Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 6, 57961-57964 [2024-15506]
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Federal Register / Vol. 89, No. 136 / Tuesday, July 16, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100492; File No. SR–MRX–
2024–21]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 6
July 10, 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 July 1,
2024, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Rules at Options 7, Section 6, Ports and
Other Services.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/mrx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Options 7, Section 6, Ports and Other
Services. Specifically, the Exchange
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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proposes to amend the monthly caps for
SQF Ports 3 and SQF Purge Ports.4
Today, MRX assesses $1,250 per port,
per month for an SQF Port as well as an
SQF Purge Port. Also, today, SQF Ports
and SQF Purge Ports are subject to a
monthly cap of $17,500, which cap is
applicable to Market Makers.
At this time, the Exchange proposes to
increase the monthly maximum SQF
Port and SQF Purge Port Fee Cap of
$17,500 for Market Makers based on the
size of the Market Maker on MRX. The
Exchange is determining the size of the
Market Maker based on the amount of
transactional volume executed on MRX
in a given month. The Exchange
proposes to take each Market’s Maker’s
electronic monthly add liquidity
transactional volume on MRX and
dividing that number by the sum of all
Market Maker electronic monthly add
liquidity volume on MRX
(‘‘Transactional Volume’’). Each Market
Maker would then be classified on
MRX, for the purpose of the SQF Port
Fee and SQF Purge Port Fee Cap, as a
‘‘small,’’ ‘‘medium,’’ or ‘‘large’’ Market
Maker based on their Transactional
Volume on MRX to determine the
applicable cap in a given month. Market
Makers that qualify as ‘‘small’’ would be
subject to an increased SQF Port and
SQF Purge Port monthly cap of $22,500.
Market Makers that qualify as
3 ‘‘Specialized Quote Feed’’ or ‘‘SQF’’ is an
interface that allows Market Makers to connect,
send, and receive messages related to quotes,
Immediate-or-Cancel Orders, and auction responses
to the Exchange. Features include the following: (1)
options symbol directory messages (e.g., underlying
instruments); (2) System event messages (e.g., start
of trading hours messages and start of opening); (3)
trading action messages (e.g., halts and resumes); (4)
execution messages; (5) quote messages; (6)
Immediate-or-Cancel Order messages; (7) risk
protection triggers and purge notifications; (8)
opening imbalance messages; (9) auction
notifications; and (10) auction responses. The SQF
Purge Interface only receives and notifies of purge
requests from the Market Maker. Market Makers
may only enter interest into SQF in their assigned
options series. Immediate-or-Cancel Orders entered
into SQF are not subject to the Order Price
Protection, Market Order Spread Protection, and
Size Limitation Protection in Options 3, Section
15(a)(1)(A), (1)(B), and (2)(B) respectively. See
Supplementary Material .03(c) to Options 3, Section
7.
4 SQF Purge is a specific port for the SQF
interface that only receives and notifies of purge
requests from the Market Maker. Dedicated SQF
Purge Ports enable Market Makers to seamlessly
manage their ability to remove their quotes in a
swift manner. The SQF Purge Port is designed to
assist Market Makers in the management of, and
risk control over, their quotes. Market Makers may
utilize a purge port to reduce uncertainty and to
manage risk by purging all quotes in their assigned
options series. Of note, Market Makers may only
enter interest into SQF in their assigned options
series. Additionally, the SQF Purge Port may be
utilized by a Market Maker in the event that the
Member has a system issue and determines to purge
its quotes from the order book.
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‘‘medium’’ would be subject to an
increased monthly cap of $25,000 for
SQF Port and SQF Purge Port Fees.
Finally, Market Makers that qualify as
‘‘large’’ would be subject to an increased
monthly cap of $27,500 for SQF Port
and SQF Purge Port Fees.
