Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3, Titled Regular Order Fees and Rebates, 12623-12626 [2020-04291]
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Federal Register / Vol. 85, No. 42 / Tuesday, March 3, 2020 / 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–
ISE–2020–06 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–ISE–2020–06. 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
Number SR–ISE–2020–06 and should be
submitted on or before March 24, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.45
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04290 Filed 3–2–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88293; File No. SR–GEMX–
2020–04]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 3, Titled Regular Order Fees
and Rebates
February 26, 2020.
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
12, 2020, 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
GEMX’s Pricing Schedule. Specifically,
the Exchange proposes to amend
12623
Options 7, Section 3, titled ‘‘Regular
Order Fees and Rebates.’’
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
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
GEMX proposes to amend its Pricing
Schedule at Options 7, Section 3, titled
‘‘Regular Order Fees and Rebates.’’
Specifically, GEMX proposes to amend
the Qualifying Tier Thresholds in Table
1.
The Exchange originally filed the
proposed pricing changes on February
3, 2020 (SR–GEMX–2020–01). On
February 12, 2020, the Exchange
withdrew that filing and submitted this
filing.
Today, GEMX has 4 tiers as part of its
Qualifying Tier Thresholds in Table 1 of
Options 7, Section 3 as follows:
Qualifying Tier Thresholds
TABLE 1
Tier
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Tier
Tier
Tier
Tier
1
2
3
4
.........
.........
.........
.........
Total affiliated member ADV
0–99,999 ...........................................................................................................................................
100,000–224,999, or executes 1% to less than 2% of Customer Total Consolidated Volume ......
225,000–349,999, or executes 2% to less than 3% of Customer Total Consolidated Volume ......
350,000 or more, or executes 3% or greater of Customer Total Consolidated Volume .................
All market participants can qualify for
Tiers 1 through 4, provided they meet
the requisite volume thresholds
specified in Table 1 above. The maker
and taker fees for all market participants
represented in Table 1, displayed above,
are dependent on qualifying for a
45 17
CFR 200.30–3(a)(12).
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Priority customer maker ADV
17:19 Mar 02, 2020
particular tier. With respect to these
tiers, the highest tier threshold attained
applies retroactively in a given month to
all eligible traded contracts and applies
to all eligible market participants. All
eligible volume from affiliated Members
will be aggregated in determining
1 15
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PO 00000
U.S.C. 78s(b)(1).
Frm 00130
Fmt 4703
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 proposes to amend the
current Qualifying Tier Thresholds for
Non-Priority Customers by replacing the
ADV thresholds with total industry
2 17
Sfmt 4703
0–19,999.
20,000–99,999.
100,000–149,999.
150,000 or more.
CFR 240.19b–4.
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Federal Register / Vol. 85, No. 42 / Tuesday, March 3, 2020 / Notices
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percentage thresholds for the Total
Affiliated Member.3 Specifically, the
Exchange proposes that a Member
would be eligible for Tier 1 if it executes
less than 0.65% 4 of Customer Total
Consolidated Volume.5 A Member
would be eligible for Tier 2 if it executes
0.65% to less than 1.5% of Customer
Total Consolidated Volume. A Member
would be eligible for Tier 3 if it executes
1.5% to less than 2.50% of Customer
Total Consolidated Volume. Finally, a
Member would be eligible for Tier 4 if
it executes 2.5% or greater of Customer
Total Consolidated Volume. The
Exchange notes by way of comparison
that the proposed new percentage tiers
for Non-Priority Customer are
equivalent in terms of requisite volume
to the current tiers.
The Exchange also proposes to amend
the current Qualifying Tier Thresholds
by replacing the ADV thresholds with
total industry percentage thresholds
with respect to tier volumes for
Members that submit Priority Customer
maker orders.6 Specifically, the
Exchange proposes that a Member
would be eligible for Tier 1 if it executes
Priority Customer maker volume of less
than 0.10% of Customer Total
Consolidated Volume. A Member would
be eligible for Tier 2 if it executes
Priority Customer maker volume of
0.10% to less than 0.65% of Customer
Total Consolidated Volume. A Member
would be eligible for Tier 3 if it executes
Priority Customer maker Volume of
0.65% to less than 1.20% of Customer
Total Consolidated Volume. Finally, a
Member would be eligible for Tier 4 if
it executes Priority Customer maker
volume of 1.20% or greater of Customer
Total Consolidated Volume. The
Exchange notes that the proposed new
percentage for Priority Customer maker
1–3 tiers are equivalent in terms of
requisite volume to the existing tiers.
