[Federal Register Volume 90, Number 164 (Wednesday, August 27, 2025)]
[Notices]
[Pages 41859-41863]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-16362]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103763; File No. SR-GEMX-2025-21)
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend GEMX
Options 7, Section 3
August 22, 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 August 12, 2025, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
a 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 GEMX's Pricing Schedule at Options
7, Section 3, ``Regular Order Fees and Rebates'' to lower certain Maker
Rebates for Market Makers \3\ and amend notes 15 and 18 in Options 7,
Section 3.\4\
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\3\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(21).
\4\ On August 1, 2025 the Exchange filed SR-GEMX-2025-19. On
August 12, 2025 the Exchange withdrew SR-GEMX-2025-19 and filed this
proposal.
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The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/gemx/rulefilings
and at the principal office of the Exchange.
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
GEMX proposes to amend its Pricing Schedule at Options 7, Section
3, ``Regular Order Fees and Rebates'' to: (1) lower certain Maker
Rebates for Market Makers; and (2) amend notes 15 and 18 in Options 7,
Section 3. Each change will be described below.
Maker Rebates
Today, GEMX offers 4 tiers of Penny Symbol Maker Rebates. GEMX pays
the following Penny Symbol Maker Rebates to Market Makers: a Tier 1
rebate of $0.20 per contract; a Tier 2 rebate of $0.30 per contract; a
Tier 3 rebate of
[[Page 41860]]
$0.39 per contract and a Tier 4 rebate of $0.41 per contract. GEMX pays
a Tier 1 Penny Symbol Maker Rebate of $0.20 per contract to Non-Nasdaq
GEMX Market Makers (FarMM),\5\ Firm Proprietary \6\/Broker Dealers \7\
and Professional Customers. Finally, GEMX pays the following Penny
Symbol Maker Rebates to Priority Customers: \8\ a Tier 1 rebate of
$0.35 per contract; a Tier 2 rebate of $0.48 per contract; and a Tier 3
and Tier 4 rebate of $0.53 per contract.
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\5\ A ``Non-Nasdaq GEMX 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. See GEMX Options 7, Section 1.
\6\ A ``Firm Proprietary'' order is an order submitted by a
member for its own proprietary account. See GEMX Options 7, Section
1.
\7\ A ``Broker-Dealer'' order is an order submitted by a member
for a broker-dealer account that is not its own proprietary account.
See GEMX Options 7, Section 1.
\8\ 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). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail'' as
defined below. See Options 7, Section 1.
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At this time, the Exchange proposes to decrease the Tier 3 Maker
Rebate for Market Makers from $0.39 to $0.37 per contract. Also, the
Exchange proposes to decrease the Tier 4 Maker Rebate for Market Makers
from $0.41 to $0.38 per contract. While the Exchange proposes to
decrease these Market Maker rebates, thereby paying less in these
tiers, the Exchange believes that Market Makers will continue to send
order flow to GEMX to earn these rebates.
Note 15
The Exchange proposes to amend note 15 of Options 7, Section 3 that
currently states, ``Market Maker Tier 1 through Tier 4 Maker Rebates in
Penny Symbols will be ($0.41) per contract for the following option
symbols: SPY, QQQ and IWM. Priority Customer Tier 1 through Tier 2
Taker Fees in Penny Symbols will be $0.45 per contract for the
following option symbols: SPY, QQQ and IWM.'' The Exchange proposes to
lower the SPY, QQQ and IWM Tier 1 through Tier 4 Maker Rebates in Penny
Symbols for Market Makers from $0.41 to $0.38 per contract.
