Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend GEMX's Pricing Schedule at Options 7, Sections 3 and 4, 36653-36657 [2020-12987]
Download as PDF
<![CDATA[
Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
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–NYSEAMER–2020–44, and
should be submitted on or before July 8,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12988 Filed 6–16–20; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend GEMX’s
Pricing Schedule at Options 7,
Sections 3 and 4
khammond on DSKJM1Z7X2PROD with NOTICES
June 11, 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 June 1,
2020, Nasdaq GEMX, LLC (‘‘GEMX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Sep<11>2014
16:44 Jun 16, 2020
Jkt 250001
The Exchange proposes to amend
GEMX’s Pricing Schedule at Options 7,
Section 3, ‘‘Regular Order Fees and
Rebates,’’ and Options 7, Section 4,
‘‘Other Options Fees and Rebates,’’
regarding the Market Access and
Routing Subsidy (‘‘MARS’’).
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.
1. Purpose
[Release No. 34–89048; File No. SR–GEMX–
2020–14]
1 15
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
22 17
(‘‘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.
GEMX proposes to amend its Pricing
Schedule at Options 7, Section 3,
‘‘Regular Order Fees and Rebates,’’ and
Options 7, Section 4, ‘‘Other Options
Fees and Rebates,’’ regarding the Market
Access and Routing Subsidy (‘‘MARS’’).
Specifically, the Exchange proposes to:
(1) Amend the MARS Payment tiers
within Options 7, Section 4B; and (2)
pay a rebate in connection with MARS
within Options 7, Section 3. Each
change is described below in greater
detail.
By way of background, MARS pays a
subsidy to GEMX Members that provide
certain order routing functionalities to
other GEMX Members and/or use such
functionalities themselves. GEMX pays
participating GEMX Members to
subsidize their costs of providing
routing services to route orders to
PO 00000
Frm 00127
Fmt 4703
Sfmt 4703
36653
GEMX. The Exchange believes that
MARS will continue to attract higher
volumes of equity and ETF options
volume to the Exchange from nonGEMX market participants as well as
GEMX Members.
MARS System Eligibility
To qualify for MARS, a GEMX
Member’s order routing functionality is
required to meet certain criteria.
Specifically the Member’s routing
system (hereinafter ‘‘System’’) is
required to: (1) Enable the electronic
routing of orders to all of the U.S.
options exchanges, including GEMX; (2)
provide current consolidated market
data from the U.S. options exchanges;
and (3) be capable of interfacing with
GEMX’s API to access current GEMX
match engine functionality. The
Member’s System also needs to cause
GEMX to be one of the top four default
destination exchanges for (a)
individually executed marketable orders
if GEMX is at the national best bid or
offer (‘‘NBBO’’), regardless of size or
time or (b) orders that establish a new
NBBO on GEMX’s Order Book, but
allow any user to manually override
GEMX as the default destination on an
order-by-order basis. Any GEMX
Member may apply for MARS, provided
the above-referenced requirements are
met, including a robust and reliable
System.
MARS Eligible Contracts
A MARS Payment is paid to GEMX
Members that have System Eligibility
and have routed the requisite number of
Eligible Contracts daily in a month,
which were executed on GEMX. For the
purpose of qualifying for the MARS
Payment, Eligible Contracts include:
Non-Nasdaq GEMX Market Maker
(FarMM); 3 Firm Proprietary 4/BrokerDealer; 5 and Professional Customer 6
orders that are executed. Eligible
Contracts do not include qualified
contingent cross or ‘‘QCC’’ Orders 7 or
3 A ‘‘Non-Nasdaq GEMX Market Maker’’ is a
market maker as defined in Section 3(a)(38) of the
Act, as amended, registered in the same options
class on another options exchange.
4 A ‘‘Firm Proprietary’’ order is an order
submitted by a Member for its own proprietary
account.
5 A ‘‘Broker-Dealer’’ order is an order submitted
by a Member for a broker-dealer account that is not
its own proprietary account.
6 A ‘‘Professional Customer’’ is a person or entity
that is not a broker/dealer and is not a Priority
Customer.
7 A QCC Order is comprised of an originating
order to buy or sell at least 1000 contracts that is
identified as being part of a qualified contingent
trade, as that term is defined in Supplementary
Material .01 of GEMX Options 3, Section 7, coupled
with a contra-side order or orders totaling an equal
number of contracts. See Options 3, Section 7(j).
E:\FR\FM\17JNN1.SGM
17JNN1
36654
Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
Price Improvement Mechanism or
‘‘PIM’’ Orders.8 Options overlying NDX
are not considered Eligible Contracts.
MARS Payment
GEMX Members that have System
Eligibility and have executed the
requisite number of Eligible Contracts in
a month would be paid the following
per contract rebates:
Tiers
1 ................
2 ................
3 ................
Average daily
volume
(‘‘ADV’’)
10,000
15,000
20,000
MARS
payment
$0.07
0.10
0.13
khammond on DSKJM1Z7X2PROD with NOTICES
The specified MARS Payment is paid
on all executed Eligible Contracts that
add liquidity, which are routed to
GEMX through a participating GEMX
Member’s System and meet the requisite
Eligible Contracts ADV. No payment
will be made with respect to orders that
are routed to GEMX, but not executed.
Also, a GEMX Member will not be
entitled to receive any other revenue for
the use of its System specifically with
respect to orders routed to GEMX.
