Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend MRX's Pricing Schedule at Options 7, Section 7, 56457-56463 [2022-19814]
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Federal Register / Vol. 87, No. 177 / Wednesday, September 14, 2022 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95704; File No. SR–MRX–
2022–10]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–19812 Filed 9–13–22; 8:45 am]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Designation of a
Longer Period for Commission Action
on a Proposed Rule Change Relating
to Complex Orders in Connection With
a Technology Migration
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September 8, 2022.
On July 18, 2022, Nasdaq MRX, LLC
(‘‘MRX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend its rules relating to trading
functionality for Complex Orders in
connection with a technology migration.
The proposed rule change was
published for comment in the Federal
Register on July 29, 2022.3 The
Commission has received no comments
regarding the proposal.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission will either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is September 12,
2022. The Commission is extending this
45-day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates October 27, 2022, as the date
by which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–MRX–2022–10).
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 95363
(July 25, 2022), 87 FR 45814.
4 15 U.S.C. 78s(b)(2).
5 Id.
2 17
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95708; File No. SR–MRX–
2022–14]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend MRX’s Pricing
Schedule at Options 7, Section 7
September 8, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
25, 2022, 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, 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
MRX’s Pricing Schedule at Options 7,
Section 7.
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.
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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56457
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
MRX proposes to amend its Pricing
Schedule at Options 7, Section 7, to
assess market data fees, which are not
assessed today, and which have not
been assessed since MRX’s inception in
2016.3 The proposed changes are
designed to update data fees to reflect
their current value—rather than their
value when it was a new exchange six
years ago—based on increased market
share. Newly-opened exchanges often
charge no fees for market data to attract
order flow to an exchange, and later
amend their fees to reflect the true value
of those services.4 Allowing newlyopened exchanges time to build and
sustain market share before charging for
their market data encourages market
entry and promotes competition.
This Proposal reflects MRX’s
assessment that it has gained sufficient
market share to compete effectively
against other 15 options exchanges
without waiving market data fees. Such
fees are assessed by options exchanges
that compete with MRX—indeed, MRX
is the only options exchange (out of the
16 current options exchanges) not to
assess them today.
As explained in further detail below,
MRX today is in the same position as
NYSE National in 2020, when it sought
approval for the ‘‘NYSE National
Integrated Feed.’’ 5 The Commission
approved the NYSE National Integrated
Feed based on a finding that it ‘‘was
subject to significant substitution-based
competitive forces’’ based on ‘‘NYSE
3 The Exchange initially filed the proposed
pricing changes on May 2, 2022 (SR–MRX–2022–
04) instituting fees for membership, ports and
market data. See Securities Exchange Act Release
No. 94901 (May 12, 2022), 87 FR 30305 (May 18,
2022) (SR–MRX–2022–04). On June 29, 2022, the
Exchange withdrew that filing, and submitted
separate filings for membership (SR–MRX–2022–
07), market data (SR–MRX–2022–08) and ports (SR–
MRX–2022–09). On August 25, 2022, the Exchange
withdrew the market data filing (SR–MRX–2022–
08) and replaced it with the instant filing.
4 See, e.g., Securities Exchange Act Release No
88211 (February 14, 2020), 85 FR 9847 (February
20, 2020) (SR–NYSENAT–2020–05), also available
at https://www.nyse.com/publicdocs/nyse/markets/
nyse-national/rule-filings/filings/2020/SRNYSENat-2020-05.pdf. (initiating market data fees
for the NYSE National exchange after initially
setting such fees at zero).
5 NYSE National stated that the proposed
integrated feed included depth-of-book order data,
last sale data, security status updates, and stock
summary messages. See Securities Exchange Act
Release No 88211 (February 14, 2020), 85 FR 9847
(February 20, 2020) (SR–NYSENAT–2020–05), also
available at https://www.nyse.com/publicdocs/nyse/
markets/nyse-national/rule-filings/filings/2020/SRNYSENat-2020-05.pdf.
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Federal Register / Vol. 87, No. 177 / Wednesday, September 14, 2022 / Notices
National’s consistently low percentage
of market share, the relatively small
number of subscribers to the NYSE
National Integrated Feed, and the
sizeable portion of subscribers that
terminated their subscriptions following
the proposal of the fees.’’ 6
The three factors cited in the
Commission’s approval order for NYSE
National are present in MRX today.
First, MRX has a consistently low
percentage of market share, starting at
approximately 0.2 percent when it
opened as an Exchange and ending in
approximately 1.8 percent today.
Second, only a small number of firms
purchase market data from MRX relative
to its affiliated options exchanges.
Third, a sizeable portion of
subscribers—approximately 15
percent—have terminated their
subscriptions following the
implementation of the proposed fees,
demonstrating that customers can and
do exercise choice in deciding whether
to purchase the Exchange’s market data
feeds.
Disapproval of the Proposal—given
that the three factors cited in the
Commission’s approval order for NYSE
National two years ago are present in
MRX today—would result in differential
treatment of similarly-situated
exchanges. Under such circumstances,
disapproval of the Proposal should be
rejected as arbitrary and capricious.
Disapproval would also place a
substantial burden on competition.
MRX would be uniquely disadvantaged
as the only options exchange unable to
charge for its market data. If the
Commission were to disapprove this
Proposal, that action, and not market
forces, would determine whether MRX
is successful in its competition with
other options exchanges.
New exchanges commonly waive data
fees to attract market participants,
facilitating their entry into the market
and, once there is sufficient depth and
breadth of liquidity, ‘‘graduate’’ to
compete against established exchanges
and charge fees that reflect the value of
their services. If MRX is incorrect in its
assessment, that error will be reflected
in MRX’s ability to compete with other
options exchanges.7
The Exchange proposes to amend fees
for the following market data feeds
within Options 7, Section 7: (1) Nasdaq
6 See
id.
7 Nasdaq
recently announced that, beginning in
2022, Nasdaq plans to migrate its North American
markets to Amazon Web Services in a phased
approach, starting with Nasdaq MRX, a U.S. options
market. The proposed fee changes are entirely
unrelated to this effort.
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MRX Depth of Market Data; 8 (2) Nasdaq
MRX Order Feed; 9 (3) Nasdaq MRX Top
Quote Feed; 10 (4) Nasdaq MRX Trades
Feed; 11 and (5) Nasdaq MRX Spread
Feed.12 Currently, no fees are being
assessed for these feeds.
In addition to the proposed fees for
each data feed, the Exchange is
8 Nasdaq MRX Depth of Market Data Feed
(‘‘Depth of Market Feed’’) provides aggregate quotes
and orders at the top five price levels on MRX, and
provides subscribers with a consolidated view of
tradable prices beyond the BBO, showing additional
liquidity and enhancing transparency for MRX
traded options. The data provided for each option
series includes the symbols (series and underlying
security), put or call indicator, expiration date, the
strike price of the series, and whether the option
series is available for trading on MRX and identifies
if the series is available for closing transactions
only. In addition, subscribers are provided with
total aggregate quantity, Public Customer aggregate
quantity, Priority Customer aggregate quantity,
price, and side (i.e., bid/ask). This information is
provided for each of the top five price levels on the
Depth Feed. The feed also provides order
imbalances on opening/reopening. See Options 3,
Section 23(a)(1).
9 Nasdaq MRX Order Feed (‘‘Order Feed’’)
provides information on new orders resting on the
book (e.g. price, quantity and market participant
capacity). In addition, the feed also announces all
auctions. The data provided for each option series
includes the symbols (series and underlying
security), put or call indicator, expiration date, the
strike price of the series, and whether the option
series is available for trading on MRX and identifies
if the series is available for closing transactions
only. The feed also provides order imbalances on
opening/reopening. See Options 3, Section 23(a)(2).
