Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Pricing Schedule at Options 7, 36633-36637 [2020-12985]
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Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
report FINRA Facility Data to the
Central Repository, the condition that
the Participants will require the Plan
IV. Discussion
Processor to link FINRA Facility Data to
Section 36 of the Exchange Act grants Industry Member execution reports
the Commission the authority, with
submitted to the Central Repository,
certain limitations, to ‘‘conditionally or
conditions specifying that the
unconditionally exempt any person,
Participants’ Compliance Rules will
security, or transaction . . . from any
require Industry Members to report
provision or provisions of [the Exchange directly to the Central Repository if they
Act] or of any rule or regulation
do not submit the required information
thereunder, to the extent that such
to a FINRA Facility or are unable to
exemption is necessary or appropriate
provide a link between the execution
in the public interest, and is consistent
reported to the Central Repository and
with the protection of investors.’’ 35 Rule the corresponding FINRA Facility trade
608(e) of Regulation NMS under the
report or trade cancellation, and the
Exchange Act authorizes the
condition that FINRA would seek to
Commission to exempt, either
amend its FINRA Facility rules and
unconditionally or on specified terms
technical specifications to permit each
and conditions, any self-regulatory
FINRA Facility to accept timestamps up
organization, member thereof, or
to the granularity required by the CAT
specified security, from the provisions
NMS Plan.37 The Commission believes
of the rule if the Commission
that such conditions will help to ensure
determines that such exemption is
the collection of relevant and equivalent
consistent with the public interest, the
data regarding cancelled trades and
protection of investors, the maintenance clearing brokers.
of fair and orderly markets and the
The Commission also believes that the
removal of impediments to, and
phased implementation of the
perfection of the mechanisms of, a
Participants’ alternative approach is
national market system.36
appropriate. Although some elements of
The Commission believes that,
the Participants’ alternative approach
pursuant to Section 36 of the Exchange
will not be fully implemented until
Act, exemptive relief is appropriate in
2021 or 2022, including direct reporting
the public interest and consistent with
by Industry Members of clearing
the protection of investors, and that,
numbers and contra party information
pursuant to Rule 608(e) under the
in certain circumstances, the
Exchange Act, exemptive relief is
Participants have indicated that these
consistent with the public interest, the
elements would only affect a limited or
protection of investors, the maintenance de minimis amount of data.38 The
of fair and orderly markets and the
Commission therefore believes that
removal of impediments to, and the
granting the requested exemptive relief
perfection of the mechanisms of, a
according to the timeline proposed by
national market system. Relying on
the Participants is unlikely to have a
FINRA Facility Data in lieu of requiring significant impact on regulators’ shortIndustry Members to report the SROterm ability to use the transactional data
Assigned Market Participant Identifier
reported to the Central Repository.
of the clearing broker, if applicable, and Moreover, the Commission believes that
a cancelled trade indicator will be more granting exemptive relief according to
efficient and more cost-effective for
the timeline proposed by the
Industry Members, because this
Participants will simultaneously
proposed alternative approach will
provide Industry Members with
avoid burdening Industry Members with immediate relief from incurring
reporting data regarding clearing brokers duplicative costs and encourage
and cancelled trades pursuant to two
progress towards full implementation of
reporting regimes. Moreover, once the
the alternative approach on a reasonable
alternative approach is fully
and feasible schedule.
implemented, FINRA Facility Data
To the extent that the Participants are
provided to the CAT would be
availing themselves of exemptive relief
equivalent to the data required by
from a CAT NMS Plan requirement,
Sections 6.4(d)(ii)(A)(2) and (B).
such requirement shall not be included
The Commission believes that the
in the requirements for a Financial
conditions proposed by the Participants
37 See notes 14–22, 27–29 and associated text
in their request for exemptive relief are
supra for a discussion of these conditions. The
also appropriate, including the
Participants have an obligation to enforce Industry
condition that FINRA will continue to
Member compliance with their own rules,
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trades pursuant to two reporting
regimes.34
including the Compliance Rules and FINRA’s rules
relating to its trade reporting facilities. See, e.g.,
note 10 supra.
38 See, e.g., notes 23–26 and associated text supra.
34 See
id. at 5.
35 15 U.S.C. 78mm(a)(1).
36 17 CFR 242.608(e).
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36633
Accountability Milestone, provided that
the conditions of the exemption are
satisfied.39
Accordingly, it is hereby ordered,
pursuant to Section 36(a)(1) of the
Exchange Act 40 and Rule 608(e) under
the Exchange Act,41 that the
Commission grants the Participants’
request for exemptive relief, as set forth
in the Participant Letter, from the
requirements in Section 6.4(d)(ii)(A)(2)
and (B) of the CAT NMS Plan, subject
to the conditions described by the
Participants and in this Order.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12998 Filed 6–16–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89046; File No. SR–MRX–
2020–11]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Its Pricing
Schedule at Options 7
June 11, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
39 See Securities Exchange Act Release No. 88890
(May 15, 2020), 85 FR 31322, 31335 (May 22, 2020).
If the Participants do not meet the conditions set
forth herein, on the schedule set forth herein, their
ability to recover fees from Industry Members could
be impacted pursuant to the terms of Section 11.6
of the CAT NMS Plan. See CAT NMS Plan, supra
note 3, at Section 11.6 (effective June 22, 2020).
