Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Options 7, 23478-23483 [2021-09130]
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Federal Register / Vol. 86, No. 83 / Monday, May 3, 2021 / Notices
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2021–09 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–BOX–2021–09. 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 such
filing also will be available for
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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–BOX–2021–09 and should
be submitted on or before May 24, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–09131 Filed 4–30–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91686; File No. SR–CBOE–
2020–075]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Withdrawal
of a Proposed Rule Change, as
Modified by Amendment No. 2, To
Make Qualified Contingent Cross
Orders Available for FLEX Option
Trading
April 27, 2021.
On August 3, 2020, Cboe Exchange,
Inc. (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to make Qualified Contingent
Cross (‘‘QCC’’) Orders available for
electronic FLEX option trading.
The proposed rule change was
published for comment in the Federal
Register on August 20, 2020.3 On
October 1, 2020, pursuant to Section
19(b)(2) of the Exchange Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On October 23,
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 89564
(August 14, 2020), 85 FR 51531.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 90062
(October 1, 2020), 85 FR 63312 (October 7, 2020).
1 15
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2020, the Exchange filed Amendment
No. 1 to the proposed rule change,
which replaced and superseded the
proposed rule change as originally
filed.6 On November 18, 2020, the
Commission instituted proceedings
under Section 19(b)(2)(B) of the
Exchange Act 7 to determine whether to
approve or disapprove the proposed
rule change, as modified by Amendment
No. 1.8 On February 2, 2021, the
Exchange submitted Amendment No. 2
to the proposed rule change, which
replaced and superseded the proposed
rule change, as modified by Amendment
No. 1.9 On February 12, 2021, the
Commission designated a longer period
for Commission action on proceedings
to determine whether to approve or
disapprove the proposed rule change, as
modified by Amendment No. 2.10 On
April 14, 2021, the Exchange withdrew
the proposed rule change (SR–CBOE–
2020–075).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–09129 Filed 4–30–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91687; File No. SR–MRX–
2021–04]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Pricing Schedule at
Options 7
April 27, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
6 In Amendment No. 1, the Exchange provided
additional support for the proposal. The full text of
Amendment No. 1 is available on the Commission’s
website at: https://www.sec.gov/comments/sr-cboe2020-075/srcboe2020075-7940531-224727.pdf.
7 15 U.S.C. 78s(b)(2)(B).
8 See Securities Exchange Act Release No. 90457,
85 FR 75071 (November 24, 2020).
9 In Amendment No. 2, the Exchange provided
further support for the proposal. The full text of
Amendment No. 2 is available on the Commission’s
website at: https://www.sec.gov/comments/sr-cboe2020-075/srcboe2020075-8330243-228699.pdf.
10 See Securities Exchange Act Release No. 91127,
86 FR 10378 (February 19, 2021).
11 17 CFR 200.30–3(a)(12).
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Federal Register / Vol. 86, No. 83 / Monday, May 3, 2021 / Notices
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 13,
2021, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7, as described further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/mrx/rules, 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, as further
described below.
Market Maker Fees
Today, as set forth in Table 1 of
Options 7, Section 3, the Exchange
assesses the following maker/taker fees
for regular orders in Non-Penny
Symbols:
NON-PENNY SYMBOLS
Maker fee
Tier 1
Market participant
Market Maker 3 .................................................................................................
Non-Nasdaq MRX Market Maker (FarMM) .....................................................
Firm Proprietary/Broker-Dealer ........................................................................
Professional Customer ....................................................................................
Priority Customer .............................................................................................
The Exchange now proposes to
increase the maker fees for Market
Makers 4 from $0.20 to $0.35 per
contract (Tier 1) and from $0.10 to $0.20
per contract (Tier 2).
$0.20
0.90
0.90
0.90
0.00
Qualifying Tier Thresholds
Currently, the Exchange operates a
maker/taker fee model for Penny and
Non-Penny Symbols in Table 1 of
Options 7, Section 3 where all market
$0.10
0.90
0.90
0.90
0.00
Taker fee
Tier 1
$1.10
1.10
1.10
1.10
0.00
Taker fee
Tier 2
$1.10
1.10
1.10
1.10
0.00
participants are charged a fee (or are
eligible for free executions) with
potentially discounted fees based on the
following qualifying tier thresholds in
Table 3 of Options 7, Section 3:
Total affiliated member or affiliated entity ADV 5
Tiers
Tier 1 .......................................................................................................
Tier 2 .......................................................................................................
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Maker fee
Tier 2
executes 0.00%—0.7499% of Customer Total Consolidated Volume. 6
executes 0.75% or more of Customer Total Consolidated Volume.
The highest tier threshold attained
applies retroactively in a given month to
all eligible traded contracts and applies
to all eligible market participants.
The Exchange now proposes to amend
the Tier 1 qualification to require that
Members execute 0.00% to less than
0.75% of Customer Total Consolidated
Volume. The proposed rule change will
not impact current Tier 1 rates. Rather,
the purpose of the proposed change is
to ensure that all eligible volume gets
included in the calculation of the tiers.
Specifically, the proposed rule change
recognizes the potential for a Member to
execute a percentage of Customer Total
Consolidated Volume that falls between
0.7499% and 0.75%. As such, the
proposed changes will make clear that
Members that execute anywhere from
0.00% to less than 0.75% of Customer
Total Consolidated Volume will qualify
for Tier 1 pricing in the Exchange’s
maker/taker fee schedule. The Exchange
believes that its proposal will have
minimal impact as no Member falls into
this category.
The Exchange further proposes to
permit Market Makers to alternatively
qualify for the Tier 1 and Tier 2 maker/
taker fees in Penny and Non-Penny
Symbols based on Total Market Maker
ADV. Specifically, Market Makers may
alternatively qualify for the Tier 1 and
Tier 2 maker/taker fees if they: execute
up to 0.10% of Customer Total
Consolidated Volume which adds
liquidity in regular orders (Tier 1), and
execute more than 0.10% of Customer
Total Consolidated Volume which adds
15 U.S.C. 78s(b)(1).
17 CFR 240.19b–4.
3 This fee also applies to Market Maker orders
sent to the Exchange by Electronic Access Members.
