Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt an Options Regulatory Fee, 5173-5176 [2019-02740]
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Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices
on behalf of Phlx from Exchange
clearing members for all customer
transactions they clear or from nonmembers for all customer transactions
they clear that were executed on Phlx.
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 noncustomer trading activity, which tends
to be more automated and less laborintensive. 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 noncustomer 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 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
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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–
Phlx–2019–01 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–Phlx–2019–01. 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–Phlx–2019–01, and should be
submitted on or before March 13, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–02730 Filed 2–19–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85127; File No. SR–MRX–
2019–03]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Adopt an Options
Regulatory Fee
February 13, 2019.
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 February
1, 2019, Nasdaq MRX, LLC (‘‘MRX’’ 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.
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
9 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices
MRX would assess the proposed ORF
for each customer option transaction
that is either: (1) Executed by a Member
on MRX; or (2) cleared by a MRX
Member at The Options Clearing
Corporation (‘‘OCC’’) in the customer
range,3 even if the transaction was
executed by a non-member of MRX,
regardless of the exchange on which the
transaction occurs.4 If the OCC Clearing
Member is an MRX Member, ORF
would be assessed and collected on all
cleared customer contracts (after
adjustment for CMTA) 5; and (2) if the
OCC Clearing Member is not a MRX
Member, ORF is collected only on the
cleared customer contracts executed at
MRX, taking into account any CMTA
instructions which may result in
collecting the ORF from a non-member.
By way of example, if Broker A, an
MRX Member, routed a customer order
to Cboe Exchange, Inc. (‘‘CBOE’’) and
the transaction executed on CBOE and
cleared in Broker A’s OCC Clearing
account, ORF would be collected by
MRX from Broker A’s clearing account
at OCC via direct debit. While in this
example the transaction was executed
on a market other than MRX, it was
cleared by an MRX Member in the
member’s OCC clearing account in the
customer range, therefore there would
be a regulatory nexus between MRX and
the transaction. If Broker A was not an
MRX Member, then no ORF should be
assessed and collected because there is
no nexus; the transaction did not
execute on MRX nor was it cleared by
an MRX Member.
In the case where a Member both
executed a transaction and cleared the
transaction, the ORF would be assessed
to and collected from that Member. In
the case where a Member executed a
transaction and a different Member
cleared the transaction, the ORF would
be assessed to and collected from the
Member who cleared the transaction
and not the Member who executed the
transaction. In the case where a nonmember executed a transaction at an
away market and a Member cleared the
transaction, the ORF would be assessed
to and collected from the Member who
cleared the transaction. In the case
where a Member executed a transaction
on MRX and a non-member cleared the
transaction, the ORF would be assessed
to the Member that executed the
transaction on MRX and collected from
the non-member who cleared the
transaction. In the case where a Member
executed a transaction at an away
market and a non-Member cleared the
transaction, the ORF would not assessed
to the Member who executed the
transaction or collected from the nonmember who cleared the transaction
because the Exchange would not have
access to the data to make absolutely
certain that ORF should apply. Further,
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 would use 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Options 7, Section 5 to adopt an
Options Regulatory Fee or ‘‘ORF’’.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqmrx.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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
MRX proposes to amend its rules at
Options 7, Section 5 to adopt an ORF.
Specifically, MRX proposes to adopt an
ORF of $0.0004 per contract side as of
February 1, 2019 at Options 7, Section
5, A. The Exchange proposes to re-letter
current ‘‘A’’ (FINRA Web CRD Fees) as
‘‘B.’’ MRX has been operating since
2016. Initially MRX did not adopt an
ORF as it was a new market. MRX
proposes to adopt an ORF at this time.
The Exchange’s proposed ORF should
balance the Exchange’s regulatory
revenue against the anticipated
regulatory costs.
Collection of ORF
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the data would not allow the Exchange
to identify the Member executing the
trade at an away market.
ORF Revenue and Monitoring of ORF
The Exchange would monitor the
amount of revenue collected from the
ORF to ensure that it, in combination
with other regulatory fees and fines,
would not exceed regulatory costs. In
determining whether an expense is
considered a regulatory cost, the
Exchange would review all costs and
make 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 would 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, would cover a
material portion, but not all, of the
Exchange’s regulatory costs. The
Exchange would monitor the amount of
revenue collected from the ORF to
ensure that it, in combination with its
other regulatory fees and fines, would
not exceed regulatory costs. If the
Exchange determines regulatory
revenues exceed regulatory costs, the
Exchange would adjust the ORF by
submitting a fee change filing to the
Commission.
