Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Pricing Schedule at Options 7, Section 3 To Introduce a Growth Incentive, 17068-17071 [2023-05687]
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17068
Federal Register / Vol. 88, No. 54 / Tuesday, March 21, 2023 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
ddrumheller on DSK120RN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 25 and Rule 19b–4(f)(6) 26
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 27 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),28 the
Commission may designate a shorter
time of such action is consistent with
the protection of investor and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative upon
filing. The Exchange states that the
proposed rule change could
immediately benefit market participants
by clarifying for Sponsoring Members
which relationships are subject to the
Exchange’s Sponsored Access rules and
promoting just and equitable principles
of trade. The Exchange also states that
the proposed rule change could
immediately bolster Sponsoring
Members and Options Members
collective understanding of the
Exchange’s Sponsored Participant rules,
thereby contributing to the protection of
investors and public interest. The
Exchange also states the proposed
addition of 11.3(b)(2)(J) is nonsubstantive in nature for Sponsoring
Members because as broker-dealers
providing market access, Sponsoring
Members are already required to comply
with the MAR, as well as with existing
Exchange Rules regarding market
25 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
27 17 CFR 240.19b–4(f)(6).
28 17 CFR 240.19b–4(f)(6)(iii).
26 17
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access. Because the proposed rule
change does not raise any novel
regulatory issues, the Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Therefore, the Commission
hereby waives the operative delay and
designates the proposal operative upon
filing.29
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
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–CboeBZX–2023–015 and
should be submitted on or before April
11, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–05685 Filed 3–20–23; 8:45 am]
BILLING CODE 8011–01–P
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–
CboeBZX–2023–015 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Pricing
Schedule at Options 7, Section 3 To
Introduce a Growth Incentive
• 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–CboeBZX–2023–015. 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
29 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
PO 00000
Frm 00131
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[Release No. 34–97148; File No. SR–MRX–
2023–07]
March 15, 2023.
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 March 1,
2023, 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.
30 17
CFR 200.30–3(a)(12), (a)(59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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17069
Federal Register / Vol. 88, No. 54 / Tuesday, March 21, 2023 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7, Section 3 (Regular Order Fees and
Rebates).
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/mrx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
Pricing Schedule at Options 7, Section
3 (Regular Order Fees and Rebates).3
Today, as set forth in Table 1 of
Options 7, Section 3, the Exchange
assesses the following fees for regular
orders in Penny Symbols:
PENNY SYMBOLS
Maker fee
Tier 1
Market participant
ddrumheller on DSK120RN23PROD with NOTICES1
Market Maker ...................................................................................................
Non-Nasdaq MRX Market Maker (FarMM) .....................................................
Firm Proprietary/Broker-Dealer ........................................................................
Professional Customer ....................................................................................
Priority Customer .............................................................................................
Maker fee
Tier 2
$0.20
0.47
0.47
0.47
0.00
$0.10
0.47
0.47
0.47
0.00
Taker fee
Tier 1
$0.50
0.50
0.50
0.50
0.00
Taker fee
Tier 2
$0.50
0.50
0.50
0.50
0.00
targeted segment qualify them for the
proposed reduced fees. The Exchange
also proposes to offer this incentive
from January 3, 2023 until June 30, 2023
in order to encourage new Market
Makers to join MRX, and will use this
time period to evaluate the appropriate
parameters going forward for market
participants with no December 2022
volume in the targeted segment.
As noted above, the Exchange intends
for this proposal to reward Market
Makers that increase the extent to which
they add Penny Symbol liquidity to the
Exchange over time and specifically,
relative to a recent benchmark month
(December 2022). The Exchange
believes that if the proposed incentive is
effective, any ensuing increase in added
liquidity in Penny Symbols will
improve market quality, to the benefit of
all market participants.
