Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NOM Pricing Schedule at Options 7, Section 2, 3610-3613 [2022-01219]
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Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices
other market participants. As discussed,
the proposed fees, credit, and
eliminated waiver would apply to all
External Distributors of EDGX Top,
Cboe One Premium, and EDGX Depth,
respectively, on an equal and nondiscriminatory basis. The continued
difference in fees for internal and
external distribution of EDGX Top are
appropriate given the ability for
External Distributors to redistribute data
externally to their clients. Similarly, the
credit applicable to only External
Distributors is appropriate as it
incentivizes such External Distributors
to enlist subscribers, whereas Internal
Distributors have no subscribers outside
their firm. The Exchange therefore
believes that the proposed fees neither
favor nor penalize one or more
categories of market participants in a
manner that would impose an undue
burden on competition.
Intermarket Competition. The
Exchange believes that the proposed
fees do not impose a burden on
competition or on other SROs that is not
necessary or appropriate in furtherance
of the purposes of the Act. In setting the
proposed fees, the Exchange is
constrained by the availability of
numerous substitute products offered by
other national securities exchanges.
Because market data customers can find
suitable substitute feeds, an exchange
that overprices its market data products
stands a high risk that users may
substitute another product. These
competitive pressures ensure that no
one exchange’s market data fees can
impose an undue burden on
competition, and the Exchange’s
proposed fees do not do so here.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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)
of the Act 48 and paragraph (f) of Rule
19b–4 49 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 necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
48 15
49 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change 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–
CboeEDGX–2022–002 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–CboeEDGX–2022–002. 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–CboeEDGX–2022–002 and
PO 00000
Frm 00116
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should be submitted on or before
February 14, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.50
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01228 Filed 1–21–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93987; File No. SR–
NASDAQ–2022–001]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
NOM Pricing Schedule at Options 7,
Section 2
January 18, 2022.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on January
3, 2022, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Nasdaq Options Market (‘‘NOM’’)
Pricing Schedule at Options 7, Section
2.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/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
50 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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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
Schedule at Options 7, Section 2 to: (1)
Increase the Fee to Remove Liquidity in
Penny Symbols for Customers 4 and
Professionals,5 and (2) amend the
qualifications for the Tier 3 NOM
Market Maker 6 Rebate to Add Liquidity
in Penny Symbols to allow an
alternative way to qualify for the rebate.
Each change is further discussed below.
1. Purpose
Customer and Professional Fee To
Remove Liquidity
The purpose of the proposed rule
change is to amend NOM’s Pricing
Today, the Exchange charges
Customers and Professionals a $0.48 per
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contract Fee to Remove Liquidity in
Penny Symbols. The Exchange proposes
to increase this fee to $0.49 per contract
for Customers and Professionals.
NOM Market Maker Rebate To Add
Liquidity
Today, the Exchange offers tiered
NOM Market Maker Rebates to Add
Liquidity in Penny Symbols that are
$0.20 (Tier 1), $0.25 (Tier 2), $0.30 (Tier
3),7 $0.32 (Tier 4),8 $0.44 (Tier 5), and
$0.48 (Tier 6). These rebates are paid
per the highest tier achieved below.
Monthly volume
Tier 1 ......................
Tier 2 ......................
Tier 3 ......................
Tier 4 ......................
Tier 5 ......................
Tier 6 ......................
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of up to 0.10% of total industry customer equity and ETF option average daily volume (‘‘ADV’’) contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 0.10% to 0.20% of
total industry customer equity and ETF option ADV contracts per day in a month.
Participant: (a) Adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 0.20% to 0.60% of
total industry customer equity and ETF option ADV contracts per day in a month; or (b)(1) adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 0.07% to 0.20% of total industry customer equity and ETF
option ADV contracts per day in a month, (2) transacts in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.70% or more of Consolidated Volume (‘‘CV’’) which adds liquidity in the same month on The
Nasdaq Stock Market, (3) transacts in Tape B securities through one or more of its Nasdaq Market Center MPIDs that
represent 0.10% or more of CV which adds liquidity in the same month on The Nasdaq Stock Market, and (4) executes
greater than 0.01% of CV via Market-on- Close/Limit-on-Close (‘‘MOC/LOC’’) volume within The Nasdaq Stock Market
Closing Cross in the same month.
