Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend MRX's Options 7, 60945-60953 [2024-16547]
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Federal Register / Vol. 89, No. 145 / Monday, July 29, 2024 / Notices
Dated: July 23, 2024.
Sherry R. Haywood,
Assistant Secretary.
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
[FR Doc. 2024–16567 Filed 7–26–24; 8:45 am]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100575; File No. SR–MRX–
2024–25]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend MRX’s Options
7
July 23, 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 15,
2024, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Pricing Schedule at Options
7.3
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/mrx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
ddrumheller on DSK120RN23PROD with NOTICES1
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 On June 11, 2024, the Exchange withdrew SR–
MRX–2024–13 and replaced it with SR–MRX–
2024–14. On June 25, 2024, the Exchange withdrew
SR–MRX–2024–14 and replaced it with SR–MRX–
2024–16. On July 2, 2024, the Exchange withdrew
SR–MRX–2024–16 and replaced it with SR–MRX–
2024–22. On July 15, 2024, the Exchange withdrew
SR–MRX–2024–22 and replaced it with this rule
change.
2 17
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1. Purpose
MRX proposes to amend the
Exchange’s Pricing Schedule at Options
7 to make various changes. Specifically,
the Exchange proposes to amend
Options 7: Section 1, General
Provisions; Section 3, Regular Order
Fees and Rebates; and Section 4,
Complex Order Fees. Each change will
be described below.
Options 7, Section 3—Table 1
Today, MRX offers Regular Order
Maker Fees/Rebates and Taker Fees in
Penny and Non-Penny Symbols in
Options 7, Section 3, Table 1.
Specifically, with respect to Penny
Symbols, the Exchange assesses/pays
Market Makers 4 a Tier 1 Maker Fee of
$0.10 per contract, no Tier 2 Maker Fee,
a Tier 3 Maker Rebate of $0.05 per
contract and a Tier 4 Maker Rebate of
$0.10 per contract in Penny Symbols.
Today, the Exchange assesses Market
Maker Tier 1 through Tier 4 Penny
Symbol Taker Fees of $0.50 per
contract. Today, the Exchange assesses
Non-Nasdaq MRX Market Makers
(FarMM),5 Firm Proprietary/BrokerDealer 6 and Professional Customers 7 a
Tier 1 through Tier 4 Maker Fee of $0.47
per contract and a Tier 1 through Tier
4 Taker Fee of $0.50 per contract in
Penny Symbols. Finally, today, the
Exchange assesses a Priority Customer 8
no Maker Fees and pays no Maker
Rebates and assesses a $0.20 per
4 A ‘‘Market Maker’’ is a market maker as defined
in Nasdaq MRX Rule Options 1, Section 1(a)(21).
See Options 7, Section 1(c).
5 A ‘‘Non-Nasdaq MRX Market Maker’’ is a market
maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended,
registered in the same options class on another
options exchange. See Options 7, Section 1(c).
6 A ‘‘Firm Proprietary’’ order is an order
submitted by a Member for its own proprietary
account. A ‘‘Broker-Dealer’’ order is an order
submitted by a Member for a broker-dealer account
that is not its own proprietary account. See Options
7, Section 1(c).
7 A ‘‘Professional Customer’’ is a person or entity
that is not a broker/dealer and is not a Priority
Customer. See Options 7, Section 1(c).
8 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in Nasdaq MRX
Options 1, Section 1(a)(36). Unless otherwise noted,
when used in this Pricing Schedule the term
‘‘Priority Customer’’ includes ‘‘Retail’’. See Options
7, Section 1(c).
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60945
contract Tier 1 through Tier 4 Taker Fee
in Penny Symbols.
With respect to Non-Penny Symbols,
today, the Exchange assesses Market
Makers a Tier 1 Maker Fee of $0.35 per
contract, a Tier 2 Maker Fee of $0.20 per
contract, a Tier 3 Maker Fee of $0.15 per
contract and a Tier 4 Maker Fee of $0.10
per contract. Today, the Exchange
assesses Market Makers a Tier 1 through
Tier 4 Taker Fee of $1.10 per contract
in Non-Penny Symbols. Today, the
Exchange assesses Non-Nasdaq MRX
Market Makers (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customers a Tier 1 through
Tier 4 Maker Fee of $0.90 per contract
and a Tier 1 through Tier 4 Taker Fee
of $1.10 per contract in Non-Penny
Symbols. Finally, today, the Exchange
assesses a Priority Customer no Maker
Fees and assesses a $0.40 per contract
Tier 1 through Tier 4 Taker Fee in NonPenny Symbols.
At this time, the Exchange proposes to
no longer offer Maker Rebates for adding
liquidity and instead offer Taker Rebates
for removing liquidity. With this new
structure, the Exchange would continue
to assess Priority Customers no Maker
Fees for Penny and Non-Penny Symbols
to continue to encourage Members to
send Priority Customer order flow that
adds liquidity to MRX and rests on the
order book. The Exchange proposes to
begin offering Priority Customer Taker
Rebates in Penny and Non-Penny
Symbols to encourage Members to send
Priority Customer order flow that
removes liquidity from MRX’s order
book. MRX’s proposal offers to pay
rebates to Members to engage in Priority
Customer liquidity removing activity on
MRX. Specifically, the Exchange
believes that the Taker Rebates will
encourage additional order flow to be
sent to MRX with the goal of removing
liquidity and obtaining a Taker Rebate.
To the extent this proposal attracts such
order flow to MRX, all Members should
benefit through more trading
opportunities.
As a result of this structural change in
pricing, the Exchange would assess a
Market Maker a $0.50 per contract
Penny Symbol Maker Fee in Tier 1
through Tier 4. This would be an
increase in the Tier 1 Maker Fee of
$0.40 per contract and an increase in the
Tier 2 Maker Fee of $0.50 per contract
for Market Makers in Penny Symbols.
The Exchange would no longer pay a
$0.05 per contract Maker Rebate in Tier
3 nor pay a $0.10 per contract Tier 4
Maker Rebate to Market Makers in
Penny Symbols and instead assess the
$0.50 per contract Maker Fee.
Additionally, a Market Maker would
pay a decreased Penny Symbol Taker
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60946
Federal Register / Vol. 89, No. 145 / Monday, July 29, 2024 / Notices
Fee of $0.35 per contract in Tier 1
through Tier 4 as compared to the
current $0.50 per contract Taker Fee.
Further, the Exchange would assess
Non-Nasdaq MRX Market Makers
(FarMM), Firm Proprietary/BrokerDealer and Professional Customers a
increased Tier 1 through Tier 4 Penny
Symbol Maker Fee of $0.50 per contract,
instead of $0.47 per contract, and a
decreased Tier 1 through Tier 4 Taker
Fee of $0.35 per contract, instead of
$0.50 per contract in Penny Symbols.
Finally, the Exchange would continue to
assess a Priority Customer no Maker
Fees in Penny Symbols. Additionally,
the Exchange would replace the Priority
Customer Penny Symbol Tier 1 Taker
Fee of $0.20 with a Taker Rebate of
$0.31 per contract. The Exchange would
replace the Priority Customer Penny
Symbol Tier 2 Taker Fee of $0.20 with
a Taker Rebate of $0.36 per contract.
The Exchange would replace the
Priority Customer Penny Symbol Tier 3
Taker Fee of $0.20 with a Taker Rebate
of $0.41 per contract. Finally, the
Exchange would replace the Priority
Customer Penny Symbol Tier 4 Taker
Fee of $0.20 with a Taker Rebate of
$0.44 per contract.
At this time, the Exchange proposes to
increase the Market Maker Non-Penny
Symbol Maker Fees in Tier 1 from $0.35
to $1.25 per contract, the Tier 2 Maker
Fee from $0.20 to $1.25 per contract, the
Tier 3 Maker Fee from $0.15 to $1.25
per contract, and the Tier 4 Maker Fee
for $0.10 to $1.25 per contract. The
Exchange proposes to continue to assess
Market Makers a $1.10 per contract
Non-Penny Symbol Taker Fee. Further,
the Exchange would assess Non-Nasdaq
MRX Market Makers (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customers an increased
Tier 1 through Tier 4 Penny Symbol
Maker Fee of $1.25 per contract, instead
of $0.90 per contract, and would assess
the same Tier 1 through Tier 4 Taker
Fee of $1.10 per contract in Non-Penny
Symbols. Finally, the Exchange would
continue to assess a Priority Customer
no Non-Penny Symbol Maker Fees.
Additionally, the Exchange would
replace the Priority Customer NonPenny Symbol Taker Fees with Taker
Rebates as follows: instead of a $0.40
per contract Tier 1 Taker Fee, MRX
would pay an $0.80 per contract Taker
Rebate; instead of a $0.40 per contract
Tier 2 Taker Fee, MRX would pay a
$0.90 per contract Taker Rebate; instead
of a $0.40 per contract Tier 3 Taker Fee,
MRX would pay a $1.00 per contract
Taker Rebate; and instead of a $0.40 per
contract Tier 4 Taker Fee, MRX paya
$1.10 per contract Taker Rebate.
The Exchange believes that the
Priority Customer Taker Rebates will
encourage market participants to
remove liquidity on MRX in order to be
eligible for Taker Rebates.
As a result of the change to Table 1
in Options 7, Section 3, the Exchange
proposes to amend the description of an
‘‘Exposed Order.’’ Today, an Exposed
Order is an order that is broadcast via
an order exposure alert as described
within Options 5, Section 4 (Order
Routing). Unless otherwise noted in
Options 7, Section 3 pricing, Exposed
Orders will be assessed the applicable
‘‘Taker’’ Fee and any order or quote that
executes against an Exposed Order
during a Route Timer will be paid/
assessed the applicable ‘‘Maker’’ Rebate/
Fee. The Exchange proposes to instead
state that is an order that is broadcast
via an order exposure alert as described
within Options 5, Section 4 (Order
Routing). Unless otherwise noted in
Options 7, Section 3 pricing, Exposed
Orders will be paid/assessed the
applicable ‘‘Taker’’ Fee/Rebate and any
order or quote that executes against an
Exposed Order during a Route Timer
will be assessed the applicable ‘‘Maker’’
Fee. The Exchange is amending this
description because the Exchange
would no longer pay Maker Rebates and
would instead pay Taker Rebates as
proposed in the Pricing Schedule at
Options 7, Section 3, Table 1.
The Exchange also proposes to
conform note 6 in Options 7, Section 3
to account for the removal of Maker
Rebates and the addition of Priority
Customer Taker Rebates. Options 7,
Section 3 currently provides, ‘‘Market
Maker Tier 1 through Tier 4 Maker Fees/
Rebates and Priority Customer Tier 1
through Tier 4 Taker Fees will be $0.00
per contract, in Penny Symbols, for the
following option symbols: SPY, QQQ
and IWM.’’ The Exchange proposes to
instead state, ‘‘Market Maker Tier 1
through Tier 4 Maker Fees and Priority
Customer Tier 1 through Tier 4 Taker
Fees/Rebates will be $0.00 per contract,
in Penny Symbols, for the following
option symbols: SPY, QQQ and IWM.’’
The Exchange also proposes to
remove the discounted fees in note 7 of
Options 7, Section 3 in Table 1 which
provides, ‘‘Members that execute Total
Affiliated Member or Affiliated Entity
Priority Customer ADV of 0.30%
Customer Total Consolidated Volume in
Regular Orders for Penny and NonPenny Symbols which remove liquidity
in a given month will be assessed: (1)
a $0.10 per contract Priority Customer
Taker Fee in Penny Symbols; and (2) a
$0.20 per contract Priority Customer
Taker Fee in Non-Penny Symbols.’’ The
Exchange would no longer offer these
discounts with the new fee structure
and proposes to instead incentivize
Members differently with its new Taker
Rebates.
Options 7, Section 3—Table 2
Today, Options 7, Section 3, Table 2
applies only to regular orders. Today,
the Exchange assesses the following
Crossing Order Fees in Penny and NonPenny Symbols:
PENNY SYMBOLS
Fee for
crossing
orders 1
ddrumheller on DSK120RN23PROD with NOTICES1
Market participant
Market Maker 4 .........................................................................................................................................................
Non-Nasdaq MRX Market Maker (FarMM) .............................................................................................................
Firm Proprietary/Broker-Dealer ................................................................................................................................
Professional Customer ............................................................................................................................................
Priority Customer .....................................................................................................................................................
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$0.20
0.20
0.20
0.20
0.00
Fee for
responses to
crossing
orders 2
$0.50
0.50
0.50
0.50
0.50
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Federal Register / Vol. 89, No. 145 / Monday, July 29, 2024 / Notices
NON-PENNY SYMBOLS
Fee for
crossing
orders 1
Market participant
Market Maker 4 .........................................................................................................................................................
Non-Nasdaq MRX Market Maker (FarMM) .............................................................................................................
Firm Proprietary/Broker-Dealer ................................................................................................................................
Professional Customer ............................................................................................................................................
