Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3, 57978-57982 [2024-15502]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES 57978 Federal Register / Vol. 89, No. 136 / Tuesday, July 16, 2024 / Notices Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow. Moreover, the Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow in response to new or different pricing structures being introduced to the market. As described above, the proposed change is a competitive proposal through which the Exchange seeks to encourage certain order flow to the Exchange and to promote market quality through an alternative pricing incentive that is similar in structure and purpose to a pricing program available at the Exchange, as well as at least one competing equities exchange.35 Accordingly, the Exchange believes the proposal would not burden, but rather promote, intermarket competition by enabling it to better compete with other exchanges that offer similar incentives to market participants that enhance market quality. Additionally, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 36 The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the DC circuit stated: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possess a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’ . . . .’’ 37 Accordingly, the Exchange 35 See supra notes 9 and 26. Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 37 See NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR does not believe its proposed pricing changes impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor 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,38 and Rule 19b–4(f)(2) 39 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR–PEARL–2024–28 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–PEARL–2024–28. 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 36 See VerDate Sep<11>2014 16:55 Jul 15, 2024 Jkt 262001 74770, 74782–83 (December 9, 2008) (SR–NYSE– 2006–21)). 38 15 U.S.C. 78s(b)(3)(A)(ii). 39 17 CFR 240.19b–4(f)(2). PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 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–PEARL–2024–28 and should be submitted on or before August 6, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.40 Vanessa A. Countryman, Secretary. [FR Doc. 2024–15505 Filed 7–15–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100488; File No. SR– NASDAQ–2024–036] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 3 DATES: 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 July 1, 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 40 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\16JYN1.SGM 16JYN1 Federal Register / Vol. 89, No. 136 / Tuesday, July 16, 2024 / Notices 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. 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 khammond on DSKJM1Z7X2PROD with NOTICES The Exchange proposes to amend Options 7, Section 3, Nasdaq Options Market—Ports and Other Services. Specifically, the Exchange proposes to amend Options 7, Section 3(i) to increase the per port, per month SQF VerDate Sep<11>2014 16:55 Jul 15, 2024 Jkt 262001 Port 3 and SQF Purge 4 Port Fees for all ports over 20 ports (21 and above).5 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 $750 per port, per month fee for all ports over 20 ports (21 and above). At this time, the Exchange proposes to increase the per port, per month fee for SQF Ports and SQF Ports above 20 ports (21 and above) for Market Makers based on the size of the Market Maker on NOM. The Exchange is determining the size of the Market Maker based on the amount of transactional volume executed on NOM in a given month. The Exchange proposes to take each Market’s Maker’s electronic monthly transactional volume via SQF on NOM and divide that number by the sum of all Market Maker electronic monthly transactional volume via SQF on NOM (‘‘Transactional Volume’’). All SQF interest would be considered. Each Market Maker would then be classified on NOM, for the purpose of the SQF Port Fee and SQF Purge Port Fee, as a ‘‘small,’’ ‘‘medium,’’ or ‘‘large’’ Market Maker based on their Transactional Volume on NOM to determine the applicable fee in a given month for all SQF Ports and SQF Purge Ports over 20 ports. Market Makers that qualify as ‘‘medium’’ would be subject to an increased monthly fee of $625 per port for all SQF Ports and SQF Purge Ports over 20 ports. Market Makers that qualify as ‘‘large’’ would be subject to an increased monthly fee of $750 per port for all SQF Ports and SQF Purge Ports 3 ‘‘Specialized Quote Feed’’ or ‘‘SQF’’ is an interface that allows Market Makers to connect, send, and receive messages related to quotes and Immediate-or-Cancel Orders into and from 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; and (8) opening imbalance messages. 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, or Size Limitation in Options 3, Section 15(a)(1) and (a)(2), and (b)(2), respectively. See Options 3, Section 7(e)(1)(B). 4 SQF Purge is a specific port for the SQF interface that only receives and notifies of purge requests from the NOM Market Maker. 5 The Exchange also proposes a technical amendment to remove an extraneous period in Options 7, Section 3 in the second paragraph. PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 57979 over 20 ports. Market Makers that qualify as ‘‘small’’ would continue to pay a monthly fee of $500 per port for all SQF Port and SQF Purge Port Fees for all ports over 20 ports. The Exchange believes that these increased SQF Port and SQF Purge Port Fees for all ports over 20 ports for Market Maker that qualify as ‘‘medium’’ and ‘‘large,’’ will offer a level playing field related to pricing when acquiring a larger amount of ports. 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 and SQF Purge Ports to organize its business,6 only one SQF Port and SQF Purge Port is necessary for a NOM Market Maker to fulfill its regulatory quoting obligations.7 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,9 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that increasing the fee for SQF Ports and SQF Purge Ports over 20 ports (21 and above) for Market Makers that qualify as ‘‘medium’’ from $500 to $625 per month, and to increase the SQF Port Fee and SQF Purge Port Fee Cap for Market Makers that qualify as ‘‘large’’ from $500 to $750 per month, is reasonable because these increased SQF Port and SQF Purge Port Fees for all ports over 20 ports for Market Maker that qualify 6 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. 