Notice2022-10806
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the GEMX Pricing Schedule at Options 7, Section 3
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Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 20, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 98 (Friday, May 20, 2022)</title>
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[Federal Register Volume 87, Number 98 (Friday, May 20, 2022)]
[Notices]
[Pages 31010-31013]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10806]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94922; File No. SR-GEMX-2022-06]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the GEMX
Pricing Schedule at Options 7, Section 3
May 16, 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 GEMX, LLC (``GEMX'' 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
[[Page 31011]]
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 GEMX's Pricing Schedule at Options
7, Section 3 (Regular Order Fees and Rebates).
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/gemx/rules">https://listingcenter.nasdaq.com/rulebook/gemx/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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
GEMX proposes to amend its Pricing Schedule at Options 7, Section 3
to: (1) Decrease the Priority Customer \3\ Tier 4 Maker Rebate in Penny
Symbols,\4\ and (2) decrease the Non-Priority Customer \5\ and Priority
Customer Penny Symbol Taker Fees in note 13. Each amendment is
described below.
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\3\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq GEMX Options 1,
Section 1(a)(36).
\4\ ``Penny Symbols'' are options overlying all symbols listed
on Nasdaq GEMX that are in the Penny Interval Program. See Options
7, Section 1.
\5\ ``Non-Priority Customer'' includes Market Makers (including
Market Maker orders sent to the Exchange by EAMs), Non-Nasdaq GEMX
Market Makers (FarMM), Firm Proprietary/Broker-Dealers, and
Professional Customers.
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Priority Customer Maker Rebate
Today, the Exchange provides Priority Customers Penny Symbol Maker
Rebates as follows: $0.25 per contract (Tier 1), $0.40 per contract
(Tier 2), $0.48 per contract (Tier 3), and $0.53 per contract (Tier 4).
Priority Customers are eligible for the higher tiers of Maker Rebates
based on achieving the tiered volume thresholds in Table 1 in Options
7, Section 3. The Exchange now proposes to lower the Tier 4 Priority
Customer Maker Rebate from $0.53 to $0.52 per contract.
Note 13 Taker Fees
Today, the Exchange assesses all market participants Penny Symbol
Taker Fees in Tiers 1-4 as follows:
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Taker fee: Taker fee: Taker fee: Taker fee:
Market participant Tier 1 Tier 2 Tier 3 Tier 4
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Market Maker.................................... $0.50 $0.50 $0.50 $0.48
Non-Nasdaq GEMX Market Maker (FarMM)............ 0.50 0.50 0.50 0.48
Firm Proprietary/Broker-Dealer.................. 0.50 0.50 0.50 0.49
Professional Customer........................... 0.50 0.50 0.50 0.49
Priority Customer............................... 0.48 0.48 0.48 0.43
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Market participants are eligible for the higher tiers of Penny
Taker Fees based on achieving the tiered volume thresholds in Table 1
in Options 7, Section 3. The tiered Penny Taker Fees set forth above
apply when the market participant trades against a Non-Priority
Customer. When the market participant trades against a Priority
Customer, the Exchange assesses the Penny Taker Fees set forth in note
13 of Options 7, Section 3, regardless of tier. Specifically, note 13
currently provides that Non-Priority Customers who execute less than
4.0% of Customer Total Consolidated Volume will be charged a Penny
Taker Fee of $0.50 per contract for trades executed against a Priority
Customer. Non-Priority Customers who execute 4.0% or greater of
Customer Total Consolidated Volume will be charged a Penny Taker Fee of
$0.47 per contract for trades executed against a Priority Customer. All
Priority Customer orders will be charged a Penny Taker Fee of $0.49 per
contract for trades executed against a Priority Customer. For purposes
of note 13, Customer Total Consolidated Volume means the total volume
cleared at The Options Clearing Corporation in the Customer range in
equity and ETF options in that month.
The Exchange now proposes to lower the: (i) $0.50 Taker Fee for
Non-Priority Customers that execute less than 4.0% of Customer Total
Consolidated Volume to $0.48 per contract when trading against a
Priority Customer, and (ii) the $0.49 Taker Fee for Priority Customers
that trade against another Priority Customer to $0.48 per contract. In
other words, all market participants would be charged a base Penny
Taker Fee of $0.48 per contract if they trade against a Priority
Customer. Non-Priority Customers will continue to have an opportunity
to lower that fee to $0.47 per contract if they execute 4.0% or greater
of Customer Total Consolidated Volume.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\7\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its Pricing Schedule are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options
securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[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
[[Page 31012]]
of order flow from broker dealers'. . . .'' \8\
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\8\ NetCoalition v. SEC, 615 F.3d 525, 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)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \9\
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\9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, 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. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
Priority Customer Maker Rebate
The Exchange believes that its proposal to lower the Tier 4 Penny
Maker Rebate for Priority Customers from $0.53 to $0.52 per contract is
reasonable, equitable and not unfairly discriminatory. While the
Exchange is lowering this rebate, Priority Customers will continue to
receive the highest Penny Maker Rebates with the proposed changes. No
market participants other than Market Makers and Priority Customers are
offered enhanced Penny Maker Rebates in Tier 4, and the proposed $0.52
Tier 4 Maker Rebate for Priority Customers continues to be
significantly higher than the $0.41 Tier 4 Maker Rebate currently
provided to Market Makers.\10\ The Exchange therefore believes that the
proposed pricing will continue to be attractive for Priority Customer
order flow.
