Notice2022-22657
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend GEMX Options 7
Primary source
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
October 19, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 201 (Wednesday, October 19, 2022)</title>
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[Federal Register Volume 87, Number 201 (Wednesday, October 19, 2022)]
[Notices]
[Pages 63544-63548]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22657]
[[Page 63544]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96062; File No. SR-GEMX-2022-09]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend GEMX
Options 7
October 13, 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 October 3, 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 solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7.
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
The Exchange proposes to amend Options 7, Sections 1, 3 and 4 in
connection with adopting an Affiliated Entity program. The Exchange
also proposes to amend Options 7, Section 3 to amend its Regular Order
Fees and Rebates for Penny Symbols and Non-Penny Symbols and Qualifying
Tier Thresholds and remove note 13 from the Pricing Schedule. Each
change is described below.
Affiliated Entity Program
The Exchange proposes to permit Affiliated Entities to aggregate
certain volume for purposes of paying lower fees or receiving higher
rebates. Today, Nasdaq MRX, LLC (``MRX'') and Nasdaq ISE, LLC (``ISE'')
\3\ also permit Affiliated Entities to aggregate volume for purposes of
qualifying for certain pricing.
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\3\ See MRX and ISE Options 7, Section 1.
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Specifically, the Exchange proposes to adopt the term ``Affiliated
Entity'' within Options 7, Section 1(c).\4\ An ``Affiliated Entity''
would be a relationship between an Appointed Market Maker and an
Appointed OFP for purposes of qualifying for certain pricing specified
in the Pricing Schedule. An ``Appointed Market Maker'' is proposed to
be defined within Options 7, Section 1(c) as a Market Maker who has
been appointed by an OFP for purposes of qualifying as an Affiliated
Entity. An ``Order Flow Provider'' or ``OFP'' is proposed to be defined
within Options 7, Section 1(c) as any Member, other than a Market
Maker, that submits orders, as agent or principal, to the Exchange.\5\
Finally, an ``Appointed OFP'' would be defined within Options 7,
Section 1(c) as an OFP who has been appointed by a Market Maker for
purposes of qualifying as an Affiliated Entity.
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\4\ The Exchange proposes to add a ``c'' before the term
references within Options 7, Section 1 to further describe this
section of the Pricing Schedule.
\5\ Market Makers shall not be considered Appointed OFPs for the
purpose of becoming an Affiliated Entity.
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In order to become an Affiliated Entity, Market Makers and OFPs
would be required to send an email to the Exchange to appoint their
counterpart, at least 3 business days prior to the last day of the
month to qualify for the next month.\6\ For example, with this
proposal, market participants should have submitted emails to the
Exchange to become Affiliated Entities to qualify for discounted
pricing by September 28, 2022, which is 3 business days prior to the
first business day of October 3, 2022. The Exchange will acknowledge
receipt of the emails and specify the date the Affiliated Entity is
eligible for applicable pricing, as specified in the Pricing Schedule
within Options 7, Section 1(c).
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\6\ The Exchange issued an Options Trader Alert which provided
the email address and details required to apply to become an
Affiliated Entity.
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Each Affiliated Entity relationship will commence on the 1st of a
month and may not be terminated prior to the end of any month. An
Affiliated Entity relationship will automatically renew each month
until or unless either party terminates earlier in writing by sending
an email to the Exchange at least 3 business days prior to the last day
of the month to terminate for the next month. Affiliated Members \7\
may not qualify as a counterparty comprising an Affiliated Entity. Each
Member may qualify for only one (1) Affiliated Entity relationship at
any given time. As proposed, an Affiliated Entity shall be eligible to
aggregate their volume for purposes of qualifying for certain pricing
specified in the Pricing Schedule, as described below.
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\7\ An ``Affiliated Member'' is Member that shares at least 75%
common ownership with a particular Member as reflected on the
Member's Form BD, Schedule A. This term is currently described
within Options 7, Sections 3 and 4. The Exchange proposes to remove
the description of an Affiliated Member from Options 7, Sections 3
and 4 and instead describe an Affiliated Member within Options 7,
Section 1(c). The Exchange also proposes to capitalize the word
``affiliated'' within Options 7, Section 4 to refer to the defined
term.
