[Federal Register Volume 83, Number 8 (Thursday, January 11, 2018)]
[Notices]
[Pages 1388-1391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00308]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82449; File No. SR-GEMX-2017-60]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Various
Fees and Rebates Set Forth in Section I of the Exchanges Schedule of
Fees
January 5, 2018.
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 December 22, 2017, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II 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 various fees and rebates set forth
in Section I of the Exchanges Schedule of Fees.
The text of the proposed rule change is available on the Exchange's
website at http://nasdaqgemx.cchwallstreet.com/, 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 various fees
and
[[Page 1389]]
rebates set forth in Section I of the Exchange's Schedule of Fees. Each
proposed change is described in more detail below.
Changes to Maker Rebates and Taker Fees Based on Qualifying Tier
Thresholds
By way of background, GEMX currently provides volume-based maker
rebates to Market Maker \3\ and Priority Customer \4\ orders in four
tiers based on a member's average daily volume (``ADV'') in the
following categories: (i) Total Affiliated Member ADV \5\ and (ii)
Priority Customer Maker ADV,\6\ as shown in the table below.\7\ In
addition, GEMX charges volume-based taker fees to market participants
based on achieving these volume thresholds.
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\3\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively.
\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).
\5\ The Total Affiliated Member ADV category includes all volume
in all symbols and order types, including both maker and taker
volume and volume executed in the PIM, Facilitation, Solicitation,
and QCC mechanisms. For purposes of determining a member's
eligibility for the volume-based tiers in the Total Affiliated
Member ADV category, the Exchange uses either numeric thresholds
that measure a member's absolute volume or, as an alternative, a
percentage-based calculation that considers a member's volume
relative to total customer industry volume (i.e., the ``Customer
Total Consolidated Volume''). For purposes of measuring Total
Affiliated Member ADV, Customer Total Consolidated Volume means the
total volume cleared at The Options Clearing Corporation in the
Customer range in equity and ETF options in that month.
\6\ The Priority Customer Maker ADV category includes all
Priority Customer volume that adds liquidity in all symbols.
\7\ All eligible volume from affiliated Members will be
aggregated in determining applicable tiers, provided there is at
least 75% common ownership between the Members as reflected on each
Member's Form BD, Schedule A.
The highest tier threshold attained above applies retroactively
in a given month to all eligible traded contracts and applies to all
eligible market participants.
Any day that the market is not open for the entire trading day
or the Exchange instructs members in writing to route their orders
to other markets may be excluded from the ADV calculation; provided
that the Exchange will only remove the day for members that would
have a lower ADV with the day included.
Table 1--Qualifying Tier Thresholds
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Priority customer
Tier Total affiliated member ADV maker ADV
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Tier 1............ 0-99,999...................... 0-19,999
Tier 2............ 100,000-224,999, or executes 20,000-99,999
1% to less than 2% of
Customer Total Consolidated
Volume.
Tier 3............ 225,000-349,999, or executes 100,000-149,999
2% to less than 3% of
Customer Total Consolidated
Volume.
Tier 4............ 350,000 or more, or executes 150,000 or more
3% or greater of Customer
Total Consolidated Volume.
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Maker Rebates in Penny Symbols and SPY
Currently, the Exchange provides a maker rebate to Market Maker
orders in Penny Symbols and SPY that is $0.30 per contract in Tier 1,
$0.32 per contract in Tier 2, $0.34 per contract in Tier 3, and $0.45
per contract in Tier 4. The Exchange proposes the following changes to
the maker rebate provided to Market Maker orders in Penny Symbols and
SPY in Tiers 1-3: (i) Decrease the maker rebate to $0.28 per contract
in Tier 1, (ii) decrease the maker rebate to $0.30 per contract in Tier
2, and (iii) increase the maker rebate to $0.35 per contract in Tier 3.
