Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 6, 7746-7750 [2024-02162]

Download as PDF 7746 Federal Register / Vol. 89, No. 24 / Monday, February 5, 2024 / Notices Service request, the title of each Postal Service request, the request’s acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request. The public portions of the Postal Service’s request(s) can be accessed via the Commission’s website (https:// www.prc.gov). Non-public portions of the Postal Service’s request(s), if any, can be accessed through compliance with the requirements of 39 CFR 3011.301.1 The Commission invites comments on whether the Postal Service’s request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern Market Dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern Competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II. lotter on DSK11XQN23PROD with NOTICES1 II. Docketed Proceeding(s) 1. Docket No(s).: CP2023–45; Filing Title: USPS Notice of Amendment to Priority Mail, First-Class Package Service & Parcel Select Contract 4, Filed Under Seal; Filing Acceptance Date: January 30, 2024; Filing Authority: 39 CFR 3035.105; Public Representative: Almaroof Agoro; Comments Due: February 7, 2024. 2. Docket No(s).: MC2024–170 and CP2024–176; Filing Title: USPS Request to Add Priority Mail & USPS Ground Advantage Contract 177 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: January 30, 2024; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Samuel Robinson; Comments Due: February 7, 2024. 3. Docket No(s).: MC2024–171 and CP2024–177; Filing Title: USPS Request to Add Priority Mail & USPS Ground Advantage Contract 178 to Competitive 1 See Docket No. RM2018–3, Order Adopting Final Rules Relating to Non-Public Information, June 27, 2018, Attachment A at 19–22 (Order No. 4679). VerDate Sep<11>2014 17:56 Feb 02, 2024 Jkt 262001 Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: January 30, 2024; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Christopher C. Mohr; Comments Due: February 7, 2024. 4. Docket No(s).: MC2024–172 and CP2024–178; Filing Title: USPS Request to Add Priority Mail & USPS Ground Advantage Contract 179 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: January 30, 2024; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Christopher C. Mohr; Comments Due: February 7, 2024. 5. Docket No(s).: MC2024–173 and CP2024–179; Filing Title: USPS Request to Add Priority Mail Express, Priority Mail & USPS Ground Advantage Contract 44 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: January 30, 2024; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Christopher C. Mohr; Comments Due: February 7, 2024. 6. Docket No(s).: MC2024–174 and CP2024–180; Filing Title: USPS Request to Add Priority Mail Express, Priority Mail, USPS Ground Advantage & Parcel Select Contract 4 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: January 30, 2024; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Christopher C. Mohr; Comments Due: February 7, 2024. This Notice will be published in the Federal Register. Jennie L. Jbara, Alternate Certifying Officer. [FR Doc. 2024–02188 Filed 2–2–24; 8:45 am] BILLING CODE 7710–FW–P notice is hereby given that on January 16, 2024, Nasdaq MRX, LLC (‘‘MRX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Rules at Options 7, Section 6, Ports and Other Services.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. 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 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99451; File No. SR–MRX– 2024–02] The Exchange proposes to amend Options 7, Section 6, Ports and Other Services. Specifically, the Exchange proposes to amend the monthly caps for Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 6 January 30, 2024. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00065 Fmt 4703 Sfmt 4703 3 The Exchange initially filed the proposed pricing changes on November 28, 2023 (SR–MRX– 2023–23) to be effective on December 1, 2023. On December 5, 2023, the Exchange withdrew SR– MRX–2023–23 and replaced it with SR–MRX– 2023–25. On January 16, 2023, the Exchange withdrew SR–MRX–2023–25 and submitted this filing. E:\FR\FM\05FEN1.SGM 05FEN1 Federal Register / Vol. 89, No. 24 / Monday, February 5, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 SQF Ports 4 and SQF Purge Ports.5 The Exchange also proposes to remove unnecessary rule text from Options 7, Section 6 related to a technology migration. Both changes are explained below. Today, MRX assesses $1,250 per port, per month for an SQF Port as well as an SQF Purge Port. Today, MRX waives one SQF Port fee per Market Maker per month. Also, today, SQF Ports and SQF Purge Ports are subject to a monthly cap of $17,500, which cap is applicable to Market Makers. At this time, the Exchange proposes to increase the SQF Port and SQF Purge Port monthly cap fee of $17,500 per month to $27,500 per month.6 The Exchange is not amending the $1,250 per port, per month SQF Port and SQF Purge Port fees and the Exchange would continue to waive one SQF Port fee per Market Maker per month. As is the case today, the Exchange would not assess a Member an SQF Port or SQF Purge Port fee beyond the monthly cap once the Member has exceeded the monthly cap for the respective month. Despite increasing the monthly cap for SQF 4 ‘‘Specialized Quote Feed’’ or ‘‘SQF’’ is an interface that allows Market Makers to connect, send, and receive messages related to quotes, Immediate-or-Cancel Orders, and auction responses to the Exchange. Features include the following: (1) options symbol directory messages (e.g., underlying and complex instruments); (2) system event messages (e.g., start of trading hours messages and start of opening); (3) trading action messages (e.g., halts and resumes); (4) execution messages; (5) quote messages; (6) Immediate-or-Cancel Order messages; (7) risk protection triggers and purge notifications; (8) opening imbalance messages; (9) auction notifications; and (10) auction responses. The SQF Purge Interface only receives and notifies of purge requests from the Market Maker. Market Makers may only enter interest into SQF in their assigned options series. Immediate-or-Cancel Orders entered into SQF are not subject to the (i) Order Price Protection, Market Order Spread Protection, and Size Limitation Protection in Options 3, Section 15(a)(1)(A), (1)(B), and (2)(B) respectively, for single leg orders, or (ii) Complex Order Price Protection as defined in Options 3, Section 16(c)(1) for Complex Orders. See Supplementary Material .03(c) to Options 3, Section 7. 