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\10\ As set forth in Options 7, Section 3, Non-Nasdaq GEMX
Market Makers (FarMM), Firm Proprietary/Broker-Dealers, and
Professional Customers are eligible to receive a $0.20 Penny Maker
Rebate in Tier 1 only.
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The Exchange believes that the proposed Tier 4 Priority Customer
Maker Rebate changes are equitable and not unfairly discriminatory. As
discussed above, the Exchange believes the proposed pricing will
continue to attract Priority Customer order flow to the Exchange.
Priority Customer liquidity benefits all market participants by
providing more trading opportunities, which attracts Market Makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
Note 13 Taker Fees
The Exchange believes that its proposal in note 13 of Options 7,
Section 3 to lower the Penny Taker Fees that apply when trading against
a Priority Customer is reasonable. As discussed above, the Exchange is
proposing to lower the base Penny Taker Fee for all market participants
to $0.48 per contract if they trade against a Priority Customer. Non-
Priority Customers would continue to have an opportunity to lower that
fee to $0.47 per contract if they execute 4.0% or greater of Customer
Total Consolidated Volume. The Exchange notes that the proposed Penny
Taker Fees for trading against Priority Customers will generally be
lower or comparable to the current tiered Penny Taker Fees for trading
against Non-Priority Customers. The only exception is the Tier 4 Penny
Taker Fee for Priority Customers when trading against a Non-Priority
Customer. As described above, this fee is currently $0.43 per contract.
Otherwise, the proposed Taker Fees are lower or comparable for all
market participants, regardless of tier.\11\ The Exchange believes that
its proposal will enhance Priority Customer experience on the Exchange
by incentivizing market participants with a lower Penny Taker Fee to
remove Priority Customer liquidity. At the same time, the Exchange
believes the proposed pricing (including the Priority Customer Taker
Fee when the counter party is another Priority Customer) appropriately
balances the Exchange's intent to offset the favorable Penny Symbol
pricing currently offered to Priority Customers through higher Maker
Rebates and lower Taker Fees. With the proposed changes, the Exchange
continues to believe that its pricing structure for Penny Symbols will
continue to attract additional volume to GEMX.
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\11\ Specifically, all Non-Priority Customers are currently
assessed a Penny Taker Fee of $0.50 per contract in Tiers 1-3 when
trading against Non-Priority Customers, while this fee is $0.48 per
contract for Priority Customers in Tiers 1-3. In Tier 4, Market
Makers and Non-Nasdaq GEMX Market Makers are currently assessed a
$0.48 per contract Penny Taker Fee when trading against Non-Priority
Customers. For Firm Proprietary/Broker-Dealers and Professional
Customers, the Tier 4 fee is currently $0.49 per contract. As
previously discussed, the Tier 4 fee is currently $0.43 per contract
for Priority Customers.
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The Exchange further believes that the proposed changes to lower
the Penny Taker Fees in note 13 are equitable and not unfairly
discriminatory. In particular, the Exchange is lowering the Penny Taker
Fee to $0.48 per contract for all market participants when the counter
party is a Priority Customer.
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 proposed Tier 4 Priority Customer Maker Rebate changes do not
impose an undue burden on intra-market competition. As discussed above,
Priority Customers will continue to receive the highest Penny Maker
Rebates on the Exchange with the proposed changes, so the Exchange
believes its proposal will continue to attract Priority Customer order
flow to the Exchange. Priority Customer liquidity benefits all market
participants by providing more trading opportunities, which attracts
Market Makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants. As
it relates to proposed note 13 Taker Fee changes, the Exchange will
assess the same Taker Fee to all market participants when the counter
party is a Priority Customer. Accordingly, the Exchange does not
believe that its pricing proposal will place any market participant at
a competitive disadvantage.
As it relates to inter-market competition, the Exchange believes
its proposal remains competitive with other options markets and will
offer market participants with another choice of where 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. In
such an environment, the
[[Page 31013]]
Exchange must continually adjust its fees to remain competitive with
other options exchanges. Because competitors are free to modify their
own fees in response, and because market participants may readily
adjust their order routing practices, the Exchange believes that the
degree to which fee changes in this market may impose any burden on
competition is extremely limited.
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.\12\ 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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\12\ 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#691b1c050c440a0604040c071d1a291a0c0a470e061f"><span class="__cf_email__" data-cfemail="4230372e276f212d2f2f272c3631023127216c252d34">[email protected]</span></a>. Please include
File Number SR-GEMX-2022-06 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-GEMX-2022-06. 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-GEMX-2022-06 and should be submitted on
or before June 10, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10806 Filed 5-19-22; 8:45 am]
BILLING CODE 8011-01-P
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