Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 6, 54108-54113 [2024-14209]
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54108
Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices
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:
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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–
NASDAQ–2024–025 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–NASDAQ–2024–025. 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
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SR–NASDAQ–2024–025 and should be
submitted on or before July 19, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–14211 Filed 6–27–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–563, OMB Control No.
3235–0694]
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 17g–10 and Form ABS Due
Diligence—15E
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit an extension for this
current collection of information to the
Office of Management and Budget for
approval.
Rule 17g–10 (17 CFR 240.17g–10)
requires a provider of third-party due
diligence services to provide the written
certification required by Section
15E(s)(4) of the Securities Exchange Act
of 1934 (15 U.S.C. 78a et seq.) on Form
ABS Due Diligence—15E (17 CFR
249b.500). Based on Commission staff’s
experience, it is estimated that thirdparty due diligence service providers
would be required to spend, on average,
0.20 hours to complete and transmit
Form ABS Due Diligence—15E, for a
total annual burden of 470 hours.1 The
cost for a compliance manager to
complete and submit Form ABS Due
Diligence—15E pursuant to Rule 17g–10
is estimated at $372 per hour,2 resulting
17 17
CFR 200.30–3(a)(12).
1 This figure is calculated by multiplying the per
year average number of offerings of asset-backed
securities, as the term is defined in Section 3(a)(79)
of the Exchange Act, which was estimated at 1,410
offerings, by the hour burden to complete and
transmit Form ABS Due Diligence—15E estimated
at 0.20 hours (1,410 offerings × 0.20 hours = 470
hours).
2 The $372 figure for a compliance manager is
based on SIFMA’s Management & Professional
Earnings in the Securities Industry 2013, modified
by Commission staff to account for an 1,800-hour
work-year and multiplied by 5.35 to account for
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in an industry-wide annual internal cost
to third-party service providers of
$175,000 per year.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice by July 29, 2024 to (i)
MBX.OMB.OIRA.SEC_desk_officer@
omb.eop.gov and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o John Pezzullo, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: June 24, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–14224 Filed 6–27–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100406; File No. SR–
GEMX–2024–13]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 6
June 24, 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 June 12,
2024, Nasdaq GEMX, LLC (‘‘GEMX’’ 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 6.3 The
bonuses, firm size, employee benefits and overhead,
as adjusted for inflation using the Bureau of Labor
Statistics’ CPI Inflation Calculator.
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange initially filed the proposed
pricing changes on November 28, 2023 (SR–GEMX–
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Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices
Exchange proposes to sunset the
amendments to Options 7, Section 6, C
on July 1, 2024. The amendments to
Options 7, Section 6, C proposed herein
will remain in effect through the month
of June 2024.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/gemx/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
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The Exchange proposes to amend
Options 7, Section 6, C, Ports and Other
Services. Specifically, the Exchange
proposes to amend the monthly caps for
2023–16) to be effective on December 1, 2023. On
December 5, 2023, the Exchange withdrew SR–
GEMX–2023–16 and replaced it with SR–GEMX–
2023–19. On January 16, 2023, the Exchange
withdrew SR–GEMX–2023–19 and submitted SR–
GEMX–2024–03. On March 7, 2024, the Exchange
withdrew SR–GEMX–2024–03 and submitted SR–
GEMX–2024–07. On May 1, 2024, the Exchange
withdrew SR–GEMX–2024–07 and submitted SR–
GEMX–2024–10. On June 12, 2024, the Exchange
withdrew SR–GEMX–2024–10 and submitted this
filing.
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SQF Ports 4 and SQF Purge Ports.5 The
Exchange proposes to sunset the
amendments to Options 7, Section 6, C
on July 1, 2024. The amendments to
Options 7, Section 6, C proposed herein
will remain in effect through the month
of June 2024.
Today, GEMX assesses $1,250 per
port, per month for an SQF Port as well
as an SQF Purge Port.6 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
establish an increased SQF Fee and SQF
Purge Port Cap to Primary Market
Makers and Market Makers that do not
provide a minimum amount of liquidity
on GEMX. This proposed increased SQF
Fee and SQF Purge Port Cap is intended
to incentivize Primary Market Makers
and Market Makers to add liquidity on
GEMX for the benefit of other market
participants in order to lower their fees.
