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Notice2022-10617

Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend MRX's Pricing Schedule at Options 7 To Assess Membership, Port and Market Data Fees

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Published

May 18, 2022

Issuing agencies

Securities and Exchange Commission

Full Text

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[Federal Register Volume 87, Number 96 (Wednesday, May 18, 2022)]
[Notices]
[Pages 30305-30317]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10617]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94901; File No. SR-MRX-2022-04]

Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend MRX's
Pricing Schedule at Options 7 To Assess Membership, Port and Market
Data Fees

May 12, 2022.
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 May 2, 2022, Nasdaq MRX, LLC (``MRX'' 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 MRX's Pricing Schedule at Options 7
to assess membership, port and market data fees.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/mrx/rules">https://listingcenter.nasdaq.com/rulebook/mrx/rules</a>, 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 30306]]

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

1. Purpose
MRX proposes to amend its Pricing Schedule at Options 7 to assess
membership, port and market data fees, which are not assessed today,
and which have not been assessed since MRX's inception in 2016. The
proposed changes are designed to update fees for MRX's data and
services to reflect their current value--rather than their value when
it was a new exchange six years ago--based on MRX's ability to deliver
value to its customers through technology, liquidity and functionality.
Newly-opened exchanges often charge no fees for certain services such
as membership, ports and market data in order to attract order flow to
an exchange, and later amend their fees to reflect the true value of
those services.\3\ Allowing newly-opened exchanges time to build and
sustain market share before charging non-transactional fees encourages
market entry and promotes competition. The proposed changes fall into
three categories, discussed in detail below: Membership fees (Options
7, Section 5; Other Options Fees and Rebates); port fees (Options 7,
Section 6; Ports and Other Services); and market data fees (Options 7,
Section 7 Market Data).
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\3\ See, e.g., Securities Exchange Act Release No 88211
(February 14, 2020), 85 FR 9847 (February 20, 2020) (SR-NYSENAT-
2020-05), also available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf</a>. (initiating market data fees for the NYSE National exchange
after initially setting such fees at zero); see also Securities
Exchange Act Release No. 93927 (January 7, 2022), 87 FR 2191
(January 13, 2022) (SR-MEMX-2021-19) (introduction of membership
fees by MEMX).
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This Proposal reflects MRX's assessment that it has gained
sufficient market share to compete effectively against the other 15
options exchanges without waiving fees for membership, ports or market
data. These types of fees are assessed by options exchanges that
compete with MRX in the sale of exchange services--indeed, MRX is the
only options exchange (out of the 16 current options exchanges) not
assessing membership, port and market data fees today. New exchanges
commonly waive connectivity, data and membership fees to attract market
participants, facilitating their entry into the market and, once there
is sufficient depth and breadth of liquidity, ``graduate'' to compete
against established exchanges and charge fees that reflect the value of
their services.\4\ If MRX is incorrect in this assessment, that error
will be reflected in MRX's ability to compete with other options
exchanges.\5\
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\4\ For example, MIAX Emerald commenced operations as a national
securities exchange registered on March 1, 2019. See Securities
Exchange Act Release No. 84891 (December 20, 2018), 83 FR 67421
(December 28, 2018) (File No. 10-233) (order approving application
of MIAX Emerald, LLC for registration as a national securities
exchange). MIAX Emerald filed to adopt its transaction fees and
certain of its non-transaction fees in its filing SR-EMERALD-2019-
15. See Securities Exchange Act Release No. 85393 (March 21, 2019),
84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Establish
the MIAX Emerald Fee Schedule). MIAX Emerald waived its one-time
application fee and monthly Trading Permit Fees assessable to EEMs
and Market Makers among other fees within SR-EMERALD-2019-15.
\5\ Nasdaq recently announced that, beginning in 2022, Nasdaq
plans to migrate its North American markets to Amazon Web Services
in a phased approach, starting with Nasdaq MRX, a U.S. options
market. The proposed fee changes are entirely unrelated to this
effort.
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Options 7, Section 5
As noted above, MRX Members are not assessed fees for membership
today. Under the proposed fee change, MRX Members will be required to
pay a monthly Access Fee, which entitles MRX Members to trade on the
Exchange based on their membership type. Specifically, MRX proposes to
assess Electronic Access Members \6\ an Access Fee of $200 per month,
per membership. The Exchange proposes to assess Market Makers \7\
Access Fees depending on whether they are a Primary Market Maker
(``PMM'') or a Competitive Market Maker (``CMM''). A PMM would be
assessed an Access Fee of $200 per month, per membership. A CMM would
be assessed an Access Fee of $100 per month, per membership.\8\ The
proposed fees are identical to access fees on Nasdaq GEMX, LLC
(``GEMX'').\9\
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\6\ The term ``Electronic Access Member'' or ``EAM'' means a
Member that is approved to exercise trading privileges associated
with EAM Rights. See General 1, Section 1(a)(6).
\7\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21). The term ``Competitive Market Maker'' means a
Member that is approved to exercise trading privileges associated
with CMM Rights. See Options 1, Section 1(a)(12). The term ``Primary
Market Maker'' means a Member that is approved to exercise trading
privileges associated with PMM Rights. See Options 1, Section
1(a)(35).
\8\ In the case where a single Member has multiple MRX
memberships, the monthly access fee is charged for each membership.
For example, if a single member firm is both an EAM and a CMM, or
owns multiple CMM memberships, the firm is subject to the access fee
for each of those memberships.
\9\ See GEMX Options 7, Section 6.A. (Access Fees).
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In order to receive market making appointments to quote in any
options class, CMMs will also be assessed a CMM Trading Right Fee
identical to GEMX.\10\ CMM trading rights entitle a CMM to enter quotes
in options symbols that comprise a certain percentage of industry
volume. On a quarterly basis, the Exchange assigns points to each
options class equal to its percentage of overall industry volume (not
including exclusively traded index options), rounded down to the
nearest one hundredth of a percentage with a maximum of 15 points. A
new listing is assigned a point value of zero for the remainder of the
quarter in which it was listed. CMMs may seek appointments to options
classes that total 20 points for the first CMM Right it holds, and 10
points for the second and each subsequent CMM Right it holds.\11\ In
order to encourage CMMs to quote on the Exchange, MRX launched CMM
trading rights without any fees, allowing CMMs to freely quote in all
options classes.
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\10\ See GEMX Options 7, Section 6.B. (CMM Trading Rights Fees).
\11\ A CMM may request changes to its appointments at any time
upon advance notification to the Exchange in a form and manner
prescribed by the Exchange. See MRX Options 2, Section 3(c)(3).
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The Exchange is now proposing to adopt a monthly CMM Trading Rights
Fee. Under the proposed fee structure, CMMs will be assessed a Trading
Rights Fee of $850 per month for the first trading right, which will
entitle the CMM to quote in 20 percent of industry volume.\12\ Each
additional CMM Right will cost $500 per month, and will entitle the CMM
to quote an additional 10 percent of volume. Similar to GEMX's trading
rights fee,\13\ a new CMM would pay $850 for the first trading right
and all CMMs would thereafter pay $500 for each additional trading
right. The Exchange is proposing this pricing model because each
subsequent CMM Right costs less than the first trading right. All CMMs
have the opportunity to purchase additional CMM Rights beyond the
initial trading right in order to quote in additional options series.
The Exchange notes that it is not proposing trading right fees for
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\12\ These trading rights are referred to as CMM Rights. See MRX
Options 2, Section 3.
\13\ See GEMX Options 7, Section 6.B.

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[[Page 30307]]