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The Exchange proposes to amend Options 7, Section 3, Regular Order
Fees and Rebates, to indicate that with respect to the Qualifying Tier
Thresholds, for purposes of measuring Total Affiliated Member or
Affiliated Entity % of Customer Total Consolidated Volume, 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. Further, the Exchange proposes to provide that all eligible
volume from Affiliated Members or an Affiliated Entity will be
aggregated in determining applicable tiers for each of the Qualifying
Tier Thresholds in Table 1. Finally, the Exchange proposes to note that
the Total Affiliated Member or Affiliated Entity % of Customer Total
Consolidated Volume category includes all volume in all symbols and
order types, including both maker and taker volume and volume executed
in the PIM, Facilitation, Solicitation, and QCC mechanisms.
With these proposed amendments, an Affiliated Entity would be
permitted to aggregate its volume to qualify for the Qualifying Tier
Thresholds. By aggregating volume, the Appointed Market Maker and
Appointed OFP will both have an opportunity to receive lower Taker Fees
and higher Maker Rebates as a result of the aggregation. The Exchange
believes that the
[[Page 63545]]
Affiliated Entity program will encourage Appointed Market Makers and
Appointed OFPs to submit additional liquidity on GEMX.
As noted above, with this proposed change, a GEMX Member may
aggregate either as an Affiliated Member or an Affiliated Entity during
the same time period, but may not aggregate under both programs during
the same time period. The Exchange proposes to incentivize certain
Members, who are not Affiliated Members, to enter into an Affiliated
Entity relationship for the purpose of aggregating volume executed on
the Exchange to qualify to for certain Maker or Taker tiers.
Options 7, Section 3
The Exchange proposes to amend Options 7, Section 3, Regular Order
Fees and Rebates, to: (1) renumber current Penny and Non-Penny Symbol
Maker Rebate Tier 4 and Taker Fee Tier 4 as Maker Rebate Tier 5 and
Taker Fee Tier 5, respectively, (2) add a new Maker Rebate Tier 4 and
Taker Fee Tier 4; (3) amend new Priority Customer \8\ Maker Rebate Tier
5; and (4) eliminate current note 13. Each change will be described
below.
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\8\ 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). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail'' as
defined below. See Options 7, Section 1(c), as proposed.
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Maker Rebates
Today, GEMX pays the following Tier 4 Penny Symbol Maker Rebates:
$0.41 per contract to Market Makers \9\ and $0.52 per contract to
Priority Customers. Non-Nasdaq GEMX Market Makers (FarMM),\10\ Firm
Proprietary \11\/Broker Dealers \12\ and Professional Customers \13\
are not eligible for Tier 4 Penny Symbol Maker Rebates. Today, GEMX
pays the following Tier 4 Non-Penny Symbol Maker Rebates: $0.75 per
contract to Market Makers and $1.05 per contract to Priority Customers.
Non-Nasdaq GEMX Market Makers (FarMM), Firm Proprietary/Broker Dealers
and Professional Customers are not eligible for Tier 4 Non-Penny Symbol
Maker Rebates.
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\9\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\10\ A ``Non-Nasdaq GEMX Market Maker'' is a market maker as
defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended, registered in the same options class on another options
exchange. See GEMX Options 7, Section 1.
\11\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account. See GEMX Options 7, Section
1.
\12\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
See GEMX Options 7, Section 1.
\13\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer. See GEMX Options
7, Section 1.
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At this time, the Exchange proposes to renumber Penny and Non-Penny
Symbol Maker Rebate Tiers 4 as Tier 5.
The Exchange also proposes to increase the Priority Customer Penny
Symbol newly renumbered Maker Rebate Tier 5 from $0.52 to $0.53 per
contract.
The Exchange also proposes to adopt a new Penny Symbol Maker Rebate
Tier 4 as follows: $0.32 per contract to Market Makers and $0.51 per
contract to Priority Customers. Non-Nasdaq GEMX Market Makers (FarMM),
Firm Proprietary/Broker Dealers and Professional Customers will not be
eligible for proposed Tier 4 Penny Symbol Maker Rebates.
The Exchange also proposes to adopt a new Non-Penny Symbol Maker
Rebate Tier 4 as follows: $0.50 per contract to Market Makers and $0.90
per contract to Priority Customers. Non-Nasdaq GEMX Market Makers
(FarMM), Firm Proprietary/Broker Dealers and Professional Customers
will not be eligible for proposed Tier 4 Non-Penny Symbol Maker
Rebates.