Additionally, the Exchange proposes to decrease the SPY, QQQ and IWM
Priority Customer Tier 1 through Tier 2 Taker Fees in Penny Symbols
from $0.45 to $0.44 per contract. With this proposal, the Exchange is
lowering the Penny Symbol Maker Rebate for Market Makers as well as the
Penny Symbol Taker Fee for Priority Customers in SPY, QQQ and IWM. With
this proposal, the Exchange would continue to pay a Penny Symbol Maker
Rebate equivalent to the highest Penny Symbol Market Maker rebate for
all SPY, QQQ and IWM transactions. Also, with this proposal, the
Exchange would continue to assess a Penny Symbol Taker Fee that is
lower than non-Priority Customer Penny Symbol Taker Fees currently
assessed for all other options symbols. These incentives are intended
to encourage Members to send volume to GEMX in SPY, QQQ and IWM.
Note 18
The Exchange proposes to amend note 18 to Options 7, Section 3 that
provides that Tier 3 and 4 Penny Symbol Taker Fees for Market Makers
and Non-Nasdaq GEMX Market Makers (FarMM) will be $0.42 per contract
when the Member is (i) both the buyer and the seller or (ii) the Member
removes liquidity from another Member as an Affiliated Member \9\ or
Affiliated Entity.\10\ The Exchange proposes to increase the $0.42 per
contract Tier 3 and 4 Penny Symbol Taker Fees for Market Makers and
Non-Nasdaq GEMX Market Makers (FarMM) to $0.43 per contract provided
the Member is (i) both the buyer and the seller or (ii) the Member
removes liquidity from another Member as an Affiliated Member or
Affiliated Entity. The proposed Penny Symbol Taker Fee is in lieu of
the $0.50 per contract Tier 3 Penny Symbol Taker Fee and in lieu of the
$0.49 per contract Tier 4 Penny Symbol Taker Fee for Market Makers and
Non-Nasdaq GEMX Market Makers (FarMM). A Member would continue to
receive the pricing in either note 17 or amended note 18 with respect
to SPY, whichever is more favorable, but not both in a given month.
While the Exchange is increasing the Taker Fee in note 18, the
incentive continues to offer a fee reduction to encourage Market Makers
and Non-Nasdaq GEMX Market Makers (FarMM) to remove liquidity on GEMX
at the reduced Penny Symbol Taker Fee.
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\9\ 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. See Options 7, Section 1(c).
\10\ 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. See Options 7, Section 1(c).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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\11\ See 15 U.S.C. 78f(b).
\12\ See 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to the Pricing Schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for order flow, which
constrains its pricing determinations. The fact that the market for
order flow is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated, ``[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 of
order flow from broker dealers'. . . .'' \13\
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\13\ See NetCoalition, 615 F.3d at 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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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is only one of eighteen
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. Within the
foregoing context, the proposal represents a reasonable attempt by the
Exchange to attract additional order flow to the Exchange and increase
its market share relative to its competitors.
[[Page 41861]]
Maker Rebates
The Exchange's proposal to decrease the Tier 3 Maker Rebate for
Market Makers from $0.39 to $0.37 per contract and the proposal to
decrease the Tier 4 Maker Rebate for Market Makers from $0.41 to $0.38
per contract are reasonable because while the rebates are being
lowered, the Exchange believes the proposed Maker Rebates will continue
to attract order flow to GEMX and incentivize order flow to be sent to
GEMX.
The Exchange's proposal to decrease the Tier 3 Maker Rebate for
Market Makers from $0.39 to $0.37 per contract and the proposal to
decrease the Tier 4 Maker Rebate for Market Makers from $0.41 to $0.38
per contract are equitable and not unfairly discriminatory because all
Market Makers would be paid the same Maker Rebates. Market Makers have
different requirements and additional obligations as compared to other
market participants (such as quoting requirements).\14\ Also, Priority
Customers would continue to receive higher Maker Rebates as compared to
all non-Priority Customer 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, to the benefit of all market
participants who may interact with the order flow.
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\14\ See GEMX Options 2, Section 5.