PMMs, as the Exchange wishes to encourage Members to act as PMMs, which
will benefit the market through, for example, more robust quoting
requirements. PMMs have additional obligations on MRX as compared to
CMMs.\14\ The Exchange is proposing only to charge the $200 access fee
to EAMs, and no trading rights fee, as the technical, regulatory, and
administrative services associated with an EAM's use of the Exchange
are not as comprehensive as those associated with Market Makers'
use.\15\
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\14\ PMMs are required to provide two-sided quotations in 90% of
cumulative number of seconds, or such higher percentage as the
Exchange may announce in advance. In contrast, a CMM is not required
to enter quotations in the options classes to which it is appointed;
however, if a CMM initiates quoting in an options class, the CMM is
required to provide two-sided quotations in 60% of the cumulative
number of seconds, or such higher percentage as the Exchange may
announce in advance. See Options 2, Section 5(e)(2). Additionally,
PMMs are required to submit a Valid Width Quote to open their
assigned options series. See Options 3, Section 8(c)(1) and 8(c)(3).
\15\ The Exchange notes that all MRX Members may submit orders;
however, only Market Makers may submit quotes. The Exchange surveils
Market Makers quotes in addition to any orders transacted on MRX and
conducts surveillance on Market Maker quotes to ensure these
participants have met their quoting and other market making
obligations. The regulatory oversight for Market Makers is in
addition to the regulatory oversight which is administered for all
EAMs.
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Options 7, Section 6
The Exchange proposes to amend fees for the following ports within
Options 7, Section 6: (1) FIX,\16\ (2) SQF; \17\ (3) SQF Purge; \18\
(4) OTTO; \19\ (5) CTI; \20\ and (6) FIX DROP.\21\ Currently, no fees
are being assessed for these ports. The Exchange proposes to assess a
FIX Port Fee and OTTO Port Fee of $650 per port, per month, per account
number.\22\ The Exchange proposes to assess an SQF Port Fee and SQF
Purge Port Fee of $1,250 per port, per month.\23\ The Exchange proposes
to assess a CTI Port Fee and a FIX Drop Port Fee of $650 per port, per
month.
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\16\ ``Financial Information eXchange'' or ``FIX'' is an
interface that allows Members and their Sponsored Customers to
connect, send, and receive messages related to orders and auction
orders to the Exchange. Features include the following: (1)
Execution messages; (2) order messages; (3) risk protection triggers
and cancel notifications; and (4) post trade allocation messages.
See Supplementary Material .03(a) to Options 3, Section 7.
\17\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Market Makers to connect, send, and receive messages related
to quotes, Immediate-or-Cancel Orders, and auction responses to the
Exchange. Features include the following: (1) Options symbol
directory messages (e.g., underlying and complex instruments); (2)
system event messages (e.g., start of trading hours messages and
start of opening); (3) trading action messages (e.g., halts and
resumes); (4) execution messages; (5) quote messages; (6) Immediate-
or-Cancel Order messages; (7) risk protection triggers and purge
notifications; (8) opening imbalance messages; (9) auction
notifications; and (10) auction responses. The SQF Purge Interface
only receives and notifies of purge requests from the Market Maker.
Market Makers may only enter interest into SQF in their assigned
options series. See Supplementary Material .03(c) to Options 3,
Section 7.
\18\ SQF Purge is a specific port for the SQF interface that
only receives and notifies of purge requests from the market maker.
Dedicated SQF Purge Ports enable market makers to seamlessly manage
their ability to remove their quotes in a swift manner.
\19\ ``Ouch to Trade Options'' or ``OTTO'' is an interface that
allows Members and their Sponsored Customers to connect, send, and
receive messages related to orders, auction orders, and auction
responses to the Exchange. Features include the following: (1)
Options symbol directory messages (e.g., underlying and complex
instruments); (2) system event messages (e.g., start of trading
hours messages and start of opening); (3) trading action messages
(e.g., halts and resumes); (4) execution messages; (5) order
messages; (6) risk protection triggers and cancel notifications; (7)
auction notifications; (8) auction responses; and (9) post trade
allocation messages. See Supplementary Material .03(b) to Options 3,
Section 7.
\20\ Clearing Trade Interface (``CTI'') is a real-time cleared
trade update message that is sent to a Member after an execution has
occurred and contains trade details specific to that Member. The
information includes, among other things, the following: (i) The
Clearing Member Trade Agreement (``CMTA'') or The Options Clearing
Corporation (``OCC'') number; (ii) badge or mnemonic; (iii) account
number; (iv) information which identifies the transaction type
(e.g., auction type) for billing purposes; and (v) market
participant capacity. See Options 3, Section 23(b)(1).
\21\ FIX DROP is a real-time order and execution update message
that is sent to a Member after an order been received/modified or an
execution has occurred and contains trade details specific to that
Member. The information includes, among other things, the following:
(i) Executions; (ii) cancellations; (iii) modifications to an
existing order; and (iv) busts or post-trade corrections. See
Options 3, Section 23(b)(3).
\22\ An ``account number'' shall mean a number assigned to a
Member. Members may have more than one account number. See Options
1, Section 1(a)(1).
\23\ SQF's Port Fees are assessed a higher dollar fee as
compared to FIX and OTTO ports ($1,250 vs. $650) because the
Exchange has to maintain options assignments within SQF and manage
quoting traffic. Market Makers may utilize SQF Ports in their
assigned options series. Market Maker badges are assigned to
specific SQF ports to manage the option series in which a Market
Maker may quote. Additionally, because of quoting obligations
provided for within Options 2, Section 5, Market Makers are required
to provide liquidity in their assigned options series which
generates quote traffic. The Exchange notes because of the higher
fee, SQF ports are billed per port, per month while FIX and OTTO
ports are billed per port, per month, per account number. Members
may have more than one account number.
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The OTTO Port, CTI Port, FIX Port, FIX Drop Port and all Disaster
Recovery Ports \24\ are available to all EAMs, and will be subject to a
monthly cap of $7,500.
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\24\ This includes FIX, SQF, SQF Purge, OTTO, CTI and FIX Drop
Disaster Recovery Ports.
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The SQF Port and the SQF Purge Port will be subject to a monthly
cap of $17,500. The SQF Port and SQF Purge Port are available to Market
Makers.\25\
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\25\ Only Market Makers may quote on MRX. The Exchange is
proposing non-substantive technical amendments to add commas within
the Production column of the proposed rule text to separate terms.
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The Exchange is not amending the TradeInfo MRX Interface or the
Nasdaq MRX Depth of Market, Nasdaq MRX Order Feed, Nasdaq MRX Top Quote
Feed, Nasdaq MRX Trades Feed or Nasdaq MRX Spread Feed Ports, all of
these aforementioned ports will continue to be assessed no fees.
Additionally, as is the case today, the Disaster Recovery Ports for
TradeInfo and the Nasdaq MRX Depth of Market, Nasdaq MRX Order Feed,
Nasdaq MRX Top Quote Feed, Nasdaq MRX Trades Feed or Nasdaq MRX Spread
Feed Ports will not be assessed a fee.
Finally, the Exchange proposes to amend the Disaster Recovery Port
Fee from $0 to $50 per port, per month, per account for FIX, SQF, SQF
Purge and OTTO Ports and from $0 to $50 per port, per month for CTI,
and FIX DROP Ports. Disaster Recovery ports provide connectivity to the
Exchange's disaster recovery data center, to be utilized in the event
the Exchange should failover during a trading day. The Exchange
proposes to assess the aforementioned Disaster Recovery Port Fees to
encourage Members to be efficient when purchasing Disaster Recovery
ports. Similar to all other ports, Disaster Recovery Ports need to be
maintained by the Exchange.\26\ The proposed port fees are similar to
fees assessed by GEMX.\27\
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\26\ The Exchange maintains ports in a number of ways to ensure
that ports are properly connected to the Exchange at all times. This
includes offering testing, ensuring all ports are up-to-date with
the latest code releases, as well as ensuring that all ports meet
the Exchange's information security specifications.
\27\ See GEMX Options 7, Section 6.C. (Ports and Other
Services).
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In order to submit orders into MRX, only one order protocol is
required, either FIX or OTTO.\28\ A quoting protocol, such as SQF, is
only required to the extent an MRX Member has been appointed as a
Market Maker in an options series pursuant to Options 2, Section 1.
Similarly, only one quoting protocol, or SQF Port, is necessary to

[[Page 30308]]

