81 FR 14155 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Fees and Rebates To Adopt the Select Symbols Options Tier Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 51 (March 16, 2016)

Page Range		14155-14160
FR Document		2016-05854
Federal Register, Volume 81 Issue 51 (Wednesday, March 16, 2016)
[Federal Register Volume 81, Number 51 (Wednesday, March 16, 2016)]
[Notices]
[Pages 14155-14160]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-05854]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77339; File No. SR-BX-2016-016]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Regarding Fees and 
Rebates To Adopt the Select Symbols Options Tier Schedule

March 10, 2016.
    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 March 1, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') \3\ filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange notes that it has legally changed its name to 
NASDAQ BX, Inc. with the state of Delaware and filed Form 1 
reflecting the change, and is in the process of changing its rules 
to reflect the new name.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend 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 modify certain fees and rebates 
(per executed contract) to adopt the Select Symbol Options Tier 
Schedule for certain Penny Pilot \4\ Options (each a ``Select Symbol'' 
and together the ``Select Symbols'').
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    \4\ The Penny Pilot 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).
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    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 modify 
certain fees and rebates \5\ to adopt the Select Symbol Options Tier 
Schedule for certain Penny Pilot Options. The proposed Select Symbol 
Options Tier Schedule would apply to Customers,\6\ BX Options Market 
Makers,\7\ Non-Customers,\8\ and Firms.\9\
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    \5\ Fees and rebates are per executed contract. BX Chapter XV, 
Section 2(1).
    \6\ 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)). BX Chapter XV.
    \7\ 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. BX 
Chapter XV.
    \8\ Note 1 to Chapter XV, Section 2, states: ``\1\ A Non-
Customer includes a Professional, Broker-Dealer and Non-BX Options 
Market Maker.''
    \9\ The term ``Firm'' or (``F'') applies to any transaction that 
is identified by a Participant for clearing in the Firm range at 
OCC. BX Chapter XV.
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    Currently, Chapter XV, Section 2, subsection (1), contains a SPY 
\10\ Options Tier Schedule (``SPY Schedule'') that has four tiers. The 
Exchange proposes to convert the SPY Schedule into the Select Symbols 
Options Tier Schedule, as discussed in detail below.
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    \10\ ``SPY'' or Standard and Poor's Depositary Receipts/SPDRs 
options are Penny Pilot Options that are based on the SPDR exchange-
traded fund (``ETF''), which is designed to track the performance of 
the S&P 500.
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Change 1--Penny Pilot Options: Modify Fees and Rebates To Add the 
Select Symbols Options Tier Schedule
    In Change 1, the Exchange proposes modifications to convert its 
current SPY Schedule to the Select Symbols Options Tier Schedule. The 
proposed change keeps the great majority of the current SPY Schedule 
fees and rebates assessments (twelve out of sixteen) and tiers (three 
out of four) exactly the same in the new Select Symbols Options Tier 
Schedule; and updates the fees and rebates schedule to indicate 
``Select Symbols'' rather than ``SPY.''
    Specifically, the Exchange proposes, commensurate with renaming the 
SPY Options Tier Schedule the Select Symbols Options Tier Schedule, to 
set forth the BX Options Select Symbol List. The Select Symbols \11\ on 
this list represent, similarly to SPY, some of the highest volume Penny 
Pilot Options traded on the Exchange and in the U.S. The proposed 
Select Symbols are similar to those of other options exchanges (e.g., 
the MIAX Options Exchange (``MIAX'').\12\ Like the SPY

[[Page 14156]]

Options Tier Schedule, the Select Symbols Options Tier Schedule will 
have four tiers.
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    \11\ The following are Select Symbols: ASHR, DIA, DXJ, EEM, EFA, 
EWJ, EWT, EWW, EWY, EWZ, FAS, FAZ, FXE, FXI, FXP, GDX, GLD, HYG, 
IWM, IYR, KRE, OIH, QID, QLD, QQQ, RSX, SDS, SKF, SLV, SPY, SRS, 
SSO, TBT, TLT, TNA, TZA, UNG, URE, USO, UUP, UVXY, UYG, VXX, XHB, 
XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY, XME, XOP, XRT.
    \12\ See MIAX fee schedule at http://www.miaxoptions.com/sites/default/files/fee-schedules/MIAX_Options_Fee_Schedule_10012015.pdf.
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    Proposed Tier 1 in the Select Symbols Options Tier Schedule, which 
has the same requirements as the current Tier I in the SPY Options Tier 
Schedule will be where a BX Participant (``Participant'') executes less 
than 0.05% of total industry customer equity and exchange traded fund 
(``ETF'') option average daily volume (``ADV'') contracts per month. 
Proposed Tier 1 will range from a $0.00 rebate to a $0.44 fee:

--The Rebate to Add Liquidity when Customer trading with Non-Customer, 
BX Options Market Maker, or Firm will be $0.00 (no rebate will be 
paid); \13\
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    \13\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the Fee to Add Liquidity when BX Options Market Maker trading with 
Customer will be $0.44; \14\
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    \14\ Proposed $0.44 is a modest fee increase from the current 
SPY Options Tier Schedule, which is $0.42.
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--the Rebate to Remove Liquidity when Customer trading with Non-
Customer, BX Options Market Maker, Customer, or Firm will be $0.00; 
\15\ and
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    \15\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the Fee to Remove Liquidity when BX Options Market Maker trading with 
Customer will be $0.42.\16\

    \16\ This is the same as the fee in the current SPY Options Tier 
Schedule.
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    Proposed Tier 2 in the Select Symbols Options Tier Schedule, which 
has the same requirements as current Tier 2 in the SPY Options Tier 
Schedule, will be where Participant executes 0.05% to less than 0.15% 
of total industry customer equity and ETF option ADV contracts per 
month. Proposed Tier 2 will range from a $0.25 rebate to a $0.44 fee:

--The new Rebate to Add Liquidity when Customer trading with Non-
Customer, BX Options Market Maker, or Firm will be $0.10; \17\
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    \17\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the new Fee to Add Liquidity when BX Options Market Maker trading 
with Customer will be $0.44; \18\
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    \18\ Proposed $0.44 is a modest fee increase from the current 
SPY Options Tier Schedule, which is $0.42.
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--the new Rebate to Remove Liquidity when Customer trading with Non-
Customer, BX Options Market Maker, Customer, or Firm will be $0.25; 
\19\ and
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    \19\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the new Fee to Remove Liquidity when BX Options Market Maker trading 
with Customer will be $0.42.\20\

    \20\ This is the same as the fee in the current SPY Options Tier 
Schedule.
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    Proposed Tier 3 in the Select Symbols Options Tier Schedule, which 
has the same requirements the current Tier 3 in the SPY Options Tier 
Schedule, will be where Participant executes 0.15% or more of total 
industry customer equity and ETF option ADV contracts per month. 
Proposed Tier 3 will range from a $0.37 rebate to a $0.40 fee:

--The new Rebate to Add Liquidity when Customer trading with Non-
Customer, BX Options Market Maker, or Firm will be $0.20; \21\
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    \21\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the new Fee to Add Liquidity when BX Options Market Maker trading 
with Customer will be $0.40; \22\
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    \22\ Proposed $0.40 is a modest fee increase from the current 
SPY Options Tier Schedule, which is $0.39.
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--the new Rebate to Remove Liquidity when Customer trading with Non-
Customer, BX Options Market Maker, Customer, or Firm will be $0.37; 
\23\ and
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    \23\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the new Fee to Remove Liquidity when BX Options Market Maker trading 
with Customer will be $0.39.\24\
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    \24\ This is the same as the fee in the current SPY Options Tier 
Schedule.