Priority Customer .....................................................................................................................................................
ddrumheller on DSK120RN23PROD with NOTICES1
The Exchange proposes to amend the
title of Options 7, Section 3 from
‘‘Regular Order Fees and Rebates’’ to
‘‘Fees and Rebates for Regular Orders
and All Crossing Orders’’ to account for
the inclusion of certain Complex Order
crossing order fees. The Exchange
proposes to add a title to Options 7,
Section 3, Table 2, ‘‘Regular and
Complex Crossing Orders’’ with a new
note 3. Proposed note 3 of Options 7,
Section 3 would provide that the Table
2 fees apply to Regular and Complex
orders entered into the Facilitation
Mechanism; the Solicited Order
Mechanism; the Block Order
Mechanism 9 as applicable; QCC Orders;
Complex QCC Orders; QCC with Stock
Orders; and Complex QCC with Stock
Orders.
The Exchange proposes to amend
Table 2 which consists of the Fee for
Crossing Orders.10 The Exchange
proposes to decrease the Penny Symbol
Non-Priority Customer 11 Fees for
Crossing Orders from $0.20 per contract
to $0.02 per contract for orders in the
Facilitation Mechanism, Solicitation
Mechanism and Block Orders. A
Priority Customer would continue to be
assessed no Fee for Crossing Orders in
Penny Symbols. The Exchange is
proposing to carve out pricing for QCC
Orders, Complex QCC Orders, QCC with
Stock Orders and Complex QCC with
Stock Orders, in addition to PIM Orders
which are already carved out from the
fees that apply to the originating and
contra-side orders in Table 2. The
Exchange proposes to amend note 1 of
Options 7, Section 3, Table 2 to provide,
9 Block Orders are single-leg orders only.
Additionally, Block Orders are single-sided
auctions.
10 A ‘‘Crossing Order’’ is an order executed in the
Exchange’s Facilitation Mechanism, Solicited Order
Mechanism, Price Improvement Mechanism
(‘‘PIM’’) or submitted as a Qualified Contingent
Cross order. For purposes of this Pricing Schedule,
orders executed in the Block Order Mechanism are
also considered Crossing Orders. See Options 7,
Section 1(c).
11 ‘‘Non-Priority Customers’’ include Market
Makers, Non-Nasdaq GEMX Market Makers
(FarMMs), Firm Proprietary/Broker-Dealers, and
Professional Customers.
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Fees apply to the originating and contraside orders, except for PIM Orders and
Qualified Contingent Cross (‘‘QCC’’) Orders,
Complex QCC Orders, QCC with Stock
Orders and Complex QCC with Stock Orders.
The Fee for Crossing Orders for QCC Orders,
Complex QCC Orders, QCC with Stock
Orders and Complex QCC with Stock Orders
is $0.20 per contract for Non-Priority
Customer orders in Penny and Non-Penny
Symbols. Priority Customer orders are not
assessed a fee for Crossing Orders. Regular
and Complex PIM Orders are subject to
separate pricing in Part A below.
The Exchange would continue to assess
Non-Priority Customer QCC Orders and
QCC with Stock Orders the same $0.20
per contract Fee for Crossing Orders in
Penny Symbols as today and would
continue to assess Priority Customers no
Fee for Crossing Orders in Penny and
Non-Penny Symbols. There are no Fees
for Responses to Crossing Orders for
QCC Orders and QCC with Stock
Orders.12 The Exchange is not amending
the Non-Penny Fees for Crossing Orders
in Options 7, Section 3, Table 2.
With this proposal, the Exchange
would assess Complex QCC Orders and
Complex QCC with Stock Orders the
same Fees for Crossing Orders as QCC
Orders and QCC with Stock Orders.13
Specifically, Complex QCC Orders and
Complex QCC with Stock Orders would
be assessed a $0.20 per contract Fee for
Crossing Orders to Non-Priority
Customers in Penny and Non-Penny
Symbols. Priority Customers would not
be assessed a Fee for Crossing Orders.
Complex QCC Orders and Complex QCC
with Stock Orders would be subject to
lower Penny Symbol fees and slightly
higher Non-Penny Fees for Crossing
Orders. Today, Options 7, Section 4
assesses a $0.35 per contract Penny
Symbol to all Non-Priority Customer
Orders and an $0.85 per contract NonPenny Symbol fee to all Members for
12 QCC Orders and QCC with Stock Orders are
automatically executed upon entry. Responses
cannot be submitted. See Options 3, Section 12.
13 Complex QCC Orders and Complex QCC with
Stock Orders are automatically executed upon
entry. Responses cannot be submitted. See Options
3, Section 12.
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$0.20
0.20
0.20
0.20
0.00
Fee for
responses to
crossing
orders 2
$1.10
1.10
1.10
1.10
1.10
Complex QCC Orders and Complex QCC
with Stock Orders.
Additionally, the Exchange proposes
to assess the Options 7, Section 3, Table
2 fees to orders entered into the
Complex Facilitation Mechanism and
Complex Solicitation Mechanism in
addition to Regular Orders entered into
these mechanisms. The Exchange would
assess orders entered into the Complex
Facilitation Mechanism and Complex
Solicitation Mechanism the proposed
reduced $0.02 per contract Fee for
Crossing Orders in Penny Symbols and
$0.20 per contract for Non-Penny
Symbols and would assess Priority
Customers no Fee for Crossing Orders in
Penny and Non-Penny Symbols. The
Exchange would also assess orders
entered into the Complex Facilitation
Mechanism and Complex Solicitation
Mechanism a $0.50 Fee for Responses to
Crossing Orders to all Members for
Penny Symbols and a $1.10 Fee for
Responses to Crossing Orders to all
Members in Non-Penny Symbols. This
pricing would be in lieu of the Complex
Order pricing in Options 7, Section 4.
As noted above, today, Options 7,
Section 4 assesses a $0.35 per contract
Penny Symbol to all Non-Priority
Customer Orders and an $0.85 per
contract Non-Penny Symbol fee to all
Members for orders entered into the
Complex Facilitation Mechanism and
Complex Solicitation Mechanism. The
proposed pricing for the Complex
Facilitation Mechanism and Complex
Solicitation Mechanism would be
subject to the same pricing as the
Regular Facilitation Mechanism and
Solicited Order Mechanism. The
Exchange believes that the pricing in
Options 7, Section 4, Table 2 will
incentivize Members to utilize these
mechanisms.
The Exchange also proposes to define
a Non-Priority Customer in Options 7,
Section 1. Specifically, the Exchange
proposes to state, ‘‘Non-Priority
Customers’’ include Market Makers,
Non-Nasdaq MRX Market Makers
(FarMMs), Firm Proprietary/BrokerDealers, and Professional Customers.’’
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The Exchange proposes to amend
notes 1 and 2 of Options 7, Section 3,
Table 2 to add the words ‘‘and
Complex’’ with respect to PIM Orders to
make clear that, all PIM Orders, Regular
and Complex, would be subject to the
Part A pricing in Options 7, Section 3.
As a result of this amendment, there is
no pricing change for Regular and
Complex PIM Orders.
The Exchange also proposes a Penny
Symbol Break-Up Rebate for Regular
and Complex Orders entered into the
Exchange’s Facilitation Mechanism and
Solicited Order Mechanism for Priority
Customers of $0.30 per contract. Today,
orders entered into the Complex
Facilitation Mechanism and the
Complex Solicited Order Mechanism
are not offered a Break-Up Rebate. The
Exchange believes that the new Priority
Customer Break-up Rebate will attract
MRX Members to utilize the Exchange’s
Facilitation Mechanism and Solicited
Order Mechanism for both Regular and
Complex Orders. The Exchange
proposes to add a new note 5 in Options
7, Section 3, Table 2 that provides that
break-up rebates are provided for an
originating Priority Customer Regular or
Complex order entered into the
Facilitation Mechanism or Solicited
Order Mechanism that executes with
any response (order or quote) other than
the contra-side order.
Options 7, Section 3—Table 3
Currently, Options 7, Section 3, Table
3 contains the Qualifying Tier
Thresholds for Tier 1 through Tier 4
pricing. Specifically, today, market
participants are charged the applicable
tier maker/taker fees (or are eligible for
rebates) if they meet the applicable tier
thresholds based on Total Affiliated
Member or Affiliated Entity ADV 14 in
Table 3 of Options 7, Section 3. Market
Makers may also alternatively qualify
for these fees if they meet the applicable
tier thresholds based on Total Market
Maker ADV.15
QUALIFYING TIER THRESHOLDS
Tiers
Total affiliated member or affiliated entity ADV
OR
Total market maker ADV
Tier 1 ....................
executes 0.00% to less than 0.75% of Customer Total
Consolidated Volume.
executes 0.75% to less than 1.50% of Customer Total
Consolidated Volume.
........
Tier 3 ....................
executes 1.50% to less than 2.25% of Customer Total
Consolidated Volume.
........
Tier 4 ....................
executes 2.25% or more of Customer Total Consolidated
Volume.
........
executes up to 0.10% of Customer Total Consolidated
Volume which adds liquidity in Regular Orders.
executes more than 0.10% and up to 0.25% of Customer Total Consolidated Volume which adds liquidity
in Regular Orders.
executes more than 0.25% and up to 0.45% of Customer Total Consolidated Volume which adds liquidity
in Regular Orders.
executes more than 0.45% of Customer Total Consolidated Volume which adds liquidity in Regular Orders.
ddrumheller on DSK120RN23PROD with NOTICES1
Tier 2 ....................
........
Today, the highest tier threshold
attained applies retroactively in a given
month to all eligible traded contracts
and applies to all eligible market
participants.
At this time, the Exchange proposes to
remove the current tier qualifications for
Total Affiliated Member or Affiliated
Entity ADV which is applicable to all
market participants, except Market
Makers. The Exchange would also
remove the bullet point describing the
methodology for these qualifications.
The Exchange also proposes to amend
the Total Market Maker ADV to rename
the qualifications ‘‘Total Customer
ADV’’ to reflect the new methodology
by which the Exchange will determine
eligibility for the tiers. The Exchange
proposes to amend the bullet under
Table 3 which describes Total Market
Maker ADV to instead describe Total
Customer ADV as Priority Customer
Total Consolidated Volume divided by
Customer Total Consolidated Volume.16
The Exchange defines Priority Customer
Total Consolidated Volume as a
Member’s total Priority Customer
volume executed on MRX in that
month, including volume executed by
Affiliated Members or Affiliated
Entities. The Exchange also proposes to
amend the numerical qualifications
within the four tiers for Total Customer
ADV so that Tier 1 requires a Member
to execute up to 0.10%; Tier 2 requires
a Member to execute more than 0.10%
and up to 0.40%; Tier 3 requires a
Member to execute more than 0.40%
and up to 0.70%; and Tier 4 requires a
Member to execute more than 0.70%.
Unlike today, Members will be able to
qualify for the pricing in Options 7,
Section 3, Table 1 by the amount of
Priority Customer Volume they execute
on MRX.
The Exchange believes the proposed
tier qualifications will incentivize
Members to execute a greater amount of
Priority Customer Volume on MRX in
order to receive the proposed Priority
Customer Taker Rebates for removing
liquidity.
14 Total Affiliated Member or Affiliated Entity
ADV means all ADV executed on the Exchange in
all symbols and order types, including volume
executed by Affiliated Members or Affiliated
Entities. All eligible volume from Affiliated
Members or an Affiliated Entity will be aggregated
in determining applicable tiers.
15 Total Market Maker ADV means all Market
Maker ADV executed on the Exchange in all
symbols and order types, including volume
executed by Affiliated Members or Affiliated
Entities. All eligible volume from Affiliated
Members or an Affiliated Entity will be aggregated
in determining applicable tiers.
16 Options 7, Section 1(c) defines ‘‘Customer Total
Consolidated Volume’’ as the total volume cleared
at The Options Clearing Corporation in the
Customer range in equity and ETF options in that
month. As is the case today, all eligible volume
from Affiliated Members or an Affiliated Entity will
be aggregated in determining applicable tiers. The
‘‘C’’ range at OCC includes both Priority Customer
and Professional Customer volume.
17 MRX will continue to assess a Stock Handling
Fee of $0.0010 per share (capped at a maximum of
$50 per trade) for the stock leg of Stock-Option
Orders executed against other Stock-Option Orders
in the Complex Order Book. This fee will be in
addition to the above-referenced fees for Complex
Orders. See note 1 of Options 7, Section 4.
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Options 7, Section 4
The Exchange proposes to amend
Options 7, Section 4, Complex Order
Fees. The current pricing in Options 7,
Section 4 applies to Complex Order
transactions in the Complex Order Book
as well as Complex Orders submitted
into the Complex Facilitation
Mechanism, Complex Solicited Order
Mechanism, a Complex Customer Cross
Order, Complex QCC Orders and
Complex QCC with Stock Orders.
Today, fees apply to an originating
order, contra-side order and responses,
as applicable, entered into MRX’s
Complex Facilitation Mechanism,
Complex Solicited Order Mechanism
and orders entered as a Complex
Customer Cross Order, Complex QCC
Order or Complex QCC with Stock
Order.17 Also, interest on the Regular
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Order Book that interacts with a
Complex Order is subject to Regular
Order Book fees within Options 7,
Section 3 and Complex PIM Orders are
subject to separate pricing in Options 7,
Section 3.A.
