[Federal Register Volume 87, Number 248 (Wednesday, December 28, 2022)]
[Notices]
[Pages 79915-79918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28201]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96561; File No. SR-MRX-2022-30]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend MRX's
Pricing Schedule at Options 7, Section 7
December 21, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 79916]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 19, 2022, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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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 MRX's Pricing Schedule at Options 7,
Section 7.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On May 2, 2022, MRX initially filed this proposal to amend its
Pricing Schedule at Options 7, Section 7, to assess market data fees,
which had not been assessed since MRX's inception in 2016.\3\ The
proposed changes are designed to update data fees to reflect their
current value, rather than their value when it was a new exchange six
years ago. Newly-opened exchanges often charge no fees for market data
to attract order flow to an exchange, and later amend their fees to
reflect the true value of those services.\4\ Allowing newly-opened
exchanges time to build and sustain market share before charging for
their market data encourages market entry and promotes competition.
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\3\ The Exchange initially filed the proposed pricing changes on
May 2, 2022 (SR-MRX-2022-04), instituting fees for membership, ports
and market data. See Securities Exchange Act Release No. 94901 (May
12, 2022), 87 FR 30305 (May 18, 2022) (SR-MRX-2022-04). On June 29,
2022, the Exchange withdrew that filing, and submitted separate
filings for membership (SR-MRX-2022-07), market data (SR-MRX-2022-
08) and ports (SR-MRX-2022-09). On August 25, 2022, the Exchange
withdrew the market data filing (SR-MRX-2022-08) and replaced it
with SR-MRX-2022-14. See Securities Exchange Act Release No. 95708
(September 8, 2022), 87 FR 56457 (September 14, 2022) (SR-MRX-2022-
14). On October 14, 2022, the Exchange withdrew SR-MRX-2022-14 and
replaced it with SR-MRX-2022-22 to reflect changes to the
information contained within each of the five MRX market data feeds
proposed in SR-MRX-2022-18. See Securities Exchange Act Release No.
96144 (October 24, 2022), 87 FR 65273 (October 28, 2022) (SR-MRX-
2022-22) (MRX market data fee filing); Securities Exchange Act
Release No. 95982 (October 4, 2022), 87 FR 61391 (October 11, 2022)
(SR-MRX-2022-18) (modifying the definitions of MRX feeds). On
December 8, 2022, the Exchange withdrew SR-MRX-2022-22 and replaced
it with SR-MRX-2022-27. On December 19, 2022, the Exchange withdrew
SR-MRX-2022-27 and replaced it with the instant filing.
\4\ See, e.g., Securities Exchange Act Release No 88211
(February 14, 2020), 85 FR 9847 (February 20, 2020) (SR-NYSENAT-
2020-05), also available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf (initiating market data fees for the NYSE National exchange
after initially setting such fees at zero).
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This Proposal reflects MRX's assessment that it is ready to
distribute its market data on the same basis as the other 15 options
exchanges. When these fees were initially proposed in May 2022, MRX was
the only options exchange out of the 16 current options exchanges not
to assess market data fees.
The Exchange proposes to amend fees for the following market data
feeds within Options 7, Section 7: (1) Nasdaq MRX Depth of Market Data
Feed (``Depth of Market Feed''); \5\ (2) Nasdaq MRX Order Feed (``Order
Feed''); \6\ (3) Nasdaq MRX Top of Market Feed (``Top Feed''); \7\ (4)
Nasdaq MRX Trades Feed (``Trades Feed''); \8\ and (5) Nasdaq MRX Spread
Feed (``Spread Feed'').\9\ Prior to the initial filing of these
proposed price changes on May 2, 2022, no fees had been assessed for
these feeds.
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\5\ Nasdaq MRX Depth of Market Data Feed is a data feed that
provides full order and quote depth information for individual
orders and quotes on the Exchange book and last sale information for
trades executed on the Exchange. The data provided for each option
series includes the symbols (series and underlying security), put or
call indicator, expiration date, the strike price of the series, and
whether the option series is available for trading on the Exchange
and identifies if the series is available for closing transactions
only. The feed also provides order imbalances on opening/reopening
(size of matched contracts and size of the imbalance). See Options
3, Section 23(a)(1).
