Notice2023-10031
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Options 7, Section 3
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
May 11, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 91 (Thursday, May 11, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Notices]
[Pages 30370-30373]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10031]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97440; File No. SR-MRX-2023-08]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Options 7, Section 3
May 5, 2023.
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 April 24, 2023, 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 and II 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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, 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/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.
[[Page 30371]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Options 7, Section 3 (Regular Order Fees and
Rebates).
Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange assesses the following fees for regular orders in Penny
Symbols:
Penny Symbols
----------------------------------------------------------------------------------------------------------------
Maker fee Tier Maker fee Tier Taker fee Tier Taker fee Tier
Market participant 1 2 1 2
----------------------------------------------------------------------------------------------------------------
Market Maker.................................... $0.20 $0.10 $0.50 $0.50
Non-Nasdaq MRX Market Maker (FarMM)............. 0.47 0.47 0.50 0.50
Firm Proprietary/Broker-Dealer.................. 0.47 0.47 0.50 0.50
Professional Customer........................... 0.47 0.47 0.50 0.50
Priority Customer............................... 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------
In addition, the Exchange currently offers a growth incentive that
allows Market Makers \3\ to reduce their maker fees described above.\4\
Specifically, Market Makers may qualify for a reduction in the Tier 1
and Tier 2 Maker Fees described above if the Market Maker has increased
its volume which adds liquidity in Penny Symbols as a percentage of
Customer Total Consolidated Volume \5\ by at least 100% over the
Member's December 2022 Market Maker volume which adds liquidity in
Penny Symbols as a percentage of Customer Total Consolidated Volume.
Market Makers that qualify would have their Tier 1 Maker Fee reduced to
$0.08 and their Tier 2 Maker Fee reduced to $0.04. From January 3, 2023
until June 30, 2023, Market Makers with no volume in the Penny Symbol
add liquidity segment for the month of December 2022 may qualify for
the reduced Tier 1 and Tier 2 Maker Fees by having any new volume
considered as added volume. As stated in the adopting filing, the
Exchange offers this temporary incentive from January 3, 2023 until
June 30, 2023 in order to encourage new Market Makers to join MRX, and
is using this time period to evaluate the appropriate parameters going
forward for market participants with no December 2022 volume in the
targeted segment.\6\
---------------------------------------------------------------------------
\3\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\4\ See Options 7, Section 3, note 6.
\5\ ``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. See Options 7,
Section 1(c).
\6\ See Securities Exchange Act Release No. 97148 (March 15,
2023), 88 FR 17068 (March 21, 2023) (SR-MRX-2023-07).
---------------------------------------------------------------------------
The Exchange now proposes to amend this Market Maker growth
incentive by expanding the sunset date from the current new Market
Maker portion of the incentive to the entire incentive. As amended,
note 6 will provide:
Market Makers may qualify for a reduction in the Tier 1 and Tier
2 Maker Fees described above if the Market Maker has increased its
volume which adds liquidity in Penny Symbols as a percentage of
Customer Total Consolidated Volume by at least 100% over the
Member's December 2022 Market Maker volume which adds liquidity in
Penny Symbols as a percentage of Customer Total Consolidated Volume.
Market Makers that qualify will have their Tier 1 Maker Fee reduced
to $0.08 and their Tier 2 Maker Fee reduced to $0.04. Market Makers
with no volume in the Penny Symbol add liquidity segment for the
month of December 2022 may qualify for the reduced Tier 1 and Tier 2
Maker Fees by having any new volume considered as added volume. This
note 6 incentive will be available to Market Makers until June 30,
2023.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\7\ in general, and furthers the objectives of sections
6(b)(4) and 6(b)(5) of the Act,\8\ 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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's proposed changes to its schedule of credits 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 of order flow from broker
dealers'. . . .'' \9\
---------------------------------------------------------------------------
\9\ 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)).
---------------------------------------------------------------------------
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
[[Page 30372]]
``has been remarkably successful in promoting market competition in its
broader forms that are most important to investors and listed
companies.'' \10\
---------------------------------------------------------------------------
\10\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
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.
The Exchange believes that it is reasonable to have the growth
incentive in note 6 expire on June 30, 2023. Currently, only the new
Market Maker portion of this incentive expires on June 30, 2023.\11\
The proposal is reasonable because it will continue to provide extra
incentives to Market Makers to engage in substantial amounts of
liquidity adding activity in Penny Symbols on the Exchange, as well as
to grow substantially the extent to which they do so relative to a
recent benchmark month. The Exchange believes that sunsetting the note
6 incentive within six months of the base month (December 2022) will
ensure that the benchmark against which Market Maker growth is measured
is timely and meets the intended purpose of encouraging increased order
flow.
---------------------------------------------------------------------------
\11\ Specifically, the rule provides that from January 3, 2023
until June 30, 2023, Market Makers with no volume in the Penny
Symbol add liquidity segment for the month of December 2022 may
qualify for the reduced Tier 1 and Tier 2 Maker Fees by having any
new volume considered as added volume.
---------------------------------------------------------------------------
The Exchange believes that its proposal to have the note 6 growth
incentive expire on June 30, 2023 is equitable and not unfairly
discriminatory because the proposed expiration date will be applied
uniformly to all Market Makers. The Exchange continues to believe that
it is equitable and not unfairly discriminatory to provide the note 6
growth incentive to only Market Makers because Market Makers have
different requirements and additional obligations to the Exchange that
other market participants do not (such as quoting requirements). As
such, this growth incentive is designed to increase Market Maker
participation and reward Market Makers for the unique role they play in
ensuring a robust market. As discussed above, the note 6 incentive is
designed to encourage Market Makers to substantially add Penny Symbol
liquidity to the Exchange, to the benefit of all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not believe
that its proposal will place any category of market participant at a
competitive disadvantage. The proposed change to sunset the note 6
incentive on June 30, 2023 does not impose an undue burden on intra-
market competition because all Market Makers will have the opportunity
to qualify for this growth incentive for the six months it is offered.
The Exchange also believes that the Market Maker growth incentive will
continue to encourage the provision of liquidity from both existing and
new Market Makers that enhances the quality of the Exchange's market
and increases the number of trading opportunities on the Exchange for
all market participants who will be able to compete for such
opportunities.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
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.
In sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act,\12\ and Rule 19b-4(f)(2) \13\ thereunder.
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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#becccbd2db93ddd1d3d3dbd0cacdfecddbdd90d9d1c8"><span class="__cf_email__" data-cfemail="5725223b327a34383a3a323923241724323479303821">[email protected]</span></a>. Please include
File Number SR-MRX-2023-08 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-2023-08. 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="https://www.sec.gov/rules/sro.shtml">https://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
[[Page 30373]]
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. Do
not include personal identifiable information in submissions; you
should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-MRX-2023-08 and should
be submitted on or before June 1, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-10031 Filed 5-10-23; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on May 11, 2023.
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.