Proposal—MARS Payment
The Exchange proposes to amend the
MARS Payment tiers to increase each of
the 3 tiers by $0.01. Therefore, Tier 1,
which requires an average daily value
(‘‘ADV’’) of 10,000 contracts and
currently pays a rebate of $0.07 per
contract, would be amended to pay
$0.08 per contract. Tier 2, which
requires an ADV of 15,000 contracts and
currently pays a rebate of $0.10 per
contract, would be amended to pay
$0.11 per contract. Tier 3, which
requires an ADV of 20,000 contracts and
currently pays a rebate of $0.13 per
contract, would be amended to pay
$0.14 contract. The Exchange believes
that paying a higher rebate will attract
even higher volumes of equity and ETF
options volume to the Exchange from
non-GEMX market participants as well
as GEMX Members. The Exchange
would continue to pay the MARS
Payment on all executed Eligible
Contracts that add liquidity, which are
routed to GEMX through a participating
GEMX Member’s System and meet the
requisite Eligible Contracts ADV. The
Exchange would continue to make no
payment with respect to orders that are
routed to GEMX, but not executed.
Proposal—Rebate
The Exchange proposes to pay an
additional $0.05 per contract rebate, in
8 Price Improvement Mechanism (‘‘PIM’’) is the
Exchange’s price improvement mechanism for
crossing transactions. See Options 3, Section 13.
VerDate Sep<11>2014
16:44 Jun 16, 2020
Jkt 250001
addition to the Tier 1 Maker Rebate in
Options 7, Section 3 for Penny Symbols
and SPY, for Non-Nasdaq GEMX Market
Maker (FarMM), Firm Proprietary/
Broker-Dealer and Professional
Customer orders that qualify as MARS
Eligible Contracts,9 pursuant to Options
7, Section 4B, and were routed through
a qualifying GEMX Member’s routing
system.10 Today, the Exchange pays a
Tier 1 Maker Rebate of $0.20 per
contract for Market Maker, Non-Nasdaq
GEMX Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customer orders. Priority
Customers are paid a $0.25 per contract
Tier 1 Maker Rebate. The proposed
rebate would be in addition to the Tier
1 Maker Rebate for Non-Nasdaq GEMX
Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customer orders. The
additional rebate would not apply to
Market Maker and Priority Customer
orders.
With this rebate, the Exchange
proposes to incentivize Members to
send order flow to GEMX Members that
qualify for MARS and, in turn, attract
higher volumes of equity and ETF
options volume to the Exchange. This
additional $0.05 per contract rebate, in
addition to the Tier 1 Maker Rebates,
will benefit all market participants who
will have an opportunity to interact
with this order flow.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,11 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,12 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 As noted herein, Eligible Contracts do not
include QCC Orders or PIM Orders. Options
overlying NDX are not considered Eligible
Contracts. See Options 7, Section 4B.
10 As noted herein, to qualify for MARS, a GEMX
Member’s System would be required to: (1) Enable
the electronic routing of orders to all of the U.S.
options exchanges, including GEMX; (2) provide
current consolidated market data from the U.S.
options exchanges; and (3) be capable of interfacing
with GEMX’s API to access current GEMX match
engine functionality. Further, the Member’s System
would also need to cause GEMX to be the one of
the top four default destination exchanges for (a)
individually executed marketable orders if GEMX is
at the national best bid or offer (‘‘NBBO’’),
regardless of size or time or (b) orders that establish
a new NBBO on GEMX’s Order Book, but allow any
user to manually override GEMX as a default
destination on an order-by-order basis. See Options
7, Section 4B.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(4) and (5).
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
discrimination between customers,
issuers, brokers, or dealers.
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 13
Likewise, in NetCoalition v. Securities
and Exchange Commission 14
(‘‘NetCoalition’’) the D.C. Circuit upheld
the Commission’s use of a market-based
approach in evaluating the fairness of
market data fees against a challenge
claiming that Congress mandated a costbased approach.15 As the court
emphasized, the Commission ‘‘intended
in Regulation NMS that ‘market forces,
rather than regulatory requirements’
play a role in determining the market
data . . . to be made available to
investors and at what cost.’’ 16
Further, ‘‘[n]o one disputes that
competition for order flow is ‘fierce.’
. . . As the SEC explained, ‘[i]n the U.S.
national market system, buyers and
sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ’no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 17 Although the court
and the SEC were discussing the cash
equities markets, the Exchange believes
that these views apply with equal force
to the options markets.
Proposal—MARS Payment
The Exchange’s proposal to increase
the MARS Payments, which are
currently paid based on certain average
daily volumes for Eligible Contracts
which add liquidity, is reasonable
because the Exchange believes that the
13 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
14 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010).
15 See NetCoalition, at 534–535.
16 Id. at 537.
17 Id. at 539 (quoting Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR
74770, 74782–83 (December 9, 2008) (SR–
NYSEArca–2006–21)).
E:\FR\FM\17JNN1.SGM
17JNN1
Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
MARS program will continue to attract
liquidity to GEMX in the form of order
flow, which will be beneficial for all
GEMX Members, in that it would
generate greater price discovery,
increased transparency, and an
increased opportunity to trade on the
Exchange. The increased MARS
Payments should enhance the
competitiveness of the Exchange.
Further, as is the case today, the
proposed tier structure would continue
to allow GEMX Members to price their
services at a level that will enable them
to attract order flow from market
participants who would otherwise
utilize an existing front-end order entry
mechanism instead of incurring the cost
in time and money to develop their own
internal systems to be able to deliver
orders directly to the Exchange’s
System. The Exchange continues to seek
to reward market participants that bring
a greater amount of order flow to the
Exchange by paying higher rebates 18
based on the average daily volume that
qualified as Eligible Contracts. The
Exchange believes that the tiers are
reasonable because the Exchange is
incentivizing GEMX Members to
transact a greater amount of qualifying
volume to earn the rebate. The
additional order flow will benefit all
market participants.
