Notice2023-27915
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Fees for Options on the Nasdaq 100 Index in the Exchange's Pricing Schedule at 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
December 20, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 243 (Wednesday, December 20, 2023)</title>
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[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88195-88197]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27915]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99172; File No. SR-GEMX-2023-20]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the Fees
for Options on the Nasdaq 100 Index in the Exchange's Pricing Schedule
at Options 7
December 14, 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 December 8, 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 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the transaction fees for Nasdaq 100
Index options in the Exchange's Pricing Schedule at Options 7, Section
3. While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on December 1, 2023.
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
[[Page 88196]]
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 transaction
fees for NDX \3\ in Options 7, Section 3. The Exchange initially filed
the proposed pricing changes on November 30, 2023 (SR-GEMX-2023-18). On
December 8, 2023, the Exchange withdrew that filing and submitted this
filing.
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\3\ NDX represents A.M. settled options on the full value of the
Nasdaq 100 Index traded under the symbol NDX.
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Today, the Exchange assesses a transaction fee of $0.75 per
contract for all Non-Priority Customer \4\ orders in NDX. Priority
Customers \5\ currently receive free executions in NDX. The Exchange
now proposes to begin assessing Priority Customer NDX orders a $0.25
per contract transaction fee. The Exchange notes that the proposed fee
amount is in line with customer transaction fees assessed on other
index products.\6\
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\4\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq
GEMX Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and
Professional Customers. As discussed later in this filing, the
Exchange will codify this definition in Options 7, Section 1.
\5\ 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).
\6\ For example, Cboe Options (``Cboe'') currently assesses a
$0.25 per contract customer transaction fee for MXEA and MXEF
options, $0.35 per contract for OEX and XEO options, and $0.36 per
contract (if premium <$1.00) or $0.45 per contract (if premium >=
$1.00) for SPX and SPESG options. See Cboe Fees Schedule.
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The Exchange also proposes a change in Options 7, Section 1(c) to
add ``Non-Priority Customers'' as a defined term. The Exchange notes
that this term is already used in its Pricing Schedule,\7\ and aligns
with how it is currently used in the Pricing Schedule as well as with
the definition in the pricing schedule of its affiliate, Nasdaq ISE,
LLC (``ISE'').\8\ The Exchange will also capitalize the current
reference to ``non-Priority Customer'' in Options 7, Section 3,
footnote 11 to align with the proposed change to add Non-Priority
Customer as a defined term. The Exchange also proposes to alphabetize
the definitions in Options 7, Section 1(c) for better readability.
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\7\ See e.g., Options 7, Section 3, footnotes 4 and 11.
\8\ See ISE Options 7, Section 1(c).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes it is reasonable to begin assessing Priority
Customer orders in NDX a $0.25 per contract fee because the proposed
pricing reflects the proprietary nature of this product. Similar to
other proprietary products, the Exchange seeks to recoup the
operational costs of listing such products.\11\ Also, pricing by symbol
is a common practice on many U.S. options exchanges as a means to
incentivize order flow to be sent to an exchange for execution in
particular products. Other options exchanges price by symbol.\12\
Further, the Exchange notes that market participants are offered
different ways to gain exposure to the Nasdaq 100 Index, whether
through the Exchange's proprietary products like NDX options, or
separately through multi-listed options overlying Invesco QQQ Trust
(``QQQ'').\13\ Offering such products provides market participants with
a variety of choices in selecting the product they desire to utilize in
order to gain exposure to the Nasdaq 100 Index. When exchanges are able
to recoup costs associated with offering proprietary products, it
incentivizes growth and competition for the innovation of additional
products.
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\11\ By way of example, in analyzing an obvious error, the
Exchange would have additional data points available in establishing
a theoretical price for a multiply listed option as compared to a
proprietary product, which requires additional analysis and
administrative time to comply with Exchange rules to resolve an
obvious error.
\12\ See supra note 6.
\13\ QQQ is an exchange-traded fund based on the same Nasdaq 100
Index as NDX.
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While the transaction fee for Priority Customer NDX orders is
increasing under this proposal, the Exchange believes that the proposal
is reasonable and would continue to incentivize market participants to
transaction in Priority Customer NDX orders because Priority Customers
would continue to be assessed a lower fee for NDX than Non-Priority
Customers (i.e., $0.25 versus $0.75 per contract). As a result, the
Exchange believes that the proposed pricing is structured in a way that
continues to encourage market participants, especially Priority
Customers, to transact in NDX on GEMX. As noted above, the proposed fee
amount is in line with customer transaction fees assessed on other
index products at another options exchange.\14\
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\14\ See supra note 6.
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The Exchange's proposal to assess a $0.25 per contract transaction
fee to Priority Customer NDX orders is equitable and not unfairly
discriminatory it will apply uniformly to all similarly situated market
participants. The Exchange believes it is equitable and not unfairly
discriminatory to continue charging Priority Customers a lower
transaction fee because Priority Customer orders bring valuable
liquidity to the market by providing more trading opportunities, which,
in turn, 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 to the benefit
of all market participants.
Lastly, the Exchange believes that the proposed changes in Options
7, Section 1(c) to add ``Non-Priority Customers'' as a defined term, to
capitalize the reference to ``non-Priority Customer'' in footnote 11 of
Options 7, Section 3, and to alphabetize the definitions are
reasonable, equitable and not unfairly discriminatory. As noted above,
the term ``Non-Priority Customers'' is already used in the Exchange's
Pricing Schedule and codifying this definition in the manner it is used
today will bring greater clarity to the Exchange's rules to the benefit
of all market participants. The Exchange likewise believes that
alphabetizing the definitions in Options 7, Section 1(c) for better
readability will add more clarity to 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 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. As noted above, market participants are offered
[[Page 88197]]
an opportunity to transact in NDX or separately execute options
overlying QQQ. Offering these products provides market participants
with a variety of choices in selecting the product they desire to use
to gain exposure to the Nasdaq 100 Index. Furthermore, the proposed fee
amount is in line with customer transaction fees assessed on other
index products at another options exchange.\15\
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\15\ See supra note 6.
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Further, the Exchange does not believe that its proposal to begin
assessing a $0.25 per contract transaction fee for Priority Customer
NDX orders will impose an undue burden on intra-market competition
because Priority Customers will continue to be assessed lower fees than
Non-Priority Customers for NDX orders. As discussed above, Priority
Customer order flow enhances liquidity on the Exchange for the benefit
of all market participants.
Finally, the Exchange believes that the proposed changes in Options
7 to add Non-Priority Customers as a defined term, to capitalize the
reference to ``non-Priority Customer,'' and to alphabetize the Pricing
Schedule definitions do not impose an undue burden on competition
because these are non-competitive changes that are intended to bring
clarity to the Exchange's Pricing Schedule.
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 \16\ and Rule 19b-4(f)(2) \17\ 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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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
\17\ 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="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#5f2d2a333a723c3032323a312b2c1f2c3a3c71383029"><span class="__cf_email__" data-cfemail="4133342d246c222e2c2c242f3532013224226f262e37">[email protected]</span></a>. Please include
file number SR-GEMX-2023-20 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-2023-20. 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 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-GEMX-2023-20 and should be
submitted on or before January 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27915 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P
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