Specifically, linkage of execution reports submitted
to the Central Repository by Industry Members to
corresponding FINRA trade reports and Industry
Member reporting of unique trade identifiers,
scheduled to begin on October 26, 2020, along with
any related changes to the Compliance Rules, will
now be relevant to the Full Implementation of Core
Equity Reporting milestone (Period 2), which must
be satisfied no later than December 31, 2020.
Functionality enabling Industry Members to report
clearing numbers and contra party information
directly to the Central Repository, scheduled to
begin on April 26, 2021 for Large Industry Members
and Small OATS Reporters, along with any related
changes to the Compliance Rules and FINRA’s
Trade Reporting Facilities and FINRA’s Alternative
Display Facility acceptance of timestamps up to the
granularity required by the CAT NMS Plan,
scheduled to begin by December 15, 2021, will now
be relevant to the Full Availability and Regulatory
Utilization of Transactional Database Functionality
milestone (Period 3), which must be satisfied no
later than December 31, 2021. FINRA’s OTC
Reporting Facility acceptance of timestamps up to
the granularity required by the CAT NMS Plan,
scheduled to begin by December 15, 2022, will now
be relevant to the Full Implementation of CAT NMS
Plan Requirements milestone (Period 4), which
must be satisfied no later than December 30, 2022.
40 15 U.S.C. 78mm(a)(1).
41 17 CFR 242.608(e).
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Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 1,
2020, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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 its
Pricing Schedule at Options 7 in
connection with the pricing for orders
entered into the Exchange’s Price
Improvement Mechanism (‘‘PIM’’).
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
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
Pricing Schedule at Options 7 to adopt
separate fees for complex PIM orders
that will be identical to the current fees
for regular PIM orders. The Exchange
also proposes to amend the PIM breakup rebates to provide the rebate only for
PIM orders that meet specified size
requirements. In connection with the
foregoing changes, the Exchange also
proposes to amend its Pricing Schedule
to set forth its PIM pricing in a separate
section for better readability. Each
change is discussed in detail below.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Background
For regular PIM orders, the Exchange
currently charges a PIM originating fee
in Penny and Non-Penny Symbols of
$0.20 per contract for Non-Priority
Customers 3 and $0.00 per contract for
Priority Customers.4 The Exchange also
charges all market participants a PIM
contra-side fee in Penny and Non-Penny
Symbols of $0.05 per contract. Members
that execute an average daily volume
(‘‘ADV’’) of 10,000 PIM originating
contracts or greater within a month are
eligible for a reduced PIM contra-side
fee of $0.02 per contract (in lieu of $0.05
per contract). In addition, the Exchange
presently charges PIM response fees of
$0.50 per contract in Penny Symbols
and $1.10 per contract in Non-Penny
Symbols.5
The Exchange currently pays a regular
PIM break-up rebate to an originating
Priority Customer PIM order that
executes with a response (order or
quote), other than the PIM contra-side
order, of $0.40 per contract in Penny
Symbols and $1.00 per contract in NonPenny Symbols. Notwithstanding the
foregoing, Members that execute an
ADV of 10,000 PIM originating contracts
or greater within a month will receive
a break-up rebate of $1.05 per contract
in Non-Penny Symbols (in lieu of $1.00
per contract).
As it relates to complex PIM orders,
the Exchange currently charges NonPriority Customers a uniform $0.15 per
contract fee for all complex orders,
including complex orders submitted
into the Complex PIM. The $0.15 per
contract fee applies to an originating
order, contra-side order and responses
entered into MRX’s Complex PIM. No
complex order fees are presently
assessed to Priority Customers,
including Priority Customer complex
PIM orders.
PIM Fees
The Exchange now proposes to adopt
separate fees for complex PIM orders
within new Section 5.E of Options 7
that will be identical to the current fees
assessed for regular PIM orders. In
particular, the Exchange proposes to
charge all complex Non-Priority
3 Non-Priority Customers consist of Market
Makers (including Market Maker orders sent to the
Exchange by EAMs), Non-Nasdaq MRX Market
Makers (FarMM), Firm Proprietary/Broker-Dealers,
and Professional Customers.
4 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in Nasdaq MRX
Options 1, Section 1(a)(36).
5 The PIM response fees are the same as the
response fees presently charged for all other
Crossing Orders. See Options 7, Section 3, Table 2.
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Customer PIM originating orders in
Penny and Non-Penny Symbols the
$0.20 per contract PIM originating fee
that it currently assesses to all regular
Non-Priority Customer PIM originating
orders, and, for complex Priority
Customer PIM originating orders, the
$0.00 per contract PIM originating fee it
currently assesses to regular Priority
Customer PIM originating orders.
Likewise, the Exchange proposes to
assess all market participants $0.05 per
contract for complex PIM contra-side
orders in Penny and Non-Penny
Symbols, identical to how regular PIM
contra-side orders are charged today.
The Exchange further proposes to offer
market participants an opportunity to
lower the proposed complex PIM
contra-side fee from $0.05 to $0.02 per
contract if they execute an ADV of
10,000 PIM originating contracts or
greater within a month, identical to the
reduced regular PIM contra-side fee it
currently offers market participants
today.6 In addition, the Exchange
proposes to assess responses entered
into complex PIM at the same rate as the
fees currently assessed for regular PIM
responses (i.e., $0.50 per contract in
Penny Symbols and $1.10 in Non-Penny
Symbols).