At this time the Exchange proposes to
amend Options 7, Section 4 so that
Complex Order fees apply to an
originating order, contra-side order and
both orders entered as a Complex
Customer Cross Order. The Exchange
proposes to assess Complex QCC
Orders, Complex QCC with Stock
Orders, Complex Facilitation Orders
and Complex Solicited Orders the
crossing order pricing in Options 7,
Section 3, Table 2, rather than the
pricing in Options 7, Section 4, as
explained above. With this proposal, the
Exchange would uniformly assess
Complex QCC Orders and Complex QCC
with Stock Orders the same pricing as
QCC Orders and QCC with Stock
Orders. Likewise, the Exchange would
uniformly assess orders entered into the
Complex Facilitation Mechanism and
Complex Solicited Order Mechanism
the same pricing as Regular Orders
entered in the Facilitation Mechanism
and Solicited Order Mechanism. Today,
Options 7, Section 4 assesses a $0.35 per
contract Penny Symbol to all NonPriority Customer Orders and an $0.85
per contract Non-Penny Symbol fee to
all Non-Priority Customer Orders for
Complex QCC Orders, Complex QCC
with Stock Orders, Complex Facilitation
Orders and Complex Solicited Orders.
Additionally, the Exchange proposes to
amend Options 7, Section 4 to note that
interest on the Regular Order Book that
interacts with a Complex Order is
subject to Regular Order Book fees
within Options 7, Section 3, and
specifically note ‘‘Table 1.’’ Also, the
Exchange proposes to note that
‘‘Complex Orders which are Crossing
Orders are subject to separate pricing in
Options 7, Section 3, Table 2. Complex
PIM Orders, along with Regular PIM
Orders, are subject to the pricing in
Options 7, Section 3, A.’’ The Exchange
is not proposing to amend the Complex
Order pricing in Options 7, Section 4.
The Exchange is proposing to add a
new note 3 in Options 7, Section 4
which provides that ‘‘Members that
execute Complex Orders that trade with
interest on the regular order book (leg)
will be assessed/paid the applicable
‘‘Taker’’ Fee/Rebate in Options 7,
Section 3, Table 1. To the extent that a
Priority Customer Complex Order legs
into the regular order book and executes
against a Priority Customer regular
order, the Exchange will not pay a Taker
Rebate for that leg.’’ The Exchange
would not assess Priority Customers a
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Complex Order fee and therefore
proposes to not pay a Taker Rebate to
a Priority Customer Complex Order that
executes against a Priority Customer leg
in the order book.
Finally, the Exchange proposes to
remove the parathesis around notes 1
and 2 and add a period to conform the
format of the numbering to Options 7,
Section 3 numbering.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,18 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,19 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 changes are reasonable
in several respects. As a threshold
matter, the Exchange is subject to
significant competitive forces in the
market for options securities transaction
services that constrain its pricing
determinations in that market. The fact
that this market is competitive has long
been recognized by the courts. In
NetCoalition v. Securities and Exchange
Commission, the D.C. Circuit stated as
follows: ‘‘[n]o one disputes that
competition for order flow is ‘fierce.’
. . . As the SEC explained, ‘[i]n the U.S.
national market system, buyers and
sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’ 20
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
20 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
PO 00000
18 15
19 15
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60949
broader forms that are most important to
investors and listed companies.’’ 21
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
security transaction services. The
Exchange is only one of seventeen
options exchanges to which market
participants may direct their order flow.
Within this environment, market
participants can freely and often do shift
their order flow among the Exchange
and competing venues in response to
changes in their respective pricing
schedules. As such, the proposal
represents a reasonable attempt by the
Exchange to increase its liquidity.
Options 7, Section 3—Table 1
The Exchange’s proposal to offer
Maker Fees and Taker Fees/Rebates in
Penny and Non-Penny Symbols in
Options 7, Section 3, Table 1 is
reasonable because the Exchange desires
to incentivize market participants to
remove Priority Customer liquidity on
MRX instead of offering rebates to add
liquidity. With this new structure, the
Exchange would continue to assess
Priority Customers no Maker Fees for
Penny and Non-Penny Symbols to
continue to encourage Members to send
Priority Customer order flow that adds
liquidity to MRX and rests on the order
book. The Exchange proposes to begin
offering Priority Customer Taker Rebates
in Penny and Non-Penny Symbols to
encourage Members to send Priority
Customer order flow that removes
liquidity from MRX’s order book. The
Exchange’s proposal to pay Priority
Customers Taker Rebates in Penny and
Non-Penny Symbols is intended to
encourage market participants to send
additional Priority Customer orders to
MRX because the proposed pricing will
reward Members that remove Priority
Customer liquidity from MRX. The
Exchange proposes to fund these
Priority Customer Taker Rebates by
assessing all Non-Priority Customers
(Market Makers, Non-Nasdaq MRX
Market Makers (FarMM), Firm
Proprietary/Broker-Dealer and
Professional Customers) uniform NonPenny Symbol Maker Fees of $1.25 per
contract. The Exchange would continue
to assess Non-Priority Customers
uniform $1.10 Non-Penny Symbol Taker
Fees. The Exchange believes that these
fees are reasonable because the Taker
Rebates will encourage additional order
flow to be sent to MRX with the goal of
removing Priority Customer liquidity
21 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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and obtaining a Taker Rebate. To the
extent this proposal attracts such order
flow to MRX, all Members should
benefit through more trading
opportunities. The proposed fees are
competitive with fees assessed on BOX
Exchange LLC (‘‘BOX’’). BOX pays a
$0.20 per contract Taker Rebate to a
Public Customer in Penny Interval
Classes provided the contra-party is not
another Public Customer. Additionally,
BOX pays a $0.50 per contract Taker
Rebate to a Public Customer in NonPenny Interval Classes provided the
contra-party is not another Public
Customer.22
The Exchange’s proposal to offer
Maker Fees and Taker Fees/Rebates in
Penny and Non-Penny Symbols is
equitable and not unfairly
discriminatory because Priority
Customers would continue to not be
assessed Penny or Non-Penny Symbol
Maker Fees. Additionally, the proposal
would pay Priority Customers Taker
Rebates in Penny and Non-Penny
Symbols. Unlike other market
participants, Priority Customer liquidity
benefits all market participants by
providing more trading opportunities,
which attracts market makers. An
increase in the activity of these market
participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow for
other market participants, to the benefit
of all market participants.
The Exchange’s proposal to remove
the discounted fees in note 7 of Options
7, Section 3 in Table 1 23 is reasonable
because the Exchange has amended
Options 7, Section 3 in an effort to
attract additional Priority Customer
order flow to the Exchange.
Additionally, the Exchange has
amended its pricing to encourage
market participants to remove liquidity
on MRX and note 7 encouraged adding
liquidity. The Exchange believes its
proposal will create competition on
MRX to execute against Priority
Customer orders and therefore note 7
would be unnecessary given other
changes to the pricing. The Exchange’s
proposal to remove the discounted fees
in note 7 of Options 7, Section 3 in
Table 1 is equitable and not unfairly
discriminatory as no market participant
22 See
BOX’s Fee Schedule at Section IV.
that execute Total Affiliated Member
or Affiliated Entity Priority Customer ADV of 0.30%
Customer Total Consolidated Volume in Regular
Orders for Penny and Non-Penny Symbols which
remove liquidity in a given month will be assessed:
(1) a $0.10 per contract Priority Customer Taker Fee
in Penny Symbols; and (2) a $0.20 per contract
Priority Customer Taker Fee in Non-Penny
Symbols. See note 7 of Options 7, Section 3 in
Table 1.
23 Members
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would be entitled to the discounted
fees.
Amending the description of an
‘‘Exposed Order’’ in Options 7, Section
1 and conforming note 6 in Options 7,
Section 6 is reasonable, equitable and
not unfairly discriminatory because the
Exchange would no longer pay Maker
Rebates and would instead uniformly
pay Priority Customer Taker Rebates
proposed in the Pricing Schedule as
proposed in Options 7, Section 3, Table
1.
Options 7, Section 3—Table 2
The Exchange’s proposal to amend
Table 2 of Options 7, Section 3 to
decrease the Penny Symbol Non-Priority
Customer Fees for Crossing Orders from
$0.20 per contract to $0.02 per contract
for orders in the Facilitation
Mechanism, Solicitation Mechanism
and Block Orders is reasonable because
the Exchange would be reducing the
fees to enter orders in the Facilitation
Mechanism, Solicitation Mechanism
and Block Orders to encourage market
participants to enter additional Crossing
Orders. Additionally, the proposal to
pay a Priority Customer Break-Up
Rebate of $0.30 per contract for orders
entered into the Facilitation Mechanism
and Solicitation Mechanism will attract
Priority Customer orders to be entered
into these auctions. Applying the
crossing order fees to orders entered in
the Complex Facilitation Mechanism
and Complex Solicitation Mechanism is
reasonable because Members would pay
the reduced fees in Options 7, Section
3, Table 2 as compared to the fees in
Options 7, Section 4. Orders entered in
the Complex Facilitation Mechanism
and Complex Solicitation Mechanism
would be assessed a $0.02 per contract
Fee for Crossing Orders to Non-Priority
Customers in Penny Symbols, a $0.20
per contract Fee for Crossing Orders to
Non-Priority Customers in Non-Penny
Symbols, a $0.50 Fee for Responses to
Crossing Orders to all Members for
Penny Symbols, and a $1.10 Fee for
Responses to Crossing Orders to all
Members in Non-Penny Symbols.
Priority Customers would not pay a Fee
for Crossing Orders. Today, Options 7,
Section 4 assesses a $0.35 per contract
Penny Symbol to all Non-Priority
Customer Orders and an $0.85 per
contract Non-Penny Symbol fee to all
Members for Complex QCC Orders,
Complex QCC with Stock Orders,
Complex Facilitation Orders and
Complex Solicited Orders. The
Exchange believes that the lower Penny
Symbol fees offset the slightly higher
Non-Penny fees that would be assessed
to orders entered in the Complex
Facilitation Mechanism and Complex
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Solicitation Mechanism. This pricing
along with the new Priority Customer
Break-Up Rebate of $0.30 per contract
will encourage Members to utilize the
Complex Facilitation Mechanism and
Complex Solicitation Mechanism.
Finally, the Exchange believes it is
reasonable to continue to assess QCC
Orders and QCC with Stock Orders the
same $0.20 per contract Fee for Crossing
Orders to Non-Priority Customers in
Penny and Non-Penny Symbols.24
Priority Customers would be assessed
no Fee for Crossing Orders. The
Exchange would not offer the proposed
lower Penny Symbol Fee for Crossing
Orders to these order types as the
Exchange would continue to offer
today’s fees with no change. The
Exchange also believes it is reasonable
to assess Complex QCC Orders and
Complex QCC with Stock Orders the
same fee as QCC Orders and QCC with
Stock Orders are assessed today, as
compared to the pricing in Options 7,
Section 4. As noted, the Exchange
would assess Complex QCC Orders and
Complex QCC with Stock Orders a $0.20
per contract Fee for Crossing Orders to
Non-Priority Customers in Penny and
Non-Penny Symbols.25 Priority
Customers would be assessed no Fee for
Crossing Orders. Complex QCC Orders
and Complex QCC with Stock Orders
would be subject to the same pricing as
Regular QCC Orders and QCC with
Stock Orders. The Exchange believes the
proposed pricing will incentivize
Members to enter Complex QCC Orders
and Complex QCC with Stock Orders on
MRX.
The Exchange’s proposal to amend
Table 2 of Options 7, Section 3 to
decrease the Penny Symbols NonPriority Customer Fees for Crossing
Orders from $0.20 per contract to $0.02
per contract for orders in the
Facilitation Mechanism, Solicitation
Mechanism and Block Orders is
equitable and not unfairly
discriminatory as all market participants
that enter orders in the Facilitation
Mechanism, Solicitation Mechanism
and Block Orders would be uniformly
assessed these fees. Additionally, the
Exchange would uniformly pay a
Priority Customer Break-Up Rebate of
$0.30 per contract for orders entered
into the Facilitation Mechanism and
Solicitation Mechanism. Applying the
crossing order fees to orders entered in
the Complex Facilitation Mechanism
24 QCC Orders and QCC with Stock Orders are
automatically executed upon entry. Responses
cannot be submitted. See Options 3, Section 12.
25 Complex QCC Orders and Complex QCC with
Stock Orders are automatically executed upon
entry. Responses cannot be submitted. See Options
3, Section 12.
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and Complex Solicitation Mechanism is
equitable and not unfairly
discriminatory as the Exchange would
uniformly apply these fees. Also, the
pricing for orders entered in the
Complex Facilitation Mechanism and
Complex Solicitation Mechanism would
be the same as pricing for Regular Order
entered into the Facilitation Mechanism
and Solicitation Mechanism. The
Exchange is not amending the pricing
for QCC Orders and QCC with Stock
Orders. The Exchange believes it is
equitable and not unfairly
discriminatory to assess the same
pricing for Complex QCC Orders and
Complex QCC with Stock Orders as
would be assessed on QCC Orders and
QCC with Stock Orders, which fees
would be uniformly applied.
