[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5508-5511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02904]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85143; File No. SR-MRX-2019-02]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the
Pricing Schedule at Options 7, Section 3
February 14, 2019.
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 January 31, 2019, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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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 Pricing Schedule at Options 7,
Section 3, entitled ``Regular Order Fees and Rebates.''
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on February 1, 2019.
The text of the proposed rule change is available on the Exchange's
website at http://nasdaqmrx.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 the Pricing
Schedule at Options 7, Section 3, entitled ``Regular Order Fees and
Rebates'' at Table 2 to (1) amend PIM Fees for Crossing Orders \3\ for
both Penny and Non-Penny Symbols; (2) increase Non-Penny Fees for
Reponses to Crossing Orders; (3) adopt a letter ``(c)'' within Options
7, Section 1 for ease of reference to defined terms. The Exchange will
describe each amendment below.
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\3\ 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.
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[[Page 5509]]
Fees for Crossing Orders
Today, MRX assesses a Fee for Crossing Orders in Penny and Non-
Penny Symbols of $0.20 per contract for Market Maker,\4\ Non-Nasdaq MRX
Market Maker,\5\ Firm Proprietary,\6\ Broker-Dealer,\7\ and
Professional Customer \8\ orders, and $0.00 per contract for Priority
Customer Orders.\9\ These fees apply to both originating and contra-
side orders for all Crossing Orders.
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\4\ A ``Market Maker'' is a market maker as defined in Nasdaq
MRX Rule 100(a)(30). Market Maker fees discussed in this section
also apply to Market Maker orders sent to the Exchange by Electronic
Access Members.
\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.
\6\ A ``Firm Proprietary'' order is an order submitted by a
Member for its own proprietary account.
\7\ A ``Broker-Dealer'' order is an order submitted by a Member
for a broker-dealer account that is not its own proprietary account.
\8\ A ``Professional Customer'' is a person or entity that is
not a broker/dealer and is not a Priority Customer.
\9\ 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 Rule
100(a)(37A).
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MRX proposes to continue assessing the Fees for Crossing Orders in
Table 2 for Penny and Non-Penny Symbols with respect to originating PIM
Orders. MRX proposes to assess a Fee for Crossing Orders in all symbols
for PIM orders of $0.05 per contract provided a market participant is
on the contra-side of a PIM auction. This fee would apply to all market
participants. This fee represents a reduced fee for Market Maker, Non-
Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer, and
Professional Customer orders (from $0.20 to $0.05 per contract) and an
increased fee for Priority Customers (from $0.00 to $0.05 per
contract).\10\
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\10\ MRX is not amending fees with respect the Facilitation
Mechanism, Solicited Order Mechanism, or an order submitted as a
Qualified Contingent Cross order or an order executed in the Block
Order Mechanism.
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Further, MRX proposes to pay a rebate to an originating Priority
Customer PIM Order that executes with a response (an order or quote),
other than the PIM contra-side order, of $0.40 per contract in Penny
Symbols and $1.00 per contract in Non-Penny Symbols. The Exchange
believes that this proposal will encourage greater participation in PIM
auctions.
The Exchange proposes to amend note 1 within the Pricing Schedule
at Options 7, Section 3 to add ``-side'' after the term ``contra'' in
the existing sentence. The Exchange also proposes to add the following
text to that sentence, ``. . . except for PIM Orders. With respect to
PIM Orders, the Fees for Crossing Orders apply to PIM originating
orders, however all market participants on the contra-side of a PIM
auction will be assessed a Fee for Crossing Orders of $0.05 per
contract. An originating Priority Customer PIM Order that executes with
any response (order or quote), other than the PIM contra-side order,
will receive a rebate of $0.40 per contract in Penny Symbols and $1.00
per contract in Non-Penny Symbols.''
Fees for Responses to Crossing Orders
Today, MRX assesses a Fee for Responses to Crossing Orders of $0.50
per contract in Penny Symbols to all market participants and $0.95 per
contract in Non-Penny Symbols to all market participants.
MRX proposes to increase the Fees for Responses to Crossing Orders
in Non-Penny Symbols from $0.95 to $1.10 per contract for all market
participants. No changes are proposed to Penny Symbols for Fees for
Reponses to Crossing Orders. The Exchange proposes to utilize the
increased rate to offer rebates to Priority Customers who submit PIM
Orders as described above.\11\
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\11\ MRX proposes herein to pay a rebate to an originating
Priority Customer PIM Order that executes with any response, other
than the PIM contra-side order, of $0.40 per contract in Penny
Symbols and $1.00 per contract in Non-Penny Symbols.
