Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3, 54104-54108 [2024-14211]

Download as PDF 54104 Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices 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–CBOE–2024–022 and should be submitted on or before July 19, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Vanessa A. Countryman, Secretary. [FR Doc. 2024–14212 Filed 6–27–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–269, OMB Control No. 3235–0276] khammond on DSKJM1Z7X2PROD with NOTICES Proposed Collection; Comment Request; Extension: Rule 6c–7 Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 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 (the ‘‘Commission’’) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Rule 6c–7 (17 CFR 270.6c–7) under the Investment Company Act of 1940 24 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 19:25 Jun 27, 2024 Jkt 262001 (15 U.S.C. 80a-1 et seq.) (‘‘1940 Act’’) provides exemption from certain provisions of Sections 22(e) and 27 of the 1940 Act for registered separate accounts offering variable annuity contracts to certain employees of Texas institutions of higher education participating in the Texas Optional Retirement Program. There are approximately 129 registrants governed by Rule 6c–7. The burden of compliance with Rule 6c–7, in connection with the registrants obtaining from a purchaser, prior to or at the time of purchase, a signed document acknowledging the restrictions on redeemability imposed by Texas law, is estimated to be approximately 3 minutes of professional time per response for each of approximately 5,900 purchasers annually (at an estimated $84 per hour),1 for a total annual burden of 295 hours (at a total annual cost of $24,780). The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act, and is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules or forms. The Commission does not include in the estimate of average burden hours the time preparing registration statements and sales literature disclosure regarding the restrictions on redeem ability imposed by Texas law. The estimate of burden hours for completing the relevant registration statements are reported on the separate PRA submissions for those statements. (See the separate PRA submissions for Form N–3 (17 CFR 274.11b) and Form N–4 (17 CFR 274.11c).) Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of 1 $84/hour figure for a Compliance Clerk is based on the Commission’s estimates concerning the allocation of burden hours and the relevant wage rates from the Commission’s consultations with industry representatives and on salary information for the securities industry compiled by the Securities Industry and Financial Markets Association’s Office Salaries in the Securities Industry 2013; the estimated wage figures are modified by Commission staff to account for an 1800-hour work-year and multiplied by 2.93 to account for bonuses, firm size, employee benefits, overhead, and adjusted to account for the effects of inflation; see Securities Industry and Financial Markets Association, Report on Management & Professional Earnings in the Securities Industry 2013. PO 00000 Frm 00167 Fmt 4703 Sfmt 4703 information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by August 27, 2024. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. Please direct your written comments to: David Bottom, Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street, NE Washington, DC 20549 or send an email to: PRA_Mailbox@ sec.gov. Dated: June 24, 2024. Vanessa A. Countryman, Secretary. [FR Doc. 2024–14220 Filed 6–27–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100408; File No. SR– NASDAQ–2024–025] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3 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, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ 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 The Nasdaq Options Market LLC’s (‘‘NOM’’) Rules at Options 7, Section 3, Nasdaq Options Market—Ports and Other Services.3 The Exchange proposes to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Exchange initially filed the proposed pricing changes on November 28, 2023 (SR– NASDAQ–2023–050) to be effective on December 1, 2023. On December 5, 2023, the Exchange withdrew SR–NASDAQ–2023–050 and placed it with SR– NASDAQ–2023–054. On January 16, 2023, the Exchange withdrew SR–NASDAQ–2023–054 and 2 17 E:\FR\FM\28JNN1.SGM 28JNN1 Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices sunset the amendments to Options 7, Section 3 on July 1, 2024. The amendments to Options 7, Section 3 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/nasdaq/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. khammond on DSKJM1Z7X2PROD with NOTICES 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 3, Nasdaq Options Market—Ports and Other Services. The Exchange proposes to sunset the amendments to Options 7, Section 3 on July 1, 2024. The amendments to Options 7, Section 3 proposed herein will remain in effect through the month of June 2024. Today, NOM assesses SQF Ports and SQF Purge Ports a per port, per month fee based on a tiered fee schedule. Specifically, NOM assesses an SQF Port and an SQF Purge Port fee of $1,500 per port, per month for the first 5 ports (1– 5), a $1,000 per port, per month fee for the next 15 ports (6–20), and a $500 per port, per month fee for all ports over 20 ports (21 and above). At this time, the Exchange proposes to establish an increased fee for SQF Ports and SQF Ports above 20 ports (21 and above) that do not provide a minimum amount of liquidity on NOM. This increased fee is intended to incentivize Market Makers to add liquidity on NOM for the benefit of other market submitted SR–NASDAQ–2024–003. On