[Federal Register Volume 87, Number 96 (Wednesday, May 18, 2022)]
[Notices]
[Pages 30305-30317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10617]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94901; File No. SR-MRX-2022-04]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend MRX's 
Pricing Schedule at Options 7 To Assess Membership, Port and Market 
Data Fees

May 12, 2022.
    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 May 2, 2022, 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 MRX's Pricing Schedule at Options 7 
to assess membership, port and market data fees.
    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.

[[Page 30306]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    MRX proposes to amend its Pricing Schedule at Options 7 to assess 
membership, port and market data fees, which are not assessed today, 
and which have not been assessed since MRX's inception in 2016. The 
proposed changes are designed to update fees for MRX's data and 
services to reflect their current value--rather than their value when 
it was a new exchange six years ago--based on MRX's ability to deliver 
value to its customers through technology, liquidity and functionality. 
Newly-opened exchanges often charge no fees for certain services such 
as membership, ports and market data in order to attract order flow to 
an exchange, and later amend their fees to reflect the true value of 
those services.\3\ Allowing newly-opened exchanges time to build and 
sustain market share before charging non-transactional fees encourages 
market entry and promotes competition. The proposed changes fall into 
three categories, discussed in detail below: Membership fees (Options 
7, Section 5; Other Options Fees and Rebates); port fees (Options 7, 
Section 6; Ports and Other Services); and market data fees (Options 7, 
Section 7 Market Data).
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    \3\ See, e.g., Securities Exchange Act Release No 88211 
(February 14, 2020), 85 FR 9847 (February 20, 2020) (SR-NYSENAT-
2020-05), also available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf. (initiating market data fees for the NYSE National exchange 
after initially setting such fees at zero); see also Securities 
Exchange Act Release No. 93927 (January 7, 2022), 87 FR 2191 
(January 13, 2022) (SR-MEMX-2021-19) (introduction of membership 
fees by MEMX).
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    This Proposal reflects MRX's assessment that it has gained 
sufficient market share to compete effectively against the other 15 
options exchanges without waiving fees for membership, ports or market 
data. These types of fees are assessed by options exchanges that 
compete with MRX in the sale of exchange services--indeed, MRX is the 
only options exchange (out of the 16 current options exchanges) not 
assessing membership, port and market data fees today. New exchanges 
commonly waive connectivity, data and membership fees to attract market 
participants, facilitating their entry into the market and, once there 
is sufficient depth and breadth of liquidity, ``graduate'' to compete 
against established exchanges and charge fees that reflect the value of 
their services.\4\ If MRX is incorrect in this assessment, that error 
will be reflected in MRX's ability to compete with other options 
exchanges.\5\
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    \4\ For example, MIAX Emerald commenced operations as a national 
securities exchange registered on March 1, 2019. See Securities 
Exchange Act Release No. 84891 (December 20, 2018), 83 FR 67421 
(December 28, 2018) (File No. 10-233) (order approving application 
of MIAX Emerald, LLC for registration as a national securities 
exchange). MIAX Emerald filed to adopt its transaction fees and 
certain of its non-transaction fees in its filing SR-EMERALD-2019-
15. See Securities Exchange Act Release No. 85393 (March 21, 2019), 
84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15) (Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Establish 
the MIAX Emerald Fee Schedule). MIAX Emerald waived its one-time 
application fee and monthly Trading Permit Fees assessable to EEMs 
and Market Makers among other fees within SR-EMERALD-2019-15.
    \5\ Nasdaq recently announced that, beginning in 2022, Nasdaq 
plans to migrate its North American markets to Amazon Web Services 
in a phased approach, starting with Nasdaq MRX, a U.S. options 
market. The proposed fee changes are entirely unrelated to this 
effort.
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Options 7, Section 5
    As noted above, MRX Members are not assessed fees for membership 
today. Under the proposed fee change, MRX Members will be required to 
pay a monthly Access Fee, which entitles MRX Members to trade on the 
Exchange based on their membership type. Specifically, MRX proposes to 
assess Electronic Access Members \6\ an Access Fee of $200 per month, 
per membership. The Exchange proposes to assess Market Makers \7\ 
Access Fees depending on whether they are a Primary Market Maker 
(``PMM'') or a Competitive Market Maker (``CMM''). A PMM would be 
assessed an Access Fee of $200 per month, per membership. A CMM would 
be assessed an Access Fee of $100 per month, per membership.\8\ The 
proposed fees are identical to access fees on Nasdaq GEMX, LLC 
(``GEMX'').\9\
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    \6\ The term ``Electronic Access Member'' or ``EAM'' means a 
Member that is approved to exercise trading privileges associated 
with EAM Rights. See General 1, Section 1(a)(6).
    \7\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Options 1, 
Section 1(a)(21). The term ``Competitive Market Maker'' means a 
Member that is approved to exercise trading privileges associated 
with CMM Rights. See Options 1, Section 1(a)(12). The term ``Primary 
Market Maker'' means a Member that is approved to exercise trading 
privileges associated with PMM Rights. See Options 1, Section 
1(a)(35).
    \8\ In the case where a single Member has multiple MRX 
memberships, the monthly access fee is charged for each membership. 
For example, if a single member firm is both an EAM and a CMM, or 
owns multiple CMM memberships, the firm is subject to the access fee 
for each of those memberships.
    \9\ See GEMX Options 7, Section 6.A. (Access Fees).
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    In order to receive market making appointments to quote in any 
options class, CMMs will also be assessed a CMM Trading Right Fee 
identical to GEMX.\10\ CMM trading rights entitle a CMM to enter quotes 
in options symbols that comprise a certain percentage of industry 
volume. On a quarterly basis, the Exchange assigns points to each 
options class equal to its percentage of overall industry volume (not 
including exclusively traded index options), rounded down to the 
nearest one hundredth of a percentage with a maximum of 15 points. A 
new listing is assigned a point value of zero for the remainder of the 
quarter in which it was listed. CMMs may seek appointments to options 
classes that total 20 points for the first CMM Right it holds, and 10 
points for the second and each subsequent CMM Right it holds.\11\ In 
order to encourage CMMs to quote on the Exchange, MRX launched CMM 
trading rights without any fees, allowing CMMs to freely quote in all 
options classes.
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    \10\ See GEMX Options 7, Section 6.B. (CMM Trading Rights Fees).
    \11\ A CMM may request changes to its appointments at any time 
upon advance notification to the Exchange in a form and manner 
prescribed by the Exchange. See MRX Options 2, Section 3(c)(3).
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    The Exchange is now proposing to adopt a monthly CMM Trading Rights 
Fee. Under the proposed fee structure, CMMs will be assessed a Trading 
Rights Fee of $850 per month for the first trading right, which will 
entitle the CMM to quote in 20 percent of industry volume.\12\ Each 
additional CMM Right will cost $500 per month, and will entitle the CMM 
to quote an additional 10 percent of volume. Similar to GEMX's trading 
rights fee,\13\ a new CMM would pay $850 for the first trading right 
and all CMMs would thereafter pay $500 for each additional trading 
right. The Exchange is proposing this pricing model because each 
subsequent CMM Right costs less than the first trading right. All CMMs 
have the opportunity to purchase additional CMM Rights beyond the 
initial trading right in order to quote in additional options series. 
The Exchange notes that it is not proposing trading right fees for
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    \12\ These trading rights are referred to as CMM Rights. See MRX 
Options 2, Section 3.
    \13\ See GEMX Options 7, Section 6.B.

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[[Page 30307]]