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Note 15
The Exchange's proposal to amend note 15 of Options 7, Section 3 to
lower the Maker Rebate in SPY, QQQ and IWM for Market Maker Tier 1
through Tier 4 Maker Rebates in Penny Symbols from $0.41 to $0.38 per
contract and decrease the Taker Fee for SPY, QQQ and IWM for Priority
Customer Tier 1 through Tier 2 Taker Fees in Penny Symbols from $0.45
to $0.44 per contract is reasonable. With this proposal the Exchange is
lowering the Penny Symbol Maker Rebate for Market Makers and the Penny
Symbol Taker Fee for Priority Customers in SPY, QQQ and IWM. With this
proposal, the Exchange would continue to pay a Penny Symbol Maker
Rebate equivalent to the highest Penny Symbol Market Maker rebate for
all SPY, QQQ and IWM transactions.\15\ Also, with this proposal, the
Exchange would continue to assess a Penny Symbol Taker Fee that is
lower than non-Priority Customer Penny Symbol Taker Fees currently
assessed for all other options symbols.\16\ These incentives are
intended to encourage Members to send volume to GEMX in SPY, QQQ and
IWM. Accordingly, the Exchange believes that Market Makers will
continue to be incentivized to add liquidity in these symbols on the
Exchange. Increased liquidity benefits all market participants by
deepening the Exchange's liquidity pool and supporting the quality of
price discovery. The Exchange also believes that assessing different
pricing for SPY, QQQ and IWM, as compared to other symbols, is
reasonable because trading in SPY, QQQ and IWM is different from
trading in other symbols in that they are more liquid, have higher
volume and competition for executions is more intense.
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\15\ Current Maker Rebates in Tiers 1-4 range from $0.20 to
$0.53 per contract.
\16\ Current Taker Fees in Tiers 1-4 range from $0.42 to $0.50
per contract.
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The Exchange's proposal to amend note 15 of Options 7, Section 3 to
lower the Maker Rebate in SPY, QQQ and IWM for Market Maker Tier 1
through Tier 4 Maker Rebates in Penny Symbols from $0.41 to $0.38 per
contract and decrease the Taker Fee for SPY, QQQ and IWM for Priority
Customer Tier 1 through Tier 2 Taker Fees in Penny Symbols from $0.45
to $0.44 per contract is equitable and not unfairly discriminatory.
Market Makers have different requirements and additional obligations
that other market participants do not (such as quoting
requirements).\17\ The amended note 15 incentive is designed to
continue to incentivize Market Maker add liquidity activity in SPY,
QQQ, and IWM, thereby facilitating tighter spreads and contributing
towards a robust, well-balanced market ecosystem, to the benefit of all
market participants. Additionally, paying [sic] a lower Tier 1 and Tier
2 Taker Fee in Penny Symbols to Priority Customer is equitable and not
unfairly discriminatory because 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, to the benefit of all market participants who may
interact with the order flow.
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\17\ See GEMX Options 2, Section 5.
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Note 18
The Exchange's proposal to amend note 18 to Options 7, Section 3 to
increase the $0.42 per contract Penny Symbol Taker Fee to $0.43 per
contract is reasonable because it would continue to allow Market Makers
and Non-Nasdaq GEMX Market Makers (FarMM) to lower their Tier 3 and 4
Penny Symbol Taker Fees thereby attracting more order flow to GEMX. The
proposed fee would be in lieu of the $0.50 per contract Penny Symbol
Tier 3 Taker Fee and in lieu of the $0.49 per contract Penny Symbol
Tier 4 Taker Fee for Market Makers and Non-Nasdaq GEMX Market Makers
(FarMM).
The Exchange's proposal to amend note 18 to Options 7, Section 3 to
increase the $0.42 per contract Penny Symbol Taker Fee to $0.43 per
contract is equitable and not unfairly discriminatory because Market
Makers have different requirements and additional obligations as
compared to other market participants (such as quoting
requirements).\18\ The proposed note 18 incentive is designed to
continue to incentivize Market Makers to remove liquidity on GEMX
thereby facilitating tighter spreads and contributing towards a robust,
well-balanced market ecosystem, to the benefit of all market
participants. Non-Nasdaq GEMX Market Makers (FarMM) qualify as market
makers on other exchanges. The Exchange believes that market makers not
registered on GEMX will be encouraged to continue to remove liquidity
on GEMX as an away market maker (Non-Nasdaq GEMX Market Makers (FarMM))
with this incentive. Because the incentive is being offered to both
market makers registered on GEMX and those not registered on GEMX, the
Exchange believes that the proposal is equitable and not unfairly
discriminatory because it encourages market makers to remove liquidity
thereby filling orders of other market participants. This proposal
recognizes the overall contributions made by market makers to a listed
options market.