March 7, 2024, the Exchange withdrew SR–NASDAQ–2024– 003 and submitted SR–NASDAQ–2024–012. On May 1, 2024, the Exchange withdrew SR– NASDAQ–2024–012 and submitted SR–NASDAQ– 2024–021. On June 12, 2024, the Exchange withdrew SR–NASDAQ–2024–021 and submitted this filing. VerDate Sep<11>2014 19:25 Jun 27, 2024 Jkt 262001 participants. Specifically, NOM proposes an SQF Port Fee and an SQF Purge Port Fee of $750 per port for all ports above 20 ports if a Market Maker did not transact 1.50% of Total Customer Volume in electronic simple orders that adds liquidity in a month.4 Market Makers who transact 1.50% of Total Customer Volume that adds liquidity in a month will continue to be assessed a $500 per port fee for SQF Ports and SQF Purge Ports for over 20 ports. The Exchange believes that Market Makers will add liquidity to NOM in order to decrease their costs of doing business on the Exchange by achieving the lower SQF Port Fee and SQF Purge Port Fee for more than 20 ports. Pursuant to Options 3, Section 7(e)(1)(B), NOM Market Makers may only enter quotes into SQF in their assigned options series. Pursuant to Options 3, Section 7(e)(1)(B), the SQF interface allows NOM 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 NOM Market Maker may submit all quotes through one SQF Port and utilize one SQF Purge Port to view its purge requests. While a NOM Market Maker may elect to obtain multiple SQF Ports and SQF Purge Ports to organize its business,5 only one SQF Port and SQF Purge Port is necessary for a NOM Market Maker to fulfill its regulatory quoting obligations.6 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) 4 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’’). 5 For example, a NOM 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 NOM Participant. The Exchange notes that 78% of NOM Market Makers pay the $1,000 per port, per month fee for 6–20 ports and 39% pay the proposed $750 per port, per month fee for over 20 ports. 6 NOM Market Makers have various regulatory requirements as provided for in Options 2, Section 4. Additionally, NOM Market Makers have certain quoting requirements with respect to their assigned options series as provided in Options 2, Section 5. The Exchange notes that SQF Ports are the only quoting protocol available on NOM and only NOM Market Makers may utilize SQF Ports. The same is true for SQF Purge Ports. 7 15 U.S.C. 78f(b). PO 00000 Frm 00168 Fmt 4703 Sfmt 4703 54105 of the Act,8 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The proposed pricing change to increase the SQF Port Fee and SQF Purge Port Fee for above 20 ports to $750 per port if a Market Maker does not transact 1.50% of Total Customer Volume that adds liquidity in a month is reasonable because it will incentivize Market Makers to add liquidity on NOM to lower their costs. Further, 1.50% of Total Customer Volume that adds liquidity in a month is an achievable number for Market Makers who currently add volume to the Exchange. The Exchange believes that increasing the SQF Port Fee and SQF Purge Port Fee for above 20 ports from $500 to $750 per port is reasonable because Market Makers are obligated, among other things, to maintain a two-sided market in those options in which the Market Maker is registered to trade, in a manner that enhances the depth, liquidity and competitiveness of the market and compete with other Market Makers in all options in all capacities in which the Market Maker is registered to trade.9 The Exchange believes that it is reasonable to increase the SQF Port Fee and SQF Purge Port Fee for above 20 ports from $500 to $750 per port for Market Makers that do not transact 1.50% of Total Customer Volume that adds liquidity in a month because the Exchange believes that Market Makers that do not contribute a minimum amount of liquidity on NOM should not be subject to the same opportunities to lower their costs as those 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 Market Makers to submit order flow to NOM in order to lower their cost and would result in additional order competition. The Exchange believes this proposal promotes liquidity, quote competition, and trading opportunities. A NOM Market Maker requires only one SQF Port to submit quotes in its assigned options series into NOM. A NOM Market Maker may submit all quotes through one SQF Port and utilize one SQF Purge Port to view its purge requests. While a NOM Market Maker may elect to obtain multiple SQF Ports 8 15 U.S.C. 78f(b)(4) and (5). Options 2, Section 4(a)(1) and (3). 9 See E:\FR\FM\28JNN1.SGM 28JNN1 54106 Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices and SQF Purge Ports to organize its business,10 only one SQF Port and SQF Purge Port is necessary for a NOM Market Maker to fulfill its regulatory quoting obligations. For those Market Makers that elect to organize themselves by obtaining a greater number of SQF Ports and SQF Purge Ports they will be able to reduce their fees.11 Participants may choose a greater number of SQF Ports or SQF Purge Ports, beyond one port, depending on that Participant’s particular business model. The proposed pricing change to increase the SQF Port Fee and SQF Purge Port Fee for above 20 ports to $750 per port if a Market Maker does not transact 1.50% of Total Customer Volume that adds liquidity in a month is equitable and not unfairly discriminatory as the Exchange would uniformly apply the criteria when assessing fees. The Exchange notes that unlike other market participants, Market Makers are required to quote intraday.12 Further, unlike other market participants, Market Makers have obligations to the market to maintain a two-sided market in those options in which the Market Maker is registered to trade, in a manner that enhances the