Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Fee Schedule, 28204-28207 [2017-12762]

Download as PDF 28204 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. 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: sradovich on DSK3GMQ082PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2017–30 on the subject line. Paper Comments • 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–NYSE–2017–30. 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 Web site (http://www.sec.gov/ rules/sro.shtml). 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSE– VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 2017–30 and should be submitted on or before July 11, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–12804 Filed 6–19–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80921; File No. SR–GEMX– 2017–23] Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Fee Schedule June 14, 2017. 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 1, 2017, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s Fee Schedule to add a percentage measurement as an alternative way of qualifying for Tiers 2–4 of the Total Affiliated Member ADV for purposes of calculating a member’s fees and rebates for purposes of Section I, as described further below. The text of the proposed rule change is available on the Exchange’s Web site at http:// nasdaqgemx.cchwallstreet.com/, 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 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00162 Fmt 4703 Sfmt 4703 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 Fee Schedule to add a percentage measurement as an alternative way of qualifying for Tiers 2–4 of the Total Affiliated Member ADV for purposes of calculating a member’s fees and rebates for purposes of Section I. The Exchange currently uses volumebased tiers, referred to as the Total Affiliated Member ADV, to assess the level of taker fees and maker rebates applicable to members. These tiers apply to both Penny Symbols and SPY, and to Non-Penny Symbols (excluding index options). These tiers apply to all different categories of market participants set forth in Section I, such as Market Makers, Firm Proprietary/ Broker-Dealer, and Priority Customers.3 The Total Affiliated Member ADV category includes all volume in all symbols and order types, including both maker and taker volume and volume executed in the Price Improvement Mechanism (‘‘PIM’’), Facilitation, Solicitation, and Qualified Contingent Cross (‘‘QCC’’) mechanisms. All eligible volume from affiliated members will be aggregated in determining applicable tiers, provided there is at least 75% common ownership between the members as reflected on each member’s Form BD, Schedule A. The Exchange currently uses numeric thresholds for the purpose of determining a member’s eligibility for Tiers 1–4. Currently, a member would qualify for Tier 1 if its ADV is 0–99,999 contracts in a given month; Tier 2 if its ADV is 100,000–224,999 contracts in a given month; Tier 3 if its ADV is 225,000–349,999 contracts in a given month, and Tier 4 if its ADV is 350,000 or more contracts in a given month. The Exchange now proposes to add a percentage-based calculation that may be used as an alternative to the numeric 3 The Exchange also uses a separate set of tiers to determine the amount of a Priority Customer’s maker rebate. These volume requirements of these tiers are a subset of a member’s Total Affiliated Member ADV. The Exchange is not changing the Priority Customer Maker ADV tiers as part of this proposed rule change. E:\FR\FM\20JNN1.SGM 20JNN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices thresholds for determining a member’s eligibility for the Total Affiliated Member ADV tiers. Specifically, a member would be eligible for Tier 2 if it executes 100,000–224,999 contracts or 1% to less than 2% of Customer Total Consolidated Volume; Tier 3 if it executes 225,000–349,999 contracts or 2% to less than 3% of Customer Total Consolidated Volume; and Tier 4 if it executes 350,000 or more contracts or 3% or greater of Customer Total Consolidated Volume. For purposes of measuring Total Affiliated Member ADV, 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. The Exchange developed these percentage requirements based on historical data, and believes that there is a close correlation between the proposed percentage requirements and the current numeric requirements. As is the case currently, the Total Affiliated Member ADV category will continue to include all volume in all symbols and order types, including both maker and taker volume and volume executed in the PIM, Facilitation, Solicitation, and QCC mechanisms. Similarly, all eligible volume from affiliated members will continue to be aggregated in determining applicable tiers, provided there is at least 75% common ownership between the members as reflected on each member’s Form BD, Schedule A. The fees and rebates in Section I to which the Total Affiliated Member ADV tiers apply remain unchanged. In using a percentage-based measurement that considers a member’s volume relative to total customer industry volume, rather than a member’s absolute volume, the Exchange is providing members with an alternative way to achieve a tier even if that member’s absolute volume no longer meets the tier’s requirements. In using a relative measurement, the Exchange is recognizing that both the industry and a member’s volume may change due to a variety of factors, and is providing an alternative measurement that may allow that member to continue to meet its existing tier. At the same time, the proposed requirements, which are closely aligned to the current numeric requirements, still require a member to add meaningful volume in order to qualify for a given tier. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 of the Act,4 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,5 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. 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.’’ 6 Likewise, in NetCoalition v. Securities and Exchange Commission 7 (‘‘NetCoalition’’) the D.C. Circuit upheld the Commission’s use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a costbased approach.8 As the court emphasized, the Commission ‘‘intended in Regulation NMS that ‘market forces, rather than regulatory requirements’ play a role in determining the market data . . . to be made available to investors and at what cost.’’ 9 Further, ‘‘[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 brokerdealers 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’ . . . .’’ 