Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee, 40108-40110 [2018-17254]
Download as PDF
<![CDATA[
40108
Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices
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 and Rule
19b–4(f)(2) 16 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
necessary or appropriate in the public
interest, for the protection of investors,
or 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:
sradovich on DSK3GMQ082PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2018–19 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–MIAX–2018–19. 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 (https://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 website viewing and
printing in the Commission’s Public
15 15
16 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
20:42 Aug 10, 2018
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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MIAX–2018–19 and should
be submitted on or before September 4,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–17252 Filed 8–10–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
August 2, 2018.
PLACE: Closed Commission Hearing
Room 10800.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
Commissioner Peirce, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matters of the closed
meeting will be:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
TIME AND DATE:
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Brent J. Fields from the Office of the
Secretary at (202) 551–5400.
Dated: July 26, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018–17391 Filed 8–9–18; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83789; File No. SR–GEMX–
2018–27]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Options
Regulatory Fee
August 7, 2018.
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 27,
2018, Nasdaq GEMX, LLC (‘‘GEMX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to revise
GEMX’s Schedule of Fees to amend its
Options Regulatory Fee or ‘‘ORF’’.
While the changes proposed herein
are effective upon filing, the Exchange
has designated the amendments become
operative on August 1, 2018.
The text of the proposed rule change
is available on the Exchange’s website at
https://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
1 15
17 17
Jkt 244001
PO 00000
CFR 200.30–3(a)(12).
Frm 00128
Fmt 4703
Sfmt 4703
2 17
E:\FR\FM\13AUN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
13AUN1
Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Currently, GEMX assesses an ORF of
$0.0010 per contract side. The Exchange
proposes to increase this ORF to
$0.0020 per contract side. GEMX
proposes to increase its ORF to recoup
regulatory expenses while also ensuring
that the ORF will not exceed costs. The
Exchange’s proposed change to the ORF
should balance the Exchange’s
regulatory revenue against the
anticipated costs.
sradovich on DSK3GMQ082PROD with NOTICES
Collection of ORF
Currently, GEMX assesses its ORF for
each customer option transaction that is
either: (1) Executed by a Member on
GEMX; or (2) cleared by a GEMX
Member at The Options Clearing
Corporation (‘‘OCC’’) in the customer
range,3 even if the transaction was
executed by a non-member of GEMX,
regardless of the exchange on which the
transaction occurs.4 If the OCC clearing
member is a GEMX Member, ORF is
assessed and collected on all cleared
customer contracts (after adjustment for
CMTA 5); and (2) if the OCC clearing
member is not a GEMX Member, ORF is
collected only on the cleared customer
contracts executed at GEMX, taking into
account any CMTA instructions which
may result in collecting the ORF from a
non-member.
By way of example, if Broker A, a
GEMX Member, routes a customer order
to CBOE and the transaction executes on
CBOE and clears in Broker A’s OCC
Clearing account, ORF will be collected
by GEMX from Broker A’s clearing
account at OCC via direct debit. While
this transaction was executed on a
market other than GEMX, it was cleared
by a GEMX Member in the member’s
3 Members must record the appropriate account
origin code on all orders at the time of entry in
order. The Exchange represents that it has
surveillances in place to verify that members mark
orders with the correct account origin code.
4 The Exchange uses reports from OCC when
assessing and collecting the ORF.
5 CMTA or Clearing Member Trade Assignment is
a form of ‘‘give-up’’ whereby the position will be
assigned to a specific clearing firm at OCC.
VerDate Sep<11>2014
20:42 Aug 10, 2018
Jkt 244001
OCC clearing account in the customer
range, therefore there is a regulatory
nexus between GEMX and the
transaction. If Broker A was not a GEMX
Member, then no ORF should be
assessed and collected because there is
no nexus; the transaction did not
execute on GEMX nor was it cleared by
a GEMX Member.
In the case where a Member both
executes a transaction and clears the
transaction, the ORF is assessed to and
collected from that Member. In the case
where a Member executes a transaction
and a different member clears the
transaction, the ORF is assessed to and
collected from the Member who clears
the transaction and not the Member who
executes the transaction. In the case
where a non-member executes a
transaction at an away market and a
Member clears the transaction, the ORF
is assessed to and collected from the
Member who clears the transaction. In
the case where a Member executes a
transaction on GEMX and a nonmember clears the transaction, the ORF
is assessed to the Member that executed
the transaction on GEMX and collected
from the non-member who cleared the
transaction. In the case where a Member
executes a transaction at an away
market and a non-member clears the
transaction, the ORF is not assessed to
the Member who executed the
transaction or collected from the nonmember who cleared the transaction
because the Exchange does not have
access to the data to make absolutely
certain that ORF should apply. Further,
the data does not allow the Exchange to
identify the Member executing the trade
at an away market.