Priority maker Tier 4 requires additional
volume to meet the proposed criteria of
3 As proposed, the Total Affiliated Member % of
Customer Total Consolidated Volume category
includes 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. See proposed Pricing Schedule
at Options 7, Section 3.
4 For example, 0.65% of Customer Total
Consolidated Volume is approximately 100,000
contracts per day.
5 As proposed, for purposes of measuring Total
Affiliated Member % of Customer Total
Consolidated Volume, 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. See
proposed Pricing Schedule at Options 7, Section 3.
6 As proposed, the Priority Customer maker % of
Customer Total Consolidated Volume category
includes all Priority Customer volume that adds
liquidity in all symbols. See proposed Pricing
Schedule at Options 7, Section 3.
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17:19 Mar 02, 2020
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1.20% of Customer Total Consolidated
Volume, which is approximately
180,000 contracts per day, as compared
to a current ADV of 150,000 contracts.
The Exchange is proposing to amend
these volume requirements to align with
increasing Member activity on GEMX
over time. The Exchange believes that
Members will not be impacted by this
proposal with the exception of the Tier
4 Priority Customer maker tier, which is
more stringent as a result of this
proposal.7 While the Tier 4 Priority
Customer tier is more stringent, the
proposed pricing is intended to
continue to reward Members that
submit Priority Customer order flow to
the Exchange and thereby increase
liquidity and trading opportunities for
all Members. The Total Affiliated
Member % of Customer Total
Consolidated Volume category, as
proposed and described below, includes
all volume executed on the Exchange in
all symbols and order types, as is the
case today. The maker/taker fees will
remain the same for all Member orders 8
regardless of the tier achieved.
Finally, the Exchange proposes to
amend the notes within Options 7,
Section 3, which follow the Qualifying
Tier Thresholds, to replace the term
‘‘ADV’’ with ‘‘% of Customer Total
Consolidated Volume’’ to conform the
text to the amendments proposed
herein.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,9 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,10 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The proposed changes to its Pricing
Schedule are reasonable in several
respects. As a threshold matter, the
Exchange is subject to significant
competitive forces in the market for
options transaction services that
constrain its pricing determinations in
that market. The fact that this market is
competitive has long been recognized by
7 Based on 2019 participant tier qualifications, the
Exchange anticipates that market participants will
continue to qualify for the Tier 4 Priority Customer
maker tier, notwithstanding the additional volume
requirements.
8 The Exchange is not proposing to amend any
GEMX maker or taker fees within Options 7,
Section 3 for Penny and Non-Penny Symbols.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4) and (5).
PO 00000
Frm 00131
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the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C.
Circuit stated as follows: ‘‘[n]o one
disputes that competition for order flow
is ‘fierce.’ . . . As the SEC explained,
‘[i]n the U.S. national market system,
buyers and sellers of securities, and the
broker-dealers that act as their orderrouting 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’. . . .’’ 11
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 12
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
transaction services. The Exchange is
only one of options venues to which
market participants may direct their
order flow. Competing options
exchanges offer similar tiered pricing
structures to that of the Exchange,
including schedules of rebates and fees
that apply based upon Members
achieving certain volume thresholds.
Within this environment, market
participants can freely and often do shift
their order flow among the Exchange
and competing venues in response to
changes in their respective pricing
schedules. As such, the proposal
represents a reasonable attempt by the
Exchange to increase its liquidity and
market share relative to its competitors.
The Exchange’s proposal to amend
the current Qualifying Tier Thresholds
for Non-Priority Customers by replacing
the ADV thresholds with total industry
percentage thresholds for the Total
Affiliated Member is consistent with the
11 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
12 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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Act.13 The Exchange is proposing to
base Tiers 1 through 4 on a percentage
of industry volume in recognition of the
fact that the volume executed by a
Member may rise or fall with industry
volume. A percentage of industry
volume calculation allows the
Exchange’s tiers to be calibrated to
current market volumes rather than
requiring the same amount of volume
regardless of market conditions. While
the amount of volume required by the
proposed tiers may change in any given
month due to increases or decreases in
industry volume, the Exchange believes
that the proposed tier requirements are
set at appropriate levels. These
proposed percentage of industry volume
tier requirements are no more stringent
than the current ADV requirements. The
Exchange is proposing to effectively
equalize the volume thresholds with the
current Qualifying Tier Thresholds so
that the Exchange may continue to align
the tier requirements with GEMX’s
anticipated growth as a venue (and
corresponding increased Member
activity) over time. These proposed
percentage of industry volume tier
requirements are no more stringent than
the current ADV requirements and
therefore the Exchange does not
anticipate any impact to Non-Priority
Customers as a result of replacing the
ADV thresholds with total industry
percentage thresholds for the Total
Affiliated Member.
