assessing Customers a lesser fee for Agency Order and for Contra- Side Order (in both cases $0.00) is reasonable because of the desirability of Customer activity. The proposed new fees and rebates for PRISM schedule is set up to encourage greater Customer trade volume to the Exchange. Customer activity enhances liquidity on the Exchange for the benefit of all market participants and benefits all market participants by providing more trading [[Page 80411]] 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. The practice of incentivizing increased Customer order flow through a fee and rebate schedule in order to attract professional liquidity providers (market-makers) is, and has been, commonly practiced in the options markets.\25\ The proposed fee and rebate schedule similarly attracts Customer order flow. --------------------------------------------------------------------------- \25\ See, e.g., MIAX Fee Schedule, NYSE Arca Fee Schedule, Nasdaq Options Market (``NOM'') Fee Schedule. --------------------------------------------------------------------------- The proposed fee and rebate schedule is reasonably designed because it is within the range of fees and rebates assessed by other exchanges employing similar fee structures for price improvement mechanisms.\26\ Other competing exchanges offer different fees and rebates for agency orders, contra-side order, and responders to the auction in a manner similar to the proposal.\27\ Other competing exchanges also charge different rates for transactions in their price improvement mechanisms for customers versus their non-customers in a manner similar to the proposal.\28\ As proposed, all applicable fees and rebates are within the range of fees and rebates for executions in price improvement mechanisms assessed by other exchanges employing similar fee structures for price improvement mechanisms. --------------------------------------------------------------------------- \26\ See MIAX Fee Schedule; and Securities Exchange Act Release No. 72943 (August 28, 2014), 80 FR 52785 (September 4, 2014) (SR- MIAX-2015-45) (notice of filing and immediate effectiveness regarding MIAX PRIME). See also, e.g., NYSE Amex Options Fee Schedule; International Securities Exchange Fee Schedule; and BOX Options Exchange Fee Schedule. \27\ Id. \28\ Id. --------------------------------------------------------------------------- The fee and rebate schedule as proposed continues to reflect differentiation among different market participants typically found in options fee and rebate schedules.\29\ The Exchange believes that the differentiation is reasonable and notes that unlike others (e.g. Customers) some market participants like BX Options Market Makers commit to various obligations. For example, transactions of a BX Market Maker 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. Further, all Market Makers are designated as specialists on BX for all purposes under the Act or rules thereunder.\30\ --------------------------------------------------------------------------- \29\ See, e.g., NOM Chapter XV, Section 2 and BX Chapter XV, Section 2. See also MIAX Fee Schedule. \30\ See Chapter VII, Section 5, entitled ``Obligations of Market Makers''. --------------------------------------------------------------------------- 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. Moreover, all similarly situated Submitted PRISM Orders are subject to the same proposed fee schedule, and access to the Exchange is offered on terms that are not unfairly discriminatory. In addition, fees for Submitted Prism Order are equitable and not unfairly discriminatory because, while each market participant (Customer, BX Options Market Maker, non-Customer) is assessed a fee the Customer fee is lowest because an increase in Customer order flow will bring greater volume and liquidity, which benefits all market participants by providing more trading opportunities and tighter spreads. 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 associated revenue will allow the Exchange to maintain and enhance its services. The practice of incentivizing increased Customer order flow through a fee and rebate schedule in order to attract professional liquidity providers (market-makers) is, and has been, commonly practiced in the options markets.\31\ The proposed fee and rebate schedule similarly attracts Customer order flow. --------------------------------------------------------------------------- \31\ See MIAX Fee Schedule, NYSE Arca Fee Schedule, NOM Fee Schedule. --------------------------------------------------------------------------- The proposed fee and rebate schedule is reasonably designed because it is within the range of fees and rebates assessed by other exchanges employing similar fee structures for price improvement mechanisms.\32\ Other competing exchanges offer different fees and rebates for agency orders, contra-side order, and responders to the auction in a manner similar to the proposal.\33\ Other competing exchanges also charge different rates for transactions in their price improvement mechanisms for customers versus their non-customers in a manner similar to the proposal.\34\ As proposed, all applicable fees and rebates are within the range of fees and rebates for executions in price improvement mechanisms assessed by other exchanges employing similar fee structures for price improvement mechanisms. --------------------------------------------------------------------------- \32\ See MIAX Fee Schedule; and Securities Exchange Act Release No. 72943 (August 28, 2014), 80 FR 52785 (September 4, 2014) (SR- MIAX-2015-45) (notice of filing and immediate effectiveness regarding MIAX PRIME). See also, e.g., NYSE Amex Options Fee Schedule; International Securities Exchange Fee Schedule; and BOX Options Exchange Fee Schedule. \33\ Id. \34\ Id. --------------------------------------------------------------------------- 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. The practice of incentivizing increased Customer order flow through a fee and rebate schedule in order to attract professional liquidity providers (market- makers) is, and has been, commonly practiced in the options markets.