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 0.60% of total industry customer equity and ETF option ADV contracts per day in a month.
Participant adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 0.40% of total industry customer equity and ETF option ADV contracts per day in a month and transacts in all securities through one or
more of its Nasdaq Market Center MPIDs that represent 0.40% or more of Consolidated Volume (‘‘CV’’) which adds liquidity in the same month on The Nasdaq Stock Market.
Participant: (a)(1) Adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 0.95% of total
industry customer equity and ETF option ADV contracts per day in a month, (2) executes Total Volume of 250,000 or
more contracts per day in a month, of which 30,000 or more contracts per day in a month must be removing liquidity,
and (3) adds Firm, Broker-Dealer and Non-NOM Market Maker liquidity in Non-Penny Symbols of 10,000 or more contracts per day in a month; or (b)(1) adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols
above 1.50% of total industry customer equity and ETF option ADV contracts per day in a month, and (2) executes
Total Volume of 250,000 or more contracts per day in a month, of which 15,000 or more contracts per day in a month
must be removing liquidity.
As set forth above, the Exchange
currently offers two different paths in
(a) and (b) for Participants to achieve the
Tier 3 Market Maker rebate. The
Exchange now proposes to amend the
Tier 3 qualifications in (b) as follows:
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Participant . . . (b)(1) adds NOM Market
Maker liquidity in Penny Symbols and/or
Non-Penny Symbols above 0.07% to 0.20%
of total industry customer equity and ETF
option ADV contracts per day in a month, (2)
transacts in all securities through one or
more of its Nasdaq Market Center MPIDs that
represent (i) 0.70% or more of Consolidated
Volume (‘‘CV’’) which adds liquidity in the
same month on The Nasdaq Stock Market or
4 The term ‘‘Customer’’ or (‘‘C’’) applies to any
transaction that is identified by a Participant for
clearing in the Customer range at The Options
Clearing Corporation (‘‘OCC’’) which is not for the
account of broker or dealer or for the account of a
‘‘Professional’’ (as that term is defined in Options
1, Section 1(a)(47)).
5 The term ‘‘Professional’’ or (‘‘P’’) means any
person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in
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(ii) 70 million shares or more ADV which
adds liquidity in the same month on The
Nasdaq Stock Market, (3) transacts in Tape B
securities through one or more of its Nasdaq
Market Center MPIDs that represent 0.10% or
more of CV which adds liquidity in the same
month on The Nasdaq Stock Market, and (4)
executes greater than 0.01% of CV via
Market-on- Close/Limit-on-Close (‘‘MOC/
LOC’’) volume within The Nasdaq Stock
Market Closing Cross in the same month
The proposal adds an alternative
route to achieve the equity component
in (b)(2), namely by introducing an
alternative volume-based requirement in
new (b)(2)(ii) that requires Market
listed options per day on average during a calendar
month for its own beneficial account(s) pursuant to
Options 1, Section 1(a)(47). All Professional orders
shall be appropriately marked by Participants.
6 The term ‘‘NOM Market Maker’’ or (‘‘M’’) is a
Participant that has registered as a Market Maker on
NOM pursuant to Options 2, Section 1, and must
also remain in good standing pursuant to Options
2, Section 9. In order to receive NOM Market Maker
pricing in all securities, the Participant must be
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
Makers to transact in all securities
through one or more of its Nasdaq
Market Center MPIDs that represent 70
million shares or more ADV which adds
liquidity in the same month on The
Nasdaq Stock Market.9 The options
component in (b)(1) and the other equity
components in (b)(3) and (b)(4) to
qualify for the Tier 3 rebate will remain
unchanged. The Exchange will also
make a related change to renumber the
existing volume requirement in (b)(2) as
(b)(2)(i).
registered as a NOM Market Maker in at least one
security.
7 This rebate is $0.40 per contract in the following
symbols: AAPL, SPY, QQQ, IWM, and VXX. See
Options 7, Section 2(1), note 4.
8 Id.
9 All NOM Participants are required to be
members of The Nasdaq Stock Market pursuant to
General 3 (Membership and Access).
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,11 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s proposed changes to
its Pricing Schedule are reasonable in
several respects. As a threshold matter,
the Exchange is subject to significant
competitive forces in the market for
options securities transaction services
that constrain its pricing determinations
in that market. The fact that this market
is competitive has long been recognized
by the courts. In NetCoalition v.
