[Federal Register Volume 90, Number 117 (Friday, June 20, 2025)]
[Notices]
[Pages 26353-26354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11294]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103264; File No. SR-GEMX-2025-12]
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
June 16, 2025.
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 June 2, 2025, Nasdaq GEMX, LLC (``GEMX'' 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 fees for Nasdaq 100 Index
options in the Exchange's Pricing Schedule at Options 7, Section 3 to
adopt a new surcharge for removing liquidity.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/gemx/rulefilings,
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.
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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 $1.50 per contract to all regular Non-Priority
Customer orders that remove liquidity.\6\ Priority Customer NDX fees
will remain unchanged under this proposal. The proposed surcharge is
aimed at encouraging Non-Priority Customers to add more liquidity and
reduce ``take'' behavior that removes liquidity from the order book.
The Exchange notes that the proposed surcharge amount is within the
range of surcharges assessed for transactions in other proprietary
products at another options exchange.\7\
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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 18 in Options 7, Section 3.
\7\ For example, Cboe Options (``Cboe'') currently assesses
market participants LEAPS surcharge fees for SPX ranging from $1.00
to $2.50 per contract. See Cboe Fees Schedule.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that its proposal to add a $1.50 per contract
surcharge to all regular Non-Priority Customer orders that remove
liquidity is reasonable because the proposed pricing reflects the
proprietary nature of this product. Similar to other proprietary
products like options overlying the Nasdaq 100 Micro Index (``XND''),
the Exchange seeks to recoup the operational costs of listing
proprietary products.\10\ 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. As noted
above, another options exchange assesses surcharges for its proprietary
index options products that are within the range (or higher) of what
the Exchange is proposing herein.\11\ 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 options overlying NDX or XND, or separately through multi-listed
options overlying Invesco QQQ Trust (``QQQ'').\12\ 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.
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\10\ 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.
\11\ See supra note 7.
\12\ QQQ is an exchange-traded fund based on the same Nasdaq 100
Index as NDX and XND.
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The Exchange believes that its proposal is equitable and not
unfairly discriminatory because it will be applied uniformly to all
regular Non-Priority Customer NDX orders that remove liquidity.
Assessing this surcharge only to Non-Priority Customers is equitable
and not unfairly discriminatory because Priority Customers have
historically been assessed more favorable pricing on the Exchange,
including on NDX orders
[[Page 26354]]
where they will continue to be assessed the lowest transaction fee of
$0.25 per contract under this proposal. Priority Customer order flow
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, to the benefit of all market
participants who may interact with this order flow. Further, the
proposed surcharge is aimed at encouraging Non-Priority Customers to
add more liquidity and reduce ``take'' behavior that removes liquidity
from the order book. To the extent the Exchange is successful in
incentivizing this behavior, the additional liquidity on the Exchange
will benefit all market participants through more trading
opportunities, tighter spreads, and added price discovery.
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 will apply the
proposed surcharge uniformly to all Non-Priority Customers. As
discussed above, the proposed change is aimed at encouraging Non-
Priority Customers to add more liquidity and reduce ``take'' behavior
that removes liquidity from the order book. To the extent the Exchange
is successful in incentivizing this behavior, the additional liquidity
on the Exchange will benefit all market participants through more
trading opportunities, tighter spreads, and added 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 XND, 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 proprietary
products at another options exchange.\13\
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\13\ See supra note 7.
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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.\14\ 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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\14\ 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.
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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.\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-GEMX-2025-12 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-2025-12. 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-2025-12 and should be
submitted on or before July 11, 2025.
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. 2025-11294 Filed 6-18-25; 8:45 am]
BILLING CODE 8011-01-P