[Federal Register Volume 83, Number 10 (Tuesday, January 16, 2018)]
[Notices]
[Pages 2258-2261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00523]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82466; File No. SR-GEMX-2017-63]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Schedule of Fees at Chapter V, Section H, Entitled ``Nasdaq 
GEMX Trades Feed''

January 9, 2018.
    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 December 26, 2017, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Schedule of Fees at 
Chapter V, Section H, entitled ``Nasdaq GEMX Trades Feed,'' to 
introduce a monthly fee of $500 for unlimited internal and/or external 
distribution of the Nasdaq GEMX Trade Feed,\3\ as described further 
below.
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    \3\ As part of this proposal, the Exchange proposes to correct a 
typographical error by renaming the Nasdaq GEMX Trades Feed the 
``Nasdaq GEMX Trade Feed.'' The Exchange hereinafter refers to the 
product by its corrected name.
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

[[Page 2259]]

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 Exchange's 
Schedule of Fees at Chapter V, Section H, entitled ``Nasdaq GEMX Trades 
Feed,'' to introduce a monthly fee of $500 for unlimited internal and/
or external distribution of the GEMX Trade Feed.
    The Nasdaq GEMX Trade Feed is a direct data feed product that 
displays last sale information about trades that occur in the 
Exchange's execution system, along with opening price, cumulative 
volume, and high and low prices for the day. The data provided for each 
instrument includes the symbols (series and underlying security), put 
or call indicator, expiration date, the strike price of the series, and 
trading status. Access to real-time last sale options data from the 
Exchange increases transparency and enables firms to provide 
dynamically updated tickers, portfolio trackers and price/time charts.
    The Exchange presently offers subscriptions to the Nasdaq GEMX 
Trade Feed for free, but subscriptions are available only to those 
firms that subscribe to other fee-liable Nasdaq GEMX data products--
i.e., the Nasdaq GEMX Real-time Depth of Market Raw Data Feed, the 
Nasdaq GEMX Order Feed, or the Nasdaq GEMX Top Quote Feed.
    The Exchange now proposes to amend Section H to offer the Nasdaq 
GEMX Trade Feed on a standalone basis, including to firms that do not 
currently subscribe to another fee-liable GEMX data feed. For this 
standalone subscription to the Nasdaq GEMX Trade Feed, the Exchange 
proposes to charge a fee of $500 per month (for unlimited internal and 
external distribution). Upon effectiveness of the proposal, this 
monthly fee will apply to all firms that choose to subscribe to the 
Nasdaq GEMX Trade Feed, including firms that currently subscribe to or 
that subsequently become subscribers to the Nasdaq GEMX Real-time Depth 
of Market Raw Data Feed, the Nasdaq GEMX Order Feed, or the Nasdaq GEMX 
Top Quote Feed.
    Although the Exchange proposes to offer the Nasdaq GEMX Trade Feed 
for a fee on a standalone basis, it notes that the Trade Feed is a 
purely optional product and a subscription to it is not required to 
receive the data that it provides. The same GEMX trade information that 
is available on the Nasdaq GEMX Trade Feed is also broadcast on two 
other Nasdaq GEMX data feeds: the GEMX Top Quote Feed and the GEMX 
Depth of Market Feed.
    The Exchange's proposal reflects the value of the investments that 
the Exchange has made in developing, maintaining, and upgrading the 
GEMX Trade Feed product and the Exchange trading facility that supports 
it, which include the following:
     Exchange Re-Platform and Harmonization of Specifications. 
In connection with its recent acquisition by Nasdaq, Inc. and the 
associated efforts to re-platform and integrate the Exchange into the 
Nasdaq, Inc. family of exchanges, the Exchange upgraded the GEMX Trade 
Feed so that it is consistent with the specifications and formats of 
the other Nasdaq, Inc. trade data feeds. The re-platforming and 
associated upgrades will render connection to and consumption of the 
GEMX Trade Feeds and other data products easier for customers to 
manage. Having one harmonized specification document format that is 
standardized across six exchanges makes initial onboarding and 
implementation of the data feeds into customers' systems more efficient 
than having multiple documents in disparate formats across different 
platforms. Furthermore, any updates or enhancements that are introduced 
across any of the six exchanges will now be more cost effective for 
customers to implement because of the standardized message format. In 
addition, the migration to the Nasdaq Inet technology allows customers 
to seamlessly conduct business across multiple exchanges by leveraging 
Nasdaq's standard messaging protocols to interact with GEMX data feeds 
as well as all Nasdaq options data feeds. Moreover, the hardware 
efficiencies provide a highly-distributed and efficient system for the 
Exchange to operate from.
     Geographic Diversity. In connection with the Exchange's 
integration into the Nasdaq, Inc. family of exchanges, the Exchange 
moved its disaster recovery system to the site utilized by the other 
Nasdaq, Inc. exchanges in Chicago, Illinois. Customers can both receive 
market data and send orders through the Chicago facility, potentially 
reducing overall networking costs. Additionally, this new disaster 
recovery location enables firms to easily connect to a multitude of 
multi-asset class engines currently housed in or near this Chicago 
facility, which also may reduce networking costs. Adding such 
geographic diversity helps protect the market in the event of a 
catastrophic event impacting the entire East Coast. Lastly, the new 
facility has new equipment that will offer improved performance and 
resiliency.
    The Exchange notes that while it and its sister exchange, Nasdaq 
ISE, LLC, are unique among theirs [sic] competitors in offering a 
standalone Trade Feed, the Exchange proposes to price the product at or 
below the prices that competing exchanges charge for their data feeds. 
The Exchange notes that although fees for external distribution of data 
feeds are typically higher than internal distribution fees, the 
Exchange proposes to charge the same price for both internal and 
external distribution of the Trade Feed as a means of incentivizing 
external distribution.
    The Exchange also notes that it proposes to price its Trade Feed 
lower than that of the Nasdaq ISE product. The Exchange believes that 
this price differential is reasonable given the fact that Nasdaq ISE 
has more listings, strike volume, and market makers than does Nasdaq 
GEMX, such that the Nasdaq ISE Trade Feed product has greater potential 
value to customers than does the Exchange's product. Specifically, the 
ISE market has 3,788 listed options on its platform, totaling 732,000 
strikes. Comparatively, GEMX has 2,642 listed options and 619.000 [sic] 
strikes. ISE also has 33% more market makers providing liquidity than 
does GEMX.
    Finally, offering valuable trade data as a standalone feed allows 
for a much lower bandwidth option that customers can utilize instead of 
having to subscribe to other GEMX feeds that may include quotes and 
orders and require much more system effort to consume and utilize due 
to the larger number of messages required for processing.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5)