Securities and Exchange Commission,
the D.C. Circuit stated as follows: ‘‘[n]o
one disputes that competition for order
flow is ‘fierce.’ . . . As the SEC
explained, ‘[i]n the U.S. national market
system, buyers and sellers of securities,
and the broker-dealers that act as their
order-routing agents, have a wide range
of choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers’
. . . .’’ 12
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 13
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
10 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
12 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
13 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
11 15
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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.
Customer and Professional Fee To
Remove Liquidity
The Exchange believes that its
proposal to increase the Fee to Remove
Liquidity in Penny Symbols for
Customers and Professionals from $0.48
to $0.49 per contract is reasonable.
While this fee is increasing, Customers
and Professionals will continue to be
assessed the lowest Fee to Remove
Liquidity in Penny Symbols compared
to all other market participants.14
Accordingly, the Exchange believes that
the proposed fee will continue to attract
Customer and Professional order flow to
NOM to the benefit of all market
participants.
The Exchange further believes that its
proposal is equitable and not unfairly
discriminatory because it will apply
uniformly to all similarly situated
Participants. With the proposed
changes, Customers and Professionals
will continue to be assessed a lower Fee
to Remove Liquidity in Penny Symbols
compared to all other market
participants. The Exchange does not
believe it is inequitable or unfairly
discriminatory to assess a lower fee to
Customers and Professionals, and not to
other market participants. Customer
order flow offers unique benefits to the
market by providing more trading
opportunities, which attracts specialists
and market makers. An increase in the
activity of these market participants in
turn facilitates tighter spreads, which
may cause a corresponding increase in
order flow from other market
participants. The Exchange believes that
encouraging Professional order flow is
similarly beneficial, as the lower fee
may cause market participants to select
NOM as a venue to send Professional
order flow, which benefits all market
participants by attracting valuable
liquidity to the market and thereby
enhancing the trading quality and
efficiency for all.
The Exchange currently charges all other
market participants (i.e., Broker-Dealers, Firms,
Non-NOM Market Makers, and NOM Market
Makers) a $0.50 per contract Fee to Remove
Liquidity in Penny Symbols.
14
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NOM Market Maker Rebate To Add
Liquidity
The Exchange believes that its
proposal to amend the qualifications for
the Tier 3 NOM Market Maker Rebate to
Add Liquidity in Penny Symbols
represents a reasonable attempt to
incentivize market participants to
increase the number and variety of
orders sent to the Exchange for
execution. Specifically, the Exchange
proposes to introduce an alternative
volume-based requirement in new
subsection (b)(2)(ii) that requires Market
Makers to transact in all securities
through one or more of its Nasdaq
Market Center MPIDs that represent 70
million shares or more ADV which adds
liquidity in the same month on The
Nasdaq Stock Market. By introducing an
alternative method to qualify for the
Tier 3 rebate, the Exchange will create
an additional opportunity for Market
Makers to increase their liquidity
adding activity on the Exchange’s equity
market. Taken together with existing
options and equity components that
comprise the Tier 3 rebate qualifications
in (b), the Exchange believes that the
amended qualifying criteria will
continue to incentivize participation in
greater volume from cross asset activity,
which would improve the overall
quality of the Exchange’s marketplace to
the benefit of all market participants,
both on NOM and The Nasdaq Stock
Market.
The Exchange also believes that the
proposed changes to the qualifications
for the Tier 3 Market Maker Rebate to
Add Liquidity in Penny Symbols is
equitable and not unfairly
discriminatory because the Exchange
will pay the Tier 3 rebate uniformly to
any qualifying Market Makers. Market
Makers add value through continuous
quoting and the commitment of
capital.15 Because Market Makers have
these obligations to the market and
regulatory requirements that normally
do not apply to other market
participants, the Exchange believes that
offering the rebate to only Market
Makers is equitable and not unfairly
discriminatory in light of their
obligations. Finally, encouraging Market
Makers to add greater liquidity benefits
all market participants, both on NOM
and The Nasdaq Stock Market, in the
quality of order interaction.
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
15 See
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Options 2, Sections 4 and 5.
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necessary or appropriate in furtherance
of the purposes of the Act.