    Proposed Tier 4 in the Select Symbols Options Tier Schedule, which 
is modified from the current Tier 4 in the SPY Options Tier Schedule, 
will be where Participant executes more than 10,000 BX Price 
Improvement Auction (``PRISM'') \25\ Agency Contracts per month; or 
Participant executes BX Options Market Maker volume of 0.30% or more of 
total industry customer equity and ETF options ADV per month. If a 
Participant qualifies for Tier 4 the rates applicable to this tier will 
supersede any other Select Symbols tier rates that the Participant may 
qualify for. Proposed Tier 4 will range from a $0.37 rebate to a $0.29 
fee:
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    \25\ 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, the duration of which is set at 200 milliseconds. 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, 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 [sic]. See 
Chapter VI, Section 9; and Securities Exchange Act Release No. 76301 
(October 29, 2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032) 
(order approving BX PRISM).

--The new Rebate to Add Liquidity when Customer trading with Non-
Customer, BX Options Market Maker, or Firm will be $0.25; \26\
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    \26\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the new Fee to Add Liquidity when BX Options Market Maker trading 
with Customer will be $0.29; \27\
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    \27\ Proposed $0.29 is, in order to further promote liquidity on 
the Exchange, a modest fee decrease from the current SPY Options 
Tier Schedule, which is $0.32.
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--the new Rebate to Remove Liquidity when Customer trading with Non-
Customer, BX Options Market Maker, Customer, or Firm will be $0.37; 
\28\ and
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    \28\ This is the same as the rebate in the current SPY Options 
Tier Schedule.
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--the new Fee to Remove Liquidity when BX Options Market Maker trading 
with Customer will be $0.25.\29\
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    \29\ This is the same as the fee in the current SPY Options Tier 
Schedule.

    In addition, there are currently six explanatory notes in the SPY 
Options Tier Schedule. In each such note the Exchange will, as 
elsewhere in the fees and rebates schedule, replace ``SPY'' with 
``Select Symbols.'' The Exchange proposes to also establish a fee on 
one note that is not currently fee liable in the SPY Options Tier 
Schedule. Specifically, the Exchange proposes to state that BX Options 
Market Maker fee to add liquidity in SPY [sic] Options will be $0.04 
when trading with Firm, Non-Customer, or BX Options Market Maker.
    Chapter XV, Section 2 subsection (1) reflecting the proposed Select 
Symbols Options Tier Schedule will read as follows:
Sec. 2 BX Options Market--Fees and Rebates
    The following charges shall apply to the use of the order execution 
and routing services of the BX Options market for all securities.
    (1) Fees for Execution of Contracts on the BX Options Market:
* * * * *

[[Page 14157]]



                                      Select Symbols Options Tier Schedule
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                                              Rebate to add      Fee to add    Rebate to  remove   Fee to remove
                                                liquidity         liquidity         liquidity        liquidity
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When:                                                Customer      BX Options           Customer      BX Options
                                                                 market maker                       market maker
----------------------------------------------------------------------------------------------------------------
Trading with:                                   Non-Customer,        Customer      Non-Customer,        Customer
                                                   BX options                         BX options
                                                market maker,                      market maker,
                                                      or firm                          customer,
                                                                                         or firm
----------------------------------------------------------------------------------------------------------------
Tier 1:
    Participant executes less than 0.05%                $0.00           $0.44              $0.00           $0.42
     of total industry customer equity and
     ETF option ADV contracts per month...
Tier 2:
    Participant executes 0.05% to less                   0.10            0.44               0.25            0.42
     than 0.15% of total industry customer
     equity and ETF option ADV contracts
     per month............................
Tier 3:
    Participant executes 0.15% or more of                0.20            0.40               0.37            0.39
     total industry customer equity and
     ETF option ADV contracts per month...
Tier 4:
    Participant executes more than 10,000                0.25            0.29               0.37            0.25
     PRISM Agency Contracts per month; or
     Participant executes BX Options
     Market Maker volume of 0.30% or more
     of total industry customer equity and
     ETF options ADV per month............
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BX Options Select Symbol List
    The following are Select Symbols: ASHR, DIA, DXJ, EEM, EFA, EWJ, 
EWT, EWW, EWY, EWZ, FAS, FAZ, FXE, FXI, FXP, GDX, GLD, HYG, IWM, IYR, 
KRE, OIH, QID, QLD, QQQ, RSX, SDS, SKF, SLV, SPY, SRS, SSO, TBT, TLT, 
TNA, TZA, UNG, URE, USO, UUP, UVXY, UYG, VXX, XHB, XLB, XLE, XLF, XLI, 
XLK, XLP, XLU, XLV, XLY, XME, XOP, XRT
     BX Options Market Maker fee to add liquidity in Select 
Symbols Options will be $0.04 when trading with Firm, Non-Customer, or 
BX Options Market Maker.
     Firm fee to add liquidity and fee to remove liquidity in 
Select Symbols Options will be $0.33 per contract, regardless of 
counterparty.
     Non-Customer fee to add liquidity and fee to remove 
liquidity in Select Symbols Options will be $0.46 per contract, 
regardless of counterparty.
     BX Options Market Maker fee to remove liquidity in Select 
Symbols Options will be $0.46 per contract when trading with Firm, Non-
Customer, or BX Options Market Maker.
     Customer fee to add liquidity in Select Symbols Options 
when contra to another Customer is $0.33 per contract.
     Volume from all products listed on BX Options will apply 
to the Select Symbols Options Tiers.
* * * * *
    The Exchange is proposing fees and rebate changes and adopting the 
Select Symbols Options Tier Schedule at this time because it believes 
that this will provide incentives for execution of contracts, and in 
particular Select Symbols Options contracts, on the BX Options Market.
    The Exchange also believes that its proposal should provide 
increased opportunities for participation in executions on the 
Exchange, facilitating the ability of the Exchange to bring together 
participants and encourage more robust competition for orders.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Pricing 
Schedule is consistent with Section 6(b) of the Act,\30\ in general, 
and furthers the objectives of Section 6(b)(4) and (b)(5) of the 
Act,\31\ 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.
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    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(4), (5).
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    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, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \32\
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    \32\ Securities Exchange Act Release No. 51808 at 37499 (June 9, 
2005) (``Regulation NMS Adopting Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission 
\33\ (``NetCoalition'') 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.\34\ 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.'' \35\
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    \33\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \34\ See id. at 534-535.
    \35\ See id. at 537.
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    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