10 Nasdaq MRX Top Quote Feed (‘‘Top Quote
Feed’’) calculates and disseminates MRX’s best bid
and offer position, with aggregated size (including
total size in aggregate, for Professional Order size
in the aggregate and Priority Customer Order size
in the aggregate), based on displayable order and
quote interest in the System. The feed also provides
last trade information along with opening price,
daily trading volume, high and low prices for the
day. The data provided for each option series
includes the symbols (series and underlying
security), put or call indicator, expiration date, the
strike price of the series, and whether the option
series is available for trading on MRX and identifies
if the series is available for closing transactions
only. The feed also provides order imbalances on
opening/reopening. See Options 3, Section 23(a)(3).
11 Nasdaq MRX Trades Feed (‘‘Trades Feed’’)
displays last trade information along with opening
price, daily trading volume, high and low prices for
the day. The data provided for each option series
includes the symbols (series and underlying
security), put or call indicator, expiration date, the
strike price of the series, and whether the option
series is available for trading on MRX and identifies
if the series is available for closing transactions
only. See Options 3, Section 23(a)(4).
12 Nasdaq MRX Spread Feed (‘‘Spread Feed’’) is
a feed that consists of: (1) options orders for all
Complex Orders (i.e., spreads, buy-writes, delta
neutral strategies, etc.); (2) data aggregated at the
top five price levels (BBO) on both the bid and offer
side of the market; (3) last trades information. The
Spread Feed provides updates, including prices,
side, size and capacity, for every Complex Order
placed on the MRX Complex Order Book. The
Spread Feed shows: (1) aggregate bid/ask quote size;
(2) aggregate bid/ask quote size for Professional
Customer Orders; and (3) aggregate bid/ask quote
size for Priority Customer Orders for MRX traded
options. The feed also provides Complex Order
auction notifications. See Options 3, Section
23(a)(5).
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introducing an Internal Distributor
Fee 13 of $1,500 per month for the
Nasdaq MRX Depth of Market Feed,
Order Feed, and Top Quote Feed, an
Internal Distributor Fee of $750 per
month for the Trades Feed, and an
Internal Distributor Fee of $1,000 per
month for the Spread Feed. If a Member
subscribes to both the Trades Feed and
the Spread Feed, both Internal
Distributor Fees would be assessed.
The Exchange also proposes to assess
an External Distributor Fee of $2,000 per
month for the Nasdaq MRX Depth of
Market Feed, Order Feed, and Top
Quote Feed, an External Distributor Fee
of $1,000 per month for the Trades
Feed, and an External Distributor Fee of
$1,500 per month for the Spread Feed.
MRX will also assess Professional 14
and Non-Professional 15 subscriber fees.
The Professional Subscriber will be $25
per month, and the Non-Professional
Subscriber will be $1 per month. These
subscriber fees (both Professional and
Non-Professional) cover the usage of all
five MRX data products identified above
and would not be assessed separately
for each product.16
MRX also proposes a Non-Display
Enterprise License for $7,500 per
month. This license would lower costs
for internal professional subscribers and
lower administrative costs overall by
permitting the distribution of all MRX
proprietary direct data feed products to
an unlimited number of internal nondisplay Subscribers without incurring
additional fees for each internal
Subscriber, or requiring the customer to
count internal subscribers. 17 The Non13 A ‘‘distributor’’ of Nasdaq MRX data is any
entity that receives a feed or data file of data
directly from Nasdaq MRX or indirectly through
another entity and then distributes it either
internally (within that entity) or externally (outside
that entity). All distributors shall execute a Nasdaq
Global Data Agreement.
14 A Professional Subscriber is any Subscriber
that is not a Non-Professional Subscriber.
15 A Non-Professional Subscriber is a natural
person who is neither: (i) registered or qualified in
any capacity with the Commission, the
Commodities Futures Trading Commission, any
state securities agency, any securities exchange or
association, or any commodities or futures contract
market or association; (ii) engaged as an
‘‘investment adviser’’ as that term is defined in
Section 201(11) of the Investment Advisors Act of
1940 (whether or not registered or qualified under
that Act); nor (iii) employed by a bank or other
organization exempt from registration under federal
or state securities laws to perform functions that
would require registration or qualification if such
functions were performed for an organization not so
exempt.
16 For example, if a firm has one Professional
(Non-Professional) Subscriber accessing Top of
Market, Order, and Depth of Market Feed the firm
would only report the Subscriber once and pay $25
($1 for Non-Professional).
17 The Non-Display Enterprise License of $7,500
per month is optional. A firm that does not have
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Display Enterprise License is in
addition to any other associated
distributor fees for MRX proprietary
direct data feed products.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,18 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,19 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The proposed changes to the pricing
schedule are reasonable in several
respects. As a threshold matter, the
Exchange is subject to significant
competitive forces in the market for
order flow, which constrains its pricing
determinations. The fact that the market
for order flow is competitive has long
been recognized by the courts. In
NetCoalition v. Securities and Exchange
Commission, the D.C. Circuit stated,
‘‘[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’. . . .’’ 20
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention to determine 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.’’ 21
a sufficient number of subscribers to benefit from
purchase of the license need not do so.
18 See 15 U.S.C. 78f(b).
19 See 15 U.S.C. 78f(b)(4) and (5).
20 See NetCoalition, 615 F.3d at 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)).
21 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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Congress directed the Commission to
‘‘rely on ‘competition, whenever
possible, in meeting its regulatory
responsibilities for overseeing the SROs
and the national market system.’’ 22 As
a result, the Commission has
historically relied on competitive forces
to determine whether a fee proposal is
equitable, fair, reasonable, and not
unreasonably or unfairly discriminatory.
‘‘If competitive forces are operative, the
self-interest of the exchanges themselves
will work powerfully to constrain
unreasonable or unfair behavior.’’ 23
Accordingly, ‘‘the existence of
significant competition provides a
substantial basis for finding that the
terms of an exchange’s fee proposal are
equitable, fair, reasonable, and not
unreasonably or unfairly
discriminatory.’’ 24 In its 2019 guidance
on fee proposals, Commission staff
indicated that they would look at factors
beyond the competitive environment,
such as cost, only if a ‘‘proposal lacks
persuasive evidence that the proposed
fee is constrained by significant
competitive forces.’’ 25
History of MRX Operations
Over the years, MRX has amended its
transactional pricing to attract order
flow to the Exchange.26 In June 2019,
22 See NetCoalition, 615 F.3d at 534–35; see also
H.R. Rep. No. 94–229 at 92 (1975) (‘‘[I]t is the intent
of the conferees that the national market system
evolve through the interplay of competitive forces
as unnecessary regulatory restrictions are
removed.’’).
23 See Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74,770 (December 9,
2008) (SR–NYSEArca-2006–21).