PMMs, as the Exchange wishes to encourage Members to act as PMMs, which 
will benefit the market through, for example, more robust quoting 
requirements. PMMs have additional obligations on MRX as compared to 
CMMs.\14\ The Exchange is proposing only to charge the $200 access fee 
to EAMs, and no trading rights fee, as the technical, regulatory, and 
administrative services associated with an EAM's use of the Exchange 
are not as comprehensive as those associated with Market Makers' 
use.\15\
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    \14\ PMMs are required to provide two-sided quotations in 90% of 
cumulative number of seconds, or such higher percentage as the 
Exchange may announce in advance. In contrast, a CMM is not required 
to enter quotations in the options classes to which it is appointed; 
however, if a CMM initiates quoting in an options class, the CMM is 
required to provide two-sided quotations in 60% of the cumulative 
number of seconds, or such higher percentage as the Exchange may 
announce in advance. See Options 2, Section 5(e)(2). Additionally, 
PMMs are required to submit a Valid Width Quote to open their 
assigned options series. See Options 3, Section 8(c)(1) and 8(c)(3).
    \15\ The Exchange notes that all MRX Members may submit orders; 
however, only Market Makers may submit quotes. The Exchange surveils 
Market Makers quotes in addition to any orders transacted on MRX and 
conducts surveillance on Market Maker quotes to ensure these 
participants have met their quoting and other market making 
obligations. The regulatory oversight for Market Makers is in 
addition to the regulatory oversight which is administered for all 
EAMs.
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Options 7, Section 6
    The Exchange proposes to amend fees for the following ports within 
Options 7, Section 6: (1) FIX,\16\ (2) SQF; \17\ (3) SQF Purge; \18\ 
(4) OTTO; \19\ (5) CTI; \20\ and (6) FIX DROP.\21\ Currently, no fees 
are being assessed for these ports. The Exchange proposes to assess a 
FIX Port Fee and OTTO Port Fee of $650 per port, per month, per account 
number.\22\ The Exchange proposes to assess an SQF Port Fee and SQF 
Purge Port Fee of $1,250 per port, per month.\23\ The Exchange proposes 
to assess a CTI Port Fee and a FIX Drop Port Fee of $650 per port, per 
month.
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    \16\ ``Financial Information eXchange'' or ``FIX'' is an 
interface that allows Members and their Sponsored Customers to 
connect, send, and receive messages related to orders and auction 
orders to the Exchange. Features include the following: (1) 
Execution messages; (2) order messages; (3) risk protection triggers 
and cancel notifications; and (4) post trade allocation messages. 
See Supplementary Material .03(a) to Options 3, Section 7.
    \17\ ``Specialized Quote Feed'' or ``SQF'' is an interface that 
allows Market Makers to connect, send, and receive messages related 
to quotes, Immediate-or-Cancel Orders, and auction responses to the 
Exchange. Features include the following: (1) Options symbol 
directory messages (e.g., underlying and complex instruments); (2) 
system event messages (e.g., start of trading hours messages and 
start of opening); (3) trading action messages (e.g., halts and 
resumes); (4) execution messages; (5) quote messages; (6) Immediate-
or-Cancel Order messages; (7) risk protection triggers and purge 
notifications; (8) opening imbalance messages; (9) auction 
notifications; and (10) auction responses. The SQF Purge Interface 
only receives and notifies of purge requests from the Market Maker. 
Market Makers may only enter interest into SQF in their assigned 
options series. See Supplementary Material .03(c) to Options 3, 
Section 7.
    \18\ SQF Purge is a specific port for the SQF interface that 
only receives and notifies of purge requests from the market maker. 
Dedicated SQF Purge Ports enable market makers to seamlessly manage 
their ability to remove their quotes in a swift manner.
    \19\ ``Ouch to Trade Options'' or ``OTTO'' is an interface that 
allows Members and their Sponsored Customers to connect, send, and 
receive messages related to orders, auction orders, and auction 
responses to the Exchange. Features include the following: (1) 
Options symbol directory messages (e.g., underlying and complex 
instruments); (2) system event messages (e.g., start of trading 
hours messages and start of opening); (3) trading action messages 
(e.g., halts and resumes); (4) execution messages; (5) order 
messages; (6) risk protection triggers and cancel notifications; (7) 
auction notifications; (8) auction responses; and (9) post trade 
allocation messages. See Supplementary Material .03(b) to Options 3, 
Section 7.
    \20\ Clearing Trade Interface (``CTI'') is a real-time cleared 
trade update message that is sent to a Member after an execution has 
occurred and contains trade details specific to that Member. The 
information includes, among other things, the following: (i) The 
Clearing Member Trade Agreement (``CMTA'') or The Options Clearing 
Corporation (``OCC'') number; (ii) badge or mnemonic; (iii) account 
number; (iv) information which identifies the transaction type 
(e.g., auction type) for billing purposes; and (v) market 
participant capacity. See Options 3, Section 23(b)(1).
    \21\ FIX DROP is a real-time order and execution update message 
that is sent to a Member after an order been received/modified or an 
execution has occurred and contains trade details specific to that 
Member. The information includes, among other things, the following: 
(i) Executions; (ii) cancellations; (iii) modifications to an 
existing order; and (iv) busts or post-trade corrections. See 
Options 3, Section 23(b)(3).
    \22\ An ``account number'' shall mean a number assigned to a 
Member. Members may have more than one account number. See Options 
1, Section 1(a)(1).
    \23\ SQF's Port Fees are assessed a higher dollar fee as 
compared to FIX and OTTO ports ($1,250 vs. $650) because the 
Exchange has to maintain options assignments within SQF and manage 
quoting traffic. Market Makers may utilize SQF Ports in their 
assigned options series. Market Maker badges are assigned to 
specific SQF ports to manage the option series in which a Market 
Maker may quote. Additionally, because of quoting obligations 
provided for within Options 2, Section 5, Market Makers are required 
to provide liquidity in their assigned options series which 
generates quote traffic. The Exchange notes because of the higher 
fee, SQF ports are billed per port, per month while FIX and OTTO 
ports are billed per port, per month, per account number. Members 
may have more than one account number.
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    The OTTO Port, CTI Port, FIX Port, FIX Drop Port and all Disaster 
Recovery Ports \24\ are available to all EAMs, and will be subject to a 
monthly cap of $7,500.
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    \24\ This includes FIX, SQF, SQF Purge, OTTO, CTI and FIX Drop 
Disaster Recovery Ports.
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    The SQF Port and the SQF Purge Port will be subject to a monthly 
cap of $17,500. The SQF Port and SQF Purge Port are available to Market 
Makers.\25\
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    \25\ Only Market Makers may quote on MRX. The Exchange is 
proposing non-substantive technical amendments to add commas within 
the Production column of the proposed rule text to separate terms.
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    The Exchange is not amending the TradeInfo MRX Interface or the 
Nasdaq MRX Depth of Market, Nasdaq MRX Order Feed, Nasdaq MRX Top Quote 
Feed, Nasdaq MRX Trades Feed or Nasdaq MRX Spread Feed Ports, all of 
these aforementioned ports will continue to be assessed no fees. 
Additionally, as is the case today, the Disaster Recovery Ports for 
TradeInfo and the Nasdaq MRX Depth of Market, Nasdaq MRX Order Feed, 
Nasdaq MRX Top Quote Feed, Nasdaq MRX Trades Feed or Nasdaq MRX Spread 
Feed Ports will not be assessed a fee.
    Finally, the Exchange proposes to amend the Disaster Recovery Port 
Fee from $0 to $50 per port, per month, per account for FIX, SQF, SQF 
Purge and OTTO Ports and from $0 to $50 per port, per month for CTI, 
and FIX DROP Ports. Disaster Recovery ports provide connectivity to the 
Exchange's disaster recovery data center, to be utilized in the event 
the Exchange should failover during a trading day. The Exchange 
proposes to assess the aforementioned Disaster Recovery Port Fees to 
encourage Members to be efficient when purchasing Disaster Recovery 
ports. Similar to all other ports, Disaster Recovery Ports need to be 
maintained by the Exchange.\26\ The proposed port fees are similar to 
fees assessed by GEMX.\27\
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    \26\ The Exchange maintains ports in a number of ways to ensure 
that ports are properly connected to the Exchange at all times. This 
includes offering testing, ensuring all ports are up-to-date with 
the latest code releases, as well as ensuring that all ports meet 
the Exchange's information security specifications.
    \27\ See GEMX Options 7, Section 6.C. (Ports and Other 
Services).
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    In order to submit orders into MRX, only one order protocol is 
required, either FIX or OTTO.\28\ A quoting protocol, such as SQF, is 
only required to the extent an MRX Member has been appointed as a 
Market Maker in an options series pursuant to Options 2, Section 1. 
Similarly, only one quoting protocol, or SQF Port, is necessary to

[[Page 30308]]