\35\ The proposed fee and rebate schedule similarly attracts Customer order flow. --------------------------------------------------------------------------- \35\ See MIAX Fee Schedule, NYSE Arca Fee Schedule, NOM Fee Schedule. --------------------------------------------------------------------------- The proposed fee and rebate schedule is reasonably designed because it is within the range of fees and rebates assessed by other exchanges employing similar fee structures for price improvement mechanisms.\36\ Other competing exchanges offer different fees and rebates for agency orders, contra-side order, and responders to the auction in a manner similar to the proposal.\37\ Other competing exchanges also charge different rates for transactions in their price improvement mechanisms for customers versus their non-customers in a manner similar to the proposal.\38\ As proposed, all applicable fees and rebates are within the range of fees and rebates for executions in price improvement mechanisms assessed by other [[Page 80412]] exchanges employing similar fee structures for price improvement mechanisms. --------------------------------------------------------------------------- \36\ See MIAX Fee Schedule; and Securities Exchange Act Release No. 72943 (August 28, 2014), 80 FR 52785 (September 4, 2014) (SR- MIAX-2015-45) (notice of filing and immediate effectiveness regarding MIAX PRIME). See also, e.g., NYSE Amex Options Fee Schedule; International Securities Exchange Fee Schedule; and BOX Options Exchange Fee Schedule. \37\ Id. \38\ Id. --------------------------------------------------------------------------- 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. Moreover, all similarly situated Submitted PRISM Orders are subject to the same proposed fee schedule, and access to the Exchange is offered on terms that are not unfairly discriminatory. 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. The rebate is also reasonable because paying the rebate only to Customers will allow the Exchange to maintain and enhance its services.\39\ --------------------------------------------------------------------------- \39\ As noted, such rebate would be applied in conjunction with any Agency Order fee that the Submitted PRISM Order is assessed. --------------------------------------------------------------------------- Offering a rebate only for Customer ($0.35 or $0.70) is reasonable because of the significance of Customer activity. 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. The practice of incentivizing increased Customer order flow through a fee and rebate schedule in order to attract professional liquidity providers (market-makers) is, and has been, commonly practiced in the options markets.\40\ The proposed fee and rebate schedule similarly attracts Customer order flow. --------------------------------------------------------------------------- \40\ See MIAX Fee Schedule, NYSE Arca Fee Schedule, NOM Fee Schedule. --------------------------------------------------------------------------- The proposed fee and rebate schedule is reasonably designed because it is within the range of fees and rebates assessed by other exchanges employing similar fee structures for price improvement mechanisms.\41\ Other competing exchanges offer different fees and rebates for agency orders, contra-side order, and responders to the auction in a manner similar to the proposal.\42\ Other competing exchanges also charge different rates for transactions in their price improvement mechanisms for customers versus their non-customers in a manner similar to the proposal.\43\ As proposed, all applicable fees and rebates are within the range of fees and rebates for executions in price improvement mechanisms assessed by other exchanges employing similar fee structures for price improvement mechanisms. --------------------------------------------------------------------------- \41\ See MIAX Fee Schedule; and Securities Exchange Act Release No. 72943 (August 28, 2014), 80 FR 52785 (September 4, 2014) (SR- MIAX-2015-45) (notice of filing and immediate effectiveness regarding MIAX PRIME). See also, e.g., NYSE Amex Options Fee Schedule; International Securities Exchange Fee Schedule; and BOX Options Exchange Fee Schedule. \42\ Id. \43\ Id. --------------------------------------------------------------------------- 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. Moreover, all similarly situated PRISM Order Traded with PRISM Response are subject to the same proposed rebate schedule, and access to the Exchange is offered on terms that are not unfairly discriminatory. In addition, rebates for PRISM Order Traded with PRISM Response are equitable and not unfairly discriminatory because, while only Customer, can earn a rebate, Customer order flow will bring greater volume and liquidity, which benefits all market participants by providing more trading opportunities and tighter spreads. The rebate schedule as proposed continues to reflect differentiation among different market participants typically found in options fee and rebate schedules.\44\ The Exchange believes that the differentiation is reasonable and notes that unlike others (e.g. Customers) some market participants like BX Options Market Makers commit to various obligations. For example, transactions of a BX Market Maker 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. Further, all Market Makers are designated as specialists on BX for all purposes under the Act or rules thereunder.