[[Page 14158]]

dealers'. . . .'' \36\ 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.
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    \36\ See id. at 539 (quoting Securities Exchange [sic] Release 
No. 59039 (December 2, 2008), 73 FR 74770 (December 9, 2008) (SR-
NYSEArca-2006-21) at 73 FR at 74782-74783).
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    The Exchange proposes to amend its Chapter XV, Section 2 to modify 
certain fees and rebates to adopt the Select Symbol Options Tier 
Schedule for certain Penny Pilot Options. The proposed modified fees 
and rebates and new Select Symbols Options Tier Schedule would, as 
discussed, apply to Customers, BX Options Market Makers, Non-Customers, 
and Firms. The Exchange believes that its proposal is reasonable, 
equitable, and not unfairly discriminatory and should provide increased 
opportunities for participation in executions on the Exchange, 
facilitating the ability of the Exchange to bring together participants 
and encourage more robust competition for orders.
Change 1--Penny Pilot Options: Modify Fees and Rebates To Add the 
Select Symbols Options Tier Schedule
    In Change 1, the Exchange proposes to convert its current SPY 
Options Tier Schedule to the Select Symbols Options Tier Schedule and 
to set forth the BX Options Select Symbol List. The Select Symbols on 
this list represent, similarly to SPY, some of the highest volume Penny 
Pilot Options traded on the Exchange and in the U.S and are similar to 
those of other options exchanges (e.g., the MIAX).
    As discussed, the proposed change updates the fees and rebates 
schedule to indicate ``Select Symbols'' rather than ``SPY'' and keeps 
the great majority of the current SPY Schedule fees and rebates 
assessments and tiers exactly the same in the new Select Symbols 
Options Tier Schedule. The proposed fee changes are in respect of the 
Fee to Add Liquidity when BX Options Market Maker trades with Customer. 
Each of the Tier 1, 2, and 3 changes is a modest fee increase from the 
current schedule, not exceeding two pennies. The Tier 4 change is a fee 
decrease from the current fee schedule in order to further promote 
liquidity on the Exchange.\37\ The Exchange also proposes to change one 
explanatory note applicable to the Select Symbols to make it fee 
liable.
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    \37\ Tier 4 is updated from the current SPY Options Tier 
Schedule to give additional ways to achieve the tier requirements 
through specified PRISM volume as well as options volume.
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    The proposed rule change is reasonable because it continues to 
encourage market participant behavior through the fees and rebates 
system, which is an accepted methodology among options exchanges.\38\ 
Converting SPY Options Tier Schedule to the Select Symbols Options Tier 
Schedule is reasonable because of the nature of Select Symbol options, 
which are the most heavily traded options on the Exchange as well as in 
the industry. By expanding from SPY Options to Select Symbol Options, 
the Exchange is further promoting options liquidity [sic] the Exchange.
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    \38\ See, e.g., fee and rebate schedules of other options 
exchanges, including, but not limited to, NASDAQ Options Market 
(``NOM''), NASDAQ PHLX LLC (``Phlx''), and Chicago Board Options 
Exchange (``CBOE'').
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    The Exchange believes that the proposed Select Symbol Options Tier 
Schedule is reasonable because it is not a novel, untested structure 
but rather is similar to what is offered by other options markets, such 
as MIAX, and is based on the Exchange's existing SPY Options Tier 
Schedule. The proposed Tiers in the Select Symbols Options Tier 
Schedule clearly reflect the progressively increasing nature of 
Participant executions structured for the purpose of attracting order 
flow to the Exchange. This encourages market participant behavior 
through progressive tiered fees and rebates using an accepted 
methodology among options exchanges.\39\
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    \39\ Id.
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    Tier 1 in the Select Symbols Options Tier Schedule is, similarly to 
Tier 1 in the current SPY Options Tier Schedule, set up to enable a 
Participant to earn a Rebate to Add Liquidity or pay a Fee to Add 
Liquidity in Select Symbols where the Participant executes less than 
0.05% of total industry customer equity and ETF option ADV contracts 
per month.
    Tier 2 in the Select Symbols Options Tier Schedule is, similarly to 
Tier 2 in the current SPY Options Tier Schedule, set up to enable a 
Participant to earn a Rebate to Add Liquidity or pay a Fee to Add 
Liquidity in the Select Symbols where the Participant executes 0.05% to 
less than 0.15% of total industry customer equity and ETF option ADV 
contracts per month.
    And Tier 3 in the Select Symbols Options Tier Schedule is, 
similarly to Tier 3 in the SPY Options Tier Schedule, set up to enable 
a Participant to earn a Rebate to Add Liquidity or pay a Fee to Add 
Liquidity in the Select Symbols to Participant [sic] executes 0.15% or 
more of total industry customer equity and ETF option ADV contracts per 
month. The fees and rebates that BX Options Market Makers and Customers 
are assessed are, as has been discussed, almost all comparable to the 
fees and rebates in the SPY Options Tier Schedule.
    The Exchange believes that it is reasonable to also adjust the 
current Tier 4 in the SPY Options Tier Schedule as reflected in the new 
Tier 4 in the Select Symbols Options Tier Schedule, in order to enable 
a Participant to earn a Rebate to Add Liquidity or pay a Fee to Add 
Liquidity in Select Symbols where the Participant executes more than 
10,000 PRISM Agency Contracts per month; or Participant executes BX 
Options Market Maker volume of 0.30% or more of total industry customer 
equity and ETF options ADV per month. By so doing, the Exchange 
encourages Participants to trade PRISM and/or make markets on the 
exchange.
    In addition, the Exchange believes that making changes to add the 
Select Symbols Options Tier Schedule in terms of Rebate to Add 
Liquidity and Fee to Add Liquidity, and Rebate to Remove Liquidity and 
Fee to Remove Liquidity, is reasonable because it encourages the 
desired Customer behavior by attracting Customer interest in Select 
Symbols 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 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 Select Symbols Options Tier Schedule is reasonable in that it 
is, similarly to the current SPY Options Tier Schedule, set up to 
incentivize Participants to direct liquidity to the Exchange; using 
volume from all products listed on BX Options will further incentivize 
Participants. As Participants execute more of total industry customer 
equity and ETF option ADV contracts per month on the Exchange, they can 
in certain categories earn higher rebates and be assessed lower fees. 
For example, in the Select Symbols Options Tier Schedule the Tier 3 
Rebate to Add Liquidity when Customer trading with Non-Customer, BX 
Options Market Maker, or Firm is higher ($0.20) than the Tier 1 Rebate 
to Add Liquidity ($0.00); and the Tier 3 Rebate to Remove Liquidity 
when Customer trading with Non-Customer, BX Options Market Maker, 
Customer, or Firm is higher ($0.37) that the Tier 2 Rebate to Remove 
Liquidity ($0.25).
    Similarly, the proposed Fee to Add Liquidity when BX Option Market 
Maker trading with Customer is lower for Tier 3 ($0.40) than for Tier 1 
($0.44);