As is the case today, the Exchange
would not assess a Market Maker an
SQF Port and SQF Purge Port Fee
beyond the monthly cap once the
Market Maker has exceeded the monthly
cap for the respective month. Despite
increasing the maximum SQF Port and
SQF Purge Port Fee Cap for Market
Makers that qualify as ‘‘small,’’
‘‘medium’’ and ‘‘large,’’ the Exchange
will continue to offer all Market Makers
the opportunity to cap their SQF Port
and SQF Purge Port Fees to limit their
costs as they would not be assessed an
SQF Port or SQF Purge Port Fee beyond
the applicable cap each month.
A MRX Market Maker requires only
one SQF Port to submit quotes in its
assigned options series into MRX. An
SQF Purge is a specific port for the SQF
interface that only receives and notifies
of purge requests from the Market
Maker. A MRX Market Maker may
submit all quotes through one SQF Port
and utilize one SQF Purge Port to view
its purge requests. While a Market
Maker may elect to obtain multiple SQF
Ports and SQF Purge Ports to organize
its business,5 only one SQF Port and
SQF Purge Port is necessary for a 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)
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
5 For example, a Market Maker may desire to
utilize multiple SQF Ports for accounting purposes,
to measure performance, for regulatory reasons or
other determinations that are specific to that
Member.
6 MRX Market Makers have various regulatory
requirements as provided for in Options 2, Section
4. Additionally, MRX Market Makers have certain
quoting requirements with respect to their assigned
options series as provided in Options 2, Section 5.
SQF Ports are the only quoting protocol available
on MRX and only Market Makers may utilize SQF
Ports. The same is true for SQF Purge Ports.
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4) and (5).
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Purge Port Fee Cap for Market Makers
that qualify as ‘‘small,’’ from $17,500 to
$22,500, to increase the SQF Port Fee
and SQF Purge Port Fee Cap for Market
Makers that qualify as ‘‘medium’’ from
$27,500 to $25,000 per month, and to
increase the SQF Port Fee and SQF
Purge Port Fee Cap for Market Makers
that qualify as ‘‘large’’ from $42,000 to
$50,000 per month, is reasonable
because despite the increase in the
maximum SQF Port Fee and SQF Purge
Port Fee Cap, the Exchange will
continue to offer all Market Makers the
opportunity to cap their SQF Port Fees
each month to limit their cost as they
would not be assessed an SQF Port or
SQF Purge Port Fee Cap Fees beyond
the cap.
A MRX Market Maker requires only
one SQF Port to submit quotes in its
assigned options series into MRX. A
MRX Market Maker may submit all
quotes through one SQF Port and utilize
one SQF Purge Port to view its purge
requests. While a Market Maker may
elect to obtain multiple SQF Ports and
SQF Purge Ports to organize its
business,9 only one SQF Port and SQF
Purge Port is necessary for a Market
Maker to fulfill its regulatory quoting
obligations.10 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. MRX
must manage the security and message
traffic, among other things, for each
port. Utilizing the various caps 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 Fee Caps were
determined based on the level of
Transactional Volume on MRX in 2024
9 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.
10 MRX Market Makers have various regulatory
requirements as provided for in Options 2, Section
4. Additionally, MRX Market Makers have certain
quoting requirements with respect to their assigned
options series as provided in Options 2, Section 5.
SQF Ports are the only quoting protocol available
on MRX and only Market Makers may utilize SQF
Ports.
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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
capping the SQF Ports and SQF Purge
Ports 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 Fee Cap 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.11
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 to cap their total
port cost. MRX believes the existence of
a cap based on the ‘‘size’’ of the Market
Maker 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, the existence of an
SQF Port and SQF Purge Port Fee Cap
allows for efficiencies and permits
Market Makers to increase their number
of ports beyond the cap. The cap levels
the playing field by allowing various
types of Market Makers that want to
obtain a larger number of ports to do so
with the certainty of a fee cap. Without
the SQF Port and SQF Purge Port Fee
Cap, Market Makers may pay more to
obtain multiple SQF Port and SQF
Purge Ports on the Exchange. 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.12 Miami
International Securities Exchange, LLC’s
(‘‘MIAX’’) MIAX Express Interface
(‘‘MEI’’) Fee levels are based on a tiered
fee structure based on the Market
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.