depth, liquidity and competitiveness of the market and compete with other Market Makers in all options in all capacities in which the Market Maker is registered to trade, among other obligations.13 These liquidity providers are critical market participants in that they are the only market participants that provide liquidity to NOM. Allowing Market Makers to manage their costs by lowering the SQF Port and SQF Purge Port Fees for above 20 ports 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 NOM. The following chart represents the classification of NOM members and the percentage of Market Makers. NOM Member Type Distribution The Exchange believes that 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 reduced fee for above 20 ports is designed to ensure that Market Makers that add a certain amount of liquidity on NOM could obtain lower fees for above 20 ports to reduce costs. The Exchange desires to reward Market Makers provided they are adding a certain amount of liquidity to NOM and would apply the criteria uniformly. Finally, the reduced SQF Port and SQF Purge Port fees for above 20 ports is constrained by competitive forces and reasonably designed in consideration of the competitive environment in which the Exchange operates. This fee structure incents 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 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 10 For example, a NOM 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 Participant. 11 The number of ports that member organizations choose to purchase varies widely. Today, on Phlx, 2 Market Makers have 1 SQF Port, 5 Market Makers have 2–5 SQF Ports, 4 Market Makers have between 6–10 SQF Ports, and 11 Market Makers have more than 10 SQF Ports. Additionally, today, on Nasdaq GEMX, LLC no Market Makers have 1 SQF Port/ SQF Purge Port, 1 Market Maker has 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 10 SQF Ports/SQF Purge Ports. Finally, on Nasdaq MRX LLC (‘‘MRX’’), 2 Market Makers have 1 SQF Ports/SQF Purge Ports, no Market Makers have 2–5 SQF Ports/SQF Purge Ports, 2 Market Makers have between 6–10 SQF Ports/SQF Purge Ports, and 6 Market Makers have more than 10 SQF Ports/SQF Purge Ports. 12 See Options 2, Section 5(d). 13 See Options 2, Section 4(a)(1) and (3). VerDate Sep<11>2014 19:25 Jun 27, 2024 Jkt 262001 PO 00000 Frm 00169 Fmt 4703 Sfmt 4703 any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. E:\FR\FM\28JNN1.SGM 28JNN1 EN28JN24.024</GPH> khammond on DSKJM1Z7X2PROD with NOTICES March2024 Federal Register / Vol. 89, No. 125 / Friday, June 28, 2024 / Notices 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 54107 of each exchange to meet those needs through technology, liquidity and functionality. Options Market Share by Exchange: February 2024 CBOE 17.6% ARCA 12.5% PHLX 9.3% AMEX 7.0% EDGX 6.6% !SE 6.0% MlAX 6.0% BOX Options Exchanges- Parent Company 5.8% MPRL 5.5% NOM 5.0% BATS 4.0% 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 khammond on DSKJM1Z7X2PROD with NOTICES Intramarket Competition The proposed pricing change to increase the SQF Port Fee and SQF Purge Port Fee for above 20 ports to $750 per port if a Market Maker does not transact 1.50% of Total Customer Volume that adds liquidity in a month does not impose an undue burden on competition as the Exchange would uniformly apply the criteria when assessing fees. The Exchange notes that unlike other market participants, Market Makers are required to quote intraday.14 Further, unlike other market participants, Market Makers have 14 See Options 2, Section 5(d). VerDate Sep<11>2014 19:25 Jun 27, 2024 obligations to the market to maintain a two-sided market in those options in which the Market Maker is registered to trade, in a manner that enhances the depth, liquidity and competitiveness of the market and compete with other Market Makers in all options in all capacities in which the Market Maker is registered to trade, among other obligations.15 These liquidity providers are critical market participants in that they are the only market participants that provide liquidity to NOM. Allowing Market Makers to manage their costs by lowering the SQF Port and SQF Purge Port Fees for above 20 ports 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 NOM. The Exchange believes that 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 reduced fee for above 20 ports is designed to ensure that Market Makers that add a certain amount of liquidity on NOM could obtain lower fees for above 20 ports to reduce costs. The Exchange 15 See Jkt 262001 PO 00000 Options 2, Section 4(a)(1) and (3). Frm 00170 Fmt 4703 Sfmt 4703 desires to reward Market Makers provided they are adding a certain amount of liquidity to NOM and would apply the criteria uniformly. Finally, the reduced SQF Port and SQF Purge Port fees for above 20 ports is constrained by competitive forces and reasonably designed in consideration of the competitive environment in which the Exchange operates. This fee structure incents Market Makers to support increased liquidity, quote competition, and trading opportunities on the Exchange, for the benefit of all market participants. 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.16 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 16 15 E:\FR\FM\28JNN1.SGM U.S.C. 78s(b)(3)(A)(ii). 28JNN1 EN28JN24.025</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. 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: khammond on DSKJM1Z7X2PROD with NOTICES 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 VerDate Sep<11>2014 19:25 Jun 27, 2024 Jkt 262001 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 PO 00000 Frm 00171 Fmt 4703 Sfmt 4703 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– E:\FR\FM\28JNN1.SGM 28JNN1