\6\ Nasdaq MRX Order Feed provides information on new orders
resting on the book (e.g. price, quantity, market participant
capacity and Attributable Order tags when provided by a Member). The
data provided for each option series includes the symbols (series
and underlying security), displayed order types, order attributes
(e.g., OCC account number, give-up information, CMTA information),
put or call indicator, expiration date, the strike price of the
series, and whether the option series is available for trading on
MRX and identifies if the series is available for closing
transactions only. The feed also provides order imbalances on
opening/reopening (size of matched contracts and size of the
imbalance), auction and exposure notifications. See Options 3,
Section 23(a)(2).
\7\ Nasdaq MRX Top of Market Feed calculates and disseminates
MRX's best bid and offer position, with aggregated size (including
total size in aggregate, for Professional Order size in the
aggregate and Priority Customer Order size in the aggregate), based
on displayable order and quote interest in the System. The feed also
provides last trade information and for each option series includes
the symbols (series and underlying security), put or call indicator,
expiration date, the strike price of the series, and whether the
option series is available for trading on MRX and identifies if the
series is available for closing transactions only. The feed also
provides order imbalances on opening/reopening. See Options 3,
Section 23(a)(3).
\8\ Nasdaq MRX Trades Feed displays last trade information. The
data provided for each option series includes the symbols (series
and underlying security), put or call indicator, expiration date,
the strike price of the series, and whether the option series is
available for trading on MRX and identifies if the series is
available for closing transactions only. See Options 3, Section
23(a)(4).
\9\ Nasdaq MRX Spread Feed is a feed that consists of: (1)
options orders for all Complex Orders (i.e., spreads, buy-writes,
delta neutral strategies, etc.); (2)full Complex Order depth
information, including prices, side, size, capacity, Attributable
Complex Order tags when provided by a Member, and order attributes
(e.g., OCC account number, give-up information, CMTA information),
for individual Complex Orders on the Exchange book; (3) last trades
information; and (4) calculating and disseminating MRX's complex
best bid and offer position, with aggregated size (including total
size in aggregate, for Professional Order size in the aggregate and
Priority Customer Order size in the aggregate), based on displayable
Complex Order interest in the System. The feed also provides Complex
Order auction notifications. See Options 3, Section 23(a)(5).
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In addition to the proposed fees for each data feed, the Exchange
proposes an Internal Distributor Fee \10\ of $1,500 per month for the
Depth of Market Feed, Order Feed, and Top Feed, an Internal Distributor
Fee of $750 per month for the Trades Feed, and an Internal Distributor
Fee of $1,000 per month for the Spread Feed. If a Member subscribes to
both the Trades Feed and the Spread Feed, both Internal Distributor
Fees would be assessed.
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\10\ A ``distributor'' of Nasdaq MRX data is any entity that
receives a feed or data file of data directly from Nasdaq MRX or
indirectly through another entity and then distributes it either
internally (within that entity) or externally (outside that entity).
All distributors shall execute a Nasdaq Global Data Agreement.
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The Exchange also proposes to assess an External Distributor Fee of
$2,000 per month for the Depth of Market Feed, Order Feed, and Top
Feed, an External
[[Page 79917]]
Distributor Fee of $1,000 per month for the Trades Feed, and an
External Distributor Fee of $1,500 per month for the Spread Feed.
MRX will also assess Professional \11\ and Non-Professional \12\
subscriber fees. The Professional Subscriber fee will be $25 per month,
and the Non-Professional Subscriber fee will be $1 per month. These
subscriber fees (both Professional and Non-Professional) cover the
usage of all five MRX data products identified above and would not be
assessed separately for each product.\13\
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\11\ A Professional Subscriber is any Subscriber that is not a
Non-Professional Subscriber.
\12\ A Non-Professional Subscriber is a natural person who is
neither: (i) registered or qualified in any capacity with the
Commission, the Commodities Futures Trading Commission, any state
securities agency, any securities exchange or association, or any
commodities or futures contract market or association; (ii) engaged
as an ``investment adviser'' as that term is defined in Section
201(11) of the Investment Advisors Act of 1940 (whether or not
registered or qualified under that Act); nor (iii) employed by a
bank or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt.