The Exchange now proposes to
introduce a growth incentive in new
note 6 that would allow Market Makers 4
to reduce their maker fees described
above. The proposed growth incentive
will be aimed at rewarding new and
existing Market Makers to grow the
extent of their liquidity adding activity
in Penny Symbols on the Exchange over
time. Market Makers, including any new
Market Makers, who did not have any
volume in the Market Maker Penny add
liquidity segment for the month of
December 2022 (and therefore lack
December 2022 baseline volume against
which to measure subsequent growth)
would meet the growth requirement
through whatever volume of Market
Maker add liquidity activity in Penny
Symbols during the first month of use.5
Specifically, Market Makers may
qualify for a reduction in the Tier 1 and
Tier 2 Maker Fees described above if the
Market Maker has increased its volume
which adds liquidity in Penny Symbols
as a percentage of Customer Total
Consolidated Volume 6 by at least 100%
over the Member’s December 2022
Market Maker volume which adds
liquidity in Penny Symbols as a
percentage of Customer Total
Consolidated Volume. Market Makers
that qualify will have their Tier 1 Maker
Fee reduced to $0.08 and their Tier 2
Maker Fee reduced to $0.04. In doing so,
the Exchange is proposing to reduce the
Tier 1 and Tier 2 Maker Fees by 60%
for qualifying Market Makers.
As noted above, Market Makers,
including any new Market Makers, who
did not have any volume in the Market
Maker Penny add liquidity segment for
the month of December 2022 would
meet the growth requirement through
whatever volume of Market Maker add
liquidity activity in Penny Symbols
during the first month of use. The
Exchange therefore proposes to also add
that Market Makers with no volume in
the Penny Symbol add liquidity
segment for the month of December
2022 may qualify for the reduced Tier
1 and Tier 2 Maker Fees described
above by having any new volume
considered as added volume. As such,
new Market Makers that qualify for the
Tier 1 or Tier 2 Maker Fee in a given
month will have any new volume in the
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,8 in particular, in that it
provides for the equitable allocation of
3 The Exchange initially filed the proposed
pricing changes on January 3, 2023 (SR–MRX–
2023–01) to adopt a Market Maker growth incentive
and to amend complex order fees. On January 17,
2023, the Exchange withdrew that filing and
submitted SR–MRX–2023–02. On January 30, 2023,
the Exchange withdrew that filing and submitted
separate filings for the Market Maker growth
incentive and complex order fees. SR–MRX–2023–
04 replaced the Market Maker growth incentive set
forth in SR–MRX–2023–02. On March 1, 2023, the
Exchange withdrew SR–MRX–2023–04 and
submitted this filing.
4 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See Options 1, Section
1(a)(21).
5 As discussed below, the Exchange will sunset
this incentive for new Market Makers on June 30,
2023 and will use this time period to evaluate the
proposed growth tier criteria to determine whether
the parameters are appropriately designed to
incentivize Market Makers in the intended manner.
The Exchange intends to come in with a future rule
filing to adjust the growth tier parameters for new
Market Makers.
6 ‘‘Customer Total Consolidated Volume’’ means
the total volume cleared at The Options Clearing
Corporation in the Customer range in equity and
ETF options in that month. See Options 7, Section
1(c).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4) and (5).
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Federal Register / Vol. 88, No. 54 / Tuesday, March 21, 2023 / Notices
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reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s proposed changes to
its schedule of credits are reasonable in
several respects. As a threshold matter,
the Exchange is subject to significant
competitive forces in the market for
options securities transaction services
that constrain its pricing determinations
in that market. The fact that this market
is competitive has long been recognized
by the courts. In NetCoalition v.
Securities and Exchange Commission,
the D.C. Circuit stated as follows: ‘‘[n]o
one disputes that competition for order
flow is ‘fierce.’ . . . As the SEC
explained, ‘[i]n the U.S. national market
system, buyers and sellers of securities,
and the broker-dealers that act as their
order-routing agents, have a wide range
of choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers’
. . . .’’ 9
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 10
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of sixteen options
exchanges to which market participants
may direct their order flow. Within this
environment, market participants can
freely and often do shift their order flow
among the Exchange and competing
venues in response to changes in their
9 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca–2006–21)).
10 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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respective pricing schedules. As such,
the proposal represents a reasonable
attempt by the Exchange to increase its
liquidity and market share relative to its
competitors.