10 Although the court and the SEC were discussing the cash equities markets, the Exchange believes 4 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 6 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). 7 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). 8 See NetCoalition, at 534–535. 9 Id. at 537. 10 Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782–83 (December 9, 2008) (SR– NYSEArca–2006–21)). 5 15 PO 00000 Frm 00163 Fmt 4703 Sfmt 4703 28205 that these views apply with equal force to the options markets. The Exchange believes that determining a member’s eligibility for a Total Affiliated Member ADV tier by using percentage requirements as an alternative to the existing numeric requirements is reasonable. In using a percentage-based measurement that considers a member’s volume relative to total customer industry volume, rather than a member’s absolute volume, the Exchange is providing members with an alternative way to achieve a tier even if that member’s absolute volume no longer meets the tier’s requirements. The Exchange also believes that the actual proposed percentage requirements are reasonable. Using historical data, the Exchange has formulated percentage requirements that it believes are closely correlated to the existing numeric requirements. In using a relative measurement, the Exchange is recognizing that both the industry and a member’s volume may change due to a variety of factors, and is providing an alternative measurement that may allow that member to continue to meet its existing tier. At the same time, the proposed requirements, which are closely aligned to the current numeric requirements, still require a member to add meaningful volume in order to qualify for a given tier. The Exchange believes that it is reasonable to calculate the percentage based on the total volume cleared at the OCC in the Customer range in that month. The Exchange notes that other exchanges have similar programs that use percentage requirements based on national customer volume. For example, NASDAQ PHLX LLC (‘‘Phlx’’) operates a Customer Rebate Program, which has five volume tiers that consist of percentage thresholds of national customer volume in multiply-listed equity and ETF options classes (excluding monthly SPY options).11 Similarly, the NASDAQ Options Market (‘‘NOM’’) operates a tiered rebate program, which consists of eight tiers, using both numeric and percentage thresholds, that is based on the total industry customer equity and ETF option average daily volume contracts per day in a month.12 As with these programs, the Exchange believes that the use of customer volume in equity and ETF options here as the baseline provides a meaningful metric by which to measure a member’s activity. The Exchange believes that it is reasonable to add the percentage requirements to Tiers 2–4. Since a 11 See 12 See E:\FR\FM\20JNN1.SGM Phlx Pricing Schedule, Preface B. NOM Chapter XV, Section 2. 20JNN1 28206 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES member may qualify for the Tier 1 with an ADV of 0, the Exchange does not believes that a percentage requirement is necessary for this Tier. The Exchange also believes that it is reasonable to add percentage requirements to the Total Affiliated Member ADV, and not Priority Customer Maker ADV, because the proposed change will apply to all members subject to maker rebates and taker fees in Section I, not just the subset of market participants and activity that is covered by the Priority Customer Maker ADV tiers. The Exchange also believes that the proposal is an equitable allocation and is not unfairly discriminatory. As noted above, the Total Affiliated Member ADV applies to all market participants that are subject to Maker Rebates and Taker Fees pursuant to Section I, and the proposed percentage requirements will correspondingly apply. The percentage requirements, which are closely aligned to the current numeric requirements, recognize that both a member’s and industry volume may change for a number of reasons, and provides members with an alternative way to qualify for a given tier that uses a relative, rather than an absolute, measurement. At the same time, the Exchange will apply the same percentage requirements to all similarly situated members. The Exchange believes it is equitable and not unfairly discriminatory to add the percentage requirements to Tiers 2–4, since, as described above, it believes the percentage requirement for Tier 1 is unnecessary. The Exchange believes that it is equitable and not unfairly discriminatory to add percentage requirement to the Total Affiliated Member ADV, and not Priority Customer Maker ADV, because the proposed change will apply to all members subject to maker rebates and taker fees in Section I, not just the subset of market participants and activity that is covered by the Priority Customer Maker ADV tiers. 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. In such an VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 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. The proposed addition of percentage requirements to Tiers 2–4 of the Total Affiliated Member ADV tiers does not impose a burden on competition not necessary or appropriate because the Exchange’s execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. More specifically, the Total Affiliated Member ADV applies to all market participants that are subject to Maker Rebates and Taker Fees pursuant to Section I, and the proposed percentage requirements will correspondingly apply. The percentage requirements recognize that both a member’s and industry volume may change for a number of reasons, and provides members with an alternative way to qualify for a given tier that uses a relative, rather than an absolute, measurement. At the same time, the Exchange will apply the same percentage requirements to all similarly situated members. The Exchange believes that adding the percentage requirements to Tiers 2–4 does not impose a burden on competition not necessary or appropriate since, as described above, it believes the percentage requirement for Tier 1 is unnecessary. The Exchange believes that adding the percentage requirement to the Total Affiliated Member ADV, and not Priority Customer Maker ADV, does not impose a burden on competition not necessary or appropriate because the proposed change will apply to all members subject to maker rebates and taker fees in Section I, not just the subset of market participants and activity that is covered by the Priority Customer Maker ADV tiers. 