[Federal Register Volume 89, Number 59 (Tuesday, March 26, 2024)]
[Notices]
[Pages 21063-21065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06321]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99784; File No. SR-MRX-2024-08]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Regular Taker Fees in the Exchange's Pricing Schedule at Options 7, 
Section 3

March 20, 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 March 12, 2024, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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 regular taker fees in 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/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
    The purpose of the proposed rule change is to amend the regular 
taker fees in the Exchange's Pricing Schedule at Options 7, Section 3.
    The Exchange initially filed the proposed pricing changes on March 
1, 2024 (SR-MRX-2024-06). On March 12, 2024, the Exchange withdrew that 
filing and replaced it with this filing.
    Today, as set forth in Table 1 of Options 7, Section 3, the 
Exchange charges tiered taker fees to Priority Customer \3\ orders in 
Penny Symbols that range from: $0.15 (Tier 1 through Tier 3) to $0.10 
(Tier 4). For Non-Penny Symbols, Priority Customer orders are assessed 
tiered taker fees that range from: $0.35 (Tier 1), $0.25 (Tier 2), 
$0.15 (Tier 3), and $0.10 (Tier 4).
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    \3\ A ``Priority Customer'' is a person or entity that is not a 
broker/dealer in securities, and does not place more than 390 orders 
in listed options per day on average during a calendar month for its 
own beneficial account(s), as defined in Nasdaq MRX Options 1, 
Section 1(a)(36).
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    The Exchange now proposes a number of changes to the Priority 
Customer taker fees. First, the Exchange proposes to increase the 
Priority Customer taker fees in Penny Symbols to $0.20 per contract 
across Tiers 1-4. Second, the Exchange proposes to increase the 
Priority Customer taker fees in Non-Penny Symbols to $0.40 per contract 
across Tiers 1-4. Third, the Exchange proposes to reduce the proposed 
Priority Customer taker fees from $0.20 to $0.10 per contract (Penny 
Symbols) and from $0.40 to $0.20 per contract (Non-Penny Symbols) for 
Members that execute Total Affiliated Member \4\ or Affiliated Entity 
\5\ Priority Customer ADV \6\ of 0.30% Customer Total Consolidated 
Volume \7\ in regular orders for Penny and Non-Penny Symbols which 
remove liquidity in a given month.\8\
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    \4\ An ``Affiliated Member'' is a Member that shares at least 
75% common ownership with a particular Member as reflected on the 
Member's Form BD, Schedule A.
    \5\ An ``Affiliated Entity'' is a relationship between an 
Appointed Market Maker and an Appointed OFP for purposes of 
qualifying for certain pricing specified in the Pricing Schedule. 
Market Makers and OFPs are required to send an email to the Exchange 
to appoint their counterpart, at least 3 business days prior to the 
last day of the month to qualify for the next month. The Exchange 
will acknowledge receipt of the emails and specify the date the 
Affiliated Entity is eligible for applicable pricing, as specified 
in the Pricing Schedule. Each Affiliated Entity relationship will 
commence on the 1st of a month and may not be terminated prior to 
the end of any month. An Affiliated Entity relationship will 
automatically renew each month until or unless either party 
terminates earlier in writing by sending an email to the Exchange at 
least 3 business days prior to the last day of the month to 
terminate for the next month. Affiliated Members may not qualify as 
a counterparty comprising an Affiliated Entity. Each Member may 
qualify for only one (1) Affiliated Entity relationship at any given 
time.
    \6\ Total Affiliated Member or Affiliated Entity Priority 
Customer ADV means all Priority Customer ADV executed on the 
Exchange in all symbols and order types, including volume executed 
by Affiliated Members or Affiliated Entities. All eligible volume 
from Affiliated Members or an Affiliated Entity will be aggregated 
in determining applicable tiers. See note 4 of Options 7, Section 3, 
Table 1.
    \7\ ``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.
    \8\ See proposed note 7 of Options 7, Section 3, Table 1.
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    Lastly, the Exchange proposes non-substantive, technical edits in 
Options 7, Section 3, Table 1 to add parentheses around the note 6 
references appended to the Priority Customer taker fees in Penny 
Symbols to correct a formatting error in the Pricing Schedule.
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 Pricing Schedule 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

[[Page 21064]]