The Exchange’s proposal to amend
the current Qualifying Tier Thresholds
for Priority Customers makers by
replacing the ADV thresholds with total
industry percentage thresholds for the
Total Affiliated Member is consistent
with the Act.14 The Exchange is
13 The Exchange proposes that a Member would
be eligible for Tier 1 if it executes less than 0.65%
of Customer Total Consolidated Volume. A Member
would be eligible for Tier 2 if it executes 0.65% to
less than 1.5% of Customer Total Consolidated
Volume. A Member would be eligible for Tier 3 if
it executes 1.5% to less than 2.50% of Customer
Total Consolidated Volume. Finally, a Member
would be eligible for Tier 4 if it executes 2.5% or
greater of Customer Total Consolidated Volume. As
proposed, for purposes of measuring Total
Affiliated and/or Appointed Member % of
Customer Total Consolidated Volume, 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.
14 The Exchange proposes that a Member would
be eligible for Tier 1 if it executes Priority Customer
maker volume of less than 0.10% of Customer Total
Consolidated Volume. A Member would be eligible
for Tier 2 if it executes Priority Customer maker
volume of 0.10% to less than 0.65% of Customer
Total Consolidated Volume. A Member would be
eligible for Tier 3 if it executes Priority Customer
maker Volume of 0.65% to less than 1.20% of
Customer Total Consolidated Volume. Finally, a
Member would be eligible for Tier 4 if it executes
Priority Customer maker volume of 1.20% or greater
of Customer Total Consolidated Volume.
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17:19 Mar 02, 2020
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proposing to base Tiers 1 through 4 on
a percentage of industry volume in
recognition of the fact that the volume
executed by a Member may rise or fall
with industry volume. A percentage of
industry volume calculation allows the
Exchange’s tiers to be calibrated to
current market volumes rather than
requiring the same amount of volume
regardless of market conditions. While
the amount of volume required by the
proposed tiers may change in any given
month due to increases or decreases in
industry volume, the Exchange believes
that the proposed tier requirements are
set at appropriate levels. These
proposed percentage of industry volume
tier requirements are no more stringent
than the current ADV requirements for
Tier 1 through 3 and therefore the
Exchange does not anticipate any
impact to Members that submit Priority
Customer maker orders as a result of
replacing the ADV thresholds with total
industry percentage thresholds.
However, with this proposal, Priority
Customer Tier 4 is more stringent than
the current tier level. Despite the
increased volume amount to qualify for
proposed Priority Customer Tier 4 of
1.20% of Customer Total Consolidated
Volume, which is approximately
180,000 contracts per day as compared
to a current ADV of 150,000 contracts,
the maker/taker tiered fee structure is
intended to continue to reward
Members to bring more order flow to the
Exchange and thereby increase liquidity
and trading opportunities for all
Members. Overall, the Exchange is
proposing to effectively equalize the
volume thresholds with the current
Qualifying Tier Thresholds so that the
Exchange may continue to align the tier
requirements with GEMX’s anticipated
growth as a venue (and corresponding
increased Member activity) over time.
The Exchange’s proposal to amend
the current Non-Priority Customer and
Priority Customer maker Qualifying Tier
Thresholds is equitable and not unfairly
discriminatory. The proposed tiers will
be applied uniformly to all market
participants, respectively. Furthermore,
the Exchange believes that the
qualifying tier thresholds are equitable
and not unfairly discriminatory as all
market participants may qualify for a
higher tier by executing the required
volume of contracts, either through the
Member or its affiliates, as is the case
today. The Exchange believes that
Members will not be impacted by this
proposal, with the exception of the Tier
4 Priority Customer maker. With this
proposal, Tier 4 Priority Customers will
be required to submit a greater amount
of order flow to qualify for proposed
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12625
Tier 4 as compared to today (1.20% of
Customer Total Consolidated Volume is
approximately 180,000 contracts per
day as compared to a current ADV of
150,000 contracts). Priority Customer
orders bring valuable liquidity to the
market which liquidity benefits other
market participants. Further, the maker/
taker fees will remain the same for all
Member orders 15 regardless of the tier
achieved.