Agencies

[Federal Register Volume 89, Number 125 (Friday, June 28, 2024)]
[Notices]
[Pages 54104-54108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14211]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100408; File No. SR-NASDAQ-2024-025]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Options 7, Section 3

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, The Nasdaq Stock Market LLC (``Nasdaq'' 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend The Nasdaq Options Market LLC's 
(``NOM'') Rules at Options 7, Section 3, Nasdaq Options Market--Ports 
and Other Services.\3\ The Exchange proposes to

[[Page 54105]]

sunset the amendments to Options 7, Section 3 on July 1, 2024. The 
amendments to Options 7, Section 3 proposed herein will remain in 
effect through the month of June 2024.
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    \3\ The Exchange initially filed the proposed pricing changes on 
November 28, 2023 (SR-NASDAQ-2023-050) to be effective on December 
1, 2023. On December 5, 2023, the Exchange withdrew SR-NASDAQ-2023-
050 and placed it with SR-NASDAQ-2023-054. On January 16, 2023, the 
Exchange withdrew SR-NASDAQ-2023-054 and submitted SR-NASDAQ-2024-
003. On March 7, 2024, the Exchange withdrew SR-NASDAQ-2024-003 and 
submitted SR-NASDAQ-2024-012. On May 1, 2024, the Exchange withdrew 
SR-NASDAQ-2024-012 and submitted SR-NASDAQ-2024-021. On June 12, 
2024, the Exchange withdrew SR-NASDAQ-2024-021 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/nasdaq/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 3, Nasdaq Options 
Market--Ports and Other Services. The Exchange proposes to sunset the 
amendments to Options 7, Section 3 on July 1, 2024. The amendments to 
Options 7, Section 3 proposed herein will remain in effect through the 
month of June 2024.
    Today, NOM assesses SQF Ports and SQF Purge Ports a per port, per 
month fee based on a tiered fee schedule. Specifically, NOM assesses an 
SQF Port and an SQF Purge Port fee of $1,500 per port, per month for 
the first 5 ports (1-5), a $1,000 per port, per month fee for the next 
15 ports (6-20), and a $500 per port, per month fee for all ports over 
20 ports (21 and above).
    At this time, the Exchange proposes to establish an increased fee 
for SQF Ports and SQF Ports above 20 ports (21 and above) that do not 
provide a minimum amount of liquidity on NOM. This increased fee is 
intended to incentivize Market Makers to add liquidity on NOM for the 
benefit of other market participants. Specifically, NOM proposes an SQF 
Port Fee and an SQF Purge Port Fee of $750 per port for all ports above 
20 ports if a Market Maker did not transact 1.50% of Total Customer 
Volume in electronic simple orders that adds liquidity in a month.\4\ 
Market Makers who transact 1.50% of Total Customer Volume that adds 
liquidity in a month will continue to be assessed a $500 per port fee 
for SQF Ports and SQF Purge Ports for over 20 ports. The Exchange 
believes that Market Makers will add liquidity to NOM in order to 
decrease their costs of doing business on the Exchange by achieving the 
lower SQF Port Fee and SQF Purge Port Fee for more than 20 ports.
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    \4\ 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'').
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    Pursuant to Options 3, Section 7(e)(1)(B), NOM Market Makers may 
only enter quotes into SQF in their assigned options series. Pursuant 