Amending notes 1 and 2 of Options 7,
Section 3, Table 2 to add the words
‘‘and Complex’’ with respect to PIM
Orders to make clear that all PIM Orders
would be subject to the Part A pricing
in Options 7, Section 3 is reasonable,
equitable and not unfairly
discriminatory as Regular PIM Orders
are already subject to the separate
pricing in Part A below. There is no
substantive change from today’s pricing
for Regular and Complex PIM Orders as
a result of these amendments to the
Pricing Schedule.
ddrumheller on DSK120RN23PROD with NOTICES1
Options 7, Section 3—Table 3
Amending the current tier
qualifications in Table 3 of Options 7,
Section 3 is reasonable because
requiring Members to execute Total
Customer ADV 26 to qualify for various
tiers of pricing would continue to attract
Priority Customer volume to the
Exchange and allow MRX Members to
interact with that order flow. The
Exchange continues to utilize
heightened amounts of executions for
each subsequent tier in Priority
Customer Total Consolidated Volume to
achieve the various fees. The Exchange
believes the volume requirement at each
tier level is reasonable. The first tier
level is achievable by executing any
amount of Priority Customer Total
Consolidated Volume up to 10%. These
levels take into account MRX’s current
market share and, as compared a more
mature market,27 are reasonable. The
Exchange believes that market
26 The Exchange proposes to amend the
numerical qualifications within the four tiers for
Total Customer ADV so that Tier 1 requires a
Member to execute up to 0.10%; Tier 2 requires a
Member to execute more than 0.10% and up to
0.40%; Tier 3 requires a Member to execute more
than 0.40% and up to 0.70%; and Tier 4 requires
a Member to execute more than 0.70%.
27 See Nasdaq Phlx LLC’s Customer Rebate
Program Tier qualifications at Options 7, Section 2
for a comparison.
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participants will benefit from an
increased amount of Priority Customer
Volume on MRX.
Amending the current tier
qualifications in Table 3 of Options 7,
Section 3 is equitable and not unfairly
discriminatory as the Exchange would
uniformly apply the tier qualifications
to all Members.
Options 7, Section 4
The Exchange’s proposal to amend
Options 7, Section 4 so that Complex
Order fees apply to an originating order,
contra-side order and orders in the
Complex Order book as well as a
Complex Customer Cross Order is
reasonable, equitable and not unfairly
discriminatory as the Exchange is
relocating Complex QCC Orders,
Complex QCC with Stock Orders,
Complex Facilitation Orders and
Complex Solicited Orders to the pricing
in Options 7, Section 3, Table 2, rather
than the pricing in Options 7, Section 4.
The Exchange would uniformly assess
Complex QCC Orders, Complex QCC
with Stock Orders the same pricing as
QCC Orders and QCC with Stock Orders
instead of the pricing in Options 7,
Section 4. Complex QCC Orders,
Complex QCC with Stock Orders would
assess Non-Priority Customers a $0.20
per contract Fee for Crossing Orders in
Penny and Non-Penny Symbols.28
Likewise, the Exchange would
uniformly assess orders entered into the
Complex Facilitation Mechanism and
Complex Solicited Order Mechanism
the same pricing as Regular Orders
entered in the Facilitation Mechanism
and Solicited Order Mechanism. The
Exchange would assess orders entered
into the Complex Facilitation
Mechanism and Complex Solicited
Order Mechanism a Non-Priority
Customers a $0.02 per contract Fee for
Crossing Orders in Penny Symbols and
a $0.20 per contract Fee for Crossing
Orders in Non-Penny Symbols and a
$0.50 Fee for Responses to Crossing
Orders to all Members for Penny
Symbols, and a $1.10 Fee for Responses
to Crossing Orders to all Members in
Non-Penny Symbols. Additionally, the
Exchange’s proposal to amend Options
7, Section 4 to note that ‘‘Complex
Orders which are Crossing Orders are
subject to separate pricing in Options 7,
Section 3, Table 2. Complex PIM
Orders, along with Regular PIM Orders,
are subject to the pricing in Options 7,
Section 3, A’’ is reasonable, equitable
and not unfairly discriminatory as the
28 QCC Orders, QCC with Stock Orders, Complex
QCC Orders, and Complex QCC with Stock Orders
are automatically executed upon entry. Responses
cannot be submitted. See Options 3, Section 12.
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60951
Exchange believes the additional
language will add clarity concerning the
applicable fees all of which would be
uniformly applied as such.
The Exchange’s proposal to add a new
note 3 in Options 7, Section 4 which
provides that ‘‘Members that execute
Complex Orders that trade with interest
on the regular order book (leg) will be
assessed/paid the applicable ‘‘Taker’’
Fee/Rebate in Options 7, Section 3,
Table 1. To the extent that a Priority
Customer Complex Order legs into the
regular order book and executes against
a Priority Customer regular order, the
Exchange will not pay a Taker Rebate
for that leg,’’ is reasonable, equitable
and not unfairly discriminatory as the
Exchange would not assess Priority
Customers a Complex Order fee and
therefore proposes to not pay a Taker
Rebate to a Priority Customer Complex
Order that executes against a Priority
Customer leg in the order book. Today,
the Exchange applies the pricing in
Options 7, Section 3 to the regular order
book. This would continue to apply,
except that the Taker Fee or Taker
Rebate would apply to this pricing. The
Exchange would uniformly assess the
applicable pricing, Regular order book
or Complex Order book, to the order.
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.
Options 7, Section 3—Table 1
In terms of intra-market competition,
the Exchange’s proposal to offer Maker
Fees and Taker Fees/Rebates in Penny
and Non-Penny Symbols does not
impose an undue burden on
competition. Priority Customers are not
assessed Penny or Non-Penny Symbol
Maker Fees. Additionally, the proposal
pays Priority Customers Taker Rebates
in Penny and Non-Penny Symbols,
unlike other market participants, and
assesses Priority Customers the same or
lower Taker Fees in Non-Penny
Symbols as compared to other market
participants. Priority Customer liquidity
benefits all market participants by
providing more trading opportunities,
which attracts market makers. An
increase in the activity of these market
participants in turn facilitates tighter
spreads, which may cause an additional
corresponding increase in order flow for
other market participants, to the benefit
of all market participants.
The Exchange’s proposal to remove
the discounted fees in note 7 of Options
7, Section 3 in Table 1 does not impose
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an undue burden on competition as no
market participant would be entitled to
the discounted fees.
Amending the description of an
‘‘Exposed Order’’ in Options 7, Section
1 and conforming note 6 in Options 7,
Section 6 does not impose an undue
burden on competition because the
Exchange would no longer pay Maker
Rebates and would uniformly pay Taker
Rebates where proposed in the Pricing
Schedule at Options 7, Section 3, Table
1.
Options 7, Section 3—Table 2
In terms of intra-market competition,
the Exchange’s proposal to amend Table
2 of Options 7, Section 3 to decrease the
Penny Symbol Non-Priority Customer
Fees for Crossing Orders from $0.20 per
contract to $0.02 per contract for orders
in the Facilitation Mechanism,
Solicitation Mechanism and Block
Orders does not impose an undue
burden on competition as all market
participants that enter orders in the
Facilitation Mechanism, Solicitation
Mechanism and Block Orders would be
uniformly assessed these fees. Assessing
lower Penny Symbol Non-Priority
Customer Fees for Crossing Orders and
not lowering the Penny Symbol NonPriority Customer Responses for
Crossing Orders does not impose an
undue burden on competition.
Today, a differential exists as between
the Fees for Crossing Orders (the fees
that apply to the originating and contraside orders) and the Responses for
Crossing Orders, the Exchange does not
believe that widening this differential
burdens competition because lowering
these originating and contra-side order
fees encourages Members to initiate
Facilitation Mechanisms, Complex
Facilitation Mechanisms, Solicitation
Mechanisms, Complex Solicitation
Mechanisms and Block Orders in Penny
Symbols. Members responding to these
auctions would continue to be assessed
$0.50 per contract. While this fee is
higher than the proposed fee of $0.35
per contract to remove liquidity from
the order book, the Exchange believes
the fee remains competitive with other
options exchanges 29 and will continue
to encourage Members to initiate
Facilitation Mechanisms, Complex
Facilitation Mechanisms, Solicitation
Mechanisms, Complex Solicitation
Mechanisms and Block Orders in Penny
Symbols. The liquidity the Exchange is
29 Miami International Securities Exchange, LLC
(‘‘MIAX’’) assesses a $0.50 per contract Penny Class
Responder to PRIME Auction Fee. See MIAX’s Fee
Schedule. Nasdaq ISE, LLC (‘‘ISE’’) assesses a $0.50
per contract Fee for Responses to Facilitation
Orders, Solicited Orders and Block Orders. See
ISE’s Pricing Schedule.
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able to attract to MRX in the form of
these auctions provides other Members
an opportunity to engage with auction
orders and participate in the trade by
breaking-up the auction order or being
allocated in the auction. Members
would not be able to respond to the
auctions if such auctions never
commence.
Additionally, the Exchange would
uniformly pay a Priority Customer
Break-Up Rebate of $0.30 per contract
for orders entered into the Facilitation
Mechanism and Solicitation
Mechanism. The Exchange believes that
offering a Break-Up Rebate only to a
Priority Customer, and not other market
participants, would not cause an undue
burden on competition because Priority
Customer originating order flow from
the Facilitation Mechanism and
Solicitation Mechanism enhances
liquidity on the Exchange. This, in turn,
provides more trading opportunities and
attracts other market participants, thus
facilitating tighter spreads, increased
order flow and trading opportunities to
the benefit of all market participants.
Moreover, the Exchange does not assess
Priority Customers a Fee for Penny or
Non-Penny orders entered into the
Facilitation Mechanism and Solicitation
Mechanism to attract such order flow.
Applying the crossing order fees to
orders entered in the Complex
Facilitation Mechanism and Complex
Solicitation Mechanism does not
impose an undue burden on
competition as the Exchange would
uniformly apply these fees. Also, the
pricing for orders entered in the
Complex Facilitation Mechanism and
Complex Solicitation Mechanism would
be the same as pricing for Regular Order
entered into the Facilitation Mechanism
and Solicitation Mechanism. The
Exchange is not amending the pricing
for QCC Orders and QCC with Stock
Orders. The Exchange believes assess
the same pricing for Complex QCC
Orders and Complex QCC with Stock
Orders as would be assessed on QCC
Orders and QCC with Stock Orders does
not impose an undue burden on
competition because these fees would
be uniformly applied. Priority Customer
orders would continue to be assess no
Fee for Crossing Orders.
Amending notes 1 and 2 of Options 7,
Section 3, Table 2 to add the words
‘‘and Complex’’ with respect to PIM
Orders to make clear that all PIM Orders
would be subject to the Part A pricing
in Options 7, Section 3 does not impose
an undue burden on competition as
Regular PIM Orders are already subject
to the separate pricing in Part A below.
There is no substantive change from
today’s pricing for Regular and Complex
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PIM Orders as a result of these
amendments to the Pricing Schedule.
Options 7, Section 3—Table 3
In terms of intra-market competition,
amending the current tier qualifications
in Table 3 of Options 7, Section 3 does
not impose an undue burden on
competition as the Exchange would
uniformly apply the tier qualifications
to all Members.
Options 7, Section 4
In terms of intra-market competition,
the Exchange’s proposal to amend
Options 7, Section 4 so that Complex
Order fees apply to an originating order,
contra-side order and orders in the
Complex Order book as well as a
Complex Customer Cross Order does not
impose an undue burden on
competition because the Exchange
would uniformly assess Complex QCC
Orders, Complex QCC with Stock
Orders the same pricing as QCC Orders
and QCC with Stock Orders. Likewise,
the Exchange would uniformly assess
orders entered into the Complex
Facilitation Mechanism and Complex
Solicited Order Mechanism the same
pricing as Regular Orders entered in the
Facilitation Mechanism and Solicited
Order Mechanism. Additionally, the
Exchange’s proposal to amend Options
7, Section 4 to note that ‘‘Complex
Orders which are Crossing Orders are
subject to separate pricing in Options 7,
Section 3, Table 2. Complex PIM
Orders, along with Regular PIM Orders,
are subject to the pricing in Options 7,
Section 3, A’’ does not impose an undue
burden on competition as the Exchange
would uniformly apply the pricing as
noted herein.
The Exchange’s proposal to add a new
note 3 in Options 7, Section 4 which
provides that ‘‘Members that execute
Complex Orders that trade with interest
on the regular order book (leg) will be
assessed/paid the applicable ‘‘Taker’’
Fee/Rebate in Options 7, Section 3,
Table 1. To the extent that a Priority
Customer Complex Order legs into the
regular order book and executes against
a Priority Customer regular order, the
Exchange will not pay a Taker Rebate
for that leg,’’ does not impose an undue
burden on competition as the Exchange
would uniformly assess the applicable
pricing, Regular order book or Complex
Order book to the order.
In terms of inter-market 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, or rebate opportunities
available at other venues to be more
E:\FR\FM\29JYN1.SGM
29JYN1
Federal Register / Vol. 89, No. 145 / Monday, July 29, 2024 / Notices
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
options 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.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.30 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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:
ddrumheller on DSK120RN23PROD with NOTICES1
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
MRX–2024–25 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–2024–25. 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–2024–25 and should be
submitted on or before August 19, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–16547 Filed 7–26–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–656, OMB Control No.
