[Federal Register Volume 89, Number 145 (Monday, July 29, 2024)]
[Notices]
[Pages 60939-60941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16548]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100577; File No. SR-GEMX-2024-22]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the Fees 
for Nasdaq 100 Index Options in Options 7, Section 3

July 23, 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 July 12, 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 fees for Nasdaq 100 Index 
options 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/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 fees for 
NDX \3\ in Options 7, Section 3. The Exchange initially filed the 
proposed pricing changes on July 1, 2024 (SR-GEMX-2024-18). On July 12, 
2024, the Exchange withdrew that filing and submitted this filing.
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    \3\ NDX represents A.M. settled options on the full value of the 
Nasdaq 100 Index traded under the symbol NDX.
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    Today, the Exchange assesses transaction fees of $0.75 per contract 
for all Non-Priority Customer \4\ orders in NDX and $0.25 per contract 
for all Priority Customers \5\ NDX orders. The Exchange now proposes to 
assess a surcharge of $0.25 per contract to all market participants for 
executions in NDX with a premium price of $25.00 or greater.\6\ The 
fees for NDX executions with a premium price of less than $25.00 will 
remain unchanged under this proposal. The Exchange notes that charging 
different fees based on the option premium is consistent with how other 
options are priced at another options exchange.\7\ The Exchange further 
notes that the proposed surcharge amount is within the range of 
surcharges assessed for transactions in other products at other options 
exchanges.\8\
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    \4\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq 
GEMX Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and 
Professional Customers.
    \5\ 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).
    \6\ See proposed note 14 (which is currently reserved) of 
Options 7, Section 3.
    \7\ For example, Cboe Options (``Cboe'') currently assesses 
customers a $0.36 per contract fee (if premium < $1.00) or $0.45 per 
contract fee (if premium >= $1.00) for SPX and SPESG options. Cboe 
also currently assesses market-makers a $0.05 per contract fee (if 
premium is $0.00-$0.10) or $0.23 per contract (if premium >= $0.11) 
for VIX options. See Cboe Fees Schedule.
    \8\ For example, Cboe currently assesses customers a $0.25 per 
contract exotic surcharge and a $0.21 per contract execution 
surcharge in SPX and SPESG options. See Cboe Fees Schedule. In 
addition, the Exchange's affiliate, Nasdaq Phlx LLC (``Phlx'') 
current assesses a $0.25 per contract complex surcharge for 
executions in singly-listed U.S. dollar-settled foreign currency 
options. See Phlx Options 7, Section 5.D.
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    The Exchange notes that less than 50% of total NDX executed volume 
is in NDX contracts with a premium of $25.00 or greater, as shown in 
the chart below.\9\
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    \9\ The chart includes A.M. and P.M. settled options on the full 
value of the Nasdaq 100[supreg] Index on Nasdaq ISE, LLC, Nasdaq 
GEMX, LLC, and Nasdaq Phlx LLC.

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[[Page 60940]]

[GRAPHIC] [TIFF OMITTED] TN29JY24.000

    Notably, the majority of NDX contracts have a premium price of 
below $25.00. The Exchange believes that on the whole, while it is 
proposing a $0.25 per contract surcharge on NDX executions with a 
premium price of $25.00 or greater, market participants will continue 
to be incentivized to transact in NDX, especially given that the 
majority of such transactions would occur below the threshold at which 
the proposed surcharge would be assessed.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that its proposal to add a $0.25 per contract 
surcharge to all market participants for NDX executions with a premium 
price of $25.00 or greater is reasonable because the proposed pricing 
reflects the proprietary nature of this product. Similar to other 
proprietary products, the Exchange seeks to recoup the operational 
costs of listing proprietary products.\12\ Also, pricing by symbol is a 
common practice on many U.S. options exchanges as a means to 
incentivize order flow to be sent to an exchange for execution in 
particular products. Other options exchanges price by symbol and based 
on the option premium.\13\ Further, the Exchange notes that market 
participants are offered different ways to gain exposure to the Nasdaq 
100 Index, whether through the Exchange's proprietary products like NDX 
options, or separately through multi-listed options overlying Invesco 
QQQ Trust (``QQQ'').\14\ Offering such products provides market 
participants with a variety of choices in selecting the product they 
desire to utilize in order to gain exposure to the Nasdaq 100 Index. 
When exchanges are able to recoup costs associated with offering 
proprietary products, it incentivizes growth and competition for the 
innovation of additional products. The Exchange further believes that 
the proposed surcharge described above is reasonable because the new 
fee is in line with surcharges assessed on other index products at 
other options exchanges.\15\
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    \12\ By way of example, in analyzing an obvious error, the 
Exchange would have additional data points available in establishing 
a theoretical price for a multiply listed option as compared to a 
proprietary product, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \13\ See supra note 7.
    \14\ QQQ is an exchange-traded fund based on the same Nasdaq 100 
Index as NDX.
    \15\ See supra note 8.
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    The Exchange believes that its proposal is equitable and not 
unfairly discriminatory because it will be applied uniformly to all 
market participants. Assessing a surcharge only for executions in NDX 
whose premium is $25.00 or greater is equitable and not unfairly 
discriminatory for the reasons that follow. As shown in the chart 
above, the majority of NDX contracts have a premium of less than 
$25.00, and the Exchange is limiting the proposed surcharge to higher-
priced NDX contracts (i.e., $25.00 or greater), while maintaining lower 
costs on lower-priced NDX contracts (i.e., below $25.00). As such, the 
Exchange believes that its proposal will continue to promote liquidity 
in these products, to the benefit of all market participants because 
the majority of NDX contracts would not incur the proposed $0.25 
surcharge as they would fall below the premium price threshold at which 
the surcharge would be assessed.

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.

[[Page 60941]]

    In terms of intra-market competition, the Exchange will apply the 
proposed surcharge uniformly to all market participants. As discussed 
above, the majority of NDX contracts have a premium of less than $25.00 
and these contracts would not incur the proposed $0.25 surcharge as 
they would fall under the premium price threshold at which the 
surcharge would be assessed. By limiting the proposed surcharge to 
higher-priced NDX contracts (i.e., with a premium price of $25.00 or 
higher), the Exchange believes that its proposal will continue to 
promote liquidity in NDX by maintaining lower costs for lower-priced 
NDX contracts. Greater liquidity benefits all market participants by 
providing more trading opportunities, tighter spreads, and added market 
transparency 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 
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. As noted above, market participants are offered 
an opportunity to transact in NDX, or separately execute options 
overlying QQQ. Offering these products provides market participants 
with a variety of choices in selecting the product they desire to use 
to gain exposure to the Nasdaq 100 Index. Furthermore, the proposed 
surcharge is in line with surcharges assessed on other products at 
another options exchange.\16\
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    \16\ See supra note 8.
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    In addition to the Exchange, market participants have alternative 
options exchanges that they may participate on and direct their order 
flow, which list proprietary products that compete with NDX.\17\ 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 options 
exchanges to maintain their competitive standing in the financial 
markets.
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    \17\ See e.g., pricing for Russell 2000 Index (``RUT'') on 
Cboe's Fees Schedule and Cboe C2 Exchange, Inc.'s (``C2'') Fees 
Schedule. See also SPX pricing on Cboe's Fees Schedule. Both RUT and 
SPX are proprietary products on the Cboe markets that are broad-
based index options, like NDX and NDXP.
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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-2024-22 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-2024-22. 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-2024-22 and should be 
submitted on or before August 19, 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. 2024-16548 Filed 7-26-24; 8:45 am]
BILLING CODE 8011-01-P