to Options 3, Section 7(e)(1)(B), the SQF interface allows NOM 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 NOM Market 
Maker may submit all quotes through one SQF Port and utilize one SQF 
Purge Port to view its purge requests. While a NOM Market Maker may 
elect to obtain multiple SQF Ports and SQF Purge Ports to organize its 
business,\5\ only one SQF Port and SQF Purge Port is necessary for a 
NOM Market Maker to fulfill its regulatory quoting obligations.\6\
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    \5\ For example, a NOM 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 NOM Participant. The Exchange notes that 78% of NOM Market 
Makers pay the $1,000 per port, per month fee for 6-20 ports and 39% 
pay the proposed $750 per port, per month fee for over 20 ports.
    \6\ NOM Market Makers have various regulatory requirements as 
provided for in Options 2, Section 4. Additionally, NOM Market 
Makers have certain quoting requirements with respect to their 
assigned options series as provided in Options 2, Section 5. The 
Exchange notes that SQF Ports are the only quoting protocol 
available on NOM and only NOM Market Makers may utilize SQF Ports. 
The same is true for SQF Purge Ports.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed pricing change to increase the SQF Port Fee and SQF 
Purge Port Fee for above 20 ports to $750 per port if a Market Maker 
does not transact 1.50% of Total Customer Volume that adds liquidity in 
a month is reasonable because it will incentivize Market Makers to add 
liquidity on NOM to lower their costs. Further, 1.50% of Total Customer 
Volume that adds liquidity in a month is an achievable number for 
Market Makers who currently add volume to the Exchange. The Exchange 
believes that increasing the SQF Port Fee and SQF Purge Port Fee for 
above 20 ports from $500 to $750 per port is reasonable because Market 
Makers are obligated, among other things, to maintain a two-sided 
market in those options in which the Market Maker is registered to 
trade, in a manner that enhances the depth, liquidity and 
competitiveness of the market and compete with other Market Makers in 
all options in all capacities in which the Market Maker is registered 
to trade.\9\ The Exchange believes that it is reasonable to increase 
the SQF Port Fee and SQF Purge Port Fee for above 20 ports from $500 to 
$750 per port for Market Makers that do not transact 1.50% of Total 
Customer Volume that adds liquidity in a month because the Exchange 
believes that Market Makers that do not contribute a minimum amount of 
liquidity on NOM should not be subject to the same opportunities to 
lower their costs as those 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 Market Makers to 
submit order flow to NOM in order to lower their cost and would result 
in additional order competition. The Exchange believes this proposal 
promotes liquidity, quote competition, and trading opportunities.
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    \9\ See Options 2, Section 4(a)(1) and (3).
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    A NOM Market Maker requires only one SQF Port to submit quotes in 
its assigned options series into NOM. A NOM Market Maker may submit all 
quotes through one SQF Port and utilize one SQF Purge Port to view its 
purge requests. While a NOM Market Maker may elect to obtain multiple 
SQF Ports

[[Page 54106]]

