Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Options 7, Section 3, 67117-67120 [2024-18476]
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Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100724; File Nos. PCAOB–
2024–02, PCAOB–2024–03, PCAOB–2024–
04]
Public Company Accounting Oversight
Board; Extension of Approval Periods
for Proposed Rules on a Firm’s System
of Quality Control and Related
Amendments to PCAOB Standards,
Proposed Rules on Amendments
Related to Aspects of Designing and
Performing Audit Procedures That
Involve Technology-Assisted Analysis
of Information in Electronic Form, and
Proposed Rules on Amendment to
PCAOB Rule 3502 Governing
Contributory Liability
August 13, 2024.
On May 24 and June 20, 2024, the
Public Company Accounting Oversight
Board (‘‘PCAOB’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 the proposed rules
referenced above (collectively, the
‘‘proposed rules’’).3 The Quality Control
Proposed Rules were published for
comment in the Federal Register on
June 11, 2024. The Technology-Assisted
Analysis Proposed Rules and
Contributory Liability Proposed Rules
were each published for comment in the
Federal Register on July 2, 2024.4 The
Commission provided a 21-day public
comment period for the proposed rules,5
which ended on July 2 for the Quality
Control Proposed Rules and July 23,
2024 for the Technology Assisted
Analysis Proposed Rules and
Contributory Liability Proposed Rules.
Section 19(b)(2) of the Act 6 provides
that no later than 45 days after the date
of the publication of notice of the filing
of a proposed rule change, or within
such longer period up to 90 days as the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Proposed Rules Relating to A Firm’s System
of Quality Control and Related Amendments to
PCAOB Standards (the ‘‘Quality Control Proposed
Rules’’) were filed with the Commission on May 24,
2024, and the Amendments Related to Aspects of
Designing and Performing Audit Procedures that
Involve Technology-Assisted Analysis of
Information in Electronic Form (the ‘‘TechnologyAssisted Analysis Proposed Rules’’), and
Amendment to PCAOB Rule 3502 Governing
Contributory Liability (the ‘‘Contributory Liability
Proposed Rules’’) were filed on June 20, 2024.
4 See Securities Exchange Act Release No. 34–
100277 (June 5, 2024) [89 FR 49588 (June 11,
2024)], and Securities Exchange Act Release Nos.
34–100429 and 34–100430 (June 26, 2024) [89 FR
54895 and 89 FR 54922 (July 2, 2024)].
5 See id.
6 15 U.S.C. 78s(b)(2).
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2 17
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Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or as to which the self-regulatory
organization 7 consents, the Commission
shall either approve or disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for the
proposed rules is July 26, 2024, for the
Quality Control Proposed Rules and
August 16, 2024, for each of the
Technology Assisted Analysis Proposed
Rules and the Contributory Liability
Proposed Rules.
On July 1, 2024, the Commission
extended the date by which the
Commission shall either approve or
disapprove, or institute proceedings to
determine whether to approve or
disapprove, the Quality Control
Proposed Rules to August 25, 2024.8 To
provide additional time for
consideration of the Quality Control
Proposed Rules and the issues raised
therein, the Commission finds it
appropriate to extend the time period
within which the Commission must take
action on those proposed rules for up to
an additional 15 days. To provide
additional time for consideration of the
Technology-Assisted Analysis Proposed
Rules and the Contributory Liability
Proposed Rules and the issues raised
therein, the Commission finds it
appropriate to extend the time period
within which the Commission must take
action on those proposed rules for up to
seven days. Accordingly, pursuant to
Section 19(b)(2) of the Act,9 the
Commission extends the date by which
the Commission shall either approve or
disapprove, or institute proceedings to
determine whether to approve or
disapprove, the proposed rules to
August 23, 2024 for the Technology
Assisted Analysis Proposed Rules and
the Contributory Liability Proposed
Rules (File Nos. PCAOB–2024–03,
PCAOB–2024–04) and September 9,
2024 (File No. PCAOB–2024–02).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–18491 Filed 8–16–24; 8:45 am]
BILLING CODE 8011–01–P
7 The
term ‘‘self-regulatory organization’’ includes
a ‘‘registered securities association.’’ See Section
3(a)(26) of the Act. Section 107(b)(4) of the
Sarbanes-Oxley Act of 2002 states that the
provisions of Sections 19(b)(1) through (3) of the
Act shall govern the proposed rules of the PCAOB
as fully as if the PCAOB were a registered securities
association for purposes of that Section.