4 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See Options 1, Section
1(a)(21).
5 ‘‘Total Affiliated Member or Affiliated Entity
ADV’’ means all average daily volume (‘‘ADV’’)
executed on the Exchange in all symbols and order
types, including volume executed by Affiliated
Members or Affiliated Entities. All eligible volume
from Affiliated Members or an Affiliated Entity are
aggregated in determining applicable tiers.
6 ‘‘Customer Total Consolidated Volume’’ means
the total volume cleared at The Options Clearing
Corporation in the Customer range in equity and
ETF options in that month.
1
2
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Federal Register / Vol. 86, No. 83 / Monday, May 3, 2021 / Notices
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liquidity in regular orders (Tier 2).7 The
Exchange also proposes to add a
definition of Total Market Maker ADV
to include all Market Maker ADV
executed on the Exchange in all symbols
and order types, including volume
executed by Affiliated Members 8 or
Affiliated Entities.9 All eligible volume
from Affiliated Members or an Affiliated
Entity will be aggregated in determining
applicable tiers.10 The Exchange also
proposes to add a new note 5 in Table
1 of Options 7, Section 3, which will
provide that Market Makers may
alternatively qualify for the fees in Table
1 if they meet the applicable tier
thresholds based on Total Market Maker
ADV set forth in Table 3. Lastly, the
Exchange proposes to amend the current
definition of Total Affiliated Member or
Affiliated Entity ADV in Table 3 as
follows: ‘‘Total Affiliated Member or
Affiliated Entity ADV means all ADV
executed on the Exchange in all symbols
and order types, including volume
executed by Affiliated Members or
Affiliated Entities. All eligible volume
from Affiliated Members or an Affiliated
Entity will be aggregated in determining
applicable tiers.’’ With the foregoing
change, the Exchange also proposes to
delete redundant language regarding
aggregation of Affiliated Member or
Affiliated Entity volume currently in the
last bullet point of Table 3.
While the fees in Table 1 of Options
7, Section 3 for nearly all market
participants (i.e., Non-Nasdaq MRX
7 0.10% of Customer Total Consolidated Volume
is approximately 28,000 contracts per day.
8 An ‘‘Affiliated Member’’ is a Member that shares
at least 75% common ownership with a particular
Member as reflected on the Member’s Form BD,
Schedule A.
9 An ‘‘Affiliated Entity’’ is a relationship between
an Appointed Market Maker and an Appointed OFP
for purposes of qualifying for certain pricing
specified in the Pricing Schedule. Market Makers
and OFPs are required to send an email to the
Exchange to appoint their counterpart, at least 3
business days prior to the last day of the month to
qualify for the next month. The Exchange will
acknowledge receipt of the emails and specify the
date the Affiliated Entity is eligible for applicable
pricing, as specified in the Pricing Schedule. Each
Affiliated Entity relationship will commence on the
1st of a month and may not be terminated prior to
the end of any month. An Affiliated Entity
relationship will terminate after a one (1) year
period, unless either party terminates earlier in
writing by sending an email to the Exchange at least
3 business days prior to the last day of the month
to terminate for the next month. Affiliated Entity
relationships must be renewed annually by each
party sending an email to the Exchange. Affiliated
Members may not qualify as a counterparty
comprising an Affiliated Entity. Each Member may
qualify for only one (1) Affiliated Entity
relationship at any given time.
10 The proposed definition will be set forth in the
Table 3 notes of Options 7, Section 3.
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Market Makers,11 Firm Proprietary 12/
Broker-Dealers,13 Professional
Customers,14 and Priority Customers) 15
will not be impacted by this proposal,16
the proposed volume requirements will
impact Market Makers that will be
eligible to alternatively qualify for the
lower maker fees.17 The Exchange
believes that the proposed fee structure
will encourage Market Makers and their
Affiliated Members or Affiliated Entities
to increase their liquidity providing
activity on the Exchange, which would
support the quality of price discovery
on the Exchange and provide additional
liquidity for incoming orders.
PIM Break-Up Rebates
Today, as set forth in Options 7,
Section 3.A, the Exchange pays a 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 $0.25 per contract in Penny
Symbols and $0.60 per contract in NonPenny Symbols.18 The Exchange also
offers additional break-up rebates in
note 3 of Options 7, Section 3.A for
Members that meet certain volume
requirements or alternatively, that enter
into Affiliated Member or Affiliated
Entity relationships. In particular, note
3 currently provides: ‘‘Members that are
not in an Affiliated Member or
Affiliated Entity relationship and that
execute 0.05% or greater of Customer
11 A ‘‘Non-Nasdaq MRX Market Maker’’ is a
market maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended,
registered in the same options class on another
options exchange.
12 A ‘‘Firm Proprietary order is an order
submitted by a Member for its own proprietary
account.
13 A ‘‘Broker-Dealer’’ order is an order submitted
by a Member for a broker-dealer account that is not
its own proprietary account.
14 A ‘‘Professional Customer’’ is a person or entity
that is not a broker/dealer and is not a Priority
Customer.
15 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).
16 In particular, other non-Priority Customers will
continue to be uniformly charged the same maker
fees of $0.47 per contract (Penny Symbols) and
$0.90 per contract (Non-Penny Symbols), regardless
of tier achieved. Priority Customers will continue
to receive free executions for their orders.
17 Currently, Market Makers are charged maker
fees of $0.20 per contract (Tier 1) and $0.10 per
contract (Tier 2) in both Penny and Non-Penny
Symbols. As proposed above, the maker fees for
Market Makers will be increased to $0.35 per
contract (Tier 1) and $0.20 per contract (Tier 2) in
Non-Penny Symbols only.
18 Break-up rebates apply only to regular PIM
orders of 500 or fewer contracts and to complex
PIM orders where the largest leg is 500 or fewer
contracts.
