Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend MRX Options 7, Section 3, 56672-56675 [2023-17759]
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56672
Federal Register / Vol. 88, No. 159 / Friday, August 18, 2023 / Notices
to modify their own credits and fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which credit
or fee changes in this market may
impose any burden on competition is
extremely limited.
The proposal is reflective of this
competition because, as a threshold
issue, the Exchange is a relatively small
market so its ability to burden
intermarket competition is limited. In
this regard, even the largest U.S.
equities exchange by volume has less
than 20% market share, which in most
markets could hardly be categorized as
having enough market power to burden
competition. Moreover, as noted above,
price competition between exchanges is
fierce, with liquidity and market share
moving freely between exchanges in
reaction to fee and credit changes. This
is in addition to free flow of order flow
to and among off-exchange venues
which comprised more than 40% of
industry volume.
In sum, the Exchange intends for the
proposed changes, in the aggregate, to
increase member incentives to engage in
the addition of liquidity on the
Exchange. 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.
lotter on DSK11XQN23PROD with NOTICES1
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.10
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
10 15
U.S.C. 78s(b)(3)(A)(ii).
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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:
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–BX–2023–18 and should be
submitted on or before September 8,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17757 Filed 8–17–23; 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–
BX–2023–18 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–BX–2023–018. 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
a.m. and 3 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
PO 00000
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98129; File No. SR–MRX–
2023–15]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend MRX Options
7, Section 3
August 14, 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 August 9,
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).3
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.
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange withdrew SR–MRX–2023–13 on
August 9, 2023 and replaced it with the instant
filing.
1 15
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Federal Register / Vol. 88, No. 159 / Friday, August 18, 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 Maker Fees/
Rebate 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 .............................................................................................
Today, the Exchange assesses the
following Penny Symbol Maker Fees/
Rebates to Market Makers: 4 a Tier 1 fee
of $0.10 per contract, a Tier 2 fee of
$0.00 per contract, a Tier 3 rebate of
$0.05 per contract and a Tier 4 rebate of
$0.10 per contract. At this time, the
Exchange proposes to amend the Market
$0.10
0.47
0.47
0.47
0.00
Maker Tier 1 through Tier 4 Penny
Symbol Maker Fees/Rebates by adding a
new note 6 in Options 7, Section 3 that
would provide that Market Maker Penny
Symbol Tier 1 through Tier 4 Maker
Fees/Rebates will be $0.00 per contract
for options on SPDR S&P 500 ETF Trust
(‘‘SPY’’), the INVESCO QQQ TrustSM,
Taker fee
tier 1
Market participant
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Market Maker ...................................................................................................
Non-Nasdaq MRX Market Maker (FarMM) .....................................................
Firm Proprietary/Broker-Dealer ........................................................................
Professional Customer ....................................................................................
Priority Customer .............................................................................................
to MRX in Penny Symbols.
Additionally, the Exchange believes this
pricing will encourage Market Makers to
add liquidity on the MRX order book in
SPY, QQQ and IWM as the Tier 1
Market Maker Penny Symbol Maker Fee
of $0.10 per contract is being reduced to
$0.00 per contract. While Market
Makers that add liquidity in SPY, QQQ
and IWM will no longer receive the
Market Maker Tier 3 or Tier 4 Maker
Rebates in Penny Symbols, the proposed
pricing should overall continue to
attract order flow to MRX in these
symbols.
4 A ‘‘Market Maker’’ is a market maker as defined
in Nasdaq MRX Rule Options 1, Section 1(a)(21).
See Options 1, Section 1(c).
5 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in Nasdaq MRX
Options 1, Section 1(a)(36). Unless otherwise noted,
when used in this Pricing Schedule the term
‘‘Priority Customer’’ includes ‘‘Retail’’. A ‘‘Retail’’
order is a Priority Customer order that originates
from a natural person, provided that no change is
18:26 Aug 17, 2023
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Frm 00086
Fmt 4703
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Maker fee/
rebate
tier 3
$0.00
0.47
0.47
0.47
0.00
($0.05)
0.47
0.47
0.47
0.00
Maker Fee/
rebate
tier 4
($0.10)
0.47
0.47
0.47
0.00
Series 1 (‘‘QQQ’’), and iShares Russell
2000 ETF (‘‘IWM’’).
Today, as set forth in Table 1 of
Options 7, Section 3, the Exchange
assesses the following Taker Fees for
regular orders in Penny Symbols:
Taker fee
tier 2
$0.50
0.50
0.50
0.50
0.15
Today, the Exchange assesses the
following Penny Symbol Taker Fees to
Priority Customers: a Tier 1 fee of $0.15
per contract, a Tier 2 fee of $0.15 per
contract, a Tier 3 fee of $0.15 per
contract and a Tier 4 fee of $0.10 per
contract. At this time, the Exchange
proposes to amend the Priority
Customer 5 Tier 1 through Tier 4 Penny
Symbol Taker Fees by adding a new
note 6 in Options 7, Section 3 that
would provide that the Priority
Customer Penny Symbol Tier 1 through
Tier 4 Taker Fees will be $0.00 for
options on SPY, QQQ and IWM.