In terms of intra-market competition,
the Exchange does not that its proposals
will place any category of market
participant at a competitive
disadvantage. As discussed above, while
the Exchange’s proposals target certain
order flow and activity on the Exchange
(i.e., Customer, Professional, and Market
Maker activity), the proposed changes
are ultimately aimed at attracting greater
order flow to the Exchange, which
benefits all market participants by
providing more trading opportunities.
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
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. In
sum, if the changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of Participants or competing exchanges
to maintain their competitive standing
in the financial markets.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.16
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
16 15
U.S.C. 78s(b)(3)(A)(ii).
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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
3613
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01219 Filed 1–21–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93994; File No. SR–
CboeBZX–2022–001]
• 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–
NASDAQ–2022–001 on the subject line.
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Fees Applicable to Various Market
Data Products
Paper Comments
January 18, 2022.
• 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–NASDAQ–2022–001. 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–NASDAQ–2022–001, and
should be submitted on or before
February 14, 2022.
PO 00000
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Fmt 4703
Sfmt 4703
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 4,
2022, Cboe BZX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (‘‘BZX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to amend the fees applicable to
various market data products. The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\24JAN1.SGM
24JAN1
]]>Agencies
[Federal Register Volume 87, Number 15 (Monday, January 24, 2022)]
[Notices]
[Pages 3610-3613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01219]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93987; File No. SR-NASDAQ-2022-001]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the NOM Pricing Schedule at Options 7, Section 2
January 18, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 3, 2022, The Nasdaq Stock Market LLC (``Nasdaq''
or ``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Nasdaq Options Market (``NOM'')
Pricing Schedule at Options 7, Section 2.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/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
[[Page 3611]]
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 NOM's Pricing
Schedule at Options 7, Section 2 to: (1) Increase the Fee to Remove
Liquidity in Penny Symbols for Customers \4\ and Professionals,\5\ and
(2) amend the qualifications for the Tier 3 NOM Market Maker \6\ Rebate
to Add Liquidity in Penny Symbols to allow an alternative way to
qualify for the rebate. Each change is further discussed below.
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\4\ The term ``Customer'' or (``C'') applies to any transaction
that is identified by a Participant for clearing in the Customer
range at The Options Clearing Corporation (``OCC'') which is not for
the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(a)(47)).
\5\ The term ``Professional'' or (``P'') means any person or
entity that (i) is not a broker or dealer in securities, and (ii)
places more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s) pursuant
to Options 1, Section 1(a)(47). All Professional orders shall be
appropriately marked by Participants.
\6\ The term ``NOM Market Maker'' or (``M'') is a Participant
that has registered as a Market Maker on NOM pursuant to Options 2,
Section 1, and must also remain in good standing pursuant to Options
2, Section 9. In order to receive NOM Market Maker pricing in all
securities, the Participant must be registered as a NOM Market Maker
in at least one security.
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Customer and Professional Fee To Remove Liquidity
Today, the Exchange charges Customers and Professionals a $0.48 per
contract Fee to Remove Liquidity in Penny Symbols. The Exchange
proposes to increase this fee to $0.49 per contract for Customers and
Professionals.
NOM Market Maker Rebate To Add Liquidity
Today, the Exchange offers tiered NOM Market Maker Rebates to Add
Liquidity in Penny Symbols that are $0.20 (Tier 1), $0.25 (Tier 2),
$0.30 (Tier 3),\7\ $0.32 (Tier 4),\8\ $0.44 (Tier 5), and $0.48 (Tier
6). These rebates are paid per the highest tier achieved below.
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\7\ This rebate is $0.40 per contract in the following symbols:
AAPL, SPY, QQQ, IWM, and VXX. See Options 7, Section 2(1), note 4.
\8\ Id.
------------------------------------------------------------------------
Monthly volume
------------------------------------------------------------------------
Tier 1..................... Participant adds NOM Market Maker liquidity
in Penny Symbols and/or Non-Penny Symbols
of up to 0.10% of total industry customer
equity and ETF option average daily volume
(``ADV'') contracts per day in a month.
Tier 2..................... Participant adds NOM Market Maker liquidity
in Penny Symbols and/or Non-Penny Symbols
above 0.10% to 0.20% of total industry
customer equity and ETF option ADV
contracts per day in a month.
