81 FR 51258 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Tiers Related to SPY Options
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 149 (August 3, 2016)
Federal Register Volume 81, Issue 149 (August 3, 2016)
| Page Range | 51258-51264 | |
| FR Document | 2016-18313 |
[Federal Register Volume 81, Number 149 (Wednesday, August 3, 2016)] [Notices] [Pages 51258-51264] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-18313] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78431; File No. SR-BX-2016-045] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Tiers Related to SPY Options July 28, 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 July 14, 2016, NASDAQ 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 modify fees and rebates (per executed contract) for certain Penny Pilot \3\ Options to: (a) Delete SPY Options from the Select Symbols Options Tier Schedule; and (b) adopt a SPY Options Tier Schedule.\4\ --------------------------------------------------------------------------- \3\ The Penny Pilot was established in June 2012 and extended through 2016. 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 78036 (June 10, 2016), 81 FR 39308 (June 16, 2016) (SR-BX-2016-021) (notice of filing and immediate effectiveness extending the Penny Pilot through December 31, 2016). \4\ SPY, Select Symbols Options Tier Schedule, and SPY Options Tier Schedule are discussed below. --------------------------------------------------------------------------- The text of the proposed rule change is available on the Exchange's Web site at http://nasdaqbx.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. [[Page 51259]] 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 Chapter XV, Section 2 to modify fees and rebates \5\ for certain Penny Pilot Options to: (a) Delete SPY \6\ Options from the Select Symbols Options Tier Schedule; and (b) adopt a SPY Options Tier Schedule with explanatory notes. The proposed SPY Options Tier Schedule would apply to Customers \7\ that remove liquidity from Customers, Non-Customers,\8\ BX Options Market Makers,\9\ and Firms.\10\ --------------------------------------------------------------------------- \5\ Fees and rebates are per executed contract. Chapter XV, Section 2(1). \6\ ``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. Options on SPY (``SPY Options'') are among the highest volume options traded on the Exchange. \7\ 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. This is known as being marked in the Customer range. \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 ``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. \10\ 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. --------------------------------------------------------------------------- Currently, Chapter XV, Section 2 subsection (1) has a Select Symbols Options Tier Schedule that includes SPY,\11\ but it does not have a SPY Options Tier Schedule. Both of these issues are addressed in the current filing and each specific change is described in detail below. --------------------------------------------------------------------------- \11\ See Securities Exchange Act Release No. 77339 (March 10, 2016), 81 FR 14155 (March 16, 2016) (SR-BX-2016-016) (notice of filing and immediate effectiveness to adopt Select Symbols Options Tier Schedule). --------------------------------------------------------------------------- Change 1--Penny Pilot Options: Remove SPY Options From Select Symbols Options Tier Schedule In Change 1, under Penny Pilot Options, the Exchange proposes to remove SPY Options from the Select Symbols Options Tier Schedule. The Exchange simultaneously proposes to establish a new SPY Options Tier Schedule. Specifically, the Exchange proposes, commensurate with establishing the SPY Options Tier Schedule, to delete SPY from 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. The following are currently 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. The Select Symbol List is similar to that of other options exchanges (e.g., the MIAX Options Exchange (``MIAX'').\12\ Whereas the current Select Symbols Options Tier Schedule has four Tiers, the proposed SPY Options Tier Schedule will have three Tiers. Moreover the SPY Options Tier requirements as well as the proposed fees and rebates are, as described below, very similar to those currently applicable to Select Symbols. --------------------------------------------------------------------------- \12\ See MIAX fee schedule at https://www.miaxoptions.com/content/fees. --------------------------------------------------------------------------- As proposed, the BX Options Select Symbol List in Chapter XV, Section 2 subsection (1) will not include SPY and will read as follows: 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, 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. Change 2--Penny Pilot Options: Add SPY Options Tier Schedule For Penny Pilot Options, in Change 2 the Exchange is proposing to modify fees and rebates for Customer and BX Options Market Maker in respect of SPY Options.\13\ Specifically, the Exchange is proposing to add a SPY Options Tier Schedule. This schedule will have three Tiers for Rebate to Remove Liquidity for Customer and several notes. The three new Tiers, described below along with several proposed notes, together make up the ``SPY Options Tier Schedule''. --------------------------------------------------------------------------- \13\ The Non- Penny Pilot Options pricing will remain unchanged. --------------------------------------------------------------------------- Proposed Tier 1 in the SPY Options Tier Schedule, which is similar in structure to current Tier 1 in the Select Symbols Options Tier Schedule Rebate to Remove Liquidity,\14\ states that a BX Participant (``Participant'') may earn a rebate if he removes less than 1500 SPY Options contracts per day in the Customer range.\15\ Proposed Tier 1 offers a $0.10 rebate when a Customer trades with Non-Customer, BX Options Market Maker, Customer, or Firm. The proposed $0.10 rebate is a modest increase from the current $0.00 rebate in the Select Symbols Options Tier Schedule now applicable to SPY Options. This increase is, as further discussed, reasonable because it incentivizes Participants to bring SPY Options volume to the Exchange. Whereas the Select Symbols Options Tier Schedule takes into account total industry Customer volume per month including equity and ETF options ADV contracts, in order to incentivize Participants to transact more SPY Options volume on the Exchange, proposed Tier 1 looks only at the amount of daily SPY Options volume in the Customer range that is removed by the Participant. --------------------------------------------------------------------------- \14\ Current Select Symbols Options Tiers use industry customer equity and ETF Option ADV to determine tier level. Rather than industry ADV, proposed SPY Options Tier 1 looks only at how many SPY Options contracts Participant removes in a day. \15\ For a discussion of Customer range, see note 7 above. --------------------------------------------------------------------------- Proposed Tier 2 in the SPY Options Tier Schedule, which is similar in structure to current Tier 2 in the Select Symbols Options Tier Schedule Rebate to Remove Liquidity, states that a Participant may earn a rebate if he removes 1500 to not more than 2999 SPY Options contracts per day in the Customer range. Proposed Tier 2 offers a $0.42 rebate when a Customer trades with Non-Customer, BX Options Market Maker, Customer, or Firm. The proposed $0.42 rebate is a modest increase from the current $0.25 rebate in the Select Symbols Options Tier Schedule now applicable to SPY Options. This increase is, as further discussed, reasonable because it incentivizes Participants to bring SPY Options volume to the Exchange. Whereas the Select Symbols Options Tier Schedule takes into account total industry Customer volume per month including equity and ETF options ADV contracts, in order to incentivize Participants to transact more SPY Options volume on the Exchange, proposed Tier 2 looks only at the amount of daily SPY Options volume in the Customer range that is removed by the Participant. The highest proposed Tier 3 in the SPY Options Tier Schedule, which is similar in structure to current Tier 3 in [[Page 51260]] the Select Symbols Options Tier Schedule Rebate to Remove Liquidity, states that a Participant may earn a rebate if he removes more than 2999 SPY Options contracts