Notice2024-16938
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend MRX 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
August 1, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 148 (Thursday, August 1, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 148 (Thursday, August 1, 2024)]
[Notices]
[Pages 62818-62821]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16938]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100607; File No. SR-MRX-2024-29]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend MRX
Options 7, Section 3
July 26, 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 July 24, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7.\3\
---------------------------------------------------------------------------
\3\ On July 15, 2024, the Exchange withdrew SR-MRX-2024-20 and
replaced it with SR-MRX-2024-26. On July 24, 2024, the Exchange
withdrew SR-MRX-2024-26 and replaced it with this filing.
---------------------------------------------------------------------------
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
MRX proposes to amend the Exchange's Pricing Schedule at Options 7,
Section 3, Table 2 related to Crossing Orders. Specifically, the
Exchange proposes to amend the Regular and Complex Order Non-Penny
Symbol Fees for Crossing Orders.\4\
---------------------------------------------------------------------------
\4\ A ``Crossing Order'' is an order executed in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement
Mechanism (``PIM'') or submitted as a Qualified Contingent Cross
order. For purposes of this Pricing Schedule, orders executed in the
Block Order Mechanism are also considered Crossing Orders. See
Options 7, Section 1(c).
---------------------------------------------------------------------------
Options 7, Section 3--Table 2
Today, Options 7, Section 3, Table 2 applies to Regular and Complex
Crossing Orders. Today, the Exchange assesses the following Regular and
Complex Crossing Order Fees in Penny and Non-Penny Symbols: \5\
---------------------------------------------------------------------------
\5\ Footnotes in the Pricing Schedule are not displayed in this
table.
[[Page 62819]]
Regular and Complex Crossing Orders
----------------------------------------------------------------------------------------------------------------
Break-up rebate
Fee for Fee for responses for facilitation
Market participant crossing to crossing mechanism and
orders orders solicited order
mechanism
----------------------------------------------------------------------------------------------------------------
Penny Symbols
----------------------------------------------------------------------------------------------------------------
Market Maker.............................................. $0.02 $0.50 N/A
Non-Nasdaq MRX Market Maker (FarMM)....................... 0.02 0.50 N/A
Firm Proprietary/Broker-Dealer............................ 0.02 0.50 N/A
Professional Customer..................................... 0.02 0.50 N/A
Priority Customer......................................... 0.00 0.50 (0.30)
----------------------------------------------------------------------------------------------------------------
Non-Penny Symbols
----------------------------------------------------------------------------------------------------------------
Market Maker.............................................. 0.20 1.10
Non-Nasdaq MRX Market Maker (FarMM)....................... 0.20 1.10
Firm Proprietary/Broker-Dealer............................ 0.20 1.10
Professional Customer..................................... 0.20 1.10
Priority Customer......................................... 0.00 1.10
----------------------------------------------------------------------------------------------------------------
At this time, the Exchange proposes to amend Table 2 of Options 7,
Section 3 to decrease the Non-Penny Symbol Non-Priority Customer \6\
Fees for Crossing Orders from $0.20 to $0.02 per contract for orders in
the Facilitation Mechanism,\7\ Complex Facilitation Mechanism,\8\
Solicitation Mechanism,\9\ Complex Solicitation Mechanism \10\ and
Block Orders.\11\ A Priority Customer would continue to be assessed no
Regular and Complex Order Fee for Crossing Orders in Non-Penny Symbols.
---------------------------------------------------------------------------
\6\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq
GEMX Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and
Professional Customers. See Options 7, Section 1(c).
\7\ The Facilitation Mechanism is described in Options 3,
Section 11(b).
\8\ The Facilitation Mechanism is described in Options 3,
Section 11(c).
\9\ The Solicitation Mechanism is described in Options 3,
Section 11(d).
\10\ The Solicitation Mechanism is described in Options 3,
Section 11(e).
\11\ Block Orders are single-leg orders in single-sided
auctions. See Options 3, Section 11(a).
---------------------------------------------------------------------------
Fees apply to the originating and contra-side orders, except for
PIM Orders and Qualified Contingent Cross (``QCC'') Orders, Complex QCC
Orders, QCC with Stock Orders and Complex QCC with Stock Orders. The
Fee for Crossing Orders for QCC Orders, Complex QCC Orders, QCC with
Stock Orders and Complex QCC with Stock Orders is $0.20 per contract
for Non-Priority Customer orders in Penny and Non-Penny Symbols.
Priority Customer orders are not assessed a fee for Crossing Orders.
Regular and Complex PIM Orders are subject to separate pricing in Part
A of Options 7, Section 3.