5 SQF Purge is a specific port for the SQF interface that only receives and notifies of purge requests from the Market Maker. Dedicated SQF Purge Ports enable Market Makers to seamlessly manage their ability to remove their quotes in a swift manner. The SQF Purge Port is designed to assist Market Makers in the management of, and risk control over, their quotes. Market Makers may utilize a purge port to reduce uncertainty and to manage risk by purging all quotes in their assigned options series. Of note, Market Makers may only enter interest into SQF in their assigned options series. Additionally, the SQF Purge Port may be utilized by a Market Maker in the event that the Member has a system issue and determines to purge its quotes from the order book. 6 Today, 63% of Market Makers cap their SQF Ports and SQF Purge Ports on MRX. The Exchange notes that of the Market Makers currently registered on MRX, there is a mix of size of Market Makers that cap. VerDate Sep<11>2014 17:56 Feb 02, 2024 Jkt 262001 Ports and SQF Purge Ports from $17,500 per month to $27,500 per month, the Exchange will continue to offer Members the opportunity to cap their SQF Port and SQF Purge Port fees so that they would not be assessed these fees beyond the cap. Further, an MRX Market Maker requires only one SQF Port to submit quotes in its assigned options series into MRX. An MRX Market Maker may submit all quotes through one SQF Port and utilize one SQF Purge Port to view its purge requests. While a Market Maker may elect to obtain multiple SQF Ports and SQF Purge Ports to organize its business,7 only one SQF Port and SQF Purge Port is necessary for a Market Maker to fulfill its regulatory quoting obligations.8 The Exchange proposes to remove the italicized language in Options 7, Section 6 related to a technology migration that took place in 2022. In 2022, MRX filed a pricing change 9 to permit Members to request certain duplicative ports at no additional cost, from November 1, 2022 through December 30, 2022, to facilitate a technology migration. The rule text related to the 2022 technology migration is no longer necessary because the migration is complete and the pricing is no longer applicable. At this time, the Exchange proposes to remove this rule text. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act,10 in general, and furthers the objectives of sections 6(b)(4) and 6(b)(5) of the Act,11 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The proposed pricing change to increase the monthly cap applicable to 7 For example, a Market Maker may desire to utilize multiple SQF Ports for accounting purposes, to measure performance, for regulatory reasons or other determinations that are specific to that Member. 8 MRX Market Makers have various regulatory requirements as provided for in Options 2, Section 4. Additionally, MRX Market Makers have certain quoting requirements with respect to their assigned options series as provided in Options 2, Section 5. SQF Ports are the only quoting protocol available on MRX and only Market Makers may utilize SQF Ports. The same is true for SQF Purge Ports. 9 See Securities Exchange Act Release No. 96120 (October 21, 2022), 87 FR 65105 (October 27, 2022) (SR–MRX–2022–21) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7 in Connection With a Technology Migration). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(4) and (5). PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 7747 SQF Ports and SQF Purge Ports is 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 brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’ 12 The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 13 Numerous indicia demonstrate the competitive nature of this market. 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. The proposed pricing change to increase the SQF Port and SQF Purge Port monthly cap from $17,500 per month to $27,500 per month is reasonable because despite the increase in the monthly cap, the Exchange will continue to offer Members the opportunity to cap their SQF Port and SQF Purge Port fees so that they would not be assessed these fees beyond the cap. Additionally, an MRX Market Maker requires only one SQF Port to submit quotes in its assigned options 12 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782– 83 (December 9, 2008) (SR–NYSEArca–2006–21)). 13 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). E:\FR\FM\05FEN1.SGM 05FEN1 7748 Federal Register / Vol. 89, No. 24 / Monday, February 5, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 series into MRX. An MRX Market Maker may submit all quotes through one SQF Port and utilize one SQF Purge Port to view its purge requests. While a Market Maker may elect to obtain multiple SQF Ports and SQF Purge Ports to organize its business,14 only one SQF Port and SQF Purge Port is necessary for a Market Maker to fulfill its regulatory quoting obligations.15 Additionally, the Exchange believes that the caps are reasonable for two reasons. First, SQF Ports are a secure method for Market Makers to submit quotes into the Exchange’s match engine and for the Exchange to send messages related to those quotes to Market Makers. MRX must manage the security and message traffic, among other things, for each port. Utilizing the cap to