PIM Break-up Rebate
The Exchange also proposes to adopt
complex PIM break-up rebates that are
similar to the regular PIM break-up
rebates described above, with two
differences. First, the Exchange
proposes, for complex PIM orders only,
to pay a higher break-up rebate of $0.45
per contract (in lieu of $0.40 per
contract) with respect to a Priority
Customer PIM originating order in
Penny Symbols for qualifying Members
that execute an ADV of 10,000 PIM
originating contracts or greater within a
month.7 Currently for regular PIM
orders, the Exchange only provides a
higher break-up rebate with respect to a
Priority Customer PIM originating order
in Non-Penny Symbols ($1.05 per
contract in lieu of $1.00 per contract),
not Penny Symbols, to qualifying
Members that meet this ADV threshold.8
Second, the Exchange proposes to
provide break-up rebates only for
Priority Customer PIM originating
orders that meet specified size
requirements. Specifically, the
Exchange proposes to apply the breakup rebates only to regular PIM orders of
6 See
proposed note 1 in Options 7, Section 5.E.
proposed note 3 in Options 7, Section 5.E.
8 As discussed later in this filing, the Exchange’s
proposal will offer this higher Non-Penny Symbol
rebate of $1.05 per contract for both regular and
complex PIM orders. See proposed note 3 in
Options 7, Section 5.E.
7 See
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Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
500 or fewer contracts and to complex
PIM orders where the largest leg is 500
or fewer contracts.9 As such, the breakup rebates currently offered to regular
Priority Customer PIM originating
orders of more than 500 contracts will
be eliminated under this proposal. The
Exchange is seeking to attract smaller
and medium sized Priority Customer
PIM order flow to MRX with this
change.
Otherwise, the Exchange will apply
the same break-up rebates to complex
Priority Customer PIM originating
orders as the current rebates applied to
regular Priority Customer PIM
originating orders, provided that such
PIM orders meet the proposed size
requirement of 500 or fewer contracts.
Thus, the break-up rebates will be $0.40
per contract in Penny Symbols and
$1.00 per contract in Non-Penny
Symbols, applicable to Priority
Customer PIM originating orders that
are 500 or fewer contracts (for regular
orders) and where the largest leg is 500
or fewer contracts (for complex orders).
Furthermore, Members that execute an
ADV of 10,000 PIM originating contracts
or greater within a month will be
eligible to receive, Exchange will apply
the break-up rebate of $1.05 per contract
in Non-Penny Symbols (in lieu of $1.00
per contract)
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Technical Changes
For better readability, the Exchange
proposes to relocate the fees and rebates
for regular PIM orders currently within
Table 2 of Options 7, Section 3 into new
Section 5.E, titled ‘‘PIM Pricing for
Regular and Complex Orders,’’ to group
them with the proposed pricing for
complex PIM orders. In connection with
the foregoing changes, the Exchange
also proposes to amend Options 7,
Sections 3 and 4 to clarify that regular
and complex PIM orders are subject to
separate pricing in Options 7, Section
5.E. Lastly, the Exchange is correcting a
typo in note 1 of Options 7, Section 4
to revise ‘‘abovereferenced’’ to ‘‘abovereferenced.’’
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,11 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
9 See
proposed note 2 in Options 7, Section 5.E.
U.S.C. 78 f(b).
11 15 U.S.C. 78f(b)(4) and (5).
10 15
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discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s 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 securities transaction services
that constrain its pricing determinations
in that market. The fact that this market
is competitive has long been recognized
by the courts. In NetCoalition v.
Securities and Exchange Commission,
the D.C. Circuit stated as follows: ‘‘[n]o
one disputes that competition for order
flow is ‘fierce.’ . . . As the SEC
explained, ‘[i]n the U.S. national market
system, buyers and sellers of securities,
and the broker-dealers that act as their
order-routing agents, have a wide range
of choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers’.
. . .’’ 12
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.’’ 13
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of sixteen options
exchanges to which market participants
may direct their order flow. Within this
environment, market participants can
freely and often do shift their order flow
among the Exchange and competing
venues in response to changes in their
respective pricing schedules. As such,
the proposal represents a reasonable
attempt by the Exchange to increase its
liquidity and market share relative to its
competitors.
12 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)).
13 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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36635
PIM Fees
The Exchange believes that the
proposed fee structure for complex PIM
orders (i.e., originating, contra-side, and
responses) is reasonably designed
because the proposed fees will be
aligned with the fees currently in place
for regular PIM orders. The proposed fee
structure is designed to promote order
flow through the complex PIM, which
benefits all market participants by
providing additional trading
opportunities at improved prices. While
the Exchange is increasing the complex
PIM originating fees for Non-Priority
Customers 14 and the complex PIM
response fees for all market
participants 15 under this proposal, the
proposed fees will harmonize the
complex PIM fees with the regular PIM
fees assessed today. While the all
market participants will be charged
higher complex PIM response fees than
the fees currently assessed, the
Exchange believes that the increased
fees are appropriate to offset the
significant break-up rebates to Priority
Customers who submit PIM orders as
proposed herein.16
As proposed, the Exchange will also
charge complex PIM contra-side orders
at the same rate as regular PIM contraside order today. The proposed changes
will decrease the complex PIM contraside fee for certain market participants
while increasing the fee for others. In
particular, the Exchange believes that its
proposal to assess Non-Priority
Customers a decreased complex PIM
contra-side fee 17 is reasonable because
the Exchange is seeking to encourage
these market participants to submit a
greater amount of order flow to the MRX
PIM auction. The Exchange believes it is
14 The complex PIM originating fees will increase
from $0.15 to $0.20 per contract for Non-Priority
Customers in all symbols. As discussed above, this
fee will remain at $0.00 for Priority Customers.