per day in the customer range. Proposed Tier 3 offers a $0.51 rebate when a Customer trades with Non-Customer, BX Options Market Maker, Customer, or Firm. The proposed $0.51 rebate is a modest increase from the current $0.37 rebate in the Select Symbols Options Tier Schedule now applicable to SPY Options. This increase is, as further discussed, reasonable because it incentivizes Participants to bring SPY Options volume to the Exchange. Whereas the Select Symbols Options Tier Schedule takes into account total industry Customer volume per month including equity and ETF options ADV contracts, in order to incentivize Participants to transact more SPY Options volume on the Exchange, proposed Tier 3 looks only at the amount of daily SPY Options volume in the Customer range that is removed by the Participant. As part of the new SPY Options Tier Schedule the Exchange proposes six notes regarding certain fees to add liquidity and fees to remove liquidity. The first four proposed notes are taken directly from the Select Symbols Options Tier Schedule and use the same language except that these proposed notes refer to SPY Options rather than Select Symbols. The Exchange is also adding a sentence to the fourth note to state: There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer.\16\ The Exchange also proposes two additional notes. Proposed note 5 would state that BX Options Market Maker fee to add liquidity and BX Options Market Maker fee to remove liquidity in SPY Options will each be $0.44 per contract when trading with Customer. Proposed note 6 would state that BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when trading with Firm, BX Options Market Maker or Non Customer. --------------------------------------------------------------------------- \16\ The Exchange believes that while the fourth note applicable to Select Symbols Options now states that Customer fee to add liquidity in when contra to another Customer is $0.33 per contract, the proposed change is reasonable in light of the overall Exchange efforts to incentivize Participants to bring SPY Options liquidity to the Exchange. --------------------------------------------------------------------------- Today, when BX Options Market Maker trades in SPY Options with Customer, the fee to add liquidity is between $0.29 and $0.44 per contract and the fee to remove liquidity is between $0.25 and $0.42 per contract, according to Tiers. Going forward, per proposed note 5, both the fee to add liquidity in SPY Options and the fee to remove liquidity in SPY Options when BX Options Market Maker trades with Customer will be $0.44 per contract. Today the fee to add liquidity when BX Options Market maker trades in SPY Options with Non-Customer or BX Options Market Maker, or Firm is between $0.14 and $0.00 per contract, according to Tiers. Going forward per proposed note 6 the BX Options Market Maker fee to add liquidity will be $0.10 per contract when trading SPY Options with Firm, BX Options Market Maker or Non Customer. The Exchange believes that it is reasonable to normalize the fees discussed in note 5 and in note 6 so that they are the same for BX Options Market Makers when trading such SPY Options. As proposed, the SPY Options Tier Schedule in Chapter XV, Section 2 subsection (1) will read as follows: SPY Options Tier Schedule Rebate To Remove Liquidity [per contract] ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Applied to: Customer ---------------------------------------------------------------------------------------------------------------- Trading with: Non-Customer, BX Options Market Maker, Customer, or Firm ---------------------------------------------------------------------------------------------------------------- Tier 1................................... Participant removes less than 1500 SPY Options $0.10 contracts per day in the customer range. Tier 2................................... Participant removes 1500 to not more than 2999 SPY 0.42 Options contracts per day in the customer range. Tier 3................................... Participant removes more than 2999 SPY Options 0.51 contracts per day in the customer range. ----------------------------------------------------------------------------------------------------------------Note 1: Firm fee to add liquidity and fee to remove liquidity in SPY Options will be $0.33 per contract, regardless of counterparty. Note 2: Non-Customer fee to add liquidity and fee to remove liquidity in SPY Options will be $0.46 per contract, regardless of counterparty. Note 3: BX Options Market Maker fee to remove liquidity in SPY Options will be $0.46 per contract when trading with Firm, Non-Customer, or BX Options Market Maker. Note 4: Customer fee to add liquidity in SPY Options when contra to another Customer will be $0.33 per contract. There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer. Note 5: BX Options Market Maker fee to add liquidity and BX Options Market Maker fee to remove liquidity in SPY Options will each be $0.44 per contract when trading with Customer. Note 6: BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when trading with Firm, BX Options Market Maker or Non Customer. The Exchange is adopting a separate SPY Options Tier Schedule because it believes that it will provide even greater incentives for execution of SPY Options contracts on the BX Options Market. The Exchange believes that its proposal should provide increased opportunities for participation in SPY Options 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 the proposed rule change is consistent with Section 6 of the Act,\17\ in general, and with Section 6(b)(4) and 6(b)(5) of the Act,\18\ in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the Exchange operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Attracting order flow to the Exchange benefits all Participants who have the opportunity to interact with this order flow. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f. \18\ 15 U.S.C. 78f (b) (4) and (5). --------------------------------------------------------------------------- The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the [[Page 51261]] 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.'' \19\ --------------------------------------------------------------------------- \19\ Securities Exchange Act Release No. 51808 (June 29, 2005), 70 FR 37496 at 37499 (File No. S7-10-04) (``Regulation NMS Adopting Release''). --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \20\ (``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.\21\ 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.'' \22\ --------------------------------------------------------------------------- \20\ Net Coalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \21\ See id. At 534-535. \22\ See 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'. . . .'' \23\ 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. --------------------------------------------------------------------------- \23\ See id. At 539 (quoting Securities Exchange Act Commission at [sic] Release No. 59039 (December 2, 2008), 73 FR 74770 at 74782- 74783 (December 9, 2008) (SR-NYSEArca-2006-21)). --------------------------------------------------------------------------- The Exchange believes that its proposal should provide increased opportunities for participation in SPY Options executions on the Exchange, facilitating the ability of the Exchange to bring together participants and encourage more robust competition for orders. The Exchange believes that the proposed change is reasonable, equitable and not unfairly discriminatory for the following reasons. Change 1--Penny Pilot Options: Remove SPY Options From Select Symbols Options Tier Schedule For Penny Pilot Options, in Change 1, the Exchange proposes modifications to remove SPY Options from the Select Symbols Options Tier Schedule. The Exchange simultaneously proposes to establish a new SPY Options Tier Schedule. Deleting SPY Options from the Select Symbols Options Tier Schedule of rebates and fees is reasonable because SPY Options are proposed to have their own new Tier structure to further incentivize Participants to send SPY Options order flow to the Exchange. The Exchange believes it is equitable and not unfairly discriminatory to delete SPY Options from Select Symbols and establish the SPY Options Tier Schedule because this schedule will be applied uniformly to all similarly situated Participants. This is further discussed below. Change 2--Penny Pilot Options: Add SPY Options Tier Schedule For Penny Pilot Options, in Change 2 the Exchange is proposing to modify fees and rebates for Customer and BX Options Market Maker in respect of SPY Options.