Notice2023-13895
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 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
June 30, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 125 (Friday, June 30, 2023)</title>
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[Federal Register Volume 88, Number 125 (Friday, June 30, 2023)]
[Notices]
[Pages 42409-42414]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-13895]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97800; File No. SR-MRX-2023-11]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Pricing Schedule at Options 7, Section 3
June 26, 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 June 12, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 42410]]
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.
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). The Exchange initially filed the proposed pricing changes on
June 1, 2023 (SR-MRX-2023-09). On June 12, 2023, the Exchange withdrew
that filing and submitted this filing.
Background
Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange assesses the following maker/taker fees for regular orders in
Penny and Non-Penny Symbols:
----------------------------------------------------------------------------------------------------------------
Maker fee Maker fee Taker fee Taker fee
Market participant Tier 1 Tier 2 Tier 1 Tier 2
----------------------------------------------------------------------------------------------------------------
Penny Symbols
----------------------------------------------------------------------------------------------------------------
Market Maker \3\............................................ $0.20 $0.10 $0.50 $0.50
Non-Nasdaq MRX Market Maker (FarMM) \4\..................... 0.47 0.47 0.50 0.50
Firm Proprietary \5\/Broker-Dealer \6\...................... 0.47 0.47 0.50 0.50
Professional Customer \7\................................... 0.47 0.47 0.50 0.50
Priority Customer \8\....................................... 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------
Non-Penny Symbols
----------------------------------------------------------------------------------------------------------------
Market Maker................................................ 0.35 0.20 1.10 1.10
Non-Nasdaq MRX Market Maker (FarMM)......................... 0.90 0.90 1.10 1.10
Firm Proprietary/Broker-Dealer.............................. 0.90 0.90 1.10 1.10
Professional Customer....................................... 0.90 0.90 1.10 1.10
Priority Customer........................................... 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------
Market participants are charged the above Tier 1 and Tier 2 maker/
taker fees (or are eligible for free executions) if they meet the
applicable tier thresholds based on Total Affiliated Member or
Affiliated Entity ADV \9\ in Table 3 of Options 7, Section 3. Market
Makers may also alternatively qualify for these fees if they meet the
applicable tier thresholds based on Total Market Maker ADV \10\ in
Table 3. Specifically:
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\3\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\4\ A ``Non-Nasdaq MRX 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.
\5\ A ``Firm Proprietary'' order is an order submitted by a
Member for its own proprietary account.
\6\ A ``Broker-Dealer'' order is an order submitted by a Member
for a broker-dealer account that is not its own proprietary account.
\7\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer.
\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 MRX Options 1,
Section 1(a)(36).
\9\ Total Affiliated Member or Affiliated Entity ADV means all
ADV executed on the Exchange in all symbols and order types,
including volume executed by Affiliated Members or Affiliated
Entities. All eligible volume from Affiliated Members or an
Affiliated Entity will be aggregated in determining applicable
tiers.
\10\ Total Market Maker ADV means all Market Maker ADV executed
on the Exchange in all symbols and order types, including volume
executed by Affiliated Members or Affiliated Entities. All eligible
volume from Affiliated Members or an Affiliated Entity will be
aggregated in determining applicable tiers.
\11\ ``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.
------------------------------------------------------------------------
Total Affiliated
Tiers Member or Affiliated OR Total Market Maker
Entity ADV ADV
------------------------------------------------------------------------
Tier 1........... executes 0.00% to less executes up to 0.10%
than 0.75% of of Customer Total
Customer Total Consolidated Volume
Consolidated Volume which adds liquidity
\11\. in Regular Orders.
Tier 2........... executes 0.75% or more executes more than
of Customer Total 0.10% of Customer
Consolidated Volume. Total Consolidated
Volume which adds
liquidity in Regular
Orders.