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, February 1, 2019.6 The Exchange
believes that the prior notification will
ensure Members 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
6 See
Options Trader Alert #2018–46.
U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4) and (5).
7 15
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Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices
discrimination between customers,
issuers, brokers, or dealers.
The Exchange believes that adopting
an ORF of $0.0004 per contract side as
of February 1, 2019 is reasonable
because the Exchange’s collection of
ORF would be balanced against the
amount of regulatory costs incurred by
the Exchange. Specifically, the ORF
would balance the Exchange’s
regulatory revenue against the
anticipated regulatory costs. The
Exchange notes that other options
markets have adopted an ORF.9
The Exchange believes that adopting
an ORF of $0.0004 per contract side as
of February 1, 2019 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 an MRX Member would be
an equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities. The ORF would be
collected by OCC on behalf of MRX
from Exchange clearing members for all
customer transactions they clear or from
non-members for all customer
transactions they clear that were
executed on MRX. The Exchange
believes the ORF would ensure 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 would be 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 would monitor the
amount of revenue collected from the
ORF to ensure that it, in combination
9 CBOE, Nasdaq Phlx LLC, The Nasdaq Options
Market LLC, Nasdaq ISE, LLC, BOX Exchange LLC
and Miami International Securities Exchange LLC
are examples of options markets that have adopted
an ORF.
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with its other regulatory fees and fines,
would 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, would
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 would
apply to all customer activity, thereby
raising regulatory revenue to offset
regulatory expenses. It would also
supplement the regulatory revenue
derived from non-customer activity.
This proposal does not create an
unnecessary or inappropriate intermarket 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, would 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.10 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
10
PO 00000
15 U.S.C. 78s(b)(3)(A)(ii).
Frm 00130
Fmt 4703
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5175
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–
MRX–2019–03 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–MRX–2019–03. 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–MRX–2019–03, and should be
submitted on or before March 13, 2019.
E:\FR\FM\20FEN1.SGM
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5176
Federal Register / Vol. 84, No. 34 / Wednesday, February 20, 2019 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–02740 Filed 2–19–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–85116; File No. SR–
CboeEDGA–2019–002]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
EDGA Fee Schedule as It Relates to
Pricing for the Use of Certain Routing
Strategies
February 13, 2019.
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 February
1, 2019, Cboe EDGA Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGA’’) 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 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
Cboe EDGA Exchange, Inc. (‘‘EDGA’’
or the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to amend the EDGA fee schedule
as it relates to pricing for the use of
certain routing strategies. The text of the
proposed rule change is attached as
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/edga/),
at the Exchange’s Office of the
Secretary, 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
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Jkt 247001
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.
1. Purpose
The purpose of the proposed rule
change is to amend the EDGA fee
schedule to change the pricing
applicable to orders routed using the
ROUC routing strategy in connection
with planned changes to the System
routing table.3 ROUC is a routing
strategy offered by the Exchange that is
used to target certain low cost protected
market centers by routing to those
venues after accessing available
liquidity on the EDGA Book and certain
non-exchange destinations, and prior to
routing to other trading centers included
in the System routing table and posting
to the Cboe EDGX Exchange, Inc.
(‘‘EDGX’’) order book, if possible. The
Exchange periodically changes the low
cost venues targeted by the ROUC
routing strategy to ensure that the
venues prioritized for routing can be
accessed at a low cost. Currently, three
exchanges are included in the System
routing table as low cost protected
market centers: Cboe BYX Exchange,
Inc. (‘‘BYX’’), Nasdaq BX, Inc. (‘‘BX’’),
and New York Stock Exchange LLC
(‘‘NYSE’’). Pursuant to Rule 11.11(g), the
Exchange has determined to modify
System routing table such that NYSE
would no longer be listed as a low cost
protected market center where orders
are first routed after seeking available
liquidity on the EDGA Book and certain
non-exchange destinations. In addition,
the Exchange has decided to add NYSE
American LLC (‘‘NYSE American’’) and
NYSE National, Inc. (‘‘NYSE National’’)
as low cost protected market centers.
These changes to the System routing
table are scheduled to be introduced on
February 1, 2019.