quote on MRX. Depending on a Member's business model, one protocol may 
be better suited for a Member as compared to another protocol when 
determining which order entry protocol to select.\29\ Members may elect 
to utilize both order entry protocols, depending on how they organize 
their business. Only one protocol is necessary to submit orders into 
MRX; however, Members may choose to purchase a greater number of order 
entry ports, depending on that Member's business model.\30\
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    \28\ Only Members may utilize ports on MRX. Any market 
participant that sends orders to a Member would not need to utilize 
a port. The Member can send all orders, proprietary and agency, 
through one port to MRX. Members may elect to obtain multiple 
account numbers to organize their business, however only one account 
number and one port is necessary for a Member to trade on MRX.
    \29\ For example, while the FIX protocol permits routing 
capability the OTTO protocol does not permit routing capability. 
This distinction may cause a Member to elect a certain protocol 
based on whether a Member desires to execute an order locally or 
route an order. The OTTO Port offers lower latency as compared to 
the FIX Port, which may be attractive to Members depending on their 
trading behavior.
    \30\ For example, a Member may desire to utilize multiple FIX or 
OTTO ports for accounting purposes, to measure performance, for 
regulatory reasons or other determinations that are specific to that 
Member.
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    The Exchange notes that FIX, and OTTO Ports, as well TradeInfo, are 
available to all Members and may be utilized to cancel orders. Further, 
FIX DROP, the Clearing Trade Interface, and TradeInfo are available to 
all Members and may be utilized to obtain order information. These 
different protocols are not all necessary to conduct business on MRX; a 
Member may choose among protocols based on their business workflow.
Options 7, Section 7
    The Exchange proposes to amend fees for the following market data 
feeds within Options 7, Section 7: (1) Nasdaq MRX Depth of Market Data; 
\31\ (2) Nasdaq MRX Order Feed; \32\ (3) Nasdaq MRX Top Quote Feed; 
\33\ (4) Nasdaq MRX Trades Feed; \34\ and (5) Nasdaq MRX Spread 
Feed.\35\ Currently, no fees are being assessed for these feeds.
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    \31\ Nasdaq MRX Depth of Market Data Feed (``Depth of Market 
Feed'') provides aggregate quotes and orders at the top five price 
levels on MRX, and provides subscribers with a consolidated view of 
tradable prices beyond the BBO, showing additional liquidity and 
enhancing transparency for MRX traded options. The data provided for 
each option series includes the symbols (series and underlying 
security), put or call indicator, expiration date, the strike price 
of the series, and whether the option series is available for 
trading on MRX and identifies if the series is available for closing 
transactions only. In addition, subscribers are provided with total 
aggregate quantity, Public Customer aggregate quantity, Priority 
Customer aggregate quantity, price, and side (i.e., bid/ask). This 
information is provided for each of the top five price levels on the 
Depth Feed. The feed also provides order imbalances on opening/
reopening. See Options 3, Section 23(a)(1).
    \32\ Nasdaq MRX Order Feed (``Order Feed'') provides information 
on new orders resting on the book (e.g., price, quantity and market 
participant capacity). In addition, the feed also announces all 
auctions. The data provided for each option series includes the 
symbols (series and underlying security), put or call indicator, 
expiration date, the strike price of the series, and whether the 
option series is available for trading on MRX and identifies if the 
series is available for closing transactions only. The feed also 
provides order imbalances on opening/reopening. See Options 3, 
Section 23(a)(2).
    \33\ Nasdaq MRX Top Quote Feed (``Top Quote Feed'') calculates 
and disseminates MRX's best bid and offer position, with aggregated 
size (including total size in aggregate, for Professional Order size 
in the aggregate and Priority Customer Order size in the aggregate), 
based on displayable order and quote interest in the System. The 
feed also provides last trade information along with opening price, 
daily trading volume, high and low prices for the day. The data 
provided for each option series includes the symbols (series and 
underlying security), put or call indicator, expiration date, the 
strike price of the series, and whether the option series is 
available for trading on MRX and identifies if the series is 
available for closing transactions only. The feed also provides 
order imbalances on opening/reopening. See Options 3, Section 
23(a)(3).
    \34\ Nasdaq MRX Trades Feed (``Trades Feed'') displays last 
trade information along with opening price, daily trading volume, 
high and low prices for the day. The data provided for each option 
series includes the symbols (series and underlying security), put or 
call indicator, expiration date, the strike price of the series, and 
whether the option series is available for trading on MRX and 
identifies if the series is available for closing transactions only. 
See Options 3, Section 23(a)(4).
    \35\ Nasdaq MRX Spread Feed (``Spread Feed'') is a feed that 
consists of: (1) Options orders for all Complex Orders (i.e., 
spreads, buy-writes, delta neutral strategies, etc.); (2) data 
aggregated at the top five price levels (BBO) on both the bid and 
offer side of the market; (3) last trades information. The Spread 
Feed provides updates, including prices, side, size and capacity, 
for every Complex Order placed on the MRX Complex Order Book. The 
Spread Feed shows: (1) Aggregate bid/ask quote size; (2) aggregate 
bid/ask quote size for Professional Customer Orders; and (3) 
aggregate bid/ask quote size for Priority Customer Orders for MRX 
traded options. The feed also provides Complex Order auction 
notifications. See Options 3, Section 23(a)(5).
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    The Exchange also proposes to assess an Internal Distributor Fee 
\36\ of $1,500 per month for the Nasdaq MRX Depth of Market Feed, Order 
Feed, and Top Quote Feed. The Exchange proposes to assess an Internal 
Distributor Fee of $750 per month for the Trades Feed. Finally, the 
Exchange proposes to assess an Internal Distributor Fee of $1,000 per 
month for the Spread Feed. If a Member subscribes to both the Trades 
Feed and the Spread Feed, both Internal Distributor Fees would be 
assessed.
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    \36\ A ``distributor'' of Nasdaq MRX data is any entity that 
receives a feed or data file of data directly from Nasdaq MRX or 
indirectly through another entity and then distributes it either 
internally (within that entity) or externally (outside that entity). 
All distributors shall execute a Nasdaq Global Data Agreement.
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    The Exchange proposes to assess an External Distributor Fee of 
$2,000 per month for the Nasdaq MRX Depth of Market Feed, Order Feed, 
and Top Quote Feed, an External Distributor Fee of $1,000 per month for 
the Trades Feed, and an External Distributor Fee of $1,500 per month 
for the Spread Feed.
    MRX does not currently assess subscriber fees, but proposes to 
begin assessing Professional \37\ and Non-Professional \38\ subscriber 
fees. The Exchange proposes to assess a Professional Subscriber of $25 
per month, and a Non-Professional Subscriber of $1 per month. These 
subscriber fees (both Professional and Non-Professional) cover the 
usage of all five MRX data products identified above and would not be 
assessed separately for each data product.\39\
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    \37\ A Professional Subscriber is any Subscriber that is not a 
Non-Professional Subscriber.
    \38\ A Non-Professional Subscriber is a natural person who is 
neither: (i) Registered or qualified in any capacity with the 
Commission, the Commodities Futures Trading Commission, any state 
securities agency, any securities exchange or association, or any 
commodities or futures contract market or association; (ii) engaged 
as an ``investment adviser'' as that term is defined in Section 
201(11) of the Investment Advisors Act of 1940 (whether or not 
registered or qualified under that Act); nor (iii) employed by a 
bank or other organization exempt from registration under federal or 
state securities laws to perform functions that would require 
registration or qualification if such functions were performed for 
an organization not so exempt.
    \39\ For example, if a firm has one Professional (Non-
Professional) Subscriber accessing Top of Market, Order, and Depth 
of Market Feed the firm would only report the Subscriber once and 
pay $25 ($1 for Non-Professional).
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    MRX also proposes a Non-Display Enterprise License of $7,500 per 
month. This license would lower costs for internal professional 
subscribers and lower administrative costs overall by permitting the 
distribution of all MRX proprietary direct data feed products to an 
unlimited number of internal non-display Subscribers without incurring 
additional fees for each internal Subscriber, or requiring the customer 
to count internal subscribers.\40\
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    \40\ The Non-Display Enterprise License of $7,500 per month is 
optional. A firm that does not have a sufficient number of 
subscribers to benefit from purchase of the license need not do so.
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    The Non-Display Enterprise License is in addition to any other 
associated distributor fees for MRX proprietary direct data feed 
products.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\41\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\42\ 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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    \41\ See 15 U.S.C. 78f(b).
    \42\ See 15 U.S.C. 78f(b)(4) and (5).

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[[Page 30309]]