quote on MRX. Depending on a Member's business model, one protocol may
be better suited for a Member as compared to another protocol when
determining which order entry protocol to select.\29\ Members may elect
to utilize both order entry protocols, depending on how they organize
their business. Only one protocol is necessary to submit orders into
MRX; however, Members may choose to purchase a greater number of order
entry ports, depending on that Member's business model.\30\
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\28\ Only Members may utilize ports on MRX. Any market
participant that sends orders to a Member would not need to utilize
a port. The Member can send all orders, proprietary and agency,
through one port to MRX. Members may elect to obtain multiple
account numbers to organize their business, however only one account
number and one port is necessary for a Member to trade on MRX.
\29\ For example, while the FIX protocol permits routing
capability the OTTO protocol does not permit routing capability.
This distinction may cause a Member to elect a certain protocol
based on whether a Member desires to execute an order locally or
route an order. The OTTO Port offers lower latency as compared to
the FIX Port, which may be attractive to Members depending on their
trading behavior.
\30\ For example, a Member may desire to utilize multiple FIX or
OTTO ports for accounting purposes, to measure performance, for
regulatory reasons or other determinations that are specific to that
Member.
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The Exchange notes that FIX, and OTTO Ports, as well TradeInfo, are
available to all Members and may be utilized to cancel orders. Further,
FIX DROP, the Clearing Trade Interface, and TradeInfo are available to
all Members and may be utilized to obtain order information. These
different protocols are not all necessary to conduct business on MRX; a
Member may choose among protocols based on their business workflow.
Options 7, Section 7
The Exchange proposes to amend fees for the following market data
feeds within Options 7, Section 7: (1) Nasdaq MRX Depth of Market Data;
\31\ (2) Nasdaq MRX Order Feed; \32\ (3) Nasdaq MRX Top Quote Feed;
\33\ (4) Nasdaq MRX Trades Feed; \34\ and (5) Nasdaq MRX Spread
Feed.\35\ Currently, no fees are being assessed for these feeds.
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\31\ Nasdaq MRX Depth of Market Data Feed (``Depth of Market
Feed'') provides aggregate quotes and orders at the top five price
levels on MRX, and provides subscribers with a consolidated view of
tradable prices beyond the BBO, showing additional liquidity and
enhancing transparency for MRX traded options. The data provided for
each option series includes the symbols (series and underlying
security), put or call indicator, expiration date, the strike price
of the series, and whether the option series is available for
trading on MRX and identifies if the series is available for closing
transactions only. In addition, subscribers are provided with total
aggregate quantity, Public Customer aggregate quantity, Priority
Customer aggregate quantity, price, and side (i.e., bid/ask). This
information is provided for each of the top five price levels on the
Depth Feed. The feed also provides order imbalances on opening/
reopening. See Options 3, Section 23(a)(1).
\32\ Nasdaq MRX Order Feed (``Order Feed'') provides information
on new orders resting on the book (e.g., price, quantity and market
participant capacity). In addition, the feed also announces all
auctions. The data provided for each option series includes the
symbols (series and underlying security), put or call indicator,
expiration date, the strike price of the series, and whether the
option series is available for trading on MRX and identifies if the
series is available for closing transactions only. The feed also
provides order imbalances on opening/reopening. See Options 3,
Section 23(a)(2).
\33\ Nasdaq MRX Top Quote Feed (``Top Quote Feed'') calculates
and disseminates MRX's best bid and offer position, with aggregated
size (including total size in aggregate, for Professional Order size
in the aggregate and Priority Customer Order size in the aggregate),
based on displayable order and quote interest in the System. The
feed also provides last trade information along with opening price,
daily trading volume, high and low prices for the day. The data
provided for each option series includes the symbols (series and
underlying security), put or call indicator, expiration date, the
strike price of the series, and whether the option series is
available for trading on MRX and identifies if the series is
available for closing transactions only. The feed also provides
order imbalances on opening/reopening. See Options 3, Section
23(a)(3).
\34\ Nasdaq MRX Trades Feed (``Trades Feed'') displays last
trade information along with opening price, daily trading volume,
high and low prices for the day. The data provided for each option
series includes the symbols (series and underlying security), put or
call indicator, expiration date, the strike price of the series, and
whether the option series is available for trading on MRX and
identifies if the series is available for closing transactions only.
See Options 3, Section 23(a)(4).
\35\ Nasdaq MRX Spread Feed (``Spread Feed'') is a feed that
consists of: (1) Options orders for all Complex Orders (i.e.,
spreads, buy-writes, delta neutral strategies, etc.); (2) data
aggregated at the top five price levels (BBO) on both the bid and
offer side of the market; (3) last trades information. The Spread
Feed provides updates, including prices, side, size and capacity,
for every Complex Order placed on the MRX Complex Order Book. The
Spread Feed shows: (1) Aggregate bid/ask quote size; (2) aggregate
bid/ask quote size for Professional Customer Orders; and (3)
aggregate bid/ask quote size for Priority Customer Orders for MRX
traded options. The feed also provides Complex Order auction
notifications. See Options 3, Section 23(a)(5).
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The Exchange also proposes to assess an Internal Distributor Fee
\36\ of $1,500 per month for the Nasdaq MRX Depth of Market Feed, Order
Feed, and Top Quote Feed. The Exchange proposes to assess an Internal
Distributor Fee of $750 per month for the Trades Feed. Finally, the
Exchange proposes to assess an Internal Distributor Fee of $1,000 per
month for the Spread Feed. If a Member subscribes to both the Trades
Feed and the Spread Feed, both Internal Distributor Fees would be
assessed.
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\36\ A ``distributor'' of Nasdaq MRX data is any entity that
receives a feed or data file of data directly from Nasdaq MRX or
indirectly through another entity and then distributes it either
internally (within that entity) or externally (outside that entity).
All distributors shall execute a Nasdaq Global Data Agreement.
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The Exchange proposes to assess an External Distributor Fee of
$2,000 per month for the Nasdaq MRX Depth of Market Feed, Order Feed,
and Top Quote Feed, an External Distributor Fee of $1,000 per month for
the Trades Feed, and an External Distributor Fee of $1,500 per month
for the Spread Feed.
MRX does not currently assess subscriber fees, but proposes to
begin assessing Professional \37\ and Non-Professional \38\ subscriber
fees. The Exchange proposes to assess a Professional Subscriber of $25
per month, and a Non-Professional Subscriber of $1 per month. These
subscriber fees (both Professional and Non-Professional) cover the
usage of all five MRX data products identified above and would not be
assessed separately for each data product.\39\
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\37\ A Professional Subscriber is any Subscriber that is not a
Non-Professional Subscriber.
\38\ A Non-Professional Subscriber is a natural person who is
neither: (i) Registered or qualified in any capacity with the
Commission, the Commodities Futures Trading Commission, any state
securities agency, any securities exchange or association, or any
commodities or futures contract market or association; (ii) engaged
as an ``investment adviser'' as that term is defined in Section
201(11) of the Investment Advisors Act of 1940 (whether or not
registered or qualified under that Act); nor (iii) employed by a
bank or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt.
\39\ For example, if a firm has one Professional (Non-
Professional) Subscriber accessing Top of Market, Order, and Depth
of Market Feed the firm would only report the Subscriber once and
pay $25 ($1 for Non-Professional).
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MRX also proposes a Non-Display Enterprise License of $7,500 per
month. This license would lower costs for internal professional
subscribers and lower administrative costs overall by permitting the
distribution of all MRX proprietary direct data feed products to an
unlimited number of internal non-display Subscribers without incurring
additional fees for each internal Subscriber, or requiring the customer
to count internal subscribers.\40\
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\40\ The Non-Display Enterprise License of $7,500 per month is
optional. A firm that does not have a sufficient number of
subscribers to benefit from purchase of the license need not do so.
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The Non-Display Enterprise License is in addition to any other
associated distributor fees for MRX proprietary direct data feed
products.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\41\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\42\ 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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\41\ See 15 U.S.C. 78f(b).
\42\ See 15 U.S.C. 78f(b)(4) and (5).

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[[Page 30309]]

The proposed changes to the pricing schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for order flow, which
constrains its pricing determinations. The fact that the market for
order flow is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated, ``[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'. . . .'' \43\
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\43\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention to determine
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues, and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \44\
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\44\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Congress directed the Commission to ``rely on `competition,
whenever possible, in meeting its regulatory responsibilities for
overseeing the SROs and the national market system.' '' \45\ As a
result, the Commission has historically relied on competitive forces to
determine whether a fee proposal is equitable, fair, reasonable, and
not unreasonably or unfairly discriminatory. ``If competitive forces
are operative, the self-interest of the exchanges themselves will work
powerfully to constrain unreasonable or unfair behavior.'' \46\
Accordingly, ``the existence of significant competition provides a
substantial basis for finding that the terms of an exchange's fee
proposal are equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.'' \47\ In its 2019 guidance on fee proposals,
Commission staff indicated that they would look at factors beyond the
competitive environment, such as cost, only if a ``proposal lacks
persuasive evidence that the proposed fee is constrained by significant
competitive forces.'' \48\
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\45\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep.
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that
the national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.'').
\46\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\47\ Id.
\48\ See U.S. Securities and Exchange Commission, ``Staff
Guidance on SRO Rule filings Relating to Fees'' (May 21, 2019),
available at <a href="https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees">https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees</a>.
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History of MRX Operations
Over the years, MRX has amended its transactional pricing to remain
competitive and attract order flow to the Exchange.\49\
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\49\ See e.g., Securities Exchange Act Release Nos. 77292 (March
4, 2016), 81 FR 12770 (March 10, 2016) (SR-ISEMercury-2016-02)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Establish the Schedule of Fees); 77409 (March 21, 2016),
81 FR 16240 (March 25, 2016) (SR-ISEMercury-2016-05) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
the Schedule of Fees); 81 FR 16238 (March 21, 2016), 81 FR 16238
(March 25, 2016) (SR-ISEMercury-2016-06) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend the
Schedule of Fees); 77841 (May 16, 2016), 81 FR 31986 (SR-ISEMercury-
2016-11) (Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the Schedule of Fees); 82537 (January 19,
2018), 83 FR 3784 (January 26, 2018) (SR-MRX-2018-01) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
the Schedule of Fees To Introduce a New Pricing Model); 82990 (April
4, 2018), 83 FR 15434 (April 10, 2018) (SR-MRX-2018-10) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Chapter IV of the Exchange's Schedule of Fees); 28677 (June 14,
2018), 83 FR 28677 (June 20, 2018) (SR-MRX-2018-19) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Increase Certain Route-Out Fees Set Forth in Section II.A of the
Schedule of Fees); 84113 (September 13, 2018), 83 FR 47386
(September 19, 2018) (SR-MRX-2018-27) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Relocate the
Exchange's Schedule of Fees); 85143 (February 14, 2019), 84 FR 5508
(February 21, 2019) (SR-MRX-2019-02) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend the Pricing
Schedule at Options 7, Section 3); 85313 (March 14, 2019), 84 FR
10357 (March 20, 2019) (SR-MRX-2019-05) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change Relating to PIM
Fees and Rebates); 86326 (July 8, 2019), 84 FR 33300 (July 12, 2019)
(SR-MRX-2019-14) (Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Adopt Complex Order Pricing); 88022 (January
23, 2020), 85 FR 5263 (January 29, 2020) (SR-MRX-2020-02) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
MRX Pricing Schedule); 89046 (June 11, 2020), 85 FR 36633 (June 17,
2020) (SR-MRX-2020-11) (Notice of Filing and Immediate Effectiveness
of Proposed Rule Change To Amend Its Pricing Schedule at Options 7);
89320 (July 15, 2020), 85 FR 44135 (July 21, 2020) (SR-MRX-2020-14)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Its Pricing Schedule at Options 7, Section 5, Other
Options Fees and Rebates, in Connection With the Pricing for Orders
Entered Into the Exchanges Price Improvement Mechanism); 90503
(November 24, 2020), 85 FR 77317 (December 1, 2020) (SR-MRX-2020-18)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Its Pricing Schedule at Options 7 for Orders Entered
Into the Exchange's Price Improvement Mechanism); 90434 (November
16, 2020), 85 FR 74473 (November 20, 2020) (SR-MRX-2020-19) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To the
Exchange's Pricing Schedule at Options 7 To Amend Taker Fees for
Regular Orders); 90455 (November 18, 2020), 85 FR 75064 (November
24, 2020) (SR-MRX-2020-21) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend the Pricing
Schedule); and 91687 (April 27, 2021), 86 FR 23478 (May 3, 2021)
(SR-MRX-2021-04) (Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the Exchange's Pricing Schedule at
Options 7). Note that ISE Mercury is an earlier name for MRX.
---------------------------------------------------------------------------