The Exchange’s proposal to increase
the MARS Payments, which are
currently paid based on certain average
daily volumes for Eligible Contracts
which add liquidity, is equitable and
not unfairly discriminatory because the
Exchange will uniformly pay all
qualifying GEMX Members, that offer
market access and connectivity to the
Exchange and/or utilize such
functionality themselves, the proposed
rebates specified in the proposed MARS
Payment tiers, provided the GEMX
Member has executed the requisite
number of Eligible Contracts. Moreover,
the Exchange believes that the proposed
MARS Payments offered by the
Exchange are equitable and not unfairly
discriminatory because any qualifying
GEMX Member that offers market access
and connectivity to the Exchange and/
or utilizes such functionality themselves
may earn the MARS Payments for all
Eligible Contracts.
18 Currently, the Exchange pays a $0.07 per
contract rebate to qualifying GEMX Members who
transact 10,000 ADV; a rebate of $0.10 per contract
to qualifying GEMX Members who transact 15,000
ADV and a $0.13 per contact rebate to qualifying
GEMX Members who transact 20,000 ADV. The
qualifying ADV is not being amended with this
proposal. This proposal would increase each of the
3 rebate tiers by $0.01 per contract.
VerDate Sep<11>2014
16:44 Jun 16, 2020
Jkt 250001
Proposal—Rebate
The Exchange’s proposal to pay an
additional $0.05 per contract rebate, in
addition to the Tier 1 Maker Rebates in
Options 7, Section 3 for Penny Symbols
and SPY,19 for Non-Nasdaq GEMX
Market Maker (FARMM), Firm
Proprietary/Broker-Dealer and
Professional Customer orders that
qualify as MARS Eligible Contracts,20
pursuant to Options 7, Section 4B, and
were routed through a qualifying GEMX
Member’s System 21 is reasonable. The
Exchange believes that its proposal will
incentivize Members to send order flow
to GEMX Members that qualify for
MARS and, in turn, attract higher
volumes of equity and ETF options
volume to the Exchange. The rebate will
benefit all market participants who will
have an opportunity to interact with this
order flow.
The Exchange’s proposal to pay an
additional $0.05 per contract rebate, in
addition to the Tier 1 Maker Rebate in
Options 7, Section 3 for Penny Symbols
and SPY, for Non-Nasdaq GEMX Market
Maker (FarMM), Firm Proprietary/
Broker-Dealer and Professional
Customer orders that qualify as MARS
Eligible Contracts, pursuant to Options
7, Section 4B, and were routed through
a qualifying GEMX Member’s routing
system is equitable and not unfairly
discriminatory. While MARS is only
being offered to qualifying GEMX
Members for Non-Nasdaq GEMX Market
Maker (FarMM), Firm Proprietary/
Broker-Dealer and Professional
Customer equity option orders, and
would not pay an additional rebate for
Priority Customer or Market Maker 22
19 Today, the Exchange pays a Tier 1 Maker
Rebate of $0.20 per contract for Market Makers,
Non-Nasdaq GEMX Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and Professional
Customer orders. Priority Customers are paid a
$0.25 per contract Tier 1 Maker Rebate.
20 As noted herein, Eligible Contracts do not
include QCC Orders or PIM Orders. Options
overlying NDX are not considered Eligible
Contracts. See Options 7, Section 4B.
21 As noted herein, to qualify for MARS, a GEMX
Member’s System would be required to: (1) Enable
the electronic routing of orders to all of the U.S.
options exchanges, including GEMX; (2) provide
current consolidated market data from the U.S.
options exchanges; and (3) be capable of interfacing
with GEMX’s API to access current GEMX match
engine functionality. Further, the Member’s System
would also need to cause GEMX to be the one of
the top four default destination exchanges for (a)
individually executed marketable orders if GEMX is
at the national best bid or offer (‘‘NBBO’’),
regardless of size or time or (b) orders that establish
a new NBBO on GEMX’s Order Book, but allow any
user to manually override GEMX as a default
destination on an order-by-order basis. See Options
7, Section 4B.
22 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See Options 1, Section
1(a)(21).
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
36655
orders, the Exchange believes this is
equitable and not unfairly
discriminatory for the reasons below.
With respect to Priority Customer
orders, the Exchange notes that, today,
Priority Customer Orders may earn the
highest Maker Rebates available on
GEMX.23 The Exchange believes that the
availability of these aforementioned
rebates for Priority Customer Orders
does not warrant the Exchange paying
an additional rebate on Priority
Customer orders for MARS. With
respect to Market Maker orders, today
the Exchange offers certain Maker
Rebates on Market Maker orders.24 The
Exchange believes that these rebates
provide ample incentive for attracting
Market Maker orders to the Exchange
and that no further subsidy is warranted
at this time.25 To offer the proposed
subsidy on Priority Customer or Market
Maker orders would require funding
from some other source, such as raising
fees for other participants. As a result,
the Exchange believes it is appropriate
to only count Non-Nasdaq GEMX
Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customer orders toward the
Eligible Contracts, which unlike Priority
Customer and Market Maker orders, are
not eligible for Maker Rebates today
beyond $0.20 per contract on GEMX.
The Exchange notes that it is
commonplace within the options
industry for exchanges to charge
different rates and/or offer different
rebates depending upon the capacity in
which a participant is trading. For these
reasons, the Exchange believes that the
proposal to only count certain order
flow as Eligible Contracts is equitable
and not unfairly discriminatory for the
reasons mentioned herein.