24 Id.
25 See U.S. Securities and Exchange Commission,
‘‘Staff Guidance on SRO Rule filings Relating to
Fees’’ (May 21, 2019), available at https://
www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
26 See e.g. Securities Exchange Act Release Nos.
77292 (March 4, 2016), 81 FR 12770 (March 10,
2016) (SR–ISEMercury-2016–02) (Notice of Filing
and Immediate Effectiveness of Proposed Rule
Change To Establish the Schedule of Fees); 77409
(March 21, 2016), 81 FR 16240 (March 25, 2016)
(SR–ISEMercury-2016–05) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Amend the Schedule of Fees); 81 FR 16238
(March 21, 2016), 81 FR 16238 (March 25, 2016)
(SR–ISEMercury-2016–06) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Amend the Schedule of Fees); 77841 (May 16,
2016), 81 FR 31986 (SR–ISEMercury-2016–11)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the Schedule of
Fees); 82537 (January 19, 2018), 83 FR 3784
(January 26, 2018) (SR–MRX–2018–01) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the Schedule of Fees To
Introduce a New Pricing Model); 82990 (April 4,
2018), 83 FR 15434 (April 10, 2018) (SR–MRX–
2018–10) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
Chapter IV of the Exchange’s Schedule of Fees);
28677 (June 14, 2018), 83 FR 28677 (June 20, 2018)
(SR–MRX–2018–19) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Increase Certain Route-Out Fees Set Forth in
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56459
MRX commenced offering complex
orders.27 With the addition of complex
order functionality, MRX offered
Members certain order types, an
opening process, auction capabilities
and other trading functionality that was
nearly identical to functionality
available on ISE.28 The added
Section II.A of the Schedule of Fees); 84113
(September 13, 2018), 83 FR 47386 (September 19,
2018) (SR–MRX–2018–27) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Relocate the Exchange’s Schedule of Fees);
85143 (February 14, 2019), 84 FR 5508 (February
21, 2019) (SR–MRX–2019–02) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Amend the Pricing Schedule at Options 7,
Section 3); 85313 (March 14, 2019), 84 FR 10357
(March 20, 2019) (SR–MRX–2019–05) (Notice of
Filing and Immediate Effectiveness of a Proposed
Rule Change Relating to PIM Fees and Rebates);
86326 (July 8, 2019), 84 FR 33300 (July 12, 2019)
(SR–MRX–2019–14) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Adopt Complex Order Pricing); 88022 (January
23, 2020), 85 FR 5263 (January 29, 2020) (SR–MRX–
2020–02) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
MRX Pricing Schedule); 89046 (June 11, 2020), 85
FR 36633 (June 17, 2020) (SR–MRX–2020–11)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its Pricing
Schedule at Options 7); 89320 (July 15, 2020), 85
FR 44135 (July 21, 2020) (SR–MRX–2020–14)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its Pricing
Schedule at Options 7, Section 5, Other Options
Fees and Rebates, in Connection With the Pricing
for Orders Entered Into the Exchanges Price
Improvement Mechanism); 90503 (November 24,
2020), 85 FR 77317 (December 1, 2020) (SR–MRX–
2020–18) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend
Its Pricing Schedule at Options 7 for Orders Entered
Into the Exchange’s Price Improvement
Mechanism); 90434 (November 16, 2020), 85 FR
74473 (November 20, 2020) (SR–MRX–2020–19)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To the Exchange’s Pricing
Schedule at Options 7 To Amend Taker Fees for
Regular Orders); 90455 (November 18, 2020), 85 FR
75064 (November 24, 2020) (SR–MRX–2020–21)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the Pricing
Schedule); and 91687 (April 27, 2021), 86 FR 23478
(May 3, 2021) (SR–MRX–2021–04) (Notice of Filing
and Immediate Effectiveness of Proposed Rule
Change To Amend the Exchange’s Pricing Schedule
at Options 7). Note that ISE Mercury is an earlier
name for MRX.
27 See Securities Exchange Act Release No. 86326
(July 8, 2019), 84 FR 33300 (July 12, 2019) (SR–
MRX–2019–14) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Adopt
Complex Order Pricing).
28 One distinction is that ISE offered its Members
access to Nasdaq Precise in 2019 and since that
time. MRX has never offered Precise. ‘‘Nasdaq
Precise’’ or ‘‘Precise’’ is a front-end interface that
allows EAMs and their Sponsored Customers to
send orders to the Exchange and perform other
related functions. Features include the following:
(1) order and execution management: enter, modify,
and cancel orders on the Exchange, and manage
executions (e.g., parent/child orders, inactive
orders, and post-trade allocations); (2) market data:
access to real-time market data (e.g., NBBO and
Exchange BBO); (3) risk management: set
customizable risk parameters (e.g., kill switch); and
(4) book keeping and reporting: comprehensive
audit trail of orders and trades (e.g., order history
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functionality attracted order flow,
which has enhanced the value of its
market data and is the basis for these
proposed fee changes.
Market Data Products are Subject to
Significant Substitution-Based
Competitive Forces
An Exchange can show that a product
is ‘‘subject to significant substitutionbased competitive forces’’ by
introducing evidence that customers can
substitute that product with products
offered by other exchanges.
NYSE National was able to prove
exactly this when it sought approval for
the ‘‘NYSE National Integrated Feed’’ 29
in 2020. NYSE National at the time of
its filing was in a similar position to
MRX today—the exchange had an
approximately 1.9% market share of
executed volume of equity trades.30 The
Commission approved the proposal to
establish fees for NYSE National based
on a finding that the exchange ‘‘was
subject to significant substitution-based
competitive forces.’’ Citing NetCoalition
I,31 the Commission stated that
‘‘whether a market is competitive
notwithstanding potential alternatives
depends on factors such as the number
of buyers who consider other products
interchangeable and at what prices.’’ 32
Noting that ‘‘many market participants
. . . do not subscribe to . . . the NYSE
National Integrated Feed, even when the
feed is offered without charge,’’ the
Commission concluded that ‘‘NYSE
National’s consistently low percentage
of market share, the relatively small
number of subscribers to the NYSE
National Integrated Feed, and the
sizeable portion of subscribers that
terminated their subscriptions following
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and done away trade reports). See ISE
Supplementary Material .03(d) of Options 3,
Section 7. Precise is also available on GEMX.
29 See Securities Exchange Act Release No 88211
(February 14, 2020), 85 FR 9847 (February 20, 2020)
(SR–NYSENAT–2020–05), also available at https://
www.nyse.com/publicdocs/nyse/markets/nysenational/rule-filings/filings/2020/SR-NYSENat2020-05.pdf.
30 See id.
31 See NetCoalition v. SEC, 615 F.3d 525, 535 (DC
2010) (‘‘NetCoalition I’’)
32 See NYSE National Approval Order (citing
NetCoalition I)
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the proposal of the fees,’’ demonstrated
that the exchange ‘‘was subject to
significant substitution-based
competitive forces’’ in setting fees such
that the proposed rule change was
consistent with the Act.33
MRX today is in essentially the same
position as NYSE National in 2020, and
all three of the factors cited in the
Commission’s approval order for NYSE
National are present in MRX today.
First, MRX has a consistently low
percentage of market share, starting at
approximately 0.2 percent when it
opened as an Exchange and ending in
approximately 1.8 percent today.
Second, only a small number of firms
purchase market data from MRX relative
to its affiliated options exchanges.
Third, a sizeable portion of
subscribers—approximately 15
percent—have terminated their
subscriptions following the
implementation of the proposed fees,
demonstrating that customers can and
do exercise choice in deciding whether
to purchase the Exchange’s market data
feeds.
As of May 2, 2022, the date that MRX
initially proposed these market data
fees, MRX reported that two customers
had terminated their market data
subscriptions.34 As of today, a total of
five firms have cancelled, amounting to
approximately 15 percent of the 34
customers that had been taking MRX
feeds in the first quarter of 2022.35
Commission Staff have requested
additional information pertaining to: (i)
the types of feeds available to these
customers prior to termination, (ii) the
characteristics of the customers that
terminated their feeds, and (iii) whether
such customers traded on the Exchange.
With respect to the types of data feeds
accessed, two of the five customers had
access to all five feeds: Nasdaq MRX
Depth of Market Data, Nasdaq MRX
Order Feed, Nasdaq MRX Top Quote
33 See
id.
Securities Exchange Act Release No. 94901
(May 12, 2022), 87 FR 30305 (May 18, 2022) (SR–
MRX–2022–04).
35 These terminations were limited to market
data; none of these customers were members of
MRX and therefore purchased neither memberships
nor ports from the Exchange.
Feed, Nasdaq MRX Trades Feed, and
Nasdaq MRX Spread Feed. The three
remaining customers had access to only
two feeds: the Order Feed and the Top
Quote Feed. All five customers
cancelled all feeds available to them.
With respect to the types of customers
cancelling feeds, three of the five were
either data vendors or technology
suppliers. Data vendors purchase
exchange data and redistribute it to
downstream customers, while
technology suppliers incorporate
exchange data into software solutions,
which are sold to downstream
customers. The remaining two firms
engage in options trading, either on
their own behalf or that of a customer.
With respect to trading, the three data
vendors/technology suppliers do not
trade on their own behalf or on the
behalf of any downstream customs,
although their customers may do so.