Taker Fees
Today, GEMX pays the following Tier 4 Penny Symbol Taker Fees:
$0.48 per contract to Market Makers and Non-Nasdaq GEMX Market Makers
(FarMM), $0.49 per contract to Firm Proprietary/Broker Dealers and
Professional Customers, and $0.43 per contract to Priority Customers.
Today, GEMX pays the following Tier 4 Non-Penny Symbol Taker Fees:
$0.94 per contract to Market Makers, Non-Nasdaq GEMX Market Makers
(FarMM), Firm Proprietary/Broker Dealers and Professional Customers and
$0.82 per contract to Priority Customers
At this time, the Exchange proposes to renumber Penny and Non-Penny
Symbol Taker Fee Tiers 4 as Tier 5.
The Exchange also proposes to adopt a new Penny Symbol Taker Fee
Tier 4 as follows: $0.50 per contract to Market Makers, Non-Nasdaq GEMX
Market Makers (FarMM), Firm Proprietary/Broker Dealers and Professional
Customers, and $0.48 per contract to Priority Customers. Similar to
current Penny Symbol Taker Fees, non-Priority Customer \14\ orders will
be charged the Penny Symbol Taker Fee for trades executed during the
Opening Process for Penny Symbol Tier 4 Taker Fees. Priority Customer
orders executed during the Opening Process will receive the applicable
Penny Symbol Maker Rebate based on the tier achieved.\15\
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\14\ Non-Priority Customer Orders includes order for the
accounts of Market Makers, Non-Nasdaq GEMX Market Makers (FarMM),
Firm Proprietary/Broker Dealers and Professional Customers.
\15\ See note 4 in Options 7, Section 3 of the Pricing Schedule.
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The Exchange also proposes to adopt a new Non-Penny Symbol Taker
Fee Tier 4 as follows: $0.99 per contract to Market Makers, Non-Nasdaq
GEMX Market Makers (FarMM), Firm Proprietary/Broker Dealers and
Professional Customers, and $0.85 per contract to Priority Customers.
Similar to current Non-Penny Symbol Taker Fees, non-Priority Customer
orders will be charged the Non-Penny Taker Fee for trades executed
during the Opening Process for Non-Penny Symbol Tier 4 Taker Fees.
Priority Customer orders executed during the Opening Process will
receive the applicable Non-Penny Symbol Maker Rebate based on the tier
achieved.\16\ Additionally, Non-Priority Customer orders will be
charged a Non-Penny Symbol Taker Fee of $1.10 per contract for trades
executed against a Priority Customer. Priority Customer orders will be
charged a Non-Penny Symbol Taker Fee of $0.85 per contract for trades
executed against a Priority Customer.\17\
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\16\ See note 4 in Options 7, Section 3 of the Pricing Schedule.
\17\ See note 16 in Options 7, Section 3 of the Pricing
Schedule.
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Today, for Penny Symbol Taker Fees 1,\18\ 2,\19\ 3 \20\ and 4, non-
Priority Customers who execute less than 4.0% of Customer Total
Consolidated Volume \21\ will be charged a Penny Symbol Taker Fee of
$0.48 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 Symbol Taker Fee of $0.47
per contract for trades executed against a Priority Customer. All
Priority Customer orders will be charged a Penny Symbol Taker Fee of
$0.48 per
[[Page 63546]]
contract for trades executed against a Priority Customer.\22\
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\18\ Today, the Exchange assesses $0.50 per contract for Penny
Symbol Taker Fee 1 for all non-Priority Customers and $0.48 per
contract for Priority Customers.
\19\ Today, the Exchange assesses $0.50 per contract for Penny
Symbol Taker Fee 2 for all non-Priority Customers and $0.48 per
contract for Priority Customers.
\20\ Today, the Exchange assesses $0.50 per contract for Penny
Symbol Taker Fee 3 for all non-Priority Customers and $0.48 per
contract for Priority Customers.
\21\ 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.
\22\ See note 13 in Options 7, Section 3 of the Pricing
Schedule.
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At this time, the Exchange proposes to remove note 13 from the
Pricing Schedule within Options 7, Section 3. While the Exchange is
eliminating certain incentives to lower the Penny Symbol Taker Fee when
trading against a Priority Customer, the Exchange believes that the
amendments proposed herein to the Taker Fees offer market participants
the ability to obtain lower Taker Fees, if they are currently in Penny
Symbol Taker Fee Tiers 1-3, by submitting additional order flow to
GEMX.