3235–0715]
Submission for OMB Review;
Comment Request; Extension: Rule
3a71–6
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA
Services, 100 F Street NE,
Washington, DC 20549–2736.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
60953
collection of information provided for in
Rule 3a71–6 (17 CFR 240.3a71–6),
under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.).
Rule 3a71–6 provides that non-U.S.
security-based swap dealers and major
security-based swap participants may
comply with certain Exchange Act
requirements via compliance with
requirements of a foreign financial
regulatory system that the Commission
has determined by order to be
comparable to those Exchange Act
requirements, taking into account the
scope and objectives of the relevant
foreign requirements, and the
effectiveness of supervision and
enforcement under the foreign
regulatory regime.
Requests for substituted compliance
may come from parties or groups of
parties that may rely on substituted
compliance, or from foreign financial
authorities supervising such parties or
their security-based swap activities. In
practice, the Commission continues to
expect that the greater portion of any
such substituted compliance requests
will be submitted by foreign financial
authorities. For purposes of the PRA,
the Commission continues to estimate
that three security-based swap dealers
or major security-based swap
participants will submit substituted
compliance applications.
The Commission staff estimates that
the total time burden associated with
Rule 3a71–6 is 240 hours per year and
the total cost burden associated with
Rule 3a71–6 is $350,400 per year.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent by
August 28, 2024 to (i) www.reginfo.gov/
public/do/PRAMain and (ii) Austin
Gerig, Director/Chief Data Officer,
Securities and Exchange Commission, c/
o Oluwaseun Ajayi, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: July 24, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–16610 Filed 7–26–24; 8:45 am]
30 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
18:51 Jul 26, 2024
31 17
Jkt 262001
PO 00000
CFR 200.30–3(a)(12).
Frm 00099
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]]>Agencies
[Federal Register Volume 89, Number 145 (Monday, July 29, 2024)]
[Notices]
[Pages 60945-60953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16547]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100575; File No. SR-MRX-2024-25]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend MRX's
Options 7
July 23, 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 15, 2024, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``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 the Exchange's Pricing Schedule at
Options 7.\3\
---------------------------------------------------------------------------
\3\ On June 11, 2024, the Exchange withdrew SR-MRX-2024-13 and
replaced it with SR-MRX-2024-14. On June 25, 2024, the Exchange
withdrew SR-MRX-2024-14 and replaced it with SR-MRX-2024-16. On July
2, 2024, the Exchange withdrew SR-MRX-2024-16 and replaced it with
SR-MRX-2024-22. On July 15, 2024, the Exchange withdrew SR-MRX-2024-
22 and replaced it with this rule change.
---------------------------------------------------------------------------
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
MRX proposes to amend the Exchange's Pricing Schedule at Options 7
to make various changes. Specifically, the Exchange proposes to amend
Options 7: Section 1, General Provisions; Section 3, Regular Order Fees
and Rebates; and Section 4, Complex Order Fees. Each change will be
described below.
Options 7, Section 3--Table 1
Today, MRX offers Regular Order Maker Fees/Rebates and Taker Fees
in Penny and Non-Penny Symbols in Options 7, Section 3, Table 1.
Specifically, with respect to Penny Symbols, the Exchange assesses/pays
Market Makers \4\ a Tier 1 Maker Fee of $0.10 per contract, no Tier 2
Maker Fee, a Tier 3 Maker Rebate of $0.05 per contract and a Tier 4
Maker Rebate of $0.10 per contract in Penny Symbols. Today, the
Exchange assesses Market Maker Tier 1 through Tier 4 Penny Symbol Taker
Fees of $0.50 per contract. Today, the Exchange assesses Non-Nasdaq MRX
Market Makers (FarMM),\5\ Firm Proprietary/Broker-Dealer \6\ and
Professional Customers \7\ a Tier 1 through Tier 4 Maker Fee of $0.47
per contract and a Tier 1 through Tier 4 Taker Fee of $0.50 per
contract in Penny Symbols. Finally, today, the Exchange assesses a
Priority Customer \8\ no Maker Fees and pays no Maker Rebates and
assesses a $0.20 per contract Tier 1 through Tier 4 Taker Fee in Penny
Symbols.
---------------------------------------------------------------------------
\4\ A ``Market Maker'' is a market maker as defined in Nasdaq
MRX Rule Options 1, Section 1(a)(21). See Options 7, Section 1(c).
\5\ A ``Non-Nasdaq MRX Market Maker'' is a market maker as
defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended, registered in the same options class on another options
exchange. See Options 7, Section 1(c).
\6\ A ``Firm Proprietary'' order is an order submitted by a
Member for its own proprietary account. A ``Broker-Dealer'' order is
an order submitted by a Member for a broker-dealer account that is
not its own proprietary account. See Options 7, Section 1(c).
\7\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer. See Options 7,
Section 1(c).
\8\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq MRX Options 1,
Section 1(a)(36). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail''. See
Options 7, Section 1(c).
---------------------------------------------------------------------------
With respect to Non-Penny Symbols, today, the Exchange assesses
Market Makers a Tier 1 Maker Fee of $0.35 per contract, a Tier 2 Maker
Fee of $0.20 per contract, a Tier 3 Maker Fee of $0.15 per contract and
a Tier 4 Maker Fee of $0.10 per contract. Today, the Exchange assesses
Market Makers a Tier 1 through Tier 4 Taker Fee of $1.10 per contract
in Non-Penny Symbols. Today, the Exchange assesses Non-Nasdaq MRX
Market Makers (FarMM), Firm Proprietary/Broker-Dealer and Professional
Customers a Tier 1 through Tier 4 Maker Fee of $0.90 per contract and a
Tier 1 through Tier 4 Taker Fee of $1.10 per contract in Non-Penny
Symbols. Finally, today, the Exchange assesses a Priority Customer no
Maker Fees and assesses a $0.40 per contract Tier 1 through Tier 4
Taker Fee in Non-Penny Symbols.
At this time, the Exchange proposes to no longer offer Maker
Rebates for adding liquidity and instead offer Taker Rebates for
removing liquidity. With this new structure, the Exchange would
continue to assess Priority Customers no Maker Fees for Penny and Non-
Penny Symbols to continue to encourage Members to send Priority
Customer order flow that adds liquidity to MRX and rests on the order
book. The Exchange proposes to begin offering Priority Customer Taker
Rebates in Penny and Non-Penny Symbols to encourage Members to send
Priority Customer order flow that removes liquidity from MRX's order
book. MRX's proposal offers to pay rebates to Members to engage in
Priority Customer liquidity removing activity on MRX. Specifically, the
Exchange believes that the Taker Rebates will encourage additional
order flow to be sent to MRX with the goal of removing liquidity and
obtaining a Taker Rebate. To the extent this proposal attracts such
order flow to MRX, all Members should benefit through more trading
opportunities.
As a result of this structural change in pricing, the Exchange
would assess a Market Maker a $0.50 per contract Penny Symbol Maker Fee
in Tier 1 through Tier 4. This would be an increase in the Tier 1 Maker
Fee of $0.40 per contract and an increase in the Tier 2 Maker Fee of
$0.50 per contract for Market Makers in Penny Symbols. The Exchange
would no longer pay a $0.05 per contract Maker Rebate in Tier 3 nor pay
a $0.10 per contract Tier 4 Maker Rebate to Market Makers in Penny
Symbols and instead assess the $0.50 per contract Maker Fee.
Additionally, a Market Maker would pay a decreased Penny Symbol Taker
[[Page 60946]]
Fee of $0.35 per contract in Tier 1 through Tier 4 as compared to the
current $0.50 per contract Taker Fee. Further, the Exchange would
assess Non-Nasdaq MRX Market Makers (FarMM), Firm Proprietary/Broker-
Dealer and Professional Customers a increased Tier 1 through Tier 4
Penny Symbol Maker Fee of $0.50 per contract, instead of $0.47 per
contract, and a decreased Tier 1 through Tier 4 Taker Fee of $0.35 per
contract, instead of $0.50 per contract in Penny Symbols. Finally, the
Exchange would continue to assess a Priority Customer no Maker Fees in
Penny Symbols. Additionally, the Exchange would replace the Priority
Customer Penny Symbol Tier 1 Taker Fee of $0.20 with a Taker Rebate of
$0.31 per contract. The Exchange would replace the Priority Customer
Penny Symbol Tier 2 Taker Fee of $0.20 with a Taker Rebate of $0.36 per
contract. The Exchange would replace the Priority Customer Penny Symbol
Tier 3 Taker Fee of $0.20 with a Taker Rebate of $0.41 per contract.
Finally, the Exchange would replace the Priority Customer Penny Symbol
Tier 4 Taker Fee of $0.20 with a Taker Rebate of $0.44 per contract.
At this time, the Exchange proposes to increase the Market Maker
Non-Penny Symbol Maker Fees in Tier 1 from $0.35 to $1.25 per contract,
the Tier 2 Maker Fee from $0.20 to $1.25 per contract, the Tier 3 Maker
Fee from $0.15 to $1.25 per contract, and the Tier 4 Maker Fee for
$0.10 to $1.25 per contract. The Exchange proposes to continue to
assess Market Makers a $1.10 per contract Non-Penny Symbol Taker Fee.
Further, the Exchange would assess Non-Nasdaq MRX Market Makers
(FarMM), Firm Proprietary/Broker-Dealer and Professional Customers an
increased Tier 1 through Tier 4 Penny Symbol Maker Fee of $1.25 per
contract, instead of $0.90 per contract, and would assess the same Tier
1 through Tier 4 Taker Fee of $1.10 per contract in Non-Penny Symbols.
Finally, the Exchange would continue to assess a Priority Customer no
Non-Penny Symbol Maker Fees. Additionally, the Exchange would replace
the Priority Customer Non-Penny Symbol Taker Fees with Taker Rebates as
follows: instead of a $0.40 per contract Tier 1 Taker Fee, MRX would
pay an $0.80 per contract Taker Rebate; instead of a $0.40 per contract
Tier 2 Taker Fee, MRX would pay a $0.90 per contract Taker Rebate;
instead of a $0.40 per contract Tier 3 Taker Fee, MRX would pay a $1.00
per contract Taker Rebate; and instead of a $0.40 per contract Tier 4
Taker Fee, MRX paya $1.10 per contract Taker Rebate.
The Exchange believes that the Priority Customer Taker Rebates will
encourage market participants to remove liquidity on MRX in order to be
eligible for Taker Rebates.
As a result of the change to Table 1 in Options 7, Section 3, the
Exchange proposes to amend the description of an ``Exposed Order.''
Today, an Exposed Order is an order that is broadcast via an order
exposure alert as described within Options 5, Section 4 (Order
Routing). Unless otherwise noted in Options 7, Section 3 pricing,
Exposed Orders will be assessed the applicable ``Taker'' Fee and any
order or quote that executes against an Exposed Order during a Route
Timer will be paid/assessed the applicable ``Maker'' Rebate/Fee. The
Exchange proposes to instead state that is an order that is broadcast
via an order exposure alert as described within Options 5, Section 4
(Order Routing). Unless otherwise noted in Options 7, Section 3
pricing, Exposed Orders will be paid/assessed the applicable ``Taker''
Fee/Rebate and any order or quote that executes against an Exposed
Order during a Route Timer will be assessed the applicable ``Maker''
Fee. The Exchange is amending this description because the Exchange
would no longer pay Maker Rebates and would instead pay Taker Rebates
as proposed in the Pricing Schedule at Options 7, Section 3, Table 1.
The Exchange also proposes to conform note 6 in Options 7, Section
3 to account for the removal of Maker Rebates and the addition of
Priority Customer Taker Rebates. Options 7, Section 3 currently
provides, ``Market Maker Tier 1 through Tier 4 Maker Fees/Rebates and
Priority Customer Tier 1 through Tier 4 Taker Fees will be $0.00 per
contract, in Penny Symbols, for the following option symbols: SPY, QQQ
and IWM.'' The Exchange proposes to instead state, ``Market Maker Tier
1 through Tier 4 Maker Fees and Priority Customer Tier 1 through Tier 4
Taker Fees/Rebates will be $0.00 per contract, in Penny Symbols, for
the following option symbols: SPY, QQQ and IWM.''
The Exchange also proposes to remove the discounted fees in note 7
of Options 7, Section 3 in Table 1 which provides, ``Members that
execute Total Affiliated Member or Affiliated Entity Priority Customer
ADV of 0.30% Customer Total Consolidated Volume in Regular Orders for
Penny and Non-Penny Symbols which remove liquidity in a given month
will be assessed: (1) a $0.10 per contract Priority Customer Taker Fee
in Penny Symbols; and (2) a $0.20 per contract Priority Customer Taker
Fee in Non-Penny Symbols.'' The Exchange would no longer offer these
discounts with the new fee structure and proposes to instead
incentivize Members differently with its new Taker Rebates.