\45\ --------------------------------------------------------------------------- \44\ See, e.g., NOM Chapter XV, Section 2 and BX Chapter XV, Section 2. \45\ See Chapter VII, Section 5, entitled ``Obligations of Market Makers''. --------------------------------------------------------------------------- In sum the Exchange believes that the proposed fee and rebate structure is designed to attract Customer liquidity, which benefits all market participants by providing more trading opportunities. This attracts BX Market Makers and 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. Moreover, the Exchange believes that assessing market participants other than Customers a higher effective rate for certain PRISM Order transactions is reasonable, equitable, and not unfairly discriminatory because these types of market participants are more sophisticated and have higher levels of order flow activity and system usage. This level of trading activity draws on a greater amount of system resources than that of Customers, and thus, generates greater ongoing operational costs. The proposed fees and rebates 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 [[Page 80413]] 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. The Exchange believes that the proposed change would increase both inter-market and intra-market competition by incentivizing members to direct their orders, and particularly Customer orders, to the Exchange, which benefits all market participants by providing more trading opportunities, which attracts market makers. To the extent that there is a differentiation between proposed fees assessed and rebates offered to Customers as opposed other market participants, the Exchange believes that this is appropriate because the fees and rebate should incentivize members to direct additional order flow to the Exchange and thus provide additional liquidity that enhances the quality of its markets and increases the volume of contracts traded on the Exchange. To the extent that this purpose is achieved, all the Exchange's market participants should benefit from the improved market liquidity. Enhanced market quality and increased transaction volume that results from the anticipated increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange. 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. The Exchange believes that the proposed fees and rebates for participation in the PRISM Auction are not going to have an impact on intra-market competition based on the total cost for participants to transact as respondents to the Auction as compared to the cost for participants to engage in non-Auction electronic transactions on the Exchange. As noted above, the Exchange believes that the proposed pricing for the PRISM Auction is comparable to that of other exchanges offering similar electronic price improvement mechanisms, and the Exchange believes that, based on experience with electronic price improvement crossing mechanisms on other markets, market participants understand that the price-improving benefits offered by the Auction justify and offset the transaction costs associated with Auction. To the extent that there is a difference between non-PRISM transactions and PRISM transactions, the Exchange does not believe this difference will cause participants to refrain from submitting or responding to PRISM. In addition, the Exchange does not believe that the proposed transaction fees and credits burden competition by creating a disparity of transaction fees between the PRISM Order and the transaction fees a responder pays would result in certain participants being unable to compete with the contra side order. The Exchange expects to see robust competition within the PRISM Auction. As discussed, 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. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and to attract order flow to the Exchange. The Exchange believes that the proposed rule change reflects this competitive environment because it establishes a fee structure in a manner that encourages market participants to direct their order flow, to provide liquidity, and to attract additional transaction volume to the Exchange. 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,\46\ 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. --------------------------------------------------------------------------- \46\ 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 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-2015-079 on the subject line. [[Page 80414]] 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-2015-079. 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-2015-079 and should be submitted on or before January 14, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\47\ --------------------------------------------------------------------------- \47\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-32389 Filed 12-23-15; 8:45 am] BILLING CODE 8011-01-P
![80408 Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Notices
number should be included on the or ‘‘Exchange’’) filed with the Securities Mechanism for all-electronic BX
subject line if email is used. To help the and Exchange Commission (‘‘SEC’’ or Options whereby a buy and sell order
Commission process and review your ‘‘Commission’’) the proposed rule may be submitted in one order message
comments more efficiently, please use change as described in Items I, II, and to initiate an auction at a ‘stop price’
only one method. The Commission will III, below, which Items have been and seek potential price improvement.