Tier 3..................... Participant: (a) Adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.20% to 0.60% of
total industry customer equity and ETF
option ADV contracts per day in a month;
or (b)(1) adds NOM Market Maker liquidity
in Penny Symbols and/or Non-Penny Symbols
above 0.07% to 0.20% of total industry
customer equity and ETF option ADV
contracts per day in a month, (2)
transacts in all securities through one or
more of its Nasdaq Market Center MPIDs
that represent 0.70% or more of
Consolidated Volume (``CV'') which adds
liquidity in the same month on The Nasdaq
Stock Market, (3) transacts in Tape B
securities through one or more of its
Nasdaq Market Center MPIDs that represent
0.10% or more of CV which adds liquidity
in the same month on The Nasdaq Stock
Market, and (4) executes greater than
0.01% of CV via Market-on- Close/Limit-on-
Close (``MOC/LOC'') volume within The
Nasdaq Stock Market Closing Cross in the
same month.
Tier 4..................... Participant adds NOM Market Maker liquidity
in Penny Symbols and/or Non-Penny Symbols
of above 0.60% of total industry customer
equity and ETF option ADV contracts per
day in a month.
Tier 5..................... Participant adds NOM Market Maker liquidity
in Penny Symbols and/or Non-Penny Symbols
of above 0.40% of total industry customer
equity and ETF option ADV contracts per
day in a month and transacts in all
securities through one or more of its
Nasdaq Market Center MPIDs that represent
0.40% or more of Consolidated Volume
(``CV'') which adds liquidity in the same
month on The Nasdaq Stock Market.
Tier 6..................... Participant: (a)(1) Adds NOM Market Maker
liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.95% of total
industry customer equity and ETF option
ADV contracts per day in a month, (2)
executes Total Volume of 250,000 or more
contracts per day in a month, of which
30,000 or more contracts per day in a
month must be removing liquidity, and (3)
adds Firm, Broker-Dealer and Non-NOM
Market Maker liquidity in Non-Penny
Symbols of 10,000 or more contracts per
day in a month; or (b)(1) adds NOM Market
Maker liquidity in Penny Symbols and/or
Non-Penny Symbols above 1.50% of total
industry customer equity and ETF option
ADV contracts per day in a month, and (2)
executes Total Volume of 250,000 or more
contracts per day in a month, of which
15,000 or more contracts per day in a
month must be removing liquidity.
------------------------------------------------------------------------
As set forth above, the Exchange currently offers two different
paths in (a) and (b) for Participants to achieve the Tier 3 Market
Maker rebate. The Exchange now proposes to amend the Tier 3
qualifications in (b) as follows:
Participant . . . (b)(1) adds NOM Market Maker liquidity in
Penny Symbols and/or Non-Penny Symbols above 0.07% to 0.20% of total
industry customer equity and ETF option ADV contracts per day in a
month, (2) transacts in all securities through one or more of its
Nasdaq Market Center MPIDs that represent (i) 0.70% or more of
Consolidated Volume (``CV'') which adds liquidity in the same month
on The Nasdaq Stock Market or (ii) 70 million shares or more ADV
which adds liquidity in the same month on The Nasdaq Stock Market,
(3) transacts in Tape B securities through one or more of its Nasdaq
Market Center MPIDs that represent 0.10% or more of CV which adds
liquidity in the same month on The Nasdaq Stock Market, and (4)
executes greater than 0.01% of CV via Market-on- Close/Limit-on-
Close (``MOC/LOC'') volume within The Nasdaq Stock Market Closing
Cross in the same month
The proposal adds an alternative route to achieve the equity
component in (b)(2), namely by introducing an alternative volume-based
requirement in new (b)(2)(ii) that requires Market Makers to transact
in all securities through one or more of its Nasdaq Market Center MPIDs
that represent 70 million shares or more ADV which adds liquidity in
the same month on The Nasdaq Stock Market.\9\ The options component in
(b)(1) and the other equity components in (b)(3) and (b)(4) to qualify
for the Tier 3 rebate will remain unchanged. The Exchange will also
make a related change to renumber the existing volume requirement in
(b)(2) as (b)(2)(i).
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\9\ All NOM Participants are required to be members of The
Nasdaq Stock Market pursuant to General 3 (Membership and Access).
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[[Page 3612]]
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 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' . . . .'' \12\
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\12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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.'' \13\
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\13\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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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.