15 The complex PIM response fees will increase
(i) in Penny Symbols, from $0.15 to $0.50 per
contract for Non-Priority Customers and from $0.00
to $0.50 per contract for Priority Customers, and (ii)
in Non-Penny Symbols, from $0.15 to $1.10 per
contract for Non-Priority Customers and from $0.00
to $1.10 per contract for Priority Customers.
16 As discussed above, the Exchange proposes to
offer break-up rebates to Priority Customer PIM
originating orders of 500 or fewer contracts (regular
PIM orders) or where the largest leg is 500 or fewer
contracts (complex PIM orders), which execute with
any response other than the PIM contra-side order.
This rebate will be (i) $0.40 per contract in Penny
Symbols (or, for complex PIM orders only, $0.45 for
Members that execute an ADV of 10,000 PIM
originating contracts or greater within a month for
complex PIM orders only), and (ii) $1.00 per
contract in Non-Penny Symbols (or, for both regular
and complex PIM orders, $1.05 for Members that
execute an ADV of 10,000 PIM originating contracts
or greater within a month).
17 The complex PIM contra-side fee will decrease
from $0.20 to $0.05 per contract for Non-Priority
Customers in all symbols.
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Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
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reasonable to assess Priority Customers
an increased complex PIM contra-side
fee 18 because the Exchange will also
offer Priority Customers an opportunity
to receive significant break-up rebates
for any originating Priority Customer
PIM order that meets the requirements
described herein. In addition, Priority
Customers will continue to receive free
executions on their complex PIM
originating orders as is the case today.
Furthermore, all market participants
will have the opportunity to reduce
their $0.05 contra-side PIM fees to $0.02
per contract if they execute an ADV of
10,000 PIM originating contracts or
greater within a month, thereby
incentivizing market participants to
send additional PIM order flow to MRX.
Greater liquidity in the PIM auction
provides additional opportunities for
price improvement. The Exchange
further notes that the proposed fees are
generally within the range of fees
assessed by another exchange that
employs a similar fee structure for its
price improvement mechanisms.19
The Exchange believes that the
proposed fees for complex PIM orders
(i.e., originating, contra-side, and
responses) are equitable and not
unfairly discriminatory as the fees will
be more standardized across regular and
complex PIM orders, and across market
participant types, with the exception
that Priority Customers will continue to
not be charged a fee for PIM originating
orders. The Exchange believes it is
equitable and not unfairly
discriminatory to not charge Priority
Customers a complex PIM originating
fee as the Exchange has historically
offered lower pricing or other incentives
to Priority Customer orders in order to
incentivize such order flow to the
Exchange. Priority Customer order flow
enhances liquidity on the Exchange for
the benefit of all market participants by
providing more trading opportunities,
which in turn attracts Market Makers
and other market participants that may
trade with this order flow.
18 The complex PIM contra-side fee will increase
from $0.00 to $0.05 per contract for Priority
Customers in all symbols.
19 See MIAX Options (‘‘MIAX’’) Fee Schedule,
Section 1(a)(vi) (MIAX Complex Price Improvement
Mechanism (‘‘cPRIME’’) Fees), which provides for
comparable rates for similar originating (i.e.,
agency) orders, contra-side orders and responses
submitted into its cPRIME auctions. For example,
MIAX assesses all non-Priority Customers a fee of
$0.30 for cPRIME agency orders and $0.04 for
cPRIME contra-side orders. MIAX also assesses all
market participants a fee of $0.50 (Penny Classes)
and $0.99 (Non-Penny Classes) for cPRIME
responses. As it relates to the Non-Penny response
fee, while the Exchange will charge a higher
complex PIM response fee, the proposed fee is
intended to offset the proposed break-up rebates as
discussed below.
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PIM Break-up Rebate
The Exchange believes that the
proposed PIM break-up rebates are
reasonable because these incentives will
attract additional order flow to PIM,
particularly smaller to medium sized
Priority Customer PIM orders (i.e., 500
or fewer contracts). By providing breakup rebates of $0.40 (Penny Symbols)
and $1.00 (Non-Penny Symbols) to
Priority Customer PIM originating
orders that execute with any response
other than the PIM contra-side order,
and by offering these rebates only to
PIM orders of 500 or fewer contracts, the
proposal is designed to encourage
Members to execute this order flow in
the Exchange’s PIM. Additional PIM
order flow provides all market
participants with additional trading
opportunities at improved prices. The
Exchange notes that other exchanges,
including its affiliate Nasdaq ISE
(‘‘ISE’’), impose size requirements for
certain rebates and credits.20
Furthermore, the Exchange believes that
providing higher break-up rebates to
Members that execute a higher ADV of
PIM originating orders as described
above will encourage Members to send
additional PIM order flow to MRX in
order to qualify for the higher rebates.