------------------------------------------------------------------------
In addition, the Exchange currently offers Market Makers a number
of ways to reduce their maker/taker fees described above. First, Market
Makers may qualify for reduced taker fees in Penny Symbols when trading
against Priority Customer orders in Penny Symbols entered by an
Affiliated
[[Page 42411]]
Member \12\ or Affiliated Entity.\13\ In lieu of the $0.50 per contract
Tier 1/Tier 2 Market Maker Taker Fee, a Taker Fee of $0.20 per contract
applies instead when trading with Priority Customer orders in Penny
Symbols entered by an Affiliated Member or Affiliated Entity. A Taker
Fee of $0.10 per contract applies instead when trading with Priority
Customer orders in Penny Symbols entered by an Affiliated Member or
Affiliated Entity if the Member has a Total Affiliated Member or
Affiliated Entity Priority Customer ADV \14\ of 0.20% to less than
0.75% Customer Total Consolidated Volume. A Taker Fee of $0.00 per
contract applies instead when trading with Priority Customer orders in
Penny Symbols entered by an Affiliated Member or Affiliated Entity if
the Member has a Total Affiliated Member or Affiliated Entity Priority
Customer ADV of 0.75% Customer Total Consolidated Volume or more.\15\
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\12\ An ``Affiliated Member'' is a Member that shares at least
75% common ownership with a particular Member as reflected on the
Member's Form BD, Schedule A.
\13\ An ``Affiliated Entity'' is a relationship between an
Appointed Market Maker and an Appointed OFP for purposes of
qualifying for certain pricing specified in the Pricing Schedule.
Market Makers and OFPs are 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. 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. 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 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.
\14\ Total Affiliated Member or Affiliated Entity Priority
Customer ADV means all Priority Customer ADV executed on the
Exchange in all symbols and order types, including volume executed
by Affiliated Members or Affiliated Entities. All eligible volume
from Affiliated Members or an Affiliated Entity will be aggregated
in determining applicable tiers.
\15\ See Options 7, Section 3, Table 1, note 2 (``note 2
incentive'').
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Second, Market Makers may currently qualify for reduced taker fees
in Non-Penny Symbols when trading against Priority Customer orders in
Non-Penny Symbols entered by an Affiliated Member or Affiliated Entity.
In lieu of the $1.10 per contract Tier 1/Tier 2 Market Maker Taker Fee,
a Taker Fee of $0.90 per contract applies instead when trading with
Priority Customer orders in Non-Penny Symbols entered by an Affiliated
Member or Affiliated Entity. A Taker Fee of $0.50 per contract applies
instead when trading with Priority Customer orders in Non-Penny Symbols
entered by an Affiliated Member or Affiliated Entity if the Member has
a Total Affiliated Member or Affiliated Entity Priority Customer ADV of
0.20% to less than 0.75% Customer Total Consolidated Volume. A Taker
Fee of $0.20 per contract applies instead when trading with Priority
Customer orders in Non-Penny Symbols entered by an Affiliated Member or
Affiliated Entity if the Member has a Total Affiliated Member or
Affiliated Entity Priority Customer ADV of 0.75% Customer Total
Consolidated Volume or more.\16\
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\16\ See Options 7, Section 3, Table 1, note 3 (``note 3
incentive'').
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Third, 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.\17\
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\17\ See Options 7, Section 3, Table 1, note 6 (``note 6
incentive''). The note 6 incentive will be available to Market
Makers until June 30, 2023.
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Proposal 1: Amend Qualifying Tier Thresholds and Related Maker/Taker
Pricing
The Exchange now proposes to amend the Table 3 qualifying tier
thresholds in the following manner. First, the Exchange proposes to
introduce new Tiers 3 and 4 and related maker/taker fees. Specifically,
the Exchange proposes that Tiers 3 and 4 will have the following volume
requirements:
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\18\ 1.50% of Customer Total Consolidated Volume is
approximately 517,800 contracts per day.
\19\ 0.25% of Customer Total Consolidated Volume is
approximately 86,300 contracts per day. 0.45% of Customer Total
Consolidated Volume is approximately 155,300 contracts per day.
\20\ 2.25% of Customer Total Consolidated Volume is
approximately 776,700 contracts per day.