8 See https://www.sec.gov/files/rules/pcaob/2024/
34-100451.pdf.
9 15 U.S.C. 78s(b)(2).
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67117
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100722; File No. SR–
GEMX–2024–27]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Pricing Schedule at
Options 7, Section 3
August 13, 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 August 1,
2024, Nasdaq GEMX, LLC (‘‘GEMX’’ 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, Section 3.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/gemx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices
Pricing Schedule at Options 7, Section
3.
Maker
rebate:
Tier 1
Market participant
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Market Maker ............................................
Priority Customer ......................................
Today, as set forth in Options 7,
Section 3, the Exchange assesses Market
Makers 3 and Priority Customers 4 the
Maker
rebate:
Tier 2
($0.20)
(0.25)
Maker
rebate:
Tier 3
($0.25)
(0.43)
($0.30)
(0.48)
Maker
rebate:
Tier 4
($0.32)
(0.51)
Maker
rebate:
Tier 5
below tiered maker/taker pricing for
adding/removing liquidity in Penny
Symbols.
Taker
fee:
Tier 1
($0.41)
(0.53)
$0.50
0.41
Taker
fee:
Tier 2
$0.50
0.41
Taker
fee:
Tier 3
$0.50
0.41
Taker
fee:
Tier 4
$0.50
0.41
Taker
fee:
Tier 5
$0.48
0.41
The Exchange now proposes to assess
Market Makers and Priority Customers
separate pricing for SPY, QQQ, and
IWM in lieu of the maker/taker pricing
set forth above for other Penny Symbols.
First, the Exchange proposes to pay
Market Makers a $0.41 per contract
Maker Rebate in Tiers 1–5 for SPY,
QQQ, and IWM (instead of the current
Maker Rebates in Tiers 1–5 ranging from
$0.20 to $0.41 per contract).5 Second,
the Exchange proposes to assess Priority
Customers a $0.45 per contract Taker
Fee in Tiers 1–5 for SPY, QQQ, and
IWM (instead of the current $0.41 per
contract Taker Fee in Tiers 1–5).6 Third,
the Exchange proposes to reduce the
new $0.45 per contract Taker Fee in
Tiers 1–5 for SPY, QQQ, and IWM by
$0.02 per contract when the Preferred
Market Maker 7 transacts against a
Priority Customer Order directed to that
Preferred Market Maker for execution.8
The Exchange will set forth the above
changes in proposed notes 15 and 17 of
Options 7, Section 3. Proposed note 15
will provide: ‘‘Market Maker Tier 1
through Tier 5 Maker Rebates in Penny
Symbols will be ($0.41) per contract for
the following option symbols: SPY,
QQQ and IWM. Priority Customer Tier
1 through Tier 5 Taker Fees in Penny
Symbols will be $0.45 per contract for
the following option symbols: SPY,
QQQ and IWM.’’ Proposed note 17 will
provide: ‘‘Priority Customer Tier 1
through Tier 5 Taker Fees in SPY, QQQ,
and IWM set forth in note 15 above will
be decreased by $0.02 per contract when
the Preferred Market Maker transacts
against a Priority Customer Order
directed to that Preferred Market Maker
for execution.’’
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,9 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,10 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange’s proposed changes to
its schedule of credits 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’. . . .’’ 11
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.’’ 12
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 and
market share relative to its competitors.
The Exchange believes that the
proposed changes to the maker/taker
pricing in SPY, QQQ, and IWM for
Market Makers and Priority Customers
in the manner described above are
reasonable, equitable and not unfairly
discriminatory for the reasons that
follow.
The Exchange believes it is reasonable
to pay Market Makers a $0.41 per
contract Maker Rebate in Tiers 1–5 for
SPY, QQQ, and IWM (instead of the
current Maker Rebates in Tiers 1–5
ranging from $0.20 to $0.41 per
contract) because the proposed changes
are intended to encourage Market
Makers to add more liquidity in these
three symbols. Specifically, the proposal
3 A ‘‘Market Maker’’ is a market maker as defined
in Nasdaq GEMX Options 1, Section 1(a)(21).
4 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 GEMX
Options 1, Section 1(a)(36).