Finally, the Exchange proposes to amend the criteria to qualify for
the tier thresholds within Options 7, Section 3. The Exchange proposes
to add tier qualifications for new Tier 4 which would require a Member
to execute 2.25% to less than 2.50% of Customer Total Consolidated
Volume for the qualifying percentage of Customer Total Consolidated
Volume. Also, for Tier 4, a Member would be required to execute
Priority Customer Maker volume of 1.05% to less than 1.20% of Customer
Total Consolidated Volume for the qualifying Priority Customer Maker %
of Customer Total Consolidated Volume.
With the addition of new Tier 4 in the Qualifying Tier Thresholds,
the Exchange proposes to also amend Tier 3 to accommodate the new tier.
The Exchange proposes to amend the range in Tier 3 for the qualifying
percentage of Customer Total Consolidated Volume to require a Member to
execute 1.5% to less than 2.25% of Customer Total Consolidated Volume
(from 1.5% to less than 2.50% of Customer Total Consolidated Volume).
Also, the Exchange proposes to amend the range in Tier 3 for the
qualifying Priority Customer Maker % of Customer Total Consolidated
Volume to require a Member to execute Priority Customer Maker volume of
0.65% to less than 1.05% of Customer Total Consolidated Volume (from
0.65% to less than 1.20% of Customer Total Consolidated Volume).
Finally, the Exchange proposes to renumber Tier 4 as Tier 5 within the
Qualifying Tier Thresholds.
The Exchange believes that the addition of Tier 4 will incentive
GEMX Members in Penny and Non-Penny Symbol Tiers 1 through 3 to submit
additional order flow to GEMX to obtain lower Taker Fees and higher
Maker Rebates.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\23\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\24\ 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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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposal Is Reasonable
The 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 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 \25\
(``NetCoalition''), 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' . . . .'' \26\
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\25\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\26\ Id. at 539 (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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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options 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. Within the
foregoing context, the proposal represents a reasonable attempt by the
Exchange to attract additional order flow to the Exchange and increase
its market share relative to its competitors.
Affiliated Entity Program
The Exchange's proposal to permit an Affiliated Entity to aggregate
certain volume for purposes of paying lower fees or receiving higher
rebates is reasonable because the Exchange believes this program will
incentivize certain GEMX Members, who are not Affiliated Members, to
enter into an Affiliated Entity relationship for the purpose of
aggregating volume executed on the Exchange to qualify for certain
lower Market Maker fees. By aggregating volume, the Appointed Market
Maker and Appointed OFP will both have an opportunity to receive lower
Taker Fees and higher Maker Rebates as a result of the aggregation.
Additionally, this proposal will harmonize GEMX's program with MRX's
and ISE's programs.\27\ While a GEMX Member may not utilize both the
Affiliated Member and the Affiliated Entity program to aggregate volume
for purposes of achieving lower fees or higher rebates, the Exchange
believes that permitting aggregation individually under each program,
Affiliated Member and the Affiliated Entity program, will encourage
Appointed Market Makers and Appointed OFPs to submit additional
liquidity on GEMX if they chose to enter into this relationship.
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\27\ See MRX and ISE Options 7, Section 1.
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The Exchange's proposal to permit Affiliated Entities to aggregate
certain volume for purposes of paying lower fees or receiving higher
rebates is equitable and not unfairly discriminatory as all market
participants may enter into an Affiliated Entity relationship, provided
they have not elected to aggregate as an Affiliated Member. As
proposed, Affiliated Members, who are eligible to aggregate volume
today, are not eligible to also enter into an Affiliated Entity
relationship. The Exchange's proposal to exclude Affiliated Members
from qualifying as an Affiliated Entity is equitable and not unfairly
discriminatory because, today, Affiliated Members may aggregate volume
for purposes of lowering fees or increasing rebates on GEMX. Also, as
proposed no GEMX Member may utilize both the Affiliated Member and the
Affiliated Entity program to aggregate volume for purposes of achieving
lower fees or higher rebates. Also, the Exchange will apply all
qualifications in a uniform manner for an Affiliated Entity.