manage a Market Maker’s costs while also managing the quantity of SQF Ports issued on MRX has led the Exchange to select $27,500 as the amended monthly cap for SQF Ports and SQF Purge Ports. By capping the ports at a different level, the Exchange is considering the message traffic and message rates associated with the current number of outstanding ports and its ability to process messages. The ability to have a cap and amend that cap permits the Exchange to scale its needs with respect to processing messages in an efficient manner. Second, the Exchange notes that multiple ports are not necessary, however, to the extent that some Market Makers elect to obtain multiple ports, the Exchange is offering to cap their total port cost at $27,500 per month. MRX believes the existence of a cap allows for efficiencies and permits Market Makers to increase their number of ports beyond the cap. The cap levels the playing field by allowing those Market Makers that want to obtain a larger number of ports to do so with the certainty of a fee cap. Without the cap, MRX Market Makers may pay more to obtain multiple ports on MRX. The Exchange’s proposed pricing change to increase the SQF Port and SQF Purge Port monthly cap from $17,500 per month to $27,500 per month is equitable and not unfairly discriminatory because the Exchange would uniformly not assess any Market 14 For example, a Market Maker or may desire to utilize multiple SQF Ports for accounting purposes, to measure performance, for regulatory reasons or other determinations that are specific to that Member. 15 MRX Market Makers have various regulatory requirements as provided for in Options 2, Section 4. Additionally, MRX Market Makers have certain quoting requirements with respect to their assigned options series as provided in Options 2, Section 5. SQF Ports are the only quoting protocol available on MRX and only Market Makers may utilize SQF Ports. VerDate Sep<11>2014 17:56 Feb 02, 2024 Jkt 262001 Makers that exceeded the proposed monthly cap any SQF Port and SQF Purge Port fees for that month beyond the cap. Market Makers are the only market participants that are assessed SQF Port and SQF Purge Port fees because they are the only market participants that are permitted to quote on the Exchange. Unlike other market participants, Market Makers are subject to market making and quoting obligations.16 These liquidity providers are critical market participants in that they are the only market participants that provide liquidity to MRX on a continuous basis. In addition, the Exchange notes that Lead Market Makers are required to submit quotes in the Opening Process to open an options series.17 Market Makers are subject to a number of fees, unlike other market participants. Market Makers pay separate Membership Fees,18 and CMM Trading Right Fees,19 in addition to other fees paid by other market participants. Providing Market Makers a means to cap their cost related to quoting and enabling all Market Makers to acquire SQF Ports and SQF Purge Ports at no cost beyond a certain dollar amount enables these market participants to provide the necessary liquidity to MRX at lower costs. In 2022, NYSE Arca, Inc. (‘‘NYSE Arca’’) proposed to restructure fees relating to OTPs for Market Makers.20 In that rule change,21 NYSE Arca argued that, Market Makers serve a unique and important function on the Exchange (and other options exchanges) given the quotedriven nature of options markets. Because options exchanges rely on actively quoting Market Makers to facilitate a robust marketplace that attracts order flow, options exchanges must attract and retain Market Makers, including by setting competitive Market Maker permit fees. Stated otherwise, changes to Market Maker permit fees can have a direct effect on the ability of an exchange to compete for order flow. The Exchange also believes that the number of options exchanges on which Market Makers can effect option transactions also ensures competition in the marketplace and constrains the ability of exchanges to charge supracompetitive fees for access to its market by Market Makers. 16 See Options 2, Sections 4 and 5. Options 3, Section 8. 18 See Options 7, Section 5, E. 19 See Options 7, Section 5, F. 20 See Securities Exchange Act Release No. 95412 (June 23, 2022), 87 FR 38786 (June 29, 2022) (SR– NYSEArca–2022–36). NYSE Arca proposed to increase both the monthly fee per Market Maker OTP and the number of issues covered by each additional OTP because, among other reasons, the number of issues traded on the Exchange has increased significantly in recent years. 21 Id at 38788. 17 See PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 Further, NYSE ARCA noted that,22 The Exchange further believes that its ability to set Market Maker permit fees is constrained by competitive forces based on the fact that Market Makers can, and have, chosen to terminate their status as a Market Maker if they deem Market Maker permit fees to be unreasonable or excessive. Specifically, the Exchange notes that a BOX participant modified its access to BOX in connection with the implementation of a proposed change to BOX’s Market Maker permit fees. The Exchange has also observed that another options exchange group experienced decreases in market share following its proposed modifications of its access fees (including Market Maker trading permit fees), suggesting that market participants (including Market Makers) are sensitive to changes in exchanges’ access fees and may respond by shifting their order flow elsewhere if they deem the fees to be unreasonable or excessive. There is no requirement, regulatory or otherwise, that any Market Maker connect to and access any (or all of) the available options exchanges. The Exchange also is not aware of any reason why a Market Maker could not cease being a permit holder in response to unreasonable price increases. The Exchange does not assess any