\24\ Specifically, the Exchange is proposing to add a SPY Options Tier Schedule as discussed. In adding the new Tiers in the SPY Options Tier Schedule, the current SPY Options pricing in the Select Symbols Options Tier Schedule will be replaced with the proposed SPY Options Tier Schedule specifically applicable to SPY Options, which are among the very highest volume options traded on the Exchange. The proposed SPY Options Tier Schedule will have three Tiers for Rebate to Remove Liquidity for Customer as well as several notes. The three new Tiers, which make up the ``SPY Options Tier Schedule,'' are similar in structure to the current Select Symbols Options Tier Schedule Rebate to Remove Liquidity.\25\ --------------------------------------------------------------------------- \24\ Fees and rebates, as well as Tiers, for all other Select Symbols options will remain unchanged. \25\ Unlike the Select Symbols Options Tier Schedule, in the SPY Options Tier Schedule there is no tier 4, which in the Select Symbols Options Tier Schedule for a rebate requires an even higher amount of volume or volume associated with the Price Improvement Mechanism Auction (``PRISM''). --------------------------------------------------------------------------- The Exchange believes that it is reasonable to establish separate SPY Options Tiers to attract SPY Options volume to the Exchange while separately setting forth fees and rebates related to SPY Options. The Exchange believes that the proposed Tiers in the SPY Options Tier Schedule are reasonable in that they reflect a structure that is not novel in the options markets but rather is similar to that of other options markets and competitive with what is offered by other exchanges.\26\ In addition, the Exchange believes that making changes to add Tiers applicable to the Customer in terms of Rebate to Remove Liquidity is reasonable because it encourages the desired Customer behavior by attracting Customer interest 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. --------------------------------------------------------------------------- \26\ See, e.g., the MIAX fee schedule at https://www.miaxoptions.com/content/fees and the BOX fee schedule at http://boxoptions.com/fee-schedule/ schedule/. --------------------------------------------------------------------------- Establishing SPY Option Tiers for Rebate to Remove Liquidity is reasonable because it encourages market participant behavior through progressive tiered fees and rebates using an accepted methodology among options exchanges.\27\ The proposed Tiers in the SPY Options Tier Schedule clearly reflect the progressively increasing nature of Participant executions structured for the purpose of attracting order flow to the Exchange. That is, as discussed if a Participant removes more SPY Options contracts per day in the customer range he can earn higher rebates. For example, in the highest proposed SPY Options Tier 3 Rebate to Remove Liquidity, for which Participant must remove more than 2999 SPY Options contracts per day in the customer range, the Participant can earn the highest $0.51 rebate (per contract). And in the lowest proposed SPY Options Tier 1 Rebate to Remove Liquidity, for which Participant must remove less than 1500 SPY Options contracts per day in the customer range, the Participant can earn the lowest $0.10 rebate (per contract). --------------------------------------------------------------------------- \27\ 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''). --------------------------------------------------------------------------- For Penny Pilot Options, establishing the Customer-related and BX Options Market Maker-related fee and rebate changes in respect of SPY Options, which includes the new SPY Options Tiers with notes, is equitable and not unfairly discriminatory because the Exchange's proposal to assess fees and pay rebates according to the SPY [[Page 51262]] Options Tier Schedule will apply uniformly to all similarly situated Participants. Thus, for example, certain Participants would earn a Rebate to Remove Liquidity according to the same Tiers per the SPY Options Tier Schedule. 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, and notes that unlike others (e.g. Non-Customers) some market participants like BX Options Market Makers commit to various obligations. Despite the fact that certain BX Options Market Maker fees to add and remove liquidity are proposed to be increased as discussed, the BX Options Market Maker fees to add and remove will be lower as compared to other non-Customer market participants. Unlike other non-Customer market participants, BX Options MMs have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\28\ A BX Options Market Maker has the obligation to make continuous markets, engage in course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with course [sic] of dealings. Customers will continue to be assessed the lowest fees because Customer liquidity 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. --------------------------------------------------------------------------- \28\ Pursuant to Chapter VII (Market Participants), Section 5 (Obligations of Market Makers), in registering as a Market Maker, an Options Participant commits himself to various obligations. Transactions of a Market Maker in its market making capacity must constitute a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and Market Makers should not make bids or offers or enter into transactions that are inconsistent with such course of dealings. Further, all Market Makers are designated as specialists on BX for all purposes under the Act or rules thereunder. See Chapter VII, Section 5.'' --------------------------------------------------------------------------- As part of the new SPY Options Tier Schedule the Exchange proposes six notes regarding certain fees to add liquidity and fees to remove liquidity. The Exchange believes that this is reasonable. The first four proposed notes are taken directly from the Select Symbols Options Tier Schedule and use the same language except that these proposed notes refer to SPY Options rather than Select Symbols; and note four has one proposed added sentence.\29\ Proposed note 4 would state that Customer fee to add liquidity in SPY Options when contra to another Customer will be $0.33 per contract. There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer.\30\ The Exchange also proposes two additional notes. Proposed note 5 would state that BX Options Market Maker fee to add liquidity and the BX Options Market Maker fee to remove liquidity in SPY Options will each be $0.44 per contract when trading with Customer. Proposed note 6 would state that BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when trading with Firm, BX Options Market Maker or Non Customer. --------------------------------------------------------------------------- \29\ The sentence proposed to be added to the fourth note would state: There will be no fee or rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer. \30\ Previously, as part of the Select Symbol Tier Schedule, a Customer, when trading with Firm, BX Options Market Maker or Non Customer could receive a Rebate to add liquidity ($0.00 to $0.25 rebate); and now there is no fee or rebate when a Customer adds liquidity in SPY Options when trading with Firm, BX Options Market Maker or Non Customer. The Exchange believes this change is reasonable and not inequitable or unfairly discriminatory in light of the overall Exchange efforts to incentivize Participants to bring SPY Options liquidity to the Exchange. --------------------------------------------------------------------------- Today, when BX Options Market Maker trades in SPY Options with Customer, the fee to add liquidity is between $0.29 and $0.44 per contract and the fee to remove liquidity is between $0.25 and $0.42 per contract, according to Tiers. Going forward, per proposed note 5, both the fee to add liquidity in SPY Options and the fee to remove liquidity in SPY Options when BX Options Market Maker trades with Customer will be $0.44 per contract. Today the fee to add liquidity when BX Options Market maker trades in SPY Options with Non-Customer or BX Options Market Maker, or Firm is between $0.14 and $0.00 per contract, according to Tiers. Going forward per proposed note 6 the BX Options Market Maker fee to add liquidity will be $0.10 per contract when trading SPY Options with Firm, BX Options Market Maker or Non Customer.