[[Page 14159]]

and, the Fee to Remove Liquidity when BX Option Market Maker trading 
with Customer is lower for Tier 3 ($0.39) than for Tier 1 ($0.42).
    The Exchange believes that it is reasonable to indicate a $0.04 fee 
assessment in the discussed BX Options Market Maker explanatory note. 
This explanatory note, which is currently not fee liable for options on 
SPY, will be fee liable for Select Symbols. The Exchange believes that 
this is in line with its continued effort to promote liquidity on the 
Exchange while covering costs through fees and rebates.
    Establishing the Select Symbol Options Tier Schedule is equitable 
and not unfairly discriminatory. This is because the Exchange's 
proposal to assess fees and pay rebates according to Tiers 1, 2, 3, and 
4 as proposed to be amended will apply uniformly to all similarly 
situated Participants. Customers would earn a Rebate to Add Liquidity 
and a Rebate to Remove Liquidity according to the Tiers,\40\ and BX 
Market Makers would be assessed a Fee to Add Liquidity and a Fee to 
Remove Liquidity according to the same Tiers per the Select Symbols 
Options Tier Schedule; and certain fees would be the same regardless of 
counterparty. The fee and rebate schedule as proposed continues to 
reflect differentiation among different market participants. The 
Exchange believes that the differentiation is equitable and not 
unfairly discriminatory, as well as reasonable, because transactions of 
a BX Options Market Maker must constitute a course of dealings 
reasonably calculated to contribute to the maintenance of a fair and 
orderly market, and BX Options Market Makers should not make bids or 
offers or enter into transactions that are inconsistent with such 
course of dealings. Further, all BX Options Market Makers are 
designated as specialists on BX for all purposes under the Act or rules 
thereunder.\41\
---------------------------------------------------------------------------

    \40\ Per a note to the Select Symbol Options Tier Schedule, 
Customer fee to add liquidity in Select Symbols Options when contra 
to another Customer is $0.33 per contract. The only change in this 
note, which is currently applicable to the SPY Options Tier 
Schedule, is that the note will be applicable to the Select Symbol 
Options Tier Schedule.
    \41\ See Chapter VII, Section 5, entitled ``Obligations of 
Market Makers.''
---------------------------------------------------------------------------

    The Exchange believes that by making the proposed changes it is 
continuing to incentivize Participants to execute more volume on the 
Exchange to further enhance liquidity in this market.

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 make changes to its Penny Pilot 
Options to establish a Select Symbols Options Tiers Schedule will 
impose any undue 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 continuing its fees and rebates for Penny Pilot Options and 
establishing a Select Symbols Options Tiers Schedule 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 terms of intra-market competition, the Exchange notes that price 
differentiation among different market participants operating on the 
Exchange (e.g., Customer and BX Options Market Maker) is reasonable. 
Customer activity, for example, 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 
(particularly in response to pricing) in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants.
    Moreover, unlike others market participants each BX Options Market 
Maker commits to various obligations. These obligations include, 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.\42\ In this instance, the proposed changes to the 
fees and rebates to establish a Select Symbols Options Tiers Schedule, 
does 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 
order executions.
---------------------------------------------------------------------------

    \42\ See Chapter VII, Section 5.
---------------------------------------------------------------------------

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,\43\ 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.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the

[[Page 14160]]

Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is: (i) Necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2016-016 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BX-2016-016. 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-2016-016 and 
should be submitted on or before April 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
---------------------------------------------------------------------------

    \44\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05854 Filed 3-15-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 51 / Wednesday, March 16, 2016 / Notices 14155

to either approve the proposed rule solicit comments on the proposed rule BX Options Market Makers,7 Non-
change, disapprove the proposed rule change from interested persons. Customers,8 and Firms.9
change, or institute proceedings to Currently, Chapter XV, Section 2,
I. Self-Regulatory Organization’s subsection (1), contains a SPY 10
determine whether to disapprove the
Statement of the Terms of Substance of Options Tier Schedule (‘‘SPY
proposed rule change.6 On December
the Proposed Rule Change Schedule’’) that has four tiers. The
11, 2015, the Commission instituted
proceedings under Section 19(b)(2)(B) of The Exchange proposes to amend its Exchange proposes to convert the SPY
the Act 7 to determine whether to Options Pricing at Chapter XV Section Schedule into the Select Symbols
approve or disapprove the proposed 2, entitled ‘‘BX Options Market—Fees Options Tier Schedule, as discussed in
rule change, as modified by Amendment and Rebates,’’ which governs pricing for detail below.
No. 1.8 The Commission has not BX members using the BX Options
Change 1—Penny Pilot Options: Modify
received any comments on the proposal, Market (‘‘BX Options’’). The Exchange Fees and Rebates To Add the Select
as modified by Amendment No. 1. proposes to modify certain fees and Symbols Options Tier Schedule
On March 7, 2016, the Exchange rebates (per executed contract) to adopt
withdrew the proposed rule change the Select Symbol Options Tier In Change 1, the Exchange proposes
(SR–NYSEArca–2015–76). Schedule for certain Penny Pilot 4 modifications to convert its current SPY
Options (each a ‘‘Select Symbol’’ and Schedule to the Select Symbols Options
For the Commission, by the Division of
Trading and Markets, pursuant to delegated together the ‘‘Select Symbols’’). Tier Schedule. The proposed change
authority.9 The text of the proposed rule change keeps the great majority of the current
Robert W. Errett, is available on the Exchange’s Web site SPY Schedule fees and rebates
Deputy Secretary. at http://nasdaqomxbx.cchwall assessments (twelve out of sixteen) and
street.com/, at the principal office of the tiers (three out of four) exactly the same
[FR Doc. 2016–05851 Filed 3–15–16; 8:45 am]
Exchange, and at the Commission’s in the new Select Symbols Options Tier
BILLING CODE 8011–01–P
Public Reference Room. Schedule; and updates the fees and
rebates schedule to indicate ‘‘Select
II. Self-Regulatory Organization’s Symbols’’ rather than ‘‘SPY.’’
SECURITIES AND EXCHANGE Statement of the Purpose of, and Specifically, the Exchange proposes,
COMMISSION Statutory Basis for, the Proposed Rule commensurate with renaming the SPY
[Release No. 34–77339; File No. SR–BX– Change Options Tier Schedule the Select
2016–016] Symbols Options Tier Schedule, to set
In its filing with the Commission, the
Exchange included statements forth the BX Options Select Symbol List.
Self-Regulatory Organizations; The Select Symbols 11 on this list
NASDAQ BX, Inc.; Notice of Filing and concerning the purpose of and basis for
the proposed rule change and discussed represent, similarly to SPY, some of the
Immediate Effectiveness of Proposed highest volume Penny Pilot Options
Rule Change Regarding Fees and any comments it received on the
proposed rule change. The text of these traded on the Exchange and in the U.S.
Rebates To Adopt the Select Symbols The proposed Select Symbols are
Options Tier Schedule statements may be examined at the
places specified in Item IV below. The similar to those of other options
March 10, 2016. Exchange has prepared summaries, set exchanges (e.g., the MIAX Options
Pursuant to Section 19(b)(1) of the forth in sections A, B, and C below, of Exchange (‘‘MIAX’’).12 Like the SPY
Securities Exchange Act of 1934 the most significant aspects of such
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 statements. ‘‘Professional’’ (as that term is defined in Chapter
I, Section 1(a)(48)). BX Chapter XV.
notice is hereby given that on March 1,
2016, NASDAQ BX, Inc. (‘‘BX’’ or A. Self-Regulatory Organization’s 7 BX Options Market Makers may also be referred