12 See BOX’s Fee Schedule.
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11 Each
Frm 00120
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Maker’s total monthly executed volume
during the relevant month.13
The proposed pricing change to
increase the SQF Port Fee and SQF
Purge Port Fee Cap for Market Makers
that qualify as ‘‘small,’’ from $17,500 to
$22,500, to increase the SQF Port Fee
and SQF Purge Port Fee Cap for Market
Makers that qualify as ‘‘medium’’ from
$27,500 to $25,000 per month, and to
increase the SQF Port Fee and SQF
Purge Port Fee Cap for Market Makers
that qualify as ‘‘large’’ from $42,000 to
$50,000 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 to cap their costs at different
levels and potentially obtain some SQF
Ports and SQF Purge Ports at no cost.
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 to increase SQF
Port and SQF Purge Port Fee Cap from
$17,500 to $22,500 per month 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 the cap from
$17,500 to $25,000 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
cap, by setting different fee caps 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 the cap from
$17,500 to $27,500 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 cap by setting different fee
caps for each group. The proposal
presumes that based that based on
13 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.
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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 Market Maker cap to each
Market Maker group based on the same
volume calculation. Also, Market
Makers who exceed their applicable cap
would uniformly not be assessed any fee
for SQF Ports and SQF Purge Ports
beyond the applicable maximum
amount.
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, Market Makers are subject
to market making and quoting
obligations.14 These liquidity providers
are critical market participants in that
they are the only market participants
that provide liquidity to MRX on a
continuous basis. In addition, the
Exchange notes that Lead Market
Makers are required to submit quotes in
the Opening Process to open an options
series.15 Market Makers are subject to a
number of fees, unlike other market
participants. Market Makers pay
separate Membership Fees,16 and CMM
Trading Right Fees,17 in addition to
other fees paid by other market
participants. Providing Market Makers a
means to cap their cost related to
quoting at a rate that reflects their ‘‘size’’
and enabling all Market Makers to
acquire SQF Ports and SQF Purge Ports
at no cost beyond the applicable cap
enables these market participants to
provide the necessary liquidity to MRX
at lower costs. Therefore, because
Market Makers fulfill a unique role on
the Exchange, are the only market
participant required to submit quotes as
part of their obligations to operate on
the Exchange, and, in light of that role,
they are eligible for certain incentives.
The proposed SQF Port and SQF Purge
Fee cap is designed to continue to
incent Market Makers to quote on MRX,
thereby promoting liquidity, quote
competition, and trading opportunities.
In 2022, NYSE Arca, Inc. (‘‘NYSE
Arca’’) proposed to restructure fees
relating to OTPs for Market Makers.18 In
14 See
Options 2, Sections 4 and 5.
Options 3, Section 8.
16 See Options 7, Section 5, E.
17 See Options 7, Section 5, F.
18 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
15 See
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that rule change,19 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,20
The Exchange further believes that its
ability to set Market Maker permit fees is
constrained by competitive forces based on
the fact that Market Makers can, and have,
chosen to terminate their status as a Market
Maker if they deem Market Maker permit fees
to be unreasonable or excessive. Specifically,
the Exchange notes that a BOX participant
modified its access to BOX in connection
with the implementation of a proposed
change to BOX’s Market Maker permit fees.
The Exchange has also observed that another
options exchange group experienced
decreases in market share following its
proposed modifications of its access fees
(including Market Maker trading permit fees),
suggesting that market participants
(including Market Makers) are sensitive to
changes in exchanges’ access fees and may
respond by shifting their order flow
elsewhere if they deem the fees to be
unreasonable or excessive.