\31\ The Exchange believes that it is reasonable to normalize the fees discussed in note 5 and in note 6 so that they are the same for BX Options Market Makers when trading such SPY Options. The Exchange believes that to incentivize bringing SPY Options liquidity to the Exchange it is reasonable to make the proposed change in notes 1, 2, 3, and 4 (with the added sentence in note 4 as noted) to refer to SPY Options rather than the Select Symbol Tier Schedule. The Exchange believes that to incentivize bringing SPY Options liquidity to the Exchange it is reasonable to normalize note 5 and note 6 fees so that they are the same under all circumstances for BX Options Market Makers when trading such SPY Options.\32\ --------------------------------------------------------------------------- \31\ Previously, as part of the Select Symbol Tier Schedule, BX Options Market Maker when trading with Customer would be assessed a fee to remove liquidity in SPY Options ($0.25 to $0.42), and BX Options Market Maker when trading with Customer would be assessed a fee to add liquidity ($0.29 to $0.44); and as proposed there will be a $0.44 fee to remove liquidity and a $0.44 fee to add liquidity in SPY Options for all Tiers. The Exchange believes this change is reasonable and not inequitable or unfairly discriminatory in light of the overall Exchange efforts to incentivize Participants to bring SPY Options liquidity to the Exchange. \32\ As part of the Select Symbol Tier Schedule a BX Options Market Maker, when trading with a Customer, would be assessed a fee to add liquidity between $0.29 to $0.44 depending on tier; and as proposed in note 5 there will be a $0.44 fee to add liquidity in SPY options for all Tiers. As part of the Select Symbol Tier Schedule a BX Options Market Maker, when trading with a Non-Customer or BX Options Market Maker, or Firm, would be assessed a fee to add liquidity between $0.00 to $0.14 depending on tier, and as proposed in note 5 [sic] there will be a $0.10 fee to add liquidity in SPY options for all Tiers. --------------------------------------------------------------------------- For Penny Pilot Options, establishing the Customer-related and BX Options Market Maker-related fee and rebate changes in respect of SPY Options, which includes the new SPY Options Tiers with notes, is equitable and not unfairly discriminatory. This is because the Exchange's proposal to assess fees and pay rebates according to the SPY Options Tier Schedule will apply uniformly to all similarly situated Participants. Thus, for example, Participants would earn a Rebate to Remove Liquidity according to the same Tiers per the SPY Options Tier Schedule. It is equitable and not unfairly discriminatory to assess the same fee and rebate in respect of SPY Options regardless of industry trade volume where this is applied uniformly to all similarly situated Participants. The Exchange believes that by making the proposed changes it is incentivizing Participants to bring more SPY Options volume to 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, [[Page 51263]] the Exchange does not believe that its proposal to make changes to its Penny Pilot Options fees and rebates and to establish the SPY Options Tier Schedule with notes for such fees and rebates 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 and establishing separate Tiers for SPY Options 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, BX Options Market Maker, and Non-Customer) 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 (e.g., Non-Customers) 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. In this instance, the proposed changes to the fees and rebates for execution of contracts on the Exchange, and establishing SPY Options Tiers with notes for such fees and rebates, 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 order executions. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.\33\ --------------------------------------------------------------------------- \33\ 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 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-2016-045 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BX-2016-045. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BX-2016-045, and should be submitted on or before August 24, 2016. [[Page 51264]] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\34\ --------------------------------------------------------------------------- \34\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-18313 Filed 8-2-16; 8:45 am] BILLING CODE 8011-01-P
![51258 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices
common members. Furthermore, modifications to the Certification need (‘‘Act’’),1 and Rule 19b–4 thereunder,2
because IEX and FINRA will coordinate not be filed with the Commission as an notice is hereby given that, on July 14,
their regulatory functions in accordance amendment to the Plan, provided that 2016, NASDAQ BX, Inc. (‘‘BX’’ or
with the Plan, the Plan should promote the Parties are only adding to, deleting ‘‘Exchange’’) filed with the Securities
investor protection. from, or confirming changes to IEX rules and Exchange Commission (‘‘SEC’’ or
The Commission notes that, under the in the Certification in conformance with ‘‘Commission’’) the proposed rule
Plan, IEX and FINRA have allocated the definition of Common Rules change as described in Items I, II, and
regulatory responsibility for those IEX provided in the Plan. However, should III below, which Items have been
rules, set forth in the Certification, that the Parties decide to add an IEX rule to prepared by the Exchange. The
are substantially similar to the the Certification that is not substantially Commission is publishing this notice to
applicable FINRA rules in that similar to a FINRA rule; delete an IEX
examination for compliance with such solicit comments on the proposed rule
rule from the Certification that is change from interested persons.
provisions and rules would not require substantially similar to a FINRA rule; or
FINRA to develop one or more new leave on the Certification an IEX rule I. Self-Regulatory Organization’s
examination standards, modules, that is no longer substantially similar to Statement of the Terms of Substance of
procedures, or criteria in order to a FINRA rule, then such a change would the Proposed Rule Change
analyze the application of the rule, or a constitute an amendment to the Plan,
common member’s activity, conduct, or which must be filed with the The Exchange proposes to amend its
output in relation to such rule. In Commission pursuant to Rule 17d–2 Options Pricing at Chapter XV Section
addition, under the Plan, FINRA would under the Act.17 2, entitled ‘‘BX Options Market—Fees
assume regulatory responsibility for and Rebates,’’ which governs pricing for
certain provisions of the federal IV. Conclusion
BX members using the BX Options
securities laws and the rules and This Order gives effect to the Plan Market (‘‘BX Options’’). The Exchange
regulations thereunder that are set forth filed with the Commission in File No. proposes to modify fees and rebates (per
in the Certification. The Common Rules 4–700. The Parties shall notify all executed contract) for certain Penny
covered by the Plan are specifically members affected by the Plan of their Pilot 3 Options to: (a) Delete SPY
listed in the Certification, as may be rights and obligations under the Plan. Options from the Select Symbols
amended by the Parties from time to IT IS THEREFORE ORDERED,
time. Options Tier Schedule; and (b) adopt a
pursuant to Section 17(d) of the Act, SPY Options Tier Schedule.4
According to the Plan, IEX will that the Plan in File No. 4–700, between
review the Certification, at least FINRA and IEX, filed pursuant to Rule The text of the proposed rule change
annually, or more frequently if required 17d–2 under the Act, is approved and is available on the Exchange’s Web site
by changes in either the rules of IEX or declared effective. at http://nasdaqbx.cchwallstreet.com/,
FINRA, and, if necessary, submit to IT IS FURTHER ORDERED that IEX is at the principal office of the Exchange,
FINRA an updated list of Common relieved of those responsibilities and at the Commission’s Public
Rules to add IEX rules not included on allocated to FINRA under the Plan in Reference Room.
the then-current list of Common Rules File No. 4–700.
