82 FR 14261 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Rule 7018

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 51 (March 17, 2017)

[Federal Register Volume 82, Number 51 (Friday, March 17, 2017)]
[Notices]
[Pages 14261-14263]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-05339]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80224; File No. SR-BX-2017-017]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Transaction Fees at Rule 7018

March 13, 2017.
    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, 2017, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 the Exchange's transaction fees at 
Rule 7018 to add a new charge for providing liquidity on the BX equity 
market.
    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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
transaction fees at Rule 7018 to add a reduced fee for providing 
liquidity on the BX equity market if certain volume requirements are 
met. The Exchange operates on the ``taker-maker'' model, whereby it 
pays rebates to members that take liquidity and charges fees to members 
that provide liquidity. Currently, a member that adds liquidity through 
a displayed order and that does not qualify for one of the current 
reduced fees would be assessed a charge of $0.0020 per share executed. 
With this proposal, the Exchange proposes to charge $0.0018 per share 
executed for a displayed order entered by a member that adds liquidity 
equal to or exceeding the member's Growth Target. The Growth Target is 
defined as the liquidity the member added in January 2017 as a percent 
of total Consolidated Volume plus 0.04% of total Consolidated 
Volume.\3\ As such, if the member added liquidity that represented 
0.10% of total Consolidated Volume in January, the member's Growth 
Target would be 0.14% of total Consolidated Volume. A member that added 
0.14% of total Consolidated Volume in March would therefore qualify for 
the reduced fee in March.\4\
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    \3\ Rule 7018(a) defines ``Consolidated Volume'' as the total 
consolidated volume reported to all consolidated transaction 
reporting plans by all exchanges and trade reporting facilities 
during a month in equity securities, excluding executed orders with 
a size of less than one round lot. For purposes of calculating 
Consolidated Volume and the extent of a member's trading activity, 
the date of the annual reconstitution of the Russell Investments 
Indexes shall be excluded from both total Consolidated Volume and 
the member's trading activity.
    \4\ If a member was not active in the month of January, its 
Growth Target would be 0.04% for purposes of determining the 
eligibility for this fee.
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    The purpose of this reduced fee is to incentivize members to add 
additional liquidity to the Exchange, thereby increasing the market 
quality of the Exchange and benefitting all participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\6\ 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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed fee of $0.0018 per share 
executed is reasonable. The charge for adding

[[Page 14262]]

displayed liquidity to the Exchange set forth in Rule 7018(a) ranges 
from $0.0014 per share executed to $0.0020 per share executed, 
depending on whether any required volume thresholds were met. The 
Exchange believes that the proposed fee of $0.0018 is reasonable, 
because it is consistent with other of the Exchange's charges for 
adding liquidity, while it is sufficiently low that it incentivizes 
members to add increased liquidity.
    The Exchange also believes that the corresponding volume threshold 
to qualify for the fee, and the utilization of January 2017 as the base 
for the Growth Target, is reasonable. The requirement that a member add 
0.04% over its January added liquidity as a percent of Consolidated 
Volume is a meaningful requirement which is designed to incentivize 
members to add liquidity. In addition, the proposed volume threshold is 
closely aligned with the amount of the transaction fee, and is 
consistent with similar volume requirements assessed by the Exchange in 
connection with other transaction fees.\7\ The Exchange believes that 
using January 2017 as the base for the Growth Target is reasonable 
because that month represents the most recent full month of trading, 
and because the selection of a previous month as a baseline prevents 
members from changing their behavior prospectively to influence their 
baseline, and thus, their eligibility for the reduced fee.
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    \7\ For example, the Exchange assesses a transaction fee of 
$0.0017 per share executed for a Displayed order entered by a member 
that adds liquidity equal to or exceeding 0.15% of total 
Consolidated Volume during a month, and $0.0024 per share executed 
for Non-displayed orders (other than orders with Midpoint pegging) 
entered by a member that adds 0.06% of total Consolidated Volume of 
non-displayed liquidity.
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    The Exchange also notes that the proposal is consistent with 
transaction fees and credits assessed by other exchanges. For example, 
Bats BZX Exchange, which operates a maker-taker model, pays a credit of 
$0.0030 per share for displayed orders if the member increases its 
share of total Consolidated Volume for adding liquidity by 0.15% or 
more in comparison to its volume in April 2016,\8\ and assesses a fee 
of $0.00295 per share if the member increases its share of total 
Consolidated Volume for removing liquidity by 0.05% or more in 
comparison to its July 2016 volume.\9\ Similarly, Bats EDGX Exchange 
pays a credit of $0.0032 per share if the member increases its share of 
total Consolidated Volume for adding liquidity by 0.10% or more in 
comparison to its volume in January 2017.\10\
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    \8\ To be eligible for this rebate, the member must also have an 
average daily added volume as a percentage of total Consolidated 
Volume that equals or exceeds 0.20%.
    \9\ To be eligible for this fee, the member must also have 
Customer orders that remove liquidity that equal or exceed 0.30% of 
total Consolidated Volume.
    \10\ To be eligible for this fee, the member must also add an 
average daily volume that equals or exceeds 0.40% of total 
Consolidated Volume.
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    BX also believes that the proposed change is equitably allocated 
among members, and is not designed to permit unfair discrimination. BX 
notes that participation on the Exchange, and eligibility for the 
reduced fee, is voluntary, and that the proposed charge applies to all 
members that otherwise qualify for the reduced fee, e.g., members that 
add 0.04% in excess of the liquidity added in January in a given month.
    In adopting this fee, the Exchange is providing members with 
another way in which they may qualify for a reduced transaction fee, 
while incentivizing members to add increased liquidity, thereby 
benefitting all participants. BX notes that a member that adds 0.04% in 
excess of its January liquidity provided as a percent of total 
Consolidated Volume would continue to be eligible for the reduced fee 
for each month in which it met this requirement. BX believes this 
aspect of the proposal is equitable and not unfairly discriminatory, as 
this way to receive an ongoing reduced transaction fee is open to any 
member that elects to meet the volume requirements.

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. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable.
    In such an environment, the Exchange must continually adjust its 
fees to remain competitive with other exchanges and with alternative 
trading systems that have been exempted from compliance with the 
statutory standards applicable to exchanges. Because competitors are 
free to modify their own fees in response, and because market 
participants may readily adjust their order routing practices, the 
Exchange believes that the degree to which fee changes in this market 
may impose any burden on competition is extremely limited.
    In this instance, the proposed fee does not impose a burden on 
competition because the Exchange's execution services are completely 
voluntary and subject to extensive competition both from other 
exchanges and from off-exchange venues. The new fee is consistent with 
transaction fees and credits currently assessed by other exchanges. The 
new fee applies equally to all members that meet the volume 
requirements, and all similarly situated members are equally capable of 
qualifying for the fee if they choose to meet the volume requirements. 
Moreover, the same fee will be assessed to all members that qualify for 
the volume requirement. Finally, the purpose of the reduced fee is to 
incentivize members to add liquidity to the Exchange, potentially 
attracting additional participants to the Exchange and thereby 
promoting competition.
    In sum, 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.

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.\11\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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,

[[Page 14263]]

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-2017-017 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-2017-017. 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-2017-017 and 
should be submitted on or before April 7, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05339 Filed 3-16-17; 8:45 am]
 BILLING CODE 8011-01-P