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
23 See
Options 7, Section 3.
24 Id.
25 Market Maker and Priority Customer orders are
eligible for higher Maker Rebates based on
achieving certain volume requirements specified in
the Table 1 Qualifying Tier Thresholds. See Options
7, Section 3.
E:\FR\FM\17JNN1.SGM
17JNN1
36656
Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
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.
khammond on DSKJM1Z7X2PROD with NOTICES
Proposal—MARS Payment
The Exchange’s proposal to increase
the MARS Payments, which are
currently paid based on certain average
daily volumes for Eligible Contracts
which add liquidity, does not impose an
undue burden on competition because
the Exchange will uniformly pay all
qualifying GEMX Members, that offer
market access and connectivity to the
Exchange and/or utilize such
functionality themselves, the proposed
rebates specified in the proposed MARS
Payment tiers, provided the GEMX
Member has executed the requisite
number of Eligible Contracts. Moreover,
the Exchange believes that the proposed
MARS Payments offered by the
Exchange do not impose an undue
burden on competition because any
qualifying GEMX Member that offers
market access and connectivity to the
Exchange and/or utilizes such
functionality themselves may earn the
MARS Payments for all Eligible
Contracts.
Proposal—Rebate
The Exchange’s proposal to pay an
additional $0.05 per contract rebate, in
addition to the Tier 1 Maker Rebate in
Options 7, Section 3 for Penny Symbols
and SPY,26 for Non-Nasdaq GEMX
Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customer orders that
26 Today, the Exchange pays a Tier 1 Maker
Rebate of $0.20 per contract for Market Makers,
Non-Nasdaq GEMX Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and Professional
Customer orders. Priority Customers are paid a
$0.25 per contract Tier 1 Maker Rebate.
VerDate Sep<11>2014
16:44 Jun 16, 2020
Jkt 250001
qualify as MARS Eligible Contracts,
pursuant to Options 7, Section 4B, and
were routed through a qualifying GEMX
Member’s routing system, does not
impose an undue burden on
competition. While MARS is only being
offered to qualifying GEMX Members for
Non-Nasdaq GEMX Market Maker
(FarMM), Firm Proprietary/BrokerDealer and Professional Customer equity
option orders, and would not pay an
additional rebate for Priority Customer
or Market Maker orders, the Exchange
believes this does not impose an undue
burden on competition. With respect to
Priority Customer orders, the Exchange
notes that, today, Priority Customer
orders may earn the highest Maker
Rebates available on GEMX.27 The
Exchange believes that the availability
of these rebates for Priority Customer
orders does not warrant paying an
additional subsidy on Priority Customer
orders for MARS. With respect to
Market Maker orders, today the
Exchange offers certain Maker Rebates
on Market Maker orders.28 To offer the
proposed subsidy on Priority Customer
or Market Maker orders would require
funding from some other source, such as
raising fees for other participants. As a
result, the Exchange believes it is
appropriate to only count Non-Nasdaq
GEMX Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customer orders toward the
Eligible Contracts, which unlike Priority
Customer and Market Maker orders, are
not eligible for Maker Rebates today
beyond $0.20 per contract on GEMX.
The Exchange notes that it is
commonplace within the options
industry for exchanges to charge
different rates and/or offer different
rebates depending upon the capacity in
which a participant is trading. For these
reasons, the Exchange believes that the
proposal to only count certain order
flow as Eligible Contracts does not
impose an undue burden on
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,29 and Rule
27 See
Options 7, Section 3.
19b–4(f)(2) 30 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
Necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
GEMX–2020–14 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–2020–14. 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
28 Id.
29 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00130
Fmt 4703
Sfmt 4703
30 17
E:\FR\FM\17JNN1.SGM
CFR 240.19b–4(f)(2).
17JNN1
Federal Register / Vol. 85, No. 117 / Wednesday, June 17, 2020 / Notices
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–2020–14 and
should be submitted on or before July 8,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12987 Filed 6–16–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
khammond on DSKJM1Z7X2PROD with NOTICES
Extension:
Rule 30b1–10, Form N–LIQUID
SEC File No. 270–803, OMB Control No.
3235–0754
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
17 CFR 270.30b1–10 (Rule 30b1–10)
and 17 CFR 274.223 (Form N–LIQUID)
require open-end investment
companies, including exchange-traded
funds that redeem in kind (‘‘In-Kind
ETFs’’) but not including money market
funds, to file a current report on Form
N–LIQUID on a non-public basis when
certain events related to their liquidity
occur. The information reported on
Form N–LIQUID concerns events under
which more than 15% of a fund’s or InKind ETF’s net assets are, or become,
illiquid investments that are assets as
defined in 17 CFR 270.22e–4 (rule 22e–
4) and when holdings in illiquid
investments are assets that previously
exceeded 15% of a fund’s net assets
have changed to be less than or equal to
31 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
16:44 Jun 16, 2020
Jkt 250001
15% of the fund’s net assets.1 The
information reported on Form N–
LIQUID also regards events under which
a fund’s holdings in assets that are
highly liquid investments fall below the
fund’s highly liquid investment
minimum for more than 7 consecutive
calendar days. A report on Form N–
LIQUID is required to be filed, as
applicable, within one business day of
the occurrence of one or more of these
events.2
Based on staff analysis, we estimate
that the Commission receives an average
of 30 reports per year on Form N–
LIQUID.3 When filing a report on Form
N–LIQUID, staff estimates that a fund
will spend on average approximately 4
hours of an in-house attorney’s time and
1 hour of an in-house accountant’s time
to prepare, review, and submit Form N–
LIQUID, at a total time cost of $1,894.4
Accordingly, in the aggregate, staff
estimates that compliance with rule
30b1–10 and Form N–LIQUID will
result in a total annual burden of
approximately 150 burden hours and
total annual time costs of approximately
$56,820.5
Compliance with rule 30b1–10 is
mandatory for all open-end investment
companies, other than money market
funds. Responses to the disclosure
requirements will be kept confidential.