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.
Intermarket Competition
The proposal does not impose an
undue burden on intermarket
competition. The Exchange believes its
proposal remains competitive with
other options markets and will offer
market participants with another choice
of where to transact options. 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 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.
Intramarket Competition
The proposed amendments do not
impose an undue burden on intramarket
competition. The Exchange’s proposal
to amend the current Non-Priority
Customer and Priority Customer
Qualifying Tier Thresholds do not
impose an undue burden on intramarket
competition. The tiers will be applied
uniformly to all market participants.
Furthermore, all market participants
may qualify for a higher tier by
executing the required volume of
contracts, either through the Member or
its affiliates, as is the case today. These
15 The Exchange is not proposing to amend any
GEMX maker or taker fees within Options 7,
Section 3 for Penny and Non-Penny Symbols.
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Federal Register / Vol. 85, No. 42 / Tuesday, March 3, 2020 / Notices
proposed percentage of industry volume
tier requirements are no more stringent
than the current ADV requirements,
with the exception of the Tier 4 Priority
Customer maker. With this proposal,
Tier 4 Priority Customers will be
required to submit a greater amount of
order flow to qualify for the current Tier
4. Priority Customer orders bring
valuable liquidity to the market which
liquidity benefits other market
participants. As to the remainder of the
proposed tiers, the Exchange does not
anticipate any impact to market
participants as a result of replacing the
ADV thresholds with total industry
percentage thresholds. Finally, the
maker/taker fees will remain the same
for all Member orders 16 regardless of
the tier achieved. For the foregoing
reasons, the Exchange does not believe
that its proposal will have an undue
burden on intramarket competition.
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,17 and Rule
19b–4(f)(2) 18 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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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:
16 The Exchange is not proposing to amend any
GEMX maker or taker fees within Options 7,
Section 3 for Penny and Non-Penny Symbols.
17 15 U.S.C. 78s(b)(3)(A)(ii).
18 17 CFR 240.19b–4(f)(2).
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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–
GEMX–2020–04 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–2020–04. 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
Number SR–GEMX–2020–04 and
should be submitted on or before March
24, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04291 Filed 3–2–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88286; File No. SR–Phlx–
2020–05]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 3,
Section 7 Related to Order Types and
Times-in-Force Provisions
February 26, 2020.
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
14, 2020, Nasdaq PHLX LLC (‘‘Phlx’’ 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
Options 3, Section 7, ‘‘Electronic
Acceptance of Quotes and Orders’’ and
Options 8, Section 32, ‘‘Certain Types of
Floor-Based (Non-System) Orders
Defined,’’ to permit the Exchange to
determine the availability of order types
and time-in-force provisions.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqphlx.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.
1 15
19 17
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 85, Number 42 (Tuesday, March 3, 2020)]
[Notices]
[Pages 12623-12626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04291]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88293; File No. SR-GEMX-2020-04]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 3, Titled Regular Order Fees and Rebates
February 26, 2020.
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 12, 2020, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend GEMX's Pricing Schedule.
Specifically, the Exchange proposes to amend Options 7, Section 3,
titled ``Regular Order Fees and Rebates.''
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
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
GEMX proposes to amend its Pricing Schedule at Options 7, Section
3, titled ``Regular Order Fees and Rebates.'' Specifically, GEMX
proposes to amend the Qualifying Tier Thresholds in Table 1.
The Exchange originally filed the proposed pricing changes on
February 3, 2020 (SR-GEMX-2020-01). On February 12, 2020, the Exchange
withdrew that filing and submitted this filing.
Today, GEMX has 4 tiers as part of its Qualifying Tier Thresholds
in Table 1 of Options 7, Section 3 as follows:
Qualifying Tier Thresholds
Table 1
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Priority customer
Tier Total affiliated member ADV maker ADV
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Tier 1........... 0-99,999......................... 0-19,999.
Tier 2........... 100,000-224,999, or executes 1% 20,000-99,999.
to less than 2% of Customer
Total Consolidated Volume.