The Exchange understands that these
three firms cancelled due to insufficient
demand from their downstream
customers for MRX data. The two
remaining firms, which do engage in
options trading, have not traded on
MRX, but are active traders on other
Nasdaq options exchanges.36
Detailed information supporting the
first step in the analysis of substitutionbased competitive forces—low market
share—is set forth in Chart 1, which
shows the January 2022 market share for
multiply-listed options by exchange. Of
the 16 operating options exchanges,
none currently has more than a 13.1%
market share, and MRX has the smallest
market share at 1.8%. Customers widely
distribute their transactions across
exchanges according to their business
needs and the ability of each exchange
to meet those needs through technology,
liquidity and functionality. Average
market share for the 16 options
exchanges is 6.26 percent, with the
median at 5.8, and a range between 1.8
and 13.1 percent.
34 See
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
36 NYSE National did not provide similarly
detailed information regarding the characteristics of
cancelling customers. Nevertheless, the Exchange
believes that the characteristics of such customers
are similar for both NYSE National and MRX, and
the same competitive forces apply to all exchanges.
E:\FR\FM\14SEN1.SGM
14SEN1
56461
Federal Register / Vol. 87, No. 177 / Wednesday, September 14, 2022 / Notices
Chart 1: Market Share by Exchange for January 2022
Market Share - El«:hanp
10;:i.%
8;7%
7.8"
11.2%
6.2.'Ki
5.8%
4.4,t;
Z.5%
Z.2,t;
1.8"
The second step in this analysis—
demonstrating that only a small number
of firms purchase market data relative to
affiliated options exchanges—is shown
in Chart 2, which compares the number
of firms with access to market data from
MRX to the number of firms purchasing
Market share is the percentage of
volume on a particular exchange
relative to the total volume across all
exchanges, and indicates the amount of
order flow directed to that exchange.
High levels of market share enhance the
value of market data.
market data from the four MRXaffiliated options exchanges, GEMX,
ISE, The Nasdaq Stock Market LLC
(‘‘NOM’’) and Nasdaq PHLX, LLC
(‘‘Phlx’’).
Chart 2: Number of Firms with Access to Market Data and Purchasing Trading
Services from Options Venues (March 2022)
Nasdaq Option Venues - March 2022
80
.............................
.................---""""""""""-•"·-·------·-·-·-··••.~--······-··-·----······•--•·--··--
70
60
■ MRX
■ BXOP
GEMX
.........
20
................
10
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■ PHLX
..
-
Data
Trading
of firms purchasing market data from
the Nasdaq-affiliated options exchanges.
The third step in this analysis—
showing that a sizable number of
customers terminated subscriptions
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
following the proposal of the fees—is
confirmed by the five customer
cancellations. As explained above, all
five customers terminated all feeds
available to them. Although not all
E:\FR\FM\14SEN1.SGM
14SEN1
EN14SE22.001</GPH>
Chart 2 shows that 34 firms
subscribed to at least one market data
product from MRX in the first quarter of
2022. This is the second lowest number
IINOM
EN14SE22.000</GPH>
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·..
-"s•--~-->s-,---- ---=-- ,
0
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IIISE
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56462
Federal Register / Vol. 87, No. 177 / Wednesday, September 14, 2022 / Notices
customers took all of the MRX feeds,
each one of these feeds was cancelled by
at least one customer, demonstrating
that customers can and do exercise
choice with respect to each feed. These
cancellations reduced the number of
firms with access to at least one MRX
market data feed from 34 to 29, an
approximately 15 percent reduction in
usage, demonstrating that firms can and
do exercise choice in determining
whether to purchase market data from
the Exchange.
MRX lists no proprietary options
products that are entirely unique to
MRX. Firms can substitute MRX market
data with feeds from exchanges that
provide a high degree of functionality,
including complex orders. Full market
data options are available, for example,
from Cboe,37 MIAX,38 and NYSE Arca
Options.39 Because MRX does not list
options on products that are exclusively
available on MRX, consumers can
substitute MRX data with data from any
exchange that lists such multiply-listed
options, or through OPRA. Moreover, all
broker-dealers involved in order routing
must take consolidated data from OPRA,
and proprietary data feeds cannot be
used to meet that particular
requirement. As such, all proprietary
data feeds are optional.
This analysis must be viewed in the
context of a field with relatively low
barriers to entry. MRX, like many new
entrants to the field, offered market data
for free to establish itself and gain
market share. As new entrants enter the
field, MRX can also expect competition
from these new entrants. Those new
entrants, like MRX, are likely to set
market data fees to zero, increasing
marketplace competition.
The Proposal is not unfairly
discriminatory. The five market data
feeds at issue here—the Depth of Market
Feed, Order Feed, Top Quote Feed,
Trades Feed, and Spreads Feed—are
used by a variety of market participants
for a variety of purposes. Users include
regulators, market makers, competing
exchanges, media, retail, academics,
portfolio managers. Market data feeds
will be available to members of all of
these groups on a non-discriminatory
basis.
With respect to the proposed NonDisplay Enterprise License, enterprise
licenses in general have been widely
recognized as an effective and not
unfairly discriminatory method of
37 See Cboe DataShop, available at https://
datashop.cboe.com/.
38 See MIAX Options Market Data & Offerings,
available at https://www.miaxoptions.com/marketdata-offerings.
39 See NYSE Options Markets, available at https://
www.nyse.com/options.
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18:31 Sep 13, 2022
Jkt 256001
distributing market data. Enterprise
licenses are widely employed by
options exchanges, and the proposal
here is typical of such licenses.
After 6 years, MRX proposes to
commence assessing market data fees,
just as all other options exchanges do
now.40 The introduction of these fees
will not impede access to MRX, but
rather will allow MRX to continue to
compete and grow its marketplace so
that it may continue to offer a robust
trading architecture, a quality opening
process, an array of simple and complex
order types and auctions, and
competitive transaction pricing. If MRX
is incorrect in its assessment of the
value of its services, that assessment
will be reflected in MRX’s ability to
compete with other options exchanges.
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. For all of the
reasons set forth above, the Exchange is
subject to ‘‘significant substitutionbased competitive forces’’: (i) it has a
consistently low percentage of market
share, starting at approximately 0.2
percent when it opened as an Exchange
and ending in approximately 1.8
percent today; (ii) only a small number
of firms purchase market data from
MRX relative to its affiliated options
exchanges; and (iii) a sizeable portion of
subscribers—approximately 15
percent—have terminated their
subscriptions following the
implementation of the proposed fees,
demonstrating that customers can and
do exercise choice in deciding whether
to purchase market data.
Nothing in the Proposal burdens
inter-market competition (the
competition among self-regulatory
organizations) because approval of the
Proposal does not impose any burden
on the ability of other options exchanges
to compete. Each of the remaining 15
options exchanges currently sells its
market data, and is capable of modifying
its fees in response to the proposed
changes by MRX. Moreover, allowing
MRX, or any new market entrant, to
waive fees for a period of time to allow
it to become established encourages
market entry and thereby ultimately
promotes competition.
Nothing in the Proposal burdens
intra-market competition (the
competition among consumers of
exchange data) because each customer
40 Today, MRX is the only options exchange that
does not assess market data fees.
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
will be able to decide whether or not to
purchase the Exchange’s market data, as
demonstrated by the fact that a
significant number of the Exchange’s
customers have already elected to
terminate their access to such feeds.
The Exchange 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.
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. If the changes
proposed herein are unattractive to
market participants, it is likely that the
Exchange will lose market share.41
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.42 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:
41 The Exchange notified market participants of
the new fees on December 20, 2021. See Data News
#2021–11 (December 20, 2021, available at https://
www.nasdaqtrader.com/TraderNews.aspx?
id=dn2021-11. As such, market participants have
had ample notice of the proposed fee changes and
will be able to adjust their purchases of exchange
services accordingly.