post all comments on the Commission’s prepared by the Exchange. The Options are traded electronically on BX
Internet Web site (http://www.sec.gov/ Commission is publishing this notice to Options, and all options participants
rules/sro.shtml). solicit comments on the proposed rule may respond to a PRISM Auction,4 the
Copies of the submission, all change from interested persons. duration of which will be set at 200
subsequent amendments, all written milliseconds.5 PRISM includes auto-
statements with respect to the proposed I. Self-Regulatory Organization’s match functionality in which a
rule change that are filed with the Statement of the Terms of Substance of Participant (an ‘‘Initiating Participant’’)
Commission, and all written the Proposed Rule Change may electronically submit for execution
communications relating to the The Exchange proposes to amend its an order it represents as agent on behalf
proposed rule change between the Options Pricing at Chapter XV, Section of customer,6 broker dealer, or any other
Commission and any person, other than 2, entitled ‘‘BX Options Market—Fees entity (‘‘PRISM Order’’) against
those that may be withheld from the and Rebates,’’ which governs pricing for principal interest or against any other
public in accordance with the BX members using the BX Options order it represents as agent (an
provisions of 5 U.S.C. 552, will be Market (‘‘BX Options’’). The Exchange ‘‘Initiating Order’’) provided it submits
available for Web site viewing and proposes to adopt new subsection (5) to the PRISM Order for electronic
printing in the Commission’s Public add fees and rebates for BX Price execution into the PRISM Auction
Reference Room, 100 F Street NE., Improvement Auction (‘‘PRISM’’), pursuant to Chapter VI, Section 9.7 The
Washington, DC 20549, on official which is a mechanism for price PRISM Rule describes the circumstances
business days between the hours of improvement on BX Options (‘‘Price under which an Initiating Participant
10:00 a.m. and 3:00 p.m. Copies of the Improvement Mechanism’’). may initiate an Auction. A PRISM Order
filing also will be available for The text of the proposed rule change that is for a Non-Customer (account of
inspection and copying at the principal is available on the Exchange’s Web site a broker-dealer or any other person or
office of the Exchange. All comments at http://nasdaqomxbx.cchwall entity that is not a Public Customer) is
received will be posted without change; street.com/, at the principal office of the always required to improve the same
the Commission does not edit personal Exchange, and at the Commission’s side of the BX BBO even if there is no
identifying information from Public Reference Room. resting limit order on the book. PRISM
submissions. You should submit only Orders that do not comply with the
information that you wish to make II. Self-Regulatory Organization’s requirements set forth in the PRISM
available publicly. Statement of the Purpose of, and Rule are not eligible to initiate an
All submissions should refer to File Statutory Basis for, the Proposed Rule Auction and will be immediately
Number SR–PHLX–2015–85 and should Change cancelled. Also, PRISM Orders
be submitted on or before January 14, In its filing with the Commission, the submitted at or before the opening of
2016. Exchange included statements trading are not eligible to initiate an
For the Commission, by the Division of concerning the purpose of and basis for Auction and will be rejected. PRISM
Trading and Markets, pursuant to delegated the proposed rule change and discussed Orders submitted during the final two
authority.21 any comments it received on the seconds of the trading session in the
Robert W. Errett, proposed rule change. The text of these
Deputy Secretary. statements may be examined at the (‘‘PRISM Filing’’). In the PRISM Approval the
Exchange noted that it will file a rule change
[FR Doc. 2015–32383 Filed 12–23–15; 8:45 am] places specified in Item IV below. The separately with the Commission to remove Price
BILLING CODE 8011–01–P Exchange has prepared summaries, set Improving and Post-Only Order types from its
forth in sections A, B, and C below, of Rules. The Exchange will not commence offering
the most significant aspects of such BX PRISM until such time as it has an effective and
operative rule in place from the Commission to
SECURITIES AND EXCHANGE statements. remove Price Improving and Post-Only Orders and
COMMISSION removes the ability to submit Price Improving and
A. Self-Regulatory Organization’s Post-Only Orders into the auction. In the event the
[Release No. 34–76693; File No. SR–BX– Statement of the Purpose of, and Exchange determines to amend its order types to
2015–079] Statutory Basis for, the Proposed Rule allow the entry of non-displayed order types, e.g.
Change Price Improving or Post-Only Orders, the Exchange
Self-Regulatory Organizations; will file a proposed rule change pursuant to Section
NASDAQ OMX BX, Inc.; Notice of Filing 1. Purpose 19(b)(2) with the Commission to seek approval for
such rule change. See also Options Technical
and Immediate Effectiveness of The Exchange proposes to amend its Update #2015–6.