GEMX proposes to increase the SQF
Port and SQF Purge Port Cap to $27,500
a month if a Primary Market Maker or
Market Maker does not transact 0.50%
of Total Customer Volume in electronic
simple orders that adds liquidity in a
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
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 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. 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 The Exchange proposes to add a comma
between ‘‘per port’’ and ‘‘per month’’ in the Options
7, Section 6, C, SQF Port and SQF Purge Port Fee
rule text. The Exchange also proposes to remove an
extraneous period in Options 7, Section 6, C, in the
second paragraph.
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54109
month.7 Today, GEMX caps an SQF Port
and SQF Purge Port at $17,500 a
month.8 With this proposal, the
Exchange would not assess Primary
Market Makers and Market Makers an
SQF Port and SQF Purge Port Cap
beyond the monthly cap of $27,500,
instead of $17,500, once the Member
has exceeded the proposed port cap for
the respective month. Primary Market
Makers and Market Makers who transact
0.50% of Total Customer Volume in
electronic simple orders that adds
liquidity in a month will continue to be
subject to the $17,500 SQF Port and
SQF Purge Port Cap.
Pursuant to Supplementary Material
.03(c) to Options 3, Section 7, Market
Makers may only enter interest into SQF
in their assigned options series.
Pursuant to Supplementary Material
.03(c) to Options 3, Section 7, the SQF
interface allows Market Makers to
connect, send, and receive messages
related to quotes, Immediate-or-Cancel
Orders, and auction responses to the
Exchange. An SQF Purge is a specific
port for the SQF interface that only
receives and notifies of purge requests
from the Market Maker. A GEMX Market
Maker requires only one SQF Port to
submit quotes in its assigned options
series into GEMX. While a Market
Maker may elect to obtain multiple SQF
Ports and SQF Purge Ports to organize
its business,9 only one SQF Port and
SQF Purge Port is necessary for a Market
Maker to fulfill its regulatory quoting
obligations.10
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,11 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,12 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
7 For purposes of this cap, ‘‘Total Customer
Volume’’ shall be defined as a percentage of all
cleared customer volume at The Options Clearing
Corporation in Multiply Listed Equity Options and
Exchange-Traded Products (‘‘TCV’’).
8 The Exchange also proposes a technical
amendment to remove an extra period in Options
7, Section 6, C.
9 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.
10 GEMX Market Makers have various regulatory
requirements as provided for in Options 2, Section
4. Additionally, GEMX 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 GEMX and only Market Makers may utilize SQF
Ports. The same is true for SQF Purge Ports.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(4) and (5).
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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 SQF Port and SQF Purge
Port monthly cap from $17,500 per
month to $27,500 per month if Primary
Market Makers or Market Makers do not
transact 0.50% of Total Customer
Volume in electronic simple orders that
adds liquidity in a month is reasonable
because it will incentivize Primary
Market Makers and Market Makers to
add liquidity on GEMX to lower their
costs. The Exchange believes that the
total volume required to achieve the cap
is reasonable as the Exchange has
limited the volume to simple orders, as
not all Market Makers transact complex
orders. Further, 0.50% of Total
Customer Volume in electronic simple
orders that adds liquidity in a month is
an achievable number for Market
Makers who currently add volume to
the Exchange. Additionally, the
Exchange believes that an SQF Fee and
SQF Purge Port Cap of $27,500, in lieu
of $17, 500, is reasonable because
Primary Market Makers and Market
Makers are obligated, among other
things, to compete with other Market
Makers to improve the market in all
series of options classes to which the
Market Maker is appointed and to
update market quotations in response to
changed market conditions in all series
of options classes to which the Market
Maker is appointed.13 The Exchange
believes that it is reasonable to increase
the SQF Port and SQF Purge Port Cap
to $27,500 for Primary Market Makers
and Market Makers that do not transact
0.50% of Total Customer Volume in
electronic simple orders that adds
liquidity in a month because the
Exchange believes that Primary Market
Makers and Market Makers that do not
contribute a minimum amount of
liquidity on GEMX should not be
subject to the same opportunities to
lower their costs as those Primary
Market Makers and Market Makers that
do contribute to liquidity and therefore
provide the ability for other market
participants to engage with that order
flow. The Exchange believes that the
13 See
Options 2, Section 4(b)(1) and (3).