\13\ For example, if a firm has one Professional (Non-
Professional) Subscriber accessing Top Quote Feed, Order, and Depth
of Market Feed the firm would only report the Subscriber once and
pay $25 ($1 for Non-Professional).
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MRX also proposes a Non-Display Enterprise License for $7,500 per
month. This license would lower costs for internal professional
subscribers and lower administrative costs overall by permitting the
distribution of all MRX proprietary direct data feed products to an
unlimited number of internal non-display Subscribers without incurring
additional fees for each internal Subscriber, or requiring the customer
to count internal subscribers.\14\ The Non-Display Enterprise License
is in addition to any other associated distributor fees for MRX
proprietary direct data feed products.
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\14\ The Non-Display Enterprise License of $7,500 per month is
optional. A firm that does not have a sufficient number of
subscribers to benefit from purchase of the license need not do so.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\15\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\16\ 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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\15\ See 15 U.S.C. 78f(b).
\16\ See 15 U.S.C. 78f(b)(4) and (5).
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The Proposal is reasonable and unlikely to burden the market in
light of MRX's small size, the nature of the fees, and the demonstrated
ability of MRX customers to cancel their subscriptions for market
data.\17\ MRX has had a consistently low percentage of market share,
starting at approximately 0.2 percent when it opened as an Exchange and
ending in approximately 1.37% in November 2022. The proposed fees are
comparable to those of other exchanges; in particular, the proposed MRX
fees are lower than those charged by ISE today, as well as those of the
MIAX Emerald Options Exchange, C2 Options, and NYSE American Options,
to cite a few examples. A sizeable portion of subscribers--
approximately 15 percent--have terminated their subscriptions following
the implementation of the proposed fees, demonstrating that customers
can and do exercise choice in deciding whether to purchase the
Exchange's market data feeds.
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\17\ Nasdaq announced that, beginning in 2022, it would migrate
its North American markets to Amazon Web Services in a phased
approach, starting with MRX. The MRX migration took place in
November 2022. The proposed fee changes are unrelated to that
effort.
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MRX has had a consistently low percentage of market share, starting
at approximately 0.2 percent when it opened as an Exchange and ending
at approximately 1.37% in November 2022. This is the smallest market
share of the 16 operating options exchanges.
The proposed fees are comparable to those of other exchanges. For
example, the MIAX Emerald Options Exchange charges $3,000 for internal
distribution and $3,500 for external distribution of the MIAX Order
Feed (``MOR'').\18\ The proposed MRX Order Feed is $1,500 for internal
distribution and $2,000 for external distribution.
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\18\ See MIAX Emerald Options Exchange, Fee Schedule (December
8, 2022), available at https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_12082022c.pdf.
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C2 Options charges $2,500 per month for internal and external
distribution of its Book Depth Data Feed, plus $50 per Device or user
ID for Display Only Service Users (external users).\19\ MRX proposes to
charge $1,500 for internal distribution, and $2,000 for external
distribution, of its Depth of Market Feed.
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\19\ See Cboe U.S. Options Fee Schedule, C2 Options, BBO Data
Feed (Effective September 1, 2022), available at https://www.cboe.com/us/options/membership/fee_schedule/ctwo/.
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NYSE American Options charges an access fee of $3,000 per month for
its American Options Top, American Options Deep and American Options
Complex products, plus a multiple datafeed fee of $200, a
redistribution fee of $2,000 per month, and a Professional per user fee
of $50 per month and a Non-Professional user fee of $1 per month.\20\
MRX proposes to charge no access or multiple datafeed fees, but rather
a monthly external distributor fee of $2,000 for Top Feed, and a
monthly external distributor fee of $2,000 for its Depth of Market
Feed.
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\20\ See NYSE American Options Fee Schedule (March 1, 2022),
available at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf.
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Internal distribution fees for the Nasdaq ISE Order Feed is $3,000
per month per distributor for internal use, and $3,000 per month for
external redistribution, with additional fees for external controlled
devices.\21\ Proposed Distributor fees for the MRX Order Feed is $1,500
per month for internal distribution, and $2,000 per month for external
distribution.