5 See proposed note 15 of Options 7, Section 3.
6 See id.
7 Today, an Electronic Access Member may
designate a ‘‘Preferred Market Maker’’ on orders it
enters into the System. A Preferred Market Maker
may be the Primary Market Maker appointed to the
options class or any Competitive Market Maker
appointed to the options class. Market Makers may
be categorized as Preferred Market Makers when
such Market Makers execute against a ‘‘Preferenced
Order’’ directed to them for execution by an Order
Flow Provider. An Order Flow Provider means any
Member that submits, as agent, orders to the
Exchange. The Preferred Market Maker must be
quoting at the better of the internal BBO or NBBO
at the time the Preferenced Order is received in
order to receive the Preferred Market Maker
allocation described in Options 3, Section
10(c)(1)(C). See Options 2, Section 10. See also
Securities Exchange Act Release No. 100612 (July
29, 2024) (SR–GEMX–2024–20) (amending, among
other changes that are immediately effective but not
yet operative, Options 2, Section 10 that sets forth
the aforementioned definitions) .
8 See proposed note 17 of Options 7, Section 3.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(4) and (5).
11 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)).
12 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
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generally provides Market Makers
significantly higher Maker Rebates in
SPY, QQQ, and IWM than they receive
today except for the Tier 5 Maker
Rebate, which is currently the highest
Maker Rebate in Penny Symbols for
Market Makers and will remain the
same as today. Accordingly, the
Exchange believes that Market Makers
will continue to be incentivized to add
liquidity in these symbols on the
Exchange. Increased liquidity benefits
all market participants by deepening the
Exchange’s liquidity pool and
supporting the quality of price
discovery.
The Exchange also believes that it is
reasonable to assess Priority Customers
a $0.45 per contract Taker Fee in Tiers
1–5 for SPY, QQQ, and IWM (instead of
the current $0.41 per contract Taker Fee
in Tiers 1–5). While Priority Customers
will be charged higher Taker Fees for
SPY, QQQ, and IWM than the Taker
Fees currently assessed, the Exchange
believes that the increased Taker Fees
are appropriate to offset the proposed
Maker Market Maker Rebates for SPY,
QQQ, and IWM. Furthermore, Priority
Customers will continue to be assessed
lower Taker Fees in Penny Symbols
compared to all other market
participants today.13
The Exchange believes that reducing
the Priority Customer Taker Fee in Tiers
1–5 for SPY, QQQ, and IWM by $0.02
per contract when the Preferred Market
Maker transacts against a Priority
Customer Order directed to that
Preferred Market Maker for execution is
reasonable because the Exchange seeks
to incentivize Members to direct more
Priority Customer order flow in these
symbols to the Exchange. As discussed
above, the proposal provides the
reduced Taker Fee benefit to the Priority
Customer. To the extent the proposal
attracts more Priority Customer order
flow in SPY, QQQ, and IWM to the
Exchange, the Exchange believes that
this will benefit all market participants
through increased trading opportunities.
The Exchange also represents that for
orders directed to Preferred Market
Makers, Preferred Market Makers are
unaware of the identity of the contraparty prior to and at the time of the
trade. Furthermore, Options 9, Section 1
(Just and Equitable Principles of Trade)
and Options 9, Section 9 (Prevention of
the Misuse of Material Nonpublic
13 Specifically, Market Makers and Non-Nasdaq
GEMX Market Makers are currently assessed Taker
Fees in Penny Symbols ranging from $0.48 to $0.50
per contract. In addition, Firm Proprietary/BrokerDealers and Professional Customers are currently
assessed Taker Fees ranging from $0.49 to $0.50 per
contract. See Options 7, Section 3.
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Information) 14 are intended to prohibit
coordinated actions between Preferred
Market Makers and Order Flow
Providers,15 and the Exchange
proactively conducts surveillance for,
and enforces against, such violations.
Finally, of note, a Market Maker must be
quoting at the better of the internal BBO
or the NBBO at the time the Preferenced
Order is received to be allocated, as
required by Options 2, Section 10.
The Exchange also believes that
assessing different pricing for SPY, QQQ
and IWM, as compared to other
symbols, is reasonable because trading
in SPY, QQQ and IWM is different from
trading in other symbols in that they are
more liquid, have higher volume and
competition for executions is more
intense.