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increase is modest and would serve to
encourage Primary Market Makers and
Market Makers to submit order flow to
GEMX in order to lower their cost and
would result in additional order
competition, which also benefits market
participants. The Exchange believes this
proposal promotes liquidity, quote
competition, and trading opportunities.
SQF Ports and SQF Purge Ports are
utilized by Primary Market Makers and
Market Makers to quote on GEMX. A
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 to
organize its business,14 only one SQF
Port is necessary for a Market Maker to
fulfill its regulatory quoting
obligations.15 For those Market Makers
that elect to organize themselves by
obtaining a greater number of SQF Ports
or SQF Purge Ports, they will be subject
to a cap.16 For Market Makers that only
take 1 SQF Port or only a few SQF Ports
or SQF Purge Ports, their costs would be
far below the $27,500 or $17,500
threshold for the cap.
The proposed pricing change to
increase the SQF Fee and SQF Purge
Cap for Primary Market Makers and
Market Makers to $27,500 a month if
Primary Market Makers or Market
Makers do not transact 0.50% of Total
Customer Volume in electronic simple
orders that adds liquidity in a month is
equitable and not unfairly
discriminatory as all Primary Market
Makers and Market Makers would be
able to cap their SQF Port and SQF
Purge Port costs at $17,500, provided
they transacted the requisite volume,
14 For example, a Market Maker may desire to
utilize multiple SQF Ports and SQF Purge Ports for
accounting purposes, to measure performance, for
regulatory reasons or other determinations that are
specific to that member organization.
15 Market Makers have various regulatory
requirements as provided for in Options 2, Section
4. Additionally, 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 GEMX.
16 The number of ports that members choose to
purchase varies widely. Today, on GEMX, no
Market Makers have 1 SQF Port/SQF Purge Port, 1
Market Maker had 2–5 SQF Ports/SQF Purge Ports,
4 Market Makers have between 6–10 SQF Ports/SQF
Purge Ports, and 8 Market Makers have more than
11 SQF Ports/SQF Purge Ports.
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otherwise Primary Market Makers and
Market Makers would be uniformly
subject to the $27,500 SQF Port and
SQF Purge Port Cap. The Exchange
notes that unlike other market
participants, Primary Market Makers are
obligated to quote in the Opening
Process and intra-day.17 Additionally,
Market Makers may enter quotes in the
Opening Process to open an option
series and they are required to quote
intra-day.18 Further, unlike other market
participants, Primary Market Makers
and Market Makers have obligations to
compete with other Market Makers to
improve the market in all series of
options classes to which the Market
Maker is appointed and to update
market quotations in response to
changed market conditions in all series
of options classes to which the Market
Maker is appointed.19 Finally, unlike
other market participants, Primary
Market Makers and Market Makers incur
other costs related to their quoting
obligations in addition to other fees paid
by other market participants. Market
Makers are subject to a number of fees,
unlike other market participants. Market
Makers pay separate Membership
Fees,20 and CMM Trading Right Fees,21
in addition to other fees paid by other
market participants. These liquidity
providers are critical market
participants in that they are the only
market participants that provide
liquidity to GEMX and are necessary for
opening the market. Allowing Primary
Market Makers and Market Makers to
manage their costs by capping SQF
Ports and SQF Purge Ports in addition
to transaction fees enables these
essential market participants to manage
their business model more effectively
and better allocate resources to other
technologies that are necessary to
manage risk and capacity to ensure that
these market participants continue to
compete effectively on GEMX. The
following chart represents the
classification of GEMX members and the
percentage of Market Makers.
17 See
Options 3, Section 8 and Options 2, Section
5.
18 Id.
19 See
Options 2, Section 4(b)(1) and (3).
Options 7, Section 6, A.
21 See Options 7, Section 6, B.
20 See
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54111
GEMX Member Type Distribution
March 2024
52.3$%
MM
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reasonably designed in consideration of
the competitive environment in which
the Exchange operates. This fee
structure incents Primary Market
Makers and Market Makers to support
increased liquidity, quote competition,
and trading opportunities on the
Exchange, for the benefit of all market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Intermarket Competition
The proposal does not impose an
undue burden on intermarket
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Sfmt 4703
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. The
chart below shows the February 2024
market share for multiply listed options
by exchange. Of the 17 operating
options exchanges, none currently has
more than a 17.6% market share.
Customers widely distribute their
transactions across exchanges according
to their business needs and the ability
of each exchange to meet those needs
through technology, liquidity and
functionality.