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Total Consolidated Volume in non-PIM
Priority Customer contracts within a
month will receive an additional rebate
of: (i) $0.20 per contract in Penny
Symbols for Complex PIM Orders only,
(ii) $0.15 per contract in Penny Symbols
for Regular PIM Orders only, and (iii)
$0.45 per contract in Non-Penny
Symbols for both Regular and Complex
PIM Orders. Alternatively, Affiliated
Members or Affiliated Entities will be
eligible to receive the rebates in this
note 3 without any additional volume
requirements.’’
The Exchange now proposes to
modify the note 3 rebate qualifications
only for those Members that are not in
Affiliated Member or Affiliated Entity
relationships. Under this proposal,
Affiliated Members or Affiliated Entities
will continue to be eligible to receive
the note 3 rebates without any
additional volume requirements.
Specifically, the Exchange proposes to
require Members not in Affiliated
Member or Affiliated Entity
relationships to execute 0.05% or
greater of Customer Total Consolidated
Volume which adds liquidity in nonPIM Priority Customer contracts within
a month in order to receive the
additional rebates in note 3.
Marketing Fee
Today, as set forth in Options 7,
Section 5.B, the Exchange assesses
Market Makers a marketing fee of $0.25
per contract in Penny Symbols and
$0.70 per contract in Non-Penny
Symbols for each regular Priority
Customer contract executed.19 This fee
is currently waived for (i) Flash Order 20
responses; (ii) Market Maker orders that
take liquidity from the order book; (iii)
Crossing Orders 21 and Responses to
19 The marketing fee is rebated proportionately to
the Members that paid the fee such that on a
monthly basis the marketing fee fund balance
administered by a Primary Market Maker for a
Group of options established under Options 2,
Section 3(b) does not exceed $100,000 and the
marketing fee fund balance administered by a
preferenced Competitive Market Maker for such a
Group does not exceed $100,000. A preferenced
Competitive Market Maker that elects not to
administer a fund is not charged the marketing fee.
The Exchange assesses an administrative fee of
.45% on the total amount of the funds collected
each month.
20 A ‘‘Flash Order’’ is an order that is exposed
at the National Best Bid or Offer by the Exchange
to all Members for execution, as provided under
Supplementary Material .02 to Nasdaq MRX
Options 5, Section 2. For all Flash Orders, the
Exchange will charge the applicable taker fee and
for responses that trade against a Flash Order, the
Exchange will charge the applicable maker fee.
21 A ‘‘Crossing Order’’ is an order executed in the
Exchange’s Facilitation Mechanism, Solicited Order
Mechanism, PIM or submitted as a Qualified
Contingent Cross order. For purposes of this Pricing
Schedule, orders executed in the Block Order
Mechanism are also considered Crossing Orders.
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Crossing Orders; 22 and (iv) complex
orders.
The Exchange now proposes to set
this marketing fee to $0.00 per contract.
The Exchange also proposes in Options
7, Section 5.B to add language that
makes clear no marketing fees will be
charged with the proposed changes.
Specifically, the Exchange will add that
no marketing fees are charged for Penny
and Non-Penny Symbols. If the
Exchange determines to charge a
marketing fee in the future, it will do so
pursuant to a rule filing.
Technical Amendments
The Exchange proposes nonsubstantive, technical amendments in
Options 7, Section 1(c) to rearrange the
definitions in alphabetical order
without changing the substance of the
Rule. The Exchange also proposes in
Options 7, Section 3 to relocate the
definition of Total Affiliated Member or
Affiliated Entity Priority Customer ADV
from Table 3 into Table 1 as this
definition is currently only used within
Table 1 pricing. The relocated definition
will provide that Total Affiliated
Member or Affiliated Entity Priority
Customer ADV means all Priority
Customer ADV executed on the
Exchange in all symbols and order
types, including volume executed by
Affiliated Members or Affiliated
Entities. All eligible volume from
Affiliated Members or an Affiliated
Entity will be aggregated in determining
applicable tiers.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,23 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,24 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The 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
22 ‘‘Responses to Crossing Order’’ is any contraside interest (i.e., orders & quotes) submitted after
the commencement of an auction in the Exchange’s
Facilitation Mechanism, Solicited Order
Mechanism, Block Order Mechanism or Price
Improvement Mechanism.
23 15 U.S.C. 78f(b).
24 15 U.S.C. 78f(b)(4) and (5).
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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’. . ..’’ 25
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.’’ 26
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.
Market Maker Fees
The Exchange believes that the
proposed increase in the Tier 1 and Tier
2 maker fees for Market Makers in NonPenny Symbols is reasonable. As
proposed, the maker fees will increase
from $0.20 to $0.35 per contract (Tier 1)
and from $0.10 to $0.20 per contract
(Tier 2). The Exchange believes that the
proposed maker fees will remain
25 NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca-2006–21)).
26 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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23481
attractive to Market Makers and will
continue to incentivize them to add
liquidity in Non-Penny Symbols as the
proposed fees will remain the lowest
maker fees assessed to any other market
participant on the Exchange, except for
Priority Customers who will continue to
receive free executions.27 Incentivizing
Market Makers to provide liquidity
through the lower maker fees will create
additional displayed liquidity and
opportunities for market participants to
trade.
The Exchange’s proposal to increase
the Tier 1 and Tier 2 maker fees in NonPenny Symbols for Market Makers is
equitable and not unfairly
discriminatory as the proposed increase
will apply uniformly to all similarly
situated market participants. Market
Makers will continue to pay lower
maker fees in Non-Penny Symbols
compared to other non-Priority
Customers. The Exchange believes that
it is equitable and not unfairly
discriminatory to continue charging
lower maker fees for Market Makers as
they, unlike other market participants,
add value to the Exchange through
quoting obligations and their
commitment of capital.
Qualifying Tier Thresholds
The Exchange believes that the
proposal to amend the current Tier 1
threshold is reasonable, equitable, and
not unfairly discriminatory. As
discussed above, the proposed rule
change will not impact current Tier 1
rates; rather, the proposed change will
ensure that all eligible volume gets
included in the calculation of the tiers
and will make clear that Members that
execute 0.00% to less than 0.75% of
Customer Total Consolidated Volume
will qualify for Tier 1 pricing in the
Exchange’s maker/taker fee schedule. As
noted above, the Exchange believes that
its proposal will have minimal impact
as no market participant falls into this
category. Furthermore, the proposed
changes to the existing Tier 1 threshold
will apply uniformly to all market
participants.