Tier 3........... 225,000-349,999, or executes 2% 100,000-149,999.
to less than 3% of Customer
Total Consolidated Volume.
Tier 4........... 350,000 or more, or executes 3% 150,000 or more.
or greater of Customer Total
Consolidated Volume.
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All market participants can qualify for Tiers 1 through 4, provided
they meet the requisite volume thresholds specified in Table 1 above.
The maker and taker fees for all market participants represented in
Table 1, displayed above, are dependent on qualifying for a particular
tier. With respect to these tiers, the highest tier threshold attained
applies retroactively in a given month to all eligible traded contracts
and applies to all eligible market participants. 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 proposes to amend the current Qualifying Tier
Thresholds for Non-Priority Customers by replacing the ADV thresholds
with total industry
[[Page 12624]]
percentage thresholds for the Total Affiliated Member.\3\ Specifically,
the Exchange proposes that a Member would be eligible for Tier 1 if it
executes less than 0.65% \4\ of Customer Total Consolidated Volume.\5\
A Member would be eligible for Tier 2 if it executes 0.65% to less than
1.5% of Customer Total Consolidated Volume. A Member would be eligible
for Tier 3 if it executes 1.5% to less than 2.50% of Customer Total
Consolidated Volume. Finally, a Member would be eligible for Tier 4 if
it executes 2.5% or greater of Customer Total Consolidated Volume. The
Exchange notes by way of comparison that the proposed new percentage
tiers for Non-Priority Customer are equivalent in terms of requisite
volume to the current tiers.
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\3\ As proposed, the Total Affiliated Member % of Customer Total
Consolidated Volume category includes 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.
See proposed Pricing Schedule at Options 7, Section 3.
\4\ For example, 0.65% of Customer Total Consolidated Volume is
approximately 100,000 contracts per day.
\5\ As proposed, for purposes of measuring Total Affiliated
Member % of Customer Total Consolidated Volume, 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. See proposed Pricing Schedule at Options 7, Section
3.
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The Exchange also proposes to amend the current Qualifying Tier
Thresholds by replacing the ADV thresholds with total industry
percentage thresholds with respect to tier volumes for Members that
submit Priority Customer maker orders.\6\ Specifically, the Exchange
proposes that a Member would be eligible for Tier 1 if it executes
Priority Customer maker volume of less than 0.10% of Customer Total
Consolidated Volume. A Member would be eligible for Tier 2 if it
executes Priority Customer maker volume of 0.10% to less than 0.65% of
Customer Total Consolidated Volume. A Member would be eligible for Tier
3 if it executes Priority Customer maker Volume of 0.65% to less than
1.20% of Customer Total Consolidated Volume. Finally, a Member would be
eligible for Tier 4 if it executes Priority Customer maker volume of
1.20% or greater of Customer Total Consolidated Volume. The Exchange
notes that the proposed new percentage for Priority Customer maker 1-3
tiers are equivalent in terms of requisite volume to the existing
tiers. Priority maker Tier 4 requires additional volume to meet the
proposed criteria of 1.20% of Customer Total Consolidated Volume, which
is approximately 180,000 contracts per day, as compared to a current
ADV of 150,000 contracts.
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\6\ As proposed, the Priority Customer maker % of Customer Total
Consolidated Volume category includes all Priority Customer volume
that adds liquidity in all symbols. See proposed Pricing Schedule at
Options 7, Section 3.
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The Exchange is proposing to amend these volume requirements to
align with increasing Member activity on GEMX over time. The Exchange
believes that Members will not be impacted by this proposal with the
exception of the Tier 4 Priority Customer maker tier, which is more
stringent as a result of this proposal.\7\ While the Tier 4 Priority
Customer tier is more stringent, the proposed pricing is intended to
continue to reward Members that submit Priority Customer order flow to
the Exchange and thereby increase liquidity and trading opportunities
for all Members. The Total Affiliated Member % of Customer Total
Consolidated Volume category, as proposed and described below, includes
all volume executed on the Exchange in all symbols and order types, as
is the case today. The maker/taker fees will remain the same for all
Member orders \8\ regardless of the tier achieved.
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\7\ Based on 2019 participant tier qualifications, the Exchange
anticipates that market participants will continue to qualify for
the Tier 4 Priority Customer maker tier, notwithstanding the
additional volume requirements.