The Exchange believes that it is
equitable and not unfairly
discriminatory to provide the proposed
Maker Rebate Tiers 1–5 for SPY, QQQ,
and IWM to Market Makers because
they have different requirements and
additional obligations that other market
participants do not (such as quoting
requirements).16 As discussed above,
the proposed Maker Rebates of $0.41 per
contract are designed to continue to
incentivize Market Maker add liquidity
activity in SPY, QQQ, and IWM, thereby
facilitating tighter spreads and
contributing towards a robust, wellbalanced market ecosystem, to the
benefit of all market participants.
The Exchange further believes that it
is equitable and not unfairly
discriminatory to assess Priority
Customers a $0.45 per contract Taker
Fee in Tiers 1–5 for SPY, QQQ, and
IWM because Priority Customers will
continue to be assessed lower Taker
Fees in Penny Symbols compared to all
other market participants today. As
such, the Exchange believes that the
proposed taker pricing will continue to
incentivize Priority Customer order flow
in SPY, QQQ, and IWM to the
Exchange. An increase in Priority
Customer order flow 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 from other market
participants, to the benefit of all market
participants.
The Exchange further believes it is
equitable and not unfairly
14 GEMX Options 9, Sections 1 and 9 incorporates
ISE Options 9, Sections 1 and 9 by reference.
15 An Order Flow Provider means any Member
that submits, as agent, orders to the Exchange. See
supra note 7.
16 See Options 2, Section 5.
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67119
discriminatory to reduce the Priority
Customer Taker Fee in Tiers 1–5 for
SPY, QQQ, and IWM set forth in
proposed note 15 by $0.02 per contract
when the Preferred Market Maker
transacts against a Priority Customer
Order directed to that Preferred Market
Maker for execution. Any Member can
be an Order Flow Provider (as defined
in Options 2, Section 10) and may direct
a Priority Customer order to any Market
Maker on the Exchange.17 Furthermore,
the proposal seeks to encourage more
Priority Customer order flow in SPY,
QQQ, and IWM to the Exchange by
providing a reduced Taker Fee to
Priority Customers in the manner
discussed above. An increase in Priority
Customer order flow 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 from other market
participants, to the benefit of all market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
In terms of intra-market competition,
the Exchange does not believe that its
proposal will place any category of
market participants at a competitive
disadvantage. The Exchange believes
that all of the changes proposed above
will incentivize market participants to
direct more order flow to the Exchange,
to the benefit of all market participants
who may interact with this order flow.
While some aspects of the proposal
apply directly to Market Makers
(through the Market Maker Tier 1
through Tier 5 Maker Rebates for SPY,
QQQ, and IWM) or Priority Customers
(through the Priority Customer Tier 1
through Tier 5 Taker Fees for SPY,
QQQ, and IWM; and the reduced
Priority Customer Tier 1 through 5
Taker Fees for SPY, QQQ, and IWM
when the Preferred Market Maker
transacts against a Priority Customer
Order directed to that Preferred Market
Maker for execution), the Exchange
believes that the proposed changes
taken together will fortify and encourage
activity, especially Market Maker and
Priority Customer activity, on the
Exchange. As discussed above, all
17 An Order Flow Provider, by definition, means
any Member that submits, as agent, orders to the
Exchange. See supra note 7.
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market participants will benefit from
any increase in market activity that the
proposal effectuates. As it relates to the
reduced Taker Fee in SPY, QQQ, and
IWM for Priority Customers, any
Member can be an Order Flow Provider,
and may direct a Priority Customer
Order to any Market Maker at any time
on an order by order basis.
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
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. In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
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.
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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.18 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.
18 15
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
GEMX–2024–27 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–GEMX–2024–27. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–GEMX–2024–27 and should be
submitted on or before September 9,
2024.
U.S.C. 78s(b)(3)(A)(ii).
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–18476 Filed 8–16–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100720; File No. SR–NYSE–
2024–23]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Amend
Section 703.12(II) of the NYSE Listed
Company Manual To Expand the
Circumstances Under Which Rights
May Be Listed on the NYSE
August 13, 2024.