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 regular 
taker fees in the manner described above are reasonable for several 
reasons. While the Exchange is proposing to increase the Priority 
Customer taker fees in Tiers 1 through 4 to $0.20 per contract in Penny 
Symbols and $0.40 per contract in Non-Penny Symbols, the Exchange 
believes that its taker fees remain competitive and lower than other 
options exchanges.\13\ The Exchange also believes that despite the 
increase, its pricing structure will remain attractive for Priority 
Customer orders because the Exchange will also offer market 
participants the opportunity to reduce the proposed taker fees by half 
if they meet the proposed volume qualifications in new note 7 of 
Options 7, Section 3, Table 1. As discussed above, note 7 will provide 
that Members that execute Total Affiliated Member or Affiliated Entity 
Priority Customer ADV of 0.30% Customer Total Consolidated Volume in 
regular orders for Penny and Non-Penny Symbols which remove liquidity 
in a given month will be assessed: (1) a $0.10 per contract Priority 
Customer Taker Fee in Penny Symbols; and (2) a $0.20 per contract 
Priority Customer Taker Fee in Non-Penny Symbols. By tying the 
discounted Priority Customer taker fees in note 7 to Affiliated Member 
and Affiliated Entity volume, the Exchange believes that Members may be 
incentivized to aggregate volume and bring more Priority Customer 
regular order flow to MRX to qualify for the note 7 incentives. In 
addition, the Exchange believes that the total industry percentage 
threshold is reasonable in order to align with increasing Member 
activity on MRX over time. Total industry percentage thresholds are 
established concepts within the Exchange's Pricing Schedule.\14\ As 
with its existing percentage thresholds, the Exchange is proposing to 
base the discounted Priority Customer taker fee volume requirements on 
a percentage of industry volume in recognition of the fact that the 
volume executed by a Member may rise or fall with industry volume. A 
percentage of industry volume calculation allows the proposed 
qualification in note 7 to be calibrated to current market volumes 
rather than requiring a static amount of volume regardless of market 
conditions. The proposed threshold of 0.30% Customer Total Consolidated 
Volume is intended to reward Members for executing more Priority 
Customer regular volume on MRX. To the extent Priority Customer 
activity is increased by this proposal, market participants may 
increasingly compete for the opportunity to trade on the Exchange to 
the benefit of all market participants.
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    \13\ For example, Cboe C2 Options (``C2'') charges Public 
Customers a $0.43 per contract fee for removing liquidity in Penny 
Classes and a $0.85 per contract fee for removing liquidity in Non-
Penny Classes. See C2 Fee Schedule at: https://www.cboe.com/us/options/membership/fee_schedule/ctwo/. In addition, MIAX Emerald 
charges Priority Customers a $0.50 per contract taker fee in Penny 
Classes and a $0.85 per contract taker fee in Non-Penny Classes. See 
MIAX Emerald Fee Schedule at: https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_02262024.pdf.
    \14\ For instance, the qualifying tier thresholds for the 
Exchange's regular order maker/taker pricing in Table 1 are 
currently based on Customer Total Consolidated Volume percentages. 
See Options 7, Section 3, Table 3.
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    Further, the Exchange believes that the proposal described above is 
equitable and not unfairly discriminatory because it will apply 
uniformly to all similarly situated market participants. With the 
proposed changes, Priority Customers will continue to be assessed lower 
regular order taker fees than any other market participant on the 
Exchange, with opportunity to further reduce these fees by qualifying 
for the proposed note 7 incentives. The Exchange continues to believe 
that it is equitable and not unfairly discriminatory to provide more 
favorable pricing for Priority Customers because the proposed changes 
are intended to increase Priority Customer regular order flow to MRX. 
An increase in Priority Customer order flow enhances liquidity on the 
Exchange to the benefit of all market participants by providing more 
trading opportunities, which in turn attracts Market Makers and other 
market participants that may interact with this order flow.
    Lastly, the Exchange believes that the non-substantive, technical 
edits in Options 7, Section 3, Table 1 described above are consistent 
with the Act as they are intended to correct a formatting error in the 
Exchange's Pricing Schedule.

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 participant at a competitive disadvantage. While 
the proposed changes described above will apply directly to Priority 
Customers, the Exchange believes that these changes will ultimately 
encourage increased activity on the Exchange to the extent the proposal 
incentivizes more Priority Customer regular order volume to be executed 
on MRX. All Members will benefit from any increase in market activity 
that the proposal effectuates through increased trading opportunities 
and price discovery.
    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 
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

[[Page 21065]]

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.\15\ 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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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MRX-2024-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-MRX-2024-08. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MRX-2024-08 and should be 
submitted on or before April 16, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06321 Filed 3-25-24; 8:45 am]
BILLING CODE 8011-01-P