------------------------------------------------------------------------
Total Affiliated
Tiers Member or Affiliated OR Total Market Maker
Entity ADV ADV
------------------------------------------------------------------------
Tier 3........... executes 1.50% to less executes more than
than 2.25% of 0.25% and up to
Customer Total 0.45% of Customer
Consolidated Volume Total Consolidated
\18\. Volume which adds
liquidity in Regular
Orders.\19\
Tier 4........... executes 2.25% or more executes more than
of Customer Total 0.45% of Customer
Consolidated Volume Total Consolidated
\20\. Volume which adds
liquidity in Regular
Orders.
------------------------------------------------------------------------
As proposed, Market Makers that qualify for Tiers 3 and 4 will
receive Penny Symbol maker rebates of $0.05 per contract (Tier 3) and
$0.10 per contract (Tier 4). Additionally, Market Makers that qualify
for Tiers 3 and 4 will be assessed a Penny Symbol taker fee of $0.50
per contract in both tiers, which is the same Penny Symbol taker fee
they are charged today in Tiers 1 and 2. The note 2 incentive will also
apply to the Market Maker Tiers 3 and 4 taker fees in Penny Symbols,
like they do today for Tiers 1 and 2. Specifically, the Exchange will
also offer Market Makers the reduced Penny Symbol taker fees set forth
in the note 2 incentive (in lieu of the $0.50 per contract Tier 3//Tier
4 taker fee) if they trade against Priority Customer orders in Penny
Symbols entered by an Affiliated Member or Affiliated Entity.\21\
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\21\ As discussed above, the note 2 incentive currently provides
that a Taker Fee of $0.20 per contract applies instead when trading
with Priority Customer orders in Penny Symbols entered by an
Affiliated Member or Affiliated Entity. A Taker Fee of $0.10 per
contract applies instead when trading with Priority Customer orders
in Penny Symbols entered by an Affiliated Member or Affiliated
Entity if the Member has a Total Affiliated Member or Affiliated
Entity Priority Customer ADV of 0.20% to less than 0.75% Customer
Total Consolidated Volume. A Taker Fee of $0.00 per contract applies
instead when trading with Priority Customer orders in Penny Symbols
entered by an Affiliated Member or Affiliated Entity if the Member
has a Total Affiliated Member or Affiliated Entity Priority Customer
ADV of 0.75% Customer Total Consolidated Volume or more.
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In Non-Penny Symbols, Market Makers that qualify for Tiers 3 and 4
will be charged maker fees of $0.15 per contract (Tier 3) and $0.10 per
contract (Tier 4). Additionally, Market Makers that qualify for Tiers 3
and 4 will be assessed a Non-Penny Symbol taker fee of $1.10 per
contract in both tiers,
[[Page 42412]]
which is the same Non-Penny Symbol taker fee they are charged today in
Tiers 1 and 2. The note 3 incentive will also apply to Market Maker
Tiers 3 and 4 taker fees in Non-Penny Symbols, like they do today for
Tiers 1 and 2. Specifically, the Exchange will also offer Market Makers
the reduced Non-Penny Symbol taker fees set forth in the note 3
incentive (in lieu of the $1.10 per contract Tier 3/Tier 4 taker fee)
if they trade against Priority Customer orders in Non-Penny Symbols
entered by an Affiliated Member or Affiliated Entity.\22\
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\22\ As discussed above, the note 3 incentive currently provides
that a Taker Fee of $0.90 per contract applies instead when trading
with Priority Customer orders in Non-Penny Symbols entered by an
Affiliated Member or Affiliated Entity. A Taker Fee of $0.50 per
contract applies instead when trading with Priority Customer orders
in Non-Penny Symbols entered by an Affiliated Member or Affiliated
Entity if the Member has a Total Affiliated Member or Affiliated
Entity Priority Customer ADV of 0.20% to less than 0.75% Customer
Total Consolidated Volume. A Taker Fee of $0.20 per contract applies
instead when trading with Priority Customer orders in Non-Penny
Symbols entered by an Affiliated Member or Affiliated Entity if the
Member has a Total Affiliated Member or Affiliated Entity Priority
Customer ADV of 0.75% Customer Total Consolidated Volume or more.