Proposed Rule Change To Establish Chapter XV, Section 2 to adopt new 4 PRISM Auction eligibility requirements and the
Fees and Rebates Related to BX Price subsection (5) to add fees and rebates for early conclusion of the PRISM Auction are, with
Improvement Auction (PRISM) certain other PRISM features, subject to a pilot
PRISM. program scheduled to expire July 18, 2016. See BX
December 18, 2015. Effective on or about November 16, Chapter VI, Section 9.
Pursuant to Section 19(b)(1) of the 2015, BX Options is introducing PRISM, 5 Other exchanges that have price improvement
which is codified in BX Chapter VI, auctions have developed different durations. See,
mstockstill on DSK4VPTVN1PROD with NOTICES
Securities Exchange Act of 1934 e.g., CBOE Rule 6.74A(b)(1)(C) (CBOE’s AIM
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Section 9 (also known as the ‘‘PRISM auction has a duration of one second); and BOX
notice is hereby given that on December Rule’’).3 PRISM is a Price Improvement Rule 7150(f)(1) (BOX’s PIP auction has a duration
of one hundred milliseconds, commencing on the
11, 2015, NASDAQ OMX BX, Inc. (‘‘BX’’ 3 See Securities Exchange Act Release Nos. 76301 dissemination of the PIP broadcast).
6 The term ‘‘Customer’’ is defined below for
(October 29, 2015), 80 FR 68347 (November 4, 2015)
21 17 CFR 200.30–3(a)(12). (SR–BX–2015–032) (approval order) (‘‘PRISM purposes of this fee proposal.
1 15 U.S.C. 78s(b)(1). Approval’’); and 75827 (September 3, 2015), 80 FR 7 BX PRISM will only conduct an auction for
2 17 CFR 240.19b–4. 54601 (September 10, 2015) (SR–BX–2015–032) simple (non-complex) Orders.
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![80410 Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Notices
rebate of $0.35 (fee $0.00 + rebate trades against a PRISM Response in a Responded to PRISM Auction will be
$0.35). The market participant that Penny Class (one contract). The Non- assessed a fee of $0.49.
Responded to PRISM Auction will be Customer Agency Order is assessed a fee As proposed, Chapter XV, Section 2
assessed a fee of $0.49. of $0.30 and given a rebate of $0.00 for subsection (5) will read as follows:
Example 2 a total fee of $0.30 (fee $0.30 + rebate
(5) Fees and rebates for BX Price
$0.00). The market participant that
A Non-Customer PRISM Agency Improvement Auction (‘‘PRISM’’)
Order in a Penny Class (one contract)
FEES AND REBATES (PER CONTACT)
Submitted PRISM Responded to PRISM PRISM order traded with
order fee 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 (wheth-
er $0.00 or otherwise in this fees and rebates schedule) for PRISM Order Traded with PRISM Response.
The Exchange is adopting these fees NetCoalition v. NYSE Arca, Inc.21 opportunity for price improvement in a
and rebates at this time because it (‘‘NetCoalition’’) the D.C. Circuit upheld competitive auction process. The
believes that they will allow the the Commission’s use of a market-based Exchange believes that its proposal will
Exchange to recoup some of the costs approach in evaluating the fairness of allow the Exchange to recoup costs
associated with PRISM, which promotes market data fees against a challenge associated with PRISM while also
price improvement to the benefit of claiming that Congress mandated a cost- incentivizing its use.