Statement of the Purpose of, and to as ‘‘Market Makers’’. The term ‘‘BX Options
‘‘Exchange’’) 3 filed with the Securities Market Maker’’ or (‘‘M’’) means a Participant that
and Exchange Commission (‘‘SEC’’ or Statutory Basis for, the Proposed Rule has registered as a Market Maker on BX Options
‘‘Commission’’) the proposed rule Change pursuant to Chapter VII, Section 2, and must also
remain in good standing pursuant to Chapter VII,
change as described in Items I, II, and 1. Purpose Section 4. In order to receive Market Maker pricing
III, below, which Items have been The Exchange proposes to amend its in all securities, the Participant must be registered
prepared by the Exchange. The as a BX Options Market Maker in at least one
Chapter XV, Section 2, to modify certain security. BX Chapter XV.
Commission is publishing this notice to fees and rebates 5 to adopt the Select 8 Note 1 to Chapter XV, Section 2, states: ‘‘1 A

6 See Securities Exchange Act Release No. 76291,
Symbol Options Tier Schedule for Non-Customer includes a Professional, Broker-
certain Penny Pilot Options. The Dealer and Non-BX Options Market Maker.’’
80 FR 67827 (Nov. 3, 2015). The Commission 9 The term ‘‘Firm’’ or (‘‘F’’) applies to any
determined that it was appropriate to designate a proposed Select Symbol Options Tier transaction that is identified by a Participant for
longer period within which to take action on the Schedule would apply to Customers,6 clearing in the Firm range at OCC. BX Chapter XV.
proposed rule change so that it had sufficient time 10 ‘‘SPY’’ or Standard and Poor’s Depositary
to consider the proposed rule change. Accordingly, 4 The Penny Pilot was established in June 2012 Receipts/SPDRs options are Penny Pilot Options
the Commission designated December 15, 2015 as
and extended in 2015. See Securities Exchange Act that are based on the SPDR exchange-traded fund
the date by which it should approve, disapprove,
Release Nos. 67256 (June 26, 2012), 77 FR 39277 (‘‘ETF’’), which is designed to track the
or institute proceedings to determine whether to
(July 2, 2012) (SR–BX–2012–030) (order approving performance of the S&P 500.
disapprove the proposed rule change.
7 15 U.S.C. 78s(b)(2)(B).
BX option rules and establishing Penny Pilot); and 11 The following are Select Symbols: ASHR, DIA,
75326 (June 29, 2015), 80 FR 38481 (July 6, 2015) DXJ, EEM, EFA, EWJ, EWT, EWW, EWY, EWZ,
8 See Securities Exchange Act Release No. 76630,
(SR–BX–2015–037) (notice of filing and immediate FAS, FAZ, FXE, FXI, FXP, GDX, GLD, HYG, IWM,
mstockstill on DSK4VPTVN1PROD with NOTICES

80 FR 78791 (Dec. 17, 2015). effectiveness extending the Penny Pilot through IYR, KRE, OIH, QID, QLD, QQQ, RSX, SDS, SKF,
9 17 CFR 200.30–3(a)(57).
June 30, 2016). SLV, SPY, SRS, SSO, TBT, TLT, TNA, TZA, UNG,
1 15 U.S.C. 78s(b)(1). 5 Fees and rebates are per executed contract. BX URE, USO, UUP, UVXY, UYG, VXX, XHB, XLB,
2 17 CFR 240.19b–4. Chapter XV, Section 2(1). XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY, XME,
3 The Exchange notes that it has legally changed 6 The term ‘‘Customer’’ or (‘‘C’’) applies to any XOP, XRT.
its name to NASDAQ BX, Inc. with the state of transaction that is identified by a Participant for 12 See MIAX fee schedule at http://

Delaware and filed Form 1 reflecting the change, clearing in the Customer range at The Options www.miaxoptions.com/sites/default/files/fee-
and is in the process of changing its rules to reflect Clearing Corporation (‘‘OCC’’) which is not for the schedules/MIAX_Options_Fee_Schedule_
the new name. account of broker or dealer or for the account of a 10012015.pdf.

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14156 Federal Register / Vol. 81, No. 51 / Wednesday, March 16, 2016 / Notices