that are substantially similar to FINRA II. Self-Regulatory Organization’s
rules; delete IEX rules included in the For the Commission, by the Division of Statement of the Purpose of, and
then-current list of Common Rules that Trading and Markets, pursuant to delegated Statutory Basis for, the Proposed Rule
authority.18
are no longer substantially similar to Change
FINRA rules; and confirm that the Robert W. Errett,
remaining rules on the list of Common Deputy Secretary. In its filing with the Commission, the
Rules continue to be IEX rules that are [FR Doc. 2016–18316 Filed 8–2–16; 8:45 am] Exchange included statements
substantially similar to FINRA rules.15 BILLING CODE 8011–01–P concerning the purpose of and basis for
FINRA will then confirm in writing the proposed rule change and discussed
whether the rules listed in any updated any comments it received on the
list are Common Rules as defined in the SECURITIES AND EXCHANGE proposed rule change. The text of these
Plan. Under the Plan, IEX will also COMMISSION statements may be examined at the
provide FINRA with a current list of places specified in Item IV below. The
[Release No. 34–78431; File No. SR–BX–
common members and shall update the Exchange has prepared summaries, set
2016–045]
list no less frequently than once each forth in sections A, B, and C below, of
quarter.16 The Commission believes that Self-Regulatory Organizations; the most significant aspects of such
these provisions are designed to provide NASDAQ BX, Inc.; Notice of Filing and statements.
for continuing communication between Immediate Effectiveness of Proposed
the Parties to ensure the continued Rule Change Regarding Tiers Related
accuracy of the scope of the proposed to SPY Options 1 15 U.S.C. 78s(b)(1).
allocation of regulatory responsibility.
2 17 CFR 240.19b–4.
The Commission is hereby declaring July 28, 2016.
3 The Penny Pilot was established in June 2012
effective a Plan that, among other Pursuant to Section 19(b)(1) of the
and extended through 2016. See Securities
asabaliauskas on DSK3SPTVN1PROD with NOTICES
things, allocates regulatory Securities Exchange Act of 1934 Exchange Act Release Nos. 67256 (June 26, 2012),
responsibility to FINRA for the 77 FR 39277 (July 2, 2012) (SR–BX–2012–030)
oversight and enforcement of all IEX 17 The Commission also notes that the addition to (order approving BX option rules and establishing
rules that are substantially similar to the or deletion from the Certification of any federal Penny Pilot); and 78036 (June 10, 2016), 81 FR
securities laws, rules, and regulations for which 39308 (June 16, 2016) (SR–BX–2016–021) (notice of
rules of FINRA for common members of
FINRA would bear responsibility under the Plan for filing and immediate effectiveness extending the
IEX and FINRA. Therefore, examining, and enforcing compliance by, common Penny Pilot through December 31, 2016).
members, also would constitute an amendment to 4 SPY, Select Symbols Options Tier Schedule,
15 See paragraph 2 of the Plan. the Plan. and SPY Options Tier Schedule are discussed
16 See paragraph 3 of the Plan. 18 17 CFR 200.30–3(a)(34). below.
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![51260 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices
the Select Symbols Options Tier notes regarding certain fees to add and the fee to remove liquidity is
Schedule Rebate to Remove Liquidity, liquidity and fees to remove liquidity. between $0.25 and $0.42 per contract,
states that a Participant may earn a The first four proposed notes are taken according to Tiers. Going forward, per
rebate if he removes more than 2999 directly from the Select Symbols proposed note 5, both the fee to add
SPY Options contracts per day in the Options Tier Schedule and use the same liquidity in SPY Options and the fee to
customer range. Proposed Tier 3 offers language except that these proposed remove liquidity in SPY Options when
a $0.51 rebate when a Customer trades notes refer to SPY Options rather than BX Options Market Maker trades with
with Non-Customer, BX Options Market Select Symbols. The Exchange is also Customer will be $0.44 per contract.
Maker, Customer, or Firm. The adding a sentence to the fourth note to Today the fee to add liquidity when BX
proposed $0.51 rebate is a modest state: There will be no fee or rebate for Options Market maker trades in SPY
increase from the current $0.37 rebate in Customer SPY Options that add
Options with Non-Customer or BX
the Select Symbols Options Tier liquidity when contra to Firm, BX
Options Market Maker, or Firm is
Schedule now applicable to SPY Options Market Maker or Non
Options. This increase is, as further Customer.16 The Exchange also between $0.14 and $0.00 per contract,
discussed, reasonable because it proposes two additional notes. Proposed according to Tiers. Going forward per
incentivizes Participants to bring SPY note 5 would state that BX Options proposed note 6 the BX Options Market
Options volume to the Exchange. Market Maker fee to add liquidity and Maker fee to add liquidity will be $0.10
Whereas the Select Symbols Options BX Options Market Maker fee to remove per contract when trading SPY Options
Tier Schedule takes into account total liquidity in SPY Options will each be with Firm, BX Options Market Maker or
industry Customer volume per month $0.44 per contract when trading with Non Customer. The Exchange believes
including equity and ETF options ADV Customer. Proposed note 6 would state that it is reasonable to normalize the
contracts, in order to incentivize that BX Options Market Maker fee to fees discussed in note 5 and in note 6
Participants to transact more SPY add liquidity in SPY Options will be so that they are the same for BX Options
Options volume on the Exchange, $0.10 per contract when trading with Market Makers when trading such SPY
proposed Tier 3 looks only at the Firm, BX Options Market Maker or Non Options.
amount of daily SPY Options volume in Customer. As proposed, the SPY Options Tier
the Customer range that is removed by Today, when BX Options Market Schedule in Chapter XV, Section 2
the Participant. Maker trades in SPY Options with subsection (1) will read as follows:
As part of the new SPY Options Tier Customer, the fee to add liquidity is
Schedule the Exchange proposes six between $0.29 and $0.44 per contract SPY Options Tier Schedule
REBATE TO REMOVE LIQUIDITY
[per contract]
Applied to: Customer
Trading with: Non-Customer, BX Options Market Maker, Customer, or Firm
Tier 1 .............................. Participant removes less than 1500 SPY Options contracts per day in the customer range ................ $0.10
Tier 2 .............................. Participant removes 1500 to not more than 2999 SPY Options contracts per day in the customer 0.42
range.
Tier 3 .............................. Participant removes more than 2999 SPY Options contracts per day in the customer range .............. 0.51
• Note 1: Firm fee to add liquidity and fee to remove liquidity in SPY Options will be $0.33 per contract, regardless of counterparty.
• Note 2: Non-Customer fee to add liquidity and fee to remove liquidity in SPY Options will be $0.46 per contract, regardless of counterparty.
• Note 3: BX Options Market Maker fee to remove liquidity in SPY Options will be $0.46 per contract when trading with Firm, Non-Customer,
or BX Options Market Maker.
• Note 4: Customer fee to add liquidity in SPY Options when contra to another Customer will be $0.33 per contract. There will be no fee or
rebate for Customer SPY Options that add liquidity when contra to Firm, BX Options Market Maker or Non Customer.
• Note 5: BX Options Market Maker fee to add liquidity and BX Options Market Maker fee to remove liquidity in SPY Options will each be
$0.44 per contract when trading with Customer.
• Note 6: BX Options Market Maker fee to add liquidity in SPY Options will be $0.10 per contract when trading with Firm, BX Options Market
Maker or Non Customer.