Furthermore, the Exchange believes
that it is reasonable to introduce an
alternative way for Market Makers to
qualify for the Tier 1 and Tier 2 fees
based on Total Market Maker ADV.28 As
27 Specifically, Non-Nasdaq MRX Market Makers,
Firm Proprietary/Broker-Dealers, and Professional
Customers will continue to be assessed the $0.90
per contract maker fee in Non-Penny Symbols,
regardless of tier achieved.
28 As discussed above, Total Market Maker ADV
will be defined in the Pricing Schedule as all
Market Maker ADV executed on the Exchange in all
symbols and order types, including volume
executed by Affiliated Members or Affiliated
E:\FR\FM\03MYN1.SGM
Continued
03MYN1
23482
Federal Register / Vol. 86, No. 83 / Monday, May 3, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
discussed above, Market Makers may
alternatively qualify for the Tier 1 and
Tier 2 maker/taker fees if they: execute
up to 0.10% of Customer Total
Consolidated Volume which adds
liquidity in regular orders (Tier 1), and
execute more than 0.10% of Customer
Total Consolidated Volume which adds
liquidity in regular orders (Tier 2). The
Exchange believes that the proposal
would encourage additional order flow,
especially liquidity adding regular order
flow, from Market Makers and their
Affiliated Members or Affiliated Entities
by providing an alternative method for
Market Makers to qualify for the Tier 1
and Tier 2 fees. This, in turn, will
benefit all market participants that will
have an opportunity to trade with the
order flow that these firms bring to the
market.
The Exchange’s proposal to introduce
an alternative way for Market Makers to
qualify for Tier 1 and Tier 2 pricing
based on Total Market Maker ADV is
equitable and not unfairly
discriminatory because it will apply
uniformly to all similarly situated
market participants. The Exchange
believes it is equitable and not unfairly
discriminatory to introduce the
proposed alternative qualifications for
only Market Makers because Market
Makers have different requirements and
obligations to the Exchange that other
market participants do not (such as
quoting requirements). As such, the
Exchange’s proposal is designed to
increase Market Maker participation and
reward Market Makers for the unique
role that they play in ensuring a robust
market.
PIM Break-up Rebates
The Exchange believes that the
proposed changes to the qualifications
for receiving the additional PIM breakup rebates are reasonable, equitable, and
not unfairly discriminatory. As
discussed above, the Exchange is
proposing to amend the rebate
qualifications to require that Members
not in Affiliated Member or Affiliated
Entity relationships execute 0.05% or
greater of Customer Total Consolidated
Volume which adds liquidity in nonPIM Priority Customer contracts within
a month in order to receive the
additional rebates in note 3 of Options
7, Section 3.A. The Exchange believes
that the proposed changes will
incentivize Members to bring greater
liquidity adding order flow for
execution on the Exchange, which the
Exchange believes may result in tighter
Entities. Furthermore, all eligible volume from
Affiliated Members or an Affiliated Entity will be
aggregated in determining applicable tiers.
VerDate Sep<11>2014
20:34 Apr 30, 2021
Jkt 253001
spreads, thereby making the Exchange a
more attractive trading venue to the
benefit of all market participants.
The Exchange believes that the
proposed changes to the additional PIM
break-up rebate qualifications in note 3
are equitable and not unfairly
discriminatory because the changes will
apply uniformly to all Priority Customer
PIM originating orders that execute with
any PIM response. While Priority
Customer PIM originating orders will
continue to be eligible to receive the
additional break-up rebates in note 3, as
opposed to other market participants,
the Exchange believes that the
application of this rebate program is
equitable and not unfairly
discriminatory because Priority
Customer PIM originating 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, the
Exchange has historically provided
lower pricing or other incentives to
Priority Customer PIM originating
orders in order to attract such order
flow.
Marketing Fee
The Exchange believes that it is
reasonable to set the marketing fee to
$0.00 per contract for Penny and NonPenny Symbols because the Exchange
seeks to limit the cost of transacting in
regular orders for Market Makers who
are the only market participants that are
assessed this fee today. The Exchange
believes that the proposed fee change is
equitable and not unfairly
discriminatory as no Market Makers
would be charged a marketing fee under
this proposal. Furthermore, the
Exchange believes that it is reasonable,
equitable, and not unfairly
discriminatory to add language in
Options 7, Section 5.B as it will make
clear that no marketing fees will be
assessed for Penny and Non-Penny
Symbols with the proposed changes,
and that if the Exchange determines to
charge a marketing fee in the future, it
will do so pursuant to a rule filing.
Technical Amendments
The Exchange believes that the
proposed changes to alphabetize the
definitions in Options 7, Section 1(c)
and to relocate the definition of Total
Affiliated Member or Affiliated Entity
Priority Customer ADV in Options 7,
Section 3 in the manner described above
are reasonable, equitable, and not
unfairly discriminatory. All of the
changes are non-substantive, technical
PO 00000
Frm 00141
Fmt 4703
Sfmt 4703
amendments that will facilitate the use
of the Exchange’s Pricing Schedule by
market participants.
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 the proposed
changes will place any category of
market participant at a competitive
disadvantage. Overall, the Exchange’s
proposal is designed to incentivize
Members to bring additional order flow
to the Exchange, and create a more
active and quality market in MRX-listed
options. Market Makers and Priority
Customers would continue to receive
favorable pricing by way of lower fees
or rebates, as compared to other market
participants. As discussed above,
Market Makers add value through
continuous quoting and are subject to
additional requirements and obligations
unlike other market participants.
Incentivizing Market Makers to increase
their participation on the Exchange
benefits all market participants through
the quality of order interaction.
Similarly, Priority Customer liquidity
benefits all market participants by
providing more trading opportunities,
which attracts other market participants,
thus facilitating tighter spreads,
increased order flow and trading
opportunities to the benefit of all market
participants.