and SQF Purge Ports to organize its business,\10\ only one SQF Port and 
SQF Purge Port is necessary for a NOM Market Maker to fulfill its 
regulatory quoting obligations. For those Market Makers that elect to 
organize themselves by obtaining a greater number of SQF Ports and SQF 
Purge Ports they will be able to reduce their fees.\11\ Participants 
may choose a greater number of SQF Ports or SQF Purge Ports, beyond one 
port, depending on that Participant's particular business model.
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    \10\ For example, a NOM 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 Participant.
    \11\ The number of ports that member organizations choose to 
purchase varies widely. Today, on Phlx, 2 Market Makers have 1 SQF 
Port, 5 Market Makers have 2-5 SQF Ports, 4 Market Makers have 
between 6-10 SQF Ports, and 11 Market Makers have more than 10 SQF 
Ports. Additionally, today, on Nasdaq GEMX, LLC no Market Makers 
have 1 SQF Port/SQF Purge Port, 1 Market Maker has 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 10 SQF Ports/SQF Purge 
Ports. Finally, on Nasdaq MRX LLC (``MRX''), 2 Market Makers have 1 
SQF Ports/SQF Purge Ports, no Market Makers have 2-5 SQF Ports/SQF 
Purge Ports, 2 Market Makers have between 6-10 SQF Ports/SQF Purge 
Ports, and 6 Market Makers have more than 10 SQF Ports/SQF Purge 
Ports.
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    The proposed pricing change to increase the SQF Port Fee and SQF 
Purge Port Fee for above 20 ports to $750 per port if a Market Maker 
does not transact 1.50% of Total Customer Volume that adds liquidity in 
a month is equitable and not unfairly discriminatory as the Exchange 
would uniformly apply the criteria when assessing fees. The Exchange 
notes that unlike other market participants, Market Makers are required 
to quote intra-day.\12\ Further, unlike other market participants, 
Market Makers have obligations to the market to maintain a two-sided 
market in those options in which the Market Maker is registered to 
trade, in a manner that enhances the depth, liquidity and 
competitiveness of the market and compete with other Market Makers in 
all options in all capacities in which the Market Maker is registered 
to trade, among other obligations.\13\ These liquidity providers are 
critical market participants in that they are the only market 
participants that provide liquidity to NOM. Allowing Market Makers to 
manage their costs by lowering the SQF Port and SQF Purge Port Fees for 
above 20 ports 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 NOM. The following chart represents the classification of NOM 
members and the percentage of Market Makers.
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    \12\ See Options 2, Section 5(d).
    \13\ See Options 2, Section 4(a)(1) and (3).
    [GRAPHIC] [TIFF OMITTED] TN28JN24.024
    
    The Exchange believes that 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 reduced fee for above 20 ports is designed to 
ensure that Market Makers that add a certain amount of liquidity on NOM 
could obtain lower fees for above 20 ports to reduce costs. The 
Exchange desires to reward Market Makers provided they are adding a 
certain amount of liquidity to NOM and would apply the criteria 
uniformly.
    Finally, the reduced SQF Port and SQF Purge Port fees for above 20 
ports is constrained by competitive forces and reasonably designed in 
consideration of the competitive environment in which the Exchange 
operates. This fee structure incents 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

[[Page 54107]]

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.
[GRAPHIC] [TIFF OMITTED] TN28JN24.025

    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 Port Fee and SQF 
Purge Port Fee for above 20 ports to $750 per port if a Market Maker 
does not transact 1.50% of Total Customer Volume that adds liquidity in 
a month does not impose an undue burden on competition as the Exchange 
would uniformly apply the criteria when assessing fees. The Exchange 
notes that unlike other market participants, Market Makers are required 
to quote intra-day.\14\ Further, unlike other market participants, 
Market Makers have obligations to the market to maintain a two-sided 
market in those options in which the Market Maker is registered to 
trade, in a manner that enhances the depth, liquidity and 
competitiveness of the market and compete with other Market Makers in 
all options in all capacities in which the Market Maker is registered 
to trade, among other obligations.\15\ These liquidity providers are 
critical market participants in that they are the only market 
participants that provide liquidity to NOM. Allowing Market Makers to 
manage their costs by lowering the SQF Port and SQF Purge Port Fees for 
above 20 ports 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 NOM. The Exchange believes that 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 reduced fee for above 20 ports is designed to 
ensure that Market Makers that add a certain amount of liquidity on NOM 
could obtain lower fees for above 20 ports to reduce costs. The 
Exchange desires to reward Market Makers provided they are adding a 
certain amount of liquidity to NOM and would apply the criteria 
uniformly.
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    \14\ See Options 2, Section 5(d).
    \15\ See Options 2, Section 4(a)(1) and (3).
---------------------------------------------------------------------------

    Finally, the reduced SQF Port and SQF Purge Port fees for above 20 
ports is constrained by competitive forces and reasonably designed in 
consideration of the competitive environment in which the Exchange 
operates. This fee structure incents Market Makers to support increased 
liquidity, quote competition, and trading opportunities on the 
Exchange, for the benefit of all market participants.

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.\16\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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

[[Page 54108]]

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 [email protected]. 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 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\
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    \17\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-14211 Filed 6-27-24; 8:45 am]
BILLING CODE 8011-01-P
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