Currently, the Exchange provides a maker rebate to Priority
Customer orders in Penny Symbols and SPY that is $0.25 per contract in
Tier 1 (or $0.32 per contract for members that execute a Priority
Customer Maker ADV of 5,000 to 19,999 contracts in a given month),
$0.40 per contract in Tier 2, $0.48 per contract in Tier 3, and $0.53
per contract in Tier 4. The Exchange proposes to eliminate the higher
maker rebate provided in Tier 1 for members that execute a Priority
Customer ADV of 5,000 to 19,999 contracts in a given month.
Maker Rebates in Non-Penny Symbols (Excluding Index Options)
Currently, the Exchange provides a maker rebate to Market Maker
orders in Non-Penny Symbols (excluding index options) that is $0.40 per
contract in Tier 1, $0.42 per contract in Tier 2, $0.50 per contract in
Tier 3, and $0.75 per contract in Tier 4. The Exchange proposes to
decrease the maker rebate provided to Market Maker orders in Non-Penny
Symbols (excluding index options) to $0.45 in Tier 3.
Currently, the Exchange provides a maker rebate to Priority
Customer orders in Non-Penny Symbols (excluding index options) that is
$0.75 per contract in Tier 1 (or $0.76 per contract for members that
execute a Priority Customer Maker ADV of 5,000 to 19,999 contracts in a
given month), $0.80 per contract in Tier 2, $0.85 per contract in Tier
3, and $1.05 per contract in Tier 4. The Exchange proposes to eliminate
the higher maker rebate provided in Tier 1 for members that execute a
Priority Customer Maker ADV of 5,000 to 19,999 contracts in a given
month.
Taker Fees in Penny Symbols and SPY
Currently, the Exchange charges a taker fee for Market Makers and
Non-Nasdaq GEMX Market Maker \8\ orders in Penny Symbols and SPY that
is $0.49 per contract in Tiers 1-3, and $0.48 per contract in Tier 4,
for trades executed against a Non-Priority Customer.\9\ Firm
Proprietary,\10\ Broker-Dealer,\11\ and Professional Customer \12\
orders in Penny Symbols and SPY are charged a $0.49 per contract taker
fee for trades executed against a Non-Priority Customer, regardless of
the tier achieved. The taker fee is $0.50 per contract for all Non-
Priority Customer orders in Penny Symbols and SPY for trades executed
against a Priority Customer. The Exchange now proposes to increase the
taker fee charged to Non-Priority Customer orders in Penny Symbols and
SPY to $0.50 per contract in Tiers 1-3 for trades executed against a
Non-Priority Customer.
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\8\ A ``Non-Nasdaq GEMX 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.
\9\ Non-Priority Customer includes Market Maker, Non-Nasdaq GEMX
Market Maker, Firm Proprietary, Broker-Dealer, and Professional
Customer.
\10\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account.
\11\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
\12\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer.
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Taker Fees in Non-Penny Symbols (Excluding Index Options)
Currently, the Exchange charges a taker fee for Non-Priority
Customer orders in Non-Penny Symbols
[[Page 1390]]
(excluding index options) that is $0.89 per contract for trades
executed against a Non-Priority Customer, regardless of the tier
achieved. The taker fee is $1.10 per contract for all Non-Priority
Customer orders in Non-Penny Symbols (excluding index options) for
trades executed against a Priority Customer. The Exchange now proposes
to increase the taker fee charged to Non-Priority Customer orders in
Non-Penny Symbols (excluding index options) to $0.99 per contract in
Tiers 1-3 and $0.94 per contract in Tier 4, in each case for trades
executed against a Non-Priority Customer.
Currently, the Exchange charges a taker fee for Priority Customer
orders in Non-Penny Symbols (excluding index options) that is $0.82 per
contract in Tier 1, and $0.81 per contract for Tiers 2-4, for trades
executed against a Non-Priority Customer. The taker fee is $0.85 per
contract for all Priority Customer orders in Non-Penny Symbols
(excluding index options) for trades executed against a Priority
Customer. The Exchange now proposes to increase the taker fee charged
to Priority Customer orders in Non-Penny Symbols (excluding index
options) to $0.85 per contract in Tiers 1-3 and $0.82 per contract in
Tier 4, in each case for trades executed against a Non-Priority
Customer.