Options Tier Schedule, the Select —the new Fee to Remove Liquidity or more of total industry customer
Symbols Options Tier Schedule will when BX Options Market Maker equity and ETF options ADV per month.
have four tiers. trading with Customer will be If a Participant qualifies for Tier 4 the
Proposed Tier 1 in the Select Symbols $0.42.20 rates applicable to this tier will
Options Tier Schedule, which has the Proposed Tier 3 in the Select Symbols supersede any other Select Symbols tier
same requirements as the current Tier I Options Tier Schedule, which has the rates that the Participant may qualify
in the SPY Options Tier Schedule will same requirements the current Tier 3 in for. Proposed Tier 4 will range from a
be where a BX Participant the SPY Options Tier Schedule, will be $0.37 rebate to a $0.29 fee:
(‘‘Participant’’) executes less than 0.05% where Participant executes 0.15% or
of total industry customer equity and more of total industry customer equity —The new Rebate to Add Liquidity
exchange traded fund (‘‘ETF’’) option and ETF option ADV contracts per when Customer trading with Non-
average daily volume (‘‘ADV’’) contracts month. Proposed Tier 3 will range from Customer, BX Options Market Maker,
per month. Proposed Tier 1 will range a $0.37 rebate to a $0.40 fee: or Firm will be $0.25; 26
from a $0.00 rebate to a $0.44 fee: —The new Rebate to Add Liquidity —the new Fee to Add Liquidity when
—The Rebate to Add Liquidity when when Customer trading with Non- BX Options Market Maker trading
Customer trading with Non-Customer, Customer, BX Options Market Maker, with Customer will be $0.29; 27
BX Options Market Maker, or Firm or Firm will be $0.20; 21 —the new Rebate to Remove Liquidity
will be $0.00 (no rebate will be —the new Fee to Add Liquidity when when Customer trading with Non-
paid); 13 BX Options Market Maker trading Customer, BX Options Market Maker,
—the Fee to Add Liquidity when BX with Customer will be $0.40; 22 Customer, or Firm will be $0.37; 28
Options Market Maker trading with —the new Rebate to Remove Liquidity and
Customer will be $0.44; 14 when Customer trading with Non- —the new Fee to Remove Liquidity
—the Rebate to Remove Liquidity when Customer, BX Options Market Maker, when BX Options Market Maker
Customer trading with Non-Customer, Customer, or Firm will be $0.37; 23 trading with Customer will be
BX Options Market Maker, Customer, and $0.25.29
or Firm will be $0.00; 15 and —the new Fee to Remove Liquidity
—the Fee to Remove Liquidity when BX when BX Options Market Maker In addition, there are currently six
Options Market Maker trading with trading with Customer will be explanatory notes in the SPY Options
Customer will be $0.42.16 $0.39.24 Tier Schedule. In each such note the
Proposed Tier 2 in the Select Symbols Proposed Tier 4 in the Select Symbols Exchange will, as elsewhere in the fees
Options Tier Schedule, which has the Options Tier Schedule, which is and rebates schedule, replace ‘‘SPY’’
same requirements as current Tier 2 in modified from the current Tier 4 in the with ‘‘Select Symbols.’’ The Exchange
the SPY Options Tier Schedule, will be SPY Options Tier Schedule, will be proposes to also establish a fee on one
where Participant executes 0.05% to where Participant executes more than note that is not currently fee liable in
less than 0.15% of total industry 10,000 BX Price Improvement Auction the SPY Options Tier Schedule.
customer equity and ETF option ADV (‘‘PRISM’’) 25 Agency Contracts per Specifically, the Exchange proposes to
contracts per month. Proposed Tier 2 month; or Participant executes BX state that BX Options Market Maker fee
will range from a $0.25 rebate to a $0.44 Options Market Maker volume of 0.30% to add liquidity in SPY [sic] Options
fee: will be $0.04 when trading with Firm,
—The new Rebate to Add Liquidity 20 This is the same as the fee in the current SPY Non-Customer, or BX Options Market
when Customer trading with Non- Options Tier Schedule. Maker.
21 This is the same as the rebate in the current
Customer, BX Options Market Maker, Chapter XV, Section 2 subsection (1)
SPY Options Tier Schedule.
or Firm will be $0.10; 17 22 Proposed $0.40 is a modest fee increase from reflecting the proposed Select Symbols
—the new Fee to Add Liquidity when the current SPY Options Tier Schedule, which is Options Tier Schedule will read as
BX Options Market Maker trading $0.39. follows:
with Customer will be $0.44; 18 23 This is the same as the rebate in the current

—the new Rebate to Remove Liquidity SPY Options Tier Schedule. Sec. 2 BX Options Market—Fees and
when Customer trading with Non- 24 This is the same as the fee in the current SPY
Rebates
Customer, BX Options Market Maker, Options Tier Schedule.
Customer, or Firm will be $0.25; 19
25 PRISM is a Price Improvement Mechanism for The following charges shall apply to
all-electronic BX Options whereby a buy and sell the use of the order execution and
and order may be submitted in one order message to
initiate an auction at a stop price and seek potential
routing services of the BX Options
13 This is the same as the rebate in the current price improvement. Options are traded market for all securities.
SPY Options Tier Schedule. electronically on BX Options, and all options (1) Fees for Execution of Contracts on
14 Proposed $0.44 is a modest fee increase from participants may respond to a PRISM Auction, the
duration of which is set at 200 milliseconds. PRISM
the BX Options Market:
the current SPY Options Tier Schedule, which is
$0.42. includes auto-match functionality in which a * * * * *
15 This is the same as the rebate in the current Participant (an ‘‘Initiating Participant’’) may
26 This is the same as the rebate in the current
SPY Options Tier Schedule. electronically submit for execution an order it
represents as agent on behalf of customer, broker SPY Options Tier Schedule.
16 This is the same as the fee in the current SPY
dealer, or any other entity (‘‘PRISM Order’’) against 27 Proposed $0.29 is, in order to further promote
Options Tier Schedule. principal interest or against any other order it
17 This is the same as the rebate in the current
liquidity on the Exchange, a modest fee decrease
represents as agent (an ‘‘Initiating Order’’) provided from the current SPY Options Tier Schedule, which
SPY Options Tier Schedule. it submits the PRISM Order for electronic execution
mstockstill on DSK4VPTVN1PROD with NOTICES

18 Proposed $0.44 is a modest fee increase from
is $0.32.
into the PRISM Auction pursuant [sic]. See Chapter 28 This is the same as the rebate in the current
the current SPY Options Tier Schedule, which is VI, Section 9; and Securities Exchange Act Release
$0.42. No. 76301 (October 29, 2015), 80 FR 68347 SPY Options Tier Schedule.
29 This is the same as the fee in the current SPY
19 This is the same as the rebate in the current (November 4, 2015) (SR–BX–2015–032) (order
SPY Options Tier Schedule. approving BX PRISM). Options Tier Schedule.