termination fee for a Market Maker to drop its OTP, nor is the Exchange aware of any other costs that would be incurred by a Market Maker to do so. The Exchange likewise believes that its ability to cap SQF Port and SQF Purge fees is constrained by competitive forces and that its proposed modifications to the SQF Port and SQF Purge Fee cap is reasonably designed in consideration of the competitive environment in which the Exchange operates, by balancing the value of the enhanced benefits available to Market Makers due to the current level of activity on the Exchange with a fee structure that will continue to incent Market Makers to support increased liquidity, quote competition, and trading opportunities on the Exchange, for the benefit of all market participants. The Exchange’s proposal to remove the italicized language in Options 7, Section 6 related to a technology migration that took place in 2022 is reasonable, equitable and not unfairly discriminatory because the rule text related to the technology migration is no longer necessary because the migration is complete and the fees are no longer applicable. No Member is subject to the pricing described for the 2022 technology migration. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose 22 Id E:\FR\FM\05FEN1.SGM at 38790. 05FEN1 Federal Register / Vol. 89, No. 24 / Monday, February 5, 2024 / Notices any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Intermarket Competition The proposal does not impose an undue burden on intermarket competition. The Exchange believes its proposal remains competitive with other options markets who also offer order entry protocols. 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. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. Other exchanges have been permitted to amend certain costs attributed to Market Makers.23 Further, in 2022, MRX proposed a monthly cap for SQF Ports and SQF Purge Ports of 17,500.24 MRX noted in its rule change that, ‘‘Only one SQF quote protocol is required for an MRX Market Maker to submit quotes into MRX and to meet its regulatory requirements.’’ 25 If the Commission were to apply a different standard of review this proposal than it applied to other exchange fee filings, where Market Maker fees were increased and port fee caps were established, it would create a burden on competition such that it would impair MRX’s ability to compete among other options markets. lotter on DSK11XQN23PROD with NOTICES1 Intramarket Competition The Exchange’s proposed pricing change to increase the SQF Port and SQF Purge Port monthly cap from $17,500 per month to $27,500 per month does not impose an undue burden on competition because the Exchange would uniformly not assess any Market Makers that exceeded the proposed monthly cap any SQF Port and SQF Purge Port fees for that month beyond the cap. Market Makers are the only market participants that are 23 See Securities Exchange Act Release No. 95412 (June 23, 2022), 87 FR 38786 (June 29, 2022) (SR– NYSEArca–2022–36). 24 See Securities Exchange Act No. 96824 (February 7, 2023), 88 FR 8975 (February 10, 2023) (SR–MRX–2023–05) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend MRX Options 7, Section 6). 25 Id at 8976. VerDate Sep<11>2014 17:56 Feb 02, 2024 Jkt 262001 assessed SQF Port and SQF Purge Port fees because they are the only market participants that are permitted to quote on the Exchange. Unlike other market participants, Market Makers are subject to market making and quoting obligations.26 These liquidity providers are critical market participants in that they are the only market participants that provide liquidity to MRX on a continuous basis. In addition, the Exchange notes that Lead Market Makers are required to submit quotes in the Opening Process to open an options series.27 Market Makers are subject to a number of fees, unlike other market participants. Market Makers pay separate Membership Fees,28 and CMM Trading Right Fees,29 in addition to other fees paid by other market participants. Providing Market Makers a means to cap their cost related to quoting and enabling all Market Makers to acquire SQF Ports and SQF Purge Ports at no cost beyond a certain dollar amount enables these market participants to provide the necessary liquidity to MRX at lower costs. Therefore, because Market Makers fulfill a unique role on the Exchange, are the only market participant required to submit quotes as part of their obligations to operate on the Exchange, and, in light of that role, they are eligible for certain incentives. The proposed SQF Port and SQF Purge Fee cap is designed to continue to incent Market Makers to quote on MRX, thereby promoting liquidity, quote competition, and trading opportunities. The Exchange’s proposal to remove the italicized language in Options 7, Section 6 related to a technology migration that took place in 2022 does not impose an undue burden on competition because the rule text related to the technology migration is no longer necessary because the migration is complete and the fees are no longer applicable. No Member is subject to the pricing described for the 2022 technology migration. 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. 26 See Options 2, Sections 4 and 5. Options 3, Section 8. 28 See Options 7, Section 5, E. 29 See Options 7, Section 5, F. 27 See PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 7749 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.30 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–2024–02 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–2024–02. 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, 30 15 E:\FR\FM\05FEN1.SGM U.S.C. 78s(b)(3)(A)(ii). 