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\18\ See GEMX Options 2, Section 5.
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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.
Intermarket Competition
The Exchange believes its proposal remains competitive with other
options markets, and will offer market participants with another choice
of venue to transact options. The Exchange notes that it operates in a
highly competitive market in which market
[[Page 41862]]
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. 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.
Intramarket Competition
Maker Rebates
The Exchange's proposal to decrease the Tier 3 Maker Rebate for
Market Makers from $0.39 to $0.37 per contract and the proposal to
decrease the Tier 4 Maker Rebate for Market Makers from $0.41 to $0.38
per contract does not impose an undue burden on competition because all
Market Makers would be paid the same Maker Rebates. Market Makers have
different requirements and additional obligations as compared to other
market participants (such as quoting requirements).\19\ Also, Priority
Customers would continue to receive higher Maker Rebates as compared to
all non-Priority Customer 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, to the benefit of all market
participants who may interact with the order flow.
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\19\ See GEMX Options 2, Section 5.
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Note 15
The Exchange's proposal to amend note 15 of Options 7, Section 3 to
lower the Maker Rebate in SPY, QQQ and IWM for Market Maker Tier 1
through Tier 4 Maker Rebates in Penny Symbols from $0.41 to $0.38 per
contract and decrease the Taker Fee for SPY, QQQ and IWM for Priority
Customer Tier 1 through Tier 2 Taker Fees in Penny Symbols from $0.45
to $0.44 per contract does not impose an undue burden on competition
because Market Makers have different requirements and additional
obligations that other market participants do not (such as quoting
requirements).\20\ The amended note 15 incentive is designed to
continue to incentivize Market Maker add liquidity activity in SPY,
QQQ, and IWM, thereby facilitating tighter spreads and contributing
towards a robust, well-balanced market ecosystem, to the benefit of all
market participants. Additionally, paying [sic] a lower Tier 1 and Tier
2 Taker Fee in Penny Symbols to Priority Customer does not impose an
undue burden on competition because 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, to the benefit of all market
participants who may interact with the order flow.
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\20\ See GEMX Options 2, Section 5.
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Note 18
The Exchange's proposal to amend note 18 to Options 7, Section 3 to
increase the $0.42 per contract Penny Symbol Taker Fee to $0.43 per
contract does not impose an undue burden on competition because Market
Makers have different requirements and additional obligations as
compared to other market participants (such as quoting
requirements).\21\ The proposed note 18 incentive is designed to
continue to incentivize Market Makers to remove liquidity on GEMX
thereby facilitating tighter spreads and contributing towards a robust,
well-balanced market ecosystem, to the benefit of all market
participants. Non-Nasdaq GEMX Market Makers (FarMM) qualify as market
makers on other exchanges. The Exchange believes that market makers not
registered on GEMX will be encouraged to continue to remove liquidity
on GEMX as an away market maker (Non-Nasdaq GEMX Market Makers (FarMM))
with this incentive. Because the incentive is being offered to both
market makers registered on GEMX and those not registered on GEMX, the
Exchange believes that the proposal is equitable and not unfairly
discriminatory because it encourages market makers to remove liquidity
thereby filling orders of other market participants. This proposal
recognizes the overall contributions made by market makers to a listed
options market.
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\21\ See GEMX Options 2, Section 5.
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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.\22\ 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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\22\ 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-GEMX-2025-21 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-2025-21. 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 filing 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-2025-21 and
should be submitted on or before September 17, 2025.
[[Page 41863]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2025-16362 Filed 8-26-25; 8:45 am]
BILLING CODE 8011-01-P