Options 7, Section 3--Table 2
Today, Options 7, Section 3, Table 2 applies only to regular
orders. Today, the Exchange assesses the following Crossing Order Fees
in Penny and Non-Penny Symbols:
Penny Symbols
------------------------------------------------------------------------
Fee for
Fee for responses to
Market participant crossing crossing
orders \1\ orders \2\
------------------------------------------------------------------------
Market Maker \4\........................ $0.20 $0.50
Non-Nasdaq MRX Market Maker (FarMM)..... 0.20 0.50
Firm Proprietary/Broker-Dealer.......... 0.20 0.50
Professional Customer................... 0.20 0.50
Priority Customer....................... 0.00 0.50
------------------------------------------------------------------------
[[Page 60947]]
Non-Penny Symbols
------------------------------------------------------------------------
Fee for
Fee for responses to
Market participant crossing crossing
orders \1\ orders \2\
------------------------------------------------------------------------
Market Maker \4\........................ $0.20 $1.10
Non-Nasdaq MRX Market Maker (FarMM)..... 0.20 1.10
Firm Proprietary/Broker-Dealer.......... 0.20 1.10
Professional Customer................... 0.20 1.10
Priority Customer....................... 0.00 1.10
------------------------------------------------------------------------
The Exchange proposes to amend the title of Options 7, Section 3
from ``Regular Order Fees and Rebates'' to ``Fees and Rebates for
Regular Orders and All Crossing Orders'' to account for the inclusion
of certain Complex Order crossing order fees. The Exchange proposes to
add a title to Options 7, Section 3, Table 2, ``Regular and Complex
Crossing Orders'' with a new note 3. Proposed note 3 of Options 7,
Section 3 would provide that the Table 2 fees apply to Regular and
Complex orders entered into the Facilitation Mechanism; the Solicited
Order Mechanism; the Block Order Mechanism \9\ as applicable; QCC
Orders; Complex QCC Orders; QCC with Stock Orders; and Complex QCC with
Stock Orders.
---------------------------------------------------------------------------
\9\ Block Orders are single-leg orders only. Additionally, Block
Orders are single-sided auctions.
---------------------------------------------------------------------------
The Exchange proposes to amend Table 2 which consists of the Fee
for Crossing Orders.\10\ The Exchange proposes to decrease the Penny
Symbol Non-Priority Customer \11\ Fees for Crossing Orders from $0.20
per contract to $0.02 per contract for orders in the Facilitation
Mechanism, Solicitation Mechanism and Block Orders. A Priority Customer
would continue to be assessed no Fee for Crossing Orders in Penny
Symbols. The Exchange is proposing to carve out pricing for QCC Orders,
Complex QCC Orders, QCC with Stock Orders and Complex QCC with Stock
Orders, in addition to PIM Orders which are already carved out from the
fees that apply to the originating and contra-side orders in Table 2.
The Exchange proposes to amend note 1 of Options 7, Section 3, Table 2
to provide,
---------------------------------------------------------------------------
\10\ A ``Crossing Order'' is an order executed in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement
Mechanism (``PIM'') or submitted as a Qualified Contingent Cross
order. For purposes of this Pricing Schedule, orders executed in the
Block Order Mechanism are also considered Crossing Orders. See
Options 7, Section 1(c).
\11\ ``Non-Priority Customers'' include Market Makers, Non-
Nasdaq GEMX Market Makers (FarMMs), Firm Proprietary/Broker-Dealers,
and Professional Customers.
Fees apply to the originating and contra-side orders, except for
PIM Orders and Qualified Contingent Cross (``QCC'') Orders, Complex
QCC Orders, QCC with Stock Orders and Complex QCC with Stock Orders.
The Fee for Crossing Orders for QCC Orders, Complex QCC Orders, QCC
with Stock Orders and Complex QCC with Stock Orders is $0.20 per
contract for Non-Priority Customer orders in Penny and Non-Penny
Symbols. Priority Customer orders are not assessed a fee for
Crossing Orders. Regular and Complex PIM Orders are subject to
---------------------------------------------------------------------------
separate pricing in Part A below.
The Exchange would continue to assess Non-Priority Customer QCC Orders
and QCC with Stock Orders the same $0.20 per contract Fee for Crossing
Orders in Penny Symbols as today and would continue to assess Priority
Customers no Fee for Crossing Orders in Penny and Non-Penny Symbols.
There are no Fees for Responses to Crossing Orders for QCC Orders and
QCC with Stock Orders.\12\ The Exchange is not amending the Non-Penny
Fees for Crossing Orders in Options 7, Section 3, Table 2.
---------------------------------------------------------------------------
\12\ QCC Orders and QCC with Stock Orders are automatically
executed upon entry. Responses cannot be submitted. See Options 3,
Section 12.
---------------------------------------------------------------------------
With this proposal, the Exchange would assess Complex QCC Orders
and Complex QCC with Stock Orders the same Fees for Crossing Orders as
QCC Orders and QCC with Stock Orders.\13\ Specifically, Complex QCC
Orders and Complex QCC with Stock Orders would be assessed a $0.20 per
contract Fee for Crossing Orders to Non-Priority Customers in Penny and
Non-Penny Symbols. Priority Customers would not be assessed a Fee for
Crossing Orders. Complex QCC Orders and Complex QCC with Stock Orders
would be subject to lower Penny Symbol fees and slightly higher Non-
Penny Fees for Crossing Orders. Today, Options 7, Section 4 assesses a
$0.35 per contract Penny Symbol to all Non-Priority Customer Orders and
an $0.85 per contract Non-Penny Symbol fee to all Members for Complex
QCC Orders and Complex QCC with Stock Orders.
---------------------------------------------------------------------------
\13\ Complex QCC Orders and Complex QCC with Stock Orders are
automatically executed upon entry. Responses cannot be submitted.
See Options 3, Section 12.
---------------------------------------------------------------------------
Additionally, the Exchange proposes to assess the Options 7,
Section 3, Table 2 fees to orders entered into the Complex Facilitation
Mechanism and Complex Solicitation Mechanism in addition to Regular
Orders entered into these mechanisms. The Exchange would assess orders
entered into the Complex Facilitation Mechanism and Complex
Solicitation Mechanism the proposed reduced $0.02 per contract Fee for
Crossing Orders in Penny Symbols and $0.20 per contract for Non-Penny
Symbols and would assess Priority Customers no Fee for Crossing Orders
in Penny and Non-Penny Symbols. The Exchange would also assess orders
entered into the Complex Facilitation Mechanism and Complex
Solicitation Mechanism a $0.50 Fee for Responses to Crossing Orders to
all Members for Penny Symbols and a $1.10 Fee for Responses to Crossing
Orders to all Members in Non-Penny Symbols. This pricing would be in
lieu of the Complex Order pricing in Options 7, Section 4. As noted
above, today, Options 7, Section 4 assesses a $0.35 per contract Penny
Symbol to all Non-Priority Customer Orders and an $0.85 per contract
Non-Penny Symbol fee to all Members for orders entered into the Complex
Facilitation Mechanism and Complex Solicitation Mechanism. The proposed
pricing for the Complex Facilitation Mechanism and Complex Solicitation
Mechanism would be subject to the same pricing as the Regular
Facilitation Mechanism and Solicited Order Mechanism. The Exchange
believes that the pricing in Options 7, Section 4, Table 2 will
incentivize Members to utilize these mechanisms.
The Exchange also proposes to define a Non-Priority Customer in
Options 7, Section 1. Specifically, the Exchange proposes to state,
``Non-Priority Customers'' include Market Makers, Non-Nasdaq MRX Market
Makers (FarMMs), Firm Proprietary/Broker-Dealers, and Professional
Customers.''
[[Page 60948]]
The Exchange proposes to amend notes 1 and 2 of Options 7, Section
3, Table 2 to add the words ``and Complex'' with respect to PIM Orders
to make clear that, all PIM Orders, Regular and Complex, would be
subject to the Part A pricing in Options 7, Section 3. As a result of
this amendment, there is no pricing change for Regular and Complex PIM
Orders.
The Exchange also proposes a Penny Symbol Break-Up Rebate for
Regular and Complex Orders entered into the Exchange's Facilitation
Mechanism and Solicited Order Mechanism for Priority Customers of $0.30
per contract. Today, orders entered into the Complex Facilitation
Mechanism and the Complex Solicited Order Mechanism are not offered a
Break-Up Rebate. The Exchange believes that the new Priority Customer
Break-up Rebate will attract MRX Members to utilize the Exchange's
Facilitation Mechanism and Solicited Order Mechanism for both Regular
and Complex Orders. The Exchange proposes to add a new note 5 in
Options 7, Section 3, Table 2 that provides that break-up rebates are
provided for an originating Priority Customer Regular or Complex order
entered into the Facilitation Mechanism or Solicited Order Mechanism
that executes with any response (order or quote) other than the contra-
side order.
Options 7, Section 3--Table 3
Currently, Options 7, Section 3, Table 3 contains the Qualifying
Tier Thresholds for Tier 1 through Tier 4 pricing. Specifically, today,
market participants are charged the applicable tier maker/taker fees
(or are eligible for rebates) if they meet the applicable tier
thresholds based on Total Affiliated Member or Affiliated Entity ADV
\14\ in Table 3 of Options 7, Section 3. Market Makers may also
alternatively qualify for these fees if they meet the applicable tier
thresholds based on Total Market Maker ADV.\15\
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\14\ Total Affiliated Member or Affiliated Entity ADV means all
ADV executed on the Exchange in all symbols and order types,
including volume executed by Affiliated Members or Affiliated
Entities. All eligible volume from Affiliated Members or an
Affiliated Entity will be aggregated in determining applicable
tiers.
\15\ Total Market Maker ADV means all Market Maker ADV executed
on the Exchange in all symbols and order types, including volume
executed by Affiliated Members or Affiliated Entities. All eligible
volume from Affiliated Members or an Affiliated Entity will be
aggregated in determining applicable tiers.
Qualifying Tier Thresholds
------------------------------------------------------------------------
Total affiliated
member or Total market
Tiers affiliated OR maker ADV
entity ADV
------------------------------------------------------------------------
Tier 1....................... executes 0.00% ..... executes up to
to less than 0.10% of
0.75% of Customer Total
Customer Total Consolidated
Consolidated Volume which
Volume. adds liquidity
in Regular
Orders.
Tier 2....................... executes 0.75% ..... executes more
to less than than 0.10% and
1.50% of up to 0.25% of
Customer Total Customer Total
Consolidated Consolidated
Volume. Volume which
adds liquidity
in Regular
Orders.
Tier 3....................... executes 1.50% ..... executes more
to less than than 0.25% and
2.25% of up to 0.45% of
Customer Total Customer Total
Consolidated Consolidated
Volume. Volume which
adds liquidity
in Regular
Orders.
Tier 4....................... executes 2.25% ..... executes more
or more of than 0.45% of
Customer Total Customer Total
Consolidated Consolidated
Volume. Volume which
adds liquidity
in Regular
Orders.
------------------------------------------------------------------------
Today, the highest tier threshold attained applies retroactively in a
given month to all eligible traded contracts and applies to all
eligible market participants.
At this time, the Exchange proposes to remove the current tier
qualifications for Total Affiliated Member or Affiliated Entity ADV
which is applicable to all market participants, except Market Makers.
The Exchange would also remove the bullet point describing the
methodology for these qualifications. The Exchange also proposes to
amend the Total Market Maker ADV to rename the qualifications ``Total
Customer ADV'' to reflect the new methodology by which the Exchange
will determine eligibility for the tiers. The Exchange proposes to
amend the bullet under Table 3 which describes Total Market Maker ADV
to instead describe Total Customer ADV as Priority Customer Total
Consolidated Volume divided by Customer Total Consolidated Volume.\16\
The Exchange defines Priority Customer Total Consolidated Volume as a
Member's total Priority Customer volume executed on MRX in that month,
including volume executed by Affiliated Members or Affiliated Entities.
The Exchange also proposes to amend the numerical qualifications within
the four tiers for Total Customer ADV so that Tier 1 requires a Member
to execute up to 0.10%; Tier 2 requires a Member to execute more than
0.10% and up to 0.40%; Tier 3 requires a Member to execute more than
0.40% and up to 0.70%; and Tier 4 requires a Member to execute more
than 0.70%. Unlike today, Members will be able to qualify for the
pricing in Options 7, Section 3, Table 1 by the amount of Priority
Customer Volume they execute on MRX.
---------------------------------------------------------------------------
\16\ Options 7, Section 1(c) defines ``Customer Total
Consolidated Volume'' as the total volume cleared at The Options
Clearing Corporation in the Customer range in equity and ETF options
in that month. As is the case today, all eligible volume from
Affiliated Members or an Affiliated Entity will be aggregated in
determining applicable tiers. The ``C'' range at OCC includes both
Priority Customer and Professional Customer volume.
---------------------------------------------------------------------------
The Exchange believes the proposed tier qualifications will
incentivize Members to execute a greater amount of Priority Customer
Volume on MRX in order to receive the proposed Priority Customer Taker
Rebates for removing liquidity.