    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'. . . .'' \43\
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    \43\ 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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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention to determine 
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.'' \44\
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    \44\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Congress directed the Commission to ``rely on `competition, 
whenever possible, in meeting its regulatory responsibilities for 
overseeing the SROs and the national market system.' '' \45\ As a 
result, the Commission has historically relied on competitive forces to 
determine whether a fee proposal is equitable, fair, reasonable, and 
not unreasonably or unfairly discriminatory. ``If competitive forces 
are operative, the self-interest of the exchanges themselves will work 
powerfully to constrain unreasonable or unfair behavior.'' \46\ 
Accordingly, ``the existence of significant competition provides a 
substantial basis for finding that the terms of an exchange's fee 
proposal are equitable, fair, reasonable, and not unreasonably or 
unfairly discriminatory.'' \47\ In its 2019 guidance on fee proposals, 
Commission staff indicated that they would look at factors beyond the 
competitive environment, such as cost, only if a ``proposal lacks 
persuasive evidence that the proposed fee is constrained by significant 
competitive forces.'' \48\
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    \45\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep. 
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that 
the national market system evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed.'').
    \46\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \47\ Id.
    \48\ See U.S. Securities and Exchange Commission, ``Staff 
Guidance on SRO Rule filings Relating to Fees'' (May 21, 2019), 
available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
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History of MRX Operations
    Over the years, MRX has amended its transactional pricing to remain 
competitive and attract order flow to the Exchange.\49\
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    \49\ See e.g., Securities Exchange Act Release Nos. 77292 (March 
4, 2016), 81 FR 12770 (March 10, 2016) (SR-ISEMercury-2016-02) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Establish the Schedule of Fees); 77409 (March 21, 2016), 
81 FR 16240 (March 25, 2016) (SR-ISEMercury-2016-05) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
the Schedule of Fees); 81 FR 16238 (March 21, 2016), 81 FR 16238 
(March 25, 2016) (SR-ISEMercury-2016-06) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend the 
Schedule of Fees); 77841 (May 16, 2016), 81 FR 31986 (SR-ISEMercury-
2016-11) (Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend the Schedule of Fees); 82537 (January 19, 
2018), 83 FR 3784 (January 26, 2018) (SR-MRX-2018-01) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
the Schedule of Fees To Introduce a New Pricing Model); 82990 (April 
4, 2018), 83 FR 15434 (April 10, 2018) (SR-MRX-2018-10) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Chapter IV of the Exchange's Schedule of Fees); 28677 (June 14, 
2018), 83 FR 28677 (June 20, 2018) (SR-MRX-2018-19) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To 
Increase Certain Route-Out Fees Set Forth in Section II.A of the 
Schedule of Fees); 84113 (September 13, 2018), 83 FR 47386 
(September 19, 2018) (SR-MRX-2018-27) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Relocate the 
Exchange's Schedule of Fees); 85143 (February 14, 2019), 84 FR 5508 
(February 21, 2019) (SR-MRX-2019-02) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Amend the Pricing 
Schedule at Options 7, Section 3); 85313 (March 14, 2019), 84 FR 
10357 (March 20, 2019) (SR-MRX-2019-05) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change Relating to PIM 
Fees and Rebates); 86326 (July 8, 2019), 84 FR 33300 (July 12, 2019) 
(SR-MRX-2019-14) (Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Adopt Complex Order Pricing); 88022 (January 
23, 2020), 85 FR 5263 (January 29, 2020) (SR-MRX-2020-02) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
MRX Pricing Schedule); 89046 (June 11, 2020), 85 FR 36633 (June 17, 
2020) (SR-MRX-2020-11) (Notice of Filing and Immediate Effectiveness 
of Proposed Rule Change To Amend Its Pricing Schedule at Options 7); 
89320 (July 15, 2020), 85 FR 44135 (July 21, 2020) (SR-MRX-2020-14) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend Its Pricing Schedule at Options 7, Section 5, Other 
Options Fees and Rebates, in Connection With the Pricing for Orders 
Entered Into the Exchanges Price Improvement Mechanism); 90503 
(November 24, 2020), 85 FR 77317 (December 1, 2020) (SR-MRX-2020-18) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend Its Pricing Schedule at Options 7 for Orders Entered 
Into the Exchange's Price Improvement Mechanism); 90434 (November 
16, 2020), 85 FR 74473 (November 20, 2020) (SR-MRX-2020-19) (Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To the 
Exchange's Pricing Schedule at Options 7 To Amend Taker Fees for 
Regular Orders); 90455 (November 18, 2020), 85 FR 75064 (November 
24, 2020) (SR-MRX-2020-21) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change To Amend the Pricing 
Schedule); and 91687 (April 27, 2021), 86 FR 23478 (May 3, 2021) 
(SR-MRX-2021-04) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Amend the Exchange's Pricing Schedule at 
Options 7). Note that ISE Mercury is an earlier name for MRX.
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    In June 2019, MRX commenced offering complex orders.\50\ With the 
addition of complex order functionality, MRX offered Members certain 
order types, an opening process, auction capabilities and other trading 
functionality that was nearly identical to functionality available on 
ISE.\51\ By way of comparison, ISE, unlike MRX, assessed membership 
fees in 2019 \52\ while offering the same suite of functionality as 
MRX, with a limited exception.\53\ Additionally, by way of
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    \50\ See Securities Exchange Act Release No. 86326 (July 8, 
2019), 84 FR 33300 (July 12, 2019) (SR-MRX-2019-14) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Adopt Complex Order Pricing).
    \51\ One distinction is that ISE offered its Members access to 
Nasdaq Precise in 2019 and since that time. MRX has never offered 
Precise. ``Nasdaq Precise'' or ``Precise'' is a front-end interface 
that allows EAMs and their Sponsored Customers to send orders to the 
Exchange and perform other related functions. Features include the 
following: (1) Order and execution management: Enter, modify, and 
cancel orders on the Exchange, and manage executions (e.g., parent/
child orders, inactive orders, and post-trade allocations); (2) 
market data: Access to real-time market data (e.g., NBBO and 
Exchange BBO); (3) risk management: Set customizable risk parameters 
(e.g., kill switch); and (4) book keeping and reporting: 
Comprehensive audit trail of orders and trades (e.g., order history 
and done away trade reports). See ISE Supplementary Material .03(d) 
of Options 3, Section 7. Precise is also available on GEMX.
    \52\ In 2019, ISE assessed the following Access Fees: $500 per 
month, per membership to an Electronic Access Member, $5,000 per 
month, per membership to a Primary Market Maker and $2,500 per 
month, per membership to a Competitive Market Maker. ISE does not 
assess Trading Rights Fees to Competitive Market Makers. See 
Securities Exchange Act Release No. 82446 (January 5, 2018), 83 FR 
1446 (January 11, 2018) (SR-ISE-2017-112) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend Certain 
Non-Transaction Fees in the Exchange's Schedule of Fees). Of note, 
ISE assessed Access Fees prior to 2019 as well.
    \53\ Unlike ISE, MRX does not offer Precise. See note 51, supra.

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[[Page 30310]]

comparison, ISE assessed fees for ports \54\ in 2019 while offering the 
same suite of functionality as MRX, with a limited exception.\55\ 
Finally, in 2019, unlike MRX, ISE assessed fees for its market 
data,\56\ while offering the same functionality suite as MRX, with a 
limited exception.
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    \54\ Since 2019, ISE has assessed the following port fees: A FIX 
Port Fee of $300 per port, per month, per mnemonic, an SQF Port Fee 
and SQF Purge Port Fee of $1,100 per port, per month, an OTTO Port 
Fee of $400 per port, per month, per mnemonic with a monthly cap of 
$4,000, a CTI Port Fee and FIX DROP Port Fee of $500 per port, per 
month, per mnemonic. See Securities Exchange Act Release No. 82568 
(January 23, 2018), 83 FR 4086 (January 29, 2018) (SR-ISE-2018-07) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Assess Fees for OTTO Port, CTI Port, FIX Port, FIX Drop 
Port and Disaster Recovery Port Connectivity). Of note, ISE assessed 
port fees prior to 2019 as well.
    \55\ See note 51, supra.
    \56\ See e.g., Securities Exchange Act Release Nos. 53212 
(February 2, 2006), 71 FR 6803 (February 9, 2006) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Establishing 
Fees for Historical Options Tick Market Data); 53390 (February 28, 
2006), 71 FR 11457 (March 7, 2006) (Order Granting Accelerated 
Approval of a Proposed Rule Change Establishing Fees for Historical 
Options Tick Market Data for Non-Members); 53756 (May 3, 2006), 71 
FR 27526 (May 11, 2006) (Order Granting Approval of a Proposed Rule 
Change Establishing Fees for Enhanced Sentiment Market Data); 56254 
(August 15, 2007), 72 FR 47104 (August 22, 2007) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to ISE 
Open/Close Trade Profile Fees; 56315 (August 24, 2007), 72 FR 50148 
(August 30, 2007) (Order Approving a Proposed Rule Change Relating 
to ISEE Select Market Data Fees); 59679 (April 1, 2009), 74 FR 15795 
(April 7, 2009) (SR-ISE-2007-97) (Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto Relating to Market Data 
Fees);61086 (December 1, 2009), 74 FR 64783 (December 8, 2009) (SR-
ISE-2009-103) (Notice of Filing of Proposed Rule Change Relating to 
Market Data Fees); 65002 (August 1, 2011), 76 FR 47630 (August 5, 
2011) (SR-ISE-2011-50) (Notice of Filing and Immediate Effectiveness 
of Proposed Rule Change Relating to Market Data Fees); and 65678 
(November 10, 2011), 76 FR 70178 (November 3, 2011) (SR-ISE-2011-67) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Market Data Fees).
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Membership, Ports and Market Data Are Subject to Significant 
Substitution-Based Competitive Forces
    An Exchange can show that a product is ``subject to significant 
substitution-based competitive forces'' by introducing evidence that 
customers can substitute the product for products offered by other 
exchanges.
    NYSE National was able to prove exactly this when it sought 
approval for the ``NYSE National Integrated Feed'' \57\ in 2020. NYSE 
National at the time of its filing was in a similar position to MRX 
today--the exchange had an approximately 1.9% market share of executed 
volume of equity trades.\58\ The Commission approved the proposal to 
establish fees for NYSE National based on a finding that the exchange 
``was subject to significant substitution-based competitive forces.'' 
Citing NetCoalition I,\59\ the Commission stated that ``whether a 
market is competitive notwithstanding potential alternatives depends on 
factors such as the number of buyers who consider other products 
interchangeable and at what prices.'' \60\ Noting that ``many market 
participants . . . do not subscribe to . . . the NYSE National 
Integrated Feed, even when the feed is offered without charge,'' the 
Commission concluded that ``NYSE National's consistently low percentage 
of market share, the relatively small number of subscribers to the NYSE 
National Integrated Feed, and the sizeable portion of subscribers that 
terminated their subscriptions following the proposal of the fees,'' 
demonstrated that the exchange ``was subject to significant 
substitution-based competitive forces'' in setting fees such that the 
proposed rule change was consistent with the Act.\61\
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    \57\ NYSE National stated that the proposed integrated feed 
included depth-of-book order data, last sale data, security status 
updates, and stock summary messages. See Securities Exchange Act 
Release No 88211 (February 14, 2020), 85 FR 9847 (February 20, 2020) 
(SR-NYSENAT-2020-05), also available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf. (``Initial NYSE National Proposal'')
    \58\ See id.
    \59\ See NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. 2010) 
(``NetCoalition I'').
    \60\ See NYSE National Approval Order (citing NetCoalition I).
    \61\ See id.
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    MRX today is essentially in the same position as NYSE National in 
2020. MRX has a consistently low percentage of market share, starting 
at approximately 0.2 percent when it opened as an Exchange and ending 
in approximately 1.8 percent today. It has a small number of firms that 
are Members, subscribe to ports, or purchase market data relative to 
its affiliated options exchanges. Two firms that currently subscribe to 
MRX market data have terminated all of their subscriptions, and one 
additional firm that is currently a Member and purchases port services 
has told the Exchange that it will initiate a review of all of the 
services it purchases from MRX based on the all-in cost of trading on 
MRX. Based on prior experience, MRX may see additional cancellations of 
membership, ports and market data after May 2, 2022.
    Chart 1 below shows the January 2022 market share for multiply-
listed options by exchange. Of the 16 operating options exchanges, none 
currently has more than a 13.1% market share, and MRX has the smallest 
market share at 1.8%. Customers widely distribute their transactions 
across exchanges according to their business needs and the ability of 
each exchange to meet those needs through technology, liquidity and 
functionality. Average market share for the 16 options exchanges is 
6.26 percent, with the median at 5.8, and a range between 1.8 and 13.1 
percent.
BILLING CODE 8011-01-P