The estimate of average burden hours is
made solely for the purposes of the
PRA. The estimate is not derived from
a comprehensive or even a
representative survey or study of the
costs of Commission rules. Complying
with this collection of information
requirement is necessary to enable the
36657
Commission to receive information on
fund liquidity events more uniformly
and efficiently, and to enhance the
Commission’s oversight of funds when
significant liquidity events occur and its
ability to respond to market events. An
agency may not conduct or sponsor, and
a person is not required to respond to
a collection of information unless it
displays a currently valid control
number.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: June 12, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–13065 Filed 6–16–20; 8:45 am]
BILLING CODE 8011–01–P
See Item C.1 and Item C.2 of Part A of Form
N–LIQUID.
2 See General Instruction A.2 of Form N–LIQUID.
3 The estimated number of annual filings is based
on the number of filings in 2019, adjusted because
certain of these filings would no longer be
necessary going forward and a subset of funds were
not subject to the filing requirement for all of 2019.
4 This estimate is based on the following
calculations: (4 hours × $419/hour for an attorney
= $1,676), plus (1 hour × $218/hour for a senior
accountant = $218), for a combined total of 5 hours
at total time costs of $1,894. The estimates
concerning the wage rates for attorney and senior
accountant time are based on salary information for
the securities industry compiled by the Securities
Industry and Financial Markets Association. The
estimated wage figure is based on published rates
for in-house attorneys and senior accountants,
modified to account for a 1,800-hour work-year and
inflation, and multiplied by 5.35 to account for
bonuses, firm size, employee benefits, and
overhead. See Securities Industry and Financial
Markets Association, Report on Management &
Professional Earnings in the Securities Industry
2013.
5 This estimate is based on the following
calculations: 30 reports filed per year × 5 hours per
report = approximately 150 total annual burden
hours. 30 reports filed per year × $1,894 in costs
per report = $56,820 total annual costs.
1
PO 00000
Frm 00131
Fmt 4703
Sfmt 4703
DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
[FHWA Docket No. FHWA–2019–0040]
Surface Transportation Project
Delivery Program; Florida DOT Audit
#3 Report
Federal Highway
Administration (FHWA), U.S.
Department of Transportation (DOT).
ACTION: Notice.
AGENCY:
The Surface Transportation
Project Delivery Program allows a State
to assume FHWA’s environmental
responsibilities for review, consultation,
and compliance for Federal highway
projects. When a State assumes these
Federal responsibilities, the State
becomes solely responsible and liable
for the responsibilities it has assumed,
in lieu of FHWA. This program
SUMMARY:
E:\FR\FM\17JNN1.SGM
17JNN1
]]>Agencies
[Federal Register Volume 85, Number 117 (Wednesday, June 17, 2020)]
[Notices]
[Pages 36653-36657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12987]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89048; File No. SR-GEMX-2020-14]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend GEMX's
Pricing Schedule at Options 7, Sections 3 and 4
June 11, 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 June 1, 2020, Nasdaq GEMX, LLC (``GEMX'' 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 GEMX's Pricing Schedule at Options
7, Section 3, ``Regular Order Fees and Rebates,'' and Options 7,
Section 4, ``Other Options Fees and Rebates,'' regarding the Market
Access and Routing Subsidy (``MARS'').
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, ``Regular Order Fees and Rebates,'' and Options 7, Section 4,
``Other Options Fees and Rebates,'' regarding the Market Access and
Routing Subsidy (``MARS''). Specifically, the Exchange proposes to: (1)
Amend the MARS Payment tiers within Options 7, Section 4B; and (2) pay
a rebate in connection with MARS within Options 7, Section 3. Each
change is described below in greater detail.
By way of background, MARS pays a subsidy to GEMX Members that
provide certain order routing functionalities to other GEMX Members
and/or use such functionalities themselves. GEMX pays participating
GEMX Members to subsidize their costs of providing routing services to
route orders to GEMX. The Exchange believes that MARS will continue to
attract higher volumes of equity and ETF options volume to the Exchange
from non-GEMX market participants as well as GEMX Members.
MARS System Eligibility
To qualify for MARS, a GEMX Member's order routing functionality is
required to meet certain criteria. Specifically the Member's routing
system (hereinafter ``System'') is required to: (1) Enable the
electronic routing of orders to all of the U.S. options exchanges,
including GEMX; (2) provide current consolidated market data from the
U.S. options exchanges; and (3) be capable of interfacing with GEMX's
API to access current GEMX match engine functionality. The Member's
System also needs to cause GEMX to be one of the top four default
destination exchanges for (a) individually executed marketable orders
if GEMX is at the national best bid or offer (``NBBO''), regardless of
size or time or (b) orders that establish a new NBBO on GEMX's Order
Book, but allow any user to manually override GEMX as the default
destination on an order-by-order basis. Any GEMX Member may apply for
MARS, provided the above-referenced requirements are met, including a
robust and reliable System.