There is no requirement, regulatory or
otherwise, that any Market Maker connect to
and access any (or all of) the available
options exchanges. The Exchange also is not
aware of any reason why a Market Maker
could not cease being a permit holder in
response to unreasonable price increases.
The Exchange does not assess any
termination fee for a Market Maker to drop
its OTP, nor is the Exchange aware of any
other costs that would be incurred by a
Market Maker to do so.
The Exchange likewise believes that
its ability to cap SQF Port and SQF
Purge Port fees is constrained by
competitive forces and that its proposed
modifications to the SQF Port and SQF
Purge Fee cap is reasonably designed in
consideration of the competitive
environment in which the Exchange
operates, by balancing the value of the
enhanced benefits available to Market
additional OTP because, among other reasons, the
number of issues traded on the Exchange has
increased significantly in recent years.
19 Id at 38788.
20 Id at 38790.
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57963
Makers, based on their transactional
volume and presumed ‘‘size.’’ At the
same time, the Exchange believes the
proposed fees will 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 proposed pricing change to
increase the SQF Port Fee and SQF
Purge Port Fee Cap for Market Makers
that qualify as ‘‘small,’’ from $17,500 to
$22,500, to increase the SQF Port Fee
and SQF Purge Port Fee Cap for Market
Makers that qualify as ‘‘medium’’ from
$27,500 to $25,000 per month and to
increase the SQF Port Fee and SQF
Purge Port Fee Cap for Market Makers
that qualify as ‘‘large’’ from $42,000 to
$50,000 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 to cap their costs
at different levels and potentially obtain
some SQF Ports and SQF Purge Ports at
no cost. 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 to
increase SQF Port and SQF Purge Port
Fee Cap from $17,500 to $22,500 per
month 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 the cap from
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$17,500 to $25,000 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
cap, by setting different fee caps 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 the cap from
$17,500 to $27,500 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 cap by setting different fee
caps for each group. The proposal
presumes that based 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 Market Maker cap to each
Market Maker group based on the same
volume calculation. Also, Market
Makers who exceed their applicable cap
would uniformly not be assessed any fee
for SQF Ports and SQF Purge Ports
beyond the applicable maximum
amount.
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, Market Makers are subject
to market making and quoting
obligations.21 These liquidity providers
are critical market participants in that
they are the only market participants
that provide liquidity to MRX on a
continuous basis. In addition, the
Exchange notes that Lead Market
Makers are required to submit quotes in
the Opening Process to open an options
series.22 Market Makers are subject to a
number of fees, unlike other market
participants. Market Makers pay
separate Membership Fees,23 and CMM
Trading Right Fees,24 in addition to
other fees paid by other market
participants. Providing Market Makers a
21 See
Options 2, Sections 4 and 5.
22 See Options 3, Section 8.
23 See Options 7, Section 5, E.
24 See Options 7, Section 5, F.
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means to cap their cost related to
quoting at a rate that reflects their ‘‘size’’
and enabling all Market Makers to
acquire SQF Ports and SQF Purge Ports
at no cost beyond the applicable cap
enables these market participants to
provide the necessary liquidity to MRX
at lower costs. Therefore, because
Market Makers fulfill a unique role on
the Exchange, are the only market
participant required to submit quotes as
part of their obligations to operate on
the Exchange, and, in light of that role,
they are eligible for certain incentives.
The proposed SQF Port and SQF Purge
Fee cap is designed to continue to
incent Market Makers to quote on MRX,
thereby promoting liquidity, quote
competition, and trading opportunities.
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.25 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:
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–MRX–2024–21. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–MRX–2024–21 and should be
submitted on or before August 6, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–15506 Filed 7–15–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–100484; File No. SR–ISE–
2024–24]
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
MRX–2024–21 on the subject line.
