Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Options 7, Section 3, 30370-30373 [2023-10031]
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Federal Register / Vol. 88, No. 91 / Thursday, May 11, 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.
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, it has
become effective pursuant to section
19(b)(3)(A) of the Act 19 and Rule 19b–
4(f)(6) thereunder.20
A proposed rule change filed under
Rule 19b–4(f)(6) 21 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 22 permits the
Commission to designate a shorter time
if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange states that waiver
of the 30-day operative delay will allow
it to extend the Program prior to its
expiration on May 8, 2023, and
maintain the status quo, thereby
reducing market disruption. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest as it will allow the
Program to continue uninterrupted,
thereby avoiding investor confusion that
could result from a temporary
interruption in the Program.
Accordingly, the Commission hereby
waives the 30-day operative delay and
designates the proposed rule change as
operative upon filing.23
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19 15
U.S.C. 78s(b)(3)(A).
20 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of 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.
21 17 CFR 240.19b–4(f)(6).
22 17 CFR 240.19b–4(f)(6)(iii).
23 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2023–023 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–CBOE–2023–023. 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. Do not include
personal identifiable information in
submissions; you should submit only
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information that you wish to make
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–CBOE–2023–023,
and should be submitted on or before
June 1, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–10034 Filed 5–10–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97440; File No. SR–MRX–
2023–08]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Pricing Schedule at
Options 7, Section 3
May 5, 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 April 24,
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 and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7, 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.
24 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 88, No. 91 / Thursday, May 11, 2023 / Notices
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
Pricing Schedule at Options 7, Section
3 (Regular Order Fees and Rebates).
Today, as set forth in Table 1 of
Options 7, Section 3, the Exchange
assesses the following fees for regular
orders in Penny Symbols:
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
PENNY SYMBOLS
Maker fee
Tier 1
Market participant
Market Maker ...................................................................................................
Non-Nasdaq MRX Market Maker (FarMM) .....................................................
Firm Proprietary/Broker-Dealer ........................................................................
Professional Customer ....................................................................................
Priority Customer .............................................................................................
ddrumheller on DSK120RN23PROD with NOTICES1
In addition, the Exchange currently
offers a growth incentive that allows
Market Makers 3 to reduce their maker
fees described above.4 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 5 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 would have their Tier 1
Maker Fee reduced to $0.08 and their
Tier 2 Maker Fee reduced to $0.04.
From January 3, 2023 until June 30,
2023, 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 by having any
new volume considered as added
volume. As stated in the adopting filing,
the Exchange offers this temporary
incentive from January 3, 2023 until
June 30, 2023 in order to encourage new
Market Makers to join MRX, and is
using this time period to evaluate the
appropriate parameters going forward
for market participants with no
3 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See Options 1, Section
1(a)(21).
4 See Options 7, Section 3, note 6.
5 ‘‘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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$0.20
0.47
0.47
0.47
0.00
December 2022 volume in the targeted
segment.6
The Exchange now proposes to amend
this Market Maker growth incentive by
expanding the sunset date from the
current new Market Maker portion of
the incentive to the entire incentive. As
amended, note 6 will provide:
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 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. 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 by having any new volume
considered as added volume. This note 6
incentive will be available to Market Makers
until June 30, 2023.
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
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
6 See Securities Exchange Act Release No. 97148
(March 15, 2023), 88 FR 17068 (March 21, 2023)
(SR–MRX–2023–07).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4) and (5).
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Maker fee
Tier 2
$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
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
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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‘‘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
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 have the growth incentive
in note 6 expire on June 30, 2023.
Currently, only the new Market Maker
portion of this incentive expires on June
30, 2023.11 The proposal is reasonable
because it will continue to 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
sunsetting the note 6 incentive within
six months of the base month (December
2022) will ensure that the benchmark
against which Market Maker growth is
measured is timely and meets the
intended purpose of encouraging
increased order flow.
The Exchange believes that its
proposal to have the note 6 growth
incentive expire on June 30, 2023 is
equitable and not unfairly
discriminatory because the proposed
expiration date will be applied
uniformly to all Market Makers. The
Exchange continues to believe that it is
equitable and not unfairly
discriminatory to provide the note 6
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, this growth
incentive is designed to increase Market
10 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
11 Specifically, the rule provides that from
January 3, 2023 until June 30, 2023, 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
by having any new volume considered as added
volume.
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Maker participation and reward Market
Makers for the unique role they play in
ensuring a robust market. As discussed
above, the note 6 incentive is designed
to encourage Market Makers to
substantially add Penny Symbol
liquidity to the Exchange, to the benefit
of all market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
In terms of intra-market competition,
the Exchange does not believe that its
proposal will place any category of
market participant at a competitive
disadvantage. The proposed change to
sunset the note 6 incentive on June 30,
2023 does not impose an undue burden
on intra-market competition because all
Market Makers will have the
opportunity to qualify for this growth
incentive for the six months it is offered.