7 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. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\16JYN1.SGM 16JYN1 57980 Federal Register / Vol. 89, No. 136 / Tuesday, July 16, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES as ‘‘medium’’ and ‘‘large’’ will offer a level playing field related to pricing when acquiring a larger amount of ports. 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 Market Maker may elect to obtain multiple SQF Ports and SQF Purge Ports to organize its business,10 only one SQF Port and SQF Purge Port is necessary for a Market Maker to fulfill its regulatory quoting obligations.11 Members may choose a greater number of SQF Ports or SQF Purge Ports, beyond one port, depending on that Member’s particular business model. Additionally, the Exchange believes that the caps are reasonable for two reasons. First, SQF Ports are a secure method for Market Makers to submit quotes into the Exchange’s match engine and for the Exchange to send messages related to those quotes to Market Makers. NOM must manage the security and message traffic, among other things, for each port. Utilizing a methodology based on the ‘‘size’’ of the Market Maker as determined by Transactional Volume, provides every Market Maker the ability to manage cost. Additionally, the Exchange would have the ability to manage the quantity of SQF Ports and SQF Purge Ports issued by the Exchange. The various SQF Port and SQF Purge Port Fees were determined based on the level of Transactional Volume on NOM in 2024 for Market Makers. The Exchange assessed each level of Market Maker an increased fee based on size, as reflected by Transactional Volume, to reflect the various sizes of Market Makers present on the Exchange at this time. By establishing different SQF Ports and SQF Purge Port Fees at different levels based on ‘‘size,’’ the Exchange is considering the message traffic and message rates generated by the various ‘‘sizes’’ of Market Makers and the Exchange’s ability to process messages from all SQF Ports and SQF Purge Ports. The SQF Port and SQF Purge Port Fees would allow the Exchange to scale its 10 For example, a Market Maker or may desire to utilize multiple SQF Ports for accounting purposes, to measure performance, for regulatory reasons or other determinations that are specific to that Member. 11 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. VerDate Sep<11>2014 16:55 Jul 15, 2024 Jkt 262001 needs with respect to processing messages in an efficient manner. The Exchange notes that Cboe Exchange, Inc. (‘‘Cboe’’) limits usage on each port and assesses fees for incremental usage.12 Second, the Exchange notes that multiple ports are not necessary, however, to the extent that some Market Makers elect to obtain multiple SQF Ports and SQF Purge Ports, the Exchange is offering different prices for over 20 ports. NOM believes that this methodology of utilizing Transactional Volume on NOM for purposes of considering the ‘‘size’’ of the Market Maker to create certain SQF Port and SQF Purge Port Fees will level the playing field. The Exchange believes that this approach enables various types of Market Makers to effectively limit costs based on their executed Transactional Volume on the Exchange. Further, this methodology allows for efficiencies and permits Market Makers to increase their number of ports at varying fee levels. The various SQF Ports and SQF Purge Port Fees for over 20 ports levels the playing field by allowing various types of Market Makers that want to obtain a larger number of ports to do so with different cost structures to account for their relative size. Other markets tier port fees. BOX Exchange LLC (‘‘BOX’’) assesses $1,000 per month for all SAIL Ports for Market Making and $500 per month per port up to 5 ports for order entry and $150 per month for each additional port.13 Miami International Securities Exchange, LLC’s (‘‘MIAX’’) MIAX Express Interface (‘‘MEI’’) Fee levels are based on a tiered fee structure based on the Market Maker’s total monthly executed volume during the relevant month.14 The Exchange believes that increasing the fee for SQF Ports and SQF Purge Ports over 20 ports (21 and above) for Market Makers that qualify as ‘‘medium’’ from $500 to $625 per month, and to increase the SQF Port Fee and SQF Purge Port Fee Cap for Market 12 Each Cboe Binary Order Entry (‘‘BOE’’) or FIX Logical Port incur the logical port fee indicated when used to enter up to 70,000 orders per trading day per logical port as measured on average in a single month. For each incremental usage of up to 70,000 per day per logical port will incur an additional logical port fee of $800 per month. BOE or FIX Logical Ports provide users the ability to enter order/quotes. See Cboe’s Fees Schedule. 13 See BOX’s Fee Schedule. 14 MEI is a connection to MIAX systems that enables Market Makers to submit simple and complex electronic quotes to MIAX. MIAX caps its MEI Ports. For these Monthly MIAX MEI Fees levels, if the Market Maker’s total monthly executed volume during the relevant month is less than 0.060% of the total monthly executed volume reported by OCC in the market maker account type for MIAX-listed option classes for that month, then the fee will be $14,500 instead of the fee otherwise applicable to such level. See MIAX’s Fee Schedule. PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 Makers that qualify as ‘‘large’’ from $500 to $750 per month, is equitable and not unfairly discriminatory because the Exchange is offering different sizes of Market Makers, based on Transactional Volume executed on the Exchange, the ability pay different fees for some SQF Ports and SQF Purge Ports above 20 ports. The proposal recognizes that some Market Makers may be deemed ‘‘small’’ and may not be able to achieve the same cap as other Market Makers. To this end, the Exchange proposes not to increase SQF Port and SQF Purge Port Fees for over 20 ports for Market Makers that qualify as ‘‘small.’’ To the extent that a Market Maker qualifies in a given month as a ‘‘medium’’ Market Maker the Exchange proposes to increase SQF Port and SQF Purge Port Fees from $500 to $625 per month. This fee presumes to place a Market Maker that qualifies as ‘‘medium’’ on equal footing with a Market Maker that qualifies as a ‘‘small’’ Market Maker in terms of the fee, by setting different fees for each group. The proposal presumes that based on Transactional Volume, these Market Makers that qualify as ‘‘medium’’ have a greater ability to obtain a greater amount of SQF Ports and SQF Purge Ports as compared to Market Makers that qualify as ‘‘small.’’ Finally, to the extent that a Market Maker qualifies in a given month as a ‘‘large’’ Market Maker the Exchange proposes to increase SQF Port and SQF Purge Port Fees from $500 to $750 per month. This fee presumes to place a Market Maker that qualifies as ‘‘large’’ on equal footing with a Market Maker that qualifies as a ‘‘small’’ Market Maker, and a Market Maker that qualifies as ‘‘medium’’ in terms of the fee, by setting different fees for each group. The proposal presumes that based on Transactional Volume these Market Makers that qualify as ‘‘large’’ have the ability to obtain the largest amount of SQF Ports and SQF Purge Ports. The Exchange would uniformly apply the appropriate SQF Port and SQF Purge Port Fee to each Market Maker group based on the same volume calculation. Also, Market Makers would uniformly be assessed fees for SQF Ports and SQF Purge Ports based on the proposed methodology. NOM Market Makers are the only market participants that are assessed SQF Port and SQF Purge Port fees because they are the only market participants that are permitted to quote on the Exchange. SQF Ports and SQF Purge Ports are only utilized in the Market Maker’s assigned options series. Unlike other market participants, NOM Market Makers are subject to market E:\FR\FM\16JYN1.SGM 16JYN1 Federal Register / Vol. 89, No. 136 / Tuesday, July 16, 2024 / Notices making and quoting obligations.15 These liquidity providers are critical market participants in that they are the only market participants that provide liquidity to NOM on a continuous basis. Providing NOM Market Makers a means to manage their cost by applying different fees for SQF Ports and SQF Purge Ports beyond 20 ports enables these market participants to provide the necessary liquidity to NOM at lower costs relative to their size. Therefore, because NOM Market Makers fulfill a unique role on the Exchange, are the only market participant required to submit quotes as part of their obligations to operate on the Exchange, and, in light of that role, they are eligible for certain incentives. The proposed SQF Port and SQF Purge Fee cap is designed to continue to incent NOM Market Makers to quote on NOM, thereby promoting liquidity, quote competition, and trading opportunities. In 2022, NYSE Arca, Inc. (‘‘NYSE Arca’’) proposed to restructure fees relating to OTPs for Market Makers.16 In that rule change,17 NYSE Arca argued that, Market Makers serve a unique and important function on the Exchange (and other options exchanges) given the quotedriven nature of options markets. Because options exchanges rely on actively quoting Market Makers to facilitate a robust marketplace that attracts order flow, options exchanges must attract and retain Market Makers, including by setting competitive Market Maker permit fees. Stated otherwise, changes to Market Maker permit fees can have a direct effect on the ability of an exchange to compete for order flow. The Exchange also believes that the number of options exchanges on which Market Makers can effect option transactions also ensures competition in the marketplace and constrains the ability of exchanges to charge supracompetitive fees for access to its market by Market Makers. Further, NYSE ARCA noted that,18 The Exchange further believes that its ability to set Market Maker permit fees is constrained by competitive forces based on the fact that Market Makers can, and have, chosen to terminate their status as a Market Maker if they deem Market Maker permit fees to be unreasonable or excessive. Specifically, the Exchange notes that a BOX participant modified its access to BOX in connection with the implementation of a proposed khammond on DSKJM1Z7X2PROD with NOTICES 15 See Options 2, Sections 4 and 5. Securities Exchange Act Release No. 95412 (June 23, 2022), 87 FR 38786 (June 29, 2022) (SR– NYSEArca–2022–36). NYSE Arca proposed to increase both the monthly fee per Market Maker OTP and the number of issues covered by each additional OTP because, among other reasons, the number of issues traded on the Exchange has increased significantly in recent years. 17 Id at 38788. 18 Id at 38790. 16 See VerDate Sep<11>2014 16:55 Jul 15, 2024 Jkt 262001 change to BOX’s Market Maker permit fees. The Exchange has also observed that another options exchange group experienced decreases in market share following its proposed modifications of its access fees (including Market Maker trading permit fees), suggesting that market participants (including Market Makers) are sensitive to changes in exchanges’ access fees and may respond by shifting their order flow elsewhere if they deem the fees to be unreasonable or excessive. There is no requirement, regulatory or otherwise, that any Market Maker connect to and access any (or all of) the available options exchanges. The Exchange also is not aware of any reason why a Market Maker could not cease being a permit holder in response to unreasonable price increases. The Exchange does not assess any termination fee for a Market Maker to drop its OTP, nor is the Exchange aware of any other costs that would be incurred by a Market Maker to do so. The Exchange likewise believes that its lower SQF Ports and SQF Purge Port monthly fees beyond 20 ports is constrained by competitive forces and that its proposed modifications to the SQF Port and SQF Purge Fees is reasonably designed in consideration of the competitive environment in which the Exchange operates, by balancing the value of the enhanced benefits available to Market Makers due to the current level of activity on the Exchange with a fee structure that will continue to incent Market Makers to support increased liquidity, quote competition, and trading opportunities on the Exchange, for the benefit of all market participants. 