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\21\ See Nasdaq ISE Rules, Options 7 (Pricing Schedule), Section
10(G) (Nasdaq ISE Order Feed).
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The Top Quote Feed for ISE is $3,000 per month per distributor for
internal use, plus additional fees; $3,000 per month per distributor
for professional external distribution, plus other charges; and $3,000
per distributor per month for external Non-Professional distribution
through a controlled device.\22\ Proposed distributor fees for the MRX
Top Feed are $1,500 per month for internal distribution, and $2,000 for
external distribution.
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\22\ See Nasdaq ISE Rules, Options 7 (Pricing Schedule), Section
10(H) (Nasdaq ISE Top Quote Feed).
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MRX views the proposed fees as comparable to those of other options
exchanges and fairly representative of the value of its data.
A sizeable portion of subscribers--approximately 15 percent--have
terminated their subscriptions following the implementation of the
proposed fees, demonstrating that customers can and do exercise choice
in deciding whether to purchase the Exchange's market data feeds. As of
May 2, 2022, the date that MRX initially proposed these market data
fees, MRX reported that two customers had terminated their market data
subscriptions.\23\ As of now, a total of five firms have cancelled,
amounting to approximately 15 percent of the 34 customers that had been
taking MRX feeds in the first quarter of 2022.\24\
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Two of the five customers had access to all five feeds: the Depth of
Market Data, the Order Feed, the Top Feed, the Trades Feed, and the
Spread Feed. The three remaining customers had access to only two
feeds: the Order Feed and the Top Feed. All five customers cancelled
all feeds that they had access to.
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\23\ See Securities Exchange Act Release No. 94901 (May 12,
2022), 87 FR 30305 (May 18, 2022) (SR-MRX-2022-04).
\24\ These terminations were limited to market data; none of
these customers were members of MRX and therefore purchased neither
memberships nor ports from the Exchange.
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Three of the five customers were either data vendors or technology
suppliers. Data vendors purchase exchange data and redistribute it to
downstream customers, while technology suppliers incorporate exchange
data into software solutions, which are sold to downstream customers.
The remaining two firms engage in options trading, either on their own
behalf or that of a customer. The three data vendors/technology
suppliers do not trade on their own behalf or on the behalf of any
downstream customs, although their customers may do so. The Exchange
understands that these three firms cancelled due to insufficient demand
from their downstream customers for MRX data. The two remaining firms,
which do engage in options trading, have not traded on MRX, but are
active traders on other Nasdaq options exchanges.
The Proposal is not unfairly discriminatory. The five market data
feeds at issue here--the Depth of Market Feed, Order Feed, Top Feed,
Trades Feed, and Spread Feed--are used by a variety of market
participants for a variety of purposes. Users include regulators,
market makers, competing exchanges, media, retail, academics, portfolio
managers. Market data feeds will be available to members of all of
these groups on a non-discriminatory basis.
The Proposal is consistent with the typical growth pattern of
exchanges. New exchanges commonly waive data fees to attract market
participants, facilitating their entry into the market and, once there
is sufficient depth and breadth of liquidity, ``graduate'' to compete
against established exchanges and charge fees that reflect the value of
their services. Other options exchanges have charged market data fees
while MRX developed, and now, after 6 years, MRX proposes to do so as
well.\25\
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\25\ Prior to submission of the proposed pricing changes on May
2, 2022, MRX was the only options exchange not assessing market data
fees.
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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.
Nothing in the Proposal burdens inter-market competition (the
competition among self-regulatory organizations) because approval of
the Proposal does not impose any burden on the ability of other options
exchanges to compete. MRX market data is available to any customer
under the same fee schedule as any other customer, and any market
participant that wishes to purchase MRX market data can do so.
Nothing in the Proposal burdens intra-market competition (the
competition among consumers of exchange data) because each customer
will be able to decide whether or not to purchase the Exchange's market
data, as demonstrated by the fact that a significant number of the
Exchange's customers have already elected to terminate their access to
such feeds.
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.\26\ 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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\26\ 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-2022-30 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-2022-30. 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-MRX-2022-30 and should be submitted on
or before January 18, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28201 Filed 12-27-22; 8:45 am]
BILLING CODE 8011-01-P