42 15 U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 87, No. 177 / Wednesday, September 14, 2022 / 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–2022–14 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
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All submissions should refer to File
Number SR–MRX–2022–14. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
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–2022–14 and should
be submitted on or before October 5,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.43
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–19814 Filed 9–13–22; 8:45 am]
BILLING CODE 8011–01–P
43 17
CFR 200.30–3(a)(12).
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18:31 Sep 13, 2022
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SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–506, OMB Control No.
3235–0564]
Proposed Collection; Comment
Request; Extension: Rule 17a–6
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collections of information
summarized below. The Commission
plans to submit these existing
collections of information to the Office
of Management and Budget (‘‘OMB’’) for
extension and approval.
Section 17(a) of the Investment
Company Act of 1940 (the ‘‘Act’’)
generally prohibits affiliated persons of
a registered investment company
(‘‘fund’’) from borrowing money or other
property from, or selling or buying
securities or other property to or from,
the fund or any company that the fund
controls. Rule 17a–6 (17 CFR 270.17a–
6) permits a fund, or a company
controlled by the fund, and a ‘‘portfolio
affiliate’’ of the fund (a company that is
an affiliated person of the fund because
the fund controls the company, or holds
five percent or more of the company’s
outstanding voting securities) to engage
in principal transactions that would
otherwise be prohibited under section
17(a) of the Act under certain
conditions. A fund may not rely on the
exemption in the rule to enter into a
principal transaction with a portfolio
affiliate if certain prohibited
participants (e.g., directors, officers,
employees, or investment advisers of
the fund) have a financial interest in a
party to the transaction. Rule 17a–6
specifies certain interests that are not
‘‘financial interests,’’ including any
interest that the fund’s board of
directors (including a majority of the
directors who are not interested persons
of the fund) finds to be not material. A
board making this finding is required to
record the basis for the finding in its
meeting minutes. This recordkeeping
requirement is a collection of
information under the Paperwork
Reduction Act of 1995 (‘‘PRA’’).
The rule is designed to permit
transactions between funds and their
portfolio affiliates in circumstances in
which it is unlikely that the affiliate
would be in a position to take advantage
PO 00000
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56463
of the fund. In determining whether a
financial interest is ‘‘material,’’ the
board of the fund should consider
whether the nature and extent of the
interest in the transaction is sufficiently
small that a reasonable person would
not believe that the interest affected the
determination of whether to enter into
the transaction or arrangement or the
terms of the transaction or arrangement.
The information collection requirements
in rule 17a–6 are intended to ensure that
Commission staff can review, in the
course of its compliance and
examination functions, the basis for a
board of director’s finding that the
financial interest of an otherwise
prohibited participant in a party to a
transaction with a portfolio affiliate is
not material.
Based on public filings made with the
Commission, we estimate that annually
335 funds and their series (collectively,
‘‘funds’’) may rely on rule 17a–6 to
engage in otherwise prohibited
transactions under section 17(a) of the
1940 Act. This estimate is based on
publicly available Form N–CEN filings.
Solely for the purposes of this PRA
extension, we assume that each of these
funds has engaged in one transaction
per reporting period that resulted in a
paperwork burden pursuant to rule 17a–
6. We estimate that compliance with the
recordkeeping requirement for rule 17a–
6 will impose a burden of .2 hours (12
minutes) for each transaction for which
there is a paperwork burden. Therefore,
we estimate 67 burden hours to be
associated with rule 17a–6
recordkeeping requirements annually,
with an associated internal cost of
$5,762.
The estimate of burden hours and
burden costs is made solely for the
purposes of the PRA. The estimate is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules. Complying
with this collection of information
requirement is necessary to obtain the
benefit of relying on rule 17a–6. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid control
number.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimate of the burden of the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
E:\FR\FM\14SEN1.SGM
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]]>Agencies
[Federal Register Volume 87, Number 177 (Wednesday, September 14, 2022)]
[Notices]
[Pages 56457-56463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19814]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95708; File No. SR-MRX-2022-14]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend MRX's
Pricing Schedule at Options 7, Section 7
September 8, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 25, 2022, 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, 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.
---------------------------------------------------------------------------
\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 MRX's Pricing Schedule at Options 7,
Section 7.
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
MRX proposes to amend its Pricing Schedule at Options 7, Section 7,
to assess market data fees, which are not assessed today, and which
have not been assessed since MRX's inception in 2016.\3\ The proposed
changes are designed to update data fees to reflect their current
value--rather than their value when it was a new exchange six years
ago--based on increased market share. Newly-opened exchanges often
charge no fees for market data to attract order flow to an exchange,
and later amend their fees to reflect the true value of those
services.\4\ Allowing newly-opened exchanges time to build and sustain
market share before charging for their market data encourages market
entry and promotes competition.
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed pricing changes on
May 2, 2022 (SR-MRX-2022-04) instituting fees for membership, ports
and market data. See Securities Exchange Act Release No. 94901 (May
12, 2022), 87 FR 30305 (May 18, 2022) (SR-MRX-2022-04). On June 29,
2022, the Exchange withdrew that filing, and submitted separate
filings for membership (SR-MRX-2022-07), market data (SR-MRX-2022-
08) and ports (SR-MRX-2022-09). On August 25, 2022, the Exchange
withdrew the market data filing (SR-MRX-2022-08) and replaced it
with the instant filing.
\4\ See, e.g., Securities Exchange Act Release No 88211
(February 14, 2020), 85 FR 9847 (February 20, 2020) (SR-NYSENAT-
2020-05), also available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf. (initiating market data fees for the NYSE National exchange
after initially setting such fees at zero).
---------------------------------------------------------------------------
This Proposal reflects MRX's assessment that it has gained
sufficient market share to compete effectively against other 15 options
exchanges without waiving market data fees. Such fees are assessed by
options exchanges that compete with MRX--indeed, MRX is the only
options exchange (out of the 16 current options exchanges) not to
assess them today.
As explained in further detail below, MRX today is in the same
position as NYSE National in 2020, when it sought approval for the
``NYSE National Integrated Feed.'' \5\ The Commission approved the NYSE
National Integrated Feed based on a finding that it ``was subject to
significant substitution-based competitive forces'' based on ``NYSE
[[Page 56458]]
National's consistently low percentage of market share, the relatively
small number of subscribers to the NYSE National Integrated Feed, and
the sizeable portion of subscribers that terminated their subscriptions
following the proposal of the fees.'' \6\
---------------------------------------------------------------------------
\5\ NYSE National stated that the proposed integrated feed
included depth-of-book order data, last sale data, security status
updates, and stock summary messages. See Securities Exchange Act
Release No 88211 (February 14, 2020), 85 FR 9847 (February 20, 2020)
(SR-NYSENAT-2020-05), also available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf.
\6\ See id.
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The three factors cited in the Commission's approval order for NYSE
National are present in MRX today. First, MRX has a consistently low
percentage of market share, starting at approximately 0.2 percent when
it opened as an Exchange and ending in approximately 1.8 percent today.
Second, only a small number of firms purchase market data from MRX
relative to its affiliated options exchanges. Third, a sizeable portion
of subscribers--approximately 15 percent--have terminated their
subscriptions following the implementation of the proposed fees,
demonstrating that customers can and do exercise choice in deciding
whether to purchase the Exchange's market data feeds.
Disapproval of the Proposal--given that the three factors cited in
the Commission's approval order for NYSE National two years ago are
present in MRX today--would result in differential treatment of
similarly-situated exchanges. Under such circumstances, disapproval of
the Proposal should be rejected as arbitrary and capricious.
Disapproval would also place a substantial burden on competition.
MRX would be uniquely disadvantaged as the only options exchange unable
to charge for its market data. If the Commission were to disapprove
this Proposal, that action, and not market forces, would determine
whether MRX is successful in its competition with other options
exchanges.