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EN28JN24.026</GPH>
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GEMX believes Primary Market
Makers and Market Makers should be
eligible for certain incentives because
they fulfill a unique role on the
Exchange and are the only market
participants required to submit quotes
to the Exchange. The proposed SQF Port
and SQF Purge Cap is designed to
ensure that Primary Market Makers and
Market Makers add a certain amount of
liquidity on GEMX in order to be able
to cap their SQF Port and SQF Purge
Port Fees at the lower cap of $17,500 as
compared to the increased cap of
$27,500. The Exchange would apply the
criteria uniformly when applying the
SQF Fee and SQF Purge Cap to Primary
Market Makers and Market Makers.
Finally, GEMX believes the proposed
SQF Fee and SQF Purge Cap is
constrained by competitive forces and
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Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices
Options Market Share by Exchange: February 2024
17.6%
CBOE
ARCA
12.5%
9.3%
PHLX
AMEX
7.0%
EOGX
6.6%
!SE
6.0%
MiAX
6.0%
BOX
Options Exchanges~ Parent Company
BOX
5.8%
5.5%
MPRL
NOM
5.0%
4.0%
BATS
EMLD
3.5%
C2
MEMX
3.1%
1.4%
GEMX
2.4%
MRX
2.4%
BXOP-2.0%
31.3%
MEMX-1.4%
Source: OCC, Nadsaq Economic Research
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Intramarket Competition
The proposed pricing change to
increase the SQF Fee and SQF Purge
Cap for Primary Market Makers and
Market Makers to $27,500 a month if
Primary Market Makers or Market
Makers do not transact 0.50% of Total
Customer Volume in electronic simple
orders that adds liquidity in a month
does not impose an undue burden on
competition as all Primary Market
Makers and Market Makers would be
able to cap their SQF Port and SQF
Purge Port costs at $17,500, provided
they transacted the requisite volume,
otherwise Primary Market Makers and
Market Makers would be uniformly
subject to the $27,500 SQF Port and
SQF Purge Port Cap. The Exchange
notes that unlike other market
participants, Primary Market Makers are
obligated to quote in the Opening
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Process and intra-day.22 Additionally,
Market Makers may enter quotes in the
Opening Process to open an option
series and they are required to quote
intra-day.23 Further, unlike other market
participants, Primary Market Makers
and Market Makers have obligations to
compete with other Market Makers to
improve the market in all series of
options classes to which the Market
Maker is appointed and to update
market quotations in response to
changed market conditions in all series
of options classes to which the Market
Maker is appointed.24 Finally, unlike
other market participants, Primary
Market Makers and Market Makers incur
other costs related to their quoting
obligations in addition to other fees paid
by other market participants. Market
Makers are subject to a number of fees,
unlike other market participants. Market
Makers pay separate Membership
Fees,25 and CMM Trading Right Fees,26
in addition to other fees paid by other
market participants. These liquidity
providers are critical market
participants in that they are the only
market participants that provide
liquidity to GEMX and are necessary for
opening the market. Allowing Primary
Market Makers and Market Makers to
manage their costs by capping SQF
Ports and SQF Purge Ports in addition
to transaction fees enables these
22 See
Options 3, Section 8 and Options 2, Section
5.
23 Id.
essential market participants to manage
their business model more effectively
and better allocate resources to other
technologies that are necessary to
manage risk and capacity to ensure that
these market participants continue to
compete effectively on GEMX. GEMX
believes Primary Market Makers and
Market Makers should be eligible for
certain incentives because they fulfill a
unique role on the Exchange and are the
only market participants required to
submit quotes to the Exchange. The
proposed SQF Port Cap is designed to
ensure that Primary Market Makers and
Market Makers add a certain amount of
liquidity on GEMX in order to be able
to cap their SQF Port and SQF Purge
Port Fees at the lower cap of $17,500 as
compared to the increased cap of
$27,500. The Exchange would apply the
criteria uniformly when applying the
SQF Fee and SQF Purge Cap to Primary
Market Makers and Market Makers.
Finally, GEMX believes the proposed
SQF Fee and SQF Purge Cap is
constrained by competitive forces and
reasonably designed in consideration of
the competitive environment in which
the Exchange operates. This fee
structure incents Primary Market
Makers and Market Makers to support
increased liquidity, quote competition,
and trading opportunities on the
Exchange, for the benefit of all market
participants.
