Notice2023-10906
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3
Primary source
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Published
May 23, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 99 (Tuesday, May 23, 2023)</title>
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[Federal Register Volume 88, Number 99 (Tuesday, May 23, 2023)]
[Notices]
[Pages 33179-33181]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10906]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97521; File No. SR-GEMX-2023-07]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 3
DATES: May 17, 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 May 9, 2023, 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 GEMX's Pricing Schedule at Options
7, Section 3, ``Regular Order Fees and Rebates.'' \3\
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\3\ The Exchange originally filed SR-GEMX-2023-06 on May 1,
2023. On May 9, 2023, the Exchange withdrew SR-GEMX-2023-06 and
replaced that filing with the instant filing.
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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, ``Regular Order Fees and Rebates'' to decrease the Penny Symbol
Priority Customer \4\ Taker Fees.
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\4\ 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 the Pricing
Schedule the term ``Priority Customer'' includes ``Retail''. See
Options 7, Section 1(c).
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Today, GEMX assesses 5 tiers of Penny Symbol Taker Fees. Market
Makers,\5\ and Non-Nasdaq GEMX Market Makers (FarMM) \6\ are assessed
the following Penny Symbol Taker Fees: a Tier 1 Taker Fee of $0.50 per
contract; a Tier 2 Taker Fee of $0.50 per contract; a Tier 3 Taker Fee
of $0.50 per contract; a Tier 4 Taker Fee of $0.50 per contract; and a
Tier 5 Taker Fee of $0.48 per contract. In comparison, GEMX assesses
Firm Proprietary \7\/Broker Dealers \8\ and Professional Customers \9\
the following Penny Symbol Taker Fees: a Tier 1 Taker Fee of $0.50 per
contract; a Tier 2 Taker Fee of $0.50 per contract; a Tier 3 Taker Fee
of $0.50 per contract; a Tier 4 Taker Fee of $0.50 per contract; and a
Tier 5 Taker Fee of $0.49 per contract. Finally, Priority Customers are
assessed the following Penny Symbol Taker Fees: a Tier 1 Taker Fee of
$0.48 per contract; a Tier 2 Taker Fee of $0.48 per contract; a Tier 3
Taker Fee of $0.48 per contract; a Tier 4 Taker Fee of $0.48 per
contract; and a Tier 5 Taker Fee of $0.43 per contract.
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\5\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\6\ 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 Options 7, Section 1(c).
\7\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account. See Options 7, Section 1(c).
\8\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
See Options 7, Section 1(c).
\9\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer.
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At this time, GEMX proposes to decrease the Penny Symbol Priority
Customer Taker Fees. Specifically, GEMX proposes to decrease Penny
Symbol Priority Customer Taker Fees Tiers 1 through 4 from $0.48 per
contract to $0.41 per contract. Additionally, GEMX proposes to decrease
Penny Symbol Priority Customer Taker Fee Tier 5 from $0.43 to $0.41 per
contract. GEMX is not proposing to amend the Qualifying Tier Thresholds
to achieve these tiers. GEMX believes that decreasing the Priority
Customer Taker Fees in Penny Symbols will incentivize GEMX Members to
send additional order flow to GEMX.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5)
[[Page 33180]]
of the Act,\11\ 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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\10\ See 15 U.S.C. 78f(b).
\11\ See 15 U.S.C. 78f(b)(4) and (5).
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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'. . . .'' \12\
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\12\ 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)).
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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.
GEMX's proposal to decrease Penny Symbol Priority Customer Taker
Fees Tiers 1 through 4 from $0.48 per contract to $0.41 per contract
and Penny Symbol Priority Customer Taker Fee Tier 5 from $0.43 to $0.41
per contract is reasonable because decreasing the Priority Customer
Taker Fees in Penny Symbols should incentivize GEMX Members to send
additional order flow to GEMX.
GEMX's proposal to decrease Penny Symbol Priority Customer Taker
Fees Tiers 1 through 4 from $0.48 per contract to $0.41 per contract
and Penny Symbol Priority Customer Taker Fee Tier 5 from $0.43 to $0.41
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, 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.
Intermarket Competition
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.
Intramarket Competition
GEMX's proposal to decrease Penny Symbol Priority Customer Taker
Fees Tiers 1 through 4 from $0.48 per contract to $0.41 per contract
and Penny Symbol Priority Customer Taker Fee Tier 5 from $0.43 to $0.41
per contract does not impose an undue burden on intermarket 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, to
the benefit of all market participants.
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.\13\ 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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\13\ 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#b5c7c0d9d098d6dad8d8d0dbc1c6f5c6d0d69bd2dac3"><span class="__cf_email__" data-cfemail="c5b7b0a9a0e8a6aaa8a8a0abb1b685b6a0a6eba2aab3">[email protected]</span></a>. Please include
File Number SR-GEMX-2023-07 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-2023-07. 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
[[Page 33181]]
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-GEMX-2023-07 and should
be submitted on or before June 13, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10906 Filed 5-22-23; 8:45 am]
BILLING CODE 8011-01-P
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