New exchanges commonly waive data fees to attract market
participants, facilitating their entry into the market and, once there
is sufficient depth and breadth of liquidity, ``graduate'' to compete
against established exchanges and charge fees that reflect the value of
their services. If MRX is incorrect in its assessment, that error will
be reflected in MRX's ability to compete with other options
exchanges.\7\
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\7\ Nasdaq recently announced that, beginning in 2022, Nasdaq
plans to migrate its North American markets to Amazon Web Services
in a phased approach, starting with Nasdaq MRX, a U.S. options
market. The proposed fee changes are entirely unrelated to this
effort.
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The Exchange proposes to amend fees for the following market data
feeds within Options 7, Section 7: (1) Nasdaq MRX Depth of Market Data;
\8\ (2) Nasdaq MRX Order Feed; \9\ (3) Nasdaq MRX Top Quote Feed; \10\
(4) Nasdaq MRX Trades Feed; \11\ and (5) Nasdaq MRX Spread Feed.\12\
Currently, no fees are being assessed for these feeds.
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\8\ Nasdaq MRX Depth of Market Data Feed (``Depth of Market
Feed'') provides aggregate quotes and orders at the top five price
levels on MRX, and provides subscribers with a consolidated view of
tradable prices beyond the BBO, showing additional liquidity and
enhancing transparency for MRX traded options. The data provided for
each option series includes the symbols (series and underlying
security), put or call indicator, expiration date, the strike price
of the series, and whether the option series is available for
trading on MRX and identifies if the series is available for closing
transactions only. In addition, subscribers are provided with total
aggregate quantity, Public Customer aggregate quantity, Priority
Customer aggregate quantity, price, and side (i.e., bid/ask). This
information is provided for each of the top five price levels on the
Depth Feed. The feed also provides order imbalances on opening/
reopening. See Options 3, Section 23(a)(1).
\9\ Nasdaq MRX Order Feed (``Order Feed'') provides information
on new orders resting on the book (e.g. price, quantity and market
participant capacity). In addition, the feed also announces all
auctions. The data provided for each option series includes the
symbols (series and underlying security), put or call indicator,
expiration date, the strike price of the series, and whether the
option series is available for trading on MRX and identifies if the
series is available for closing transactions only. The feed also
provides order imbalances on opening/reopening. See Options 3,
Section 23(a)(2).
\10\ Nasdaq MRX Top Quote Feed (``Top Quote Feed'') calculates
and disseminates MRX's best bid and offer position, with aggregated
size (including total size in aggregate, for Professional Order size
in the aggregate and Priority Customer Order size in the aggregate),
based on displayable order and quote interest in the System. The
feed also provides last trade information along with opening price,
daily trading volume, high and low prices for the day. The data
provided for each option series includes the symbols (series and
underlying security), put or call indicator, expiration date, the
strike price of the series, and whether the option series is
available for trading on MRX and identifies if the series is
available for closing transactions only. The feed also provides
order imbalances on opening/reopening. See Options 3, Section
23(a)(3).
\11\ Nasdaq MRX Trades Feed (``Trades Feed'') displays last
trade information along with opening price, daily trading volume,
high and low prices for the day. The data provided for each option
series includes the symbols (series and underlying security), put or
call indicator, expiration date, the strike price of the series, and
whether the option series is available for trading on MRX and
identifies if the series is available for closing transactions only.
See Options 3, Section 23(a)(4).
\12\ Nasdaq MRX Spread Feed (``Spread Feed'') is a feed that
consists of: (1) options orders for all Complex Orders (i.e.,
spreads, buy-writes, delta neutral strategies, etc.); (2) data
aggregated at the top five price levels (BBO) on both the bid and
offer side of the market; (3) last trades information. The Spread
Feed provides updates, including prices, side, size and capacity,
for every Complex Order placed on the MRX Complex Order Book. The
Spread Feed shows: (1) aggregate bid/ask quote size; (2) aggregate
bid/ask quote size for Professional Customer Orders; and (3)
aggregate bid/ask quote size for Priority Customer Orders for MRX
traded options. The feed also provides Complex Order auction
notifications. See Options 3, Section 23(a)(5).
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In addition to the proposed fees for each data feed, the Exchange
is introducing an Internal Distributor Fee \13\ of $1,500 per month for
the Nasdaq MRX Depth of Market Feed, Order Feed, and Top Quote Feed, an
Internal Distributor Fee of $750 per month for the Trades Feed, and an
Internal Distributor Fee of $1,000 per month for the Spread Feed. If a
Member subscribes to both the Trades Feed and the Spread Feed, both
Internal Distributor Fees would be assessed.
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\13\ A ``distributor'' of Nasdaq MRX data is any entity that
receives a feed or data file of data directly from Nasdaq MRX or
indirectly through another entity and then distributes it either
internally (within that entity) or externally (outside that entity).
All distributors shall execute a Nasdaq Global Data Agreement.
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The Exchange also proposes to assess an External Distributor Fee of
$2,000 per month for the Nasdaq MRX Depth of Market Feed, Order Feed,
and Top Quote Feed, an External Distributor Fee of $1,000 per month for
the Trades Feed, and an External Distributor Fee of $1,500 per month
for the Spread Feed.
MRX will also assess Professional \14\ and Non-Professional \15\
subscriber fees. The Professional Subscriber will be $25 per month, and
the Non-Professional Subscriber will be $1 per month. These subscriber
fees (both Professional and Non-Professional) cover the usage of all
five MRX data products identified above and would not be assessed
separately for each product.\16\
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\14\ A Professional Subscriber is any Subscriber that is not a
Non-Professional Subscriber.
\15\ A Non-Professional Subscriber is a natural person who is
neither: (i) registered or qualified in any capacity with the
Commission, the Commodities Futures Trading Commission, any state
securities agency, any securities exchange or association, or any
commodities or futures contract market or association; (ii) engaged
as an ``investment adviser'' as that term is defined in Section
201(11) of the Investment Advisors Act of 1940 (whether or not
registered or qualified under that Act); nor (iii) employed by a
bank or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt.
\16\ For example, if a firm has one Professional (Non-
Professional) Subscriber accessing Top of Market, Order, and Depth
of Market Feed the firm would only report the Subscriber once and
pay $25 ($1 for Non-Professional).
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MRX also proposes a Non-Display Enterprise License for $7,500 per
month. This license would lower costs for internal professional
subscribers and lower administrative costs overall by permitting the
distribution of all MRX proprietary direct data feed products to an
unlimited number of internal non-display Subscribers without incurring
additional fees for each internal Subscriber, or requiring the customer
to count internal subscribers. \17\ The Non-
[[Page 56459]]
Display Enterprise License is in addition to any other associated
distributor fees for MRX proprietary direct data feed products.
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\17\ The Non-Display Enterprise License of $7,500 per month is
optional. A firm that does not have a sufficient number of
subscribers to benefit from purchase of the license need not do so.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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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\18\ See 15 U.S.C. 78f(b).
\19\ See 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to the pricing schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for order flow, which
constrains its pricing determinations. The fact that the market for
order flow is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated, ``[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'. . . .'' \20\
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\20\ See NetCoalition, 615 F.3d at 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 to determine
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.'' \21\
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\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Congress directed the Commission to ``rely on `competition,
whenever possible, in meeting its regulatory responsibilities for
overseeing the SROs and the national market system.'' \22\ As a result,
the Commission has historically relied on competitive forces to
determine whether a fee proposal is equitable, fair, reasonable, and
not unreasonably or unfairly discriminatory. ``If competitive forces
are operative, the self-interest of the exchanges themselves will work
powerfully to constrain unreasonable or unfair behavior.'' \23\
Accordingly, ``the existence of significant competition provides a
substantial basis for finding that the terms of an exchange's fee
proposal are equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.'' \24\ In its 2019 guidance on fee proposals,
Commission staff indicated that they would look at factors beyond the
competitive environment, such as cost, only if a ``proposal lacks
persuasive evidence that the proposed fee is constrained by significant
competitive forces.'' \25\
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\22\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep.
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that
the national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.'').
\23\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
\24\ Id.