In June 2019, MRX commenced offering complex orders.\50\ With the
addition of complex order functionality, MRX offered Members certain
order types, an opening process, auction capabilities and other trading
functionality that was nearly identical to functionality available on
ISE.\51\ By way of comparison, ISE, unlike MRX, assessed membership
fees in 2019 \52\ while offering the same suite of functionality as
MRX, with a limited exception.\53\ Additionally, by way of
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\50\ See Securities Exchange Act Release No. 86326 (July 8,
2019), 84 FR 33300 (July 12, 2019) (SR-MRX-2019-14) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Adopt Complex Order Pricing).
\51\ One distinction is that ISE offered its Members access to
Nasdaq Precise in 2019 and since that time. MRX has never offered
Precise. ``Nasdaq Precise'' or ``Precise'' is a front-end interface
that allows EAMs and their Sponsored Customers to send orders to the
Exchange and perform other related functions. Features include the
following: (1) Order and execution management: Enter, modify, and
cancel orders on the Exchange, and manage executions (e.g., parent/
child orders, inactive orders, and post-trade allocations); (2)
market data: Access to real-time market data (e.g., NBBO and
Exchange BBO); (3) risk management: Set customizable risk parameters
(e.g., kill switch); and (4) book keeping and reporting:
Comprehensive audit trail of orders and trades (e.g., order history
and done away trade reports). See ISE Supplementary Material .03(d)
of Options 3, Section 7. Precise is also available on GEMX.
\52\ In 2019, ISE assessed the following Access Fees: $500 per
month, per membership to an Electronic Access Member, $5,000 per
month, per membership to a Primary Market Maker and $2,500 per
month, per membership to a Competitive Market Maker. ISE does not
assess Trading Rights Fees to Competitive Market Makers. See
Securities Exchange Act Release No. 82446 (January 5, 2018), 83 FR
1446 (January 11, 2018) (SR-ISE-2017-112) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend Certain
Non-Transaction Fees in the Exchange's Schedule of Fees). Of note,
ISE assessed Access Fees prior to 2019 as well.
\53\ Unlike ISE, MRX does not offer Precise. See note 51, supra.

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[[Page 30310]]

comparison, ISE assessed fees for ports \54\ in 2019 while offering the
same suite of functionality as MRX, with a limited exception.\55\
Finally, in 2019, unlike MRX, ISE assessed fees for its market
data,\56\ while offering the same functionality suite as MRX, with a
limited exception.
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\54\ Since 2019, ISE has assessed the following port fees: A FIX
Port Fee of $300 per port, per month, per mnemonic, an SQF Port Fee
and SQF Purge Port Fee of $1,100 per port, per month, an OTTO Port
Fee of $400 per port, per month, per mnemonic with a monthly cap of
$4,000, a CTI Port Fee and FIX DROP Port Fee of $500 per port, per
month, per mnemonic. See Securities Exchange Act Release No. 82568
(January 23, 2018), 83 FR 4086 (January 29, 2018) (SR-ISE-2018-07)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Assess Fees for OTTO Port, CTI Port, FIX Port, FIX Drop
Port and Disaster Recovery Port Connectivity). Of note, ISE assessed
port fees prior to 2019 as well.
\55\ See note 51, supra.
\56\ See e.g., Securities Exchange Act Release Nos. 53212
(February 2, 2006), 71 FR 6803 (February 9, 2006) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Establishing
Fees for Historical Options Tick Market Data); 53390 (February 28,
2006), 71 FR 11457 (March 7, 2006) (Order Granting Accelerated
Approval of a Proposed Rule Change Establishing Fees for Historical
Options Tick Market Data for Non-Members); 53756 (May 3, 2006), 71
FR 27526 (May 11, 2006) (Order Granting Approval of a Proposed Rule
Change Establishing Fees for Enhanced Sentiment Market Data); 56254
(August 15, 2007), 72 FR 47104 (August 22, 2007) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to ISE
Open/Close Trade Profile Fees; 56315 (August 24, 2007), 72 FR 50148
(August 30, 2007) (Order Approving a Proposed Rule Change Relating
to ISEE Select Market Data Fees); 59679 (April 1, 2009), 74 FR 15795
(April 7, 2009) (SR-ISE-2007-97) (Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto Relating to Market Data
Fees);61086 (December 1, 2009), 74 FR 64783 (December 8, 2009) (SR-
ISE-2009-103) (Notice of Filing of Proposed Rule Change Relating to
Market Data Fees); 65002 (August 1, 2011), 76 FR 47630 (August 5,
2011) (SR-ISE-2011-50) (Notice of Filing and Immediate Effectiveness
of Proposed Rule Change Relating to Market Data Fees); and 65678
(November 10, 2011), 76 FR 70178 (November 3, 2011) (SR-ISE-2011-67)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Market Data Fees).
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Membership, Ports and Market Data Are Subject to Significant
Substitution-Based Competitive Forces
An Exchange can show that a product is ``subject to significant
substitution-based competitive forces'' by introducing evidence that
customers can substitute the product for products offered by other
exchanges.
NYSE National was able to prove exactly this when it sought
approval for the ``NYSE National Integrated Feed'' \57\ in 2020. NYSE
National at the time of its filing was in a similar position to MRX
today--the exchange had an approximately 1.9% market share of executed
volume of equity trades.\58\ The Commission approved the proposal to
establish fees for NYSE National based on a finding that the exchange
``was subject to significant substitution-based competitive forces.''
Citing NetCoalition I,\59\ the Commission stated that ``whether a
market is competitive notwithstanding potential alternatives depends on
factors such as the number of buyers who consider other products
interchangeable and at what prices.'' \60\ Noting that ``many market
participants . . . do not subscribe to . . . the NYSE National
Integrated Feed, even when the feed is offered without charge,'' the
Commission concluded that ``NYSE National's consistently low percentage
of market share, the relatively small number of subscribers to the NYSE
National Integrated Feed, and the sizeable portion of subscribers that
terminated their subscriptions following the proposal of the fees,''
demonstrated that the exchange ``was subject to significant
substitution-based competitive forces'' in setting fees such that the
proposed rule change was consistent with the Act.\61\
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\57\ NYSE National stated that the proposed integrated feed
included depth-of-book order data, last sale data, security status
updates, and stock summary messages. See Securities Exchange Act
Release No 88211 (February 14, 2020), 85 FR 9847 (February 20, 2020)
(SR-NYSENAT-2020-05), also available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf</a>. (``Initial NYSE National Proposal'')
\58\ See id.
\59\ See NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. 2010)
(``NetCoalition I'').
\60\ See NYSE National Approval Order (citing NetCoalition I).
\61\ See id.
---------------------------------------------------------------------------

MRX today is essentially in the same position as NYSE National in
2020. MRX has a consistently low percentage of market share, starting
at approximately 0.2 percent when it opened as an Exchange and ending
in approximately 1.8 percent today. It has a small number of firms that
are Members, subscribe to ports, or purchase market data relative to
its affiliated options exchanges. Two firms that currently subscribe to
MRX market data have terminated all of their subscriptions, and one
additional firm that is currently a Member and purchases port services
has told the Exchange that it will initiate a review of all of the
services it purchases from MRX based on the all-in cost of trading on
MRX. Based on prior experience, MRX may see additional cancellations of
membership, ports and market data after May 2, 2022.
Chart 1 below shows the January 2022 market share for multiply-
listed options by exchange. Of the 16 operating options exchanges, none
currently has more than a 13.1% market share, and MRX has the smallest
market share at 1.8%. Customers widely distribute their transactions
across exchanges according to their business needs and the ability of
each exchange to meet those needs through technology, liquidity and
functionality. Average market share for the 16 options exchanges is
6.26 percent, with the median at 5.8, and a range between 1.8 and 13.1
percent.
BILLING CODE 8011-01-P

[[Page 30311]]

[GRAPHIC] [TIFF OMITTED] TN18MY22.000

Market share is the percentage of volume on a particular exchange
relative to the total volume across all exchanges, and indicates the
amount of order flow directed to that exchange. High levels of market
share enhance the value of trading, membership, ports and market data.
Chart 2 below compares the number of firms purchasing FIX and SQF
ports, memberships, and market data from MRX to the number of firms
purchasing such services from the four MRX-affiliated options
exchanges, GEMX, ISE, The Nasdaq Stock Market LLC (``NOM'') and Nasdaq
PHLX, LLC (``Phlx'').
[GRAPHIC] [TIFF OMITTED] TN18MY22.001

BILLING CODE 8011-01-C
Chart 2 shows that fewer firms purchased MRX ports in March 2022
than the ports of its options exchange affiliates. As described in
detail below, only one order protocol is required to submit orders to
MRX, either FIX or OTTO. Quoting protocols are only required to the
extent an MRX Member has been appointed as a Market Maker in an options
series pursuant to Options 2, Section 1, and only one quoting protocol
(SQF) is necessary to quote on MRX. Members may choose a greater number
of order entry ports, however, depending on that Member's particular
business model.\62\ With respect to the submission of orders, Members
may also choose not to purchase any port at all from the Exchange, and
instead rely on the port of a third party to submit an