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Launch Proximity-OnDemand, a Managed Colocation
Solution
Paper Comments
July 10, 2024.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
25 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00122
Fmt 4703
Sfmt 4703
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
26 17
E:\FR\FM\16JYN1.SGM
CFR 200.30–3(a)(12).
16JYN1
]]>Agencies
[Federal Register Volume 89, Number 136 (Tuesday, July 16, 2024)]
[Notices]
[Pages 57961-57964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15506]
[[Page 57961]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100492; File No. SR-MRX-2024-21]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 6
July 10, 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 July 1, 2024, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III, below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Rules at Options 7, Section 6,
Ports and Other Services.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 7, Section 6, Ports and
Other Services. Specifically, the Exchange proposes to amend the
monthly caps for SQF Ports \3\ and SQF Purge Ports.\4\
---------------------------------------------------------------------------
\3\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Market Makers to connect, send, and receive messages related
to quotes, Immediate-or-Cancel Orders, and auction responses to the
Exchange. Features include the following: (1) options symbol
directory messages (e.g., underlying instruments); (2) System event
messages (e.g., start of trading hours messages and start of
opening); (3) trading action messages (e.g., halts and resumes); (4)
execution messages; (5) quote messages; (6) Immediate-or-Cancel
Order messages; (7) risk protection triggers and purge
notifications; (8) opening imbalance messages; (9) auction
notifications; and (10) auction responses. The SQF Purge Interface
only receives and notifies of purge requests from the Market Maker.
Market Makers may only enter interest into SQF in their assigned
options series. Immediate-or-Cancel Orders entered into SQF are not
subject to the Order Price Protection, Market Order Spread
Protection, and Size Limitation Protection in Options 3, Section
15(a)(1)(A), (1)(B), and (2)(B) respectively. See Supplementary
Material .03(c) to Options 3, Section 7.
\4\ SQF Purge is a specific port for the SQF interface that only
receives and notifies of purge requests from the Market Maker.
Dedicated SQF Purge Ports enable Market Makers to seamlessly manage
their ability to remove their quotes in a swift manner. The SQF
Purge Port is designed to assist Market Makers in the management of,
and risk control over, their quotes. Market Makers may utilize a
purge port to reduce uncertainty and to manage risk by purging all
quotes in their assigned options series. Of note, Market Makers may
only enter interest into SQF in their assigned options series.
Additionally, the SQF Purge Port may be utilized by a Market Maker
in the event that the Member has a system issue and determines to
purge its quotes from the order book.
---------------------------------------------------------------------------
Today, MRX assesses $1,250 per port, per month for an SQF Port as
well as an SQF Purge Port. Also, today, SQF Ports and SQF Purge Ports
are subject to a monthly cap of $17,500, which cap is applicable to
Market Makers.
At this time, the Exchange proposes to increase the monthly maximum
SQF Port and SQF Purge Port Fee Cap of $17,500 for Market Makers based
on the size of the Market Maker on MRX. The Exchange is determining the
size of the Market Maker based on the amount of transactional volume
executed on MRX in a given month. The Exchange proposes to take each
Market's Maker's electronic monthly add liquidity transactional volume
on MRX and dividing that number by the sum of all Market Maker
electronic monthly add liquidity volume on MRX (``Transactional
Volume''). Each Market Maker would then be classified on MRX, for the
purpose of the SQF Port Fee and SQF Purge Port Fee Cap, as a ``small,''
``medium,'' or ``large'' Market Maker based on their Transactional
Volume on MRX to determine the applicable cap in a given month. Market
Makers that qualify as ``small'' would be subject to an increased SQF
Port and SQF Purge Port monthly cap of $22,500. Market Makers that
qualify as ``medium'' would be subject to an increased monthly cap of
$25,000 for SQF Port and SQF Purge Port Fees. Finally, Market Makers
that qualify as ``large'' would be subject to an increased monthly cap
of $27,500 for SQF Port and SQF Purge Port Fees.