[[Page 30311]]

[GRAPHIC] [TIFF OMITTED] TN18MY22.000

    Market share is the percentage of volume on a particular exchange 
relative to the total volume across all exchanges, and indicates the 
amount of order flow directed to that exchange. High levels of market 
share enhance the value of trading, membership, ports and market data.
    Chart 2 below compares the number of firms purchasing FIX and SQF 
ports, memberships, and market data from MRX to the number of firms 
purchasing such services from the four MRX-affiliated options 
exchanges, GEMX, ISE, The Nasdaq Stock Market LLC (``NOM'') and Nasdaq 
PHLX, LLC (``Phlx'').
[GRAPHIC] [TIFF OMITTED] TN18MY22.001

BILLING CODE 8011-01-C
    Chart 2 shows that fewer firms purchased MRX ports in March 2022 
than the ports of its options exchange affiliates. As described in 
detail below, only one order protocol is required to submit orders to 
MRX, either FIX or OTTO. Quoting protocols are only required to the 
extent an MRX Member has been appointed as a Market Maker in an options 
series pursuant to Options 2, Section 1, and only one quoting protocol 
(SQF) is necessary to quote on MRX. Members may choose a greater number 
of order entry ports, however, depending on that Member's particular 
business model.\62\ With respect to the submission of orders, Members 
may also choose not to purchase any port at all from the Exchange, and 
instead rely on the port of a third party to submit an

[[Page 30312]]

order.\63\ The Exchange assigns the Member a badge \64\ and/or mnemonic 
\65\ to submit quotes and/or orders to the Exchange on a particular 
port. Use of this badge or mnemonic by a Member would allow a Member to 
use a third-party port to trade on the Exchange.
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    \62\ For example, a Member may desire to utilize multiple FIX or 
OTTO ports for accounting purposes, to measure performance, for 
regulatory reasons or other determinations that are specific to that 
Member.
    \63\ Market Makers on MRX are required to obtain one SQF port to 
submit quotes into MRX.
    \64\ A ``badge'' shall mean an account number, which may contain 
letters and/or numbers, assigned to Market Makers. A Market Maker 
account may be associated with multiple badges. See Options 1, 
Section 1(a)(5).
    \65\ A ``mnemonic'' shall mean an acronym comprised of letters 
and/or numbers assigned to Electronic Access Members. An Electronic 
Access Member account may be associated with multiple mnemonics. See 
Options 1, Section 1(a)(23).
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    The experience of MRX's affiliates shows that the number of ports 
that members choose to purchase varies widely. For example, a review of 
the Phlx exchange in April 2022 shows that, among its members that 
purchase ports, approximately 26 percent purchased 1 SQF or FIX port, 
another 26 percent purchased between 2 and 5 ports, 21 percent 
purchased between 6 and 10 ports, and 28 percent purchased more than 11 
ports. This means that any member has the option of reducing its 
purchase of port services without purchasing a substitute product by, 
for example, reconfiguring its systems to change the number of ports 
from 16 to 14.\66\
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    \66\ As noted above, one port (FIX) would be required to submit 
orders and one port (SQF) would be required to submit quotes.
---------------------------------------------------------------------------

    By way of comparison, the number of ports that MRX Members 
purchased in April 2022 also varies widely. For example, approximately 
23 percent purchased 1 SQF, FIX or OTTO port,\67\ another 43 percent 
purchased between 2 and 5 ports, 13 percent purchased between 6 and 10 
ports, and 20 percent purchased more than 11 ports. MRX Members, 
similar to Phlx members, have the option of reducing their port 
purchases without purchasing a substitute product.
---------------------------------------------------------------------------

    \67\ Phlx only offers FIX and SQF ports while MRX offers FIX, 
OTTO and SQF ports for order and quote entry.
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    Chart 2 also shows that MRX has the smallest number of Members 
relative to its GEMX, ISE, NOM and Phlx affiliates, with approximately 
40 members.\68\ This demonstrates that customers can and will choose 
where to become members, need not become members of all exchanges, and 
do not need to become Members of MRX and instead may utilize a third 
party.\69\
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    \68\ The data show that approximately 24 members purchased 
ports, while there are approximately 40 members of the Exchange. As 
discussed above, some members may use third-party ports to trade, so 
the low ratio of ports to memberships indicates that some members 
are doing so.
    \69\ Of course, that third party must itself become a member of 
MRX, so at least some market participants must become members of MRX 
for any trading to take place at all. Nevertheless, because some 
firms would be able to exercise the option of not becoming members, 
excessive membership fees would cause the Exchange to lose members.
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    With respect to market data, Chart 2 shows that approximately 34 
firms subscribe to at least one market data product from MRX in the 
first quarter of 2022. This is the second lowest number of firms 
purchasing market data from the Nasdaq-affiliated options exchanges.
    As explained above, Nasdaq proposes to introduce fees for five 
market data feeds: (i) Nasdaq MRX Depth of Market Data (aggregate 
quotes and orders at the top five price levels on MRX, and a 
consolidated view of tradable prices beyond the BBO); \70\ (ii) the 
Nasdaq MRX Order Feed (new orders resting on the book); \71\ (iii) 
Nasdaq MRX Top Quote Feed (best bid and offer position, with aggregated 
size based on displayable order and quote interest in the System; \72\ 
(iv) Nasdaq MRX Trades Feed (last trade information along with opening 
price, daily trading volume, high and low prices for the day); \73\ and 
(5) the Nasdaq MRX Spread Feed (orders for all Complex Orders, data 
aggregated at the top five price levels (BBO) on both the bid and offer 
side of the market and last trades information).\74\
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    \70\ Nasdaq MRX Depth of Market Data Feed (``Depth of Market 
Feed'') provides aggregate quotes and orders at the top five price 
levels on MRX, and provides subscribers with a consolidated view of 
tradable prices beyond the BBO, showing additional liquidity and 
enhancing transparency for MRX traded options. The data provided for 
each option series includes the symbols (series and underlying 
security), put or call indicator, expiration date, the strike price 
of the series, and whether the option series is available for 
trading on MRX and identifies if the series is available for closing 
transactions only. In addition, subscribers are provided with total 
aggregate quantity, Public Customer aggregate quantity, Priority 
Customer aggregate quantity, price, and side (i.e., bid/ask). This 
information is provided for each of the top five price levels on the 
Depth Feed. The feed also provides order imbalances on opening/
reopening. See Options 3, Section 23(a)(1).
    \71\ See Options 3, Section 23(a)(2).
    \72\ See Options 3, Section 23(a)(3).
    \73\ See Options 3, Section 23(a)(4).
    \74\ See Options 3, Section 23(a)(5).
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    The MRX Top Quote Feed and the MRX Trades Feed provide ``top-of-
book'' information. Such information is typically of interest to a 
broader audience than Members trading on exchanges, including retail 
investors, media, portfolio managers, competing exchanges and others. 
For this broader audience, top-of-book data from one exchange is, in 
general, readily substitutable with the top-of-book information from 
another exchange,\75\ and therefore the Exchange may lose customers if 
fees for top-of-book data are set too high.
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    \75\ See, e.g., Securities Exchange Act Release No. 94466 (March 
18, 2022), 87 FR 16811 (March 24, 2022) (SR-Nasdaq-2022-024) 
(explaining that top-of-book products from major exchanges are 
readily substitutable).
---------------------------------------------------------------------------