market participants, while also based approach.22 As the court
Change 1—Fees for Submitted PRISM
incentivizing the use of PRISM. emphasized, the Commission ‘‘intended
Order: Agency Order and Contra-Side
in Regulation NMS that ‘market forces,
2. Statutory Basis Order
rather than regulatory requirements’
play a role in determining the market For Submitted PRISM Order,
The Exchange believes that the data . . . to be made available to establishing that there will be no fee for
proposed rule change is consistent with investors and at what cost.’’ 23 Customer for Agency Order, while
the provisions of Section 6 of the Act,18 Further, ‘‘[n]o one disputes that establishing a $0.30 fee per contract for
in general, and with Section 6(b)(4) and competition for order flow is ‘fierce.’ BX Options Market Maker for Agency
6(b)(5) of the Act,19 in particular, in that . . . As the SEC explained, ‘[i]n the U.S. Order and a $0.30 fee per contract for
it provides for the equitable allocation national market system, buyers and Non-Customer for Agency Order, is
of reasonable dues, fees and other sellers of securities, and the broker- reasonable because it encourages the
charges among members and issuers and dealers that act as their order-routing desired Customer behavior. The fee is
other persons using any facility or agents, have a wide range of choices of also reasonable because the associated
system which the Exchange operates or where to route orders for execution’; revenue will allow the Exchange to
controls, and is not designed to permit [and] ‘no exchange can afford to take its maintain and enhance its services. For
unfair discrimination between market share percentages for granted’ Submitted PRISM Order, establishing no
customers, issuers, brokers, or dealers. because ‘no exchange possesses a Customer fee, while establishing a $0.05
The Commission and the courts have monopoly, regulatory or otherwise, in fee per contract for BX Options Market
repeatedly expressed their preference the execution of order flow from broker Maker for Contra-Side Order and a $0.05
for competition over regulatory dealers’. . .’’ 24 Although the court and fee per contract fee for Non-Customer
intervention in determining prices, the SEC were discussing the cash for Contra-Side Order, is reasonable
products, and services in the securities equities markets, the Exchange believes because it encourages the desired
markets. In Regulation NMS, for that these views apply with equal force Customer behavior. The fee is also
to the options markets. reasonable because the associated
example, the Commission indicated that
The Exchange’s proposal establishes revenue will allow the Exchange to
market forces should generally
fees and rebates regarding PRISM, maintain and enhance its services.
determine the price of non-core market which promotes price improvement to
data because national market system Assessing Customers a lesser fee for
the benefit of market participants. The Agency Order and for Contra-Side Order
regulation ‘‘has been remarkably Exchange believes that PRISM will
successful in promoting market (in both cases $0.00) is reasonable
encourage market participants, and in because of the desirability of Customer
competition in its broader forms that are particular BX Market Makers, to
mstockstill on DSK4VPTVN1PROD with NOTICES
activity. The proposed new fees and
most important to investors and listed compete vigorously to provide the rebates for PRISM schedule is set up to
companies.’’ 20 Likewise, in
encourage greater Customer trade
21 NetCoalition v. NYSE Arca, Inc. 615 F.3d 525
volume to the Exchange. Customer
18 15 U.S.C. 78f. (D.C. Cir. 2010).
19 15 U.S.C. 78f(b)(4) and (5). 22 See NetCoalition, at 534. activity enhances liquidity on the
20 Securities Exchange Act Release No. 51808 at 23 Id. at 537. Exchange for the benefit of all market
37499 (June 9, 2005) (‘‘Regulation NMS Adopting 24 Id. at 539 (quoting ArcaBook Order, 73 FR at participants and benefits all market
Release’’). 74782–74783). participants by providing more trading
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![80414 Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Notices
Paper Comments SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
COMMISSION Statement of the Purpose of, and
• Send paper comments in triplicate Statutory Basis for, the Proposed Rule
to Secretary, Securities and Exchange Change
[Release No. 34–76696; File No. SR–ICEEU–
Commission, 100 F Street NE.,
2015–020] 1. Purpose
Washington, DC 20549–1090.
ICE Clear Europe proposes revising its
All submissions should refer to File Self-Regulatory Organizations; ICE
Price Discovery Policy to accommodate
Number SR–BX–2015–079. This file Clear Europe Limited; Notice of Filing
industry change regarding the reduction
number should be included on the and Immediate Effectiveness of a
of the frequency for which SN CDS
subject line if email is used. To help the Proposed Rule Change Relating to ICC
contracts roll to the new on-the-run-
Commission process and review your End-of-Day Price Discovery Policy contract. The changes affect the labeling
comments more efficiently, please use December 18, 2015. convention for cleared SN CDS
only one method. The Commission will contracts for price reporting purposes,
post all comments on the Commission’s Pursuant to Section 19(b)(1) of the but will not alter the terms of the
Internet Web site (http://www.sec.gov/ Securities Exchange Act of 1934 contracts or the range of tenors of SN
rules/sro.shtml). Copies of the (‘‘Act’’),1 and Rule 19b–4 thereunder,2 CDS contracts currently cleared by ICE
submission, all subsequent notice is hereby given that on December Clear Europe.
amendments, all written statements 3, 2015, ICE Clear Europe Limited (‘‘ICE ICE Clear Europe believes such
with respect to the proposed rule Clear Europe’’) filed with the Securities revisions will facilitate the prompt and
change that are filed with the and Exchange Commission accurate clearance and settlement of
(‘‘Commission’’) the proposed rule securities transactions and derivative
Commission, and all written
changes as described in Items I, II, and agreements, contracts, and transactions
communications relating to the
III below, which Items have been cleared by ICE Clear Europe. The
proposed rule change between the
prepared primarily by ICE Clear Europe. proposed revisions are described in
Commission and any person, other than ICE Clear Europe filed the proposed rule detail as follows.