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 notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 57981 Intramarket Competition The Exchange believes that increasing the fee for SQF Ports and SQF Purge Ports over 20 ports (21 and above) for Market Makers that qualify as ‘‘medium’’ from $500 to $625 per month, and to increase the SQF Port Fee and SQF Purge Port Fee Cap for Market Makers that qualify as ‘‘large’’ from $500 to $750 per month, does not impose an undue burden on competition because the Exchange is offering different sizes of Market Makers, based on Transactional Volume executed on the Exchange, the ability pay different fees for some SQF Ports and SQF Purge Ports above 20 ports. The proposal recognizes that some Market Makers may be deemed ‘‘small’’ and may not be able to achieve the same cap as other Market Makers. To this end, the Exchange proposes not to increase SQF Port and SQF Purge Port Fees for over 20 ports for Market Makers that qualify as ‘‘small.’’ To the extent that a Market Maker qualifies in a given month as a ‘‘medium’’ Market Maker the Exchange proposes to increase SQF Port and SQF Purge Port Fees from $500 to $625 per month. This fee presumes to place a Market Maker that qualifies as ‘‘medium’’ on equal footing with a Market Maker that qualifies as a ‘‘small’’ Market Maker in terms of the fee, by setting different fees for each group. The proposal presumes that based on Transactional Volume, these Market Makers that qualify as ‘‘medium’’ have a greater ability to obtain a greater amount of SQF Ports and SQF Purge Ports as compared to Market Makers that qualify as ‘‘small.’’ Finally, to the extent that a Market Maker qualifies in a given month as a ‘‘large’’ Market Maker the Exchange proposes to increase SQF Port and SQF Purge Port Fees from $500 to $750 per month. This fee presumes to place a Market Maker that qualifies as ‘‘large’’ on equal footing with a Market Maker that qualifies as a ‘‘small’’ Market Maker, and a Market Maker that qualifies as ‘‘medium’’ in terms of the fee, by setting different fees for each group. The proposal presumes that based on Transactional Volume these Market Makers that qualify as ‘‘large’’ have the ability to obtain the largest amount of SQF Ports and SQF Purge Ports. The Exchange would uniformly apply the appropriate SQF Port and SQF Purge Port Fee to each Market Maker group based on the same volume calculation. Also, Market Makers would uniformly be assessed fees for SQF Ports and SQF Purge Ports based on the proposed methodology. NOM Market Makers are the only market participants that are assessed E:\FR\FM\16JYN1.SGM 16JYN1 57982 Federal Register / Vol. 89, No. 136 / Tuesday, July 16, 2024 / Notices SQF Port and SQF Purge Port fees because they are the only market participants that are permitted to quote on the Exchange. SQF Ports and SQF Purge Ports are only utilized in the Market Maker’s assigned options series. Unlike other market participants, NOM Market Makers are subject to market making and quoting obligations.19 These liquidity providers are critical market participants in that they are the only market participants that provide liquidity to NOM on a continuous basis. Providing NOM Market Makers a means to manage their cost by applying different fees for SQF Ports and SQF Purge Ports beyond 20 ports enables these market participants to provide the necessary liquidity to NOM at lower costs relative to their size. Therefore, because NOM Market Makers fulfill a unique role on the Exchange, are the only market participant required to submit quotes as part of their obligations to operate on the Exchange, and, in light of that role, they are eligible for certain incentives. The proposed SQF Port and SQF Purge Fee cap is designed to continue to incent NOM Market Makers to quote on NOM, thereby promoting liquidity, quote competition, and trading opportunities. 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. khammond on DSKJM1Z7X2PROD with NOTICES 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.20 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– NASDAQ–2024–036 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–2024–036. 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–2024–036 and should be submitted on or before August 6, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Vanessa A. Countryman, Secretary. [FR Doc. 2024–15502 Filed 7–15–24; 8:45 am] BILLING CODE 8011–01–P 19 See 20 15 Options 2, Sections 4 and 5. U.S.C. 78s(b)(3)(A)(ii). VerDate Sep<11>2014 16:55 Jul 15, 2024 Jkt 262001 21 17 PO 00000 CFR 200.30–3(a)(12). Frm 00140 Fmt 4703 Sfmt 4703 SMALL BUSINESS ADMINISTRATION [Disaster Declaration #20320 and #20321; TEXAS Disaster Number TX–20010] Presidential Declaration Amendment of a Major Disaster for the State of Texas U.S. Small Business Administration. ACTION: Amendment 10. AGENCY: This is an amendment of the Presidential declaration of a major disaster for the State of Texas (FEMA– 4781–DR), dated 05/17/2024. Incident: Severe Storms, Straight-line Winds, Tornadoes, and Flooding. Incident Period: 04/26/2024 through 06/05/2024. DATES: Issued on 07/08/2024. Physical Loan Application Deadline Date: 08/15/2024. Economic Injury (EIDL) Loan Application Deadline Date: 02/18/2025. ADDRESSES: Visit the MySBA Loan Portal at https://lending.sba.gov to apply for a disaster assistance loan. FOR FURTHER INFORMATION CONTACT: Alan Escobar, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: The notice of the President’s major disaster declaration for the State of Texas, dated 05/17/2024, is hereby amended to include the following areas as adversely affected by the disaster: Primary Counties (Physical Damage and Economic Injury Loans): Anderson, Nacogdoches, Panola, Rusk, Sabine. Contiguous Counties (Economic Injury Loans Only): Texas: Harrison, Shelby Louisiana: Caddo, De Soto All other information in the original declaration remains unchanged. SUMMARY: (Catalog of Federal Domestic Assistance Number 59008) Francisco Sánchez, Jr., Associate Administrator, Office of Disaster Recovery & Resilience. [FR Doc. 2024–15549 Filed 7–15–24; 8:45 am] BILLING CODE 8026–09–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #20360 and #20361; IOWA Disaster Number IA–20003] Presidential Declaration Amendment of a Major Disaster for the State of Iowa U.S. Small Business Administration. ACTION: Amendment 3. AGENCY: E:\FR\FM\16JYN1.SGM 16JYN1