As is the case today, the Exchange would not assess a Market Maker
an SQF Port and SQF Purge Port Fee beyond the monthly cap once the
Market Maker has exceeded the monthly cap for the respective month.
Despite increasing the maximum SQF Port and SQF Purge Port Fee Cap for
Market Makers that qualify as ``small,'' ``medium'' and ``large,'' the
Exchange will continue to offer all Market Makers the opportunity to
cap their SQF Port and SQF Purge Port Fees to limit their costs as they
would not be assessed an SQF Port or SQF Purge Port Fee beyond the
applicable cap each month.
A MRX Market Maker requires only one SQF Port to submit quotes in
its assigned options series into MRX. An SQF Purge is a specific port
for the SQF interface that only receives and notifies of purge requests
from the Market Maker. A MRX Market Maker may submit all quotes through
one SQF Port and utilize one SQF Purge Port to view its purge requests.
While a Market Maker may elect to obtain multiple SQF Ports and SQF
Purge Ports to organize its business,\5\ only one SQF Port and SQF
Purge Port is necessary for a Market Maker to fulfill its regulatory
quoting obligations.\6\
---------------------------------------------------------------------------
\5\ For example, a Market Maker may desire to utilize multiple
SQF Ports for accounting purposes, to measure performance, for
regulatory reasons or other determinations that are specific to that
Member.
\6\ MRX Market Makers have various regulatory requirements as
provided for in Options 2, Section 4. Additionally, MRX Market
Makers have certain quoting requirements with respect to their
assigned options series as provided in Options 2, Section 5. SQF
Ports are the only quoting protocol available on MRX and only Market
Makers may utilize SQF Ports. The same is true for SQF Purge Ports.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The proposed pricing change to increase the SQF Port Fee and SQF
[[Page 57962]]
Purge Port Fee Cap for Market Makers that qualify as ``small,'' from
$17,500 to $22,500, to increase the SQF Port Fee and SQF Purge Port Fee
Cap for Market Makers that qualify as ``medium'' from $27,500 to
$25,000 per month, and to increase the SQF Port Fee and SQF Purge Port
Fee Cap for Market Makers that qualify as ``large'' from $42,000 to
$50,000 per month, is reasonable because despite the increase in the
maximum SQF Port Fee and SQF Purge Port Fee Cap, the Exchange will
continue to offer all Market Makers the opportunity to cap their SQF
Port Fees each month to limit their cost as they would not be assessed
an SQF Port or SQF Purge Port Fee Cap Fees beyond the cap.
A MRX Market Maker requires only one SQF Port to submit quotes in
its assigned options series into MRX. A MRX Market Maker may submit all
quotes through one SQF Port and utilize one SQF Purge Port to view its
purge requests. While a Market Maker may elect to obtain multiple SQF
Ports and SQF Purge Ports to organize its business,\9\ only one SQF
Port and SQF Purge Port is necessary for a Market Maker to fulfill its
regulatory quoting obligations.\10\ 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.
---------------------------------------------------------------------------
\9\ 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.
\10\ MRX Market Makers have various regulatory requirements as
provided for in Options 2, Section 4. Additionally, MRX Market
Makers have certain quoting requirements with respect to their
assigned options series as provided in Options 2, Section 5. SQF
Ports are the only quoting protocol available on MRX and only Market
Makers may utilize SQF Ports.
---------------------------------------------------------------------------
First, SQF Ports are a secure method for Market Makers to submit
quotes into the Exchange's match engine and for the Exchange to send
messages related to those quotes to Market Makers. MRX must manage the
security and message traffic, among other things, for each port.
