Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to amend its fees and rebates applicable to Members
In its filing with the Commission, the self-regulatory organization 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 self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
Flag DM is yielded where non-displayed orders add or remove liquidity using the Mid-Point Discretionary order type.
In addition, the Exchange proposes to delete Footnote 18 that is appended to Flag DM in the fee schedule because the proposed Flags DM and DT will count towards volume tiers as the Exchange can now differentiate between non-displayed liquidity that adds liquidity in the discretionary range from non-displayed liquidity that removes liquidity in the discretionary range.
The Exchange also proposes to amend Flag K to only apply to Members' orders routed to NASDAQ OMX PSX (“PSX”) using the ROUC or ROUE routing strategy as defined in Rule 11.9(b)(3). The Exchange proposes to reduce the rate from $0.0025 per share to $0.0005 per share, which represents a pass-through of the Exchange's rate for routing orders to PSX, in response to the proposed pricing changes in PSX's pending filing with the Commission.
Similarly, the Exchange also proposes to amend the rate for Flag RS, which is yielded when Members route orders to PSX that add liquidity. The Exchange proposes to amend the pricing for Flag RS from a rebate of $0.0024 per share to a charge of $0.0005 per share in response to PSX's pending filing, which represents a pass-through of the Exchange's rate for routing orders to PSX.
The Exchange proposes to implement these amendments to its fee schedule on July 1, 2012.
The Exchange believes that the proposed rule changes are consistent with the objectives of Section 6 of the Act,
The Exchange believes that the proposed technical amendment to bifurcate Flag DM into Flags DM and DT promotes market transparency and improves investor protection by adding additional transparency to its fee schedule by more precisely delineating for Members whether they are “adders of liquidity” or “removers of liquidity” for purposes of Members' non-displayed orders using the Mid-Point Discretionary order type. In addition, the Exchange believes that counting Flags DM and DT towards volume tiers is reasonable and equitable as the Exchange can now differentiate between non-displayed liquidity that adds liquidity in the discretionary range from non-displayed liquidity that removes liquidity in the discretionary range, as explained above. Including Flags DM and DT in volume tiers allows their associated volume to be tracked by the Exchange in the appropriate tier(s), which may incent Members to increase use of the volume tiers in the fee
The rates and rebates associated with routing orders to PSX on the Exchange's fee schedule are pass-through rates. Currently, PSX charges the Exchange $0.0025 per share for Members' orders that are routed to PSX using the ROUC or ROUE routing strategy and the Exchange charges its Members $0.0025 per share as a pass-through. Therefore, the Exchange believes that the proposed reduction from $0.0025 per share to $0.0005 per share is equitable and reasonable because PSX is reducing the rate it charges the Exchange for routing to PSX to $0.0005. Currently, PSX provides the Exchange a rebate of $0.0024 per share for Members' orders that are routed to PSX and add liquidity and the Exchange rebates Members $0.0024 per share as a pass-through (Flag RS). Therefore, the Exchange believes that the proposed reduction from a rebate of $0.0024 per share to a charge of $0.0005 per share is equitable and reasonable because PSX is increasing the rate it charges the Exchange for routing to PSX to $0.0005 per share. In addition, the Exchange also believes that the proposed pass-through of this rate is non-discriminatory because it applies uniformly to all Members.
The Exchange believes that increasing the charge assessed for Members' orders that are routed to BATS BZX using the ROBA routing strategy (EDGA + BATS) from $0.0025 per share to $0.0029 per share (yielding Flag X) is equitable and reasonable because the Exchange is removing the $0.0004 per share incentive it previously associated with this routing strategy and replacing it with a straight pass-through of the charge BATS BZX assesses the Exchange for removing liquidity from the BZX Exchange order book.
The Exchange also notes that it operates in a highly-competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. The proposed rule change reflects a competitive pricing structure designed to incent market participants to direct their order flow to the Exchange. The Exchange believes that the proposed rates are equitable and non-discriminatory in that they apply uniformly to all Members. The Exchange believes the fees and credits remain competitive with those charged by other venues and therefore continue to be reasonable and equitably allocated to Members.
The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3) of the Act
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:
• Use the Commission's Internet comment form (
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.