The Exchange also believes that the
proposed break-up rebates are set at
reasonable rates because they are
aligned with the rebates currently
provided for regular Priority Customer
PIM originating orders.
The Exchange believes that the
proposed break-up rebates are equitable
and not unfairly discriminatory because
the proposed rebates will apply equally
to all Priority Customer PIM originating
orders that execute against PIM
responses. While Priority Customers
will receive the break-up rebate, as
opposed to other market participants,
the Exchange believes that this
application of the rebate is equitable
and not unfairly discriminatory because
Priority Customer order flow enhances
liquidity on the Exchange. This, in turn,
provides more trading opportunities and
attracts other market participants, thus
20 See ISE Pricing Schedule, Options 7, Section 4,
note 1, which sets forth a Priority Customer
complex rebate that is provided to complex orders
where the largest leg of the order is under fifty
contracts and trades with quotes and orders on the
regular order book; Cboe Options (‘‘Cboe’’) Fee
Schedule, Volume Incentive Program (‘‘VIP’’),
which provides that VIP credits on orders executed
electronically in Cboe’s Automated Improvement
Mechanism (‘‘AIM’’) will be capped at 1,000
contracts per order for simple executions and 1,000
contracts per leg for complex executions; and MIAX
Fee Schedule, Section 1(a)(iii) (Priority Customer
Rebate Program), which provides that the per
contract credit for cPRIME Agency Orders is
assessable to the first 1,000 contracts per leg for
each cPRIME Agency Order.
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
facilitating tighter spreads, increased
order flow and trading opportunities to
the benefit of all market participants.
Moreover, as stated above, the Exchange
has historically provided lower pricing
or other incentives to Priority Customers
in order to attract such order flow.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
In terms of intra-market competition,
the Exchange does not believe that its
proposal will place any category of
Exchange market participant at a
competitive disadvantage. The proposed
changes to the Exchange’s PIM pricing
program are all designed to incentivize
market participants to direct PIM order
flow to the Exchange. While some
aspects of the proposal apply directly to
Priority Customers (through the free
executions of PIM originating orders
and application of the break-up rebates),
the Exchange believes that the proposed
changes taken together will fortify and
encourage additional PIM order flow to
MRX. As noted above, all market
participants will benefit from any
increase in market activity that the
proposal effectuates.
In terms of inter-market competition,
the Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
options exchanges. Because competitors
are free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
Moreover, as noted above, price
competition between exchanges is
fierce, with liquidity and market share
moving freely between exchanges in
reaction to fee and rebate changes. In
sum, if the changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of Members or competing order
execution venues to maintain their
E:\FR\FM\17JNN1.SGM
17JNN1
Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
competitive standing in the financial
markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,21 and Rule
19b–4(f)(2) 22 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
Necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSKJM1Z7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MRX–2020–11 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–MRX–2020–11. 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–MRX–2020–11 and should
be submitted on or before July 8, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12985 Filed 6–16–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89050; File No. SR–NYSE–
2020–49]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Price List
June 11, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 1,
2020, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
21 15
22 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
16:44 Jun 16, 2020
Jkt 250001
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
36637
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Price List to (1) adopt a step up tier for
member organizations adding liquidity
in Non-Displayed Limit Orders in Tapes
A, B and C securities; (2) revise the
credits for member organizations
qualifying for Step Up Tier 2 Adding
Credit; and (3) extend through June
2020 the waiver of equipment and
related service charges and trading
license fees for NYSE Trading Floorbased member organizations
implemented for April and May 2020.
The Exchange proposes to implement
the fee changes effective June 1, 2020.
The proposed rule change is available
on the Exchange’s website at
www.nyse.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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Price List to (1) adopt a step up tier for
member organizations adding liquidity
in Non-Displayed Limit Orders in Tapes
A, B and C securities; (2) revise the
credits for member organizations
qualifying for Step Up Tier 2 Adding
Credit; and (3) extend through June
2020 the waiver of equipment and
related service charges and trading
license fees for NYSE Trading Floorbased member organizations
implemented for April and May 2020.
The proposed changes respond to the
current competitive environment where
order flow providers have a choice of
where to direct liquidity-providing
orders by offering further incentives for
member organizations to send
additional displayed liquidity to the
Exchange. The proposed changes also
respond to the current volatile market
E:\FR\FM\17JNN1.SGM
17JNN1
]]>Agencies
[Federal Register Volume 85, Number 117 (Wednesday, June 17, 2020)]
[Notices]
[Pages 36633-36637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12985]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89046; File No. SR-MRX-2020-11]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Its
Pricing Schedule at Options 7
June 11, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 36634]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 1, 2020, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Pricing Schedule at Options 7 in
connection with the pricing for orders entered into the Exchange's
Price Improvement Mechanism (``PIM'').
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Options 7 to adopt separate fees for complex PIM
orders that will be identical to the current fees for regular PIM
orders. The Exchange also proposes to amend the PIM break-up rebates to
provide the rebate only for PIM orders that meet specified size
requirements. In connection with the foregoing changes, the Exchange
also proposes to amend its Pricing Schedule to set forth its PIM
pricing in a separate section for better readability. Each change is
discussed in detail below.
Background
For regular PIM orders, the Exchange currently charges a PIM
originating fee in Penny and Non-Penny Symbols of $0.20 per contract
for Non-Priority Customers \3\ and $0.00 per contract for Priority
Customers.\4\ The Exchange also charges all market participants a PIM
contra-side fee in Penny and Non-Penny Symbols of $0.05 per contract.