Currently, orders routed using the
ROUC routing strategy are provided a
rebate of $0.00150 per share when
3 The term ‘‘System routing table’’ refers to the
proprietary process for determining the specific
trading venues to which the System routes orders
and the order in which it routes them. See Rule
11.13(b)(3) [sic]. The Exchange reserves the right to
route orders simultaneously or sequentially,
maintain a different System routing table for
different routing options and to modify the System
routing table at any time without notice. Id.
PO 00000
Frm 00131
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routed to BYX,4 charged a fee of
$0.00290 per share when routed to
Nasdaq PSX (‘‘PSX’’),5 or charged a fee
of $0.00200 per share when routed to a
non-exchange destination.6 Orders
routed to other markets may be subject
to different non-ROUC specific pricing.
The Exchange proposes to add two new
fee codes, MX and NX, that relate to
orders routed to NYSE American and
NYSE National, respectively, using the
ROUC routing strategy. In securities at
or above $1.00, orders routed using the
ROUC routing strategy would be
charged a fee of $0.00020 per share if
executed on NYSE American, and
provided a rebate of $0.00200 per share
if executed on NYSE National. As
proposed, the Exchange would not
charge a fee or provide a rebate for
orders routed in securities priced below
$1.00. The proposed fees and rebates
chosen for routing to these venues
generally reflect the current transaction
fees and rebates available for accessing
liquidity on those markets.7
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6 of the Act,8 in general, and
furthers the requirements of Section
6(b)(4),9 in particular, as it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
among its members and other persons
using its facilities. The Exchange
believes the proposed routing fee
changes are appropriate as they reflect
changes to the System routing table
used to determine the order in which
venues are accessed using the ROUC
4 See EDGA Equities Schedule of Fees, fee code
‘‘BY.’’ This rebate applies to securities priced at or
above $1.00. For securities priced below $1.00, a fee
equal to 0.10% of the dollar value is applied
instead. Id.
5 See EDGA Equities Schedule of Fees, fee code
‘‘K.’’ This fee applies to securities priced at or above
$1.00. For securities priced below $1.00, a fee equal
to 0.30% of the dollar value is applied instead. Id.
6 See EDGA Equities Schedule of Fees, fee code
‘‘Q.’’ This fee applies to securities priced at or
above $1.00. For securities priced below $1.00, a fee
equal to 0.30% of the dollar value is applied
instead. Id.
7 NYSE American currently charges a fee for
removing liquidity that is $0.00020 per share in
securities priced at or above $1.00, and 0.25% of
the total dollar value of the transaction in securities
priced below $1.00. See NYSE American Equities
Price List, I. Transaction Fees.
NYSE National currently provides a rebate of
$0.00200 per share in securities priced at or above
$1.00 for members that achieve their taking tier. See
NYSE National Schedule of Fees and Rebates, I.
Transaction Fees, B. Tiered Rates. Orders that
remove liquidity in securities below $1.00 are
executed without charge or rebate. See NYSE
National, Schedule of Fees and Rebates, I.
Transaction Fees, A. General Rates.
8 15 U.S.C. 78f.
9 15 U.S.C. 78f(b)(4).
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]]>Agencies
[Federal Register Volume 84, Number 34 (Wednesday, February 20, 2019)]
[Notices]
[Pages 5173-5176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02740]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85127; File No. SR-MRX-2019-03]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Adopt an
Options Regulatory Fee
February 13, 2019.
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 February 1, 2019, Nasdaq MRX, LLC (``MRX'' 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 5174]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Options 7, Section 5 to adopt an
Options Regulatory Fee or ``ORF''.
The text of the proposed rule change is available on the Exchange's
website at https://nasdaqmrx.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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
MRX proposes to amend its rules at Options 7, Section 5 to adopt an
ORF. Specifically, MRX proposes to adopt an ORF of $0.0004 per contract
side as of February 1, 2019 at Options 7, Section 5, A. The Exchange
proposes to re-letter current ``A'' (FINRA Web CRD Fees) as ``B.'' MRX
has been operating since 2016. Initially MRX did not adopt an ORF as it
was a new market. MRX proposes to adopt an ORF at this time. The
Exchange's proposed ORF should balance the Exchange's regulatory
revenue against the anticipated regulatory costs.