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 PO 00000 Frm 00164 Fmt 4703 Sfmt 4703 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,13 and Rule 19b–4(f)(2) 14 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. 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 • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–GEMX–2017–23 on the subject line. Paper Comments • 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–2017–23. 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 Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements 13 15 14 17 E:\FR\FM\20JNN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 20JNN1 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–GEMX– 2017–23 and should be submitted on or before July 11, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–12762 Filed 6–19–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80941; File No. SR–OCC– 2017–013] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change Concerning the Adoption of a New Stock Options and Futures Settlement Agreement Between The Options Clearing Corporation and the National Securities Clearing Corporation sradovich on DSK3GMQ082PROD with NOTICES June 15, 2017. 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 1, 2017, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by OCC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change This proposed rule change by OCC is filed in connection with proposed changes relating to a new Stock Options and Futures Settlement Agreement (‘‘New Accord’’) between OCC and the National Securities Clearing Corporation (‘‘NSCC,’’ collectively NSCC and OCC may be referred to herein as the ‘‘clearing agencies’’) and amendments to OCC’s By-Laws and Rules to accommodate the proposed provisions of the New Accord. The proposed changes to OCC’s ByLaws and Rules and the proposed New Accord were attached as Exhibits 5A–5C of the filing, respectively.3 The proposed changes are described in detail in Item 3 below. All terms with initial capitalization not defined herein have the same meaning as set forth in OCC’s By-Laws and Rules.4 II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC 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. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose 28207 through the facilities of a correspondent clearing corporation (i.e., NSCC) and are not settled through the facilities OCC. OCC and NSCC are parties to a Third Amended and Restated Options Exercise Settlement Agreement, dated February 16, 1995, as amended (‘‘Existing Accord’’),5 which governs the delivery and receipt of stock in the settlement of put and call options issued by OCC (‘‘Stock Options’’) that are eligible for settlement through NSCC’s Continuous Net Settlement (‘‘CNS’’) Accounting Operation and are designated to settle on the third business day following the date the related exercise or assignment was accepted by NSCC (‘‘Options E&A’’). All OCC Clearing Members that intend to engage in Stock Options transactions are required to also be Members of NSCC or to have appointed or nominated an NSCC Member to act on its behalf.6 OCC proposes to adopt a New Accord with NSCC, which would provide for the settlement of certain Stock Options and delivery obligations arising from certain matured physically-settled stock futures contracts cleared by OCC (‘‘Stock Futures’’). Specifically, the New Accord would, among other things: (1) Expand the category of securities that are eligible for settlement and guaranty under the agreement to certain securities (including stocks, exchangetraded funds and exchange-traded notes) that (i) are required to be delivered in the exercise and assignment of Stock Options and are eligible to be settled through NSCC’s Balance Order Accounting Operation (in addition to its CNS Accounting Operation) or (ii) are delivery obligations arising from Stock Futures that have reached maturity and are Background OCC issues and clears U.S.-listed options and futures on a number of underlying financial assets including common stocks, currencies and stock indices. OCC’s Rules, however, provide that delivery of, and payment for, securities underlying certain physically settled stock options and single stock futures cleared by OCC are effected 3 OCC has filed an advance notice with the Commission in connection with the New Accord. See SR–OCC–2017–804. NSCC also has filed proposed rule change and advance notice filings with the Commission in connection with the New Accord. See NSCC filings SR–NSCC–2017–007 and SR–NSCC–2017–803, respectively. 4 OCC’s By-Laws and Rules can be found on OCC’s public Web site: http://optionsclearing.com/ about/publications/bylaws.jsp. Other terms not defined herein or in the OCC By-Laws and Rules can be found in the Rules & Procedures of NSCC (‘‘NSCC Rules’’), available at http://www.dtcc.com/ ∼/media/Files/Downloads/legal/rules/nscc_ rules.pdf, as the context implies. PO 00000 Frm 00165 Fmt 4703 Sfmt 4703 5 The Existing Accord and the proposed changes thereunder were previously approved by the Commission. See Securities Exchange Act Release No. 37731 (September 26, 1996), 61 FR 51731 (October 3, 1996) (SR–OCC–96–04 and SR–NSCC– 96–11) (Order Approving Proposed Rule Change Related to an Amended and Restated Options Exercise Settlement Agreement Between the Options Clearing Corporation and the National Securities Clearing Corporation); Securities Exchange Act Release No. 43837 (January 12, 2001), 66 FR 6726 (January 22, 2001) (SR–OCC–00–12) (Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Creation of a Program to Relieve Strains on Clearing Members’ Liquidity in Connection With Exercise Settlements); and Securities Exchange Act Release No. 58988 (November 20, 2008), 73 FR 72098 (November 26, 2008) (SR–OCC–2008–18 and SR–NSCC–2008–09) (Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Changes Relating to Amendment No. 2 to the Third Amended and Restated Options Exercise Settlement Agreement). 6 A firm that is both an OCC Clearing Member and an NSCC Member, or is an OCC Clearing Member that has designated an NSCC Member to act on its behalf is referred to herein as a ‘‘Common Member.’’ E:\FR\FM\20JNN1.SGM 20JNN1