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
E:\FR\FM\03MYN1.SGM
03MYN1
Federal Register / Vol. 86, No. 83 / Monday, May 3, 2021 / Notices
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
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,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.
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:
jbell on DSKJLSW7X2PROD 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–2021–04 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MRX–2021–04. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
29 15
30 17
20:34 Apr 30, 2021
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–09130 Filed 4–30–21; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16936 and #16937;
ALABAMA Disaster Number AL–00120]
Presidential Declaration of a Major
Disaster for the State of ALABAMA
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for the State of ALABAMA
(FEMA—4596—DR), dated 04/26/2021.
Incident: Severe Storm, Straight-line
Winds, and Tornadoes. Incident Period:
03/25/2021 through 03/26/2021.
DATES: Issued on 04/26/2021.
Physical Loan Application Deadline
Date: 06/25/2021.
Economic Injury (EIDL) Loan
Application Deadline Date: 01/26/2022.
ADDRESSES: Submit completed loan
applications to:
SUMMARY:
U.S. Small Business Administration,
Processing and Disbursement Center,
14925 Kingsport Road, Fort Worth, TX
76155.
A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
FOR FURTHER INFORMATION CONTACT:
Notice is
hereby given that as a result of the
President’s major disaster declaration on
04/26/2021, applications for disaster
loans may be filed at the address listed
above or other locally announced
locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties (Physical Damage and
Economic Injury Loans): Bibb,
Calhoun, Clay, Hale, Jefferson,
Perry, Randolph, Shelby.
Contiguous Counties (Economic Injury
Loans Only):
Alabama: Blount, Chambers,
Cherokee, Chilton, Cleburne, Coosa,
Dallas, Etowah, Greene, Marengo,
Saint Clair, Talladega, Tallapoosa,
Tuscaloosa, Walker.
Georgia: Carroll, Heard, Troup.
SUPPLEMENTARY INFORMATION:
The Interest Rates are:
Percent
For Physical Damage:
Homeowners with Credit Available
Elsewhere .................................
Homeowners without Credit Available Elsewhere .........................
Businesses with Credit Available
Elsewhere .................................
Businesses without Credit Available Elsewhere .........................
Non-Profit Organizations with
Credit Available Elsewhere .......
Non-Profit Organizations without
Credit Available Elsewhere .......
For Economic Injury:
Businesses & Small Agricultural
Cooperatives without Credit
Available Elsewhere ..................
Non-Profit Organizations without
Credit Available Elsewhere .......
31 17
Jkt 253001
PO 00000
CFR 200.30–3(a)(12).
Frm 00142
Fmt 4703
Sfmt 9990
2.500
1.250
6.000
3.000
2.000
2.000
3.000
2.000
The number assigned to this disaster
for physical damage is 16936 C and for
economic injury is 16937 0.
(Catalog of Federal Domestic Assistance
Number 59008)
James Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2021–09179 Filed 4–30–21; 8:45 am]
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
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–2021–04 and should
be submitted on or before May 24, 2021.
23483
BILLING CODE 8026–03–P
E:\FR\FM\03MYN1.SGM
03MYN1
]]>Agencies
[Federal Register Volume 86, Number 83 (Monday, May 3, 2021)]
[Notices]
[Pages 23478-23483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09130]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91687; File No. SR-MRX-2021-04]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Options 7
April 27, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 23479]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 13, 2021, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\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 the Exchange's Pricing Schedule at
Options 7, as described further below.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, 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, as further described below.
Market Maker Fees
Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange assesses the following maker/taker fees for regular orders in
Non-Penny Symbols:
---------------------------------------------------------------------------
\3\ This fee also applies to Market Maker orders sent to the
Exchange by Electronic Access Members.
Non-Penny Symbols
----------------------------------------------------------------------------------------------------------------
Maker fee Maker fee Taker fee Taker fee
Market participant Tier 1 Tier 2 Tier 1 Tier 2
----------------------------------------------------------------------------------------------------------------
Market Maker \3\................................ $0.20 $0.10 $1.10 $1.10
Non-Nasdaq MRX Market Maker (FarMM)............. 0.90 0.90 1.10 1.10
Firm Proprietary/Broker-Dealer.................. 0.90 0.90 1.10 1.10
Professional Customer........................... 0.90 0.90 1.10 1.10
Priority Customer............................... 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------
The Exchange now proposes to increase the maker fees for Market
Makers \4\ from $0.20 to $0.35 per contract (Tier 1) and from $0.10 to
$0.20 per contract (Tier 2).
---------------------------------------------------------------------------
\4\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
---------------------------------------------------------------------------
Qualifying Tier Thresholds
Currently, the Exchange operates a maker/taker fee model for Penny
and Non-Penny Symbols in Table 1 of Options 7, Section 3 where all
market participants are charged a fee (or are eligible for free
executions) with potentially discounted fees based on the following
qualifying tier thresholds in Table 3 of Options 7, Section 3:
---------------------------------------------------------------------------
\5\ ``Total Affiliated Member or Affiliated Entity ADV'' means
all average daily volume (``ADV'') executed on the Exchange in all
symbols and order types, including volume executed by Affiliated
Members or Affiliated Entities. All eligible volume from Affiliated
Members or an Affiliated Entity are aggregated in determining
applicable tiers.
\6\ ``Customer Total Consolidated Volume'' means the total
volume cleared at The Options Clearing Corporation in the Customer
range in equity and ETF options in that month.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tiers Total affiliated member or affiliated entity ADV \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tier 1........................................ executes 0.00%--0.7499% of Customer Total Consolidated Volume. \6\
Tier 2........................................ executes 0.75% or more of Customer Total Consolidated Volume.
--------------------------------------------------------------------------------------------------------------------------------------------------------
The highest tier threshold attained applies retroactively in a
given month to all eligible traded contracts and applies to all
eligible market participants.
The Exchange now proposes to amend the Tier 1 qualification to
require that Members execute 0.00% to less than 0.75% of Customer Total
Consolidated Volume. The proposed rule change will not impact current
Tier 1 rates. Rather, the purpose of the proposed change is to ensure
that all eligible volume gets included in the calculation of the tiers.