\8\ The Exchange is not proposing to amend any GEMX maker or
taker fees within Options 7, Section 3 for Penny and Non-Penny
Symbols.
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Finally, the Exchange proposes to amend the notes within Options 7,
Section 3, which follow the Qualifying Tier Thresholds, to replace the
term ``ADV'' with ``% of Customer Total Consolidated Volume'' to
conform the text to the amendments proposed herein.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to its Pricing Schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for options transaction
services that constrain its pricing determinations in that market. The
fact that this market is competitive has long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission, the D.C.
Circuit stated as follows: ``[n]o one disputes that competition for
order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S.
national market system, buyers and sellers of securities, and the
broker-dealers that act as their order-routing agents, have a wide
range of choices of where to route orders for execution'; [and] `no
exchange can afford to take its market share percentages for granted'
because `no exchange possesses a monopoly, regulatory or otherwise, in
the execution of order flow from broker dealers'. . . .'' \11\
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\11\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \12\
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\12\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is only one of options
venues to which market participants may direct their order flow.
Competing options exchanges offer similar tiered pricing structures to
that of the Exchange, including schedules of rebates and fees that
apply based upon Members achieving certain volume thresholds.
Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. As such, the
proposal represents a reasonable attempt by the Exchange to increase
its liquidity and market share relative to its competitors.
The Exchange's proposal to amend the current Qualifying Tier
Thresholds for Non-Priority Customers by replacing the ADV thresholds
with total industry percentage thresholds for the Total Affiliated
Member is consistent with the
[[Page 12625]]
Act.\13\ The Exchange is proposing to base Tiers 1 through 4 on a
percentage of industry volume in recognition of the fact that the
volume executed by a Member may rise or fall with industry volume. A
percentage of industry volume calculation allows the Exchange's tiers
to be calibrated to current market volumes rather than requiring the
same amount of volume regardless of market conditions. While the amount
of volume required by the proposed tiers may change in any given month
due to increases or decreases in industry volume, the Exchange believes
that the proposed tier requirements are set at appropriate levels.
These proposed percentage of industry volume tier requirements are no
more stringent than the current ADV requirements. The Exchange is
proposing to effectively equalize the volume thresholds with the
current Qualifying Tier Thresholds so that the Exchange may continue to
align the tier requirements with GEMX's anticipated growth as a venue
(and corresponding increased Member activity) over time. These proposed
percentage of industry volume tier requirements are no more stringent
than the current ADV requirements and therefore the Exchange does not
anticipate any impact to Non-Priority Customers as a result of
replacing the ADV thresholds with total industry percentage thresholds
for the Total Affiliated Member.
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\13\ The Exchange proposes that a Member would be eligible for
Tier 1 if it executes less than 0.65% of Customer Total Consolidated
Volume. A Member would be eligible for Tier 2 if it executes 0.65%
to less than 1.5% of Customer Total Consolidated Volume. A Member
would be eligible for Tier 3 if it executes 1.5% to less than 2.50%
of Customer Total Consolidated Volume. Finally, a Member would be
eligible for Tier 4 if it executes 2.5% or greater of Customer Total
Consolidated Volume. As proposed, for purposes of measuring Total
Affiliated and/or Appointed Member % of Customer Total Consolidated
Volume, 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.
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The Exchange's proposal to amend the current Qualifying Tier
Thresholds for Priority Customers makers by replacing the ADV
thresholds with total industry percentage thresholds for the Total
Affiliated Member is consistent with the Act.\14\ The Exchange is
proposing to base Tiers 1 through 4 on a percentage of industry volume
in recognition of the fact that the volume executed by a Member may
rise or fall with industry volume. A percentage of industry volume
calculation allows the Exchange's tiers to be calibrated to current
market volumes rather than requiring the same amount of volume
regardless of market conditions. While the amount of volume required by
the proposed tiers may change in any given month due to increases or
decreases in industry volume, the Exchange believes that the proposed
tier requirements are set at appropriate levels. These proposed
percentage of industry volume tier requirements are no more stringent
than the current ADV requirements for Tier 1 through 3 and therefore
the Exchange does not anticipate any impact to Members that submit
Priority Customer maker orders as a result of replacing the ADV
thresholds with total industry percentage thresholds. However, with
this proposal, Priority Customer Tier 4 is more stringent than the
current tier level. Despite the increased volume amount to qualify for
proposed Priority Customer Tier 4 of 1.20% of Customer Total
Consolidated Volume, which is approximately 180,000 contracts per day
as compared to a current ADV of 150,000 contracts, the maker/taker
tiered fee structure is intended to continue to reward Members to bring
more order flow to the Exchange and thereby increase liquidity and
trading opportunities for all Members. Overall, the Exchange is
proposing to effectively equalize the volume thresholds with the
current Qualifying Tier Thresholds so that the Exchange may continue to
align the tier requirements with GEMX's anticipated growth as a venue
(and corresponding increased Member activity) over time.