24 See
Options 2, Section 4(b)(1) and (3).
Options 7, Section 6, A.
26 See Options 7, Section 6, B.
25 See
PO 00000
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E:\FR\FM\28JNN1.SGM
28JNN1
EN28JN24.027</GPH>
Market share is the percentage of
volume on a particular exchange
relative to the total volume across all
exchanges, and indicates the amount of
order flow directed to that exchange.
High levels of market share enhance the
value of trading and ports.
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.
Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices
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.27 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:
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–GEMX–2024–13 and should be
submitted on or before July 19, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–14209 Filed 6–27–24; 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–
GEMX–2024–13 on the subject line.
khammond on DSKJM1Z7X2PROD with NOTICES
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–GEMX–2024–13. 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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100407; File No. SR–MRX–
2024–15]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 6
June 24, 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 June 12,
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
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
27 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
19:25 Jun 27, 2024
Jkt 262001
PO 00000
Frm 00176
Fmt 4703
Sfmt 4703
54113
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 6.3 The
Exchange proposes to sunset the
amendments to Options 7, Section 6 on
July 1, 2024. The amendments to
Options 7, Section 6 proposed herein
will remain in effect through the month
of June 2024.
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
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 SR–
MRX–2024–02. On March 7, 2024, the Exchange
withdrew SR–MRX–2024–02 and submitted SR–
MRX–2024–07. On May 1, 2024, the Exchange
withdrew SR–MRX–2024–07 and submitted SR–
MRX–2024–11. On June 12, 2024, the Exchange
withdrew SR–MRX–2024–11 and submitted this
rule change.
E:\FR\FM\28JNN1.SGM
28JNN1
]]>Agencies
[Federal Register Volume 89, Number 125 (Friday, June 28, 2024)]
[Notices]
[Pages 54108-54113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14209]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100406; File No. SR-GEMX-2024-13]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 6
June 24, 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 June 12, 2024, Nasdaq GEMX, LLC (``GEMX'' 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.
---------------------------------------------------------------------------
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.\3\ The
[[Page 54109]]
Exchange proposes to sunset the amendments to Options 7, Section 6, C
on July 1, 2024. The amendments to Options 7, Section 6, C proposed
herein will remain in effect through the month of June 2024.
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed pricing changes on
November 28, 2023 (SR-GEMX-2023-16) to be effective on December 1,
2023. On December 5, 2023, the Exchange withdrew SR-GEMX-2023-16 and
replaced it with SR-GEMX-2023-19. On January 16, 2023, the Exchange
withdrew SR-GEMX-2023-19 and submitted SR-GEMX-2024-03. On March 7,
2024, the Exchange withdrew SR-GEMX-2024-03 and submitted SR-GEMX-
2024-07. On May 1, 2024, the Exchange withdrew SR-GEMX-2024-07 and
submitted SR-GEMX-2024-10. On June 12, 2024, the Exchange withdrew
SR-GEMX-2024-10 and submitted this filing.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/gemx/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, C, Ports and
Other Services. Specifically, the Exchange proposes to amend the
monthly caps for SQF Ports \4\ and SQF Purge Ports.\5\ The Exchange
proposes to sunset the amendments to Options 7, Section 6, C on July 1,
2024. The amendments to Options 7, Section 6, C proposed herein will
remain in effect through the month of June 2024.
---------------------------------------------------------------------------
\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 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 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. 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.
---------------------------------------------------------------------------
Today, GEMX assesses $1,250 per port, per month for an SQF Port as
well as an SQF Purge Port.\6\ Also, today, SQF Ports and SQF Purge
Ports are subject to a monthly cap of $17,500, which cap is applicable
to Market Makers.
---------------------------------------------------------------------------
\6\ The Exchange proposes to add a comma between ``per port''
and ``per month'' in the Options 7, Section 6, C, SQF Port and SQF
Purge Port Fee rule text. The Exchange also proposes to remove an
extraneous period in Options 7, Section 6, C, in the second
paragraph.