05FEN1 7750 Federal Register / Vol. 89, No. 24 / Monday, February 5, 2024 / Notices 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–2024–02 and should be submitted on or before February 26, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–02162 Filed 2–2–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99449; File No. SR– NYSEAMER–2024–06] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the NYSE American Options Fee Schedule January 30, 2024. lotter on DSK11XQN23PROD with NOTICES1 Pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on January 25, 2024, NYSE American LLC (‘‘NYSE American’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. 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 modify the NYSE American Options Fee Schedule (‘‘Fee Schedule’’). The Exchange proposes to implement the fee change effective January 25, 2024.4 The 31 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 4 The Exchange originally filed to amend the Fee Schedule on January 2, 2024 (NYSEAmer–2023–69) 1 15 VerDate Sep<11>2014 17:56 Feb 02, 2024 Jkt 262001 proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing [sic] to amend the Fee Schedule in a number of ways as described herein. The Exchange proposes to implement the rule change on January 25, 2024. First, the Exchange proposes to modify the Fee Schedule to remove reference to costs that are no longer charged and are therefore inapplicable. Specifically, the Exchange proposes to modify the Fee Schedule to remove ‘‘Login’’ costs from Sections III.E.1 and IV and to remove ‘‘Floor Broker Handheld’’ costs from Section IV. Next, the Exchange proposes to modify the Floor Broker Fixed Cost Prepayment Incentive Program (the ‘‘FB Prepay Program’’ or ‘‘Program’’), a prepayment incentive program that allows Floor Brokers to prepay certain of their annual Eligible Fixed Costs in exchange for the opportunity to qualify for certain volume rebates.5 Specifically, the Manual Billable Volume Rebate is designed to encourage Floor Brokers to increase their monthly volume in [sic] and withdrew such filing on January 12, 2024 (SR–NYSEAmer–2024–05) [sic], which latter filing the Exchange withdrew on January 25, 2024. 5 See Fee Schedule, Section III.E.1., Floor Broker Fixed Cost Prepayment Incentive Program (the ‘‘FB Prepay Program’’). ‘‘Eligible Fixed Costs’’ include monthly ATP Fees, the Floor Access Fee, and certain monthly Floor communication, connectivity, equipment and booth or podia fees, as set forth in the table in Section III.E.1. The Exchange notes that the FB Prepay Program is currently structured similarly to the Floor Broker prepayment program offered by its affiliated exchange, NYSE Arca, Inc. (‘‘NYSE Arca’’). See NYSE Arca Options Fee Schedule, FLOOR BROKER FIXED COST PREPAYMENT INCENTIVE PROGRAM (the ‘‘FB Prepay Program’’). PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 billable manual contract sides to qualify for a rebate; increasing volumes qualify the Floor Broker for a higher level of rebate. Additional rebates may be earned by meeting the qualification levels of the Floor Broker Manual Billable Incentive Program.6 Participating Floor Brokers receive their rebates payable on a monthly basis.7 Floor Brokers that wish to participate in the FB Prepay Program for the following calendar year must notify the Exchange no later than the last business day of December in the current year.8 The Exchange proposes to eliminate the Floor Broker Manual Billable Incentive Program and accompanying monthly rebates 9 and instead provide Floor Brokers participating in the FB Prepay Program with enhanced opportunities for monthly rebates based on manual billable transaction volume (the ‘‘Manual Billable Rebate Program’’) and the QCC Billable Bonus Rebate. The calculation of volume on which rebates earned through the Manual Billable Rebate Program would be paid is based on transactions for which at least one side is subject to manual transaction fees and excludes volume from QCC transactions, unless otherwise specified.10 The Exchange proposes to 6 See Fee Schedule, Section III.E.2., Floor Broker Manual Billable Incentive Program. 7 See Fee Schedule, Section III.E. The Exchange proposes to remove the preamble to Section III.E., which relates to the Exchange’s already-completed migration to the Pillar trading platform, because the text is no longer applicable and its removal would add clarity to the Fee Schedule. See proposed Fee Schedule, Section III.E. 8 See Fee Schedule, Section III.E (providing, in relevant part, that the notification ‘‘email to enroll in the Program must originate from an officer of the Floor Broker organization and, except as provided for below, represents a binding commitment through the end of the following calendar year.’’). The Exchange proposes to modify Section III.E. of the Fee Schedule to remove the now obsolete phrase ‘‘except as provided for below,’’ as there is no exception to the notification requirement, which modification will add clarity, transparency, and internal consistency to the Fee Schedule. See proposed Fee Schedule, Section III.E. 9 To effect the proposed change to eliminate the Floor Broker Manual Billable Incentive Program and related rebates, the Exchange proposes to delete in its entirety Section III.E.2. of the Fee Schedule. In addition, for consistency, the Exchange proposes to delete from the Table of Contents reference to this Section III.E.2., which is currently (and erroneously) listed as ‘‘Reserved’’. See proposed Fee Schedule, Table of Contents. 10 See proposed Fee Schedule, Section III.E.1 (excluding QCC transactions from volume calculation ‘‘unless otherwise specified’’), which would add clarity, transparency, and internal consistency to the Fee Schedule. For certain volume thresholds (i.e., those based solely on ‘‘manual billable sides’’), the Exchange proposes to continue to exclude QCC volume from the calculation of eligible volume for rebates paid through the Manual Billable Rebate Program because Floor Brokers would continue to be eligible for separate credits and rebates for QCC transactions through the QCC Billable Bonus Rebate. E:\FR\FM\05FEN1.SGM 05FEN1