Specifically, the proposed rule change recognizes the potential for a
Member to execute a percentage of Customer Total Consolidated Volume
that falls between 0.7499% and 0.75%. As such, the proposed changes
will make clear that Members that execute anywhere from 0.00% to less
than 0.75% of Customer Total Consolidated Volume will qualify for Tier
1 pricing in the Exchange's maker/taker fee schedule. The Exchange
believes that its proposal will have minimal impact as no Member falls
into this category.
The Exchange further proposes to permit Market Makers to
alternatively qualify for the Tier 1 and Tier 2 maker/taker fees in
Penny and Non-Penny Symbols based on Total Market Maker ADV.
Specifically, Market Makers may alternatively qualify for the Tier 1
and Tier 2 maker/taker fees if they: execute up to 0.10% of Customer
Total Consolidated Volume which adds liquidity in regular orders (Tier
1), and execute more than 0.10% of Customer Total Consolidated Volume
which adds
[[Page 23480]]
liquidity in regular orders (Tier 2).\7\ The Exchange also proposes to
add a definition of Total Market Maker ADV to include all Market Maker
ADV executed on the Exchange in all symbols and order types, including
volume executed by Affiliated Members \8\ or Affiliated Entities.\9\
All eligible volume from Affiliated Members or an Affiliated Entity
will be aggregated in determining applicable tiers.\10\ The Exchange
also proposes to add a new note 5 in Table 1 of Options 7, Section 3,
which will provide that Market Makers may alternatively qualify for the
fees in Table 1 if they meet the applicable tier thresholds based on
Total Market Maker ADV set forth in Table 3. Lastly, the Exchange
proposes to amend the current definition of Total Affiliated Member or
Affiliated Entity ADV in Table 3 as follows: ``Total Affiliated Member
or Affiliated Entity ADV means all ADV executed on the Exchange in all
symbols and order types, including volume executed by Affiliated
Members or Affiliated Entities. All eligible volume from Affiliated
Members or an Affiliated Entity will be aggregated in determining
applicable tiers.'' With the foregoing change, the Exchange also
proposes to delete redundant language regarding aggregation of
Affiliated Member or Affiliated Entity volume currently in the last
bullet point of Table 3.
---------------------------------------------------------------------------
\7\ 0.10% of Customer Total Consolidated Volume is approximately
28,000 contracts per day.
\8\ An ``Affiliated Member'' is a Member that shares at least
75% common ownership with a particular Member as reflected on the
Member's Form BD, Schedule A.
\9\ An ``Affiliated Entity'' is a relationship between an
Appointed Market Maker and an Appointed OFP for purposes of
qualifying for certain pricing specified in the Pricing Schedule.
Market Makers and OFPs are required to send an email to the Exchange
to appoint their counterpart, at least 3 business days prior to the
last day of the month to qualify for the next month. The Exchange
will acknowledge receipt of the emails and specify the date the
Affiliated Entity is eligible for applicable pricing, as specified
in the Pricing Schedule. Each Affiliated Entity relationship will
commence on the 1st of a month and may not be terminated prior to
the end of any month. An Affiliated Entity relationship will
terminate after a one (1) year period, unless either party
terminates earlier in writing by sending an email to the Exchange at
least 3 business days prior to the last day of the month to
terminate for the next month. Affiliated Entity relationships must
be renewed annually by each party sending an email to the Exchange.
Affiliated Members may not qualify as a counterparty comprising an
Affiliated Entity. Each Member may qualify for only one (1)
Affiliated Entity relationship at any given time.
\10\ The proposed definition will be set forth in the Table 3
notes of Options 7, Section 3.
---------------------------------------------------------------------------
While the fees in Table 1 of Options 7, Section 3 for nearly all
market participants (i.e., Non-Nasdaq MRX Market Makers,\11\ Firm
Proprietary \12\/Broker-Dealers,\13\ Professional Customers,\14\ and
Priority Customers) \15\ will not be impacted by this proposal,\16\ the
proposed volume requirements will impact Market Makers that will be
eligible to alternatively qualify for the lower maker fees.\17\ The
Exchange believes that the proposed fee structure will encourage Market
Makers and their Affiliated Members or Affiliated Entities to increase
their liquidity providing activity on the Exchange, which would support
the quality of price discovery on the Exchange and provide additional
liquidity for incoming orders.
---------------------------------------------------------------------------
\11\ A ``Non-Nasdaq MRX Market Maker'' is a market maker as
defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended, registered in the same options class on another options
exchange.
\12\ A ``Firm Proprietary order is an order submitted by a
Member for its own proprietary account.
\13\ A ``Broker-Dealer'' order is an order submitted by a Member
for a broker-dealer account that is not its own proprietary account.
\14\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer.
\15\ 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).
\16\ In particular, other non-Priority Customers will continue
to be uniformly charged the same maker fees of $0.47 per contract
(Penny Symbols) and $0.90 per contract (Non-Penny Symbols),
regardless of tier achieved. Priority Customers will continue to
receive free executions for their orders.
\17\ Currently, Market Makers are charged maker fees of $0.20
per contract (Tier 1) and $0.10 per contract (Tier 2) in both Penny
and Non-Penny Symbols. As proposed above, the maker fees for Market
Makers will be increased to $0.35 per contract (Tier 1) and $0.20
per contract (Tier 2) in Non-Penny Symbols only.
---------------------------------------------------------------------------
PIM Break-Up Rebates
Today, as set forth in Options 7, Section 3.A, the Exchange pays a
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 $0.25 per contract in Penny Symbols and $0.60 per
contract in Non-Penny Symbols.\18\ The Exchange also offers additional
break-up rebates in note 3 of Options 7, Section 3.A for Members that
meet certain volume requirements or alternatively, that enter into
Affiliated Member or Affiliated Entity relationships. In particular,
note 3 currently provides: ``Members that are not in an Affiliated
Member or Affiliated Entity relationship and that execute 0.05% or
greater of Customer Total Consolidated Volume in non-PIM Priority
Customer contracts within a month will receive an additional rebate of:
(i) $0.20 per contract in Penny Symbols for Complex PIM Orders only,
(ii) $0.15 per contract in Penny Symbols for Regular PIM Orders only,
and (iii) $0.45 per contract in Non-Penny Symbols for both Regular and
Complex PIM Orders. Alternatively, Affiliated Members or Affiliated
Entities will be eligible to receive the rebates in this note 3 without
any additional volume requirements.''