    The other three market data feeds, the Depth of Market Data feed, 
the Order Feed, and the Spread Feed are generally of more interest to 
Members trading on the Exchange relative to other market participants 
but, as noted above, MRX has the smallest market share at 1.8%, and any 
Member can choose to trade on another exchange if fees for these other 
three feeds exceed their value.
    All of these statistics must be viewed in the context of a field 
with relatively low barriers to entry. MRX, like many new entrants to 
the field, offered membership, ports and market data for free to 
establish itself and gain market share. As new entrants enter the 
field, MRX can also expect competition from these new entrants. Those 
new entrants, like MRX, are likely to set membership, port, market 
data, or other fees to zero, increasing marketplace competition.
    In summary, MRX membership, port and market data fees are subject 
to significant substitution-based competitive forces due to its 
consistently low percentage of market share, the relatively small 
number of purchasers for each product, and the purchasers that either 
cancelled or are reviewing their subscriptions. Implementation of the 
proposed fees is therefore consistent with the Act.
Fees for Membership, Ports and Market Data
    Each of the proposed membership, port and data fees described below 
are in line with those of other markets. Setting a fee above 
competitors is likely to drive away customers, so the most efficient 
price-setting strategy is to set prices at the same level as other 
firms.
Options 7, Section 5--Membership
    The Exchange's proposal to adopt membership fees is reasonable, 
equitable and not unfairly discriminatory. As a self-regulatory 
organization, MRX's membership department reviews applicants to ensure 
that each application complies with the rules specified within MRX 
General 3 \76\ as well as other requirements for membership.\77\ 
Applicants must meet the Exchange's qualification criteria

[[Page 30313]]

prior to approval. The membership review includes, but is not limited 
to, the registration and qualification of associated persons, financial 
health, the validity of the required clearing relationship, and the 
history of disciplinary matters. Approved Members would be required to 
comply with MRX's By-Laws and Rules and would be subject to regulation 
by MRX. The proposed membership fees are identical to membership fees 
on GEMX,\78\ and are lower than similar fees assessed on other options 
markets.\79\
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    \76\ MRX General 3 incorporates by reference Nasdaq General 3.
    \77\ The Exchange's Membership Department must ensure, among 
other things, that an applicant is not statutorily disqualified.
    \78\ See GEMX Options 7, Section 6A (Access Fees).
    \79\ See Cboe's Fees Schedule. Cboe assesses permit fees as 
follows: Market-Maker Electronic Access Permit of $5,000 per month; 
Electronic Access Permits of $3,000 per month; and Clearing TPH 
Permit of $2,000 per month. See also Miami International Securities 
Exchange, LLC's (``MIAX'') Fee Schedule. MIAX assesses an Electronic 
Exchange Member Fee of $1,500 per month.
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    The Exchange believes that there are many factors that may cause a 
market participant to decide to become a member of a particular 
exchange. Among various factors, the Exchange believes market 
participants consider: (i) An exchange's available liquidity in options 
series; (ii) trading functionality offered on a particular market; 
(iii) product offerings; (iv) customer service on an exchange; and (v) 
transactional pricing. The Exchange believes that the decision to 
become a member of an exchange, particularly as a registered market 
maker, is a complex one that is not solely based on non-transactional 
costs assessed by an exchange. Market participants weigh the tradeoff 
between where they choose to deploy liquidity versus where trading 
opportunities exist. Of course, the cost of membership, ports and 
market data may factor into a decision to become a member of a certain 
exchange, but the Exchange believes it is by no means the only factor 
when comparing exchanges.
Market Makers
    Market makers play an important role on options exchanges as they 
provide liquidity. In options markets, registered market makers are 
assigned options series \80\ and are required to quote in those options 
series for a specified time period during the day.\81\ Typically, a 
lead or primary market maker \82\ will be required to quote for a 
longer period of time during the day as compared to other market makers 
registered on an exchange.\83\ Additionally, market makers are 
typically required to quote within a certain width on options 
markets.\84\ Greater liquidity on options markets benefits all market 
participants by providing more trading opportunities and attracting 
greater participation by market makers. An increase in the activity of 
market makers in turn facilitates tighter spreads. Market participants 
are attracted to options markets that have ample liquidity and tighter 
spreads in options series.
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    \80\ See Phlx, ISE, GEMX, MRX, Nasdaq BX, Inc. (``BX'') and NOM 
Options 2, Section 3; Cboe Exchange, Inc. (``Cboe'') Rule 5.50; BOX 
Exchange LLC (``BOX'') Rule 8030; MIAX Rule 602; and NYSE Arca, Inc. 
(``NYSE Arca'') Rule 6.35-O.
    \81\ See ISE, GEMX and MRX, Phlx, BX and NOM Options 2, Section 
5; Cboe Rule 5.52; BOX Rule 8050; MIAX Rule 604; and NYSE Arca Rule 
6.37A-O.
    \82\ Options markets refer to the primary market maker on an 
exchange in several ways.
    \83\ See BX Options 2, Section 4; ISE, GEMX and MRX, and Phlx 
Options 2, Section 5; BOX Rule 8055; MIAX Rule 604; and NYSE Arca 
Rule 6.37A-O.
    \84\ See BX Options 2, Section 4; ISE, GEMX and MRX, Phlx and 
NOM Options 2, Section 5; and Cboe Rule 5.52; BOX Rule 8040.
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Trading Functionality
    An exchange's trading functionality attracts market participants 
who may elect, for example, to submit an order into a price improving 
auction,\85\ enter a complex order,\86\ or utilize a particular order 
type.\87\ Different options exchanges offer different trading 
functionality to their members. For example, with respect to priority 
and allocation of an order book, some options exchanges have price/time 
allocation,\88\ some have a size pro-rata allocation,\89\ while other 
exchanges offer both allocation models.\90\ The allocation methodology 
on a particular options exchange's order book may attract certain 
market participants. Also, the manner in which some options markets 
structure their solicitation auction,\91\ or opening process,\92\ may 
be attractive to certain market participants. Finally, some exchanges 
have trading floors \93\ which may accommodate trading for certain 
market participants or trading firms.\94\
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    \85\ See ISE, GEMX, MRX, Phlx and BX Options 3, Section 13; MIAX 
Rule 515A; Cboe Rule 5.37; and BOX Rules 7150 and 7245.
    \86\ See Phlx and ISE Options 3, Section 14; MIAX Rule 518; Cboe 
Rule 5.33; BOX Rule 7240; and NYSE Arca Rule 6.91-O.
    \87\ See ISE, GEMX, MRX, Phlx, BX and NOM Options 3, Section 7; 
MIAX Rule 615; Cboe Rule 5.6; BOX Rule 7110; and NYSE Arca Rule 
6.62-O.
    \88\ See Cboe Rule 5.85; BOX Rule 7130; and NYSE Arca Rule 6.76-
O.
    \89\ See Phlx, ISE, GEMX and MRX Options 3, Section 10; and BOX 
Rule 7135.
    \90\ See BX Options 3, Section 10. While BX's rule permits both 
price/time and size pro-rata allocation, all symbols on BX are 
currently designated as Price/Time. See also BOX Rules 7130 and 
7135. MIAX's rule permits both Price-Time and Pro-Rata allocation. 
See also MIAX Rule 514.
    \91\ See ISE, GEMX and MRX Options 3, Section 11; NYSE American 
Rules 971.1NY and 971.2NY; and Cboe Rule 5.39.
    \92\ See ISE, GEMX, MRX, Phlx, BX and NOM Options 3, Section 8; 
Cboe Rule 5.31, MIAX Rule 503, BOX Rule 7070, and NYSE Arca Rule 
6.64-O.
    \93\ Today, Phlx, Cboe, BOX, NYSE Arca, and NYSE American LLC 
have a trading floor. Trading floors require an on-floor presence to 
execute options transactions.
    \94\ There are certain features of open outcry trading that are 
difficult to replicate in an electronic trading environment. The 
Exchange has observed, and understands from various market 
participants, that they have had difficulty executing certain 
orders, such as larger orders and high-risk and complicated 
strategies, in an all-electronic trading configuration without the 
element of human interaction to negotiate pricing for these orders.
---------------------------------------------------------------------------

Product Offerings
    Introducing new and innovative products to the marketplace designed 
to meet customer demands may attract market participants to a 
particular options venue. New products in the options industry may 
allow market participants greater trading and hedging opportunities, as 
well as new avenues to manage risks. The listing of new options 
products enhances competition among market participants by providing 
investors with additional investment vehicles, as well as competitive 
alternatives, to existing investment products. An exchange's 
proprietary product offering may attract order flow to a particular 
exchange to trade a particular options product.\95\
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    \95\ See e.g. options on the Nasdaq-100 Index[supreg] available 
on ISE, GEMX and Phlx and Cboe's Market Volatility Index[supreg]. 
Currently, MRX does not list any proprietary products.
---------------------------------------------------------------------------