Utilizing the various caps 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 Fee Caps were
determined based on the level of Transactional Volume on MRX 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 capping the SQF Ports and SQF Purge Ports 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 Fee Cap
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.\11\
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\11\ 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 to cap their
total port cost. MRX believes the existence of a cap based on the
``size'' of the Market Maker 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, the existence of an SQF Port and SQF Purge Port
Fee Cap allows for efficiencies and permits Market Makers to increase
their number of ports beyond the cap. The cap levels the playing field
by allowing various types of Market Makers that want to obtain a larger
number of ports to do so with the certainty of a fee cap. Without the
SQF Port and SQF Purge Port Fee Cap, Market Makers may pay more to
obtain multiple SQF Port and SQF Purge Ports on the Exchange. 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.\12\ 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.\13\
---------------------------------------------------------------------------
\12\ See BOX's Fee Schedule.
\13\ 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 proposed pricing change to increase the SQF Port Fee and SQF
Purge Port Fee Cap for Market Makers that qualify as ``small,'' from
$17,500 to $22,500, to increase the SQF Port Fee and SQF Purge Port Fee
Cap for Market Makers that qualify as ``medium'' from $27,500 to
$25,000 per month, and to increase the SQF Port Fee and SQF Purge Port
Fee Cap for Market Makers that qualify as ``large'' from $42,000 to
$50,000 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 to cap their
costs at different levels and potentially obtain some SQF Ports and SQF
Purge Ports at no cost. 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 to increase SQF
Port and SQF Purge Port Fee Cap from $17,500 to $22,500 per month 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 the cap from $17,500 to $25,000 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 cap, by setting different fee
caps 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 the cap from $17,500 to
$27,500 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 cap by setting different fee caps for
each group. The proposal presumes that based that based on
[[Page 57963]]
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 Market Maker
cap to each Market Maker group based on the same volume calculation.
Also, Market Makers who exceed their applicable cap would uniformly not
be assessed any fee for SQF Ports and SQF Purge Ports beyond the
applicable maximum amount.
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, Market Makers are
subject to market making and quoting obligations.\14\ These liquidity
providers are critical market participants in that they are the only
market participants that provide liquidity to MRX on a continuous
basis. In addition, the Exchange notes that Lead Market Makers are
required to submit quotes in the Opening Process to open an options
series.\15\ Market Makers are subject to a number of fees, unlike other
market participants. Market Makers pay separate Membership Fees,\16\
and CMM Trading Right Fees,\17\ in addition to other fees paid by other
market participants. Providing Market Makers a means to cap their cost
related to quoting at a rate that reflects their ``size'' and enabling
all Market Makers to acquire SQF Ports and SQF Purge Ports at no cost
beyond the applicable cap enables these market participants to provide
the necessary liquidity to MRX at lower costs. Therefore, because
Market Makers fulfill a unique role on the Exchange, are the only
market participant required to submit quotes as part of their
obligations to operate on the Exchange, and, in light of that role,
they are eligible for certain incentives. The proposed SQF Port and SQF
Purge Fee cap is designed to continue to incent Market Makers to quote
on MRX, thereby promoting liquidity, quote competition, and trading
opportunities.
---------------------------------------------------------------------------
\14\ See Options 2, Sections 4 and 5.
\15\ See Options 3, Section 8.
\16\ See Options 7, Section 5, E.
\17\ See Options 7, Section 5, F.
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In 2022, NYSE Arca, Inc. (``NYSE Arca'') proposed to restructure
fees relating to OTPs for Market Makers.\18\ In that rule change,\19\
NYSE Arca argued that,
---------------------------------------------------------------------------
\18\ 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.
\19\ 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,\20\
---------------------------------------------------------------------------
\20\ Id at 38790.
The Exchange further believes that its ability to set Market
Maker permit fees is constrained by competitive forces based on the
fact that Market Makers can, and have, chosen to terminate their
status as a Market Maker if they deem Market Maker permit fees to be
unreasonable or excessive. Specifically, the Exchange notes that a
BOX participant modified its access to BOX in connection with the
implementation of a proposed change to BOX's Market Maker permit
fees. The Exchange has also observed that another options exchange
group experienced decreases in market share following its proposed
modifications of its access fees (including Market Maker trading
permit fees), suggesting that market participants (including Market
Makers) are sensitive to changes in exchanges' access fees and may
respond by shifting their order flow elsewhere if they deem the fees
to be unreasonable or excessive.