Agencies

[Federal Register Volume 89, Number 136 (Tuesday, July 16, 2024)]
[Notices]
[Pages 57978-57982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15502]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100488; File No. SR-NASDAQ-2024-036]


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

DATES: 
    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 July 1, 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

[[Page 57979]]

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 The Nasdaq Options Market LLC's 
(``NOM'') Rules at Options 7, Section 3, Nasdaq Options Market--Ports 
and Other Services.
    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. Specifically, the Exchange proposes 
to amend Options 7, Section 3(i) to increase the per port, per month 
SQF Port \3\ and SQF Purge \4\ Port Fees for all ports over 20 ports 
(21 and above).\5\
---------------------------------------------------------------------------

    \3\ ``Specialized Quote Feed'' or ``SQF'' is an interface that 
allows Market Makers to connect, send, and receive messages related 
to quotes and Immediate-or-Cancel Orders into and from 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; and 
(8) opening imbalance messages. 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, or Size Limitation in Options 3, Section 15(a)(1) and 
(a)(2), and (b)(2), respectively. See Options 3, Section 7(e)(1)(B).
    \4\ SQF Purge is a specific port for the SQF interface that only 
receives and notifies of purge requests from the NOM Market Maker.
    \5\ The Exchange also proposes a technical amendment to remove 
an extraneous period in Options 7, Section 3 in the second 
paragraph.
---------------------------------------------------------------------------

    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 $750 per port, per month fee for all ports over 
20 ports (21 and above).
    At this time, the Exchange proposes to increase the per port, per 
month fee for SQF Ports and SQF Ports above 20 ports (21 and above) for 
Market Makers based on the size of the Market Maker on NOM. The 
Exchange is determining the size of the Market Maker based on the 
amount of transactional volume executed on NOM in a given month. The 
Exchange proposes to take each Market's Maker's electronic monthly 
transactional volume via SQF on NOM and divide that number by the sum 
of all Market Maker electronic monthly transactional volume via SQF on 
NOM (``Transactional Volume''). All SQF interest would be considered. 
Each Market Maker would then be classified on NOM, for the purpose of 
the SQF Port Fee and SQF Purge Port Fee, as a ``small,'' ``medium,'' or 
``large'' Market Maker based on their Transactional Volume on NOM to 
determine the applicable fee in a given month for all SQF Ports and SQF 
Purge Ports over 20 ports. Market Makers that qualify as ``medium'' 
would be subject to an increased monthly fee of $625 per port for all 
SQF Ports and SQF Purge Ports over 20 ports. Market Makers that qualify 
as ``large'' would be subject to an increased monthly fee of $750 per 
port for all SQF Ports and SQF Purge Ports over 20 ports. Market Makers 
that qualify as ``small'' would continue to pay a monthly fee of $500 
per port for all SQF Port and SQF Purge Port Fees for all ports over 20 
ports.
    The Exchange believes that these increased SQF Port and SQF Purge 
Port Fees for all ports over 20 ports for Market Maker that qualify as 
``medium'' and ``large,'' will offer a level playing field related to 
pricing when acquiring a larger amount of ports.
    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 and SQF Purge Ports to organize its business,\6\ only one SQF 
Port and SQF Purge Port is necessary for a NOM Market Maker to fulfill 
its regulatory quoting obligations.\7\
---------------------------------------------------------------------------