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For non-Priority Customers except Market Makers, the Exchange will
continue to assess the same maker/taker fees in Tiers 3 and 4 for Penny
and Non-Penny Symbols as the non-Priority Customer maker/taker fees in
Tiers 1 and 2 today. Specifically, all non-Priority Customers other
than Market Makers will be assessed the Penny Symbol maker fee of $0.47
per contract and Penny Symbol taker fee of $0.50 per contract across
Tiers 1-4. Additionally, all non-Priority Customers except Market
Makers will be assessed the Non-Penny Symbol maker fee of $0.90 per
contract and Penny Symbol taker fee of $1.10 per contract across Tiers
1-4.
As it relates to Priority Customers, the Exchange will continue to
assess no maker fees in Tiers 3 and 4 in both Penny and Non-Penny
Symbols, identical to the Priority Customer Tiers 1 and 2 maker fees
today. For the taker fees in both Penny and Non-Penny Symbols, the
Exchange will charge Priority Customers $0.15 per contract in Tier 3
and $0.10 per contract in Tier 4.
Second, the Exchange proposes to modify the existing qualifying
tier thresholds and related maker/taker pricing for Tiers 1 and 2. As
it relates to the qualifying tier thresholds, the Exchange proposes to
amend the Tier 2 qualifications as follows:
------------------------------------------------------------------------
Total Affiliated
Tiers Member or Affiliated OR Total Market Maker
Entity ADV ADV
------------------------------------------------------------------------
Tier 2........... executes 0.75% to less executes more than
than 1.50% of 0.10% and up to
Customer Total 0.25% of Customer
Consolidated Volume Total Consolidated
\23\. Volume which adds
liquidity in Regular
Orders.
------------------------------------------------------------------------
As described above, the Tier 2 Total Affiliated Member or
Affiliated Entity ADV threshold and the Tier 2 Total Market Maker ADV
threshold will both be modified to accommodate the respective new
thresholds.\24\ The Tier 1 qualifications will remain unchanged under
this proposal.
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\23\ 0.75% of Customer Total Consolidated Volume is
approximately 258,900 contracts per day.
\24\ As discussed above, the new Tier 3 Total Affiliated Member
or Affiliated Entity ADV threshold will require Members to execute
1.50% to less than 2.25% of Customer Total Consolidated Volume. The
new Tier 3 Total Market Maker ADV threshold will require Market
Makers to execute more than 0.25% and up to 0.45% of Customer Total
Consolidated Volume which adds liquidity in Regular Orders.
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For the related Tier 1 and Tier 2 maker/taker fees, the Exchange
proposes to modify those fees for Market Makers and Priority Customers
in a number of ways. For Market Makers, the Exchange proposes to
decrease the Penny Symbol maker fees in Tier 1 and Tier 2 from $0.20 to
$0.10 per contract (Tier 1) and from $0.10 to $0.00 per contract (Tier
2). No other changes are being proposed to the remaining Tiers 1 and 2
maker/taker fees for Market Makers.
As it relates to Priority Customers, the Exchange proposes to begin
charging those market participant orders taker fees in Tiers 1 and 2.
Specifically, Priority Customers will be charged taker fees of $0.15
per contract in both Tiers 1 and 2 for Penny Symbols. For Non-Penny
Symbols, the Exchange proposes to charge Priority Customers taker fees
of $0.35 per contract (Tier 1) and $0.25 per contract (Tier 2).
While the maker/taker fees in Table 1 of Options 7, Section 3 for
the majority of market participants (i.e., Non-Nasdaq MRX Market
Makers, Firm Proprietary/Broker-Dealers, and Professional Customers)
will not be impacted by the changes proposed above, the proposal will
impact maker pricing for Market Makers and taker pricing for Priority
Customers.\25\ In particular, qualifying Market Makers will see a
decrease in their current Tier 1 and Tier 2 maker fees in Penny
Symbols, and be eligible to receive the new Tier 3 and Tier 4 maker
rebates in Penny Symbols. Additionally, qualifying Market Makers will
be eligible for the new Tier 3 and Tier 4 maker fees in Non-Penny
Symbols, which will be lower than the current Non-Penny Symbol Tier 1
and Tier 2 maker fees.\26\ Furthermore, the Exchange will start
charging Priority Customers taker fees in Tiers 1-4 across all symbols
traded on the Exchange in the manner described above. Today, Priority
Customers are not assessed any taker fees under the Table 1 pricing
schedule.\27\
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\25\ In particular, these market participants will continue to
be uniformly charged the same maker fees of $0.47 per contract
(Penny Symbols) and $0.90 per contract (Non-Penny Symbols),
regardless of tier achieved. In addition, they will continue to be
uniformly charged the same taker fees of $0.50 per contract (Penny
Symbols) and $1.10 per contract (Non-Penny Symbols), regardless of
tier achieved.