Members that execute an average daily volume (``ADV'') of 10,000 PIM
originating contracts or greater within a month are eligible for a
reduced PIM contra-side fee of $0.02 per contract (in lieu of $0.05 per
contract). In addition, the Exchange presently charges PIM response
fees of $0.50 per contract in Penny Symbols and $1.10 per contract in
Non-Penny Symbols.\5\
---------------------------------------------------------------------------
\3\ Non-Priority Customers consist of Market Makers (including
Market Maker orders sent to the Exchange by EAMs), Non-Nasdaq MRX
Market Makers (FarMM), Firm Proprietary/Broker-Dealers, and
Professional Customers.
\4\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq MRX Options 1,
Section 1(a)(36).
\5\ The PIM response fees are the same as the response fees
presently charged for all other Crossing Orders. See Options 7,
Section 3, Table 2.
---------------------------------------------------------------------------
The Exchange currently pays a regular PIM break-up rebate to an
originating Priority Customer PIM order that executes with a response
(order or quote), other than the PIM contra-side order, of $0.40 per
contract in Penny Symbols and $1.00 per contract in Non-Penny Symbols.
Notwithstanding the foregoing, Members that execute an ADV of 10,000
PIM originating contracts or greater within a month will receive a
break-up rebate of $1.05 per contract in Non-Penny Symbols (in lieu of
$1.00 per contract).
As it relates to complex PIM orders, the Exchange currently charges
Non-Priority Customers a uniform $0.15 per contract fee for all complex
orders, including complex orders submitted into the Complex PIM. The
$0.15 per contract fee applies to an originating order, contra-side
order and responses entered into MRX's Complex PIM. No complex order
fees are presently assessed to Priority Customers, including Priority
Customer complex PIM orders.
PIM Fees
The Exchange now proposes to adopt separate fees for complex PIM
orders within new Section 5.E of Options 7 that will be identical to
the current fees assessed for regular PIM orders. In particular, the
Exchange proposes to charge all complex Non-Priority Customer PIM
originating orders in Penny and Non-Penny Symbols the $0.20 per
contract PIM originating fee that it currently assesses to all regular
Non-Priority Customer PIM originating orders, and, for complex Priority
Customer PIM originating orders, the $0.00 per contract PIM originating
fee it currently assesses to regular Priority Customer PIM originating
orders. Likewise, the Exchange proposes to assess all market
participants $0.05 per contract for complex PIM contra-side orders in
Penny and Non-Penny Symbols, identical to how regular PIM contra-side
orders are charged today. The Exchange further proposes to offer market
participants an opportunity to lower the proposed complex PIM contra-
side fee from $0.05 to $0.02 per contract if they execute an ADV of
10,000 PIM originating contracts or greater within a month, identical
to the reduced regular PIM contra-side fee it currently offers market
participants today.\6\ In addition, the Exchange proposes to assess
responses entered into complex PIM at the same rate as the fees
currently assessed for regular PIM responses (i.e., $0.50 per contract
in Penny Symbols and $1.10 in Non-Penny Symbols).
---------------------------------------------------------------------------
\6\ See proposed note 1 in Options 7, Section 5.E.
---------------------------------------------------------------------------
PIM Break-up Rebate
The Exchange also proposes to adopt complex PIM break-up rebates
that are similar to the regular PIM break-up rebates described above,
with two differences. First, the Exchange proposes, for complex PIM
orders only, to pay a higher break-up rebate of $0.45 per contract (in
lieu of $0.40 per contract) with respect to a Priority Customer PIM
originating order in Penny Symbols for qualifying Members that execute
an ADV of 10,000 PIM originating contracts or greater within a
month.\7\ Currently for regular PIM orders, the Exchange only provides
a higher break-up rebate with respect to a Priority Customer PIM
originating order in Non-Penny Symbols ($1.05 per contract in lieu of
$1.00 per contract), not Penny Symbols, to qualifying Members that meet
this ADV threshold.\8\ Second, the Exchange proposes to provide break-
up rebates only for Priority Customer PIM originating orders that meet
specified size requirements. Specifically, the Exchange proposes to
apply the break-up rebates only to regular PIM orders of
[[Page 36635]]
500 or fewer contracts and to complex PIM orders where the largest leg
is 500 or fewer contracts.\9\ As such, the break-up rebates currently
offered to regular Priority Customer PIM originating orders of more
than 500 contracts will be eliminated under this proposal. The Exchange
is seeking to attract smaller and medium sized Priority Customer PIM
order flow to MRX with this change.
---------------------------------------------------------------------------
\7\ See proposed note 3 in Options 7, Section 5.E.
\8\ As discussed later in this filing, the Exchange's proposal
will offer this higher Non-Penny Symbol rebate of $1.05 per contract
for both regular and complex PIM orders. See proposed note 3 in
Options 7, Section 5.E.
\9\ See proposed note 2 in Options 7, Section 5.E.