Agencies

[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Notices]
[Pages 28204-28207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12762]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80921; File No. SR-GEMX-2017-23]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Amend the Fee 
Schedule

June 14, 2017.
    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 1, 2017, 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.
---------------------------------------------------------------------------

    \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 Fee Schedule to add a 
percentage measurement as an alternative way of qualifying for Tiers 2-
4 of the Total Affiliated Member ADV for purposes of calculating a 
member's fees and rebates for purposes of Section I, as described 
further below.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqgemx.cchwallstreet.com/, 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 
Fee Schedule to add a percentage measurement as an alternative way of 
qualifying for Tiers 2-4 of the Total Affiliated Member ADV for 
purposes of calculating a member's fees and rebates for purposes of 
Section I.
    The Exchange currently uses volume-based tiers, referred to as the 
Total Affiliated Member ADV, to assess the level of taker fees and 
maker rebates applicable to members. These tiers apply to both Penny 
Symbols and SPY, and to Non-Penny Symbols (excluding index options). 
These tiers apply to all different categories of market participants 
set forth in Section I, such as Market Makers, Firm Proprietary/Broker-
Dealer, and Priority Customers.\3\ The Total Affiliated Member ADV 
category includes all volume in all symbols and order types, including 
both maker and taker volume and volume executed in the Price 
Improvement Mechanism (``PIM''), Facilitation, Solicitation, and 
Qualified Contingent Cross (``QCC'') mechanisms. All eligible volume 
from affiliated members will be aggregated in determining applicable 
tiers, provided there is at least 75% common ownership between the 
members as reflected on each member's Form BD, Schedule A.
---------------------------------------------------------------------------