The Exchange is adopting a separate 2. Statutory Basis discrimination between customers,
SPY Options Tier Schedule because it issuers, brokers, or dealers. Attracting
The Exchange believes that the order flow to the Exchange benefits all
believes that it will provide even greater
proposed rule change is consistent with
incentives for execution of SPY Options Participants who have the opportunity
Section 6 of the Act,17 in general, and
contracts on the BX Options Market. to interact with this order flow.
with Section 6(b)(4) and 6(b)(5) of the
The Exchange believes that its proposal Act,18 in particular, in that it provides The Commission and the courts have
should provide increased opportunities for the equitable allocation of reasonable repeatedly expressed their preference
for participation in SPY Options dues, fees, and other charges among for competition over regulatory
asabaliauskas on DSK3SPTVN1PROD with NOTICES
executions on the Exchange, facilitating members and issuers and other persons intervention in determining prices,
the ability of the Exchange to bring using any facility or system which the products, and services in the securities
together participants and encourage Exchange operates or controls, and is markets. In Regulation NMS, while
more robust competition for orders. not designed to permit unfair adopting a series of steps to improve the
16 The Exchange believes that while the fourth the proposed change is reasonable in light of the 17 15 U.S.C. 78f.
note applicable to Select Symbols Options now overall Exchange efforts to incentivize Participants 18 15 U.S.C. 78f (b) (4) and (5).
states that Customer fee to add liquidity in when to bring SPY Options liquidity to the Exchange.
contra to another Customer is $0.33 per contract,
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![Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices 51261
current market model, the Commission Change 1—Penny Pilot Options: structure that is not novel in the options
highlighted the importance of market Remove SPY Options From Select markets but rather is similar to that of
forces in determining prices and SRO Symbols Options Tier Schedule other options markets and competitive
revenues and, also, recognized that For Penny Pilot Options, in Change 1, with what is offered by other
current regulation of the market system the Exchange proposes modifications to exchanges.26 In addition, the Exchange
‘‘has been remarkably successful in remove SPY Options from the Select believes that making changes to add
promoting market competition in its Symbols Options Tier Schedule. The Tiers applicable to the Customer in
broader forms that are most important to Exchange simultaneously proposes to terms of Rebate to Remove Liquidity is
investors and listed companies.’’ 19 establish a new SPY Options Tier reasonable because it encourages the
Schedule. desired Customer behavior by attracting
Likewise, in NetCoalition v. Securities Customer interest to the Exchange.
Deleting SPY Options from the Select
and Exchange Commission 20 Customer activity enhances liquidity on
Symbols Options Tier Schedule of
(‘‘NetCoalition’’) the D.C. Circuit upheld rebates and fees is reasonable because the Exchange for the benefit of all
the Commission’s use of a market-based SPY Options are proposed to have their market participants and benefits all
approach in evaluating the fairness of own new Tier structure to further market participants by providing more
market data fees against a challenge incentivize Participants to send SPY trading opportunities, which attracts
claiming that Congress mandated a cost- Options order flow to the Exchange. The market makers. An increase in the
based approach.21 As the court Exchange believes it is equitable and not activity of these market participants in
emphasized, the Commission ‘‘intended unfairly discriminatory to delete SPY turn facilitates tighter spreads, which
in Regulation NMS that ‘market forces, Options from Select Symbols and may cause an additional corresponding
rather than regulatory requirements’ establish the SPY Options Tier Schedule increase in order flow from other market
play a role in determining the market because this schedule will be applied participants.
data . . . to be made available to uniformly to all similarly situated Establishing SPY Option Tiers for
investors and at what cost.’’ 22 Participants. This is further discussed Rebate to Remove Liquidity is
below. reasonable because it encourages market
Further, ‘‘[n]o one disputes that participant behavior through
competition for order flow is ‘fierce.’ Change 2—Penny Pilot Options: Add progressive tiered fees and rebates using
. . . As the SEC explained, ‘[i]n the U.S. SPY Options Tier Schedule an accepted methodology among
national market system, buyers and For Penny Pilot Options, in Change 2 options exchanges.27 The proposed
sellers of securities, and the broker- the Exchange is proposing to modify Tiers in the SPY Options Tier Schedule
dealers that act as their order-routing fees and rebates for Customer and BX clearly reflect the progressively
agents, have a wide range of choices of Options Market Maker in respect of SPY increasing nature of Participant
where to route orders for execution’; Options.24 Specifically, the Exchange is executions structured for the purpose of
[and] ‘no exchange can afford to take its proposing to add a SPY Options Tier attracting order flow to the Exchange.
market share percentages for granted’ Schedule as discussed. In adding the That is, as discussed if a Participant
because ‘no exchange possesses a new Tiers in the SPY Options Tier removes more SPY Options contracts
monopoly, regulatory or otherwise, in Schedule, the current SPY Options per day in the customer range he can
the execution of order flow from broker pricing in the Select Symbols Options earn higher rebates. For example, in the
dealers’. . . .’’ 23 Although the court Tier Schedule will be replaced with the highest proposed SPY Options Tier 3
and the SEC were discussing the cash proposed SPY Options Tier Schedule Rebate to Remove Liquidity, for which
equities markets, the Exchange believes specifically applicable to SPY Options, Participant must remove more than
that these views apply with equal force which are among the very highest 2999 SPY Options contracts per day in
volume options traded on the Exchange. the customer range, the Participant can
to the options markets.
The proposed SPY Options Tier earn the highest $0.51 rebate (per
The Exchange believes that its Schedule will have three Tiers for contract). And in the lowest proposed
proposal should provide increased Rebate to Remove Liquidity for SPY Options Tier 1 Rebate to Remove
opportunities for participation in SPY Customer as well as several notes. The Liquidity, for which Participant must
Options executions on the Exchange, three new Tiers, which make up the remove less than 1500 SPY Options
facilitating the ability of the Exchange to ‘‘SPY Options Tier Schedule,’’ are contracts per day in the customer range,
bring together participants and similar in structure to the current Select the Participant can earn the lowest
encourage more robust competition for Symbols Options Tier Schedule Rebate $0.10 rebate (per contract).
orders. to Remove Liquidity.25 For Penny Pilot Options, establishing
The Exchange believes that it is the Customer-related and BX Options
The Exchange believes that the
reasonable to establish separate SPY Market Maker-related fee and rebate
proposed change is reasonable, Options Tiers to attract SPY Options
equitable and not unfairly changes in respect of SPY Options,
volume to the Exchange while which includes the new SPY Options
discriminatory for the following separately setting forth fees and rebates Tiers with notes, is equitable and not
reasons. related to SPY Options. The Exchange unfairly discriminatory because the
believes that the proposed Tiers in the Exchange’s proposal to assess fees and
19 Securities Exchange Act Release No. 51808
SPY Options Tier Schedule are pay rebates according to the SPY
asabaliauskas on DSK3SPTVN1PROD with NOTICES
(June 29, 2005), 70 FR 37496 at 37499 (File No. S7–
reasonable in that they reflect a
10–04) (‘‘Regulation NMS Adopting Release’’).