those that may be withheld from the changes pursuant to Section 19(b)(3)(A) As part of ICE Clear Europe’s end-of-
public in accordance with the of the Act,3 and Rule 19b–4(f)(4)(i) 4 day price discovery process, ICE Clear
provisions of 5 U.S.C. 552, will be thereunder, so that the proposal was Europe Clearing Members are required
available for Web site viewing and effective upon filing with the to submit end-of-day prices for specific
printing in the Commission’s Public Commission. The Commission is instruments related to their open
Reference Room, 100 F Street NE., publishing this notice to solicit interest at ICE Clear Europe, in
Washington, DC 20549, on official comments on the proposed rule changes accordance with Rule 503(g) and the ICE
business days between the hours of from interested persons. Clear Europe Procedures. These end-of-
10:00 a.m. and 3:00 p.m. Copies of the day price submissions are used by ICE
filing also will be available for I. Self-Regulatory Organization’s Clear Europe in its calculation of
inspection and copying at the principal Statement of the Terms of Substance of settlement prices.
office of the Exchange. All comments the Proposed Rule Change ICE Clear Europe refers to a group of
received will be posted without change; SN instruments with the same risk sub-
The principal purpose of the factor and coupon as a ‘‘curve.’’ Each
the Commission does not edit personal proposed rule changes is to revise the
identifying information from point, or tenor, along the curve is
ICE Clear Europe End-of-Day Price labeled with a tenor name. Currently for
submissions. You should submit only Discovery Policy (the ‘‘Price Discovery SN instruments, the market convention
information that you wish to make Policy’’) to accommodate industry is to describe tenors based on the period
available publicly. All submissions changes regarding the reduction of the remaining until the scheduled
should refer to File Number SR–BX– frequency for which Single Name termination date of the contract. Under
2015–079 and should be submitted on (‘‘SN’’) Credit Default Swap (‘‘CDS’’) this convention, the nearest-to-expiring
or before January 14, 2016. contracts roll to the new on-the-run- contract is referred to as the 0M tenor,
For the Commission, by the Division of contract. the next nearest to expiring is referred
Trading and Markets, pursuant to delegated II. Self-Regulatory Organization’s to as the three month (3M) tenor, and so
authority.47 Statement of the Purpose of, and on (with scheduled termination dates
Robert W. Errett, Statutory Basis for, the Proposed Rule spaced at 3 month intervals), up to ten
Deputy Secretary. Change years (10Y). ICE Clear Europe supports
[FR Doc. 2015–32389 Filed 12–23–15; 8:45 am]
the clearing of all 41 SN tenors from 0M
In its filing with the Commission, ICE to 10Y. As such, ICE Clear Europe also
BILLING CODE 8011–01–P
Clear Europe included statements calculates settlement prices for the 41
concerning the purpose of and basis for SN tenors on the curve. However, ICE
the proposed rule changes. The text of Clear Europe defines a subset of the 41
these statements may be examined at tenors as ‘‘benchmark-tenors’’, which
the places specified in Item IV below. are tenors for which Clearing Members
ICE Clear Europe has prepared provide submissions in the end-of-day
mstockstill on DSK4VPTVN1PROD with NOTICES
summaries, set forth in sections A, B, price discovery process. The nine
and C below, of the most significant benchmark tenors are 0M, 6M, 1Y, 2Y,
aspects of such statements. 3Y, 4Y, 5Y, 7Y, and 10Y, which
correspond to so-called ‘‘on-the-run’’
1 15 U.S.C. 78s(b)(1). contracts.
2 17 CFR 240.19b–4. Currently, as a matter of CDS market
3 15 U.S.C. 78s(b)(3)(A). practice, the on-the-run contract for a
47 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(4)(i). particular tenor is the contract expiring
VerDate Sep<11>2014 17:57 Dec 23, 2015 Jkt 238001 PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 E:\FR\FM\24DEN1.SGM 24DEN1](https://thefederalregister.org/doc/80_FR_80655/page/7.svg)
Document Created: 2015-12-24 02:25:42
Document Modified: 2015-12-24 02:25:42
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 80408 |
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