The Exchange believes that the
proposed pricing will attract Priority
Customer orders in SPY, QQQ and IWM
VerDate Sep<11>2014
Maker fee
tier 2
Taker fee
tier 3
$0.50
0.50
0.50
0.50
0.15
$0.50
0.50
0.50
0.50
0.15
Taker fee
tier 4
$0.50
0.50
0.50
0.50
0.10
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,6 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,7 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s proposed changes to
its Penny Symbol Maker Fees/Rebates
and Taker Fees are reasonable in several
respects. As a threshold matter, the
made to the terms of the order with respect to price
or side of market and the order does not originate
from a trading algorithm or any other computerized
methodology. See Options 1, Section 1(c).
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(4) and (5).
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56674
Federal Register / Vol. 88, No. 159 / Friday, August 18, 2023 / Notices
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’. . . .’’ 8
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.’’ 9
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 decrease its Market Maker
Penny Symbol Tier 1 Maker Fee from
$0.10 to $0.00 per contract on options
in SPY, QQQ and IWM and not pay any
Market Maker Penny Symbol Tier 3 or
8 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)).
9 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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18:26 Aug 17, 2023
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4 Maker Rebates (currently $0.05 and
$0.10 per contract, respectively) on
options in SPY, QQQ and IWM in order
to attract Priority Customer orders in
SPY, QQQ and IWM to MRX and
incentivize Market Makers to add
liquidity in SPY, QQQ and IWM on
MRX. With this proposal, the Exchange
seeks to assess Market Makers no Penny
Symbol Maker Fees and pay no Maker
Rebates in Penny Symbols to Market
Makers on options in SPY, QQQ and
IWM. While Market Makers who are
eligible to receive a Penny Symbol Tier
3 or 4 Maker Rebate would no longer
receive this rebate in SPY, QQQ, and
IWM, they would be able to provide
liquidity on the order book in these
symbols at no cost. Additionally,
Priority Customers would be able to
remove Penny Symbol liquidity from
the order book at no cost. With this
proposal, the Priority Customer Penny
Symbol Taker Fee in Tiers 1–3 would be
reduced from $0.15 to $0.00 per contract
and the Priority Customer Penny
Symbol Taker Fee in Tier 4 would be
reduced from $0.10 to $0.00 per contract
on options in SPY, QQQ and IWM.
The Exchange believes that it is
equitable and not unfairly
discriminatory to decrease its Market
Maker Penny Symbol Tier 1 Maker Fee
from $0.10 to $0.00 per contract and not
pay any Market Maker Penny Symbol
Tier 3 or 4 Maker Rebates, (currently
$0.05 and $0.10 per contract,
respectively) on options in SPY, QQQ
and IWM because Market Makers have
different requirements and additional
obligations to the Exchange that other
market participants do not (such as
quoting requirements).10 As such, the
proposed fees are designed to increase
Market Maker participation in SPY,
QQQ and IWM, for the benefit of all
market participants, by removing fees
for Market Makers to add Penny Symbol
liquidity in SPY, QQQ and IWM. The
Exchange believes that it is equitable
and not unfairly discriminatory to
assess Priority Customers no Penny
Symbol Taker Fees in SPY, QQQ and
IWM because Priority Customer
liquidity benefits all market participants
by providing more trading
opportunities, which attracts market
makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants, to the benefit of all market
participants.
The Exchange believes assessing
different fees for options in SPY, QQQ
and IWM, as compared to other
10 See
PO 00000
MRX Options 2, Section 5.
Frm 00087
Fmt 4703
Sfmt 4703
symbols, is reasonable because trading
in SPY, QQQ and IWM is different from
trading in other symbols in that they are
more liquid, have higher volume and
competition for executions is more
intense. Additionally, the Exchange
believes assessing different fees for
options in SPY, QQQ and IWM, as
compared to other symbols, is equitable
and not unfairly discriminatory because
the Exchange would uniformly not
assess a Market Maker the Penny
Symbol Maker Fees or pay a Market
Maker the Penny Symbol Maker Rebates
in SPY, QQQ and IWM. Similarly, the
Exchange would uniformly not assess
Priority Customers the Penny Symbol
Taker Fees in SPY, QQQ and IWM.