26 See, e.g., the MIAX fee schedule at https://
20 Net Coalition v. SEC, 615 F.3d 525 (D.C. Cir.
24 Fees and rebates, as well as Tiers, for all other www.miaxoptions.com/content/fees and the BOX
2010).
21 See id. At 534–535.
Select Symbols options will remain unchanged. fee schedule at http://boxoptions.com/fee-
25 Unlike the Select Symbols Options Tier schedule/.
22 See id. At 537.
Schedule, in the SPY Options Tier Schedule there 27 See, e.g., fee and rebate schedules of other
23 See id. At 539 (quoting Securities Exchange Act
is no tier 4, which in the Select Symbols Options options exchanges, including, but not limited to,
Commission at [sic] Release No. 59039 (December Tier Schedule for a rebate requires an even higher NASDAQ Options Market (‘‘NOM’’), NASDAQ
2, 2008), 73 FR 74770 at 74782–74783 (December amount of volume or volume associated with the PHLX LLC (‘‘Phlx’’), and Chicago Board Options
9, 2008) (SR–NYSEArca–2006–21)). Price Improvement Mechanism Auction (‘‘PRISM’’). Exchange (‘‘CBOE’’).
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![51262 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices
Options Tier Schedule will apply proposed notes refer to SPY Options that it is reasonable to normalize the
uniformly to all similarly situated rather than Select Symbols; and note fees discussed in note 5 and in note 6
Participants. Thus, for example, certain four has one proposed added so that they are the same for BX Options
Participants would earn a Rebate to sentence.29 Proposed note 4 would state Market Makers when trading such SPY
Remove Liquidity according to the same that Customer fee to add liquidity in Options. The Exchange believes that to
Tiers per the SPY Options Tier SPY Options when contra to another incentivize bringing SPY Options
Schedule. Customer will be $0.33 per contract. liquidity to the Exchange it is
The fee and rebate schedule as There will be no fee or rebate for reasonable to make the proposed change
proposed continues to reflect Customer SPY Options that add in notes 1, 2, 3, and 4 (with the added
differentiation among different market liquidity when contra to Firm, BX sentence in note 4 as noted) to refer to
participants. The Exchange believes that Options Market Maker or Non SPY Options rather than the Select
the differentiation is equitable and not Customer.30 The Exchange also Symbol Tier Schedule. The Exchange
unfairly discriminatory, as well as proposes two additional notes. Proposed believes that to incentivize bringing SPY
reasonable, and notes that unlike others note 5 would state that BX Options Options liquidity to the Exchange it is
(e.g. Non-Customers) some market Market Maker fee to add liquidity and reasonable to normalize note 5 and note
participants like BX Options Market the BX Options Market Maker fee to 6 fees so that they are the same under
Makers commit to various obligations. remove liquidity in SPY Options will all circumstances for BX Options Market
Despite the fact that certain BX Options each be $0.44 per contract when trading Makers when trading such SPY
Market Maker fees to add and remove with Customer. Proposed note 6 would Options.32
liquidity are proposed to be increased as state that BX Options Market Maker fee For Penny Pilot Options, establishing
discussed, the BX Options Market to add liquidity in SPY Options will be the Customer-related and BX Options
Maker fees to add and remove will be $0.10 per contract when trading with Market Maker-related fee and rebate
lower as compared to other non- Firm, BX Options Market Maker or Non changes in respect of SPY Options,
Customer market participants. Unlike Customer. which includes the new SPY Options
other non-Customer market participants, Today, when BX Options Market Tiers with notes, is equitable and not
BX Options MMs have obligations to the Maker trades in SPY Options with unfairly discriminatory. This is because
market and regulatory requirements, Customer, the fee to add liquidity is the Exchange’s proposal to assess fees
which normally do not apply to other between $0.29 and $0.44 per contract and pay rebates according to the SPY
market participants.28 A BX Options and the fee to remove liquidity is Options Tier Schedule will apply
Market Maker has the obligation to between $0.25 and $0.42 per contract, uniformly to all similarly situated
make continuous markets, engage in according to Tiers. Going forward, per Participants. Thus, for example,
course of dealings reasonably calculated proposed note 5, both the fee to add Participants would earn a Rebate to
to contribute to the maintenance of a liquidity in SPY Options and the fee to Remove Liquidity according to the same
fair and orderly market, and not make remove liquidity in SPY Options when Tiers per the SPY Options Tier
bids or offers or enter into transactions BX Options Market Maker trades with Schedule. It is equitable and not
that are inconsistent with course [sic] of Customer will be $0.44 per contract. unfairly discriminatory to assess the
dealings. Customers will continue to be Today the fee to add liquidity when BX same fee and rebate in respect of SPY
assessed the lowest fees because Options Market maker trades in SPY Options regardless of industry trade
Customer liquidity benefits all market Options with Non-Customer or BX volume where this is applied uniformly
participants by providing more trading Options Market Maker, or Firm is to all similarly situated Participants.
opportunities, which attracts market between $0.14 and $0.00 per contract, The Exchange believes that by making
makers. An increase in the activity of according to Tiers. Going forward per the proposed changes it is incentivizing
these market participants in turn proposed note 6 the BX Options Market Participants to bring more SPY Options
facilitates tighter spreads, which may Maker fee to add liquidity will be $0.10 volume to the Exchange to further
cause an additional corresponding per contract when trading SPY Options enhance liquidity in this market.
increase in order flow from other market with Firm, BX Options Market Maker or B. Self-Regulatory Organization’s
participants. Non Customer.31 The Exchange believes Statement on Burden on Competition
As part of the new SPY Options Tier
Schedule the Exchange proposes six 29 The sentence proposed to be added to the The Exchange does not believe that
notes regarding certain fees to add fourth note would state: There will be no fee or the proposed rule change will impose
rebate for Customer SPY Options that add liquidity any burden on competition not
liquidity and fees to remove liquidity. when contra to Firm, BX Options Market Maker or
The Exchange believes that this is Non Customer.
necessary or appropriate in furtherance
reasonable. The first four proposed 30 Previously, as part of the Select Symbol Tier of the purposes of the Act. Specifically,
notes are taken directly from the Select Schedule, a Customer, when trading with Firm, BX
Options Market Maker or Non Customer could in SPY Options for all Tiers. The Exchange believes
Symbols Options Tier Schedule and use receive a Rebate to add liquidity ($0.00 to $0.25 this change is reasonable and not inequitable or
the same language except that these rebate); and now there is no fee or rebate when a unfairly discriminatory in light of the overall
Customer adds liquidity in SPY Options when Exchange efforts to incentivize Participants to bring
28 Pursuant to Chapter VII (Market Participants), trading with Firm, BX Options Market Maker or SPY Options liquidity to the Exchange.