---------------------------------------------------------------------------
\18\ Break-up rebates apply only to regular PIM orders of 500 or
fewer contracts and to complex PIM orders where the largest leg is
500 or fewer contracts.
---------------------------------------------------------------------------
The Exchange now proposes to modify the note 3 rebate
qualifications only for those Members that are not in Affiliated Member
or Affiliated Entity relationships. Under this proposal, Affiliated
Members or Affiliated Entities will continue to be eligible to receive
the note 3 rebates without any additional volume requirements.
Specifically, the Exchange proposes to require Members not in
Affiliated Member or Affiliated Entity relationships to execute 0.05%
or greater of Customer Total Consolidated Volume which adds liquidity
in non-PIM Priority Customer contracts within a month in order to
receive the additional rebates in note 3.
Marketing Fee
Today, as set forth in Options 7, Section 5.B, the Exchange
assesses Market Makers a marketing fee of $0.25 per contract in Penny
Symbols and $0.70 per contract in Non-Penny Symbols for each regular
Priority Customer contract executed.\19\ This fee is currently waived
for (i) Flash Order \20\ responses; (ii) Market Maker orders that take
liquidity from the order book; (iii) Crossing Orders \21\ and Responses
to
[[Page 23481]]
Crossing Orders; \22\ and (iv) complex orders.
---------------------------------------------------------------------------
\19\ The marketing fee is rebated proportionately to the Members
that paid the fee such that on a monthly basis the marketing fee
fund balance administered by a Primary Market Maker for a Group of
options established under Options 2, Section 3(b) does not exceed
$100,000 and the marketing fee fund balance administered by a
preferenced Competitive Market Maker for such a Group does not
exceed $100,000. A preferenced Competitive Market Maker that elects
not to administer a fund is not charged the marketing fee. The
Exchange assesses an administrative fee of .45% on the total amount
of the funds collected each month.
\20\ A ``Flash Order'' is an order that is exposed at the
National Best Bid or Offer by the Exchange to all Members for
execution, as provided under Supplementary Material .02 to Nasdaq
MRX Options 5, Section 2. For all Flash Orders, the Exchange will
charge the applicable taker fee and for responses that trade against
a Flash Order, the Exchange will charge the applicable maker fee.
\21\ A ``Crossing Order'' is an order executed in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, PIM or submitted
as a Qualified Contingent Cross order. For purposes of this Pricing
Schedule, orders executed in the Block Order Mechanism are also
considered Crossing Orders.
\22\ ``Responses to Crossing Order'' is any contra-side interest
(i.e., orders & quotes) submitted after the commencement of an
auction in the Exchange's Facilitation Mechanism, Solicited Order
Mechanism, Block Order Mechanism or Price Improvement Mechanism.
---------------------------------------------------------------------------
The Exchange now proposes to set this marketing fee to $0.00 per
contract. The Exchange also proposes in Options 7, Section 5.B to add
language that makes clear no marketing fees will be charged with the
proposed changes. Specifically, the Exchange will add that no marketing
fees are charged for Penny and Non-Penny Symbols. If the Exchange
determines to charge a marketing fee in the future, it will do so
pursuant to a rule filing.
Technical Amendments
The Exchange proposes non-substantive, technical amendments in
Options 7, Section 1(c) to rearrange the definitions in alphabetical
order without changing the substance of the Rule. The Exchange also
proposes in Options 7, Section 3 to relocate the definition of Total
Affiliated Member or Affiliated Entity Priority Customer ADV from Table
3 into Table 1 as this definition is currently only used within Table 1
pricing. The relocated definition will provide that Total Affiliated
Member or Affiliated Entity Priority Customer ADV means all Priority
Customer ADV executed on the Exchange in all symbols and order types,
including volume executed by Affiliated Members or Affiliated Entities.
All eligible volume from Affiliated Members or an Affiliated Entity
will be aggregated in determining applicable tiers.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\23\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\24\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees, and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(4) and (5).
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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'. . ..'' \25\
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\25\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \26\
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\26\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options 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.
Market Maker Fees
The Exchange believes that the proposed increase in the Tier 1 and
Tier 2 maker fees for Market Makers in Non-Penny Symbols is reasonable.
As proposed, the maker fees will increase from $0.20 to $0.35 per
contract (Tier 1) and from $0.10 to $0.20 per contract (Tier 2). The
Exchange believes that the proposed maker fees will remain attractive
to Market Makers and will continue to incentivize them to add liquidity
in Non-Penny Symbols as the proposed fees will remain the lowest maker
fees assessed to any other market participant on the Exchange, except
for Priority Customers who will continue to receive free
executions.\27\ Incentivizing Market Makers to provide liquidity
through the lower maker fees will create additional displayed liquidity
and opportunities for market participants to trade.
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\27\ Specifically, Non-Nasdaq MRX Market Makers, Firm
Proprietary/Broker-Dealers, and Professional Customers will continue
to be assessed the $0.90 per contract maker fee in Non-Penny
Symbols, regardless of tier achieved.
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The Exchange's proposal to increase the Tier 1 and Tier 2 maker
fees in Non-Penny Symbols for Market Makers is equitable and not
unfairly discriminatory as the proposed increase will apply uniformly
to all similarly situated market participants. Market Makers will
continue to pay lower maker fees in Non-Penny Symbols compared to other
non-Priority Customers. The Exchange believes that it is equitable and
not unfairly discriminatory to continue charging lower maker fees for
Market Makers as they, unlike other market participants, add value to
the Exchange through quoting obligations and their commitment of
capital.