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 Penny
Symbol Maker Fees/Rebates and Priority
Customer Penny Symbol Taker Fees will
encourage additional liquidity and
trading of SPY, QQQ and IWM on MRX.
Despite not paying Market Makers any
Maker Rebates in SPY, QQQ and IWM
in Penny Symbols, the proposed pricing
should overall continue to attract order
flow to MRX in these symbols.
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.
The Exchange believes that this
proposal does not impose an undue
burden on competition. The proposed
pricing will attract Priority Customer
orders in SPY, QQQ and IWM to MRX
in Penny Symbols because no Priority
Customer Penny Symbol Taker Fee will
be assessed in these symbols.
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Federal Register / Vol. 88, No. 159 / Friday, August 18, 2023 / Notices
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Additionally, the Exchange believes this
pricing will encourage Market Makers to
add liquidity on the MRX order book in
SPY, QQQ and IWM as the Tier 1
Market Maker Penny Symbol Maker Fee
of $0.10 per contract is being reduced to
$0.00 per contract. While Market
Makers that add liquidity in SPY, QQQ
and IWM will no longer receive the
Market Maker Tier 3 or Tier 4 Maker
Rebates in Penny Symbols, the proposed
pricing should overall continue to
attract order flow to MRX in these
symbols. Market Makers have different
requirements and additional obligations
to the Exchange that other market
participants do not (such as quoting
requirements).11 Increasing Market
Maker participation in SPY, QQQ and
IWM, by removing the Tier 1 Maker Fee
for Market Makers to add Penny Symbol
liquidity in SPY, QQQ and IWM, will
benefit all market participants.
Assessing Priority Customers no Penny
Symbol Taker Fees in SPY, QQQ and
IWM will benefit all market participants
as Priority Customer liquidity provides
more trading opportunities, which
attracts market makers. An increase in
the activity of these market participants
in turn facilitates tighter spreads, which
may cause an additional corresponding
increase in order flow from other market
participants, for the benefit of all market
participants. The Exchange believes
assessing different fees for options in
SPY, QQQ and IWM, as compared to
other symbols, does not impose an
undue burden on competition because
the Exchange would uniformly not
assess a Market Maker a Penny Symbol
Maker Fee or pay a Market Maker a
Penny Symbol Maker Rebate in SPY,
QQQ and IWM. Similarly, the Exchange
would uniformly not assess Priority
Customers a Penny Symbol Taker Fee in
SPY, QQQ and IWM.
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.
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–2023–15 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–2023–15. 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
11 See
U.S.C. 78s(b)(3)(A)(ii).
13 17 CFR 240.19b–4(f)(2).
MRX Options 2, Section 5.
VerDate Sep<11>2014
18:26 Aug 17, 2023
Jkt 259001
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 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–2023–15 and should be
submitted on or before September 8,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17759 Filed 8–17–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98130; File No. SR–Phlx–
2023–36]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 4 Regarding Qualified
Contingent Cross Rebates
August 14, 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 August
10, 2023, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx’s Pricing Schedule at Options 7,
Section 4, ‘‘Multiply Listed Options
Fees (Includes options overlying
equities, ETFs, ETNs and indexes which
are Multiply Listed) (Excludes SPY and
14 17
12 15
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
56675
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 88, Number 159 (Friday, August 18, 2023)]
[Notices]
[Pages 56672-56675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17759]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98129; File No. SR-MRX-2023-15]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend MRX
Options 7, Section 3
August 14, 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 August 9, 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).\3\
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\3\ The Exchange withdrew SR-MRX-2023-13 on August 9, 2023 and
replaced it with the instant filing.