Agencies

[Federal Register Volume 89, Number 24 (Monday, February 5, 2024)]
[Notices]
[Pages 7746-7750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02162]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99451; File No. SR-MRX-2024-02]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, 
Section 6

January 30, 2024.
    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 January 16, 2024, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \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 its Rules at Options 7, Section 6, 
Ports and Other Services.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed pricing changes on 
November 28, 2023 (SR-MRX-2023-23) to be effective on December 1, 
2023. On December 5, 2023, the Exchange withdrew SR-MRX-2023-23 and 
replaced it with SR-MRX-2023-25. On January 16, 2023, the Exchange 
withdrew SR-MRX-2023-25 and submitted this 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.

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 Exchange proposes to amend Options 7, Section 6, Ports and 
Other Services. Specifically, the Exchange proposes to amend the 
monthly caps for

[[Page 7747]]

SQF Ports \4\ and SQF Purge Ports.\5\ The Exchange also proposes to 
remove unnecessary rule text from Options 7, Section 6 related to a 
technology migration. Both changes are explained below.
---------------------------------------------------------------------------

    \4\ ``Specialized Quote Feed'' or ``SQF'' is an interface that 
allows Market Makers to connect, send, and receive messages related 
to quotes, Immediate-or-Cancel Orders, and auction responses to the 
Exchange. Features include the following: (1) options symbol 
directory messages (e.g., underlying and complex instruments); (2) 
system event messages (e.g., start of trading hours messages and 
start of opening); (3) trading action messages (e.g., halts and 
resumes); (4) execution messages; (5) quote messages; (6) Immediate-
or-Cancel Order messages; (7) risk protection triggers and purge 
notifications; (8) opening imbalance messages; (9) auction 
notifications; and (10) auction responses. The SQF Purge Interface 
only receives and notifies of purge requests from the Market Maker. 
Market Makers may only enter interest into SQF in their assigned 
options series. Immediate-or-Cancel Orders entered into SQF are not 
subject to the (i) Order Price Protection, Market Order Spread 
Protection, and Size Limitation Protection in Options 3, Section 
15(a)(1)(A), (1)(B), and (2)(B) respectively, for single leg orders, 
or (ii) Complex Order Price Protection as defined in Options 3, 
Section 16(c)(1) for Complex Orders. See Supplementary Material 
.03(c) to Options 3, Section 7.
    \5\ SQF Purge is a specific port for the SQF interface that only 
receives and notifies of purge requests from the Market Maker. 
Dedicated SQF Purge Ports enable Market Makers to seamlessly manage 
their ability to remove their quotes in a swift manner. The SQF 
Purge Port is designed to assist Market Makers in the management of, 
and risk control over, their quotes. Market Makers may utilize a 
purge port to reduce uncertainty and to manage risk by purging all 
quotes in their assigned options series. Of note, Market Makers may 
only enter interest into SQF in their assigned options series. 
Additionally, the SQF Purge Port may be utilized by a Market Maker 
in the event that the Member has a system issue and determines to 
purge its quotes from the order book.
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    Today, MRX assesses $1,250 per port, per month for an SQF Port as 
well as an SQF Purge Port. Today, MRX waives one SQF Port fee per 
Market Maker per month. Also, today, SQF Ports and SQF Purge Ports are 
subject to a monthly cap of $17,500, which cap is applicable to Market 
Makers.
    At this time, the Exchange proposes to increase the SQF Port and 
SQF Purge Port monthly cap fee of $17,500 per month to $27,500 per 
month.\6\ The Exchange is not amending the $1,250 per port, per month 
SQF Port and SQF Purge Port fees and the Exchange would continue to 
waive one SQF Port fee per Market Maker per month. As is the case 
today, the Exchange would not assess a Member an SQF Port or SQF Purge 
Port fee beyond the monthly cap once the Member has exceeded the 
monthly cap for the respective month. Despite increasing the monthly 
cap for SQF Ports and SQF Purge Ports from $17,500 per month to $27,500 
per month, the Exchange will continue to offer Members the opportunity 
to cap their SQF Port and SQF Purge Port fees so that they would not be 
assessed these fees beyond the cap. Further, an MRX Market Maker 
requires only one SQF Port to submit quotes in its assigned options 
series into MRX. An MRX Market Maker may submit all quotes through one 
SQF Port and utilize one SQF Purge Port to view its purge requests. 
While a Market Maker may elect to obtain multiple SQF Ports and SQF 
Purge Ports to organize its business,\7\ only one SQF Port and SQF 
Purge Port is necessary for a Market Maker to fulfill its regulatory 
quoting obligations.\8\
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    \6\ Today, 63% of Market Makers cap their SQF Ports and SQF 
Purge Ports on MRX. The Exchange notes that of the Market Makers 
currently registered on MRX, there is a mix of size of Market Makers 
that cap.
    \7\ For example, a Market Maker may desire to utilize multiple 
SQF Ports for accounting purposes, to measure performance, for 
regulatory reasons or other determinations that are specific to that 
Member.
    \8\ MRX Market Makers have various regulatory requirements as 
provided for in Options 2, Section 4. Additionally, MRX Market 
Makers have certain quoting requirements with respect to their 
assigned options series as provided in Options 2, Section 5. SQF 
Ports are the only quoting protocol available on MRX and only Market 
Makers may utilize SQF Ports. The same is true for SQF Purge Ports.
---------------------------------------------------------------------------

    The Exchange proposes to remove the italicized language in Options 
7, Section 6 related to a technology migration that took place in 2022. 
In 2022, MRX filed a pricing change \9\ to permit Members to request 
certain duplicative ports at no additional cost, from November 1, 2022 
through December 30, 2022, to facilitate a technology migration. The 
rule text related to the 2022 technology migration is no longer 
necessary because the migration is complete and the pricing is no 
longer applicable. At this time, the Exchange proposes to remove this 
rule text.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 96120 (October 21, 
2022), 87 FR 65105 (October 27, 2022) (SR-MRX-2022-21) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Options 7 in Connection With a Technology Migration).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The proposed pricing change to increase the monthly cap applicable 
to SQF Ports and SQF Purge Ports is reasonable in several respects. As 
a threshold matter, the Exchange is subject to significant competitive 
forces in the market for options securities transaction services that 
constrain its pricing determinations in that market. The fact that this 
market is competitive has long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \12\
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    \12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \13\
---------------------------------------------------------------------------

    \13\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
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.
    The proposed pricing change to increase the SQF Port and SQF Purge 
Port monthly cap from $17,500 per month to $27,500 per month is 
reasonable because despite the increase in the monthly cap, the 
Exchange will continue to offer Members the opportunity to cap their 
SQF Port and SQF Purge Port fees so that they would not be assessed 
these fees beyond the cap. Additionally, an MRX Market Maker requires 
only one SQF Port to submit quotes in its assigned options

[[Page 7748]]

series into MRX. An MRX Market Maker may submit all quotes through one 
SQF Port and utilize one SQF Purge Port to view its purge requests. 
While a Market Maker may elect to obtain multiple SQF Ports and SQF 
Purge Ports to organize its business,\14\ only one SQF Port and SQF 
Purge Port is necessary for a Market Maker to fulfill its regulatory 
quoting obligations.\15\ Additionally, the Exchange believes that the 
caps are reasonable for two reasons.
---------------------------------------------------------------------------