MARS Eligible Contracts
A MARS Payment is paid to GEMX Members that have System Eligibility
and have routed the requisite number of Eligible Contracts daily in a
month, which were executed on GEMX. For the purpose of qualifying for
the MARS Payment, Eligible Contracts include: Non-Nasdaq GEMX Market
Maker (FarMM); \3\ Firm Proprietary \4\/Broker-Dealer; \5\ and
Professional Customer \6\ orders that are executed. Eligible Contracts
do not include qualified contingent cross or ``QCC'' Orders \7\ or
[[Page 36654]]
Price Improvement Mechanism or ``PIM'' Orders.\8\ Options overlying NDX
are not considered Eligible Contracts.
---------------------------------------------------------------------------
\3\ A ``Non-Nasdaq GEMX Market Maker'' is a market maker as
defined in Section 3(a)(38) of the Act, as amended, registered in
the same options class on another options exchange.
\4\ A ``Firm Proprietary'' order is an order submitted by a
Member for its own proprietary account.
\5\ A ``Broker-Dealer'' order is an order submitted by a Member
for a broker-dealer account that is not its own proprietary account.
\6\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer.
\7\ A QCC Order is comprised of an originating order to buy or
sell at least 1000 contracts that is identified as being part of a
qualified contingent trade, as that term is defined in Supplementary
Material .01 of GEMX Options 3, Section 7, coupled with a contra-
side order or orders totaling an equal number of contracts. See
Options 3, Section 7(j).
\8\ Price Improvement Mechanism (``PIM'') is the Exchange's
price improvement mechanism for crossing transactions. See Options
3, Section 13.
---------------------------------------------------------------------------
MARS Payment
GEMX Members that have System Eligibility and have executed the
requisite number of Eligible Contracts in a month would be paid the
following per contract rebates:
------------------------------------------------------------------------
Average daily
Tiers volume MARS payment
(``ADV'')
------------------------------------------------------------------------
1....................................... 10,000 $0.07
2....................................... 15,000 0.10
3....................................... 20,000 0.13
------------------------------------------------------------------------
The specified MARS Payment is paid on all executed Eligible
Contracts that add liquidity, which are routed to GEMX through a
participating GEMX Member's System and meet the requisite Eligible
Contracts ADV. No payment will be made with respect to orders that are
routed to GEMX, but not executed. Also, a GEMX Member will not be
entitled to receive any other revenue for the use of its System
specifically with respect to orders routed to GEMX.
Proposal--MARS Payment
The Exchange proposes to amend the MARS Payment tiers to increase
each of the 3 tiers by $0.01. Therefore, Tier 1, which requires an
average daily value (``ADV'') of 10,000 contracts and currently pays a
rebate of $0.07 per contract, would be amended to pay $0.08 per
contract. Tier 2, which requires an ADV of 15,000 contracts and
currently pays a rebate of $0.10 per contract, would be amended to pay
$0.11 per contract. Tier 3, which requires an ADV of 20,000 contracts
and currently pays a rebate of $0.13 per contract, would be amended to
pay $0.14 contract. The Exchange believes that paying a higher rebate
will attract even higher volumes of equity and ETF options volume to
the Exchange from non-GEMX market participants as well as GEMX Members.
The Exchange would continue to pay the MARS Payment on all executed
Eligible Contracts that add liquidity, which are routed to GEMX through
a participating GEMX Member's System and meet the requisite Eligible
Contracts ADV. The Exchange would continue to make no payment with
respect to orders that are routed to GEMX, but not executed.
Proposal--Rebate
The Exchange proposes to pay an additional $0.05 per contract
rebate, in addition to the Tier 1 Maker Rebate in Options 7, Section 3
for Penny Symbols and SPY, for Non-Nasdaq GEMX Market Maker (FarMM),
Firm Proprietary/Broker-Dealer and Professional Customer orders that
qualify as MARS Eligible Contracts,\9\ pursuant to Options 7, Section
4B, and were routed through a qualifying GEMX Member's routing
system.\10\ Today, the Exchange pays a Tier 1 Maker Rebate of $0.20 per
contract for Market Maker, Non-Nasdaq GEMX Market Maker (FarMM), Firm
Proprietary/Broker-Dealer and Professional Customer orders. Priority
Customers are paid a $0.25 per contract Tier 1 Maker Rebate. The
proposed rebate would be in addition to the Tier 1 Maker Rebate for
Non-Nasdaq GEMX Market Maker (FarMM), Firm Proprietary/Broker-Dealer
and Professional Customer orders. The additional rebate would not apply
to Market Maker and Priority Customer orders.
---------------------------------------------------------------------------
\9\ As noted herein, Eligible Contracts do not include QCC
Orders or PIM Orders. Options overlying NDX are not considered
Eligible Contracts. See Options 7, Section 4B.
\10\ As noted herein, to qualify for MARS, a GEMX Member's
System would be required to: (1) Enable the electronic routing of
orders to all of the U.S. options exchanges, including GEMX; (2)
provide current consolidated market data from the U.S. options
exchanges; and (3) be capable of interfacing with GEMX's API to
access current GEMX match engine functionality. Further, the
Member's System would also need to cause GEMX to be the one of the
top four default destination exchanges for (a) individually executed
marketable orders if GEMX is at the national best bid or offer
(``NBBO''), regardless of size or time or (b) orders that establish
a new NBBO on GEMX's Order Book, but allow any user to manually
override GEMX as a default destination on an order-by-order basis.
See Options 7, Section 4B.
---------------------------------------------------------------------------
With this rebate, the Exchange proposes to incentivize Members to
send order flow to GEMX Members that qualify for MARS and, in turn,
attract higher volumes of equity and ETF options volume to the
Exchange. This additional $0.05 per contract rebate, in addition to the
Tier 1 Maker Rebates, will benefit all market participants who will
have an opportunity to interact with this order flow.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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'').