    \6\ 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.
    \7\ 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.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\9\ 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that increasing the fee for SQF Ports and SQF 
Purge Ports over 20 ports (21 and above) for Market Makers that qualify 
as ``medium'' from $500 to $625 per month, and to increase the SQF Port 
Fee and SQF Purge Port Fee Cap for Market Makers that qualify as 
``large'' from $500 to $750 per month, is reasonable because these 
increased SQF Port and SQF Purge Port Fees for all ports over 20 ports 
for Market Maker that qualify

[[Page 57980]]

as ``medium'' and ``large'' will offer a level playing field related to 
pricing when acquiring a larger amount of ports. 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 Market Maker may elect to obtain multiple SQF Ports and SQF 
Purge Ports to organize its business,\10\ only one SQF Port and SQF 
Purge Port is necessary for a Market Maker to fulfill its regulatory 
quoting obligations.\11\ Members may choose a greater number of SQF 
Ports or SQF Purge Ports, beyond one port, depending on that Member's 
particular business model. Additionally, the Exchange believes that the 
caps are reasonable for two reasons.
---------------------------------------------------------------------------

    \10\ For example, a Market Maker or may desire to utilize 
multiple SQF Ports for accounting purposes, to measure performance, 
for regulatory reasons or other determinations that are specific to 
that Member.
    \11\ 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.
---------------------------------------------------------------------------

    First, SQF Ports are a secure method for Market Makers to submit 
quotes into the Exchange's match engine and for the Exchange to send 
messages related to those quotes to Market Makers. NOM must manage the 
security and message traffic, among other things, for each port. 
Utilizing a methodology based on the ``size'' of the Market Maker as 
determined by Transactional Volume, provides every Market Maker the 
ability to manage cost. Additionally, the Exchange would have the 
ability to manage the quantity of SQF Ports and SQF Purge Ports issued 
by the Exchange. The various SQF Port and SQF Purge Port Fees were 
determined based on the level of Transactional Volume on NOM in 2024 
for Market Makers. The Exchange assessed each level of Market Maker an 
increased fee based on size, as reflected by Transactional Volume, to 
reflect the various sizes of Market Makers present on the Exchange at 
this time. By establishing different SQF Ports and SQF Purge Port Fees 
at different levels based on ``size,'' the Exchange is considering the 
message traffic and message rates generated by the various ``sizes'' of 
Market Makers and the Exchange's ability to process messages from all 
SQF Ports and SQF Purge Ports. The SQF Port and SQF Purge Port Fees 
would allow the Exchange to scale its needs with respect to processing 
messages in an efficient manner. The Exchange notes that Cboe Exchange, 
Inc. (``Cboe'') limits usage on each port and assesses fees for 
incremental usage.\12\
---------------------------------------------------------------------------

    \12\ Each Cboe Binary Order Entry (``BOE'') or FIX Logical Port 
incur the logical port fee indicated when used to enter up to 70,000 
orders per trading day per logical port as measured on average in a 
single month. For each incremental usage of up to 70,000 per day per 
logical port will incur an additional logical port fee of $800 per 
month. BOE or FIX Logical Ports provide users the ability to enter 
order/quotes. See Cboe's Fees Schedule.
---------------------------------------------------------------------------

    Second, the Exchange notes that multiple ports are not necessary, 
however, to the extent that some Market Makers elect to obtain multiple 
SQF Ports and SQF Purge Ports, the Exchange is offering different 
prices for over 20 ports. NOM believes that this methodology of 
utilizing Transactional Volume on NOM for purposes of considering the 
``size'' of the Market Maker to create certain SQF Port and SQF Purge 
Port Fees will level the playing field. The Exchange believes that this 
approach enables various types of Market Makers to effectively limit 
costs based on their executed Transactional Volume on the Exchange. 
Further, this methodology allows for efficiencies and permits Market 
Makers to increase their number of ports at varying fee levels. The 
various SQF Ports and SQF Purge Port Fees for over 20 ports levels the 
playing field by allowing various types of Market Makers that want to 
obtain a larger number of ports to do so with different cost structures 
to account for their relative size. Other markets tier port fees. BOX 
Exchange LLC (``BOX'') assesses $1,000 per month for all SAIL Ports for 
Market Making and $500 per month per port up to 5 ports for order entry 
and $150 per month for each additional port.\13\ Miami International 
Securities Exchange, LLC's (``MIAX'') MIAX Express Interface (``MEI'') 
Fee levels are based on a tiered fee structure based on the Market 
Maker's total monthly executed volume during the relevant month.\14\
---------------------------------------------------------------------------