The Exchange believes that it is
reasonable to establish a new growth
incentive that would provide Market
Makers with the opportunity to reduce
their maker fees to $0.08 (Tier 1) and to
$0.04 (Tier 2) if they increase their
Market Maker volume which adds
liquidity in Penny Symbols as a
percentage of Customer Total
Consolidated Volume by at least 100%
over their December 2022 Market Maker
volume which adds liquidity in Penny
Symbols as a percentage of Customer
Total Consolidated Volume. The
proposal is reasonable because it will
provide extra incentives to Market
Makers to engage in substantial amounts
of liquidity adding activity in Penny
Symbols on the Exchange, as well as to
grow substantially the extent to which
they do so relative to a recent
benchmark month. The Exchange
believes that if the proposed incentive is
effective, then any ensuing increase in
liquidity adding activity on the
Exchange will improve the quality of
the market overall, to the benefit of all
market participants. The Exchange also
believes that the proposed reduced fees
are reasonable because the Exchange is
proposing to reduce the Tier 1 and Tier
2 maker fees by the same percentage
amount (i.e., 60%) such that the reduced
fees are commensurate with the base
Tier 1 and Tier 2 maker fees that
qualifying Market Makers receive for
adding Penny Symbol liquidity. The
Exchange similarly believes that it is
reasonable to consider any new Penny
add liquidity volume for Market Makers
with no such volume for the month of
December 2022 in order for those
Market Makers to receive the proposed
discounts to their maker fees because
this is designed to attract additional
Penny liquidity from new Market
Makers to the Exchange during a
temporary period between January 3,
2023 and June 30, 2023. To the extent
this proposal attracts new Market Maker
Penny add liquidity volume to the
Exchange, all market participants
should benefit through more trading
opportunities and tighter spreads. As
discussed above, the Exchange intends
for this incentive aimed at attracting
new Market Makers to sunset after June
30, 2023 and will use this time to
evaluate suitable growth tier parameters
for such market participants with no
December 2022 volume in the targeted
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segment, after which it will come in
with a rule filing to adjust the growth
incentive as appropriate.
The Exchange believes that the
proposed growth incentive is equitable
and not unfairly discriminatory for the
reasons that follow. As a general matter,
the Exchange believes that it is equitable
and not unfairly discriminatory to
provide the proposed growth incentive
to only Market Makers because Market
Makers have different requirements and
additional obligations to the Exchange
that other market participants do not
(such as quoting requirements). As such,
the Exchange’s proposal is designed to
increase Market Maker participation and
reward Market Makers for the unique
role they play in ensuring a robust
market. As discussed above, the
proposal is designed to encourage
Market Makers to substantially add
Penny Symbol liquidity to the
Exchange. To the extent the Exchange
succeeds in increasing the levels of
liquidity and activity on the Exchange,
the Exchange will experience
improvements in market quality, which
stands to benefit all market participants.
The Exchange believes that the
proposed growth incentive is equitable
and not unfairly because as discussed
above, the Exchange is proposing to
reduce the Tier 1 and Tier 2 maker fees
by the same percentage amount (i.e.,
60%) such that the reduced fees are
commensurate with the base Tier 1 and
Tier 2 maker fees that qualifying Market
Makers receive for adding Penny
Symbol liquidity. Furthermore, the
Exchange believes that it is equitable
and not unfairly discriminatory to
consider any new Penny add liquidity
volume for Market Makers with no such
volume for the month of December 2022
in order for those Market Makers to
receive the proposed discounts to their
maker fees because this is designed to
attract additional Penny liquidity from
new Market Makers to the Exchange. In
turn, this additional Penny liquidity
should benefit all market participants
through increased liquidity and order
interaction. Furthermore, the proposed
structure for new Market Makers with
no December 2022 volume in the
targeted segment will be temporary and
sunset on June 30, 2023, after which the
Exchange will come in with another
rule filing to adjust the parameters for
such market participants, as
appropriate. To the extent the proposed
maker fee attracts new Market Makers to
the Exchange during this time period,
the Exchange believes that its proposal
will increase liquidity on MRX, which
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Federal Register / Vol. 88, No. 54 / Tuesday, March 21, 2023 / Notices
benefits all market participants by
providing more trading opportunities,
tighter spreads, and increased order
interaction.