ORF Revenue and Monitoring of ORF
The Exchange monitors the amount of
revenue collected from the ORF to
ensure that it, in combination with other
regulatory fees and fines, does not
exceed regulatory costs. In determining
whether an expense is considered a
regulatory cost, the Exchange reviews
all costs and makes determinations if
there is a nexus between the expense
and a regulatory function. The Exchange
notes that fines collected by the
Exchange in connection with a
disciplinary matter offset ORF.
The ORF is designed to recover a
material portion of the costs to the
Exchange of the supervision and
regulation of its members, including
performing routine surveillances,
investigations, examinations, financial
monitoring, and policy, rulemaking,
interpretive, and enforcement activities.
The Exchange believes that revenue
generated from the ORF, when
combined with all of the Exchange’s
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
40109
other regulatory fees, will cover a
material portion, but not all, of the
Exchange’s regulatory costs. The
Exchange will continue to monitor the
amount of revenue collected from the
ORF to ensure that it, in combination
with its other regulatory fees and fines,
does not exceed regulatory costs. If the
Exchange determines regulatory
revenues exceed regulatory costs, the
Exchange will adjust the ORF by
submitting a fee change filing to the
Commission.
Proposal
The Exchange is proposing to increase
the ORF from $0.0010 to $0.0020 as of
August 1, 2018 to recoup regulatory
expenses while also ensuring that the
ORF will not exceed costs. The
Exchange regularly reviews its ORF to
ensure that the ORF, in combination
with its other regulatory fees and fines,
does not exceed regulatory costs. The
Exchange believes this adjustment will
permit the Exchange to cover a material
portion of its regulatory costs, while not
exceeding regulatory costs.
The Exchange notified Members via
an Options Trader Alert of the proposed
change to the ORF thirty (30) calendar
days prior to the proposed operative
date, August 1, 2018.6 The Exchange
believes that the prior notification
market participants will ensure market
participants are prepared to configure
their systems to properly account for the
ORF.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 7 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act 8 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 its facility and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange believes that increasing
the ORF from $0.0010 to $0.0020 as of
August 1, 2018 is reasonable because
the Exchange’s collection of ORF needs
to be balanced against the amount of
regulatory costs incurred by the
Exchange. The Exchange believes that
the proposed adjustments noted herein
will serve to balance the Exchange’s
regulatory revenue against the
anticipated regulatory costs. While these
adjustments result in an increase, the
increase is modest.
6 See
Options Trader Alert #2018–27.
U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4) and (5).
7 15
E:\FR\FM\13AUN1.SGM
13AUN1
40110
Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices
sradovich on DSK3GMQ082PROD with NOTICES
The Exchange believes that amending
the ORF from $0.0010 to $0.0020 as of
August 1, 2018 is equitable and not
unfairly discriminatory because
assessing the ORF to each Member for
options transactions cleared by OCC in
the customer range where the execution
occurs on another exchange and is
cleared by a GEMX Member is an
equitable allocation of reasonable dues,
fees, and other charges among its
members and issuers and other persons
using its facilities. The ORF is collected
by OCC on behalf of GEMX from
Exchange clearing members for all
customer transactions they clear or from
non-members for all customer
transactions they clear that were
executed on GEMX. The Exchange
believes the ORF ensures fairness by
assessing fees to Members based on the
amount of customer options business
they conduct. Regulating customer
trading activity is much more labor
intensive and requires greater
expenditure of human and technical
resources than regulating non-customer
trading activity, which tends to be more
automated and less labor-intensive. As a
result, the costs associated with
administering the customer component
of the Exchange’s overall regulatory
program are materially higher than the
costs associated with administering the
non-customer component (e.g., Member
proprietary transactions) of its
regulatory program.
The ORF is designed to recover a
material portion of the costs of
supervising and regulating Members’
customer options business including
performing routine surveillances,
investigations, examinations, financial
monitoring, and policy, rulemaking,
interpretive, and enforcement activities.
The Exchange will monitor the amount
of revenue collected from the ORF to
ensure that it, in combination with its
other regulatory fees and fines, does not
exceed the Exchange’s total regulatory
costs. The Exchange has designed the
ORF to generate revenues that, when
combined with all of the Exchange’s
other regulatory fees, will be less than
or equal to the Exchange’s regulatory
costs, which is consistent with the
Commission’s view that regulatory fees
be used for regulatory purposes and not
to support the Exchange’s business side.