I. Introduction
On April 29, 2024, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend Section 703.12(II) of
the NYSE Listed Company Manual
(‘‘Manual’’) to expand the circumstances
under which rights may be listed on the
NYSE by allowing issuers to (i) issue
rights to more than existing
shareholders for a class of securities that
is listed or to be listed on the Exchange,
and (ii) list and trade rights on the
Exchange prior to listing the security
into which such rights will be
exercisable. The proposed rule change
was published for comment in the
Federal Register on May 15, 2024.3 On
June 26, 2024, pursuant to Section
19(b)(2) of the Act,4 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.5 The Commission has
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 100102
(May 10, 2024), 89 FR 42543 (Notice of Filing of
Proposed Rule Change to Amend Section 703.12(II)
of the NYSE Listed Company Manual to Expand the
Circumstances Under Which Rights May Be Listed
on the NYSE) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No.
100437, 89 FR 54894 (July 2, 2024). The
Commission designated August 13, 2024, as the
1 15
E:\FR\FM\19AUN1.SGM
19AUN1
]]>Agencies
[Federal Register Volume 89, Number 160 (Monday, August 19, 2024)]
[Notices]
[Pages 67117-67120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18476]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100722; File No. SR-GEMX-2024-27]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Pricing Schedule at Options 7, Section 3
August 13, 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 August 1, 2024, Nasdaq GEMX, LLC (``GEMX'' 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7, Section 3.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/gemx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
[[Page 67118]]
Pricing Schedule at Options 7, Section 3.
Today, as set forth in Options 7, Section 3, the Exchange assesses
Market Makers \3\ and Priority Customers \4\ the below tiered maker/
taker pricing for adding/removing liquidity in Penny Symbols.
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\3\ A ``Market Maker'' is a market maker as defined in Nasdaq
GEMX Options 1, Section 1(a)(21).
\4\ 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 GEMX Options 1,
Section 1(a)(36).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Maker Maker Maker Maker Maker Taker Taker Taker Taker Taker
Market participant rebate: rebate: rebate: rebate: rebate: fee: Tier fee: Tier fee: Tier fee: Tier fee: Tier
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 1 2 3 4 5
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Market Maker.............................. ($0.20) ($0.25) ($0.30) ($0.32) ($0.41) $0.50 $0.50 $0.50 $0.50 $0.48
Priority Customer......................... (0.25) (0.43) (0.48) (0.51) (0.53) 0.41 0.41 0.41 0.41 0.41
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The Exchange now proposes to assess Market Makers and Priority
Customers separate pricing for SPY, QQQ, and IWM in lieu of the maker/
taker pricing set forth above for other Penny Symbols. First, the
Exchange proposes to pay Market Makers a $0.41 per contract Maker
Rebate in Tiers 1-5 for SPY, QQQ, and IWM (instead of the current Maker
Rebates in Tiers 1-5 ranging from $0.20 to $0.41 per contract).\5\
Second, the Exchange proposes to assess Priority Customers a $0.45 per
contract Taker Fee in Tiers 1-5 for SPY, QQQ, and IWM (instead of the
current $0.41 per contract Taker Fee in Tiers 1-5).\6\ Third, the
Exchange proposes to reduce the new $0.45 per contract Taker Fee in
Tiers 1-5 for SPY, QQQ, and IWM by $0.02 per contract when the
Preferred Market Maker \7\ transacts against a Priority Customer Order
directed to that Preferred Market Maker for execution.\8\
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\5\ See proposed note 15 of Options 7, Section 3.
\6\ See id.
\7\ Today, an Electronic Access Member may designate a
``Preferred Market Maker'' on orders it enters into the System. A
Preferred Market Maker may be the Primary Market Maker appointed to
the options class or any Competitive Market Maker appointed to the
options class. Market Makers may be categorized as Preferred Market
Makers when such Market Makers execute against a ``Preferenced
Order'' directed to them for execution by an Order Flow Provider. An
Order Flow Provider means any Member that submits, as agent, orders
to the Exchange. The Preferred Market Maker must be quoting at the
better of the internal BBO or NBBO at the time the Preferenced Order
is received in order to receive the Preferred Market Maker
allocation described in Options 3, Section 10(c)(1)(C). See Options
2, Section 10. See also Securities Exchange Act Release No. 100612
(July 29, 2024) (SR-GEMX-2024-20) (amending, among other changes
that are immediately effective but not yet operative, Options 2,
Section 10 that sets forth the aforementioned definitions) .
\8\ See proposed note 17 of Options 7, Section 3.