---------------------------------------------------------------------------
Otherwise, the Exchange will apply the same break-up rebates to
complex Priority Customer PIM originating orders as the current rebates
applied to regular Priority Customer PIM originating orders, provided
that such PIM orders meet the proposed size requirement of 500 or fewer
contracts. Thus, the break-up rebates will be $0.40 per contract in
Penny Symbols and $1.00 per contract in Non-Penny Symbols, applicable
to Priority Customer PIM originating orders that are 500 or fewer
contracts (for regular orders) and where the largest leg is 500 or
fewer contracts (for complex orders). Furthermore, Members that execute
an ADV of 10,000 PIM originating contracts or greater within a month
will be eligible to receive, Exchange will apply the break-up rebate of
$1.05 per contract in Non-Penny Symbols (in lieu of $1.00 per contract)
Technical Changes
For better readability, the Exchange proposes to relocate the fees
and rebates for regular PIM orders currently within Table 2 of Options
7, Section 3 into new Section 5.E, titled ``PIM Pricing for Regular and
Complex Orders,'' to group them with the proposed pricing for complex
PIM orders. In connection with the foregoing changes, the Exchange also
proposes to amend Options 7, Sections 3 and 4 to clarify that regular
and complex PIM orders are subject to separate pricing in Options 7,
Section 5.E. Lastly, the Exchange is correcting a typo in note 1 of
Options 7, Section 4 to revise ``abovereferenced'' to ``above-
referenced.''
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78 f(b).
\11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange's 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
securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \12\
---------------------------------------------------------------------------
\12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \13\
---------------------------------------------------------------------------
\13\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. Within this environment, market participants can freely and
often do shift their order flow among the Exchange and competing venues
in response to changes in their respective pricing schedules. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
PIM Fees
The Exchange believes that the proposed fee structure for complex
PIM orders (i.e., originating, contra-side, and responses) is
reasonably designed because the proposed fees will be aligned with the
fees currently in place for regular PIM orders. The proposed fee
structure is designed to promote order flow through the complex PIM,
which benefits all market participants by providing additional trading
opportunities at improved prices. While the Exchange is increasing the
complex PIM originating fees for Non-Priority Customers \14\ and the
complex PIM response fees for all market participants \15\ under this
proposal, the proposed fees will harmonize the complex PIM fees with
the regular PIM fees assessed today. While the all market participants
will be charged higher complex PIM response fees than the fees
currently assessed, the Exchange believes that the increased fees are
appropriate to offset the significant break-up rebates to Priority
Customers who submit PIM orders as proposed herein.\16\
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\14\ The complex PIM originating fees will increase from $0.15
to $0.20 per contract for Non-Priority Customers in all symbols. As
discussed above, this fee will remain at $0.00 for Priority
Customers.
\15\ The complex PIM response fees will increase (i) in Penny
Symbols, from $0.15 to $0.50 per contract for Non-Priority Customers
and from $0.00 to $0.50 per contract for Priority Customers, and
(ii) in Non-Penny Symbols, from $0.15 to $1.10 per contract for Non-
Priority Customers and from $0.00 to $1.10 per contract for Priority
Customers.
\16\ As discussed above, the Exchange proposes to offer break-up
rebates to Priority Customer PIM originating orders of 500 or fewer
contracts (regular PIM orders) or where the largest leg is 500 or
fewer contracts (complex PIM orders), which execute with any
response other than the PIM contra-side order. This rebate will be
(i) $0.40 per contract in Penny Symbols (or, for complex PIM orders
only, $0.45 for Members that execute an ADV of 10,000 PIM
originating contracts or greater within a month for complex PIM
orders only), and (ii) $1.00 per contract in Non-Penny Symbols (or,
for both regular and complex PIM orders, $1.05 for Members that
execute an ADV of 10,000 PIM originating contracts or greater within
a month).
---------------------------------------------------------------------------
As proposed, the Exchange will also charge complex PIM contra-side
orders at the same rate as regular PIM contra-side order today. The
proposed changes will decrease the complex PIM contra-side fee for
certain market participants while increasing the fee for others. In
particular, the Exchange believes that its proposal to assess Non-
Priority Customers a decreased complex PIM contra-side fee \17\ is
reasonable because the Exchange is seeking to encourage these market
participants to submit a greater amount of order flow to the MRX PIM
auction. The Exchange believes it is
[[Page 36636]]
reasonable to assess Priority Customers an increased complex PIM
contra-side fee \18\ because the Exchange will also offer Priority
Customers an opportunity to receive significant break-up rebates for
any originating Priority Customer PIM order that meets the requirements
described herein. In addition, Priority Customers will continue to
receive free executions on their complex PIM originating orders as is
the case today. Furthermore, all market participants will have the
opportunity to reduce their $0.05 contra-side PIM fees to $0.02 per
contract if they execute an ADV of 10,000 PIM originating contracts or
greater within a month, thereby incentivizing market participants to
send additional PIM order flow to MRX. Greater liquidity in the PIM
auction provides additional opportunities for price improvement. The
Exchange further notes that the proposed fees are generally within the
range of fees assessed by another exchange that employs a similar fee
structure for its price improvement mechanisms.\19\
---------------------------------------------------------------------------
\17\ The complex PIM contra-side fee will decrease from $0.20 to
$0.05 per contract for Non-Priority Customers in all symbols.
\18\ The complex PIM contra-side fee will increase from $0.00 to
$0.05 per contract for Priority Customers in all symbols.