---------------------------------------------------------------------------
Likewise, in NetCoalition v. Securities and Exchange Commission
\14\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\15\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \16\
---------------------------------------------------------------------------
\14\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\15\ See NetCoalition, at 534-535.
\16\ Id. at 537.
---------------------------------------------------------------------------
Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] 'no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \17\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
---------------------------------------------------------------------------
\17\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------
Proposal--MARS Payment
The Exchange's proposal to increase the MARS Payments, which are
currently paid based on certain average daily volumes for Eligible
Contracts which add liquidity, is reasonable because the Exchange
believes that the
[[Page 36655]]
MARS program will continue to attract liquidity to GEMX in the form of
order flow, which will be beneficial for all GEMX Members, in that it
would generate greater price discovery, increased transparency, and an
increased opportunity to trade on the Exchange. The increased MARS
Payments should enhance the competitiveness of the Exchange. Further,
as is the case today, the proposed tier structure would continue to
allow GEMX Members to price their services at a level that will enable
them to attract order flow from market participants who would otherwise
utilize an existing front-end order entry mechanism instead of
incurring the cost in time and money to develop their own internal
systems to be able to deliver orders directly to the Exchange's System.
The Exchange continues to seek to reward market participants that bring
a greater amount of order flow to the Exchange by paying higher rebates
\18\ based on the average daily volume that qualified as Eligible
Contracts. The Exchange believes that the tiers are reasonable because
the Exchange is incentivizing GEMX Members to transact a greater amount
of qualifying volume to earn the rebate. The additional order flow will
benefit all market participants.
---------------------------------------------------------------------------
\18\ Currently, the Exchange pays a $0.07 per contract rebate to
qualifying GEMX Members who transact 10,000 ADV; a rebate of $0.10
per contract to qualifying GEMX Members who transact 15,000 ADV and
a $0.13 per contact rebate to qualifying GEMX Members who transact
20,000 ADV. The qualifying ADV is not being amended with this
proposal. This proposal would increase each of the 3 rebate tiers by
$0.01 per contract.
---------------------------------------------------------------------------
The Exchange's proposal to increase the MARS Payments, which are
currently paid based on certain average daily volumes for Eligible
Contracts which add liquidity, is equitable and not unfairly
discriminatory because the Exchange will uniformly pay all qualifying
GEMX Members, that offer market access and connectivity to the Exchange
and/or utilize such functionality themselves, the proposed rebates
specified in the proposed MARS Payment tiers, provided the GEMX Member
has executed the requisite number of Eligible Contracts. Moreover, the
Exchange believes that the proposed MARS Payments offered by the
Exchange are equitable and not unfairly discriminatory because any
qualifying GEMX Member that offers market access and connectivity to
the Exchange and/or utilizes such functionality themselves may earn the
MARS Payments for all Eligible Contracts.
Proposal--Rebate
The Exchange's proposal to pay an additional $0.05 per contract
rebate, in addition to the Tier 1 Maker Rebates in Options 7, Section 3
for Penny Symbols and SPY,\19\ for Non-Nasdaq GEMX Market Maker
(FARMM), Firm Proprietary/Broker-Dealer and Professional Customer
orders that qualify as MARS Eligible Contracts,\20\ pursuant to Options
7, Section 4B, and were routed through a qualifying GEMX Member's
System \21\ is reasonable. The Exchange believes that its proposal will
incentivize Members to send order flow to GEMX Members that qualify for
MARS and, in turn, attract higher volumes of equity and ETF options
volume to the Exchange. The rebate will benefit all market participants
who will have an opportunity to interact with this order flow.
---------------------------------------------------------------------------
\19\ Today, the Exchange pays a Tier 1 Maker Rebate of $0.20 per
contract for Market Makers, Non-Nasdaq GEMX Market Maker (FarMM),
Firm Proprietary/Broker-Dealer and Professional Customer orders.
Priority Customers are paid a $0.25 per contract Tier 1 Maker
Rebate.
\20\ As noted herein, Eligible Contracts do not include QCC
Orders or PIM Orders. Options overlying NDX are not considered
Eligible Contracts. See Options 7, Section 4B.
\21\ As noted herein, to qualify for MARS, a GEMX Member's
System would be required to: (1) Enable the electronic routing of
orders to all of the U.S. options exchanges, including GEMX; (2)
provide current consolidated market data from the U.S. options
exchanges; and (3) be capable of interfacing with GEMX's API to
access current GEMX match engine functionality. Further, the
Member's System would also need to cause GEMX to be the one of the
top four default destination exchanges for (a) individually executed
marketable orders if GEMX is at the national best bid or offer
(``NBBO''), regardless of size or time or (b) orders that establish
a new NBBO on GEMX's Order Book, but allow any user to manually
override GEMX as a default destination on an order-by-order basis.
See Options 7, Section 4B.