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. This
proposal does not create an unnecessary
or inappropriate intra-market burden on
VerDate Sep<11>2014
20:42 Aug 10, 2018
Jkt 244001
competition because the ORF applies to
all customer activity, thereby raising
regulatory revenue to offset regulatory
expenses. It also supplements the
regulatory revenue derived from noncustomer activity. This proposal does
not create an unnecessary or
inappropriate inter-market burden on
competition because it is a regulatory
fee that supports regulation in
furtherance of the purposes of the Act.
The Exchange is obligated to ensure that
the amount of regulatory revenue
collected from the ORF, in combination
with its other regulatory fees and fines,
does not exceed regulatory costs.
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.9 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
GEMX–2018–27 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 No.
SR–GEMX–2018–27. 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 (https://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 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
10:00 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File No.
SR–GEMX–2018–27, and should be
submitted on or before September 4,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–17254 Filed 8–10–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83788; File No. SR–MIAX–
2018–18]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
August 7, 2018.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
10 17
9 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00130
Fmt 4703
Sfmt 4703
1 15
E:\FR\FM\13AUN1.SGM
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
13AUN1
]]>Agencies
[Federal Register Volume 83, Number 156 (Monday, August 13, 2018)]
[Notices]
[Pages 40108-40110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17254]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83789; File No. SR-GEMX-2018-27]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the
Options Regulatory Fee
August 7, 2018.
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 27, 2018, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed
with the Securities and Exchange Commission (the ``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 revise GEMX's Schedule of Fees to amend
its Options Regulatory Fee or ``ORF''.
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on August 1,
2018.
The text of the proposed rule change is available on the Exchange's
website at https://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
[[Page 40109]]
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Currently, GEMX assesses an ORF of $0.0010 per contract side. The
Exchange proposes to increase this ORF to $0.0020 per contract side.
GEMX proposes to increase its ORF to recoup regulatory expenses while
also ensuring that the ORF will not exceed costs. The Exchange's
proposed change to the ORF should balance the Exchange's regulatory
revenue against the anticipated costs.
Collection of ORF
Currently, GEMX assesses its ORF for each customer option
transaction that is either: (1) Executed by a Member on GEMX; or (2)
cleared by a GEMX Member at The Options Clearing Corporation (``OCC'')
in the customer range,\3\ even if the transaction was executed by a
non-member of GEMX, regardless of the exchange on which the transaction
occurs.\4\ If the OCC clearing member is a GEMX Member, ORF is assessed
and collected on all cleared customer contracts (after adjustment for
CMTA \5\); and (2) if the OCC clearing member is not a GEMX Member, ORF
is collected only on the cleared customer contracts executed at GEMX,
taking into account any CMTA instructions which may result in
collecting the ORF from a non-member.
---------------------------------------------------------------------------
\3\ Members must record the appropriate account origin code on
all orders at the time of entry in order. The Exchange represents
that it has surveillances in place to verify that members mark
orders with the correct account origin code.
\4\ The Exchange uses reports from OCC when assessing and
collecting the ORF.
\5\ CMTA or Clearing Member Trade Assignment is a form of
``give-up'' whereby the position will be assigned to a specific
clearing firm at OCC.
---------------------------------------------------------------------------
By way of example, if Broker A, a GEMX Member, routes a customer
order to CBOE and the transaction executes on CBOE and clears in Broker
A's OCC Clearing account, ORF will be collected by GEMX from Broker A's
clearing account at OCC via direct debit. While this transaction was
executed on a market other than GEMX, it was cleared by a GEMX Member
in the member's OCC clearing account in the customer range, therefore
there is a regulatory nexus between GEMX and the transaction. If Broker
A was not a GEMX Member, then no ORF should be assessed and collected
because there is no nexus; the transaction did not execute on GEMX nor
was it cleared by a GEMX Member.
In the case where a Member both executes a transaction and clears
the transaction, the ORF is assessed to and collected from that Member.
In the case where a Member executes a transaction and a different
member clears the transaction, the ORF is assessed to and collected
from the Member who clears the transaction and not the Member who
executes the transaction. In the case where a non-member executes a
transaction at an away market and a Member clears the transaction, the
ORF is assessed to and collected from the Member who clears the
transaction. In the case where a Member executes a transaction on GEMX
and a non-member clears the transaction, the ORF is assessed to the
Member that executed the transaction on GEMX and collected from the
non-member who cleared the transaction. In the case where a Member
executes a transaction at an away market and a non-member clears the
transaction, the ORF is not assessed to the Member who executed the
transaction or collected from the non-member who cleared the
transaction because the Exchange does not have access to the data to
make absolutely certain that ORF should apply. Further, the data does
not allow the Exchange to identify the Member executing the trade at an
away market.
ORF Revenue and Monitoring of ORF
The Exchange monitors the amount of revenue collected from the ORF
to ensure that it, in combination with other regulatory fees and fines,
does not exceed regulatory costs. In determining whether an expense is
considered a regulatory cost, the Exchange reviews all costs and makes
determinations if there is a nexus between the expense and a regulatory
function. The Exchange notes that fines collected by the Exchange in
connection with a disciplinary matter offset ORF.