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.
ddrumheller on DSK120RN23PROD with NOTICES1
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
In terms of intra-market competition,
the Exchange does not believe that its
proposals will place any category of
market participant at a competitive
disadvantage. The Exchange believes
that the proposed Market Maker growth
incentive should encourage the
provision of liquidity from both existing
and new Market Makers that enhances
the quality of the Exchange’s market and
increases the number of trading
opportunities on the Exchange for all
market participants who will be able to
compete for such opportunities.
In terms of inter-market competition,
the Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
options exchanges. Because competitors
are free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited.
As discussed above, the proposed
growth incentive is pro-competitive in
that the Exchange intends for the
changes to increase liquidity addition
and activity on the Exchange, thereby
rendering the Exchange a more
attractive and vibrant venue to market
participants.
In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
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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.11 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MRX–2023–07 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–2023–07. 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
11 15
PO 00000
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–2023–07 and should
be submitted on or before April 11,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–05687 Filed 3–20–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97145; File No. SR–
NYSEARCA–2023–06]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of a
Longer Period for Commission Action
on a Proposed Rule Change To Amend
Rule 7.44–E Relating to the Retail
Liquidity Program
March 15, 2023.
On January 10, 2023, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘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 the
Exchange’s Retail Liquidity Program
(the ‘‘Program’’).3 The proposed rule
12 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 17 CFR 240.19b–4.
3 The Program was established on a pilot basis in
2013 and was approved by the Commission to
operate on a permanent basis in 2019. See
Securities Exchange Act Release No. 87350 (October
18, 2019), 84 FR 57106 (October 24, 2019) (SR–
NYSEArca–2019–63). In connection with the
Commission’s approval of the Program on a pilot
basis, the Commission granted the Exchange’s
request for exemptive relief from Rule 612 of
Regulation NMS, 17 CFR 242.612, which, among
other things, prohibits a national securities
1 15
U.S.C. 78s(b)(3)(A)(ii).
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Continued
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]]>Agencies
[Federal Register Volume 88, Number 54 (Tuesday, March 21, 2023)]
[Notices]
[Pages 17068-17071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05687]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97148; File No. SR-MRX-2023-07]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Pricing Schedule at Options 7, Section 3 To Introduce a Growth
Incentive
March 15, 2023.
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 March 1, 2023, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 17069]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7, Section 3 (Regular Order Fees and Rebates).
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Options 7, Section 3 (Regular Order Fees and
Rebates).\3\
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\3\ The Exchange initially filed the proposed pricing changes on
January 3, 2023 (SR-MRX-2023-01) to adopt a Market Maker growth
incentive and to amend complex order fees. On January 17, 2023, the
Exchange withdrew that filing and submitted SR-MRX-2023-02. On
January 30, 2023, the Exchange withdrew that filing and submitted
separate filings for the Market Maker growth incentive and complex
order fees. SR-MRX-2023-04 replaced the Market Maker growth
incentive set forth in SR-MRX-2023-02. On March 1, 2023, the
Exchange withdrew SR-MRX-2023-04 and submitted this filing.
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Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange assesses the following fees for regular orders in Penny
Symbols:
Penny Symbols
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Maker fee Tier Maker fee Tier Taker fee Tier Taker fee Tier
Market participant 1 2 1 2
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Market Maker.................................... $0.20 $0.10 $0.50 $0.50
Non-Nasdaq MRX Market Maker (FarMM)............. 0.47 0.47 0.50 0.50
Firm Proprietary/Broker-Dealer.................. 0.47 0.47 0.50 0.50
Professional Customer........................... 0.47 0.47 0.50 0.50
Priority Customer............................... 0.00 0.00 0.00 0.00
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The Exchange now proposes to introduce a growth incentive in new
note 6 that would allow Market Makers \4\ to reduce their maker fees
described above. The proposed growth incentive will be aimed at
rewarding new and existing Market Makers to grow the extent of their
liquidity adding activity in Penny Symbols on the Exchange over time.