\26\ However, as discussed above, Market Makers will continue to
be uniformly charged the same taker fees $0.50 per contract (Penny
Symbols) and $1.10 per contract (Non-Penny Symbols), regardless of
tier achieved. They will also continue to be eligible for the note 2
incentive (Penny Symbols) and note 3 incentive (Non-Penny Symbols),
regardless of tier achieved.
\27\ However, as discussed above, Priority Customers will
continue to not be charged any maker fees pursuant to the Table 1
pricing schedule under this proposal.
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Proposal 2: Eliminate Note 6 Incentive
The Exchange proposes to eliminate the note 6 incentive described
above. This temporary incentive was first introduced to encourage
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.\28\ The Exchange does not believe that the note 6
incentive has had the intended effect, and is therefore eliminating it
before the expiration date of June 30, 2023 in order to redirect
resources into other pricing programs intended to incentivize increased
order flow.
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\28\ See Securities Exchange Act Release No. 97148 (March 15,
2023), 88 FR 17068 (March 21, 2023) (SR-MRX-2023-07).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b)
[[Page 42413]]
of the Act,\29\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\30\ 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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\29\ 15 U.S.C. 78f(b).
\30\ 15 U.S.C. 78f(b)(4) and (5).
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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'. . . .'' \31\
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\31\ 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.'' \32\
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\32\ 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.
Proposal 1: Amend Qualifying Tier Thresholds and Related Maker/Taker
Pricing
The Exchange believes that its proposal to amend the qualifying
tier thresholds and related maker/taker pricing are reasonable for
several reasons. The Exchange believes that the modified volume
threshold in Tier 2 and the new volume thresholds in Tiers 3 and 4 are
reasonably designed to encourage Market Makers and Priority Customers
to increase their liquidity adding activity to qualify for lower maker
fees or maker rebates (for Market Makers only) and to increase their
liquidity removing activity to qualify for the lower taker fees (for
Priority Customers only).\33\ The Exchange believes that adding new
Tiers 3 and 4 will encourage Market Makers and Priority Customers to
strive to achieve the higher tiers by submitting the requisite amount
of order flow. An overall increase in activity would deepen the
Exchange's liquidity pool, support the quality of price discovery, and
promote market quality to benefit of all market participants.
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\33\ As discussed above, Non-Nasdaq MRX Market Makers, Firm
Proprietary/Broker-Dealers, and Professional Customers will continue
to be uniformly charged the same maker fees of $0.47 per contract
(Penny Symbols) and $0.90 per contract (Non-Penny Symbols),
regardless of tier achieved. In addition, they will continue to be
uniformly charged the same taker fees of $0.50 per contract (Penny
Symbols) and $1.10 per contract (Non-Penny Symbols), regardless of
tier achieved.
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The Exchange also believes that the proposed maker/taker pricing in
Table 1 of Options 7, Section 3 is reasonable for the reasons that
follow. First, the Exchange believes that it is reasonable to assess
qualifying Market Makers lower maker fees or maker rebates, depending
on the tier achieved, in the manner described above.\34\ The proposed
structure will encourage Market Makers to increase their liquidity
providing activity on the Exchange, which would support the quality of
price discovery on the Exchange, provide additional liquidity for
incoming orders, and create additional opportunities for market
participants to trade. Second, the Exchange believes its proposal to
begin charging Priority Customers taker fees in Tiers 1-4 across all
symbols traded on the Exchange in the manner described above is
reasonable because Priority Customers will continue to be assessed the
lowest taker fees compared to any other market participant on the
Exchange.\35\ Accordingly, the Exchange believes that the proposed
taker fees will remain attractive and continue to incentivize more
executions in Priority Customer orders on the Exchange.