The Exchange believes that lowering the Regular and Complex Non-
Priority Customer Fees for Crossing Orders in Non-Penny Symbols will
attract additional Crossing Orders to MRX.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The proposed changes 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'. . . .'' \14\
---------------------------------------------------------------------------
\14\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \15\
---------------------------------------------------------------------------
\15\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
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.
Options 7, Section 3--Table 2
The Exchange's proposal to amend Table 2 of Options 7, Section 3 to
decrease the Regular and Complex Non-Priority Customer Fees for
Crossing Orders in Non-Penny Symbols from $0.20 to $0.02 per contract
for orders in the Facilitation Mechanism, Complex
[[Page 62820]]
Facilitation Mechanism, Solicitation Mechanism, Complex Solicitation
Mechanism and Block Orders is reasonable because the Exchange would be
reducing the originating and contra-side order fees to enter orders in
these auction mechanisms to encourage market participants to enter
additional Crossing Orders on MRX. The Exchange would continue to
assess no Regular and Complex Order Non-Penny Symbol Priority Customer
Fee for Crossing Orders.
The Exchange's proposal to amend Table 2 of Options 7, Section 3 to
decrease the Regular and Complex Non-Priority Customer Fees for
Crossing Orders in Non-Penny Symbols from $0.20 to $0.02 per contract
for orders in the Facilitation Mechanism, Complex Facilitation
Mechanism, Solicitation Mechanism, Complex Solicitation Mechanism and
Block Orders is equitable and not unfairly discriminatory as all Non-
Priority Customers that enter orders in the Facilitation Mechanism,
Complex Facilitation Mechanism, Solicitation Mechanism, Complex
Solicitation Mechanism and Block Orders would be uniformly assessed
these lower Non-Penny Symbol fees. A Priority Customer would continue
to be assessed no Regular and Complex Order Fee for Crossing Orders in
Non-Penny Symbols. Unlike other market participants, 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 for 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.
Options 7, Section 3--Table 2
In terms of intra-market competition, the Exchange's proposal to
amend Table 2 of Options 7, Section 3 to decrease the Regular and
Complex Non-Priority Customer Fees for Crossing Orders in Non-Penny
Symbols from $0.20 to $0.02 per contract for orders in the Facilitation
Mechanism, Complex Facilitation Mechanism, Solicitation Mechanism,
Complex Solicitation Mechanism and Block Orders does not impose an
undue burden on competition as all Non-Priority Customers that enter
orders in the Facilitation Mechanism, Complex Facilitation Mechanism,
Solicitation Mechanism, Complex Solicitation Mechanism and Block Orders
would be uniformly assessed these lower Non-Penny Symbol fees.
Assessing lower Non-Penny Symbol Non-Priority Customer Fees for
Crossing Orders and not lowering the Non-Penny Symbol Non-Priority
Customer Responses for Crossing Orders does not impose an undue burden
on competition.
Today, a differential exists as between the Fees for Crossing
Orders (the fees that apply to the originating and contra-side orders)
and the Responses for Crossing Orders, the Exchange does not believe
that widening this differential burdens competition because lowering
these originating and contra-side order fees encourages Members to
initiate Facilitation Mechanisms, Complex Facilitation Mechanisms,
Solicitation Mechanisms, Complex Solicitation Mechanisms and Block
Orders in Non-Penny Symbols. Members responding to these auctions would
continue to be assessed $1.10 per contract Non-Penny Symbol fee, which
is the same fee assessed today for Members removing liquidity from the
order book. The Exchange would continue to assess Members the same fees
to remove liquidity whether they are removing that liquidity from the
order book or one of the aforementioned auctions. The liquidity the
Exchange is able to attract to MRX in the form of these auctions
provides other Members an opportunity to engage with auction orders and
participate in the trade by breaking-up the auction order or being
allocated in the auction. Members would not be able to respond to the
auctions if such auctions never commence.
A Priority Customer would continue to be assessed no Regular and
Complex Order Fee for Crossing Orders in Non-Penny Symbols. Unlike
other market participants, 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 for other market
participants, to the benefit of all market participants.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
options exchanges. Because competitors are free to modify their own
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited.
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\ 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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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#a8daddc4cd85cbc7c5c5cdc6dcdbe8dbcdcb86cfc7de"><span class="__cf_email__" data-cfemail="2c5e594049014f4341414942585f6c5f494f024b435a">[email protected]</span></a>. Please include
file number SR-MRX-2024-29 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-2024-29. 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
[[Page 62821]]
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-2024-29 and should be submitted on
or before August 22, 2024.
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-16938 Filed 7-31-24; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on August 1, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.