Customer and Professional Fee To Remove Liquidity
The Exchange believes that its proposal to increase the Fee to
Remove Liquidity in Penny Symbols for Customers and Professionals from
$0.48 to $0.49 per contract is reasonable. While this fee is
increasing, Customers and Professionals will continue to be assessed
the lowest Fee to Remove Liquidity in Penny Symbols compared to all
other market participants.\14\ Accordingly, the Exchange believes that
the proposed fee will continue to attract Customer and Professional
order flow to NOM to the benefit of all market participants.
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\14\ The Exchange currently charges all other market
participants (i.e., Broker-Dealers, Firms, Non-NOM Market Makers,
and NOM Market Makers) a $0.50 per contract Fee to Remove Liquidity
in Penny Symbols.
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The Exchange further believes that its proposal is equitable and
not unfairly discriminatory because it will apply uniformly to all
similarly situated Participants. With the proposed changes, Customers
and Professionals will continue to be assessed a lower Fee to Remove
Liquidity in Penny Symbols compared to all other market participants.
The Exchange does not believe it is inequitable or unfairly
discriminatory to assess a lower fee to Customers and Professionals,
and not to other market participants. Customer order flow offers unique
benefits to the market by providing more trading opportunities, which
attracts specialists and market makers. An increase in the activity of
these market participants in turn facilitates tighter spreads, which
may cause a corresponding increase in order flow from other market
participants. The Exchange believes that encouraging Professional order
flow is similarly beneficial, as the lower fee may cause market
participants to select NOM as a venue to send Professional order flow,
which benefits all market participants by attracting valuable liquidity
to the market and thereby enhancing the trading quality and efficiency
for all.
NOM Market Maker Rebate To Add Liquidity
The Exchange believes that its proposal to amend the qualifications
for the Tier 3 NOM Market Maker Rebate to Add Liquidity in Penny
Symbols represents a reasonable attempt to incentivize market
participants to increase the number and variety of orders sent to the
Exchange for execution. Specifically, the Exchange proposes to
introduce an alternative volume-based requirement in new subsection
(b)(2)(ii) that requires Market Makers to transact in all securities
through one or more of its Nasdaq Market Center MPIDs that represent 70
million shares or more ADV which adds liquidity in the same month on
The Nasdaq Stock Market. By introducing an alternative method to
qualify for the Tier 3 rebate, the Exchange will create an additional
opportunity for Market Makers to increase their liquidity adding
activity on the Exchange's equity market. Taken together with existing
options and equity components that comprise the Tier 3 rebate
qualifications in (b), the Exchange believes that the amended
qualifying criteria will continue to incentivize participation in
greater volume from cross asset activity, which would improve the
overall quality of the Exchange's marketplace to the benefit of all
market participants, both on NOM and The Nasdaq Stock Market.
The Exchange also believes that the proposed changes to the
qualifications for the Tier 3 Market Maker Rebate to Add Liquidity in
Penny Symbols is equitable and not unfairly discriminatory because the
Exchange will pay the Tier 3 rebate uniformly to any qualifying Market
Makers. Market Makers add value through continuous quoting and the
commitment of capital.\15\ Because Market Makers have these obligations
to the market and regulatory requirements that normally do not apply to
other market participants, the Exchange believes that offering the
rebate to only Market Makers is equitable and not unfairly
discriminatory in light of their obligations. Finally, encouraging
Market Makers to add greater liquidity benefits all market
participants, both on NOM and The Nasdaq Stock Market, in the quality
of order interaction.
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\15\ See Options 2, Sections 4 and 5.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not
[[Page 3613]]
necessary or appropriate in furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not that
its proposals will place any category of market participant at a
competitive disadvantage. As discussed above, while the Exchange's
proposals target certain order flow and activity on the Exchange (i.e.,
Customer, Professional, and Market Maker activity), the proposed
changes are ultimately aimed at attracting greater order flow to the
Exchange, which benefits all market participants by providing more
trading opportunities.
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
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. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will lose market share as a result. Accordingly, the Exchange does not
believe that the proposed changes will impair the ability of
Participants or competing exchanges 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.\16\
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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 [email protected]. Please include
File Number SR-NASDAQ-2022-001 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-NASDAQ-2022-001. 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-NASDAQ-2022-001, and should be submitted
on or before February 14, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01219 Filed 1-21-22; 8:45 am]
BILLING CODE 8011-01-P