    \14\ For example, a Market Maker or may desire to utilize 
multiple SQF Ports for accounting purposes, to measure performance, 
for regulatory reasons or other determinations that are specific to 
that Member.
    \15\ MRX Market Makers have various regulatory requirements as 
provided for in Options 2, Section 4. Additionally, MRX Market 
Makers have certain quoting requirements with respect to their 
assigned options series as provided in Options 2, Section 5. SQF 
Ports are the only quoting protocol available on MRX and only Market 
Makers may utilize SQF Ports.
---------------------------------------------------------------------------

    First, SQF Ports are a secure method for Market Makers to submit 
quotes into the Exchange's match engine and for the Exchange to send 
messages related to those quotes to Market Makers. MRX must manage the 
security and message traffic, among other things, for each port. 
Utilizing the cap to manage a Market Maker's costs while also managing 
the quantity of SQF Ports issued on MRX has led the Exchange to select 
$27,500 as the amended monthly cap for SQF Ports and SQF Purge Ports. 
By capping the ports at a different level, the Exchange is considering 
the message traffic and message rates associated with the current 
number of outstanding ports and its ability to process messages. The 
ability to have a cap and amend that cap permits the Exchange to scale 
its needs with respect to processing messages in an efficient manner.
    Second, the Exchange notes that multiple ports are not necessary, 
however, to the extent that some Market Makers elect to obtain multiple 
ports, the Exchange is offering to cap their total port cost at $27,500 
per month. MRX believes the existence of a cap allows for efficiencies 
and permits Market Makers to increase their number of ports beyond the 
cap. The cap levels the playing field by allowing those Market Makers 
that want to obtain a larger number of ports to do so with the 
certainty of a fee cap. Without the cap, MRX Market Makers may pay more 
to obtain multiple ports on MRX.
    The Exchange's proposed pricing change to increase the SQF Port and 
SQF Purge Port monthly cap from $17,500 per month to $27,500 per month 
is equitable and not unfairly discriminatory because the Exchange would 
uniformly not assess any Market Makers that exceeded the proposed 
monthly cap any SQF Port and SQF Purge Port fees for that month beyond 
the cap. Market Makers are the only market participants that are 
assessed SQF Port and SQF Purge Port fees because they are the only 
market participants that are permitted to quote on the Exchange. Unlike 
other market participants, Market Makers are subject to market making 
and quoting obligations.\16\ These liquidity providers are critical 
market participants in that they are the only market participants that 
provide liquidity to MRX on a continuous basis. In addition, the 
Exchange notes that Lead Market Makers are required to submit quotes in 
the Opening Process to open an options series.\17\ Market Makers are 
subject to a number of fees, unlike other market participants. Market 
Makers pay separate Membership Fees,\18\ and CMM Trading Right 
Fees,\19\ in addition to other fees paid by other market participants. 
Providing Market Makers a means to cap their cost related to quoting 
and enabling all Market Makers to acquire SQF Ports and SQF Purge Ports 
at no cost beyond a certain dollar amount enables these market 
participants to provide the necessary liquidity to MRX at lower costs.
---------------------------------------------------------------------------

    \16\ See Options 2, Sections 4 and 5.
    \17\ See Options 3, Section 8.
    \18\ See Options 7, Section 5, E.
    \19\ See Options 7, Section 5, F.
---------------------------------------------------------------------------

    In 2022, NYSE Arca, Inc. (``NYSE Arca'') proposed to restructure 
fees relating to OTPs for Market Makers.\20\ In that rule change,\21\ 
NYSE Arca argued that,
---------------------------------------------------------------------------

    \20\ See Securities Exchange Act Release No. 95412 (June 23, 
2022), 87 FR 38786 (June 29, 2022) (SR-NYSEArca-2022-36). NYSE Arca 
proposed to increase both the monthly fee per Market Maker OTP and 
the number of issues covered by each additional OTP because, among 
other reasons, the number of issues traded on the Exchange has 
increased significantly in recent years.
    \21\ Id at 38788.

    Market Makers serve a unique and important function on the 
Exchange (and other options exchanges) given the quote-driven nature 
of options markets. Because options exchanges rely on actively 
quoting Market Makers to facilitate a robust marketplace that 
attracts order flow, options exchanges must attract and retain 
Market Makers, including by setting competitive Market Maker permit 
fees. Stated otherwise, changes to Market Maker permit fees can have 
a direct effect on the ability of an exchange to compete for order 
flow. The Exchange also believes that the number of options 
exchanges on which Market Makers can effect option transactions also 
ensures competition in the marketplace and constrains the ability of 
exchanges to charge supracompetitive fees for access to its market 
---------------------------------------------------------------------------
by Market Makers.

    Further, NYSE ARCA noted that,\22\
---------------------------------------------------------------------------

    \22\ Id at 38790.

    The Exchange further believes that its ability to set Market 
Maker permit fees is constrained by competitive forces based on the 
fact that Market Makers can, and have, chosen to terminate their 
status as a Market Maker if they deem Market Maker permit fees to be 
unreasonable or excessive. Specifically, the Exchange notes that a 
BOX participant modified its access to BOX in connection with the 
implementation of a proposed change to BOX's Market Maker permit 
fees. The Exchange has also observed that another options exchange 
group experienced decreases in market share following its proposed 
modifications of its access fees (including Market Maker trading 
permit fees), suggesting that market participants (including Market 
Makers) are sensitive to changes in exchanges' access fees and may 
respond by shifting their order flow elsewhere if they deem the fees 
to be unreasonable or excessive.
    There is no requirement, regulatory or otherwise, that any 
Market Maker connect to and access any (or all of) the available 
options exchanges. The Exchange also is not aware of any reason why 
a Market Maker could not cease being a permit holder in response to 
unreasonable price increases. The Exchange does not assess any 
termination fee for a Market Maker to drop its OTP, nor is the 
Exchange aware of any other costs that would be incurred by a Market 
Maker to do so.