Options 7, Section 4
The Exchange proposes to amend Options 7, Section 4, Complex Order
Fees. The current pricing in Options 7, Section 4 applies to Complex
Order transactions in the Complex Order Book as well as Complex Orders
submitted into the Complex Facilitation Mechanism, Complex Solicited
Order Mechanism, a Complex Customer Cross Order, Complex QCC Orders and
Complex QCC with Stock Orders. Today, fees apply to an originating
order, contra-side order and responses, as applicable, entered into
MRX's Complex Facilitation Mechanism, Complex Solicited Order Mechanism
and orders entered as a Complex Customer Cross Order, Complex QCC Order
or Complex QCC with Stock Order.\17\ Also, interest on the Regular
[[Page 60949]]
Order Book that interacts with a Complex Order is subject to Regular
Order Book fees within Options 7, Section 3 and Complex PIM Orders are
subject to separate pricing in Options 7, Section 3.A.
---------------------------------------------------------------------------
\17\ MRX will continue to assess a Stock Handling Fee of $0.0010
per share (capped at a maximum of $50 per trade) for the stock leg
of Stock-Option Orders executed against other Stock-Option Orders in
the Complex Order Book. This fee will be in addition to the above-
referenced fees for Complex Orders. See note 1 of Options 7, Section
4.
---------------------------------------------------------------------------
At this time the Exchange proposes to amend Options 7, Section 4 so
that Complex Order fees apply to an originating order, contra-side
order and both orders entered as a Complex Customer Cross Order. The
Exchange proposes to assess Complex QCC Orders, Complex QCC with Stock
Orders, Complex Facilitation Orders and Complex Solicited Orders the
crossing order pricing in Options 7, Section 3, Table 2, rather than
the pricing in Options 7, Section 4, as explained above. With this
proposal, the Exchange would uniformly assess Complex QCC Orders and
Complex QCC with Stock Orders the same pricing as QCC Orders and QCC
with Stock Orders. Likewise, the Exchange would uniformly assess orders
entered into the Complex Facilitation Mechanism and Complex Solicited
Order Mechanism the same pricing as Regular Orders entered in the
Facilitation Mechanism and Solicited Order Mechanism. Today, Options 7,
Section 4 assesses a $0.35 per contract Penny Symbol to all Non-
Priority Customer Orders and an $0.85 per contract Non-Penny Symbol fee
to all Non-Priority Customer Orders for Complex QCC Orders, Complex QCC
with Stock Orders, Complex Facilitation Orders and Complex Solicited
Orders. Additionally, the Exchange proposes to amend Options 7, Section
4 to note that interest on the Regular Order Book that interacts with a
Complex Order is subject to Regular Order Book fees within Options 7,
Section 3, and specifically note ``Table 1.'' Also, the Exchange
proposes to note that ``Complex Orders which are Crossing Orders are
subject to separate pricing in Options 7, Section 3, Table 2. Complex
PIM Orders, along with Regular PIM Orders, are subject to the pricing
in Options 7, Section 3, A.'' The Exchange is not proposing to amend
the Complex Order pricing in Options 7, Section 4.
The Exchange is proposing to add a new note 3 in Options 7, Section
4 which provides that ``Members that execute Complex Orders that trade
with interest on the regular order book (leg) will be assessed/paid the
applicable ``Taker'' Fee/Rebate in Options 7, Section 3, Table 1. To
the extent that a Priority Customer Complex Order legs into the regular
order book and executes against a Priority Customer regular order, the
Exchange will not pay a Taker Rebate for that leg.'' The Exchange would
not assess Priority Customers a Complex Order fee and therefore
proposes to not pay a Taker Rebate to a Priority Customer Complex Order
that executes against a Priority Customer leg in the order book.
Finally, the Exchange proposes to remove the parathesis around
notes 1 and 2 and add a period to conform the format of the numbering
to Options 7, Section 3 numbering.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The proposed changes are reasonable in several respects. As a
threshold matter, the Exchange is subject to significant competitive
forces in the market for options securities transaction services that
constrain its pricing determinations in that market. The fact that this
market is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \20\
---------------------------------------------------------------------------
\20\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \21\
---------------------------------------------------------------------------
\21\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
seventeen options exchanges to which market participants may direct
their order flow. Within this environment, market participants can
freely and often do shift their order flow among the Exchange and
competing venues in response to changes in their respective pricing
schedules. As such, the proposal represents a reasonable attempt by the
Exchange to increase its liquidity.
Options 7, Section 3--Table 1
The Exchange's proposal to offer Maker Fees and Taker Fees/Rebates
in Penny and Non-Penny Symbols in Options 7, Section 3, Table 1 is
reasonable because the Exchange desires to incentivize market
participants to remove Priority Customer liquidity on MRX instead of
offering rebates to add liquidity. With this new structure, the
Exchange would continue to assess Priority Customers no Maker Fees for
Penny and Non-Penny Symbols to continue to encourage Members to send
Priority Customer order flow that adds liquidity to MRX and rests on
the order book. The Exchange proposes to begin offering Priority
Customer Taker Rebates in Penny and Non-Penny Symbols to encourage
Members to send Priority Customer order flow that removes liquidity
from MRX's order book. The Exchange's proposal to pay Priority
Customers Taker Rebates in Penny and Non-Penny Symbols is intended to
encourage market participants to send additional Priority Customer
orders to MRX because the proposed pricing will reward Members that
remove Priority Customer liquidity from MRX. The Exchange proposes to
fund these Priority Customer Taker Rebates by assessing all Non-
Priority Customers (Market Makers, Non-Nasdaq MRX Market Makers
(FarMM), Firm Proprietary/Broker-Dealer and Professional Customers)
uniform Non-Penny Symbol Maker Fees of $1.25 per contract. The Exchange
would continue to assess Non-Priority Customers uniform $1.10 Non-Penny
Symbol Taker Fees. The Exchange believes that these fees are reasonable
because the Taker Rebates will encourage additional order flow to be
sent to MRX with the goal of removing Priority Customer liquidity
[[Page 60950]]
and obtaining a Taker Rebate. To the extent this proposal attracts such
order flow to MRX, all Members should benefit through more trading
opportunities. The proposed fees are competitive with fees assessed on
BOX Exchange LLC (``BOX''). BOX pays a $0.20 per contract Taker Rebate
to a Public Customer in Penny Interval Classes provided the contra-
party is not another Public Customer. Additionally, BOX pays a $0.50
per contract Taker Rebate to a Public Customer in Non-Penny Interval
Classes provided the contra-party is not another Public Customer.\22\
---------------------------------------------------------------------------
\22\ See BOX's Fee Schedule at Section IV.
---------------------------------------------------------------------------
The Exchange's proposal to offer Maker Fees and Taker Fees/Rebates
in Penny and Non-Penny Symbols is equitable and not unfairly
discriminatory because Priority Customers would continue to not be
assessed Penny or Non-Penny Symbol Maker Fees. Additionally, the
proposal would pay Priority Customers Taker Rebates in Penny and Non-
Penny Symbols. Unlike other market participants, Priority Customer
liquidity benefits all market participants by providing more trading
opportunities, which attracts market makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow for other market participants, to the benefit of all market
participants.
The Exchange's proposal to remove the discounted fees in note 7 of
Options 7, Section 3 in Table 1 \23\ is reasonable because the Exchange
has amended Options 7, Section 3 in an effort to attract additional
Priority Customer order flow to the Exchange. Additionally, the
Exchange has amended its pricing to encourage market participants to
remove liquidity on MRX and note 7 encouraged adding liquidity. The
Exchange believes its proposal will create competition on MRX to
execute against Priority Customer orders and therefore note 7 would be
unnecessary given other changes to the pricing. The Exchange's proposal
to remove the discounted fees in note 7 of Options 7, Section 3 in
Table 1 is equitable and not unfairly discriminatory as no market
participant would be entitled to the discounted fees.
---------------------------------------------------------------------------
\23\ Members that execute Total Affiliated Member or Affiliated
Entity Priority Customer ADV of 0.30% Customer Total Consolidated
Volume in Regular Orders for Penny and Non-Penny Symbols which
remove liquidity in a given month will be assessed: (1) a $0.10 per
contract Priority Customer Taker Fee in Penny Symbols; and (2) a
$0.20 per contract Priority Customer Taker Fee in Non-Penny Symbols.
See note 7 of Options 7, Section 3 in Table 1.
---------------------------------------------------------------------------
Amending the description of an ``Exposed Order'' in Options 7,
Section 1 and conforming note 6 in Options 7, Section 6 is reasonable,
equitable and not unfairly discriminatory because the Exchange would no
longer pay Maker Rebates and would instead uniformly pay Priority
Customer Taker Rebates proposed in the Pricing Schedule as proposed in
Options 7, Section 3, Table 1.
Options 7, Section 3--Table 2
The Exchange's proposal to amend Table 2 of Options 7, Section 3 to
decrease the Penny Symbol Non-Priority Customer Fees for Crossing
Orders from $0.20 per contract to $0.02 per contract for orders in the
Facilitation Mechanism, Solicitation Mechanism and Block Orders is
reasonable because the Exchange would be reducing the fees to enter
orders in the Facilitation Mechanism, Solicitation Mechanism and Block
Orders to encourage market participants to enter additional Crossing
Orders. Additionally, the proposal to pay a Priority Customer Break-Up
Rebate of $0.30 per contract for orders entered into the Facilitation
Mechanism and Solicitation Mechanism will attract Priority Customer
orders to be entered into these auctions. Applying the crossing order
fees to orders entered in the Complex Facilitation Mechanism and
Complex Solicitation Mechanism is reasonable because Members would pay
the reduced fees in Options 7, Section 3, Table 2 as compared to the
fees in Options 7, Section 4. Orders entered in the Complex
Facilitation Mechanism and Complex Solicitation Mechanism would be
assessed a $0.02 per contract Fee for Crossing Orders to Non-Priority
Customers in Penny Symbols, a $0.20 per contract Fee for Crossing
Orders to Non-Priority Customers in Non-Penny Symbols, a $0.50 Fee for
Responses to Crossing Orders to all Members for Penny Symbols, and a
$1.10 Fee for Responses to Crossing Orders to all Members in Non-Penny
Symbols. Priority Customers would not pay a Fee for Crossing Orders.
Today, Options 7, Section 4 assesses a $0.35 per contract Penny Symbol
to all Non-Priority Customer Orders and an $0.85 per contract Non-Penny
Symbol fee to all Members for Complex QCC Orders, Complex QCC with
Stock Orders, Complex Facilitation Orders and Complex Solicited Orders.
The Exchange believes that the lower Penny Symbol fees offset the
slightly higher Non-Penny fees that would be assessed to orders entered
in the Complex Facilitation Mechanism and Complex Solicitation
Mechanism. This pricing along with the new Priority Customer Break-Up
Rebate of $0.30 per contract will encourage Members to utilize the
Complex Facilitation Mechanism and Complex Solicitation Mechanism.
Finally, the Exchange believes it is reasonable to continue to assess
QCC Orders and QCC with Stock Orders the same $0.20 per contract Fee
for Crossing Orders to Non-Priority Customers in Penny and Non-Penny
Symbols.\24\ Priority Customers would be assessed no Fee for Crossing
Orders. The Exchange would not offer the proposed lower Penny Symbol
Fee for Crossing Orders to these order types as the Exchange would
continue to offer today's fees with no change. The Exchange also
believes it is reasonable to assess Complex QCC Orders and Complex QCC
with Stock Orders the same fee as QCC Orders and QCC with Stock Orders
are assessed today, as compared to the pricing in Options 7, Section 4.
As noted, the Exchange would assess Complex QCC Orders and Complex QCC
with Stock Orders a $0.20 per contract Fee for Crossing Orders to Non-
Priority Customers in Penny and Non-Penny Symbols.\25\ Priority
Customers would be assessed no Fee for Crossing Orders. Complex QCC
Orders and Complex QCC with Stock Orders would be subject to the same
pricing as Regular QCC Orders and QCC with Stock Orders. The Exchange
believes the proposed pricing will incentivize Members to enter Complex
QCC Orders and Complex QCC with Stock Orders on MRX.
---------------------------------------------------------------------------
\24\ QCC Orders and QCC with Stock Orders are automatically
executed upon entry. Responses cannot be submitted. See Options 3,
Section 12.
\25\ Complex QCC Orders and Complex QCC with Stock Orders are
automatically executed upon entry. Responses cannot be submitted.
See Options 3, Section 12.
---------------------------------------------------------------------------
The Exchange's proposal to amend Table 2 of Options 7, Section 3 to
decrease the Penny Symbols Non-Priority Customer Fees for Crossing
Orders from $0.20 per contract to $0.02 per contract for orders in the
Facilitation Mechanism, Solicitation Mechanism and Block Orders is
equitable and not unfairly discriminatory as all market participants
that enter orders in the Facilitation Mechanism, Solicitation Mechanism
and Block Orders would be uniformly assessed these fees. Additionally,
the Exchange would uniformly pay a Priority Customer Break-Up Rebate of
$0.30 per contract for orders entered into the Facilitation Mechanism
and Solicitation Mechanism. Applying the crossing order fees to orders
entered in the Complex Facilitation Mechanism
[[Page 60951]]
and Complex Solicitation Mechanism is equitable and not unfairly
discriminatory as the Exchange would uniformly apply these fees. Also,
the pricing for orders entered in the Complex Facilitation Mechanism
and Complex Solicitation Mechanism would be the same as pricing for
Regular Order entered into the Facilitation Mechanism and Solicitation
Mechanism. The Exchange is not amending the pricing for QCC Orders and
QCC with Stock Orders. The Exchange believes it is equitable and not
unfairly discriminatory to assess the same pricing for Complex QCC
Orders and Complex QCC with Stock Orders as would be assessed on QCC
Orders and QCC with Stock Orders, which fees would be uniformly
applied.