\19\ See MIAX Options (``MIAX'') Fee Schedule, Section 1(a)(vi)
(MIAX Complex Price Improvement Mechanism (``cPRIME'') Fees), which
provides for comparable rates for similar originating (i.e., agency)
orders, contra-side orders and responses submitted into its cPRIME
auctions. For example, MIAX assesses all non-Priority Customers a
fee of $0.30 for cPRIME agency orders and $0.04 for cPRIME contra-
side orders. MIAX also assesses all market participants a fee of
$0.50 (Penny Classes) and $0.99 (Non-Penny Classes) for cPRIME
responses. As it relates to the Non-Penny response fee, while the
Exchange will charge a higher complex PIM response fee, the proposed
fee is intended to offset the proposed break-up rebates as discussed
below.
---------------------------------------------------------------------------
The Exchange believes that the proposed fees for complex PIM orders
(i.e., originating, contra-side, and responses) are equitable and not
unfairly discriminatory as the fees will be more standardized across
regular and complex PIM orders, and across market participant types,
with the exception that Priority Customers will continue to not be
charged a fee for PIM originating orders. The Exchange believes it is
equitable and not unfairly discriminatory to not charge Priority
Customers a complex PIM originating fee as the Exchange has
historically offered lower pricing or other incentives to Priority
Customer orders in order to incentivize such order flow to the
Exchange. Priority Customer order flow enhances liquidity on the
Exchange for the benefit of all market participants by providing more
trading opportunities, which in turn attracts Market Makers and other
market participants that may trade with this order flow.
PIM Break-up Rebate
The Exchange believes that the proposed PIM break-up rebates are
reasonable because these incentives will attract additional order flow
to PIM, particularly smaller to medium sized Priority Customer PIM
orders (i.e., 500 or fewer contracts). By providing break-up rebates of
$0.40 (Penny Symbols) and $1.00 (Non-Penny Symbols) to Priority
Customer PIM originating orders that execute with any response other
than the PIM contra-side order, and by offering these rebates only to
PIM orders of 500 or fewer contracts, the proposal is designed to
encourage Members to execute this order flow in the Exchange's PIM.
Additional PIM order flow provides all market participants with
additional trading opportunities at improved prices. The Exchange notes
that other exchanges, including its affiliate Nasdaq ISE (``ISE''),
impose size requirements for certain rebates and credits.\20\
Furthermore, the Exchange believes that providing higher break-up
rebates to Members that execute a higher ADV of PIM originating orders
as described above will encourage Members to send additional PIM order
flow to MRX in order to qualify for the higher rebates. The Exchange
also believes that the proposed break-up rebates are set at reasonable
rates because they are aligned with the rebates currently provided for
regular Priority Customer PIM originating orders.
---------------------------------------------------------------------------
\20\ See ISE Pricing Schedule, Options 7, Section 4, note 1,
which sets forth a Priority Customer complex rebate that is provided
to complex orders where the largest leg of the order is under fifty
contracts and trades with quotes and orders on the regular order
book; Cboe Options (``Cboe'') Fee Schedule, Volume Incentive Program
(``VIP''), which provides that VIP credits on orders executed
electronically in Cboe's Automated Improvement Mechanism (``AIM'')
will be capped at 1,000 contracts per order for simple executions
and 1,000 contracts per leg for complex executions; and MIAX Fee
Schedule, Section 1(a)(iii) (Priority Customer Rebate Program),
which provides that the per contract credit for cPRIME Agency Orders
is assessable to the first 1,000 contracts per leg for each cPRIME
Agency Order.
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The Exchange believes that the proposed break-up rebates are
equitable and not unfairly discriminatory because the proposed rebates
will apply equally to all Priority Customer PIM originating orders that
execute against PIM responses. While Priority Customers will receive
the break-up rebate, as opposed to other market participants, the
Exchange believes that this application of the rebate is equitable and
not unfairly discriminatory because Priority Customer order flow
enhances liquidity on the Exchange. This, in turn, provides more
trading opportunities and attracts other market participants, thus
facilitating tighter spreads, increased order flow and trading
opportunities to the benefit of all market participants. Moreover, as
stated above, the Exchange has historically provided lower pricing or
other incentives to Priority Customers in order to attract such order
flow.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not believe
that its proposal will place any category of Exchange market
participant at a competitive disadvantage. The proposed changes to the
Exchange's PIM pricing program are all designed to incentivize market
participants to direct PIM order flow to the Exchange. While some
aspects of the proposal apply directly to Priority Customers (through
the free executions of PIM originating orders and application of the
break-up rebates), the Exchange believes that the proposed changes
taken together will fortify and encourage additional PIM order flow to
MRX. As noted above, all market participants will benefit from any
increase in market activity that the proposal effectuates.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
options exchanges. Because competitors are free to modify their own
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited.
Moreover, as noted above, price competition between exchanges is
fierce, with liquidity and market share moving freely between exchanges
in reaction to fee and rebate changes. In sum, if the changes proposed
herein are unattractive to market participants, it is likely that the
Exchange will lose market share as a result. Accordingly, the Exchange
does not believe that the proposed changes will impair the ability of
Members or competing order execution venues to maintain their
[[Page 36637]]
competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\21\ and Rule 19b-4(f)(2) \22\ 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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\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
\22\ 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-MRX-2020-11 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-MRX-2020-11. 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-MRX-2020-11 and should be submitted on
or before July 8, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12985 Filed 6-16-20; 8:45 am]
BILLING CODE 8011-01-P