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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 56673]]
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 Maker Fees/Rebate for regular orders in
Penny Symbols:
Penny Symbols
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Maker fee tier Maker fee tier Maker fee/ Maker Fee/
Market participant 1 2 rebate tier 3 rebate tier 4
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Market Maker.................................... $0.10 $0.00 ($0.05) ($0.10)
Non-Nasdaq MRX Market Maker (FarMM)............. 0.47 0.47 0.47 0.47
Firm Proprietary/Broker-Dealer.................. 0.47 0.47 0.47 0.47
Professional Customer........................... 0.47 0.47 0.47 0.47
Priority Customer............................... 0.00 0.00 0.00 0.00
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Today, the Exchange assesses the following Penny Symbol Maker Fees/
Rebates to Market Makers: \4\ a Tier 1 fee of $0.10 per contract, a
Tier 2 fee of $0.00 per contract, a Tier 3 rebate of $0.05 per contract
and a Tier 4 rebate of $0.10 per contract. At this time, the Exchange
proposes to amend the Market Maker Tier 1 through Tier 4 Penny Symbol
Maker Fees/Rebates by adding a new note 6 in Options 7, Section 3 that
would provide that Market Maker Penny Symbol Tier 1 through Tier 4
Maker Fees/Rebates will be $0.00 per contract for options on SPDR S&P
500 ETF Trust (``SPY''), the INVESCO QQQ Trust\SM\, Series 1 (``QQQ''),
and iShares Russell 2000 ETF (``IWM'').
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\4\ A ``Market Maker'' is a market maker as defined in Nasdaq
MRX Rule Options 1, Section 1(a)(21). See Options 1, Section 1(c).
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Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange assesses the following Taker Fees for regular orders in Penny
Symbols:
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Taker fee tier Taker fee tier Taker fee tier Taker fee tier
Market participant 1 2 3 4
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Market Maker.................................... $0.50 $0.50 $0.50 $0.50
Non-Nasdaq MRX Market Maker (FarMM)............. 0.50 0.50 0.50 0.50
Firm Proprietary/Broker-Dealer.................. 0.50 0.50 0.50 0.50
Professional Customer........................... 0.50 0.50 0.50 0.50
Priority Customer............................... 0.15 0.15 0.15 0.10
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Today, the Exchange assesses the following Penny Symbol Taker Fees
to Priority Customers: a Tier 1 fee of $0.15 per contract, a Tier 2 fee
of $0.15 per contract, a Tier 3 fee of $0.15 per contract and a Tier 4
fee of $0.10 per contract. At this time, the Exchange proposes to amend
the Priority Customer \5\ Tier 1 through Tier 4 Penny Symbol Taker Fees
by adding a new note 6 in Options 7, Section 3 that would provide that
the Priority Customer Penny Symbol Tier 1 through Tier 4 Taker Fees
will be $0.00 for options on SPY, QQQ and IWM.
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\5\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq MRX Options 1,
Section 1(a)(36). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail''. A
``Retail'' order is a Priority Customer order that originates from a
natural person, provided that no change is made to the terms of the
order with respect to price or side of market and the order does not
originate from a trading algorithm or any other computerized
methodology. See Options 1, Section 1(c).
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The Exchange believes that the proposed pricing will attract
Priority Customer orders in SPY, QQQ and IWM to MRX in Penny Symbols.
Additionally, the Exchange believes this pricing will encourage Market
Makers to add liquidity on the MRX order book in SPY, QQQ and IWM as
the Tier 1 Market Maker Penny Symbol Maker Fee of $0.10 per contract is
being reduced to $0.00 per contract. While Market Makers that add
liquidity in SPY, QQQ and IWM will no longer receive the Market Maker
Tier 3 or Tier 4 Maker Rebates in Penny Symbols, the proposed pricing
should overall continue to attract order flow to MRX in these symbols.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\7\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its Penny Symbol Maker Fees/
Rebates and Taker Fees are reasonable in several respects. As a
threshold matter, the
[[Page 56674]]
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'. . . .'' \8\
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\8\ 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.'' \9\
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\9\ 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 decrease its Market
Maker Penny Symbol Tier 1 Maker Fee from $0.10 to $0.00 per contract on
options in SPY, QQQ and IWM and not pay any Market Maker Penny Symbol
Tier 3 or 4 Maker Rebates (currently $0.05 and $0.10 per contract,
respectively) on options in SPY, QQQ and IWM in order to attract
Priority Customer orders in SPY, QQQ and IWM to MRX and incentivize
Market Makers to add liquidity in SPY, QQQ and IWM on MRX. With this
proposal, the Exchange seeks to assess Market Makers no Penny Symbol
Maker Fees and pay no Maker Rebates in Penny Symbols to Market Makers
on options in SPY, QQQ and IWM. While Market Makers who are eligible to
receive a Penny Symbol Tier 3 or 4 Maker Rebate would no longer receive
this rebate in SPY, QQQ, and IWM, they would be able to provide
liquidity on the order book in these symbols at no cost. Additionally,
Priority Customers would be able to remove Penny Symbol liquidity from
the order book at no cost. With this proposal, the Priority Customer
Penny Symbol Taker Fee in Tiers 1-3 would be reduced from $0.15 to
$0.00 per contract and the Priority Customer Penny Symbol Taker Fee in
Tier 4 would be reduced from $0.10 to $0.00 per contract on options in
SPY, QQQ and IWM.