    \3\ The Exchange also uses a separate set of tiers to determine 
the amount of a Priority Customer's maker rebate. These volume 
requirements of these tiers are a subset of a member's Total 
Affiliated Member ADV. The Exchange is not changing the Priority 
Customer Maker ADV tiers as part of this proposed rule change.
---------------------------------------------------------------------------

    The Exchange currently uses numeric thresholds for the purpose of 
determining a member's eligibility for Tiers 1-4. Currently, a member 
would qualify for Tier 1 if its ADV is 0-99,999 contracts in a given 
month; Tier 2 if its ADV is 100,000-224,999 contracts in a given month; 
Tier 3 if its ADV is 225,000-349,999 contracts in a given month, and 
Tier 4 if its ADV is 350,000 or more contracts in a given month.
    The Exchange now proposes to add a percentage-based calculation 
that may be used as an alternative to the numeric

[[Page 28205]]

thresholds for determining a member's eligibility for the Total 
Affiliated Member ADV tiers. Specifically, a member would be eligible 
for Tier 2 if it executes 100,000-224,999 contracts or 1% to less than 
2% of Customer Total Consolidated Volume; Tier 3 if it executes 
225,000-349,999 contracts or 2% to less than 3% of Customer Total 
Consolidated Volume; and Tier 4 if it executes 350,000 or more 
contracts or 3% or greater of Customer Total Consolidated Volume. For 
purposes of measuring Total Affiliated Member ADV, 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. The Exchange developed these percentage requirements based 
on historical data, and believes that there is a close correlation 
between the proposed percentage requirements and the current numeric 
requirements.
    As is the case currently, the Total Affiliated Member ADV category 
will continue to include all volume in all symbols and order types, 
including both maker and taker volume and volume executed in the PIM, 
Facilitation, Solicitation, and QCC mechanisms. Similarly, all eligible 
volume from affiliated members will continue to be aggregated in 
determining applicable tiers, provided there is at least 75% common 
ownership between the members as reflected on each member's Form BD, 
Schedule A.
    The fees and rebates in Section I to which the Total Affiliated 
Member ADV tiers apply remain unchanged.
    In using a percentage-based measurement that considers a member's 
volume relative to total customer industry volume, rather than a 
member's absolute volume, the Exchange is providing members with an 
alternative way to achieve a tier even if that member's absolute volume 
no longer meets the tier's requirements. In using a relative 
measurement, the Exchange is recognizing that both the industry and a 
member's volume may change due to a variety of factors, and is 
providing an alternative measurement that may allow that member to 
continue to meet its existing tier. At the same time, the proposed 
requirements, which are closely aligned to the current numeric 
requirements, still require a member to add meaningful volume in order 
to qualify for a given tier.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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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.'' \6\
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    \6\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission \7\ 
(``NetCoalition'') the D.C. Circuit upheld the Commission's use of a 
market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\8\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \9\
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    \7\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \8\ See NetCoalition, at 534-535.
    \9\ Id. at 537.
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    Further, ``[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' . . . .'' \10\ Although the court and 
the SEC were discussing the cash equities markets, the Exchange 
believes that these views apply with equal force to the options 
markets.
---------------------------------------------------------------------------

    \10\ Id. at 539 (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 Exchange believes that determining a member's eligibility for a 
Total Affiliated Member ADV tier by using percentage requirements as an 
alternative to the existing numeric requirements is reasonable. In 
using a percentage-based measurement that considers a member's volume 
relative to total customer industry volume, rather than a member's 
absolute volume, the Exchange is providing members with an alternative 
way to achieve a tier even if that member's absolute volume no longer 
meets the tier's requirements. The Exchange also believes that the 
actual proposed percentage requirements are reasonable. Using 
historical data, the Exchange has formulated percentage requirements 
that it believes are closely correlated to the existing numeric 
requirements. In using a relative measurement, the Exchange is 
recognizing that both the industry and a member's volume may change due 
to a variety of factors, and is providing an alternative measurement 
that may allow that member to continue to meet its existing tier. At 
the same time, the proposed requirements, which are closely aligned to 
the current numeric requirements, still require a member to add 
meaningful volume in order to qualify for a given tier.
    The Exchange believes that it is reasonable to calculate the 
percentage based on the total volume cleared at the OCC in the Customer 
range in that month. The Exchange notes that other exchanges have 
similar programs that use percentage requirements based on national 
customer volume. For example, NASDAQ PHLX LLC (``Phlx'') operates a 
Customer Rebate Program, which has five volume tiers that consist of 
percentage thresholds of national customer volume in multiply-listed 
equity and ETF options classes (excluding monthly SPY options).\11\ 
Similarly, the NASDAQ Options Market (``NOM'') operates a tiered rebate 
program, which consists of eight tiers, using both numeric and 
percentage thresholds, that is based on the total industry customer 
equity and ETF option average daily volume contracts per day in a 
month.\12\ As with these programs, the Exchange believes that the use 
of customer volume in equity and ETF options here as the baseline 
provides a meaningful metric by which to measure a member's activity.
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    \11\ See Phlx Pricing Schedule, Preface B.
    \12\ See NOM Chapter XV, Section 2.
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    The Exchange believes that it is reasonable to add the percentage 
requirements to Tiers 2-4. Since a