[[Page 30312]]

order.\63\ The Exchange assigns the Member a badge \64\ and/or mnemonic
\65\ to submit quotes and/or orders to the Exchange on a particular
port. Use of this badge or mnemonic by a Member would allow a Member to
use a third-party port to trade on the Exchange.
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\62\ For example, a Member may desire to utilize multiple FIX or
OTTO ports for accounting purposes, to measure performance, for
regulatory reasons or other determinations that are specific to that
Member.
\63\ Market Makers on MRX are required to obtain one SQF port to
submit quotes into MRX.
\64\ A ``badge'' shall mean an account number, which may contain
letters and/or numbers, assigned to Market Makers. A Market Maker
account may be associated with multiple badges. See Options 1,
Section 1(a)(5).
\65\ A ``mnemonic'' shall mean an acronym comprised of letters
and/or numbers assigned to Electronic Access Members. An Electronic
Access Member account may be associated with multiple mnemonics. See
Options 1, Section 1(a)(23).
---------------------------------------------------------------------------

The experience of MRX's affiliates shows that the number of ports
that members choose to purchase varies widely. For example, a review of
the Phlx exchange in April 2022 shows that, among its members that
purchase ports, approximately 26 percent purchased 1 SQF or FIX port,
another 26 percent purchased between 2 and 5 ports, 21 percent
purchased between 6 and 10 ports, and 28 percent purchased more than 11
ports. This means that any member has the option of reducing its
purchase of port services without purchasing a substitute product by,
for example, reconfiguring its systems to change the number of ports
from 16 to 14.\66\
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\66\ As noted above, one port (FIX) would be required to submit
orders and one port (SQF) would be required to submit quotes.
---------------------------------------------------------------------------

By way of comparison, the number of ports that MRX Members
purchased in April 2022 also varies widely. For example, approximately
23 percent purchased 1 SQF, FIX or OTTO port,\67\ another 43 percent
purchased between 2 and 5 ports, 13 percent purchased between 6 and 10
ports, and 20 percent purchased more than 11 ports. MRX Members,
similar to Phlx members, have the option of reducing their port
purchases without purchasing a substitute product.
---------------------------------------------------------------------------

\67\ Phlx only offers FIX and SQF ports while MRX offers FIX,
OTTO and SQF ports for order and quote entry.
---------------------------------------------------------------------------

Chart 2 also shows that MRX has the smallest number of Members
relative to its GEMX, ISE, NOM and Phlx affiliates, with approximately
40 members.\68\ This demonstrates that customers can and will choose
where to become members, need not become members of all exchanges, and
do not need to become Members of MRX and instead may utilize a third
party.\69\
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\68\ The data show that approximately 24 members purchased
ports, while there are approximately 40 members of the Exchange. As
discussed above, some members may use third-party ports to trade, so
the low ratio of ports to memberships indicates that some members
are doing so.
\69\ Of course, that third party must itself become a member of
MRX, so at least some market participants must become members of MRX
for any trading to take place at all. Nevertheless, because some
firms would be able to exercise the option of not becoming members,
excessive membership fees would cause the Exchange to lose members.
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With respect to market data, Chart 2 shows that approximately 34
firms subscribe to at least one market data product from MRX in the
first quarter of 2022. This is the second lowest number of firms
purchasing market data from the Nasdaq-affiliated options exchanges.
As explained above, Nasdaq proposes to introduce fees for five
market data feeds: (i) Nasdaq MRX Depth of Market Data (aggregate
quotes and orders at the top five price levels on MRX, and a
consolidated view of tradable prices beyond the BBO); \70\ (ii) the
Nasdaq MRX Order Feed (new orders resting on the book); \71\ (iii)
Nasdaq MRX Top Quote Feed (best bid and offer position, with aggregated
size based on displayable order and quote interest in the System; \72\
(iv) Nasdaq MRX Trades Feed (last trade information along with opening
price, daily trading volume, high and low prices for the day); \73\ and
(5) the Nasdaq MRX Spread Feed (orders for all Complex Orders, data
aggregated at the top five price levels (BBO) on both the bid and offer
side of the market and last trades information).\74\
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\70\ Nasdaq MRX Depth of Market Data Feed (``Depth of Market
Feed'') provides aggregate quotes and orders at the top five price
levels on MRX, and provides subscribers with a consolidated view of
tradable prices beyond the BBO, showing additional liquidity and
enhancing transparency for MRX traded options. The data provided for
each option series includes the symbols (series and underlying
security), put or call indicator, expiration date, the strike price
of the series, and whether the option series is available for
trading on MRX and identifies if the series is available for closing
transactions only. In addition, subscribers are provided with total
aggregate quantity, Public Customer aggregate quantity, Priority
Customer aggregate quantity, price, and side (i.e., bid/ask). This
information is provided for each of the top five price levels on the
Depth Feed. The feed also provides order imbalances on opening/
reopening. See Options 3, Section 23(a)(1).
\71\ See Options 3, Section 23(a)(2).
\72\ See Options 3, Section 23(a)(3).
\73\ See Options 3, Section 23(a)(4).
\74\ See Options 3, Section 23(a)(5).
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The MRX Top Quote Feed and the MRX Trades Feed provide ``top-of-
book'' information. Such information is typically of interest to a
broader audience than Members trading on exchanges, including retail
investors, media, portfolio managers, competing exchanges and others.
For this broader audience, top-of-book data from one exchange is, in
general, readily substitutable with the top-of-book information from
another exchange,\75\ and therefore the Exchange may lose customers if
fees for top-of-book data are set too high.
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\75\ See, e.g., Securities Exchange Act Release No. 94466 (March
18, 2022), 87 FR 16811 (March 24, 2022) (SR-Nasdaq-2022-024)
(explaining that top-of-book products from major exchanges are
readily substitutable).
---------------------------------------------------------------------------

The other three market data feeds, the Depth of Market Data feed,
the Order Feed, and the Spread Feed are generally of more interest to
Members trading on the Exchange relative to other market participants
but, as noted above, MRX has the smallest market share at 1.8%, and any
Member can choose to trade on another exchange if fees for these other
three feeds exceed their value.
All of these statistics must be viewed in the context of a field
with relatively low barriers to entry. MRX, like many new entrants to
the field, offered membership, ports and market data for free to
establish itself and gain market share. As new entrants enter the
field, MRX can also expect competition from these new entrants. Those
new entrants, like MRX, are likely to set membership, port, market
data, or other fees to zero, increasing marketplace competition.
In summary, MRX membership, port and market data fees are subject
to significant substitution-based competitive forces due to its
consistently low percentage of market share, the relatively small
number of purchasers for each product, and the purchasers that either
cancelled or are reviewing their subscriptions. Implementation of the
proposed fees is therefore consistent with the Act.
Fees for Membership, Ports and Market Data
Each of the proposed membership, port and data fees described below
are in line with those of other markets. Setting a fee above
competitors is likely to drive away customers, so the most efficient
price-setting strategy is to set prices at the same level as other
firms.
Options 7, Section 5--Membership
The Exchange's proposal to adopt membership fees is reasonable,
equitable and not unfairly discriminatory. As a self-regulatory
organization, MRX's membership department reviews applicants to ensure
that each application complies with the rules specified within MRX
General 3 \76\ as well as other requirements for membership.\77\
Applicants must meet the Exchange's qualification criteria

[[Page 30313]]

prior to approval. The membership review includes, but is not limited
to, the registration and qualification of associated persons, financial
health, the validity of the required clearing relationship, and the
history of disciplinary matters. Approved Members would be required to
comply with MRX's By-Laws and Rules and would be subject to regulation
by MRX. The proposed membership fees are identical to membership fees
on GEMX,\78\ and are lower than similar fees assessed on other options
markets.\79\
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\76\ MRX General 3 incorporates by reference Nasdaq General 3.
\77\ The Exchange's Membership Department must ensure, among
other things, that an applicant is not statutorily disqualified.
\78\ See GEMX Options 7, Section 6A (Access Fees).
\79\ See Cboe's Fees Schedule. Cboe assesses permit fees as
follows: Market-Maker Electronic Access Permit of $5,000 per month;
Electronic Access Permits of $3,000 per month; and Clearing TPH
Permit of $2,000 per month. See also Miami International Securities
Exchange, LLC's (``MIAX'') Fee Schedule. MIAX assesses an Electronic
Exchange Member Fee of $1,500 per month.
---------------------------------------------------------------------------