The Exchange believes that it is equitable and not unfairly
discriminatory to decrease its Market Maker Penny Symbol Tier 1 Maker
Fee from $0.10 to $0.00 per contract and not pay any Market Maker Penny
Symbol Tier 3 or 4 Maker Rebates, (currently $0.05 and $0.10 per
contract, respectively) on options in SPY, QQQ and IWM because Market
Makers have different requirements and additional obligations to the
Exchange that other market participants do not (such as quoting
requirements).\10\ As such, the proposed fees are designed to increase
Market Maker participation in SPY, QQQ and IWM, for the benefit of all
market participants, by removing fees for Market Makers to add Penny
Symbol liquidity in SPY, QQQ and IWM. The Exchange believes that it is
equitable and not unfairly discriminatory to assess Priority Customers
no Penny Symbol Taker Fees in SPY, QQQ and IWM because Priority
Customer liquidity benefits all market participants by providing more
trading opportunities, which attracts market makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants, to the benefit of all market
participants.
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\10\ See MRX Options 2, Section 5.
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The Exchange believes assessing different fees for options in SPY,
QQQ and IWM, as compared to other symbols, is reasonable because
trading in SPY, QQQ and IWM is different from trading in other symbols
in that they are more liquid, have higher volume and competition for
executions is more intense. Additionally, the Exchange believes
assessing different fees for options in SPY, QQQ and IWM, as compared
to other symbols, is equitable and not unfairly discriminatory because
the Exchange would uniformly not assess a Market Maker the Penny Symbol
Maker Fees or pay a Market Maker the Penny Symbol Maker Rebates in SPY,
QQQ and IWM. Similarly, the Exchange would uniformly not assess
Priority Customers the Penny Symbol Taker Fees in SPY, QQQ and IWM.
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 Penny Symbol Maker Fees/Rebates and Priority Customer
Penny Symbol Taker Fees will encourage additional liquidity and trading
of SPY, QQQ and IWM on MRX. Despite not paying Market Makers any Maker
Rebates in SPY, QQQ and IWM in Penny Symbols, the proposed pricing
should overall continue to attract order flow to MRX in these symbols.
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.
The Exchange believes that this proposal does not impose an undue
burden on competition. The proposed pricing will attract Priority
Customer orders in SPY, QQQ and IWM to MRX in Penny Symbols because no
Priority Customer Penny Symbol Taker Fee will be assessed in these
symbols.
[[Page 56675]]
Additionally, the Exchange believes this pricing will encourage Market
Makers to add liquidity on the MRX order book in SPY, QQQ and IWM as
the Tier 1 Market Maker Penny Symbol Maker Fee of $0.10 per contract is
being reduced to $0.00 per contract. While Market Makers that add
liquidity in SPY, QQQ and IWM will no longer receive the Market Maker
Tier 3 or Tier 4 Maker Rebates in Penny Symbols, the proposed pricing
should overall continue to attract order flow to MRX in these symbols.
Market Makers have different requirements and additional obligations to
the Exchange that other market participants do not (such as quoting
requirements).\11\ Increasing Market Maker participation in SPY, QQQ
and IWM, by removing the Tier 1 Maker Fee for Market Makers to add
Penny Symbol liquidity in SPY, QQQ and IWM, will benefit all market
participants. Assessing Priority Customers no Penny Symbol Taker Fees
in SPY, QQQ and IWM will benefit all market participants as Priority
Customer liquidity provides more trading opportunities, which attracts
market makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants,
for the benefit of all market participants. The Exchange believes
assessing different fees for options in SPY, QQQ and IWM, as compared
to other symbols, does not impose an undue burden on competition
because the Exchange would uniformly not assess a Market Maker a Penny
Symbol Maker Fee or pay a Market Maker a Penny Symbol Maker Rebate in
SPY, QQQ and IWM. Similarly, the Exchange would uniformly not assess
Priority Customers a Penny Symbol Taker Fee in SPY, QQQ and IWM.
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\11\ See MRX Options 2, Section 5.
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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-2023-15 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-2023-15. 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
a.m. and 3 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-2023-15 and should be
submitted on or before September 8, 2023.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17759 Filed 8-17-23; 8:45 am]
BILLING CODE 8011-01-P