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dealers’. . . .’’ 36 Although the court encourage market participant behavior been discussed, almost all comparable
and the SEC were discussing the cash through the fees and rebates system, to the fees and rebates in the SPY
equities markets, the Exchange believes which is an accepted methodology Options Tier Schedule.
that these views apply with equal force among options exchanges.38 Converting The Exchange believes that it is
to the options markets. SPY Options Tier Schedule to the Select reasonable to also adjust the current
The Exchange proposes to amend its Symbols Options Tier Schedule is Tier 4 in the SPY Options Tier Schedule
Chapter XV, Section 2 to modify certain reasonable because of the nature of as reflected in the new Tier 4 in the
fees and rebates to adopt the Select Select Symbol options, which are the Select Symbols Options Tier Schedule,
Symbol Options Tier Schedule for most heavily traded options on the in order to enable a Participant to earn
certain Penny Pilot Options. The Exchange as well as in the industry. By a Rebate to Add Liquidity or pay a Fee
proposed modified fees and rebates and expanding from SPY Options to Select to Add Liquidity in Select Symbols
new Select Symbols Options Tier Symbol Options, the Exchange is further where the Participant executes more
Schedule would, as discussed, apply to promoting options liquidity [sic] the than 10,000 PRISM Agency Contracts
Customers, BX Options Market Makers, Exchange. per month; or Participant executes BX
Non-Customers, and Firms. The The Exchange believes that the Options Market Maker volume of 0.30%
Exchange believes that its proposal is proposed Select Symbol Options Tier or more of total industry customer
reasonable, equitable, and not unfairly Schedule is reasonable because it is not equity and ETF options ADV per month.
discriminatory and should provide a novel, untested structure but rather is By so doing, the Exchange encourages
increased opportunities for participation similar to what is offered by other Participants to trade PRISM and/or
in executions on the Exchange, options markets, such as MIAX, and is make markets on the exchange.
facilitating the ability of the Exchange to based on the Exchange’s existing SPY In addition, the Exchange believes
bring together participants and Options Tier Schedule. The proposed that making changes to add the Select
encourage more robust competition for Tiers in the Select Symbols Options Tier Symbols Options Tier Schedule in terms
orders. Schedule clearly reflect the of Rebate to Add Liquidity and Fee to
progressively increasing nature of Add Liquidity, and Rebate to Remove
Change 1—Penny Pilot Options: Modify Participant executions structured for the Liquidity and Fee to Remove Liquidity,
Fees and Rebates To Add the Select purpose of attracting order flow to the is reasonable because it encourages the
Symbols Options Tier Schedule Exchange. This encourages market desired Customer behavior by attracting
In Change 1, the Exchange proposes to participant behavior through Customer interest in Select Symbols to
convert its current SPY Options Tier progressive tiered fees and rebates using the Exchange. Customer activity
Schedule to the Select Symbols Options an accepted methodology among enhances liquidity on the Exchange for
Tier Schedule and to set forth the BX options exchanges.39 the benefit of all market participants
Options Select Symbol List. The Select Tier 1 in the Select Symbols Options and benefits all market participants by
Symbols on this list represent, similarly Tier Schedule is, similarly to Tier 1 in providing more trading opportunities,
to SPY, some of the highest volume the current SPY Options Tier Schedule, which attracts market makers. An
Penny Pilot Options traded on the set up to enable a Participant to earn a increase in the activity of these market
Exchange and in the U.S and are similar Rebate to Add Liquidity or pay a Fee to participants in turn facilitates tighter
to those of other options exchanges (e.g., Add Liquidity in Select Symbols where spreads, which may cause an additional
the MIAX). the Participant executes less than 0.05% corresponding increase in order flow
As discussed, the proposed change of total industry customer equity and from other market participants.
updates the fees and rebates schedule to ETF option ADV contracts per month. The Select Symbols Options Tier
indicate ‘‘Select Symbols’’ rather than Tier 2 in the Select Symbols Options Schedule is reasonable in that it is,
‘‘SPY’’ and keeps the great majority of Tier Schedule is, similarly to Tier 2 in similarly to the current SPY Options
the current SPY Schedule fees and the current SPY Options Tier Schedule, Tier Schedule, set up to incentivize
rebates assessments and tiers exactly the set up to enable a Participant to earn a Participants to direct liquidity to the
same in the new Select Symbols Rebate to Add Liquidity or pay a Fee to Exchange; using volume from all
Options Tier Schedule. The proposed Add Liquidity in the Select Symbols products listed on BX Options will
fee changes are in respect of the Fee to where the Participant executes 0.05% to further incentivize Participants. As
Add Liquidity when BX Options Market less than 0.15% of total industry Participants execute more of total
Maker trades with Customer. Each of the customer equity and ETF option ADV industry customer equity and ETF
Tier 1, 2, and 3 changes is a modest fee contracts per month. option ADV contracts per month on the
increase from the current schedule, not And Tier 3 in the Select Symbols Exchange, they can in certain categories
exceeding two pennies. The Tier 4 Options Tier Schedule is, similarly to earn higher rebates and be assessed
change is a fee decrease from the current Tier 3 in the SPY Options Tier lower fees. For example, in the Select
fee schedule in order to further promote Schedule, set up to enable a Participant Symbols Options Tier Schedule the Tier
to earn a Rebate to Add Liquidity or pay 3 Rebate to Add Liquidity when
liquidity on the Exchange.37 The
a Fee to Add Liquidity in the Select Customer trading with Non-Customer,
Exchange also proposes to change one
Symbols to Participant [sic] executes BX Options Market Maker, or Firm is
explanatory note applicable to the
0.15% or more of total industry higher ($0.20) than the Tier 1 Rebate to
Select Symbols to make it fee liable.
The proposed rule change is customer equity and ETF option ADV Add Liquidity ($0.00); and the Tier 3
reasonable because it continues to contracts per month. The fees and Rebate to Remove Liquidity when
mstockstill on DSK4VPTVN1PROD with NOTICES

rebates that BX Options Market Makers Customer trading with Non-Customer,
36 See id. at 539 (quoting Securities Exchange [sic] and Customers are assessed are, as has BX Options Market Maker, Customer, or
Release No. 59039 (December 2, 2008), 73 FR 74770 Firm is higher ($0.37) that the Tier 2
(December 9, 2008) (SR–NYSEArca–2006–21) at 73 38 See, e.g., fee and rebate schedules of other
Rebate to Remove Liquidity ($0.25).
FR at 74782–74783). options exchanges, including, but not limited to, Similarly, the proposed Fee to Add
37 Tier 4 is updated from the current SPY Options NASDAQ Options Market (‘‘NOM’’), NASDAQ
Tier Schedule to give additional ways to achieve PHLX LLC (‘‘Phlx’’), and Chicago Board Options Liquidity when BX Option Market
the tier requirements through specified PRISM Exchange (‘‘CBOE’’). Maker trading with Customer is lower
volume as well as options volume. 39 Id. for Tier 3 ($0.40) than for Tier 1 ($0.44);