Options 7, Section 3
The Exchange's proposal to amend Options 7, Section 3, Regular
Order Fees
[[Page 63547]]
and Rebates, to renumber current Penny and Non-Penny Symbol Maker
Rebate Tier 4 and Taker Fee Tier 4 as Maker Rebate Tier 5 and Taker Fee
Tier 5, respectively, and add a new Maker Rebate Tier 4 and Taker Fee
Tier 4 is reasonable because the addition of new Tier 4 will incentive
GEMX Members to submit additional order flow to GEMX to obtain lower
fees and higher rebates. Specifically, Members currently in Penny and
Non-Penny Symbol Tiers 1 through 3 may be assessed lower Taker Fees or
receive higher Maker Rebates if they are able to submit additional
order to qualify for new Tier 4.
The Exchange's proposal to amend Options 7, Section 3, Regular
Order Fees and Rebates, to renumber current Penny and Non-Penny Symbol
Maker Rebate Tier 4 and Taker Fee Tier 4 as Maker Rebate Tier 5 and
Taker Fee Tier 5, respectively, and add a new Maker Rebate Tier 4 and
Taker Fee Tier 4 is equitable and not unfairly discriminatory because
the Exchange's maker/taker model continues to incentivize Priority
Customers by assessing them the lowest fees and paying them the highest
rebates as compared to all other non-Priority Customer market
participants. 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.
Continuing to pay Maker Rebates to Priority Customers is equitable and
not unfairly discriminatory for these reasons as well. Paying Maker
Rebates to Market Makers is equitable and not unfairly discriminatory
because Market Makers have different requirements and obligations to
the Exchange that other market participants do not (such as quoting
requirements).\28\ Incentivizing Market Makers to provide greater
liquidity benefits all market participants through the quality of order
interaction.
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\28\ See GEMX Options 2, Section 5.
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The Exchange's proposal to amend new Priority Customer Maker Rebate
Tier 5 to increase the Priority Customer Penny Symbol Maker Rebate from
$0.52 to $0.53 per contract is reasonable because the Exchange believes
this increased rebate will attract additional Priority Customer order
flow to GEMX.
The Exchange's proposal to amend new Priority Customer Maker Rebate
Tier 5 to increase the Priority Customer Penny Symbol Maker Rebate from
$0.52 to $0.53 per contract is equitable and not unfairly
discriminatory because 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.
The Exchange's proposal to eliminate note 13 from the Pricing
Schedule at Options 7, Section 3 is reasonable because while the
Exchange is eliminating certain incentives to lower the Penny Symbol
Taker Fee when trading against a Priority Customer, the Exchange
believes that the amendments proposed herein to the Penny Symbol Taker
Fees offer market participants the ability to obtain lower fees, if
they are currently in Penny Symbol Taker Fee Tiers 1-3, by submitting
additional order flow to GEMX.
The Exchange's proposal to eliminate note 13 from the Pricing
Schedule at Options 7, Section 3 is equitable and not unfairly
discriminatory because no market participant will be entitled to a
lower Penny Symbol Taker Fee as a result of the removal of note 13.
The Exchange's proposal to amend the criteria to qualify for the
tier thresholds within Options 7, Section 3 is reasonable because the
addition of new Tier 4 would allow Members to qualify for lower fees or
higher rebates if they are able to execute 2.25% to less than 2.50% of
Customer Total Consolidated Volume for the qualifying percentage of
Customer Total Consolidated Volume and execute Priority Customer Maker
volume of 1.05% to less than 1.20% of Customer Total Consolidated
Volume for the qualifying Priority Customer Maker % of Customer Total
Consolidated Volume. The criteria for new Tier 4 requires less order
flow than the criteria for re-numbered Tier 5 and pays lower Taker Fees
and higher Maker Rebates than Tier 3.\29\
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\29\ The Exchange proposes to amend Tier 3 to accommodate the
new tier 4. The Exchange proposes to amend the range in Tier 3 for
the qualifying percentage of Customer Total Consolidated Volume to
require a Member to execute 1.5% to less than 2.25% of Customer
Total Consolidated Volume (from 1.5% to less than 2.50% of Customer
Total Consolidated Volume). Also, the Exchange proposes to amend the
range in Tier 3 for the qualifying Priority Customer Maker % of
Customer Total Consolidated Volume to require a Member to execute
Priority Customer Maker volume of 0.65% to less than 1.05% of
Customer Total Consolidated Volume (from 0.65% to less than 1.20% of
Customer Total Consolidated Volume).