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Options 7, Section 1
The Exchange proposes to amend Options 7, Section 1 to add a letter
``(c)'' before certain defined terms for ease of reference.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\13\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees, and other charges among members and issuers and
other persons using any facility, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers. The
Exchange believes that the proposed changes will attract PIM order flow
to MRX, which will create trading opportunities on MRX to the benefit
of all Members.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
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Fees for Crossing Orders
The Exchange believes that its proposal to assess contra-side PIM
Orders a reduced Fee for Crossing Orders in both Penny and Non-Penny
Symbols of $0.05 per contract instead of $0.20 per contract to Market
Maker, Non-Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer,
and Professional Customer orders is reasonable because the Exchange
proposes to encourage theses market participants to submit a greater
amount of order flow to the MRX PIM auction. The Exchange believes that
it is reasonable to assess Priority Customers an increased $0.05 per
contract Fee for Crossing Orders \14\ for contra-side PIM Orders in
Penny and Non-Penny Symbols because the Exchange is also offering
Priority Customers an opportunity to receive a rebate of $0.40 per
contract in Penny Symbols and $1.00 per contract in Non-Penny Symbols
for any originating Priority Customer PIM Order that executes with any
response, other than the PIM contra-side order. As is the case today,
Priority Customers will not pay a Fee for Crossing Orders in Penny and
Non-Penny Symbols with respect originating PIM Orders and non-PIM
Crossing Order transactions.
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\14\ Today, Priority Customers pay no Fee for Crossing Orders
(originating or contra-side orders) with respect to PIM transactions
in either Penny or Non-Penny Symbols.
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The Exchange believes that its proposal to assess contra-side PIM
Orders a lower Fee for Crossing Orders in both Penny and Non-Penny
Symbols of $0.05 per contract instead of $0.20 per contract to Market
Maker, Non-Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer,
and Professional Customer orders is equitable and not unfairly
discriminatory because the Exchange will uniformly charge all market
participants, except Priority Customers, a lower contra-side Fee for
Crossing PIM Orders in Penny and Non-Penny Symbols. While a Priority
Customer's contra-side Fee for Crossing PIM Orders will increase from
$0.00 to $0.05 per contract in both Penny and Non-Penny Symbols, the
Priority Customer has an opportunity to receive a rebate of $0.40 per
contract in Penny Symbols and $1.00 per contract in Non-Penny Symbols
for any originating Priority Customer PIM Order that executes with any
response, other than the PIM contra-side order. As is the case today,
Priority Customers will not pay an originating Fee for PIM Orders.
Further, the Exchange notes that Priority Customer interest brings
valuable liquidity to the
[[Page 5510]]
market, which liquidity benefits 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 from other market participants.
Fees for Responses to Crossing Orders
The Exchange believes that its proposal to increase the Non-Penny
Symbol Fees for Responses to Crossing Orders from $0.95 to $1.10 per
contract for all market participants is reasonable because while these
fees are increasing the Exchange believes that the fees remain
competitive and will continue to attract order flow to the Exchange.
Further, the Exchange proposes to utilize the increased rate to offer
rebates to Priority Customers who submit PIM Orders as described
herein.\15\ 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 from other market participants.
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\15\ See note 9 above.
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The Exchange believes that its proposal to increase the Non-Penny
Symbol Fees for Responses to Crossing Orders from $0.95 to $1.10 per
contract for all market participants is equitable and not unfairly
discriminatory because all market participants will be uniformly
assessed the increased fee in Non-Penny Symbols.
Options 7, Section 1
The Exchange's proposal to amend Options 7, Section 1 to add a
letter ``(c)'' before certain defined terms is reasonable, equitable
and not unfairly discriminatory because this non-substantive amendment
merely makes the section easier to reference.
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. The Exchange's proposal does
not impose a burden on inter-market competition because the proposed
fee structure for Crossing Orders remains competitive with other
options exchanges. MRX 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 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.
Fees for Crossing Orders
The Exchange believes that its proposal to assess contra-side PIM
Orders a lower Fee for Crossing Orders in both Penny and Non-Penny
Symbols of $0.05 per contract instead of $0.20 per contract to Market
Maker, Non-Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer,
and Professional Customer orders does not impose a burden on intra-
market competition because the Exchange will uniformly pay all market
participants, except Priority Customers, a lower contra-side Fee for
Crossing PIM Orders in Penny and Non-Penny Symbols. While a Priority
Customer's contra-side Fee for Crossing PIM Orders will increase from
$0.00 to $0.05 per contract in Penny and Non-Penny Symbols, the
Priority Customer has an opportunity to receive a rebate of $0.40 per
contract in Penny Symbols and $1.00 per contract in Non-Penny Symbols
for any originating Priority Customer PIM Order that executes with any
response, other than the PIM contra-side order. As is the case today,
Priority Customers will not pay an originating Fee for PIM Orders.
Further, the Exchange notes that Priority Customer interest brings
valuable liquidity to the market, which liquidity benefits 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 from other market participants.
Fees for Responses to Crossing Orders
The Exchange believes that its proposal to increase the Non-Penny
Symbol Fees for Responses to Crossing Orders from $0.95 to $1.10 per
contract for all market participants does not impose a burden on intra-
market competition because all market participants will be uniformly
assessed the increased fee in Non-Penny Symbols.
Options 7, Section 1
The Exchange's proposal to amend Options 7, Section 1 to add a
letter ``(c)'' before certain defined terms does not impose an undue
burden on intra-market competition because this non-substantive
amendment merely makes the section easier to reference.
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.\16\ 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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\16\ 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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MRX-2019-02 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-2019-02. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
[[Page 5511]]
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-MRX-
2019-02 and should be submitted on or before March 14, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02904 Filed 2-20-19; 8:45 am]
BILLING CODE 8011-01-P