[[Page 28206]]

member may qualify for the Tier 1 with an ADV of 0, the Exchange does 
not believes that a percentage requirement is necessary for this Tier.
    The Exchange also believes that it is reasonable to add percentage 
requirements to the Total Affiliated Member ADV, and not Priority 
Customer Maker ADV, because the proposed change will apply to all 
members subject to maker rebates and taker fees in Section I, not just 
the subset of market participants and activity that is covered by the 
Priority Customer Maker ADV tiers.
    The Exchange also believes that the proposal is an equitable 
allocation and is not unfairly discriminatory. As noted above, the 
Total Affiliated Member ADV applies to all market participants that are 
subject to Maker Rebates and Taker Fees pursuant to Section I, and the 
proposed percentage requirements will correspondingly apply. The 
percentage requirements, which are closely aligned to the current 
numeric requirements, recognize that both a member's and industry 
volume may change for a number of reasons, and provides members with an 
alternative way to qualify for a given tier that uses a relative, 
rather than an absolute, measurement. At the same time, the Exchange 
will apply the same percentage requirements to all similarly situated 
members. The Exchange believes it is equitable and not unfairly 
discriminatory to add the percentage requirements to Tiers 2-4, since, 
as described above, it believes the percentage requirement for Tier 1 
is unnecessary. The Exchange believes that it is equitable and not 
unfairly discriminatory to add percentage requirement to the Total 
Affiliated Member ADV, and not Priority Customer Maker ADV, because the 
proposed change will apply to all members subject to maker rebates and 
taker fees in Section I, not just the subset of market participants and 
activity that is covered by the Priority Customer Maker ADV tiers.

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. 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.
    The proposed addition of percentage requirements to Tiers 2-4 of 
the Total Affiliated Member ADV tiers does not impose a burden on 
competition not necessary or appropriate because the Exchange's 
execution services are completely voluntary and subject to extensive 
competition both from other exchanges and from off-exchange venues. 
More specifically, the Total Affiliated Member ADV applies to all 
market participants that are subject to Maker Rebates and Taker Fees 
pursuant to Section I, and the proposed percentage requirements will 
correspondingly apply. The percentage requirements recognize that both 
a member's and industry volume may change for a number of reasons, and 
provides members with an alternative way to qualify for a given tier 
that uses a relative, rather than an absolute, measurement. At the same 
time, the Exchange will apply the same percentage requirements to all 
similarly situated members.
    The Exchange believes that adding the percentage requirements to 
Tiers 2-4 does not impose a burden on competition not necessary or 
appropriate since, as described above, it believes the percentage 
requirement for Tier 1 is unnecessary. The Exchange believes that 
adding the percentage requirement to the Total Affiliated Member ADV, 
and not Priority Customer Maker ADV, does not impose a burden on 
competition not necessary or appropriate because the proposed change 
will apply to all members subject to maker rebates and taker fees in 
Section I, not just the subset of market participants and activity that 
is covered by the Priority Customer Maker ADV tiers.
    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,\13\ and Rule 19b-4(f)(2) \14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-GEMX-2017-23 on the subject line.

Paper Comments

     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-2017-23. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements

[[Page 28207]]

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 Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE., Washington, 
DC 20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-GEMX-2017-23 and should be 
submitted on or before July 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12762 Filed 6-19-17; 8:45 am]
 BILLING CODE 8011-01-P