Section 5 (Obligations of Market Makers), in Non Customer. The Exchange believes this change 32 As part of the Select Symbol Tier Schedule a
registering as a Market Maker, an Options is reasonable and not inequitable or unfairly BX Options Market Maker, when trading with a
discriminatory in light of the overall Exchange
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Participant commits himself to various obligations. Customer, would be assessed a fee to add liquidity
Transactions of a Market Maker in its market efforts to incentivize Participants to bring SPY between $0.29 to $0.44 depending on tier; and as
making capacity must constitute a course of Options liquidity to the Exchange. proposed in note 5 there will be a $0.44 fee to add
dealings reasonably calculated to contribute to the 31 Previously, as part of the Select Symbol Tier liquidity in SPY options for all Tiers. As part of the
maintenance of a fair and orderly market, and Schedule, BX Options Market Maker when trading Select Symbol Tier Schedule a BX Options Market
Market Makers should not make bids or offers or with Customer would be assessed a fee to remove Maker, when trading with a Non-Customer or BX
enter into transactions that are inconsistent with liquidity in SPY Options ($0.25 to $0.42), and BX Options Market Maker, or Firm, would be assessed
such course of dealings. Further, all Market Makers Options Market Maker when trading with Customer a fee to add liquidity between $0.00 to $0.14
are designated as specialists on BX for all purposes would be assessed a fee to add liquidity ($0.29 to depending on tier, and as proposed in note 5 [sic]
under the Act or rules thereunder. See Chapter VII, $0.44); and as proposed there will be a $0.44 fee there will be a $0.10 fee to add liquidity in SPY
Section 5.’’ to remove liquidity and a $0.44 fee to add liquidity options for all Tiers.
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![51264 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices
For the Commission, by the Division of DEPARTMENT OF STATE communications and information policy
Trading and Markets, pursuant to delegated issues.
authority.34 [Public Notice: 9660]
Members are appointed by the
Robert W. Errett, International Telecommunication Coordinator and must be U.S. citizens or
Deputy Secretary. Advisory Committee; Solicitation of legal permanent residents of the United
[FR Doc. 2016–18313 Filed 8–2–16; 8:45 am] Membership States, appointed as representative of
BILLING CODE 8011–01–P U.S. organizations. To ensure diversity
AGENCY: Department of State. in advice, ITAC membership will
ACTION: Notice. include not more than one
representative from any affiliated
SUMMARY: The U.S. Coordinator for
DEPARTMENT OF STATE agency or organization so long as the
International Communications and
threshold of no fewer than 30 members
Information Policy (‘‘the Coordinator’’),
[Public Notice: 9658]
is met. Membership in subcommittees is
in the U.S. Department of State Bureau
not limited to a prescribed number, and
of Economic and Business Affairs, is
Notice of Renewal of the Charter of the there may be more than one member
accepting applications for membership
International Telecommunication designated to a subcommittee for each
on the International Telecommunication
Advisory Committee (ITAC) affiliated agency or organization. The
Advisory Committee (ITAC).
ITAC charter calls for representative
DATES: Applications must be received members; therefore, a prospective
SUMMARY: This notice announces the by the Department of State (at the email
renewal of the Charter for the member must represent a company or
addresses at the end of this Notice) not organization. Solo members (who
International Telecommunication later than August 26, 2016.
Advisory Committees (ITAC). In ‘‘represent themselves’’) will not be
SUPPLEMENTARY INFORMATION: The selected. ITAC members must be versed
accordance with the provisions of the
Department of State is soliciting in the complexity of international
Federal Advisory Committee Act (Pub. applications from subject matter experts communications and information policy
L. 92–463, 5 U.S.C. Appendix) and the who are U.S. citizens or legal permanent issues and must be able to advise the
general authority of the Secretary of residents and representatives of Coordinator and the Department of State
State and the Department of State set scientific or industrial organizations on these matters. Members are expected
forth in Title 22 of the United States that are engaged in the study of to use their expertise and provide
code, in particular Sections 2656 and telecommunications or in the design or candid advice.
2707, the charter of the International manufacture of equipment intended for Please note that ITAC members will
Telecommunication Advisory telecommunication services, not be reimbursed for travel, per diem,
Committee has been extended until July representatives of civil society nor other expenses incurred in
22, 2016. organizations and academia, and connection with their duties as ITAC
The ITAC primarily consists of individuals of any other corporation or members. For those interested in
members of the telecommunications organization engaged in applying, the ITAC currently intends to
industry, ranging from network telecommunications and information hold a meeting on or about October 12,
operators and service providers to policy matters. Applicants should 2016. A separate Federal Register notice
equipment vendors, members of include experience participating in will be published to announce the
international organizations addressing details of that meeting.
academia, members of civil society, and
telecommunications and information
officials of interested government How to Apply: Email applications in
technical and policy issues,
agencies. The ITAC provides views and participating in U.S. preparatory response to this notice to the addresses
advice to the Department of State on activities for conferences and meetings at the end of this notice. Applications
positions on international of international organizations must contain the following information:
telecommunications and information addressing technical and policy issues, (1) Name of applicant; (2) citizenship of
policy matters. This advice has been a and serving on U.S. delegations. the applicant; (3) organizational
major factor in ensuring that the United The ITAC is a federal advisory affiliation and title, as appropriate; (4)
States is well prepared to participate committee under the authority of 22 mailing address; (5) work telephone
effectively in the international U.S.C. 2651a and 2656 and the Federal number; (6) email address; (7) résumé;
telecommunications and information Advisory Committee Act, 5 U.S.C. (8) summary of qualifications for ITAC
policy arena. Appendix. (‘‘FACA’’). The purpose of membership and (9) confirmation that
the ITAC is to advise the Coordinator your organization or company expects
FOR FURTHER INFORMATION CONTACT: you to represent their interests.
and the Department of State with
Please contact Franz Zichy at 202–647–
respect to, and provide strategic This information should be emailed
5778, zichyfj@state.gov.
recommendations on, communication to: zichyfj@state.gov, gadsdensf@
Dated: July 26, 2016. and information policy matters related state.gov, and jacksonln@state.gov.
Julie N. Zoller, to U.S. participation in the work of the
FOR FURTHER INFORMATION CONTACT:
Senior Deputy Coordinator, International International Telecommunication Union
Please contact Franz Zichy at 202–647–
(ITU), the Organization of American
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Communications and Information Policy, 5778, zichyfj@state.gov .
U.S. State Department. States Inter-American
Telecommunication Commission Dated: July 27, 2016.
[FR Doc. 2016–18369 Filed 8–2–16; 8:45 am]
(CITEL), the Organization for Economic Julie N. Zoller,
BILLING CODE P
Cooperation and Development (OECD), Senior Deputy Coordinator, International
the Asia Pacific Economic Cooperation Communications and Information Policy,
Telecommunications & Information U.S. State Department.
Working Group (APEC TEL) and other [FR Doc. 2016–18378 Filed 8–2–16; 8:45 am]
34 17 CFR 200.30–3(a)(12). international bodies addressing BILLING CODE 4710–AE–P
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Document Created: 2016-08-02 23:43:58
Document Modified: 2016-08-02 23:43:58
| 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 51258 |
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