    The Exchange likewise believes that its ability to cap SQF Port and 
SQF Purge fees is constrained by competitive forces and that its 
proposed modifications to the SQF Port and SQF Purge Fee cap is 
reasonably designed in consideration of the competitive environment in 
which the Exchange operates, by balancing the value of the enhanced 
benefits available to Market Makers due to the current level of 
activity on the Exchange with a fee structure that will continue to 
incent Market Makers to support increased liquidity, quote competition, 
and trading opportunities on the Exchange, for the benefit of all 
market participants.
    The Exchange's proposal to remove the italicized language in 
Options 7, Section 6 related to a technology migration that took place 
in 2022 is reasonable, equitable and not unfairly discriminatory 
because the rule text related to the technology migration is no longer 
necessary because the migration is complete and the fees are no longer 
applicable. No Member is subject to the pricing described for the 2022 
technology migration.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose

[[Page 7749]]

any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.
Intermarket Competition
    The proposal does not impose an undue burden on intermarket 
competition. The Exchange believes its proposal remains competitive 
with other options markets who also offer order entry protocols. 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. In such an environment, 
the Exchange must continually adjust its fees to remain competitive 
with other exchanges. Because competitors are free to modify their own 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which fee changes in this market may impose any burden on competition 
is extremely limited. Other exchanges have been permitted to amend 
certain costs attributed to Market Makers.\23\ Further, in 2022, MRX 
proposed a monthly cap for SQF Ports and SQF Purge Ports of 17,500.\24\ 
MRX noted in its rule change that, ``Only one SQF quote protocol is 
required for an MRX Market Maker to submit quotes into MRX and to meet 
its regulatory requirements.'' \25\
---------------------------------------------------------------------------

    \23\ See Securities Exchange Act Release No. 95412 (June 23, 
2022), 87 FR 38786 (June 29, 2022) (SR-NYSEArca-2022-36).
    \24\ See Securities Exchange Act No. 96824 (February 7, 2023), 
88 FR 8975 (February 10, 2023) (SR-MRX-2023-05) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend MRX 
Options 7, Section 6).
    \25\ Id at 8976.
---------------------------------------------------------------------------

    If the Commission were to apply a different standard of review this 
proposal than it applied to other exchange fee filings, where Market 
Maker fees were increased and port fee caps were established, it would 
create a burden on competition such that it would impair MRX's ability 
to compete among other options markets.
Intramarket Competition
    The Exchange's proposed pricing change to increase the SQF Port and 
SQF Purge Port monthly cap from $17,500 per month to $27,500 per month 
does not impose an undue burden on competition because the Exchange 
would uniformly not assess any Market Makers that exceeded the proposed 
monthly cap any SQF Port and SQF Purge Port fees for that month beyond 
the cap. Market Makers are the only market participants that are 
assessed SQF Port and SQF Purge Port fees because they are the only 
market participants that are permitted to quote on the Exchange. Unlike 
other market participants, Market Makers are subject to market making 
and quoting obligations.\26\ These liquidity providers are critical 
market participants in that they are the only market participants that 
provide liquidity to MRX on a continuous basis. In addition, the 
Exchange notes that Lead Market Makers are required to submit quotes in 
the Opening Process to open an options series.\27\ Market Makers are 
subject to a number of fees, unlike other market participants. Market 
Makers pay separate Membership Fees,\28\ and CMM Trading Right 
Fees,\29\ in addition to other fees paid by other market participants. 
Providing Market Makers a means to cap their cost related to quoting 
and enabling all Market Makers to acquire SQF Ports and SQF Purge Ports 
at no cost beyond a certain dollar amount enables these market 
participants to provide the necessary liquidity to MRX at lower costs. 
Therefore, because Market Makers fulfill a unique role on the Exchange, 
are the only market participant required to submit quotes as part of 
their obligations to operate on the Exchange, and, in light of that 
role, they are eligible for certain incentives. The proposed SQF Port 
and SQF Purge Fee cap is designed to continue to incent Market Makers 
to quote on MRX, thereby promoting liquidity, quote competition, and 
trading opportunities.
---------------------------------------------------------------------------

    \26\ See Options 2, Sections 4 and 5.
    \27\ See Options 3, Section 8.
    \28\ See Options 7, Section 5, E.
    \29\ See Options 7, Section 5, F.
---------------------------------------------------------------------------

    The Exchange's proposal to remove the italicized language in 
Options 7, Section 6 related to a technology migration that took place 
in 2022 does not impose an undue burden on competition because the rule 
text related to the technology migration is no longer necessary because 
the migration is complete and the fees are no longer applicable. No 
Member is subject to the pricing described for the 2022 technology 
migration.

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.\30\ 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.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2024-02 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-2024-02. 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,

[[Page 7750]]

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-2024-02 and should be 
submitted on or before February 26, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02162 Filed 2-2-24; 8:45 am]
BILLING CODE 8011-01-P
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