The Exchange believes that there are many factors that may cause a
market participant to decide to become a member of a particular
exchange. Among various factors, the Exchange believes market
participants consider: (i) An exchange's available liquidity in options
series; (ii) trading functionality offered on a particular market;
(iii) product offerings; (iv) customer service on an exchange; and (v)
transactional pricing. The Exchange believes that the decision to
become a member of an exchange, particularly as a registered market
maker, is a complex one that is not solely based on non-transactional
costs assessed by an exchange. Market participants weigh the tradeoff
between where they choose to deploy liquidity versus where trading
opportunities exist. Of course, the cost of membership, ports and
market data may factor into a decision to become a member of a certain
exchange, but the Exchange believes it is by no means the only factor
when comparing exchanges.
Market Makers
Market makers play an important role on options exchanges as they
provide liquidity. In options markets, registered market makers are
assigned options series \80\ and are required to quote in those options
series for a specified time period during the day.\81\ Typically, a
lead or primary market maker \82\ will be required to quote for a
longer period of time during the day as compared to other market makers
registered on an exchange.\83\ Additionally, market makers are
typically required to quote within a certain width on options
markets.\84\ Greater liquidity on options markets benefits all market
participants by providing more trading opportunities and attracting
greater participation by market makers. An increase in the activity of
market makers in turn facilitates tighter spreads. Market participants
are attracted to options markets that have ample liquidity and tighter
spreads in options series.
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\80\ See Phlx, ISE, GEMX, MRX, Nasdaq BX, Inc. (``BX'') and NOM
Options 2, Section 3; Cboe Exchange, Inc. (``Cboe'') Rule 5.50; BOX
Exchange LLC (``BOX'') Rule 8030; MIAX Rule 602; and NYSE Arca, Inc.
(``NYSE Arca'') Rule 6.35-O.
\81\ See ISE, GEMX and MRX, Phlx, BX and NOM Options 2, Section
5; Cboe Rule 5.52; BOX Rule 8050; MIAX Rule 604; and NYSE Arca Rule
6.37A-O.
\82\ Options markets refer to the primary market maker on an
exchange in several ways.
\83\ See BX Options 2, Section 4; ISE, GEMX and MRX, and Phlx
Options 2, Section 5; BOX Rule 8055; MIAX Rule 604; and NYSE Arca
Rule 6.37A-O.
\84\ See BX Options 2, Section 4; ISE, GEMX and MRX, Phlx and
NOM Options 2, Section 5; and Cboe Rule 5.52; BOX Rule 8040.
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Trading Functionality
An exchange's trading functionality attracts market participants
who may elect, for example, to submit an order into a price improving
auction,\85\ enter a complex order,\86\ or utilize a particular order
type.\87\ Different options exchanges offer different trading
functionality to their members. For example, with respect to priority
and allocation of an order book, some options exchanges have price/time
allocation,\88\ some have a size pro-rata allocation,\89\ while other
exchanges offer both allocation models.\90\ The allocation methodology
on a particular options exchange's order book may attract certain
market participants. Also, the manner in which some options markets
structure their solicitation auction,\91\ or opening process,\92\ may
be attractive to certain market participants. Finally, some exchanges
have trading floors \93\ which may accommodate trading for certain
market participants or trading firms.\94\
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\85\ See ISE, GEMX, MRX, Phlx and BX Options 3, Section 13; MIAX
Rule 515A; Cboe Rule 5.37; and BOX Rules 7150 and 7245.
\86\ See Phlx and ISE Options 3, Section 14; MIAX Rule 518; Cboe
Rule 5.33; BOX Rule 7240; and NYSE Arca Rule 6.91-O.
\87\ See ISE, GEMX, MRX, Phlx, BX and NOM Options 3, Section 7;
MIAX Rule 615; Cboe Rule 5.6; BOX Rule 7110; and NYSE Arca Rule
6.62-O.
\88\ See Cboe Rule 5.85; BOX Rule 7130; and NYSE Arca Rule 6.76-
O.
\89\ See Phlx, ISE, GEMX and MRX Options 3, Section 10; and BOX
Rule 7135.
\90\ See BX Options 3, Section 10. While BX's rule permits both
price/time and size pro-rata allocation, all symbols on BX are
currently designated as Price/Time. See also BOX Rules 7130 and
7135. MIAX's rule permits both Price-Time and Pro-Rata allocation.
See also MIAX Rule 514.
\91\ See ISE, GEMX and MRX Options 3, Section 11; NYSE American
Rules 971.1NY and 971.2NY; and Cboe Rule 5.39.
\92\ See ISE, GEMX, MRX, Phlx, BX and NOM Options 3, Section 8;
Cboe Rule 5.31, MIAX Rule 503, BOX Rule 7070, and NYSE Arca Rule
6.64-O.
\93\ Today, Phlx, Cboe, BOX, NYSE Arca, and NYSE American LLC
have a trading floor. Trading floors require an on-floor presence to
execute options transactions.
\94\ There are certain features of open outcry trading that are
difficult to replicate in an electronic trading environment. The
Exchange has observed, and understands from various market
participants, that they have had difficulty executing certain
orders, such as larger orders and high-risk and complicated
strategies, in an all-electronic trading configuration without the
element of human interaction to negotiate pricing for these orders.
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Product Offerings
Introducing new and innovative products to the marketplace designed
to meet customer demands may attract market participants to a
particular options venue. New products in the options industry may
allow market participants greater trading and hedging opportunities, as
well as new avenues to manage risks. The listing of new options
products enhances competition among market participants by providing
investors with additional investment vehicles, as well as competitive
alternatives, to existing investment products. An exchange's
proprietary product offering may attract order flow to a particular
exchange to trade a particular options product.\95\
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\95\ See e.g. options on the Nasdaq-100 Index[supreg] available
on ISE, GEMX and Phlx and Cboe's Market Volatility Index[supreg].
Currently, MRX does not list any proprietary products.
---------------------------------------------------------------------------

Transaction Pricing
The pricing available on a particular exchange may impact a market
participant's decision to submit order flow to a particular options
venue. The options industry is competitive. Clear substitutes to the
Exchange exist in the market for options security transaction services;
the Exchange is only one of sixteen options exchanges to which market
participants may direct their order flow. Within this environment,
market participants can freely, and often do, shift their order flow
among the Exchange and competing venues in response to changes in their
respective pricing schedules.
With respect to the CMM Trading Rights Fee, the proposed fees
compare favorably with those of other options exchanges. For example, a
market maker on MIAX assesses Market Makers a $3,000 one-time fee and
then a tiered monthly fee from $7,000 for up to 10 classes to $22,000
for over 100 classes.\96\ By comparison, under the proposed fee
structure, a CMM can be granted access

[[Page 30314]]

on the Exchange for as little as $950 per month (i.e., a $100 access
fee and an $850 trading right), and could quote in all options classes
on the Exchange by paying the access fee and obtaining nine CMM trading
rights for a total of $4,950 per month. The Exchange notes that its
tiered model for CMM trading rights is consistent with the pricing
practices of other exchanges, such as NYSE Arca, which charges $6,000
per month for the first market maker trading permit, as mentioned
above, down to $1,000 per month for the fifth and additional trading
permits, with various tiers in-between. Like other options exchanges,
the Exchange is proposing a tiered pricing model because it may
encourage CMM firms to purchase additional trading rights and quote
more issues because subsequent trading rights are priced lower than the
initial trading right.
---------------------------------------------------------------------------

\96\ See Miami International Securities Exchange, LLC Fee
Schedule at 20 and 21: <a href="https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_03012022.pdf">https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_03012022.pdf</a>.
---------------------------------------------------------------------------

The Exchange does not believe that it is unfairly discriminatory to
assess different fees for PMMs, CMMs, and EAMs. For PMMs on MRX, the
fees required to access the Exchange are substantially lower than those
of competing exchanges. For example, a PMM could quote on the Exchange
for only $200 (i.e., the access fee), compared with the minimum $6,000
per month trading permit fee charged by NYSE Arca. The Exchange notes
that it is not proposing trading right fees for PMMs, as the Exchange
wishes to encourage Members to act as PMMs, which will benefit the
market through, for example, more robust quoting requirements.
Similarly, the Exchange is proposing only to charge the $200 access fee
to EAMs as the technical, regulatory, and administrative services
associated with an EAM's use of the Exchange are not as comprehensive
as those associated with Market Makers. The CMM Trading Right Fee is
identical to GEMX.\97\
---------------------------------------------------------------------------

\97\ See GEMX Options 7, Section 6.B. (CMM Trading Rights Fees).
---------------------------------------------------------------------------

Membership fees are charged by nearly all exchanges, and all
established exchanges with sufficient order flow. In 2022, MEMX LLC
(``MEMX'') established a monthly membership fee of $200.\98\ MEMX
reasoned in that rule change that there is value in becoming a Member
of the Exchange. MEMX stated that it believed that its proposed
membership fee ``is not unfairly discriminatory because no broker-
dealer is required to become a member of the Exchange.'' Moreover,
``neither the trade-through requirements under Regulation NMS nor
broker-dealers' best execution obligations require a broker-dealer to
become a member of every exchange.'' In this respect, MEMX is correct;
a monthly membership fee is reasonable, equitably allocated and not
unfairly discriminatory. Market participants may choose to become a
member of one or more options exchanges based on the market
participant's business model. A very small number of market
participants choose to become a member of all sixteen options
exchanges. It is not a requirement for market participants to become
members of all options exchanges, in fact, certain market participants
conduct an options business as a member of only one options market.
Most firms that actively trade on options markets are not currently
members of MRX and do not purchase port services at MRX. Using options
markets that Nasdaq operates as points of comparison, less than a third
of the firms that are members of at least one of the options markets
that Nasdaq operates are also members of MRX (approximately 29%). The
Exchange notes that no firm that is a member of MRX only. Few, if any,
firms have become members or purchased port services at MRX,
notwithstanding the fact that both MRX membership and ports are
currently free, because MRX currently has less liquidity than other
options markets. As explained above, MRX has the smallest market share
of the 16 options exchanges, representing only approximately 1.8% of
the market, and, for certain market participants, the current levels of
liquidity may be insufficient to justify the costs associated with
becoming a member and connecting to the exchange, notwithstanding the
fact that both are currently free.
---------------------------------------------------------------------------

\98\ See Securities Exchange Act Release No. 93927 (January 7,
2022), 87 FR 2191 (January 13, 2022) (SR-MEMX-2021-19). The Monthly
Membership Fee is assessed to each active Member at the close of
business on the first day of each month.
---------------------------------------------------------------------------