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The Exchange will set forth the above changes in proposed notes 15
and 17 of Options 7, Section 3. Proposed note 15 will provide: ``Market
Maker Tier 1 through Tier 5 Maker Rebates in Penny Symbols will be
($0.41) per contract for the following option symbols: SPY, QQQ and
IWM. Priority Customer Tier 1 through Tier 5 Taker Fees in Penny
Symbols will be $0.45 per contract for the following option symbols:
SPY, QQQ and IWM.'' Proposed note 17 will provide: ``Priority Customer
Tier 1 through Tier 5 Taker Fees in SPY, QQQ, and IWM set forth in note
15 above will be decreased by $0.02 per contract when the Preferred
Market Maker transacts against a Priority Customer Order directed to
that Preferred Market Maker for execution.''
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among members and issuers and other persons using any facility,
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposed changes to its schedule of credits 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'. . . .'' \11\
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\11\ 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)).
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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.'' \12\
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\12\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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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 and market share relative to its
competitors.
The Exchange believes that the proposed changes to the maker/taker
pricing in SPY, QQQ, and IWM for Market Makers and Priority Customers
in the manner described above are reasonable, equitable and not
unfairly discriminatory for the reasons that follow.
The Exchange believes it is reasonable to pay Market Makers a $0.41
per contract Maker Rebate in Tiers 1-5 for SPY, QQQ, and IWM (instead
of the current Maker Rebates in Tiers 1-5 ranging from $0.20 to $0.41
per contract) because the proposed changes are intended to encourage
Market Makers to add more liquidity in these three symbols.
Specifically, the proposal
[[Page 67119]]
generally provides Market Makers significantly higher Maker Rebates in
SPY, QQQ, and IWM than they receive today except for the Tier 5 Maker
Rebate, which is currently the highest Maker Rebate in Penny Symbols
for Market Makers and will remain the same as today. Accordingly, the
Exchange believes that Market Makers will continue to be incentivized
to add liquidity in these symbols on the Exchange. Increased liquidity
benefits all market participants by deepening the Exchange's liquidity
pool and supporting the quality of price discovery.
The Exchange also believes that it is reasonable to assess Priority
Customers a $0.45 per contract Taker Fee in Tiers 1-5 for SPY, QQQ, and
IWM (instead of the current $0.41 per contract Taker Fee in Tiers 1-5).
While Priority Customers will be charged higher Taker Fees for SPY,
QQQ, and IWM than the Taker Fees currently assessed, the Exchange
believes that the increased Taker Fees are appropriate to offset the
proposed Maker Market Maker Rebates for SPY, QQQ, and IWM. Furthermore,
Priority Customers will continue to be assessed lower Taker Fees in
Penny Symbols compared to all other market participants today.\13\
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\13\ Specifically, Market Makers and Non-Nasdaq GEMX Market
Makers are currently assessed Taker Fees in Penny Symbols ranging
from $0.48 to $0.50 per contract. In addition, Firm Proprietary/
Broker-Dealers and Professional Customers are currently assessed
Taker Fees ranging from $0.49 to $0.50 per contract. See Options 7,
Section 3.
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The Exchange believes that reducing the Priority Customer Taker Fee
in Tiers 1-5 for SPY, QQQ, and IWM by $0.02 per contract when the
Preferred Market Maker transacts against a Priority Customer Order
directed to that Preferred Market Maker for execution is reasonable
because the Exchange seeks to incentivize Members to direct more
Priority Customer order flow in these symbols to the Exchange. As
discussed above, the proposal provides the reduced Taker Fee benefit to
the Priority Customer. To the extent the proposal attracts more
Priority Customer order flow in SPY, QQQ, and IWM to the Exchange, the
Exchange believes that this will benefit all market participants
through increased trading opportunities. The Exchange also represents
that for orders directed to Preferred Market Makers, Preferred Market
Makers are unaware of the identity of the contra-party prior to and at
the time of the trade. Furthermore, Options 9, Section 1 (Just and
Equitable Principles of Trade) and Options 9, Section 9 (Prevention of
the Misuse of Material Nonpublic Information) \14\ are intended to
prohibit coordinated actions between Preferred Market Makers and Order
Flow Providers,\15\ and the Exchange proactively conducts surveillance
for, and enforces against, such violations. Finally, of note, a Market
Maker must be quoting at the better of the internal BBO or the NBBO at
the time the Preferenced Order is received to be allocated, as required
by Options 2, Section 10.