[[Page 2260]]

of the Act,\5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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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 self-regulatory organization (``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.'' \6\
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    \6\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission 
7 (``NetCoalition'') the D.C. Circuit upheld the 
Commission's use of a market-based approach in evaluating the fairness 
of market data fees against a challenge claiming that Congress mandated 
a cost-based approach.\8\ As the court emphasized, the Commission 
``intended in Regulation NMS that `market forces, rather than 
regulatory requirements' play a role in determining the market data . . 
. to be made available to investors and at what cost.'' \9\
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    \7\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \8\ See NetCoalition, at 534-535.
    \9\ Id. at 537.
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    Further, ``[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'. . . .'' \10\ Although the court and 
the SEC were discussing the cash equities markets, the Exchange 
believes that these views apply with equal force to the options 
markets.
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    \10\ Id. at 539 (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 Exchange believes that its proposal is reasonable because it 
expands the availability of the Nasdaq GEMX Trade Feed to all firms 
that wish to subscribe to it, rather than by limiting its availability 
to only those firms that subscribe to other fee-liable Nasdaq GEMX data 
products. Even though certain firms presently receive trade data for 
free as part of their other paid data feeds, the Exchange believes that 
such firms may prefer to receive a standalone Trade Feed because it 
will provide them with pure trade data and no longer require them to 
sift through their other paid feeds to isolate it. The Exchange also 
believes that its proposal is reasonable to charge a monthly fee for 
all subscriptions to the Nasdaq GEMX Trade Feed because this product 
provides valuable data to firms. As noted above, access to real-time 
last sale options data from the Exchange increases transparency and 
enables firms to provide dynamically updated tickers, portfolio 
trackers and price charts.
    Moreover, the Exchange believes its proposal to charge a monthly 
fee of $500 for a subscription to the Nasdaq GEMX Trade Feed is a 
reasonable reflection of the Exchange's costs in producing, 
maintaining, and upgrading the product to provide value to subscribers. 
The Exchange notes, for example, that in connection with its recent 
acquisition by Nasdaq, Inc. and the associated efforts to re-platform 
and integrate the Exchange into the Nasdaq, Inc. family of exchanges, 
the Exchange upgraded the Trade Feed so that it is consistent with the 
specifications and formats of the other Nasdaq, Inc. data feeds. The 
re-platforming and associated upgrades will render connection to and 
consumption of the Trade Feeds and other data products easier for 
customers to manage.
    Moreover, the Exchange's integration into Nasdaq, Inc. has also 
resulted in its migration to a more robust and geographically diverse 
disaster recovery facility, located in Chicago, IL. Customers can both 
receive market data and send orders through the Chicago facility, 
potentially reducing overall networking costs. Adding such geographic 
diversity helps protect the market in the event of a catastrophic event 
impacting the entire East Coast.
    The Exchange notes that while it and its sister exchange, Nasdaq 
ISE, LLC, are unique among its competitors in offering a standalone 
Trade Feed, it proposes to price the product at or below the prices 
that competing exchanges charge for their data feeds. The Exchange 
notes that although fees for external distribution of data feeds are 
typically higher than internal distribution fees, the Exchange proposes 
to charge the same price for both internal and external distribution of 
the GEMX Trade Feed as a means of incentivizing external distribution.
    The Exchange also notes that it proposes to price its Trade Feed 
lower than that of the Nasdaq ISE product. The Exchange believes that 
this price differential is reasonable given the fact that Nasdaq ISE 
has more listings, strike volume, and market makers than does Nasdaq 
GEMX, such that the Nasdaq ISE Trade Feed product has greater potential 
value to customers than does the Exchange's product.
    The Exchange believes that the proposal is an equitable allocation 
and is not unfairly discriminatory because the Exchange will apply the 
same fee to all, regardless of membership.

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 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 this instance, the proposed establishment of the Nasdaq GEMX 
Trade Feed fee does not impose an undue burden on competition because a 
subscription to the Nasdaq GEMX Trade Feed is completely voluntary and 
subject to extensive competition both [sic] other exchanges. In sum, if 
the change proposed herein is 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 change 
will impair the ability of members or competing order execution venues 
to maintain their competitive standing in the financial markets.

[[Page 2261]]

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.\11\ 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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    \11\ 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-2017-63 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-2017-63. 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-GEMX-2017-63, and should be submitted on 
or before February 6, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00523 Filed 1-12-18; 8:45 am]
BILLING CODE 8011-01-P