The decision to become a member of an exchange, particularly for
registered market makers, is complex, and not solely based on the non-
transactional costs assessed by an exchange. As noted herein, specific
factors include, but are not limited to: (i) An exchange's available
liquidity in options series; (ii) trading functionality offered on a
particular market; (iii) product offerings; (iv) customer service on an
exchange; and (v) transactional pricing. Becoming a member of the
exchange does not ``lock'' a potential member into a market or diminish
the overall competition for exchange services. The decision to become a
member of an exchange is made at the beginning of the relationship, and
is no less subject to competition than trading fees or market data.
In lieu of becoming a member at each options exchange, a market
participant may join one exchange and elect to have their orders routed
in the event that a better price is available on an away market.
Nothing in the Order Protection Rule requires a firm to become a Member
at MRX.\99\ If MRX is not at the NBBO, MRX will route an order to any
away market that is at the NBBO to prevent a trade-through and also
ensure that the order was executed at a superior price.\100\
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\99\ See Options Order Protection and Locked/Crossed Market Plan
(August 14, 2009), available at <a href="https://www.theocc.com/getmedia/7fc629d9-4e54-4b99-9f11-c0e4db1a2266/options_order_protection_plan.pdf">https://www.theocc.com/getmedia/7fc629d9-4e54-4b99-9f11-c0e4db1a2266/options_order_protection_plan.pdf</a>.
\100\ MRX Members may elect to not route their orders by marking
an order as ``do-not-route.'' In this case, the order would not be
routed.
---------------------------------------------------------------------------

In lieu of joining an exchange, a third-party may be utilized to
execute an order on an exchange. For example, a third-party broker-
dealer Member of MRX may be utilized by a retail investor to submit
orders into an Exchange. An institutional investor may utilize a
broker-dealer, a service bureau,\101\ or request sponsored access \102\
through a member of an exchange in order to submit a trade directly to
an options exchange.\103\ A market participant may either pay the costs
associated with becoming a member of an exchange or, in the
alternative, a market participant may elect to pay commissions to a
broker-dealer, pay fees to a service bureau to submit trades, or pay a
member to sponsor the market participant in order to submit trades
directly to an exchange. Market participants may elect any of the above
models and weigh the varying costs when determining how to submit
trades to an exchange. Depending on the number of orders to be
submitted, technology, ability to control submission of orders, and
projected revenues, a market participant may

[[Page 30315]]

determine one model is more cost efficient as compared to the
alternatives.
---------------------------------------------------------------------------

\101\ Service bureaus provide access to market participants to
submit and execute orders on an exchange. On MRX, a Service Bureau
may be a Member. Some MRX Members utilize a Service Bureau for
connectivity and that Service Bureau may not be a Member. Some
market participants utilize a Service Bureau who is a Member to
submit orders. As noted herein only MRX Members may submit orders or
quotes through ports.
\102\ Sponsored Access is an arrangement whereby a member
permits its customers to enter orders into an exchange's system that
bypass the member's trading system and are routed directly to the
Exchange, including routing through a service bureau or other third-
party technology provider.
\103\ This may include utilizing a Floor Broker and submitting
the trade to one of the five options trading floors.
---------------------------------------------------------------------------

Options 7, Section 6--Ports
The Exchange's proposal to amend port fees is reasonable, equitable
and not unfairly discriminatory. The proposed port fees are similar to
the fees assessed by GEMX,\104\ and lower than the fees assessed by
ISE. The proposed fees reflect the ongoing services provided to
maintain and support the ports. In order to submit orders into MRX,
only one order protocol is required, either FIX or OTTO. Quoting
protocols are only required to the extent an MRX Member has been
appointed as a Market Maker in an options series pursuant to Options 2,
Section 1. Similarly, only one quoting protocol (SQF) is necessary to
quote on MRX. Depending on a Member's business model, one protocol may
be better suited for a particular Member relative to another.\105\
Members may elect to utilize both order entry protocols, depending on
how they organize their business. Only one protocol is necessary to
submit orders into MRX. However, Members may choose a greater number of
order entry ports, depending on that Member's particular business
model.\106\ Similarly, only one account number is necessary per Member,
although Members may choose to have additional accounts number to
organize their business. The Exchange notes that FIX, OTTO, FIX DROP,
the Clearing Trade Interface, and TradeInfo are available to all
Members and may be utilized to obtain order information.
---------------------------------------------------------------------------

\104\ See GEMX Options 7, Section 6.C. (Ports and Other
Services).
\105\ For example, while the FIX protocol permits routing
capability the OTTO protocol does not permit routing capability.
This distinction may cause a Member to elect a certain protocol
based on whether they want the order executed locally or have the
option to allow the order to route. The OTTO Port offer lower
latency as compared to the FIX Port, which may be attractive to
Members depending on their trading behavior.
\106\ For example, a Member may desire to utilize multiple FIX
or OTTO ports for accounting purposes, to measure performance, for
regulatory reasons or other determinations that are specific to that
Member.
---------------------------------------------------------------------------

Members choose among the protocols based on their business
workflow. The Exchange would uniformly assess the port fees to all
Members and would uniformly apply monthly caps.
Ports are only available to MRX Members or service bureaus, and
only an MRX Member may utilize a port.\107\
---------------------------------------------------------------------------

\107\ Service bureaus may obtain ports on behalf of members. The
Exchange would only assign a badge and/or mnemonic to a Member to be
utilized to submit quotes and/or orders to the Exchange.
---------------------------------------------------------------------------

Once an applicant is approved for membership on MRX and becomes a
Member, the Exchange assigns the Member a badge \108\ and/or mnemonic
\109\ to submit quotes and/or orders to the Exchange through the
applicable port. An MRX Member may have one or more accounts numbers
and may assign badges or mnemonics to those account numbers. Membership
approval grants a Member a right to exercise trading privileges on MRX,
which includes the submission of orders and/or quotes into the Exchange
through a secure port by utilizing the badge and/or mnemonic assigned
to a specific Member by the Exchange. The Exchange utilizes ports as a
secure method for Members to submit orders into the Exchange's match
engine and for the Exchange to send messages related to those orders to
its Members.
---------------------------------------------------------------------------

\108\ See note 64, supra.
\109\ See note 65, supra.
---------------------------------------------------------------------------

MRX is obligated to regulate its Members and secure access to its
environment. In order to properly regulate its Members and secure the
trading environment, MRX takes measures to ensure access is monitored
and maintained with various controls. Ports are a method utilized by
the Exchange to grant Members secure access to communicate with the
Exchange and exercise trading rights. When a market participant elects
to be a Member of MRX, and is approved for membership by MRX, the
Member is granted trading rights to enter orders into MRX through
secure ports.
As noted herein, there is no legal or regulatory requirement that a
market participant become a Member of MRX, or, if it is a Member, to
purchase port services beyond the one quoting protocol or one order
entry protocol necessary to quote or submit orders on MRX.\110\ As
noted above, Members may freely choose to rely on one or many ports,
depending on their business model. A Member can only submit interest
(quotes or orders) through a secure port. Only one port is required to
submit an order (FIX or OTTO) to MRX and only one port is required to
submit a quote (SQF) to MRX. A market participant may decide, in the
alternative, not to become a member of an exchange and instead utilize
a third party.\111\
---------------------------------------------------------------------------

\110\ Only Members and service bureaus may request ports on MRX,
and only Members may utilize ports on MRX through their assigned
badge or mnemonic. See Options 1, Section 1(a)(5) and (23).
\111\ In lieu of joining an exchange, a third-party may be
utilized to execute an order on an exchange as described above.
---------------------------------------------------------------------------

The decision as to what types and number of ports to buy, like the
decision to become a member of an exchange, is made at the beginning of
that relationship, but that decision may be altered at any time as a
market participant's business strategy evolves or the manner in which
the market participant interacts with the exchange changes over time.
As noted herein, only one protocol is required to submit orders.
Depending on a Member's business model, one protocol may be better
suited for a Member than another. Port selection is often made at the
beginning of a trading relationship, like the decision whether to
become a member, but a member is not ``locked'' into a particular
number or type of ports over the course of the business relationship.
Options 7, Section 7--Market Data
The Exchange's proposal to adopt market data fees is reasonable,
equitable and not unfairly discriminatory. The five market data feeds
at issue here--the Depth of Market Feed,\112\ Order Feed,\113\ Top
Quote Feed,\114\ Trades Feed,\115\ and Spreads Feed \116\--are used
throughout the market by a variety of market participants for a variety
of purposes. Users include regulators, market makers, competing
exchanges, media, retail, academics, portfolio managers. Market data
feeds will be available to members of all of these groups on a non-
discriminatory basis. With respect to the proposed Non-Display
Enterprise License, the Exchange notes that enterprise licenses in
general have been widely recognized as an effective and not unfairly
discriminatory method of distributing market data. Enterprise licenses
are widely employed by options exchanges, and the proposal here is
typical of such licenses.
---------------------------------------------------------------------------

\112\ The Depth of Market Feed provides aggregate quotes and
orders at the top five price levels on MRX, and provides subscribers
with a consolidated view of tradable prices beyond the BBO, showing
additional liquidity and enhancing transparency for MRX traded
options.
\113\ The Order Feed provides information on new orders resting
on the book (e.g. price, quantity and market participant capacity),
and also announces all auctions.
\114\ The Top Quote Feed calculates and disseminates MRX's best
bid and offer position, with aggregated size (including total size
in aggregate, for Professional Order size in the aggregate and
Priority Customer Order size in the aggregate), based on displayable
order and quote interest in the System. The feed also provides last
trade information along with opening price, daily trading volume,
high and low prices for the day.
\115\ The Trades Feed displays last trade information along with
opening price, daily trading volume, high and low prices for the
day.
\116\ The Spread Feed consists of: (1) Options orders for all
Complex Orders (i.e., spreads, buy-writes, delta neutral strategies,
etc.); (2) data aggregated at the top five price levels (BBO) on
both the bid and offer side of the market; (3) last trades
information.