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\14\ The Exchange proposes that a Member would be eligible for
Tier 1 if it executes Priority Customer maker volume of less than
0.10% of Customer Total Consolidated Volume. A Member would be
eligible for Tier 2 if it executes Priority Customer maker volume of
0.10% to less than 0.65% of Customer Total Consolidated Volume. A
Member would be eligible for Tier 3 if it executes Priority Customer
maker Volume of 0.65% to less than 1.20% of Customer Total
Consolidated Volume. Finally, a Member would be eligible for Tier 4
if it executes Priority Customer maker volume of 1.20% or greater of
Customer Total Consolidated Volume.
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The Exchange's proposal to amend the current Non-Priority Customer
and Priority Customer maker Qualifying Tier Thresholds is equitable and
not unfairly discriminatory. The proposed tiers will be applied
uniformly to all market participants, respectively. Furthermore, the
Exchange believes that the qualifying tier thresholds are equitable and
not unfairly discriminatory as all market participants may qualify for
a higher tier by executing the required volume of contracts, either
through the Member or its affiliates, as is the case today. The
Exchange believes that Members will not be impacted by this proposal,
with the exception of the Tier 4 Priority Customer maker. With this
proposal, Tier 4 Priority Customers will be required to submit a
greater amount of order flow to qualify for proposed Tier 4 as compared
to today (1.20% of Customer Total Consolidated Volume is approximately
180,000 contracts per day as compared to a current ADV of 150,000
contracts). Priority Customer orders bring valuable liquidity to the
market which liquidity benefits other market participants. Further, the
maker/taker fees will remain the same for all Member orders \15\
regardless of the tier achieved.
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\15\ The Exchange is not proposing to amend any GEMX maker or
taker fees within Options 7, Section 3 for Penny and Non-Penny
Symbols.
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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.
Intermarket Competition
The proposal does not impose an undue burden on intermarket
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. 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 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.
Intramarket Competition
The proposed amendments do not impose an undue burden on
intramarket competition. The Exchange's proposal to amend the current
Non-Priority Customer and Priority Customer Qualifying Tier Thresholds
do not impose an undue burden on intramarket competition. The tiers
will be applied uniformly to all market participants. Furthermore, all
market participants may qualify for a higher tier by executing the
required volume of contracts, either through the Member or its
affiliates, as is the case today. These
[[Page 12626]]
proposed percentage of industry volume tier requirements are no more
stringent than the current ADV requirements, with the exception of the
Tier 4 Priority Customer maker. With this proposal, Tier 4 Priority
Customers will be required to submit a greater amount of order flow to
qualify for the current Tier 4. Priority Customer orders bring valuable
liquidity to the market which liquidity benefits other market
participants. As to the remainder of the proposed tiers, the Exchange
does not anticipate any impact to market participants as a result of
replacing the ADV thresholds with total industry percentage thresholds.
Finally, the maker/taker fees will remain the same for all Member
orders \16\ regardless of the tier achieved. For the foregoing reasons,
the Exchange does not believe that its proposal will have an undue
burden on intramarket competition.
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\16\ The Exchange is not proposing to amend any GEMX maker or
taker fees within Options 7, Section 3 for Penny and Non-Penny
Symbols.
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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,\17\ and Rule 19b-4(f)(2) \18\ 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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\17\ 15 U.S.C. 78s(b)(3)(A)(ii).
\18\ 17 CFR 240.19b-4(f)(2).
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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 [email protected]. Please include
File Number SR-GEMX-2020-04 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-2020-04. 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 Number SR-GEMX-2020-04 and should be submitted on
or before March 24, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04291 Filed 3-2-20; 8:45 am]
BILLING CODE 8011-01-P