Market Makers, including any new Market Makers, who did not have any
volume in the Market Maker Penny add liquidity segment for the month of
December 2022 (and therefore lack December 2022 baseline volume against
which to measure subsequent growth) would meet the growth requirement
through whatever volume of Market Maker add liquidity activity in Penny
Symbols during the first month of use.\5\
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\4\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\5\ As discussed below, the Exchange will sunset this incentive
for new Market Makers on June 30, 2023 and will use this time period
to evaluate the proposed growth tier criteria to determine whether
the parameters are appropriately designed to incentivize Market
Makers in the intended manner. The Exchange intends to come in with
a future rule filing to adjust the growth tier parameters for new
Market Makers.
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Specifically, Market Makers may qualify for a reduction in the Tier
1 and Tier 2 Maker Fees described above if the Market Maker has
increased its volume which adds liquidity in Penny Symbols as a
percentage of Customer Total Consolidated Volume \6\ by at least 100%
over the Member's December 2022 Market Maker volume which adds
liquidity in Penny Symbols as a percentage of Customer Total
Consolidated Volume. Market Makers that qualify will have their Tier 1
Maker Fee reduced to $0.08 and their Tier 2 Maker Fee reduced to $0.04.
In doing so, the Exchange is proposing to reduce the Tier 1 and Tier 2
Maker Fees by 60% for qualifying Market Makers.
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\6\ ``Customer Total Consolidated Volume'' means the total
volume cleared at The Options Clearing Corporation in the Customer
range in equity and ETF options in that month. See Options 7,
Section 1(c).
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As noted above, Market Makers, including any new Market Makers, who
did not have any volume in the Market Maker Penny add liquidity segment
for the month of December 2022 would meet the growth requirement
through whatever volume of Market Maker add liquidity activity in Penny
Symbols during the first month of use. The Exchange therefore proposes
to also add that Market Makers with no volume in the Penny Symbol add
liquidity segment for the month of December 2022 may qualify for the
reduced Tier 1 and Tier 2 Maker Fees described above by having any new
volume considered as added volume. As such, new Market Makers that
qualify for the Tier 1 or Tier 2 Maker Fee in a given month will have
any new volume in the targeted segment qualify them for the proposed
reduced fees. The Exchange also proposes to offer this incentive from
January 3, 2023 until June 30, 2023 in order to encourage new Market
Makers to join MRX, and will use this time period to evaluate the
appropriate parameters going forward for market participants with no
December 2022 volume in the targeted segment.
As noted above, the Exchange intends for this proposal to reward
Market Makers that increase the extent to which they add Penny Symbol
liquidity to the Exchange over time and specifically, relative to a
recent benchmark month (December 2022). The Exchange believes that if
the proposed incentive is effective, any ensuing increase in added
liquidity in Penny Symbols will improve market quality, to the benefit
of all market participants.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides
for the equitable allocation of
[[Page 17070]]
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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its schedule of credits are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for options
securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers' . . . .'' \9\
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\9\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \10\
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\10\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. Within this environment, market participants can freely and
often do shift their order flow among the Exchange and competing venues
in response to changes in their respective pricing schedules. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
The Exchange believes that it is reasonable to establish a new
growth incentive that would provide Market Makers with the opportunity
to reduce their maker fees to $0.08 (Tier 1) and to $0.04 (Tier 2) if
they increase their Market Maker volume which adds liquidity in Penny
Symbols as a percentage of Customer Total Consolidated Volume by at
least 100% over their December 2022 Market Maker volume which adds
liquidity in Penny Symbols as a percentage of Customer Total
Consolidated Volume. The proposal is reasonable because it will provide
extra incentives to Market Makers to engage in substantial amounts of
liquidity adding activity in Penny Symbols on the Exchange, as well as
to grow substantially the extent to which they do so relative to a
recent benchmark month. The Exchange believes that if the proposed
incentive is effective, then any ensuing increase in liquidity adding
activity on the Exchange will improve the quality of the market
overall, to the benefit of all market participants. The Exchange also
believes that the proposed reduced fees are reasonable because the
Exchange is proposing to reduce the Tier 1 and Tier 2 maker fees by the
same percentage amount (i.e., 60%) such that the reduced fees are
commensurate with the base Tier 1 and Tier 2 maker fees that qualifying
Market Makers receive for adding Penny Symbol liquidity. The Exchange
similarly believes that it is reasonable to consider any new Penny add
liquidity volume for Market Makers with no such volume for the month of
December 2022 in order for those Market Makers to receive the proposed
discounts to their maker fees because this is designed to attract
additional Penny liquidity from new Market Makers to the Exchange
during a temporary period between January 3, 2023 and June 30, 2023. To
the extent this proposal attracts new Market Maker Penny add liquidity
volume to the Exchange, all market participants should benefit through
more trading opportunities and tighter spreads. As discussed above, the
Exchange intends for this incentive aimed at attracting new Market
Makers to sunset after June 30, 2023 and will use this time to evaluate
suitable growth tier parameters for such market participants with no
December 2022 volume in the targeted segment, after which it will come
in with a rule filing to adjust the growth incentive as appropriate.