---------------------------------------------------------------------------

[[Page 30316]]

Market data, often mistakenly characterized as the ``exhaust'' of
an exchange, is in fact the engine that drives liquidity: Firms are
attracted by high levels of liquidity, diverse offerings and bids and
offers close to the NBBO. Market data, unlike membership or ports, is
not sold only to members, but rather is open to investors generally.
Nasdaq is subject to direct competition in the sale of market data.
As explained above, Nasdaq proposes to introduce fees for both top-of-
book and depth-of-book feeds. Top-of-book feeds are generally of
interest to a broader audience that can readily substitute the top-of-
book feed of one exchange with that of another. Depth-of-book feeds
are, for the most part, of more interest to Members trading on the
Exchange than other market participants but MRX has the smallest market
share at 1.8%, and any Member can choose to trade on another exchange
if fees for these other three feeds exceed their value.
Moreover, MRX lists no proprietary options products that are
entirely unique to MRX. Firms can substitute MRX market data with feeds
from exchanges that provide a high degree of functionality, including
complex orders. Full market data options are available, for example,
from Cboe,\117\ MIAX,\118\ and NYSE Arca Options.\119\
---------------------------------------------------------------------------

\117\ See Cboe DataShop, available at <a href="https://datashop.cboe.com/">https://datashop.cboe.com/</a>.
\118\ See MIAX Options Market Data & Offerings, available at
<a href="https://www.miaxoptions.com/market-data-offerings">https://www.miaxoptions.com/market-data-offerings</a>.
\119\ See NYSE Options Markets, available at <a href="https://www.nyse.com/options">https://www.nyse.com/options</a>.
---------------------------------------------------------------------------

Top-of-book data--last trade and best bid and offer information--is
sold broadly to a wide of market participants, including the media, the
general investing public, retail broker-dealers, regulatory agencies,
and many others in addition to broker-dealers routing order flow.
Because MRX does not list options on products that are exclusively
available on MRX, then these same types of general-interest consumers
of data can substitute MRX data with data from any exchange that lists
such multiply-listed options, or through OPRA, in the same sense that
consumers of top-of-book data on equity exchanges compete with other
sellers of top-of-book data.\120\ Top-of-book data is easily
substitutable by many of its users, and therefore is subject to
particularly fierce competition.
---------------------------------------------------------------------------

\120\ See Securities Exchange Act Release No. 94466 (March 18,
2022), 87 FR 16811 (March 24, 2022) (SR-NASDAQ-2022-024) (explaining
that ``[a]ll of the top-of-book proprietary products offered by the
exchanges are readily substitutable for each other.'' ``Top-of-book
data can be used for many purposes--from a retail investor casually
surveying the market to sophisticated market participants using it
for a variety of applications, such as investment analysis, risk
management, or portfolio valuation.'' ``All major exchange groups
compete to sell top-of-book data.'').
---------------------------------------------------------------------------

All of this competition must be understood in the context of the
fact that all broker-dealers involved in order routing must take
consolidated data from OPRA, and proprietary data feeds cannot be used
to meet that particular requirement. As such, all proprietary data
feeds are optional.
* * * * *
After 6 years, MRX proposes to commence assessing membership, port,
and market data fees, just as all other options exchanges.\121\ The
introduction of these fees will not impede a Member's access to MRX,
but rather will allow MRX to continue to compete and grow its
marketplace so that it may continue to offer a robust trading
architecture, a quality opening process, an array of simple and complex
order types and auctions, and competitive transaction pricing. If MRX
is incorrect in its assessment of the value of its services, that
assessment will be reflected in MRX's ability to compete with other
options exchanges.
---------------------------------------------------------------------------

\121\ Today, MRX is the only options exchange that does not
assess membership, port, and market data fees.
---------------------------------------------------------------------------

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.
The Exchange believes its proposal remains competitive with other
options markets, and will offer market participants with another choice
of venue to transact options. 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. 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.
Options 7, Section 5--Membership
The proposed membership fees are identical to membership fees
assessed by GEMX.\122\ The proposed fees are designed to reflect the
benefits of the technical, regulatory, and administrative services
provided to a Member by the Exchange, and the fees remain competitive
with similar fees offered on other options exchanges. The Exchange does
not believe that assessing different fees for PMMs, CMMs, and EAMs
creates an undue burden on competition.
---------------------------------------------------------------------------

\122\ See GEMX Options 7, Section 6.A. (Access Fees) and Section
6.B. (CMM Trading Rights Fees).
---------------------------------------------------------------------------

With respect to the CMM Trading Rights Fee, the proposed fees
compare favorably with those of other options exchanges.\123\ Like
other options exchanges, the Exchange is proposing a tiered pricing
model because it may encourage CMM firms to purchase additional trading
rights and quote more issues because subsequent trading rights are
priced lower than the initial trading right. The Exchange notes that it
is not proposing trading right fees for PMMs as the Exchange wishes to
encourage Members to act as PMMs, which will benefit the market
through, for example, more robust quoting. Additionally, as noted
herein, PMMs have higher quoting obligations as compared to CMMs.\124\
---------------------------------------------------------------------------

\123\ See NYSE Arca Fees and Charges, General Options and
Trading Permit (OTP) Fees (comparing CMM Trading Rights Fees to the
Arca Market Maker fees).
\124\ See MRX Options 2, Section 5. PMMs, associated with the
same Member, are collectively required to provide two-sided
quotations in 90% of the cumulative number of seconds, or such
higher percentage as the Exchange may announce. CMMs are not
required to enter quotations in the options classes to which it is
appointed, however if a CMM initiates quoting in an options class,
the CMM, associated with the same Member, is collectively required
to provide two-sided quotations in 60% of the cumulative number of
seconds, or such higher percentage as the Exchange may announce.
---------------------------------------------------------------------------

Options 7, Section 6--Ports
The proposed port fees are similar to port fees assessed by GEMX
\125\ for similar connectivity. As a consequence, competition will not
be burdened by the proposed fees. In order to submit orders into MRX,
only one order protocol is required, either FIX or OTTO. Likewise, only
one quoting protocol, SQF, is necessary to quote on MRX. Finally, only
one account number is necessary per Member. FIX, and OTTO Ports, as
well TradeInfo, are available to all Members and may be utilized to
cancel orders. Further, FIX, and OTTO Ports, as well TradeInfo, are
available to all Members and may be utilized to cancel orders and FIX
DROP, the Clearing Trade Interface, and TradeInfo are available to all
Members and may be utilized to obtain order information. These
different protocols are not all necessary to conduct business on MRX.
Market participants may also connect to

[[Page 30317]]

third parties instead of directly to the Exchange.
---------------------------------------------------------------------------

\125\ See GEMX Options 7, Section 6.C. (Ports and Other
Services).
---------------------------------------------------------------------------

With respect to the higher fees assessed for SQF Ports and SQF
Purge Ports, the Exchange notes that only Market Makers may utilize
these ports. Market Makers are required to provide continuous two-sided
quotes on a daily basis,\126\ and are subject to various obligations
associated with providing liquidity.\127\ As a result of these quoting
obligations, the SQF Port and SQF Purge Port are designed to handle
higher throughput to permit Market Makers to bundle orders to meet
their obligations. The technology to permit Market Makers to submit a
greater number of quotes, in addition to the various risk protections
\128\ afforded to these market participants when quoting, accounts for
the higher SQF Port and SQF Purge Port fees. Greater liquidity benefits
all market participants by providing more trading opportunities and
attracting greater participation by Market Makers. Also, an increase in
the activity of Market Makers in turn facilitates tighter spreads.
---------------------------------------------------------------------------

\126\ See MRX Options 2, Section 5.
\127\ See MRX Options 2, Section 4.
\128\ See MRX Options 3, Section 15(a)(3). Market Makers are
offered risk protections to permit them to manage their risk more
effectively.
---------------------------------------------------------------------------

Options 7, Section 7--Market Data
The initiation of market data fees will not impose an undue burden
on inter-market competition. Since February 2016, MRX has disseminated
market data without charging a fee, allowing MRX time to build order
flow. Now that order flow has increased from approximately 0.2 percent
to 1.8 percent of the market, MRX proposes charging fees that reflect
the value of that data.
Permitting MRX to charge a fee for its data does not impose any
burden on the ability of other options exchanges to compete. Each of
the remaining 15 options exchanges currently sells its market data, and
is capable of modifying its fees response to the proposed changes by
MRX. Moreover, allowing MRX, or any new market entrant, to waive fees
for a period of time to allow it to become established encourages
market entry and thereby ultimately promotes competition.
If the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market
share.\129\ 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.
---------------------------------------------------------------------------

\129\ The Exchange notified market participants of the new fees
on December 20, 2021. See Data News #2021-11 (December 20, 2021,
available at <a href="http://www.nasdaqtrader.com/TraderNews.aspx?id=dn2021-11">http://www.nasdaqtrader.com/TraderNews.aspx?id=dn2021-11</a>. As such, market participants have had ample notice of the
proposed fee changes and will be able to adjust their purchases of
exchange services accordingly.
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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.\130\ 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.
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\130\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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

<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3240475e571f515d5f5f575c4641724157511c555d44"><span class="__cf_email__" data-cfemail="d0a2a5bcb5fdb3bfbdbdb5bea4a390a3b5b3feb7bfa6">[email&#160;protected]</span></a>. Please include
File Number SR-MRX-2022-04 on the subject line.

Paper Comments

<bullet> 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-MRX-2022-04. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MRX-2022-04 and should be submitted on
or before June 8, 2022.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\131\
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\131\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10617 Filed 5-17-22; 8:45 am]
BILLING CODE 8011-01-P

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