The Exchange also believes that the
Market Maker growth incentive will
continue to 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.
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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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,12 and Rule
19b–4(f)(2) 13 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MRX–2023–08 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–2023–08. 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
12 15
13 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
11MYN1
Federal Register / Vol. 88, No. 91 / Thursday, May 11, 2023 / Notices
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. Do not include
personal identifiable information in
submissions; you should submit only
information that you wish to make
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–MRX–2023–08 and
should be submitted on or before June
1, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–10031 Filed 5–10–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97439; File No. SR–OCC–
2023–002]
Self-Regulatory Organizations; the
Options Clearing Corporation; Order
Granting Approval of Proposed Rule
Change by the Options Clearing
Corporation Concerning the
Amendment of Its Clearing
Membership Standards
May 5, 2023.
ddrumheller on DSK120RN23PROD with NOTICES1
I. Introduction
On March 3, 2023, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2023–
002 pursuant to section 19(b) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4 2
thereunder. The proposed rule change
concerns proposed changes to OCC’s
standards for its members. The
proposed rule change was published for
public comment in the Federal Register
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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on March 21, 2023.3 The Commission
has received no comments regarding the
proposed rule change. For the reasons
discussed below, the Commission is
approving the proposed rule change.
II. Background 4
OCC acts as the central counterparty
(‘‘CCP’’) for all listed options in the
U.S., as well as for certain futures. It
provides clearing services to its
members, which are financial
organizations that, in turn, facilitate the
clearing and settlement of their
customer transactions or proprietary
transactions through OCC. OCC is
proposing to change its rules that
address standards for its membership by
(i) expanding its membership types and
updating its membership requirements
and associated processes, including onboarding and off-boarding procedures;
(ii) amending members’ financial
responsibility standards; (iii) amending
members’ operational requirements; and
(iv) changing rules governing
disciplinary actions.
(i) Member Eligibility, On-Boarding, and
Termination
OCC proposes rule changes to expand
the types of entities that are eligible to
become Clearing Members, while
removing distinctions between certain
membership categories to ensure
consistent requirements across
members. The proposed rule changes
would also consolidate and streamline
the procedures and requirements for
admitting new members. Further, the
proposed rule changes would allow a
member to elect to voluntarily terminate
its membership.
Currently, OCC’s Articles and ByLaws permit three different types of
institutions eligible for clearing
membership: (i) broker-dealers, (ii)
futures commission merchants, and (iii)
non-U.S. securities firms. The proposed
rule change would expand the list of
eligible institutions to include certain
banks.5 OCC proposes limiting bank
membership to clearing proprietary
activity only. The proposed rules would
also require a bank member to provide
assurances regarding its activities and
ability to contribute collateral.
In addition to expanding its list of
eligible institutions to include banks,
OCC proposes additional revisions to
3 Securities Exchange Act Release No. 97150
(Mar. 15, 2023), 88 FR 17046 (Mar. 21, 2023) (File
No. SR–OCC–2023–002) (‘‘Notice of Filing’’).
4 Capitalized terms used but not defined herein
have the meanings specified in OCC’s Rules and ByLaws, available at https://www.theocc.com/about/
publications/bylaws.jsp.
5 OCC also proposes relocating the list of eligible
institutions in its rules from Article V of the ByLaws to new Rule 201(a)(1) through (a)(3).
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30373
member eligibility. For example,
proposed Rule 201(b)(5) would clearly
state the types of members who may
clear stock loan transactions (i.e.,
broker-dealers, non-U.S. securities
firms, or banks). Similarly, proposed
Rule 201(d) requires that each member
meet standards related to risk
management capability, in addition to
the current requirements related to
financial and operational capabilities.
The proposed rule change is designed
to accommodate the admission of nonU.S. Clearing Members other than
Canadian Clearing Members.6 Broadly,
the changes would require that such
members not conduct transactions or
activities that would result in the
imposition of taxes, withholding, or
reporting obligations with respect to
amounts paid or received by OCC (other
than U.S. federal and state income taxes
imposed on OCC’s income).7
The proposed rule change would
consolidate the admission procedures
and requirements and modify such
admission procedures and requirements
to help streamline the application
review process.8 For example, proposed
Rule 203(b) would include information
about expedited approval through
OCC’s Risk Committee, if the approval
of the applicant is appropriate for the
protection of investors and the public
interest. Moreover, proposed Rule
203(c) would allow for Clearing
Members to clear additional types of
transactions by requesting authorization
from OCC through a business expansion
request.