---------------------------------------------------------------------------
The Exchange's proposal to pay an additional $0.05 per contract
rebate, in addition to the Tier 1 Maker Rebate in Options 7, Section 3
for Penny Symbols and SPY, for Non-Nasdaq GEMX Market Maker (FarMM),
Firm Proprietary/Broker-Dealer and Professional Customer orders that
qualify as MARS Eligible Contracts, pursuant to Options 7, Section 4B,
and were routed through a qualifying GEMX Member's routing system is
equitable and not unfairly discriminatory. While MARS is only being
offered to qualifying GEMX Members for Non-Nasdaq GEMX Market Maker
(FarMM), Firm Proprietary/Broker-Dealer and Professional Customer
equity option orders, and would not pay an additional rebate for
Priority Customer or Market Maker \22\ orders, the Exchange believes
this is equitable and not unfairly discriminatory for the reasons
below. With respect to Priority Customer orders, the Exchange notes
that, today, Priority Customer Orders may earn the highest Maker
Rebates available on GEMX.\23\ The Exchange believes that the
availability of these aforementioned rebates for Priority Customer
Orders does not warrant the Exchange paying an additional rebate on
Priority Customer orders for MARS. With respect to Market Maker orders,
today the Exchange offers certain Maker Rebates on Market Maker
orders.\24\ The Exchange believes that these rebates provide ample
incentive for attracting Market Maker orders to the Exchange and that
no further subsidy is warranted at this time.\25\ To offer the proposed
subsidy on Priority Customer or Market Maker orders would require
funding from some other source, such as raising fees for other
participants. As a result, the Exchange believes it is appropriate to
only count Non-Nasdaq GEMX Market Maker (FarMM), Firm Proprietary/
Broker-Dealer and Professional Customer orders toward the Eligible
Contracts, which unlike Priority Customer and Market Maker orders, are
not eligible for Maker Rebates today beyond $0.20 per contract on GEMX.
The Exchange notes that it is commonplace within the options industry
for exchanges to charge different rates and/or offer different rebates
depending upon the capacity in which a participant is trading. For
these reasons, the Exchange believes that the proposal to only count
certain order flow as Eligible Contracts is equitable and not unfairly
discriminatory for the reasons mentioned herein.
---------------------------------------------------------------------------
\22\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\23\ See Options 7, Section 3.
\24\ Id.
\25\ Market Maker and Priority Customer orders are eligible for
higher Maker Rebates based on achieving certain volume requirements
specified in the Table 1 Qualifying Tier Thresholds. See Options 7,
Section 3.
---------------------------------------------------------------------------
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
[[Page 36656]]
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.
Proposal--MARS Payment
The Exchange's proposal to increase the MARS Payments, which are
currently paid based on certain average daily volumes for Eligible
Contracts which add liquidity, does not impose an undue burden on
competition because the Exchange will uniformly pay all qualifying GEMX
Members, that offer market access and connectivity to the Exchange and/
or utilize such functionality themselves, the proposed rebates
specified in the proposed MARS Payment tiers, provided the GEMX Member
has executed the requisite number of Eligible Contracts. Moreover, the
Exchange believes that the proposed MARS Payments offered by the
Exchange do not impose an undue burden on competition because any
qualifying GEMX Member that offers market access and connectivity to
the Exchange and/or utilizes such functionality themselves may earn the
MARS Payments for all Eligible Contracts.
Proposal--Rebate
The Exchange's proposal to pay an additional $0.05 per contract
rebate, in addition to the Tier 1 Maker Rebate in Options 7, Section 3
for Penny Symbols and SPY,\26\ for Non-Nasdaq GEMX Market Maker
(FarMM), Firm Proprietary/Broker-Dealer and Professional Customer
orders that qualify as MARS Eligible Contracts, pursuant to Options 7,
Section 4B, and were routed through a qualifying GEMX Member's routing
system, does not impose an undue burden on competition. While MARS is
only being offered to qualifying GEMX Members for Non-Nasdaq GEMX
Market Maker (FarMM), Firm Proprietary/Broker-Dealer and Professional
Customer equity option orders, and would not pay an additional rebate
for Priority Customer or Market Maker orders, the Exchange believes
this does not impose an undue burden on competition. With respect to
Priority Customer orders, the Exchange notes that, today, Priority
Customer orders may earn the highest Maker Rebates available on
GEMX.\27\ The Exchange believes that the availability of these rebates
for Priority Customer orders does not warrant paying an additional
subsidy on Priority Customer orders for MARS. With respect to Market
Maker orders, today the Exchange offers certain Maker Rebates on Market
Maker orders.\28\ To offer the proposed subsidy on Priority Customer or
Market Maker orders would require funding from some other source, such
as raising fees for other participants. As a result, the Exchange
believes it is appropriate to only count Non-Nasdaq GEMX Market Maker
(FarMM), Firm Proprietary/Broker-Dealer and Professional Customer
orders toward the Eligible Contracts, which unlike Priority Customer
and Market Maker orders, are not eligible for Maker Rebates today
beyond $0.20 per contract on GEMX. The Exchange notes that it is
commonplace within the options industry for exchanges to charge
different rates and/or offer different rebates depending upon the
capacity in which a participant is trading. For these reasons, the
Exchange believes that the proposal to only count certain order flow as
Eligible Contracts does not impose an undue burden on competition.
---------------------------------------------------------------------------
\26\ Today, the Exchange pays a Tier 1 Maker Rebate of $0.20 per
contract for Market Makers, Non-Nasdaq GEMX Market Maker (FarMM),
Firm Proprietary/Broker-Dealer and Professional Customer orders.
Priority Customers are paid a $0.25 per contract Tier 1 Maker
Rebate.
\27\ See Options 7, Section 3.
\28\ Id.
---------------------------------------------------------------------------
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,\29\ and Rule 19b-4(f)(2) \30\ 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.
---------------------------------------------------------------------------
\29\ 15 U.S.C. 78s(b)(3)(A)(ii).
\30\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-GEMX-2020-14 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-2020-14. 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
[[Page 36657]]
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-2020-14 and should be submitted on
or before July 8, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
---------------------------------------------------------------------------
\31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12987 Filed 6-16-20; 8:45 am]
BILLING CODE 8011-01-P