    \13\ See BOX's Fee Schedule.
    \14\ MEI is a connection to MIAX systems that enables Market 
Makers to submit simple and complex electronic quotes to MIAX. MIAX 
caps its MEI Ports. For these Monthly MIAX MEI Fees levels, if the 
Market Maker's total monthly executed volume during the relevant 
month is less than 0.060% of the total monthly executed volume 
reported by OCC in the market maker account type for MIAX-listed 
option classes for that month, then the fee will be $14,500 instead 
of the fee otherwise applicable to such level. See MIAX's Fee 
Schedule.
---------------------------------------------------------------------------

    The Exchange believes that increasing the fee for SQF Ports and SQF 
Purge Ports over 20 ports (21 and above) for Market Makers that qualify 
as ``medium'' from $500 to $625 per month, and to increase the SQF Port 
Fee and SQF Purge Port Fee Cap for Market Makers that qualify as 
``large'' from $500 to $750 per month, is equitable and not unfairly 
discriminatory because the Exchange is offering different sizes of 
Market Makers, based on Transactional Volume executed on the Exchange, 
the ability pay different fees for some SQF Ports and SQF Purge Ports 
above 20 ports. The proposal recognizes that some Market Makers may be 
deemed ``small'' and may not be able to achieve the same cap as other 
Market Makers. To this end, the Exchange proposes not to increase SQF 
Port and SQF Purge Port Fees for over 20 ports for Market Makers that 
qualify as ``small.'' To the extent that a Market Maker qualifies in a 
given month as a ``medium'' Market Maker the Exchange proposes to 
increase SQF Port and SQF Purge Port Fees from $500 to $625 per month. 
This fee presumes to place a Market Maker that qualifies as ``medium'' 
on equal footing with a Market Maker that qualifies as a ``small'' 
Market Maker in terms of the fee, by setting different fees for each 
group. The proposal presumes that based on Transactional Volume, these 
Market Makers that qualify as ``medium'' have a greater ability to 
obtain a greater amount of SQF Ports and SQF Purge Ports as compared to 
Market Makers that qualify as ``small.'' Finally, to the extent that a 
Market Maker qualifies in a given month as a ``large'' Market Maker the 
Exchange proposes to increase SQF Port and SQF Purge Port Fees from 
$500 to $750 per month. This fee presumes to place a Market Maker that 
qualifies as ``large'' on equal footing with a Market Maker that 
qualifies as a ``small'' Market Maker, and a Market Maker that 
qualifies as ``medium'' in terms of the fee, by setting different fees 
for each group. The proposal presumes that based on Transactional 
Volume these Market Makers that qualify as ``large'' have the ability 
to obtain the largest amount of SQF Ports and SQF Purge Ports. The 
Exchange would uniformly apply the appropriate SQF Port and SQF Purge 
Port Fee to each Market Maker group based on the same volume 
calculation. Also, Market Makers would uniformly be assessed fees for 
SQF Ports and SQF Purge Ports based on the proposed methodology.
    NOM Market Makers are the only market participants that are 
assessed SQF Port and SQF Purge Port fees because they are the only 
market participants that are permitted to quote on the Exchange. SQF 
Ports and SQF Purge Ports are only utilized in the Market Maker's 
assigned options series. Unlike other market participants, NOM Market 
Makers are subject to market

[[Page 57981]]

making and quoting obligations.\15\ These liquidity providers are 
critical market participants in that they are the only market 
participants that provide liquidity to NOM on a continuous basis. 
Providing NOM Market Makers a means to manage their cost by applying 
different fees for SQF Ports and SQF Purge Ports beyond 20 ports 
enables these market participants to provide the necessary liquidity to 
NOM at lower costs relative to their size. Therefore, because NOM 
Market Makers fulfill a unique role on the Exchange, are the only 
market participant required to submit quotes as part of their 
obligations to operate on the Exchange, and, in light of that role, 
they are eligible for certain incentives. The proposed SQF Port and SQF 
Purge Fee cap is designed to continue to incent NOM Market Makers to 
quote on NOM, thereby promoting liquidity, quote competition, and 
trading opportunities.
---------------------------------------------------------------------------

    \15\ See Options 2, Sections 4 and 5.
---------------------------------------------------------------------------

    In 2022, NYSE Arca, Inc. (``NYSE Arca'') proposed to restructure 
fees relating to OTPs for Market Makers.\16\ In that rule change,\17\ 
NYSE Arca argued that,
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 95412 (June 23, 
2022), 87 FR 38786 (June 29, 2022) (SR-NYSEArca-2022-36). NYSE Arca 
proposed to increase both the monthly fee per Market Maker OTP and 
the number of issues covered by each additional OTP because, among 
other reasons, the number of issues traded on the Exchange has 
increased significantly in recent years.
    \17\ Id at 38788.