The proposed rule change would
amend the conditions for admission as
an OCC member.9 Such amendments
would impose requirements on
applicants (e.g., an applicant must
notify OCC in writing if it is or becomes
subject to Statutory Disqualification) 10
6 OCC also proposes relocating existing Article V,
Section 1, paragraph (e) of the By-Laws and Rule
310(d) to new Rule 202.
7 Relatedly, OCC also proposes to move various
defined terms from its Bylaws to Chapter 1 of its
Rules, such as: Canadian Clearing Member, FATCA,
FATCA Compliant, FFI Clearing Member, Non-U.S.
Regulatory Agency, Non U.S. Securities Firm,
Qualified Intermediary Assuming Primary
Withholding Responsibility, and Qualified
Derivatives Dealer.
8 OCC also proposes relocating existing Article V,
Section 2 and Article V, Section 1, Interpretation
and Policy .03, clause (e) of the By-Laws to new
Rule 203.
9 OCC also proposes consolidating such
provisions currently set forth in existing Article V,
Section 3 and various other portions of Article V
of the By-Laws into new Rule 204.
10 OCC proposes to move the definition of
Statutory Disqualification from its By-Laws to
Chapter 1 of its rules, move the majority of its
current Rule 217 regarding Statutory
Disqualification to proposed Rule 308, and remove
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[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Notices]
[Pages 30370-30373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10031]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97440; File No. SR-MRX-2023-08]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Options 7, Section 3
May 5, 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 April 24, 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 and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the 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.
[[Page 30371]]
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).
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 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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In addition, the Exchange currently offers a growth incentive that
allows Market Makers \3\ to reduce their maker fees described above.\4\
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 \5\ 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 would have their Tier 1 Maker Fee reduced to
$0.08 and their Tier 2 Maker Fee reduced to $0.04. From January 3, 2023
until June 30, 2023, 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 by having any new volume
considered as added volume. As stated in the adopting filing, the
Exchange offers this temporary incentive from January 3, 2023 until
June 30, 2023 in order to encourage new Market Makers to join MRX, and
is using this time period to evaluate the appropriate parameters going
forward for market participants with no December 2022 volume in the
targeted segment.\6\
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\3\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\4\ See Options 7, Section 3, note 6.
\5\ ``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).
\6\ See Securities Exchange Act Release No. 97148 (March 15,
2023), 88 FR 17068 (March 21, 2023) (SR-MRX-2023-07).
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The Exchange now proposes to amend this Market Maker growth
incentive by expanding the sunset date from the current new Market
Maker portion of the incentive to the entire incentive. As amended,
note 6 will provide:
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 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. 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 by having any new volume considered as added volume. This
note 6 incentive will be available to Market Makers until June 30,
2023.
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 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
[[Page 30372]]
``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 have the growth
incentive in note 6 expire on June 30, 2023. Currently, only the new
Market Maker portion of this incentive expires on June 30, 2023.\11\
The proposal is reasonable because it will continue to 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 sunsetting the note
6 incentive within six months of the base month (December 2022) will
ensure that the benchmark against which Market Maker growth is measured
is timely and meets the intended purpose of encouraging increased order
flow.
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\11\ Specifically, the rule provides that from January 3, 2023
until June 30, 2023, 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 by having any
new volume considered as added volume.
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The Exchange believes that its proposal to have the note 6 growth
incentive expire on June 30, 2023 is equitable and not unfairly
discriminatory because the proposed expiration date will be applied
uniformly to all Market Makers. The Exchange continues to believe that
it is equitable and not unfairly discriminatory to provide the note 6
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, this growth incentive 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 note 6 incentive is
designed to encourage Market Makers to substantially add Penny Symbol
liquidity to the Exchange, to the benefit of all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not believe
that its proposal will place any category of market participant at a
competitive disadvantage. The proposed change to sunset the note 6
incentive on June 30, 2023 does not impose an undue burden on intra-
market competition because all Market Makers will have the opportunity
to qualify for this growth incentive for the six months it is offered.
The Exchange also believes that the Market Maker growth incentive will
continue to 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.
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,\12\ and Rule 19b-4(f)(2) \13\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is: (i) necessary or
appropriate in the public interest; (ii) for the protection of
investors; or (iii) otherwise in furtherance of the purposes of the
Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MRX-2023-08 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-2023-08. 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
[[Page 30373]]
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. Do
not include personal identifiable information in submissions; you
should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-MRX-2023-08 and should
be submitted on or before June 1, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-10031 Filed 5-10-23; 8:45 am]
BILLING CODE 8011-01-P