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\14\ GEMX Options 9, Sections 1 and 9 incorporates ISE Options
9, Sections 1 and 9 by reference.
\15\ An Order Flow Provider means any Member that submits, as
agent, orders to the Exchange. See supra note 7.
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The Exchange also believes that assessing different pricing for
SPY, QQQ and IWM, as compared to other symbols, is reasonable because
trading in SPY, QQQ and IWM is different from trading in other symbols
in that they are more liquid, have higher volume and competition for
executions is more intense.
The Exchange believes that it is equitable and not unfairly
discriminatory to provide the proposed Maker Rebate Tiers 1-5 for SPY,
QQQ, and IWM to Market Makers because they have different requirements
and additional obligations that other market participants do not (such
as quoting requirements).\16\ As discussed above, the proposed Maker
Rebates of $0.41 per contract are designed to continue to incentivize
Market Maker add liquidity activity in SPY, QQQ, and IWM, thereby
facilitating tighter spreads and contributing towards a robust, well-
balanced market ecosystem, to the benefit of all market participants.
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\16\ See Options 2, Section 5.
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The Exchange further believes that it is equitable and not unfairly
discriminatory to assess Priority Customers a $0.45 per contract Taker
Fee in Tiers 1-5 for SPY, QQQ, and IWM because Priority Customers will
continue to be assessed lower Taker Fees in Penny Symbols compared to
all other market participants today. As such, the Exchange believes
that the proposed taker pricing will continue to incentivize Priority
Customer order flow in SPY, QQQ, and IWM to the Exchange. An increase
in Priority Customer order flow 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 from other market participants, to
the benefit of all market participants.
The Exchange further believes it is equitable and not unfairly
discriminatory to reduce the Priority Customer Taker Fee in Tiers 1-5
for SPY, QQQ, and IWM set forth in proposed note 15 by $0.02 per
contract when the Preferred Market Maker transacts against a Priority
Customer Order directed to that Preferred Market Maker for execution.
Any Member can be an Order Flow Provider (as defined in Options 2,
Section 10) and may direct a Priority Customer order to any Market
Maker on the Exchange.\17\ Furthermore, the proposal seeks to encourage
more Priority Customer order flow in SPY, QQQ, and IWM to the Exchange
by providing a reduced Taker Fee to Priority Customers in the manner
discussed above. An increase in Priority Customer order flow 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 from other market
participants, to the benefit of all market participants.
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\17\ An Order Flow Provider, by definition, means any Member
that submits, as agent, orders to the Exchange. See supra note 7.
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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.
In terms of intra-market competition, the Exchange does not believe
that its proposal will place any category of market participants at a
competitive disadvantage. The Exchange believes that all of the changes
proposed above will incentivize market participants to direct more
order flow to the Exchange, to the benefit of all market participants
who may interact with this order flow. While some aspects of the
proposal apply directly to Market Makers (through the Market Maker Tier
1 through Tier 5 Maker Rebates for SPY, QQQ, and IWM) or Priority
Customers (through the Priority Customer Tier 1 through Tier 5 Taker
Fees for SPY, QQQ, and IWM; and the reduced Priority Customer Tier 1
through 5 Taker Fees for SPY, QQQ, and IWM when the Preferred Market
Maker transacts against a Priority Customer Order directed to that
Preferred Market Maker for execution), the Exchange believes that the
proposed changes taken together will fortify and encourage activity,
especially Market Maker and Priority Customer activity, on the
Exchange. As discussed above, all
[[Page 67120]]
market participants will benefit from any increase in market activity
that the proposal effectuates. As it relates to the reduced Taker Fee
in SPY, QQQ, and IWM for Priority Customers, any Member can be an Order
Flow Provider, and may direct a Priority Customer Order to any Market
Maker at any time on an order by order basis.
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 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. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will lose market share as a result. Accordingly, the Exchange does not
believe that the proposed changes will impair the ability of members or
competing order execution venues to maintain their competitive standing
in the financial markets.
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.\18\ 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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\18\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-GEMX-2024-27 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-GEMX-2024-27. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-GEMX-2024-27 and should be
submitted on or before September 9, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18476 Filed 8-16-24; 8:45 am]
BILLING CODE 8011-01-P