Changes to the Fee for Responses to Crossing Orders (Excluding PIM)
GEMX currently charges a fee for Responses to Crossing Orders \13\
(excluding PIM orders). In Penny Symbols and SPY, this fee is $0.49 per
contract for Non-Priority Customer orders and $0.45 per contract for
Priority Customer orders. In Non-Penny Symbols (excluding index
options), this fee is $0.89 per contract for Non-Priority Customer
orders and $0.82 per contract for Priority Customer orders.
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\13\ ``Responses to Crossing Order'' is any contra-side interest
(i.e., orders & quotes) submitted after the commencement of an
auction in the Exchange's Facilitation Mechanism, Solicited Order
Mechanism, Block Order Mechanism or Price Improvement Mechanism
(``PIM'').
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The Exchange now proposes to increase this fee to $0.50 per
contract for all market participants in Penny Symbols and SPY, and
$1.00 per contract for all market participants in Non-Penny Symbols
(excluding index options).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
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Changes to Maker Rebates and Taker Fees Based on Qualifying Tier
Thresholds
The Exchange believes that it is reasonable to make the proposed
changes to the maker rebates provided to Market Maker and Priority
Customer orders in Penny Symbols and SPY, and in Non-Penny Symbols
(excluding index options), as further discussed above. While the
Exchange is primarily decreasing or eliminating the maker rebates
currently provided to certain Market Maker and Priority Customer orders
(except for increasing the Tier 3 maker rebate for Market Maker orders
in Penny Symbols and SPY), the maker rebates provided to Market Makers
and Priority Customers generally remain more favorable than the maker
rebates provided to all other GEMX market participants. As such, the
Exchange believes that the proposed changes to the Market Maker and
Priority Customer maker rebates will continue to incentivize these
market participants to send additional order flow to GEMX, thereby
creating additional liquidity to the benefit of members and investors
that trade on the Exchange. Furthermore, with the proposed changes to
the Market Maker rebate amounts, the tiered maker rebates (i.e.,
ranging from $0.28 to $0.45 per contract for Penny Symbols and SPY, and
from $0.40 to $0.75 per contract for Non-Penny Symbols (excluding index
options)) remain competitive with similar rebates provided by other
options exchanges. For example, MIAX PEARL offers its market makers
tiered makers rebates that range from $0.25 to $0.48 per contract for
penny classes, and from $0.30 to $0.70 per contract for non-penny
classes.\16\
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\16\ See MIAX PEARL Fee Schedule, Section 1)a). See also Nasdaq
Options Market (``NOM'') Rules, Chapter XV Options Pricing, Sec.
2(1). NOM offers its market makers tiered rebates to add liquidity
that range from $0.20 to $0.42 per contract in penny pilot options.
In non-penny pilot options, the rebate to add liquidity for NOM
market makers is $0.30 per contract if participants add NOM market
maker liquidity in non-penny pilot options of 10,000 or more ADV
contracts per day in a month. See NOM Rules, Chapter XV Options
Pricing, Sec. 2(1).
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The Exchange also believes that the proposed changes to the maker
rebates as described above are equitable and not unfairly
discriminatory. As has historically been the case, Market Maker and
Priority Customer orders will continue to earn more favorable maker
rebates in order to encourage that order flow. Market Makers have
different requirements and obligations to the Exchange that other
market participants do not (such as quoting requirements). In addition,
a Priority Customer is by definition not a broker or 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). This limitation does not apply to participants whose
behavior is substantially similar to that of market professionals,
including Professional Customers, who will generally submit a higher
number of orders than Priority Customers. As such, Priority Customer
orders remain entitled to more favorable pricing than other market
participants.