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The Exchange's proposal to amend the criteria to qualify for the
tier thresholds within Options 7, Section 3 is equitable and not
unfairly discriminatory because the Qualifying Tier Thresholds are the
same for all Members and would be uniformly applied to all Members in
determining a Member's applicable tier.
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.
Intermarket Competition
The Exchange operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive, or rebate opportunities
available at other venues to be more favorable. In such an environment,
the Exchange must continually adjust its fees to remain competitive
with other exchanges. 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 because other options exchanges offer similar
affiliation programs and have maker/taker models akin to GEMX's model.
Moreover, as noted above, price competition between exchanges is
fierce, with liquidity and market share moving freely between exchanges
in reaction to fee and rebate changes. In sum, if the changes proposed
herein are unattractive to market participants, it is likely that the
Exchange will lose market share as a result. Accordingly, the Exchange
does not believe that the proposed changes will impair the ability of
Members or competing order execution venues to maintain their
competitive standing in the financial markets.
Intramarket Competition
Affiliated Entity Program
The Exchange's proposal to permit Affiliated Entities to aggregate
certain volume for purposes of paying lower Taker Fees or receiving
higher Maker Rebates does not impose an undue burden on competition
because all market participants may enter into an Affiliated Entity
relationship, provided they have not elected to aggregate as an
Affiliated Member. As proposed, Affiliated Members, who are eligible to
aggregate volume today, are not eligible to also enter into an
Affiliated Entity relationship. Today, Affiliated Members
[[Page 63548]]
may aggregate volume for purposes of lowering fees or increasing
rebates on GEMX. Also, as proposed no GEMX Member may utilize both the
Affiliated Member and the Affiliated Entity program to aggregate volume
for purposes of achieving lower fees or higher rebates. Also, the
Exchange will apply all qualifications in a uniform manner for an
Affiliated Entity.
Options 7, Section 3
The Exchange's proposal to amend Options 7, Section 3, Regular
Order Fees and Rebates, to renumber current Penny and Non-Penny Symbol
Maker Rebate Tier 4 and Taker Fee Tier 4 as Maker Rebate Tier 5 and
Taker Fee Tier 5, respectively, and add a new Maker Rebate Tier 4 and
Taker Fee Tier 4 does not impose an undue burden on competition because
the Exchange's maker/taker model continues to incentivize Priority
Customers by assessing them the lowest fees and paying them the highest
rebates as compared to all other non-Priority Customer market
participants. 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.
Continuing to pay Maker Rebates to Priority Customers is equitable and
not unfairly discriminatory for these reasons as well. Paying Maker
Rebates to Market Makers is equitable and not unfairly discriminatory
because Market Makers have different requirements and obligations to
the Exchange that other market participants do not (such as quoting
requirements).\30\ Incentivizing Market Makers to provide greater
liquidity benefits all market participants through the quality of order
interaction.
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\30\ See GEMX Options 2, Section 5.
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The Exchange's proposal to amend new Priority Customer Maker Rebate
Tier 5 to increase the Priority Customer Penny Symbol Maker Rebate from
$0.52 to $0.53 per contract does not impose an undue burden on
competition because 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.
The Exchange's proposal to eliminate note 13 from the Pricing
Schedule at Options 7, Section 3 does not impose an undue burden on
competition because no market participant will be entitled to a lower
Penny Symbol Taker Fee as a result of the removal of note 13.
The Exchange's proposal to amend the criteria to qualify for the
tier thresholds within Options 7, Section 3 does not impose an undue
burden on competition because the Qualifying Tier Thresholds are the
same for all Members and would be uniformly applied to all Members in
determining a Member's applicable tier.
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) of the Act \31\ and paragraph (f) of Rule 19b-4 \32\
thereunder.
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\31\ 15 U.S.C. 78s(b)(3)(A).
\32\ 17 CFR 240.19b-4(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, 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#87f5f2ebe2aae4e8eaeae2e9f3f4c7f4e2e4a9e0e8f1"><span class="__cf_email__" data-cfemail="bbc9ced7de96d8d4d6d6ded5cfc8fbc8ded895dcd4cd">[email protected]</span></a>. Please include
File Number SR-GEMX-2022-09 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-2022-09. 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-2022-09 and should be submitted on
or before November 9, 2022.
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\33\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22657 Filed 10-18-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on October 19, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.