Transaction Pricing
    The pricing available on a particular exchange may impact a market 
participant's decision to submit order flow to a particular options 
venue. The options industry is competitive. Clear substitutes to the 
Exchange exist in the market for options security transaction services; 
the Exchange is only one of sixteen 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.
    With respect to the CMM Trading Rights Fee, the proposed fees 
compare favorably with those of other options exchanges. For example, a 
market maker on MIAX assesses Market Makers a $3,000 one-time fee and 
then a tiered monthly fee from $7,000 for up to 10 classes to $22,000 
for over 100 classes.\96\ By comparison, under the proposed fee 
structure, a CMM can be granted access

[[Page 30314]]

on the Exchange for as little as $950 per month (i.e., a $100 access 
fee and an $850 trading right), and could quote in all options classes 
on the Exchange by paying the access fee and obtaining nine CMM trading 
rights for a total of $4,950 per month. The Exchange notes that its 
tiered model for CMM trading rights is consistent with the pricing 
practices of other exchanges, such as NYSE Arca, which charges $6,000 
per month for the first market maker trading permit, as mentioned 
above, down to $1,000 per month for the fifth and additional trading 
permits, with various tiers in-between. Like other options exchanges, 
the Exchange is proposing a tiered pricing model because it may 
encourage CMM firms to purchase additional trading rights and quote 
more issues because subsequent trading rights are priced lower than the 
initial trading right.
---------------------------------------------------------------------------

    \96\ See Miami International Securities Exchange, LLC Fee 
Schedule at 20 and 21: https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_03012022.pdf.
---------------------------------------------------------------------------

    The Exchange does not believe that it is unfairly discriminatory to 
assess different fees for PMMs, CMMs, and EAMs. For PMMs on MRX, the 
fees required to access the Exchange are substantially lower than those 
of competing exchanges. For example, a PMM could quote on the Exchange 
for only $200 (i.e., the access fee), compared with the minimum $6,000 
per month trading permit fee charged by NYSE Arca. The Exchange notes 
that it is not proposing trading right fees for PMMs, as the Exchange 
wishes to encourage Members to act as PMMs, which will benefit the 
market through, for example, more robust quoting requirements. 
Similarly, the Exchange is proposing only to charge the $200 access fee 
to EAMs as the technical, regulatory, and administrative services 
associated with an EAM's use of the Exchange are not as comprehensive 
as those associated with Market Makers. The CMM Trading Right Fee is 
identical to GEMX.\97\
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    \97\ See GEMX Options 7, Section 6.B. (CMM Trading Rights Fees).
---------------------------------------------------------------------------

    Membership fees are charged by nearly all exchanges, and all 
established exchanges with sufficient order flow. In 2022, MEMX LLC 
(``MEMX'') established a monthly membership fee of $200.\98\ MEMX 
reasoned in that rule change that there is value in becoming a Member 
of the Exchange. MEMX stated that it believed that its proposed 
membership fee ``is not unfairly discriminatory because no broker-
dealer is required to become a member of the Exchange.'' Moreover, 
``neither the trade-through requirements under Regulation NMS nor 
broker-dealers' best execution obligations require a broker-dealer to 
become a member of every exchange.'' In this respect, MEMX is correct; 
a monthly membership fee is reasonable, equitably allocated and not 
unfairly discriminatory. Market participants may choose to become a 
member of one or more options exchanges based on the market 
participant's business model. A very small number of market 
participants choose to become a member of all sixteen options 
exchanges. It is not a requirement for market participants to become 
members of all options exchanges, in fact, certain market participants 
conduct an options business as a member of only one options market. 
Most firms that actively trade on options markets are not currently 
members of MRX and do not purchase port services at MRX. Using options 
markets that Nasdaq operates as points of comparison, less than a third 
of the firms that are members of at least one of the options markets 
that Nasdaq operates are also members of MRX (approximately 29%). The 
Exchange notes that no firm that is a member of MRX only. Few, if any, 
firms have become members or purchased port services at MRX, 
notwithstanding the fact that both MRX membership and ports are 
currently free, because MRX currently has less liquidity than other 
options markets. As explained above, MRX has the smallest market share 
of the 16 options exchanges, representing only approximately 1.8% of 
the market, and, for certain market participants, the current levels of 
liquidity may be insufficient to justify the costs associated with 
becoming a member and connecting to the exchange, notwithstanding the 
fact that both are currently free.
---------------------------------------------------------------------------

    \98\ See Securities Exchange Act Release No. 93927 (January 7, 
2022), 87 FR 2191 (January 13, 2022) (SR-MEMX-2021-19). The Monthly 
Membership Fee is assessed to each active Member at the close of 
business on the first day of each month.
---------------------------------------------------------------------------

    The decision to become a member of an exchange, particularly for 
registered market makers, is complex, and not solely based on the non-
transactional costs assessed by an exchange. As noted herein, specific 
factors include, but are not limited to: (i) An exchange's available 
liquidity in options series; (ii) trading functionality offered on a 
particular market; (iii) product offerings; (iv) customer service on an 
exchange; and (v) transactional pricing. Becoming a member of the 
exchange does not ``lock'' a potential member into a market or diminish 
the overall competition for exchange services. The decision to become a 
member of an exchange is made at the beginning of the relationship, and 
is no less subject to competition than trading fees or market data.
    In lieu of becoming a member at each options exchange, a market 
participant may join one exchange and elect to have their orders routed 
in the event that a better price is available on an away market. 
Nothing in the Order Protection Rule requires a firm to become a Member 
at MRX.\99\ If MRX is not at the NBBO, MRX will route an order to any 
away market that is at the NBBO to prevent a trade-through and also 
ensure that the order was executed at a superior price.\100\
---------------------------------------------------------------------------

    \99\ See Options Order Protection and Locked/Crossed Market Plan 
(August 14, 2009), available at https://www.theocc.com/getmedia/7fc629d9-4e54-4b99-9f11-c0e4db1a2266/options_order_protection_plan.pdf.
    \100\ MRX Members may elect to not route their orders by marking 
an order as ``do-not-route.'' In this case, the order would not be 
routed.
---------------------------------------------------------------------------

    In lieu of joining an exchange, a third-party may be utilized to 
execute an order on an exchange. For example, a third-party broker-
dealer Member of MRX may be utilized by a retail investor to submit 
orders into an Exchange. An institutional investor may utilize a 
broker-dealer, a service bureau,\101\ or request sponsored access \102\ 
through a member of an exchange in order to submit a trade directly to 
an options exchange.\103\ A market participant may either pay the costs 
associated with becoming a member of an exchange or, in the 
alternative, a market participant may elect to pay commissions to a 
broker-dealer, pay fees to a service bureau to submit trades, or pay a 
member to sponsor the market participant in order to submit trades 
directly to an exchange. Market participants may elect any of the above 
models and weigh the varying costs when determining how to submit 
trades to an exchange. Depending on the number of orders to be 
submitted, technology, ability to control submission of orders, and 
projected revenues, a market participant may

[[Page 30315]]

determine one model is more cost efficient as compared to the 
alternatives.
---------------------------------------------------------------------------

    \101\ Service bureaus provide access to market participants to 
submit and execute orders on an exchange. On MRX, a Service Bureau 
may be a Member. Some MRX Members utilize a Service Bureau for 
connectivity and that Service Bureau may not be a Member. Some 
market participants utilize a Service Bureau who is a Member to 
submit orders. As noted herein only MRX Members may submit orders or 
quotes through ports.
    \102\ Sponsored Access is an arrangement whereby a member 
permits its customers to enter orders into an exchange's system that 
bypass the member's trading system and are routed directly to the 
Exchange, including routing through a service bureau or other third-
party technology provider.
    \103\ This may include utilizing a Floor Broker and submitting 
the trade to one of the five options trading floors.
---------------------------------------------------------------------------

Options 7, Section 6--Ports
    The Exchange's proposal to amend port fees is reasonable, equitable 
and not unfairly discriminatory. The proposed port fees are similar to 
the fees assessed by GEMX,\104\ and lower than the fees assessed by 
ISE. The proposed fees reflect the ongoing services provided to 
maintain and support the ports. In order to submit orders into MRX, 
only one order protocol is required, either FIX or OTTO. Quoting 
protocols are only required to the extent an MRX Member has been 
appointed as a Market Maker in an options series pursuant to Options 2, 
Section 1. Similarly, only one quoting protocol (SQF) is necessary to 
quote on MRX. Depending on a Member's business model, one protocol may 
be better suited for a particular Member relative to another.\105\ 
Members may elect to utilize both order entry protocols, depending on 
how they organize their business. Only one protocol is necessary to 
submit orders into MRX. However, Members may choose a greater number of 
order entry ports, depending on that Member's particular business 
model.\106\ Similarly, only one account number is necessary per Member, 
although Members may choose to have additional accounts number to 
organize their business. The Exchange notes that FIX, OTTO, FIX DROP, 
the Clearing Trade Interface, and TradeInfo are available to all 
Members and may be utilized to obtain order information.
---------------------------------------------------------------------------