The Exchange believes that the proposed growth incentive is
equitable and not unfairly discriminatory for the reasons that follow.
As a general matter, the Exchange believes that it is equitable and not
unfairly discriminatory to provide the proposed growth incentive to
only Market Makers because Market Makers have different requirements
and additional obligations to the Exchange that other market
participants do not (such as quoting requirements). As such, the
Exchange's proposal is designed to increase Market Maker participation
and reward Market Makers for the unique role they play in ensuring a
robust market. As discussed above, the proposal is designed to
encourage Market Makers to substantially add Penny Symbol liquidity to
the Exchange. To the extent the Exchange succeeds in increasing the
levels of liquidity and activity on the Exchange, the Exchange will
experience improvements in market quality, which stands to benefit all
market participants.
The Exchange believes that the proposed growth incentive is
equitable and not unfairly because as discussed above, the Exchange is
proposing to reduce the Tier 1 and Tier 2 maker fees by the same
percentage amount (i.e., 60%) such that the reduced fees are
commensurate with the base Tier 1 and Tier 2 maker fees that qualifying
Market Makers receive for adding Penny Symbol liquidity. Furthermore,
the Exchange believes that it is equitable and not unfairly
discriminatory to consider any new Penny add liquidity volume for
Market Makers with no such volume for the month of December 2022 in
order for those Market Makers to receive the proposed discounts to
their maker fees because this is designed to attract additional Penny
liquidity from new Market Makers to the Exchange. In turn, this
additional Penny liquidity should benefit all market participants
through increased liquidity and order interaction. Furthermore, the
proposed structure for new Market Makers with no December 2022 volume
in the targeted segment will be temporary and sunset on June 30, 2023,
after which the Exchange will come in with another rule filing to
adjust the parameters for such market participants, as appropriate. To
the extent the proposed maker fee attracts new Market Makers to the
Exchange during this time period, the Exchange believes that its
proposal will increase liquidity on MRX, which
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benefits all market participants by providing more trading
opportunities, tighter spreads, and increased order interaction.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not believe
that its proposals will place any category of market participant at a
competitive disadvantage. The Exchange believes that the proposed
Market Maker growth incentive should encourage the provision of
liquidity from both existing and new Market Makers that enhances the
quality of the Exchange's market and increases the number of trading
opportunities on the Exchange for all market participants who will be
able to compete for such opportunities.
In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
options exchanges. Because competitors are free to modify their own
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited.
As discussed above, the proposed growth incentive is pro-
competitive in that the Exchange intends for the changes to increase
liquidity addition and activity on the Exchange, thereby rendering the
Exchange a more attractive and vibrant venue to market participants.
In sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\11\ 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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\11\ 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:
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-2023-07 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-2023-07. 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-2023-07 and should be submitted on
or before April 11, 2023.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05687 Filed 3-20-23; 8:45 am]
BILLING CODE 8011-01-P