---------------------------------------------------------------------------
At this time, the Exchange proposes to establish an increased SQF
Fee and SQF Purge Port Cap to Primary Market Makers and Market Makers
that do not provide a minimum amount of liquidity on GEMX. This
proposed increased SQF Fee and SQF Purge Port Cap is intended to
incentivize Primary Market Makers and Market Makers to add liquidity on
GEMX for the benefit of other market participants in order to lower
their fees. GEMX proposes to increase the SQF Port and SQF Purge Port
Cap to $27,500 a month if a Primary Market Maker or Market Maker does
not transact 0.50% of Total Customer Volume in electronic simple orders
that adds liquidity in a month.\7\ Today, GEMX caps an SQF Port and SQF
Purge Port at $17,500 a month.\8\ With this proposal, the Exchange
would not assess Primary Market Makers and Market Makers an SQF Port
and SQF Purge Port Cap beyond the monthly cap of $27,500, instead of
$17,500, once the Member has exceeded the proposed port cap for the
respective month. Primary Market Makers and Market Makers who transact
0.50% of Total Customer Volume in electronic simple orders that adds
liquidity in a month will continue to be subject to the $17,500 SQF
Port and SQF Purge Port Cap.
---------------------------------------------------------------------------
\7\ For purposes of this cap, ``Total Customer Volume'' shall be
defined as a percentage of all cleared customer volume at The
Options Clearing Corporation in Multiply Listed Equity Options and
Exchange-Traded Products (``TCV'').
\8\ The Exchange also proposes a technical amendment to remove
an extra period in Options 7, Section 6, C.
---------------------------------------------------------------------------
Pursuant to Supplementary Material .03(c) to Options 3, Section 7,
Market Makers may only enter interest into SQF in their assigned
options series. Pursuant to Supplementary Material .03(c) to Options 3,
Section 7, the SQF interface allows Market Makers to connect, send, and
receive messages related to quotes, Immediate-or-Cancel Orders, and
auction responses to the Exchange. An SQF Purge is a specific port for
the SQF interface that only receives and notifies of purge requests
from the Market Maker. A GEMX Market Maker requires only one SQF Port
to submit quotes in its assigned options series into GEMX. While a
Market Maker may elect to obtain multiple SQF Ports and SQF Purge Ports
to organize its business,\9\ only one SQF Port and SQF Purge Port is
necessary for a Market Maker to fulfill its regulatory quoting
obligations.\10\
---------------------------------------------------------------------------
\9\ 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.
\10\ GEMX Market Makers have various regulatory requirements as
provided for in Options 2, Section 4. Additionally, GEMX 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 GEMX and only
Market Makers may utilize SQF Ports. The same is true for SQF Purge
Ports.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees, and
other charges among members and issuers and other
[[Page 54110]]
persons using any facility, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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 if Primary
Market Makers or Market Makers do not transact 0.50% of Total Customer
Volume in electronic simple orders that adds liquidity in a month is
reasonable because it will incentivize Primary Market Makers and Market
Makers to add liquidity on GEMX to lower their costs. The Exchange
believes that the total volume required to achieve the cap is
reasonable as the Exchange has limited the volume to simple orders, as
not all Market Makers transact complex orders. Further, 0.50% of Total
Customer Volume in electronic simple orders that adds liquidity in a
month is an achievable number for Market Makers who currently add
volume to the Exchange. Additionally, the Exchange believes that an SQF
Fee and SQF Purge Port Cap of $27,500, in lieu of $17, 500, is
reasonable because Primary Market Makers and Market Makers are
obligated, among other things, to compete with other Market Makers to
improve the market in all series of options classes to which the Market
Maker is appointed and to update market quotations in response to
changed market conditions in all series of options classes to which the
Market Maker is appointed.\13\ The Exchange believes that it is
reasonable to increase the SQF Port and SQF Purge Port Cap to $27,500
for Primary Market Makers and Market Makers that do not transact 0.50%
of Total Customer Volume in electronic simple orders that adds
liquidity in a month because the Exchange believes that Primary Market
Makers and Market Makers that do not contribute a minimum amount of
liquidity on GEMX should not be subject to the same opportunities to
lower their costs as those Primary Market Makers and Market Makers that
do contribute to liquidity and therefore provide the ability for other
market participants to engage with that order flow. The Exchange
believes that the increase is modest and would serve to encourage
Primary Market Makers and Market Makers to submit order flow to GEMX in
order to lower their cost and would result in additional order
competition, which also benefits market participants. The Exchange
believes this proposal promotes liquidity, quote competition, and
trading opportunities.