\25\ See U.S. Securities and Exchange Commission, ``Staff
Guidance on SRO Rule filings Relating to Fees'' (May 21, 2019),
available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
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History of MRX Operations
Over the years, MRX has amended its transactional pricing to
attract order flow to the Exchange.\26\ In June 2019, MRX commenced
offering complex orders.\27\ With the addition of complex order
functionality, MRX offered Members certain order types, an opening
process, auction capabilities and other trading functionality that was
nearly identical to functionality available on ISE.\28\ The added
[[Page 56460]]
functionality attracted order flow, which has enhanced the value of its
market data and is the basis for these proposed fee changes.
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\26\ See e.g. Securities Exchange Act Release Nos. 77292 (March
4, 2016), 81 FR 12770 (March 10, 2016) (SR-ISEMercury-2016-02)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Establish the Schedule of Fees); 77409 (March 21, 2016),
81 FR 16240 (March 25, 2016) (SR-ISEMercury-2016-05) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
the Schedule of Fees); 81 FR 16238 (March 21, 2016), 81 FR 16238
(March 25, 2016) (SR-ISEMercury-2016-06) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend the
Schedule of Fees); 77841 (May 16, 2016), 81 FR 31986 (SR-ISEMercury-
2016-11) (Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the Schedule of Fees); 82537 (January 19,
2018), 83 FR 3784 (January 26, 2018) (SR-MRX-2018-01) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
the Schedule of Fees To Introduce a New Pricing Model); 82990 (April
4, 2018), 83 FR 15434 (April 10, 2018) (SR-MRX-2018-10) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Chapter IV of the Exchange's Schedule of Fees); 28677 (June 14,
2018), 83 FR 28677 (June 20, 2018) (SR-MRX-2018-19) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Increase Certain Route-Out Fees Set Forth in Section II.A of the
Schedule of Fees); 84113 (September 13, 2018), 83 FR 47386
(September 19, 2018) (SR-MRX-2018-27) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Relocate the
Exchange's Schedule of Fees); 85143 (February 14, 2019), 84 FR 5508
(February 21, 2019) (SR-MRX-2019-02) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend the Pricing
Schedule at Options 7, Section 3); 85313 (March 14, 2019), 84 FR
10357 (March 20, 2019) (SR-MRX-2019-05) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change Relating to PIM
Fees and Rebates); 86326 (July 8, 2019), 84 FR 33300 (July 12, 2019)
(SR-MRX-2019-14) (Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Adopt Complex Order Pricing); 88022 (January
23, 2020), 85 FR 5263 (January 29, 2020) (SR-MRX-2020-02) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
MRX Pricing Schedule); 89046 (June 11, 2020), 85 FR 36633 (June 17,
2020) (SR-MRX-2020-11) (Notice of Filing and Immediate Effectiveness
of Proposed Rule Change To Amend Its Pricing Schedule at Options 7);
89320 (July 15, 2020), 85 FR 44135 (July 21, 2020) (SR-MRX-2020-14)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Its Pricing Schedule at Options 7, Section 5, Other
Options Fees and Rebates, in Connection With the Pricing for Orders
Entered Into the Exchanges Price Improvement Mechanism); 90503
(November 24, 2020), 85 FR 77317 (December 1, 2020) (SR-MRX-2020-18)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend Its Pricing Schedule at Options 7 for Orders Entered
Into the Exchange's Price Improvement Mechanism); 90434 (November
16, 2020), 85 FR 74473 (November 20, 2020) (SR-MRX-2020-19) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To the
Exchange's Pricing Schedule at Options 7 To Amend Taker Fees for
Regular Orders); 90455 (November 18, 2020), 85 FR 75064 (November
24, 2020) (SR-MRX-2020-21) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend the Pricing
Schedule); and 91687 (April 27, 2021), 86 FR 23478 (May 3, 2021)
(SR-MRX-2021-04) (Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the Exchange's Pricing Schedule at
Options 7). Note that ISE Mercury is an earlier name for MRX.
\27\ See Securities Exchange Act Release No. 86326 (July 8,
2019), 84 FR 33300 (July 12, 2019) (SR-MRX-2019-14) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Adopt Complex Order Pricing).
\28\ One distinction is that ISE offered its Members access to
Nasdaq Precise in 2019 and since that time. MRX has never offered
Precise. ``Nasdaq Precise'' or ``Precise'' is a front-end interface
that allows EAMs and their Sponsored Customers to send orders to the
Exchange and perform other related functions. Features include the
following: (1) order and execution management: enter, modify, and
cancel orders on the Exchange, and manage executions (e.g., parent/
child orders, inactive orders, and post-trade allocations); (2)
market data: access to real-time market data (e.g., NBBO and
Exchange BBO); (3) risk management: set customizable risk parameters
(e.g., kill switch); and (4) book keeping and reporting:
comprehensive audit trail of orders and trades (e.g., order history
and done away trade reports). See ISE Supplementary Material .03(d)
of Options 3, Section 7. Precise is also available on GEMX.
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Market Data Products are Subject to Significant Substitution-Based
Competitive Forces
An Exchange can show that a product is ``subject to significant
substitution-based competitive forces'' by introducing evidence that
customers can substitute that product with products offered by other
exchanges.
NYSE National was able to prove exactly this when it sought
approval for the ``NYSE National Integrated Feed'' \29\ in 2020. NYSE
National at the time of its filing was in a similar position to MRX
today--the exchange had an approximately 1.9% market share of executed
volume of equity trades.\30\ The Commission approved the proposal to
establish fees for NYSE National based on a finding that the exchange
``was subject to significant substitution-based competitive forces.''
Citing NetCoalition I,\31\ the Commission stated that ``whether a
market is competitive notwithstanding potential alternatives depends on
factors such as the number of buyers who consider other products
interchangeable and at what prices.'' \32\ Noting that ``many market
participants . . . do not subscribe to . . . the NYSE National
Integrated Feed, even when the feed is offered without charge,'' the
Commission concluded that ``NYSE National's consistently low percentage
of market share, the relatively small number of subscribers to the NYSE
National Integrated Feed, and the sizeable portion of subscribers that
terminated their subscriptions following the proposal of the fees,''
demonstrated that the exchange ``was subject to significant
substitution-based competitive forces'' in setting fees such that the
proposed rule change was consistent with the Act.\33\
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\29\ See Securities Exchange Act Release No 88211 (February 14,
2020), 85 FR 9847 (February 20, 2020) (SR-NYSENAT-2020-05), also
available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf.
\30\ See id.
\31\ See NetCoalition v. SEC, 615 F.3d 525, 535 (DC 2010)
(``NetCoalition I'')
\32\ See NYSE National Approval Order (citing NetCoalition I)
\33\ See id.
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MRX today is in essentially the same position as NYSE National in
2020, and all three of the factors cited in the Commission's approval
order for NYSE National are present in MRX today. First, MRX has a
consistently low percentage of market share, starting at approximately
0.2 percent when it opened as an Exchange and ending in approximately
1.8 percent today. Second, only a small number of firms purchase market
data from MRX relative to its affiliated options exchanges. Third, a
sizeable portion of subscribers--approximately 15 percent--have
terminated their subscriptions following the implementation of the
proposed fees, demonstrating that customers can and do exercise choice
in deciding whether to purchase the Exchange's market data feeds.
As of May 2, 2022, the date that MRX initially proposed these
market data fees, MRX reported that two customers had terminated their
market data subscriptions.\34\ As of today, a total of five firms have
cancelled, amounting to approximately 15 percent of the 34 customers
that had been taking MRX feeds in the first quarter of 2022.\35\
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\34\ See Securities Exchange Act Release No. 94901 (May 12,
2022), 87 FR 30305 (May 18, 2022) (SR-MRX-2022-04).
\35\ These terminations were limited to market data; none of
these customers were members of MRX and therefore purchased neither
memberships nor ports from the Exchange.