Qualifying Tier Thresholds
The Exchange believes that the proposal to amend the current Tier 1
threshold is reasonable, equitable, and not unfairly discriminatory. As
discussed above, the proposed rule change will not impact current Tier
1 rates; rather, the proposed change will ensure that all eligible
volume gets included in the calculation of the tiers and will make
clear that Members that execute 0.00% to less than 0.75% of Customer
Total Consolidated Volume will qualify for Tier 1 pricing in the
Exchange's maker/taker fee schedule. As noted above, the Exchange
believes that its proposal will have minimal impact as no market
participant falls into this category. Furthermore, the proposed changes
to the existing Tier 1 threshold will apply uniformly to all market
participants.
Furthermore, the Exchange believes that it is reasonable to
introduce an alternative way for Market Makers to qualify for the Tier
1 and Tier 2 fees based on Total Market Maker ADV.\28\ As
[[Page 23482]]
discussed above, Market Makers may alternatively qualify for the Tier 1
and Tier 2 maker/taker fees if they: execute up to 0.10% of Customer
Total Consolidated Volume which adds liquidity in regular orders (Tier
1), and execute more than 0.10% of Customer Total Consolidated Volume
which adds liquidity in regular orders (Tier 2). The Exchange believes
that the proposal would encourage additional order flow, especially
liquidity adding regular order flow, from Market Makers and their
Affiliated Members or Affiliated Entities by providing an alternative
method for Market Makers to qualify for the Tier 1 and Tier 2 fees.
This, in turn, will benefit all market participants that will have an
opportunity to trade with the order flow that these firms bring to the
market.
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\28\ As discussed above, Total Market Maker ADV will be defined
in the Pricing Schedule as all Market Maker ADV executed on the
Exchange in all symbols and order types, including volume executed
by Affiliated Members or Affiliated Entities. Furthermore, all
eligible volume from Affiliated Members or an Affiliated Entity will
be aggregated in determining applicable tiers.
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The Exchange's proposal to introduce an alternative way for Market
Makers to qualify for Tier 1 and Tier 2 pricing based on Total Market
Maker ADV is equitable and not unfairly discriminatory because it will
apply uniformly to all similarly situated market participants. The
Exchange believes it is equitable and not unfairly discriminatory to
introduce the proposed alternative qualifications for only Market
Makers because Market Makers have different requirements and
obligations to the Exchange that other market participants do not (such
as quoting requirements). As such, the Exchange's proposal is designed
to increase Market Maker participation and reward Market Makers for the
unique role that they play in ensuring a robust market.
PIM Break-up Rebates
The Exchange believes that the proposed changes to the
qualifications for receiving the additional PIM break-up rebates are
reasonable, equitable, and not unfairly discriminatory. As discussed
above, the Exchange is proposing to amend the rebate qualifications to
require that Members not in Affiliated Member or Affiliated Entity
relationships execute 0.05% or greater of Customer Total Consolidated
Volume which adds liquidity in non-PIM Priority Customer contracts
within a month in order to receive the additional rebates in note 3 of
Options 7, Section 3.A. The Exchange believes that the proposed changes
will incentivize Members to bring greater liquidity adding order flow
for execution on the Exchange, which the Exchange believes may result
in tighter spreads, thereby making the Exchange a more attractive
trading venue to the benefit of all market participants.
The Exchange believes that the proposed changes to the additional
PIM break-up rebate qualifications in note 3 are equitable and not
unfairly discriminatory because the changes will apply uniformly to all
Priority Customer PIM originating orders that execute with any PIM
response. While Priority Customer PIM originating orders will continue
to be eligible to receive the additional break-up rebates in note 3, as
opposed to other market participants, the Exchange believes that the
application of this rebate program is equitable and not unfairly
discriminatory because Priority Customer PIM originating 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, the
Exchange has historically provided lower pricing or other incentives to
Priority Customer PIM originating orders in order to attract such order
flow.
Marketing Fee
The Exchange believes that it is reasonable to set the marketing
fee to $0.00 per contract for Penny and Non-Penny Symbols because the
Exchange seeks to limit the cost of transacting in regular orders for
Market Makers who are the only market participants that are assessed
this fee today. The Exchange believes that the proposed fee change is
equitable and not unfairly discriminatory as no Market Makers would be
charged a marketing fee under this proposal. Furthermore, the Exchange
believes that it is reasonable, equitable, and not unfairly
discriminatory to add language in Options 7, Section 5.B as it will
make clear that no marketing fees will be assessed for Penny and Non-
Penny Symbols with the proposed changes, and that if the Exchange
determines to charge a marketing fee in the future, it will do so
pursuant to a rule filing.
Technical Amendments
The Exchange believes that the proposed changes to alphabetize the
definitions in Options 7, Section 1(c) and to relocate the definition
of Total Affiliated Member or Affiliated Entity Priority Customer ADV
in Options 7, Section 3 in the manner described above are reasonable,
equitable, and not unfairly discriminatory. All of the changes are non-
substantive, technical amendments that will facilitate the use of the
Exchange's Pricing Schedule by market participants.
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 the proposed changes
will place any category of market participant at a competitive
disadvantage. Overall, the Exchange's proposal is designed to
incentivize Members to bring additional order flow to the Exchange, and
create a more active and quality market in MRX-listed options. Market
Makers and Priority Customers would continue to receive favorable
pricing by way of lower fees or rebates, as compared to other market
participants. As discussed above, Market Makers add value through
continuous quoting and are subject to additional requirements and
obligations unlike other market participants. Incentivizing Market
Makers to increase their participation on the Exchange benefits all
market participants through the quality of order interaction.
Similarly, Priority Customer liquidity benefits all market participants
by providing more trading opportunities, which attracts other market
participants, thus facilitating tighter spreads, increased order flow
and trading opportunities to the benefit of all market participants.
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
[[Page 23483]]
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 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,\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.
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\29\ 15 U.S.C. 78s(b)(3)(A)(ii).
\30\ 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-2021-04 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MRX-2021-04. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MRX-2021-04 and should be submitted on
or before May 24, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09130 Filed 4-30-21; 8:45 am]
BILLING CODE 8011-01-P