Amending notes 1 and 2 of Options 7, Section 3, Table 2 to add the
words ``and Complex'' with respect to PIM Orders to make clear that all
PIM Orders would be subject to the Part A pricing in Options 7, Section
3 is reasonable, equitable and not unfairly discriminatory as Regular
PIM Orders are already subject to the separate pricing in Part A below.
There is no substantive change from today's pricing for Regular and
Complex PIM Orders as a result of these amendments to the Pricing
Schedule.
Options 7, Section 3--Table 3
Amending the current tier qualifications in Table 3 of Options 7,
Section 3 is reasonable because requiring Members to execute Total
Customer ADV \26\ to qualify for various tiers of pricing would
continue to attract Priority Customer volume to the Exchange and allow
MRX Members to interact with that order flow. The Exchange continues to
utilize heightened amounts of executions for each subsequent tier in
Priority Customer Total Consolidated Volume to achieve the various
fees. The Exchange believes the volume requirement at each tier level
is reasonable. The first tier level is achievable by executing any
amount of Priority Customer Total Consolidated Volume up to 10%. These
levels take into account MRX's current market share and, as compared a
more mature market,\27\ are reasonable. The Exchange believes that
market participants will benefit from an increased amount of Priority
Customer Volume on MRX.
---------------------------------------------------------------------------
\26\ The Exchange proposes to amend the numerical qualifications
within the four tiers for Total Customer ADV so that Tier 1 requires
a Member to execute up to 0.10%; Tier 2 requires a Member to execute
more than 0.10% and up to 0.40%; Tier 3 requires a Member to execute
more than 0.40% and up to 0.70%; and Tier 4 requires a Member to
execute more than 0.70%.
\27\ See Nasdaq Phlx LLC's Customer Rebate Program Tier
qualifications at Options 7, Section 2 for a comparison.
---------------------------------------------------------------------------
Amending the current tier qualifications in Table 3 of Options 7,
Section 3 is equitable and not unfairly discriminatory as the Exchange
would uniformly apply the tier qualifications to all Members.
Options 7, Section 4
The Exchange's proposal to amend Options 7, Section 4 so that
Complex Order fees apply to an originating order, contra-side order and
orders in the Complex Order book as well as a Complex Customer Cross
Order is reasonable, equitable and not unfairly discriminatory as the
Exchange is relocating Complex QCC Orders, Complex QCC with Stock
Orders, Complex Facilitation Orders and Complex Solicited Orders to the
pricing in Options 7, Section 3, Table 2, rather than the pricing in
Options 7, Section 4. The Exchange would uniformly assess Complex QCC
Orders, Complex QCC with Stock Orders the same pricing as QCC Orders
and QCC with Stock Orders instead of the pricing in Options 7, Section
4. Complex QCC Orders, Complex QCC with Stock Orders would assess Non-
Priority Customers a $0.20 per contract Fee for Crossing Orders in
Penny and Non-Penny Symbols.\28\ Likewise, the Exchange would uniformly
assess orders entered into the Complex Facilitation Mechanism and
Complex Solicited Order Mechanism the same pricing as Regular Orders
entered in the Facilitation Mechanism and Solicited Order Mechanism.
The Exchange would assess orders entered into the Complex Facilitation
Mechanism and Complex Solicited Order Mechanism a Non-Priority
Customers a $0.02 per contract Fee for Crossing Orders in Penny Symbols
and a $0.20 per contract Fee for Crossing Orders in Non-Penny Symbols
and a $0.50 Fee for Responses to Crossing Orders to all Members for
Penny Symbols, and a $1.10 Fee for Responses to Crossing Orders to all
Members in Non-Penny Symbols. Additionally, the Exchange's proposal to
amend Options 7, Section 4 to note that ``Complex Orders which are
Crossing Orders are subject to separate pricing in Options 7, Section
3, Table 2. Complex PIM Orders, along with Regular PIM Orders, are
subject to the pricing in Options 7, Section 3, A'' is reasonable,
equitable and not unfairly discriminatory as the Exchange believes the
additional language will add clarity concerning the applicable fees all
of which would be uniformly applied as such.
---------------------------------------------------------------------------
\28\ QCC Orders, QCC with Stock Orders, Complex QCC Orders, and
Complex QCC with Stock Orders are automatically executed upon entry.
Responses cannot be submitted. See Options 3, Section 12.
---------------------------------------------------------------------------
The Exchange's proposal to add a new note 3 in Options 7, Section 4
which provides that ``Members that execute Complex Orders that trade
with interest on the regular order book (leg) will be assessed/paid the
applicable ``Taker'' Fee/Rebate in Options 7, Section 3, Table 1. To
the extent that a Priority Customer Complex Order legs into the regular
order book and executes against a Priority Customer regular order, the
Exchange will not pay a Taker Rebate for that leg,'' is reasonable,
equitable and not unfairly discriminatory as the Exchange would not
assess Priority Customers a Complex Order fee and therefore proposes to
not pay a Taker Rebate to a Priority Customer Complex Order that
executes against a Priority Customer leg in the order book. Today, the
Exchange applies the pricing in Options 7, Section 3 to the regular
order book. This would continue to apply, except that the Taker Fee or
Taker Rebate would apply to this pricing. The Exchange would uniformly
assess the applicable pricing, Regular order book or Complex Order
book, to the order.
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.
Options 7, Section 3--Table 1
In terms of intra-market competition, the Exchange's proposal to
offer Maker Fees and Taker Fees/Rebates in Penny and Non-Penny Symbols
does not impose an undue burden on competition. Priority Customers are
not assessed Penny or Non-Penny Symbol Maker Fees. Additionally, the
proposal pays Priority Customers Taker Rebates in Penny and Non-Penny
Symbols, unlike other market participants, and assesses Priority
Customers the same or lower Taker Fees in Non-Penny Symbols as compared
to other market participants. Priority Customer liquidity benefits all
market participants by providing more trading opportunities, which
attracts market makers. An increase in the activity of these market
participants in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow for other market
participants, to the benefit of all market participants.
The Exchange's proposal to remove the discounted fees in note 7 of
Options 7, Section 3 in Table 1 does not impose
[[Page 60952]]
an undue burden on competition as no market participant would be
entitled to the discounted fees.
Amending the description of an ``Exposed Order'' in Options 7,
Section 1 and conforming note 6 in Options 7, Section 6 does not impose
an undue burden on competition because the Exchange would no longer pay
Maker Rebates and would uniformly pay Taker Rebates where proposed in
the Pricing Schedule at Options 7, Section 3, Table 1.
Options 7, Section 3--Table 2
In terms of intra-market competition, the Exchange's proposal to
amend Table 2 of Options 7, Section 3 to decrease the Penny Symbol Non-
Priority Customer Fees for Crossing Orders from $0.20 per contract to
$0.02 per contract for orders in the Facilitation Mechanism,
Solicitation Mechanism and Block Orders does not impose an undue burden
on competition as all market participants that enter orders in the
Facilitation Mechanism, Solicitation Mechanism and Block Orders would
be uniformly assessed these fees. Assessing lower Penny Symbol Non-
Priority Customer Fees for Crossing Orders and not lowering the Penny
Symbol Non-Priority Customer Responses for Crossing Orders does not
impose an undue burden on competition.
Today, a differential exists as between the Fees for Crossing
Orders (the fees that apply to the originating and contra-side orders)
and the Responses for Crossing Orders, the Exchange does not believe
that widening this differential burdens competition because lowering
these originating and contra-side order fees encourages Members to
initiate Facilitation Mechanisms, Complex Facilitation Mechanisms,
Solicitation Mechanisms, Complex Solicitation Mechanisms and Block
Orders in Penny Symbols. Members responding to these auctions would
continue to be assessed $0.50 per contract. While this fee is higher
than the proposed fee of $0.35 per contract to remove liquidity from
the order book, the Exchange believes the fee remains competitive with
other options exchanges \29\ and will continue to encourage Members to
initiate Facilitation Mechanisms, Complex Facilitation Mechanisms,
Solicitation Mechanisms, Complex Solicitation Mechanisms and Block
Orders in Penny Symbols. The liquidity the Exchange is able to attract
to MRX in the form of these auctions provides other Members an
opportunity to engage with auction orders and participate in the trade
by breaking-up the auction order or being allocated in the auction.
Members would not be able to respond to the auctions if such auctions
never commence.
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\29\ Miami International Securities Exchange, LLC (``MIAX'')
assesses a $0.50 per contract Penny Class Responder to PRIME Auction
Fee. See MIAX's Fee Schedule. Nasdaq ISE, LLC (``ISE'') assesses a
$0.50 per contract Fee for Responses to Facilitation Orders,
Solicited Orders and Block Orders. See ISE's Pricing Schedule.
---------------------------------------------------------------------------
Additionally, the Exchange would uniformly pay a Priority Customer
Break-Up Rebate of $0.30 per contract for orders entered into the
Facilitation Mechanism and Solicitation Mechanism. The Exchange
believes that offering a Break-Up Rebate only to a Priority Customer,
and not other market participants, would not cause an undue burden on
competition because Priority Customer originating order flow from the
Facilitation Mechanism and Solicitation Mechanism enhances liquidity on
the Exchange. This, in turn, provides more trading opportunities and
attracts other market participants, thus facilitating tighter spreads,
increased order flow and trading opportunities to the benefit of all
market participants. Moreover, the Exchange does not assess Priority
Customers a Fee for Penny or Non-Penny orders entered into the
Facilitation Mechanism and Solicitation Mechanism to attract such order
flow.
Applying the crossing order fees to orders entered in the Complex
Facilitation Mechanism and Complex Solicitation Mechanism does not
impose an undue burden on competition as the Exchange would uniformly
apply these fees. Also, the pricing for orders entered in the Complex
Facilitation Mechanism and Complex Solicitation Mechanism would be the
same as pricing for Regular Order entered into the Facilitation
Mechanism and Solicitation Mechanism. The Exchange is not amending the
pricing for QCC Orders and QCC with Stock Orders. The Exchange believes
assess the same pricing for Complex QCC Orders and Complex QCC with
Stock Orders as would be assessed on QCC Orders and QCC with Stock
Orders does not impose an undue burden on competition because these
fees would be uniformly applied. Priority Customer orders would
continue to be assess no Fee for Crossing Orders.
Amending notes 1 and 2 of Options 7, Section 3, Table 2 to add the
words ``and Complex'' with respect to PIM Orders to make clear that all
PIM Orders would be subject to the Part A pricing in Options 7, Section
3 does not impose an undue burden on competition as Regular PIM Orders
are already subject to the separate pricing in Part A below. There is
no substantive change from today's pricing for Regular and Complex PIM
Orders as a result of these amendments to the Pricing Schedule.
Options 7, Section 3--Table 3
In terms of intra-market competition, amending the current tier
qualifications in Table 3 of Options 7, Section 3 does not impose an
undue burden on competition as the Exchange would uniformly apply the
tier qualifications to all Members.
Options 7, Section 4
In terms of intra-market competition, the Exchange's proposal to
amend Options 7, Section 4 so that Complex Order fees apply to an
originating order, contra-side order and orders in the Complex Order
book as well as a Complex Customer Cross Order does not impose an undue
burden on competition because the Exchange would uniformly assess
Complex QCC Orders, Complex QCC with Stock Orders the same pricing as
QCC Orders and QCC with Stock Orders. Likewise, the Exchange would
uniformly assess orders entered into the Complex Facilitation Mechanism
and Complex Solicited Order Mechanism the same pricing as Regular
Orders entered in the Facilitation Mechanism and Solicited Order
Mechanism. Additionally, the Exchange's proposal to amend Options 7,
Section 4 to note that ``Complex Orders which are Crossing Orders are
subject to separate pricing in Options 7, Section 3, Table 2. Complex
PIM Orders, along with Regular PIM Orders, are subject to the pricing
in Options 7, Section 3, A'' does not impose an undue burden on
competition as the Exchange would uniformly apply the pricing as noted
herein.
The Exchange's proposal to add a new note 3 in Options 7, Section 4
which provides that ``Members that execute Complex Orders that trade
with interest on the regular order book (leg) will be assessed/paid the
applicable ``Taker'' Fee/Rebate in Options 7, Section 3, Table 1. To
the extent that a Priority Customer Complex Order legs into the regular
order book and executes against a Priority Customer regular order, the
Exchange will not pay a Taker Rebate for that leg,'' does not impose an
undue burden on competition as the Exchange would uniformly assess the
applicable pricing, Regular order book or Complex Order book to the
order.
In terms of inter-market 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, or rebate opportunities available at
other venues to be more
[[Page 60953]]
favorable. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other options 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\30\ At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is: (i) necessary or appropriate in the public
interest; (ii) for the protection of investors; or (iii) otherwise in
furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\30\ 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-2024-25 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-2024-25. 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-2024-25 and should be
submitted on or before August 19, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-16547 Filed 7-26-24; 8:45 am]
BILLING CODE 8011-01-P