---------------------------------------------------------------------------
\13\ See Options 2, Section 4(b)(1) and (3).
---------------------------------------------------------------------------
SQF Ports and SQF Purge Ports are utilized by Primary Market Makers
and Market Makers to quote on GEMX. A 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 to organize its business,\14\ only one SQF Port is necessary for
a Market Maker to fulfill its regulatory quoting obligations.\15\ For
those Market Makers that elect to organize themselves by obtaining a
greater number of SQF Ports or SQF Purge Ports, they will be subject to
a cap.\16\ For Market Makers that only take 1 SQF Port or only a few
SQF Ports or SQF Purge Ports, their costs would be far below the
$27,500 or $17,500 threshold for the cap.
---------------------------------------------------------------------------
\14\ For example, a Market Maker may desire to utilize multiple
SQF Ports and SQF Purge Ports for accounting purposes, to measure
performance, for regulatory reasons or other determinations that are
specific to that member organization.
\15\ Market Makers have various regulatory requirements as
provided for in Options 2, Section 4. Additionally, 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 GEMX.
\16\ The number of ports that members choose to purchase varies
widely. Today, on GEMX, no Market Makers have 1 SQF Port/SQF Purge
Port, 1 Market Maker had 2-5 SQF Ports/SQF Purge Ports, 4 Market
Makers have between 6-10 SQF Ports/SQF Purge Ports, and 8 Market
Makers have more than 11 SQF Ports/SQF Purge Ports.
---------------------------------------------------------------------------
The proposed pricing change to increase the SQF Fee and SQF Purge
Cap for Primary Market Makers and Market Makers to $27,500 a month if
Primary Market Makers or Market Makers do not transact 0.50% of Total
Customer Volume in electronic simple orders that adds liquidity in a
month is equitable and not unfairly discriminatory as all Primary
Market Makers and Market Makers would be able to cap their SQF Port and
SQF Purge Port costs at $17,500, provided they transacted the requisite
volume, otherwise Primary Market Makers and Market Makers would be
uniformly subject to the $27,500 SQF Port and SQF Purge Port Cap. The
Exchange notes that unlike other market participants, Primary Market
Makers are obligated to quote in the Opening Process and intra-day.\17\
Additionally, Market Makers may enter quotes in the Opening Process to
open an option series and they are required to quote intra-day.\18\
Further, unlike other market participants, Primary Market Makers and
Market Makers have obligations to compete with other Market Makers to
improve the market in all series of options classes to which the Market
Maker is appointed and to update market quotations in response to
changed market conditions in all series of options classes to which the
Market Maker is appointed.\19\ Finally, unlike other market
participants, Primary Market Makers and Market Makers incur other costs
related to their quoting obligations in addition to other fees paid by
other market participants. Market Makers are subject to a number of
fees, unlike other market participants. Market Makers pay separate
Membership Fees,\20\ and CMM Trading Right Fees,\21\ in addition to
other fees paid by other market participants. These liquidity providers
are critical market participants in that they are the only market
participants that provide liquidity to GEMX and are necessary for
opening the market. Allowing Primary Market Makers and Market Makers to
manage their costs by capping SQF Ports and SQF Purge Ports in addition
to transaction fees enables these essential market participants to
manage their business model more effectively and better allocate
resources to other technologies that are necessary to manage risk and
capacity to ensure that these market participants continue to compete
effectively on GEMX. The following chart represents the classification
of GEMX members and the percentage of Market Makers.
---------------------------------------------------------------------------
\17\ See Options 3, Section 8 and Options 2, Section 5.
\18\ Id.
\19\ See Options 2, Section 4(b)(1) and (3).
\20\ See Options 7, Section 6, A.
\21\ See Options 7, Section 6, B.
---------------------------------------------------------------------------
[[Page 54111]]
[GRAPHIC] [TIFF OMITTED] TN28JN24.026
GEMX believes Primary Market Makers and Market Makers should be
eligible for certain incentives because they fulfill a unique role on
the Exchange and are the only market participants required to submit
quotes to the Exchange. The proposed SQF Port and SQF Purge Cap is
designed to ensure that Primary Market Makers and Market Makers add a
certain amount of liquidity on GEMX in order to be able to cap their
SQF Port and SQF Purge Port Fees at the lower cap of $17,500 as
compared to the increased cap of $27,500. The Exchange would apply the
criteria uniformly when applying the SQF Fee and SQF Purge Cap to
Primary Market Makers and Market Makers.
