Notice2024-06321
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Regular Taker Fees in the Exchange's Pricing Schedule at Options 7, Section 3
Primary source
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Published
March 26, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 59 (Tuesday, March 26, 2024)</title>
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[Federal Register Volume 89, Number 59 (Tuesday, March 26, 2024)]
[Notices]
[Pages 21063-21065]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06321]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99784; File No. SR-MRX-2024-08]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Regular Taker Fees in the Exchange's Pricing Schedule at Options 7,
Section 3
March 20, 2024.
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 March 12, 2024, 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, 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 regular taker fees in the
Exchange's Pricing Schedule at Options 7, Section 3.
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 regular
taker fees in the Exchange's Pricing Schedule at Options 7, Section 3.
The Exchange initially filed the proposed pricing changes on March
1, 2024 (SR-MRX-2024-06). On March 12, 2024, the Exchange withdrew that
filing and replaced it with this filing.
Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange charges tiered taker fees to Priority Customer \3\ orders in
Penny Symbols that range from: $0.15 (Tier 1 through Tier 3) to $0.10
(Tier 4). For Non-Penny Symbols, Priority Customer orders are assessed
tiered taker fees that range from: $0.35 (Tier 1), $0.25 (Tier 2),
$0.15 (Tier 3), and $0.10 (Tier 4).
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\3\ 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).
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The Exchange now proposes a number of changes to the Priority
Customer taker fees. First, the Exchange proposes to increase the
Priority Customer taker fees in Penny Symbols to $0.20 per contract
across Tiers 1-4. Second, the Exchange proposes to increase the
Priority Customer taker fees in Non-Penny Symbols to $0.40 per contract
across Tiers 1-4. Third, the Exchange proposes to reduce the proposed
Priority Customer taker fees from $0.20 to $0.10 per contract (Penny
Symbols) and from $0.40 to $0.20 per contract (Non-Penny Symbols) for
Members that execute Total Affiliated Member \4\ or Affiliated Entity
\5\ Priority Customer ADV \6\ of 0.30% Customer Total Consolidated
Volume \7\ in regular orders for Penny and Non-Penny Symbols which
remove liquidity in a given month.\8\
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\4\ 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.
\5\ 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.
\6\ 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. See note 4 of Options 7, Section 3,
Table 1.
\7\ ``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.
\8\ See proposed note 7 of Options 7, Section 3, Table 1.
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Lastly, the Exchange proposes non-substantive, technical edits in
Options 7, Section 3, Table 1 to add parentheses around the note 6
references appended to the Priority Customer taker fees in Penny
Symbols to correct a formatting error in the Pricing Schedule.
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's 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
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
[[Page 21064]]
of order flow from broker dealers'. . . .'' \11\
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\11\ 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.'' \12\
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\12\ 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
seventeen 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 the proposed changes to the regular
taker fees in the manner described above are reasonable for several
reasons. While the Exchange is proposing to increase the Priority
Customer taker fees in Tiers 1 through 4 to $0.20 per contract in Penny
Symbols and $0.40 per contract in Non-Penny Symbols, the Exchange
believes that its taker fees remain competitive and lower than other
options exchanges.\13\ The Exchange also believes that despite the
increase, its pricing structure will remain attractive for Priority
Customer orders because the Exchange will also offer market
participants the opportunity to reduce the proposed taker fees by half
if they meet the proposed volume qualifications in new note 7 of
Options 7, Section 3, Table 1. As discussed above, note 7 will provide
that Members that execute Total Affiliated Member or Affiliated Entity
Priority Customer ADV of 0.30% Customer Total Consolidated Volume in
regular orders for Penny and Non-Penny Symbols which remove liquidity
in a given month will be assessed: (1) a $0.10 per contract Priority
Customer Taker Fee in Penny Symbols; and (2) a $0.20 per contract
Priority Customer Taker Fee in Non-Penny Symbols. By tying the
discounted Priority Customer taker fees in note 7 to Affiliated Member
and Affiliated Entity volume, the Exchange believes that Members may be
incentivized to aggregate volume and bring more Priority Customer
regular order flow to MRX to qualify for the note 7 incentives. In
addition, the Exchange believes that the total industry percentage
threshold is reasonable in order to align with increasing Member
activity on MRX over time. Total industry percentage thresholds are
established concepts within the Exchange's Pricing Schedule.\14\ As
with its existing percentage thresholds, the Exchange is proposing to
base the discounted Priority Customer taker fee volume requirements on
a percentage of industry volume in recognition of the fact that the
volume executed by a Member may rise or fall with industry volume. A
percentage of industry volume calculation allows the proposed
qualification in note 7 to be calibrated to current market volumes
rather than requiring a static amount of volume regardless of market
conditions. The proposed threshold of 0.30% Customer Total Consolidated
Volume is intended to reward Members for executing more Priority
Customer regular volume on MRX. To the extent Priority Customer
activity is increased by this proposal, market participants may
increasingly compete for the opportunity to trade on the Exchange to
the benefit of all market participants.
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\13\ For example, Cboe C2 Options (``C2'') charges Public
Customers a $0.43 per contract fee for removing liquidity in Penny
Classes and a $0.85 per contract fee for removing liquidity in Non-
Penny Classes. See C2 Fee Schedule at: <a href="https://www.cboe.com/us/options/membership/fee_schedule/ctwo/">https://www.cboe.com/us/options/membership/fee_schedule/ctwo/</a>. In addition, MIAX Emerald
charges Priority Customers a $0.50 per contract taker fee in Penny
Classes and a $0.85 per contract taker fee in Non-Penny Classes. See
MIAX Emerald Fee Schedule at: <a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_02262024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_02262024.pdf</a>.
\14\ For instance, the qualifying tier thresholds for the
Exchange's regular order maker/taker pricing in Table 1 are
currently based on Customer Total Consolidated Volume percentages.
See Options 7, Section 3, Table 3.
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Further, the Exchange believes that the proposal described above is
equitable and not unfairly discriminatory because it will apply
uniformly to all similarly situated market participants. With the
proposed changes, Priority Customers will continue to be assessed lower
regular order taker fees than any other market participant on the
Exchange, with opportunity to further reduce these fees by qualifying
for the proposed note 7 incentives. The Exchange continues to believe
that it is equitable and not unfairly discriminatory to provide more
favorable pricing for Priority Customers because the proposed changes
are intended to increase Priority Customer regular order flow to MRX.
An increase in Priority Customer order flow enhances liquidity on the
Exchange to the benefit of all market participants by providing more
trading opportunities, which in turn attracts Market Makers and other
market participants that may interact with this order flow.
Lastly, the Exchange believes that the non-substantive, technical
edits in Options 7, Section 3, Table 1 described above are consistent
with the Act as they are intended to correct a formatting error in the
Exchange's 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. While
the proposed changes described above will apply directly to Priority
Customers, the Exchange believes that these changes will ultimately
encourage increased activity on the Exchange to the extent the proposal
incentivizes more Priority Customer regular order volume to be executed
on MRX. All Members will benefit from any increase in market activity
that the proposal effectuates through increased trading opportunities
and price discovery.
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. 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
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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.\15\ 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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\15\ 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="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#4032352c256d232f2d2d252e3433003325236e272f36"><span class="__cf_email__" data-cfemail="453730292068262a2828202b3136053620266b222a33">[email protected]</span></a>. Please include
file number SR-MRX-2024-08 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-2024-08. 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 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-2024-08 and should be
submitted on or before April 16, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06321 Filed 3-25-24; 8:45 am]
BILLING CODE 8011-01-P
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