The ORF is designed to recover a material portion of the costs to
the Exchange of the supervision and regulation of its members,
including performing routine surveillances, investigations,
examinations, financial monitoring, and policy, rulemaking,
interpretive, and enforcement activities.
The Exchange believes that revenue generated from the ORF, when
combined with all of the Exchange's other regulatory fees, will cover a
material portion, but not all, of the Exchange's regulatory costs. The
Exchange will continue to monitor the amount of revenue collected from
the ORF to ensure that it, in combination with its other regulatory
fees and fines, does not exceed regulatory costs. If the Exchange
determines regulatory revenues exceed regulatory costs, the Exchange
will adjust the ORF by submitting a fee change filing to the
Commission.
Proposal
The Exchange is proposing to increase the ORF from $0.0010 to
$0.0020 as of August 1, 2018 to recoup regulatory expenses while also
ensuring that the ORF will not exceed costs. The Exchange regularly
reviews its ORF to ensure that the ORF, in combination with its other
regulatory fees and fines, does not exceed regulatory costs. The
Exchange believes this adjustment will permit the Exchange to cover a
material portion of its regulatory costs, while not exceeding
regulatory costs.
The Exchange notified Members via an Options Trader Alert of the
proposed change to the ORF thirty (30) calendar days prior to the
proposed operative date, August 1, 2018.\6\ The Exchange believes that
the prior notification market participants will ensure market
participants are prepared to configure their systems to properly
account for the ORF.
---------------------------------------------------------------------------
\6\ See Options Trader Alert #2018-27.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \7\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act \8\ 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 its facility and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that increasing the ORF from $0.0010 to
$0.0020 as of August 1, 2018 is reasonable because the Exchange's
collection of ORF needs to be balanced against the amount of regulatory
costs incurred by the Exchange. The Exchange believes that the proposed
adjustments noted herein will serve to balance the Exchange's
regulatory revenue against the anticipated regulatory costs. While
these adjustments result in an increase, the increase is modest.
[[Page 40110]]
The Exchange believes that amending the ORF from $0.0010 to $0.0020
as of August 1, 2018 is equitable and not unfairly discriminatory
because assessing the ORF to each Member for options transactions
cleared by OCC in the customer range where the execution occurs on
another exchange and is cleared by a GEMX Member is an equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities. The ORF is
collected by OCC on behalf of GEMX from Exchange clearing members for
all customer transactions they clear or from non-members for all
customer transactions they clear that were executed on GEMX. The
Exchange believes the ORF ensures fairness by assessing fees to Members
based on the amount of customer options business they conduct.
Regulating customer trading activity is much more labor intensive and
requires greater expenditure of human and technical resources than
regulating non-customer trading activity, which tends to be more
automated and less labor-intensive. As a result, the costs associated
with administering the customer component of the Exchange's overall
regulatory program are materially higher than the costs associated with
administering the non-customer component (e.g., Member proprietary
transactions) of its regulatory program.
The ORF is designed to recover a material portion of the costs of
supervising and regulating Members' customer options business including
performing routine surveillances, investigations, examinations,
financial monitoring, and policy, rulemaking, interpretive, and
enforcement activities. The Exchange will monitor the amount of revenue
collected from the ORF to ensure that it, in combination with its other
regulatory fees and fines, does not exceed the Exchange's total
regulatory costs. The Exchange has designed the ORF to generate
revenues that, when combined with all of the Exchange's other
regulatory fees, will be less than or equal to the Exchange's
regulatory costs, which is consistent with the Commission's view that
regulatory fees be used for regulatory purposes and not to support the
Exchange's business side.
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. This proposal does not create
an unnecessary or inappropriate intra-market burden on competition
because the ORF applies to all customer activity, thereby raising
regulatory revenue to offset regulatory expenses. It also supplements
the regulatory revenue derived from non-customer activity. This
proposal does not create an unnecessary or inappropriate inter-market
burden on competition because it is a regulatory fee that supports
regulation in furtherance of the purposes of the Act. The Exchange is
obligated to ensure that the amount of regulatory revenue collected
from the ORF, in combination with its other regulatory fees and fines,
does not exceed regulatory costs.
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.\9\ 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.
---------------------------------------------------------------------------
\9\ 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
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File No. SR-GEMX-2018-27 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 No. SR-GEMX-2018-27. 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 (https://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 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 10:00 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File No. SR-GEMX-2018-27, and should be submitted on or
before September 4, 2018.
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17254 Filed 8-10-18; 8:45 am]
BILLING CODE 8011-01-P