The Exchange believes that it is reasonable to increase the taker
fees charged to all Non-Priority Customer orders in Penny Symbols and
SPY from $0.49 to $0.50 per contract in Tiers 1-3 because the proposed
change is a modest increase in fees. Furthermore, the proposed taker
fees are within the range of similar fees currently charged by other
options exchanges, including NOM, which assesses all NOM participants
(including customers) a fee for removing liquidity of up to $0.50 per
contract in penny pilot options.\17\ Similarly, the Exchange believes
that the proposed increase in the taker fees assessed to all market
participant orders in Non-Penny Symbols (excluding index options) as
discussed above is reasonable as the increased fees (ranging from $0.94
to $0.99 per contract for all Non-Priority Customers, and from $0.82 to
$0.85 per contract for all Priority Customers) are still within the
range of (or lower than) similar fees currently charged by other
options exchanges. For example, MIAX PEARL charges tiered taker fees
for non-penny classes ranging from $1.02 to $1.05 per contract for all
MIAX PEARL non-priority customer orders, and from $0.84 to $0.87 per
contract for priority customer orders.\18\
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\17\ See NOM Rules, Chapter XV, Sec. 2(1). See also MIAX PEARL
Fee Schedule, Section 1)a) (assessing all MIAX PEARL participants
(other than priority customers) taker fees of up to $0.50 per
contract in penny classes).
\18\ See MIAX PEARL Fee Schedule, Section 1(a). See also NOM
Rules, Chapter XV, Sec. 2(1) (charging a fee for removing liquidity
in non-penny pilot options that is $0.85 per contract for customers
and professionals, and $1.10 per contract for all other NOM
participants).
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Furthermore, the Exchange believes that the proposed increase in
the taker fees for Penny Symbols and SPY, and for Non-Penny Symbols
(excluding
[[Page 1391]]
index options), is equitable and not unfairly discriminatory because
the proposed changes will apply uniformly to all similarly-situated
market participants.
Changes to the Fee for Responses to Crossing Orders (Excluding PIM)
The Exchange believes that the proposed fees for Responses to
Crossing Orders (excluding PIM orders), which are being increased for
all market participants to $0.50 per contract in Penny Symbols and SPY,
and $1.00 per contract in Non-Penny Symbols (excluding index options),
are reasonable because they remain competitive with similar fees
assessed by other options exchanges, including, for example, BOX
Options Exchange (``BOX''), which charges up to $0.50 and $1.15 per
contract for responses in its solicitation or facilitation auction
mechanisms for penny pilot and non-penny pilot classes,
respectively.\19\ As such, the Exchange believes that the response fees
proposed herein are set at levels that the Exchange believes will
remain attractive to market participants that trade on GEMX.
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\19\ BOX charges a fee for responses in the solicitation or
facilitation auction mechanisms for all account types that is $0.25
per contract (for penny pilot classes) and $0.40 per contract (for
non-penny pilot classes). See BOX Fee Schedule, Section I.C. As set
forth in the BOX Fee Schedule, ``[r]esponses to Facilitation and
Solicitation Orders executed in these mechanisms shall be charged
the ``add'' fee.'' Id. at Section III.B, second bullet. For all
account types, this fee (i.e., the Fee for Adding Liquidity) is
$0.25 (for penny pilot classes) and $0.75 (for non-penny pilot
classes). Id. Thus, BOX may charge a fee for responses in its
solicitation or facilitation auction mechanisms of up to $0.50 per
contract (for penny pilot classes) and $1.15 per contract (for non-
penny pilot classes).
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Finally, the Exchange believes that the proposed fees for Responses
to Crossing Orders (excluding PIM orders) are equitable and not
unfairly discriminatory because they would uniformly apply to all
similarly-situated 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. As discussed above, the
Exchange believes that the proposed fees and rebates in Section I of
the Exchange's Schedule of Fees remain competitive with similar fees
and rebates offered on other options exchanges. The Exchange 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. 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,\20\ and Rule 19b-4(f)(2) \21\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is: (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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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
\21\ 17 CFR 240.19b-4(f)(2).
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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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-GEMX-2017-60 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-2017-60. 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 (http://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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-GEMX-2017-60 and should be submitted on
or before February 1, 2018.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00308 Filed 1-10-18; 8:45 am]
BILLING CODE 8011-01-P