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Commission Staff have requested additional information pertaining
to: (i) the types of feeds available to these customers prior to
termination, (ii) the characteristics of the customers that terminated
their feeds, and (iii) whether such customers traded on the Exchange.
With respect to the types of data feeds accessed, two of the five
customers had access to all five feeds: Nasdaq MRX Depth of Market
Data, Nasdaq MRX Order Feed, Nasdaq MRX Top Quote Feed, Nasdaq MRX
Trades Feed, and Nasdaq MRX Spread Feed. The three remaining customers
had access to only two feeds: the Order Feed and the Top Quote Feed.
All five customers cancelled all feeds available to them.
With respect to the types of customers cancelling feeds, three of
the five were either data vendors or technology suppliers. Data vendors
purchase exchange data and redistribute it to downstream customers,
while technology suppliers incorporate exchange data into software
solutions, which are sold to downstream customers. The remaining two
firms engage in options trading, either on their own behalf or that of
a customer.
With respect to trading, the three data vendors/technology
suppliers do not trade on their own behalf or on the behalf of any
downstream customs, although their customers may do so. The Exchange
understands that these three firms cancelled due to insufficient demand
from their downstream customers for MRX data. The two remaining firms,
which do engage in options trading, have not traded on MRX, but are
active traders on other Nasdaq options exchanges.\36\
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\36\ NYSE National did not provide similarly detailed
information regarding the characteristics of cancelling customers.
Nevertheless, the Exchange believes that the characteristics of such
customers are similar for both NYSE National and MRX, and the same
competitive forces apply to all exchanges.
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Detailed information supporting the first step in the analysis of
substitution-based competitive forces--low market share--is set forth
in Chart 1, which shows the January 2022 market share for multiply-
listed options by exchange. Of the 16 operating options exchanges, none
currently has more than a 13.1% market share, and MRX has the smallest
market share at 1.8%. Customers widely distribute their transactions
across exchanges according to their business needs and the ability of
each exchange to meet those needs through technology, liquidity and
functionality. Average market share for the 16 options exchanges is
6.26 percent, with the median at 5.8, and a range between 1.8 and 13.1
percent.
[[Page 56461]]
[GRAPHIC] [TIFF OMITTED] TN14SE22.000
Market share is the percentage of volume on a particular exchange
relative to the total volume across all exchanges, and indicates the
amount of order flow directed to that exchange. High levels of market
share enhance the value of market data.
The second step in this analysis--demonstrating that only a small
number of firms purchase market data relative to affiliated options
exchanges--is shown in Chart 2, which compares the number of firms with
access to market data from MRX to the number of firms purchasing market
data from the four MRX-affiliated options exchanges, GEMX, ISE, The
Nasdaq Stock Market LLC (``NOM'') and Nasdaq PHLX, LLC (``Phlx'').
[GRAPHIC] [TIFF OMITTED] TN14SE22.001
Chart 2 shows that 34 firms subscribed to at least one market data
product from MRX in the first quarter of 2022. This is the second
lowest number of firms purchasing market data from the Nasdaq-
affiliated options exchanges.
The third step in this analysis--showing that a sizable number of
customers terminated subscriptions following the proposal of the fees--
is confirmed by the five customer cancellations. As explained above,
all five customers terminated all feeds available to them. Although not
all
[[Page 56462]]
customers took all of the MRX feeds, each one of these feeds was
cancelled by at least one customer, demonstrating that customers can
and do exercise choice with respect to each feed. These cancellations
reduced the number of firms with access to at least one MRX market data
feed from 34 to 29, an approximately 15 percent reduction in usage,
demonstrating that firms can and do exercise choice in determining
whether to purchase market data from the Exchange.
MRX lists no proprietary options products that are entirely unique
to MRX. Firms can substitute MRX market data with feeds from exchanges
that provide a high degree of functionality, including complex orders.
Full market data options are available, for example, from Cboe,\37\
MIAX,\38\ and NYSE Arca Options.\39\ Because MRX does not list options
on products that are exclusively available on MRX, consumers can
substitute MRX data with data from any exchange that lists such
multiply-listed options, or through OPRA. Moreover, all broker-dealers
involved in order routing must take consolidated data from OPRA, and
proprietary data feeds cannot be used to meet that particular
requirement. As such, all proprietary data feeds are optional.
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\37\ See Cboe DataShop, available at https://datashop.cboe.com/.
\38\ See MIAX Options Market Data & Offerings, available at
https://www.miaxoptions.com/market-data-offerings.
\39\ See NYSE Options Markets, available at https://www.nyse.com/options.
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This analysis must be viewed in the context of a field with
relatively low barriers to entry. MRX, like many new entrants to the
field, offered market data for free to establish itself and gain market
share. As new entrants enter the field, MRX can also expect competition
from these new entrants. Those new entrants, like MRX, are likely to
set market data fees to zero, increasing marketplace competition.
The Proposal is not unfairly discriminatory. The five market data
feeds at issue here--the Depth of Market Feed, Order Feed, Top Quote
Feed, Trades Feed, and Spreads Feed--are used by a variety of market
participants for a variety of purposes. Users include regulators,
market makers, competing exchanges, media, retail, academics, portfolio
managers. Market data feeds will be available to members of all of
these groups on a non-discriminatory basis.
With respect to the proposed Non-Display Enterprise License,
enterprise licenses in general have been widely recognized as an
effective and not unfairly discriminatory method of distributing market
data. Enterprise licenses are widely employed by options exchanges, and
the proposal here is typical of such licenses.
After 6 years, MRX proposes to commence assessing market data fees,
just as all other options exchanges do now.\40\ The introduction of
these fees will not impede access to MRX, but rather will allow MRX to
continue to compete and grow its marketplace so that it may continue to
offer a robust trading architecture, a quality opening process, an
array of simple and complex order types and auctions, and competitive
transaction pricing. If MRX is incorrect in its assessment of the value
of its services, that assessment will be reflected in MRX's ability to
compete with other options exchanges.
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\40\ Today, MRX is the only options exchange that does not
assess market data fees.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. For all of the reasons set
forth above, the Exchange is subject to ``significant substitution-
based competitive forces'': (i) it has a consistently low percentage of
market share, starting at approximately 0.2 percent when it opened as
an Exchange and ending in approximately 1.8 percent today; (ii) only a
small number of firms purchase market data from MRX relative to its
affiliated options exchanges; and (iii) a sizeable portion of
subscribers--approximately 15 percent--have terminated their
subscriptions following the implementation of the proposed fees,
demonstrating that customers can and do exercise choice in deciding
whether to purchase market data.
Nothing in the Proposal burdens inter-market competition (the
competition among self-regulatory organizations) because approval of
the Proposal does not impose any burden on the ability of other options
exchanges to compete. Each of the remaining 15 options exchanges
currently sells its market data, and is capable of modifying its fees
in response to the proposed changes by MRX. Moreover, allowing MRX, or
any new market entrant, to waive fees for a period of time to allow it
to become established encourages market entry and thereby ultimately
promotes competition.
Nothing in the Proposal burdens intra-market competition (the
competition among consumers of exchange data) because each customer
will be able to decide whether or not to purchase the Exchange's market
data, as demonstrated by the fact that a significant number of the
Exchange's customers have already elected to terminate their access to
such feeds.
The Exchange 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. 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. If the
changes proposed herein are unattractive to market participants, it is
likely that the Exchange will lose market share.\41\
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\41\ The Exchange notified market participants of the new fees
on December 20, 2021. See Data News #2021-11 (December 20, 2021,
available at https://www.nasdaqtrader.com/TraderNews.aspx?id=dn2021-11. As such, market participants have had ample notice of the
proposed fee changes and will be able to adjust their purchases of
exchange services accordingly.
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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.\42\ 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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\42\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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:
[[Page 56463]]
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-2022-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MRX-2022-14. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
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-2022-14 and should be submitted on
or before October 5, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
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\43\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19814 Filed 9-13-22; 8:45 am]
BILLING CODE 8011-01-P