There is no requirement, regulatory or otherwise, that any
Market Maker connect to and access any (or all of) the available
options exchanges. The Exchange also is not aware of any reason why
a Market Maker could not cease being a permit holder in response to
unreasonable price increases. The Exchange does not assess any
termination fee for a Market Maker to drop its OTP, nor is the
Exchange aware of any other costs that would be incurred by a Market
Maker to do so.
The Exchange likewise believes that its ability to cap SQF Port and
SQF Purge Port fees is constrained by competitive forces and that its
proposed modifications to the SQF Port and SQF Purge Fee cap is
reasonably designed in consideration of the competitive environment in
which the Exchange operates, by balancing the value of the enhanced
benefits available to Market Makers, based on their transactional
volume and presumed ``size.'' At the same time, the Exchange believes
the proposed fees will 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 proposed pricing change to increase the SQF Port Fee and SQF
Purge Port Fee Cap for Market Makers that qualify as ``small,'' from
$17,500 to $22,500, to increase the SQF Port Fee and SQF Purge Port Fee
Cap for Market Makers that qualify as ``medium'' from $27,500 to
$25,000 per month and to increase the SQF Port Fee and SQF Purge Port
Fee Cap for Market Makers that qualify as ``large'' from $42,000 to
$50,000 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 to
cap their costs at different levels and potentially obtain some SQF
Ports and SQF Purge Ports at no cost. 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
to increase SQF Port and SQF Purge Port Fee Cap from $17,500 to $22,500
per month 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 the cap from
[[Page 57964]]
$17,500 to $25,000 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 cap, by setting
different fee caps 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 the cap
from $17,500 to $27,500 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 cap by setting different fee
caps for each group. The proposal presumes that based 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 Market Maker
cap to each Market Maker group based on the same volume calculation.
Also, Market Makers who exceed their applicable cap would uniformly not
be assessed any fee for SQF Ports and SQF Purge Ports beyond the
applicable maximum amount.
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, Market Makers are
subject to market making and quoting obligations.\21\ These liquidity
providers are critical market participants in that they are the only
market participants that provide liquidity to MRX on a continuous
basis. In addition, the Exchange notes that Lead Market Makers are
required to submit quotes in the Opening Process to open an options
series.\22\ Market Makers are subject to a number of fees, unlike other
market participants. Market Makers pay separate Membership Fees,\23\
and CMM Trading Right Fees,\24\ in addition to other fees paid by other
market participants. Providing Market Makers a means to cap their cost
related to quoting at a rate that reflects their ``size'' and enabling
all Market Makers to acquire SQF Ports and SQF Purge Ports at no cost
beyond the applicable cap enables these market participants to provide
the necessary liquidity to MRX at lower costs. Therefore, because
Market Makers fulfill a unique role on the Exchange, are the only
market participant required to submit quotes as part of their
obligations to operate on the Exchange, and, in light of that role,
they are eligible for certain incentives. The proposed SQF Port and SQF
Purge Fee cap is designed to continue to incent Market Makers to quote
on MRX, thereby promoting liquidity, quote competition, and trading
opportunities.
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\21\ See Options 2, Sections 4 and 5.
\22\ See Options 3, Section 8.
\23\ See Options 7, Section 5, E.
\24\ See Options 7, Section 5, F.
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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.\25\ At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is: (i) necessary or appropriate in the public
interest; (ii) for the protection of investors; or (iii) otherwise in
furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\25\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-MRX-2024-21 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-MRX-2024-21. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-MRX-2024-21 and should be
submitted on or before August 6, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-15506 Filed 7-15-24; 8:45 am]
BILLING CODE 8011-01-P