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

    Further, NYSE ARCA noted that,\18\
---------------------------------------------------------------------------

    \18\ Id at 38790.

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

    The Exchange likewise believes that its lower SQF Ports and SQF 
Purge Port monthly fees beyond 20 ports is constrained by competitive 
forces and that its proposed modifications to the SQF Port and SQF 
Purge Fees is reasonably designed in consideration of the competitive 
environment in which the Exchange operates, by balancing the value of 
the enhanced benefits available to Market Makers due to the current 
level of activity on the Exchange with a fee structure that will 
continue to incent Market Makers to support increased liquidity, quote 
competition, and trading opportunities on the Exchange, for the benefit 
of all market participants.

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 notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
Intramarket Competition
    The Exchange believes that increasing the fee for SQF Ports and SQF 
Purge Ports over 20 ports (21 and above) for Market Makers that qualify 
as ``medium'' from $500 to $625 per month, and to increase the SQF Port 
Fee and SQF Purge Port Fee Cap for Market Makers that qualify as 
``large'' from $500 to $750 per month, does not impose an undue burden 
on competition because the Exchange is offering different sizes of 
Market Makers, based on Transactional Volume executed on the Exchange, 
the ability pay different fees for some SQF Ports and SQF Purge Ports 
above 20 ports. The proposal recognizes that some Market Makers may be 
deemed ``small'' and may not be able to achieve the same cap as other 
Market Makers. To this end, the Exchange proposes not to increase SQF 
Port and SQF Purge Port Fees for over 20 ports for Market Makers that 
qualify as ``small.'' To the extent that a Market Maker qualifies in a 
given month as a ``medium'' Market Maker the Exchange proposes to 
increase SQF Port and SQF Purge Port Fees from $500 to $625 per month. 
This fee presumes to place a Market Maker that qualifies as ``medium'' 
on equal footing with a Market Maker that qualifies as a ``small'' 
Market Maker in terms of the fee, by setting different fees for each 
group. The proposal presumes that based on Transactional Volume, these 
Market Makers that qualify as ``medium'' have a greater ability to 
obtain a greater amount of SQF Ports and SQF Purge Ports as compared to 
Market Makers that qualify as ``small.'' Finally, to the extent that a 
Market Maker qualifies in a given month as a ``large'' Market Maker the 
Exchange proposes to increase SQF Port and SQF Purge Port Fees from 
$500 to $750 per month. This fee presumes to place a Market Maker that 
qualifies as ``large'' on equal footing with a Market Maker that 
qualifies as a ``small'' Market Maker, and a Market Maker that 
qualifies as ``medium'' in terms of the fee, by setting different fees 
for each group. The proposal presumes that based on Transactional 
Volume these Market Makers that qualify as ``large'' have the ability 
to obtain the largest amount of SQF Ports and SQF Purge Ports. The 
Exchange would uniformly apply the appropriate SQF Port and SQF Purge 
Port Fee to each Market Maker group based on the same volume 
calculation. Also, Market Makers would uniformly be assessed fees for 
SQF Ports and SQF Purge Ports based on the proposed methodology.
    NOM Market Makers are the only market participants that are 
assessed

[[Page 57982]]

SQF Port and SQF Purge Port fees because they are the only market 
participants that are permitted to quote on the Exchange. SQF Ports and 
SQF Purge Ports are only utilized in the Market Maker's assigned 
options series. Unlike other market participants, NOM Market Makers are 
subject to market making and quoting obligations.\19\ These liquidity 
providers are critical market participants in that they are the only 
market participants that provide liquidity to NOM on a continuous 
basis. Providing NOM Market Makers a means to manage their cost by 
applying different fees for SQF Ports and SQF Purge Ports beyond 20 
ports enables these market participants to provide the necessary 
liquidity to NOM at lower costs relative to their size. Therefore, 
because NOM Market Makers fulfill a unique role on the Exchange, are 
the only market participant required to submit quotes as part of their 
obligations to operate on the Exchange, and, in light of that role, 
they are eligible for certain incentives. The proposed SQF Port and SQF 
Purge Fee cap is designed to continue to incent NOM Market Makers to 
quote on NOM, thereby promoting liquidity, quote competition, and 
trading opportunities.
---------------------------------------------------------------------------

    \19\ See Options 2, Sections 4 and 5.
---------------------------------------------------------------------------

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.\20\
---------------------------------------------------------------------------

    \20\ 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 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-2024-036 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-2024-036. 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-2024-036 and should 
be submitted on or before August 6, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-15502 Filed 7-15-24; 8:45 am]
BILLING CODE 8011-01-P
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