Finally, GEMX believes the proposed SQF Fee and SQF Purge Cap is
constrained by competitive forces and reasonably designed in
consideration of the competitive environment in which the Exchange
operates. This fee structure incents Primary Market Makers and Market
Makers to support increased liquidity, quote competition, and trading
opportunities on the Exchange, for the benefit of all market
participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
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. The chart below shows the
February 2024 market share for multiply listed options by exchange. Of
the 17 operating options exchanges, none currently has more than a
17.6% market share. Customers widely distribute their transactions
across exchanges according to their business needs and the ability of
each exchange to meet those needs through technology, liquidity and
functionality.
[[Page 54112]]
[GRAPHIC] [TIFF OMITTED] TN28JN24.027
Market share is the percentage of volume on a particular exchange
relative to the total volume across all exchanges, and indicates the
amount of order flow directed to that exchange. High levels of market
share enhance the value of trading and ports.
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.
Intramarket Competition
The proposed pricing change to increase the SQF Fee and SQF Purge
Cap for Primary Market Makers and Market Makers to $27,500 a month if
Primary Market Makers or Market Makers do not transact 0.50% of Total
Customer Volume in electronic simple orders that adds liquidity in a
month does not impose an undue burden on competition as all Primary
Market Makers and Market Makers would be able to cap their SQF Port and
SQF Purge Port costs at $17,500, provided they transacted the requisite
volume, otherwise Primary Market Makers and Market Makers would be
uniformly subject to the $27,500 SQF Port and SQF Purge Port Cap. The
Exchange notes that unlike other market participants, Primary Market
Makers are obligated to quote in the Opening Process and intra-day.\22\
Additionally, Market Makers may enter quotes in the Opening Process to
open an option series and they are required to quote intra-day.\23\
Further, unlike other market participants, Primary Market Makers and
Market Makers have obligations to compete with other Market Makers to
improve the market in all series of options classes to which the Market
Maker is appointed and to update market quotations in response to
changed market conditions in all series of options classes to which the
Market Maker is appointed.\24\ Finally, unlike other market
participants, Primary Market Makers and Market Makers incur other costs
related to their quoting obligations in addition to other fees paid by
other market participants. Market Makers are subject to a number of
fees, unlike other market participants. Market Makers pay separate
Membership Fees,\25\ and CMM Trading Right Fees,\26\ in addition to
other fees paid by other market participants. These liquidity providers
are critical market participants in that they are the only market
participants that provide liquidity to GEMX and are necessary for
opening the market. Allowing Primary Market Makers and Market Makers to
manage their costs by capping SQF Ports and SQF Purge Ports in addition
to transaction fees enables these essential market participants to
manage their business model more effectively and better allocate
resources to other technologies that are necessary to manage risk and
capacity to ensure that these market participants continue to compete
effectively on GEMX. GEMX believes Primary Market Makers and Market
Makers should be eligible for certain incentives because they fulfill a
unique role on the Exchange and are the only market participants
required to submit quotes to the Exchange. The proposed SQF Port Cap is
designed to ensure that Primary Market Makers and Market Makers add a
certain amount of liquidity on GEMX in order to be able to cap their
SQF Port and SQF Purge Port Fees at the lower cap of $17,500 as
compared to the increased cap of $27,500. The Exchange would apply the
criteria uniformly when applying the SQF Fee and SQF Purge Cap to
Primary Market Makers and Market Makers.
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\22\ See Options 3, Section 8 and Options 2, Section 5.
\23\ Id.
\24\ See Options 2, Section 4(b)(1) and (3).
\25\ See Options 7, Section 6, A.
\26\ See Options 7, Section 6, B.
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Finally, GEMX believes the proposed SQF Fee and SQF Purge Cap is
constrained by competitive forces and reasonably designed in
consideration of the competitive environment in which the Exchange
operates. This fee structure incents Primary Market Makers and Market
Makers to support increased liquidity, quote competition, and trading
opportunities on the Exchange, for the benefit of all market
participants.
[[Page 54113]]
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.\27\ 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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\27\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-GEMX-2024-13 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-GEMX-2024-13. 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-GEMX-2024-13 and should be
submitted on or before July 19, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-14209 Filed 6-27-24; 8:45 am]
BILLING CODE 8011-01-P