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\34\ In particular, qualifying Market Makers will see a decrease
in their current Tier 1 and Tier 2 maker fees in Penny Symbols, and
be eligible to receive the new Tier 3 and Tier 4 maker rebates in
Penny Symbols. Additionally, qualifying Market Makers will be
eligible for the new Tier 3 and Tier 4 maker fees in Non-Penny
Symbols, which will be lower than the current Non-Penny Symbol Tier
1 and Tier 2 maker fees.
\35\ As proposed, Priority Customers will now be assessed Penny
Symbol taker fees of $0.15 per contract (Tiers 1-3) and $0.10 per
contract (Tier 4). For all non-Priority Customers, this Penny Symbol
taker fee is $0.50 per contract (regardless of tier achieved).
Additionally, Priority Customers will now be assessed Non-Penny
Symbol taker fees of $0.35 per contract (Tier 1), $0.25 per contract
(Tier 2), $0.15 per contract (Tier 3), and $0.10 per contract (Tier
4). For all non-Priority Customers, this Non-Penny Symbol taker fee
is $1.10 per contract.
---------------------------------------------------------------------------
The Exchange further believes that the proposed changes to the
qualifying tier thresholds and related maker/taker pricing in the
manner described above are equitable and not unfairly discriminatory as
the proposed changes will apply uniformly to all similarly situated
participants. The maker/taker fees in Table 1 of Options 7, Section 3
for the majority of market participants (i.e., Non-Nasdaq MRX Market
Makers, Firm Proprietary/Broker-Dealers, and Professional Customers)
will not be impacted by the Exchange's proposal as they will continue
to be charged the same pricing they are assessed today, regardless of
tier achieved.\36\ The proposal, however, will impact maker pricing for
Market Makers and taker pricing for Priority Customers, which will
ultimately result in these market participants receiving more favorable
pricing compared to other market participants under amended Table 1 of
Options 7, Section 3. The Exchange believes the proposed structure
continues to be equitable and not unfairly discriminatory as the
Exchange has historically provided Market Makers and Priority Customers
with more favorable pricing. Furthermore, Market Makers, unlike other
market participants add value to the Exchange through quoting
obligations and their commitment of capital. Additionally, Priority
Customer liquidity benefits all market participants by providing more
trading opportunities, which attracts market makers. An increase in the
[[Page 42414]]
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.
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\36\ See supra note 25.
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Proposal 2: Eliminate Note 6 Incentive
The Exchange believes that its proposal to eliminate the note 6
incentive described above is reasonable because this temporary
incentive has not had its intended effect of incentivizing Market
Makers to increase their liquidity adding activity in Penny Symbols on
the Exchange over the stipulated time period. As such, the Exchange is
eliminating the note 6 incentive in order to redirect future resources
into other pricing programs intended to incentivize increased order
flow.
The Exchange also believes that its proposal is equitable and not
unfairly discriminatory as the note 6 incentive will be eliminated for
all Market Makers. Further, the Exchange notes that the proposed
changes will not adversely impact any market participant's ability to
otherwise qualify for reduced fees or rebates offered under other
programs in the Pricing Schedule.
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. As
discussed above, while parts of the Exchange's proposal provide more
incentives for certain order flow and activity on the Exchange (i.e.,
Market Maker liquidity adding activity and Priority Customer liquidity
removing activity), the proposed changes are ultimately aimed at
attracting greater liquidity to the Exchange, which benefits all market
participants in the quality of order interaction.
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
exchanges and with alternative trading systems that have been exempted
from compliance with the statutory standards applicable to 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 \37\ and Rule 19b-4(f)(2) \38\ 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.
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\37\ 15 U.S.C. 78s(b)(3)(A)(ii).
\38\ 17 CFR 240.19b-4(f)(2).
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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#4a383f262f67292527272f243e390a392f29642d253c"><span class="__cf_email__" data-cfemail="9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8">[email protected]</span></a>. Please include
file number SR-MRX-2023-11 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-2023-11. 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 a.m. and 3
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-2023-11 and should be submitted on
or before July 21, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2023-13895 Filed 6-29-23; 8:45 am]
BILLING CODE 8011-01-P
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