Collection of ORF
MRX would assess the proposed ORF for each customer option
transaction that is either: (1) Executed by a Member on MRX; or (2)
cleared by a MRX Member at The Options Clearing Corporation (``OCC'')
in the customer range,\3\ even if the transaction was executed by a
non-member of MRX, regardless of the exchange on which the transaction
occurs.\4\ If the OCC Clearing Member is an MRX Member, ORF would be
assessed and collected on all cleared customer contracts (after
adjustment for CMTA) \5\; and (2) if the OCC Clearing Member is not a
MRX Member, ORF is collected only on the cleared customer contracts
executed at MRX, taking into account any CMTA instructions which may
result in collecting the ORF from a non-member.
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\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 would use 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.
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By way of example, if Broker A, an MRX Member, routed a customer
order to Cboe Exchange, Inc. (``CBOE'') and the transaction executed on
CBOE and cleared in Broker A's OCC Clearing account, ORF would be
collected by MRX from Broker A's clearing account at OCC via direct
debit. While in this example the transaction was executed on a market
other than MRX, it was cleared by an MRX Member in the member's OCC
clearing account in the customer range, therefore there would be a
regulatory nexus between MRX and the transaction. If Broker A was not
an MRX Member, then no ORF should be assessed and collected because
there is no nexus; the transaction did not execute on MRX nor was it
cleared by an MRX Member.
In the case where a Member both executed a transaction and cleared
the transaction, the ORF would be assessed to and collected from that
Member. In the case where a Member executed a transaction and a
different Member cleared the transaction, the ORF would be assessed to
and collected from the Member who cleared the transaction and not the
Member who executed the transaction. In the case where a non-member
executed a transaction at an away market and a Member cleared the
transaction, the ORF would be assessed to and collected from the Member
who cleared the transaction. In the case where a Member executed a
transaction on MRX and a non-member cleared the transaction, the ORF
would be assessed to the Member that executed the transaction on MRX
and collected from the non-member who cleared the transaction. In the
case where a Member executed a transaction at an away market and a non-
Member cleared the transaction, the ORF would not assessed to the
Member who executed the transaction or collected from the non-member
who cleared the transaction because the Exchange would not have access
to the data to make absolutely certain that ORF should apply. Further,
the data would not allow the Exchange to identify the Member executing
the trade at an away market.
ORF Revenue and Monitoring of ORF
The Exchange would monitor the amount of revenue collected from the
ORF to ensure that it, in combination with other regulatory fees and
fines, would not exceed regulatory costs. In determining whether an
expense is considered a regulatory cost, the Exchange would review all
costs and make 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 would 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, would cover
a material portion, but not all, of the Exchange's regulatory costs.
The Exchange would monitor the amount of revenue collected from the ORF
to ensure that it, in combination with its other regulatory fees and
fines, would not exceed regulatory costs. If the Exchange determines
regulatory revenues exceed regulatory costs, the Exchange would adjust
the ORF by submitting a fee change filing to the Commission.
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, February 1, 2019.\6\ The Exchange believes
that the prior notification will ensure Members are prepared to
configure their systems to properly account for the ORF.
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\6\ See Options Trader Alert #2018-46.
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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
[[Page 5175]]
discrimination between customers, issuers, brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that adopting an ORF of $0.0004 per contract
side as of February 1, 2019 is reasonable because the Exchange's
collection of ORF would be balanced against the amount of regulatory
costs incurred by the Exchange. Specifically, the ORF would balance the
Exchange's regulatory revenue against the anticipated regulatory costs.
The Exchange notes that other options markets have adopted an ORF.\9\
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\9\ CBOE, Nasdaq Phlx LLC, The Nasdaq Options Market LLC, Nasdaq
ISE, LLC, BOX Exchange LLC and Miami International Securities
Exchange LLC are examples of options markets that have adopted an
ORF.
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The Exchange believes that adopting an ORF of $0.0004 per contract
side as of February 1, 2019 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 an MRX Member would be an
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities. The ORF
would be collected by OCC on behalf of MRX from Exchange clearing
members for all customer transactions they clear or from non-members
for all customer transactions they clear that were executed on MRX. The
Exchange believes the ORF would ensure 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 would be 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 would monitor
the amount of revenue collected from the ORF to ensure that it, in
combination with its other regulatory fees and fines, would 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, would 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 would apply to all customer activity, thereby raising
regulatory revenue to offset regulatory expenses. It would also
supplement 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, would 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.\10\ 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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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
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-MRX-2019-03 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-MRX-2019-03. 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-MRX-2019-03, and should be submitted on or
before March 13, 2019.
[[Page 5176]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02740 Filed 2-19-19; 8:45 am]
BILLING CODE 8011-01-P