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Commission summarily may information that you wish to make change on February 22, 2016, in order
temporarily suspend such rule change if available publicly. to transmit an updated pilot report that
it appears to the Commission that such All submissions should refer to File supplements Exhibit 3 to the filing, and
action is: (i) Necessary or appropriate in Number SR–BX–2016–016 and should to provide additional information
the public interest; (ii) for the protection be submitted on or before April 6, 2016. regarding transactions covered by the
of investors; or (iii) otherwise in For the Commission, by the Division of Pilot Program and FLEX Option trading
furtherance of the purposes of the Act. Trading and Markets, pursuant to delegated on the Exchange.5 The Commission is
If the Commission takes such action, the authority.44 publishing this notice to solicit
Commission shall institute proceedings Robert W. Errett, comments on Amendment No. 1 from
to determine whether the proposed rule Deputy Secretary. interested persons and is approving the
should be approved or disapproved. [FR Doc. 2016–05854 Filed 3–15–16; 8:45 am] proposed rule change, as modified by
Amendment No. 1, on an accelerated
IV. Solicitation of Comments BILLING CODE 8011–01–P
basis.
Interested persons are invited to
submit written data, views, and II. Description of the Amended
SECURITIES AND EXCHANGE Proposal
arguments concerning the foregoing, COMMISSION
including whether the proposed rule FLEX Options, unlike traditional
change is consistent with the Act. [Release No. 34–77341; File No. SR–Phlx– standardized options, allow investors to
Comments may be submitted by any of 2015–94] customize basic option terms, including
the following methods: size, expiration date, exercise style, and
Self-Regulatory Organizations;
certain exercise prices.6 Pursuant to
Electronic Comments NASDAQ OMX PHLX LLC; Notice of
Commentary .01 to Rule 1079, the
Filing of Amendment No. 1 and Order
• Use the Commission’s Internet Exchange currently has in place a Pilot
Granting Accelerated Approval of
comment form (http://www.sec.gov/ Program under which the minimum size
Proposed Rule Change, as Modified by
rules/sro.shtml); or requirements set forth in Rules
Amendment No. 1, to Make Permanent
• Send an email to rule-comments@ 1079(a)(8)(A)(i) and (ii), which apply to
the Pilot Program Eliminating Minimum
sec.gov. Please include File Number SR– RFQs for opening transactions in new
Value Sizes for Opening Transactions
BX–2016–016 on the subject line. series of FLEX Options, are eliminated.7
in New Series of FLEX Options
Prior to the Pilot Program, pursuant to
Paper Comments
March 10, 2016. Rules 1079(a)(8)(A)(i) and (ii), the
• Send paper comments in triplicate minimum value size for a RFQ for an
to Secretary, Securities and Exchange I. Introduction
Commission, 100 F Street NE., On November 25, 2015, NASDAQ 5 The Exchange attached an Exhibit 3 to its

Washington, DC 20549–1090. OMX PHLX LLC (‘‘Phlx’’ or proposed rule change that contains an initial report
summarizing pilot data collected for the period
All submissions should refer to File ‘‘Exchange’’) filed with the Securities December 1, 2014 through July 31, 2015.
Number SR–BX–2016–016. This file and Exchange Commission Specifically, the report summarizes the trading
number should be included on the (‘‘Commission’’), pursuant to Section volume and underlying value of opening
19(b)(1) of the Securities Exchange Act transactions in new series of FLEX Options with a
subject line if email is used. To help the size below the minimum value thresholds in force
Commission process and review your of 1934 (‘‘Act’’) 1 and Rule 19b–4 before the pilot, as well as the types of customers
comments more efficiently, please use thereunder,2 a proposed rule change to initiating such transactions. In Amendment No. 1,
only one method. The Commission will make permanent its pilot program the Exchange submitted an updated report as an
(‘‘Pilot Program’’) eliminating minimum amendment to Exhibit 3 that supplements the
post all comments on the Commission’s original Exhibit 3 with summary pilot data for the
Internet Web site (http://www.sec.gov/ value sizes for requests for quotes period August 1, 2015 through December 31, 2015
rules/sro.shtml). (‘‘RFQs’’) for opening transactions in (together with the initial report, ‘‘Pilot Report’’). In
Copies of the submission, all new series of flexible exchange options addition, in Amendment No. 1 the Exchange
(‘‘FLEX Options’’ or ‘‘FLEX’’). The compares the total volume and value of opening
subsequent amendments, all written transactions in new series of FLEX Options covered
statements with respect to the proposed proposed rule change was published for by the Pilot Program during the period December
rule change that are filed with the comment in the Federal Register on 2014 through December 2015 to the total volume
Commission, and all written December 14, 2015.3 The Commission and value of all opening FLEX Option transactions
received no comments on the proposal. in new series during the same period. Further, in
communications relating to the Amendment No. 1 the Exchange also compares the
proposed rule change between the On January 28, 2016, the Commission Exchange’s FLEX Option trading volume to the
Commission and any person, other than designated a longer period within which Exchange’s overall, combined trading volume for
those that may be withheld from the to approve the proposed rule change, standardized options and FLEX Options.
6 See Notice; see also Phlx Rule (‘‘Rule’’) 1079.
public in accordance with the disapprove the proposed rule change, or
FLEX equity, FLEX index, and FLEX currency
provisions of 5 U.S.C. 552, will be institute proceedings to determine options are traded on the Exchange, but the Pilot
available for Web site viewing and whether to disapprove the proposed Program encompasses only FLEX equity and FLEX
printing in the Commission’s Public rule change.4 The Exchange filed index options, and does not encompass FLEX
Amendment No. 1 to the proposed rule currency options. See Notice; Commentary .01 to
Reference Room, 100 F Street NE., Rule 1079; References to ‘‘FLEX Options’’ or
Washington, DC 20549, on official 44 17
‘‘FLEX’’ for purposes of this filing are meant to refer
CFR 200.30–3(a)(12).
business days between the hours of 1 15
only to FLEX equity and FLEX index options.
U.S.C. 78s(b)(1). 7 See Commentary .01 to Rule 1079; see also
mstockstill on DSK4VPTVN1PROD with NOTICES

10:00 a.m. and 3:00 p.m. Copies of the 2 17 CFR 240.19b–4.
Securities Exchange Act Release Nos. 62900
filing also will be available for 3 See Securities Exchange Act Release No. 76593
(September 13, 2010), 75 FR 57098 (September 17,
inspection and copying at the principal (December 8, 2015), 80 FR 77399 (‘‘Notice’’). 2010) (SR–Phlx–2010–123) (establishing Pilot
office of the Exchange. All comments 4 See Securities Exchange Act Release No. 76989, Program); and 77153 (February 17, 2016) 81 FR
received will be posted without change; 81 FR 5811 (February 3, 2016). The Commission 9039 (February 23, 2016) (SR–Phlx–2016–19)
designated March 13, 2016, as the date by which (extending Pilot Program until the earlier of March
the Commission does not edit personal it should approve, disapprove, or institute 15, 2016, or approval of the Pilot Program on a
identifying information from proceedings to determine whether to disapprove the permanent basis). The term ‘‘request for quotes’’ is
submissions. You should submit only proposed rule change. defined in Rule 1079(a)(11).

VerDate Sep<11>2014 18:11 Mar 15, 2016 Jkt 238001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1
Document Created: 2016-03-15 23:44:44
Document Modified: 2016-03-15 23:44:44
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		81 FR 14155