    \104\ See GEMX Options 7, Section 6.C. (Ports and Other 
Services).
    \105\ For example, while the FIX protocol permits routing 
capability the OTTO protocol does not permit routing capability. 
This distinction may cause a Member to elect a certain protocol 
based on whether they want the order executed locally or have the 
option to allow the order to route. The OTTO Port offer lower 
latency as compared to the FIX Port, which may be attractive to 
Members depending on their trading behavior.
    \106\ For example, a Member may desire to utilize multiple FIX 
or OTTO ports for accounting purposes, to measure performance, for 
regulatory reasons or other determinations that are specific to that 
Member.
---------------------------------------------------------------------------

    Members choose among the protocols based on their business 
workflow. The Exchange would uniformly assess the port fees to all 
Members and would uniformly apply monthly caps.
    Ports are only available to MRX Members or service bureaus, and 
only an MRX Member may utilize a port.\107\
---------------------------------------------------------------------------

    \107\ Service bureaus may obtain ports on behalf of members. The 
Exchange would only assign a badge and/or mnemonic to a Member to be 
utilized to submit quotes and/or orders to the Exchange.
---------------------------------------------------------------------------

    Once an applicant is approved for membership on MRX and becomes a 
Member, the Exchange assigns the Member a badge \108\ and/or mnemonic 
\109\ to submit quotes and/or orders to the Exchange through the 
applicable port. An MRX Member may have one or more accounts numbers 
and may assign badges or mnemonics to those account numbers. Membership 
approval grants a Member a right to exercise trading privileges on MRX, 
which includes the submission of orders and/or quotes into the Exchange 
through a secure port by utilizing the badge and/or mnemonic assigned 
to a specific Member by the Exchange. The Exchange utilizes ports as a 
secure method for Members to submit orders into the Exchange's match 
engine and for the Exchange to send messages related to those orders to 
its Members.
---------------------------------------------------------------------------

    \108\ See note 64, supra.
    \109\ See note 65, supra.
---------------------------------------------------------------------------

    MRX is obligated to regulate its Members and secure access to its 
environment. In order to properly regulate its Members and secure the 
trading environment, MRX takes measures to ensure access is monitored 
and maintained with various controls. Ports are a method utilized by 
the Exchange to grant Members secure access to communicate with the 
Exchange and exercise trading rights. When a market participant elects 
to be a Member of MRX, and is approved for membership by MRX, the 
Member is granted trading rights to enter orders into MRX through 
secure ports.
    As noted herein, there is no legal or regulatory requirement that a 
market participant become a Member of MRX, or, if it is a Member, to 
purchase port services beyond the one quoting protocol or one order 
entry protocol necessary to quote or submit orders on MRX.\110\ As 
noted above, Members may freely choose to rely on one or many ports, 
depending on their business model. A Member can only submit interest 
(quotes or orders) through a secure port. Only one port is required to 
submit an order (FIX or OTTO) to MRX and only one port is required to 
submit a quote (SQF) to MRX. A market participant may decide, in the 
alternative, not to become a member of an exchange and instead utilize 
a third party.\111\
---------------------------------------------------------------------------

    \110\ Only Members and service bureaus may request ports on MRX, 
and only Members may utilize ports on MRX through their assigned 
badge or mnemonic. See Options 1, Section 1(a)(5) and (23).
    \111\ In lieu of joining an exchange, a third-party may be 
utilized to execute an order on an exchange as described above.
---------------------------------------------------------------------------

    The decision as to what types and number of ports to buy, like the 
decision to become a member of an exchange, is made at the beginning of 
that relationship, but that decision may be altered at any time as a 
market participant's business strategy evolves or the manner in which 
the market participant interacts with the exchange changes over time. 
As noted herein, only one protocol is required to submit orders. 
Depending on a Member's business model, one protocol may be better 
suited for a Member than another. Port selection is often made at the 
beginning of a trading relationship, like the decision whether to 
become a member, but a member is not ``locked'' into a particular 
number or type of ports over the course of the business relationship.
Options 7, Section 7--Market Data
    The Exchange's proposal to adopt market data fees is reasonable, 
equitable and not unfairly discriminatory. The five market data feeds 
at issue here--the Depth of Market Feed,\112\ Order Feed,\113\ Top 
Quote Feed,\114\ Trades Feed,\115\ and Spreads Feed \116\--are used 
throughout the market by a variety of market participants for a variety 
of purposes. Users include regulators, market makers, competing 
exchanges, media, retail, academics, portfolio managers. Market data 
feeds will be available to members of all of these groups on a non-
discriminatory basis. With respect to the proposed Non-Display 
Enterprise License, the Exchange notes that enterprise licenses in 
general have been widely recognized as an effective and not unfairly 
discriminatory method of distributing market data. Enterprise licenses 
are widely employed by options exchanges, and the proposal here is 
typical of such licenses.
---------------------------------------------------------------------------

    \112\ The Depth of Market Feed provides aggregate quotes and 
orders at the top five price levels on MRX, and provides subscribers 
with a consolidated view of tradable prices beyond the BBO, showing 
additional liquidity and enhancing transparency for MRX traded 
options.
    \113\ The Order Feed provides information on new orders resting 
on the book (e.g. price, quantity and market participant capacity), 
and also announces all auctions.
    \114\ The Top Quote Feed calculates and disseminates MRX's best 
bid and offer position, with aggregated size (including total size 
in aggregate, for Professional Order size in the aggregate and 
Priority Customer Order size in the aggregate), based on displayable 
order and quote interest in the System. The feed also provides last 
trade information along with opening price, daily trading volume, 
high and low prices for the day.
    \115\ The Trades Feed displays last trade information along with 
opening price, daily trading volume, high and low prices for the 
day.
    \116\ The Spread Feed consists of: (1) Options orders for all 
Complex Orders (i.e., spreads, buy-writes, delta neutral strategies, 
etc.); (2) data aggregated at the top five price levels (BBO) on 
both the bid and offer side of the market; (3) last trades 
information.

---------------------------------------------------------------------------

[[Page 30316]]

    Market data, often mistakenly characterized as the ``exhaust'' of 
an exchange, is in fact the engine that drives liquidity: Firms are 
attracted by high levels of liquidity, diverse offerings and bids and 
offers close to the NBBO. Market data, unlike membership or ports, is 
not sold only to members, but rather is open to investors generally.
    Nasdaq is subject to direct competition in the sale of market data. 
As explained above, Nasdaq proposes to introduce fees for both top-of-
book and depth-of-book feeds. Top-of-book feeds are generally of 
interest to a broader audience that can readily substitute the top-of-
book feed of one exchange with that of another. Depth-of-book feeds 
are, for the most part, of more interest to Members trading on the 
Exchange than other market participants but MRX has the smallest market 
share at 1.8%, and any Member can choose to trade on another exchange 
if fees for these other three feeds exceed their value.
    Moreover, MRX lists no proprietary options products that are 
entirely unique to MRX. Firms can substitute MRX market data with feeds 
from exchanges that provide a high degree of functionality, including 
complex orders. Full market data options are available, for example, 
from Cboe,\117\ MIAX,\118\ and NYSE Arca Options.\119\
---------------------------------------------------------------------------

    \117\ See Cboe DataShop, available at https://datashop.cboe.com/.
    \118\ See MIAX Options Market Data & Offerings, available at 
https://www.miaxoptions.com/market-data-offerings.
    \119\ See NYSE Options Markets, available at https://www.nyse.com/options.
---------------------------------------------------------------------------

    Top-of-book data--last trade and best bid and offer information--is 
sold broadly to a wide of market participants, including the media, the 
general investing public, retail broker-dealers, regulatory agencies, 
and many others in addition to broker-dealers routing order flow. 
Because MRX does not list options on products that are exclusively 
available on MRX, then these same types of general-interest consumers 
of data can substitute MRX data with data from any exchange that lists 
such multiply-listed options, or through OPRA, in the same sense that 
consumers of top-of-book data on equity exchanges compete with other 
sellers of top-of-book data.\120\ Top-of-book data is easily 
substitutable by many of its users, and therefore is subject to 
particularly fierce competition.
---------------------------------------------------------------------------

    \120\ See Securities Exchange Act Release No. 94466 (March 18, 
2022), 87 FR 16811 (March 24, 2022) (SR-NASDAQ-2022-024) (explaining 
that ``[a]ll of the top-of-book proprietary products offered by the 
exchanges are readily substitutable for each other.'' ``Top-of-book 
data can be used for many purposes--from a retail investor casually 
surveying the market to sophisticated market participants using it 
for a variety of applications, such as investment analysis, risk 
management, or portfolio valuation.'' ``All major exchange groups 
compete to sell top-of-book data.'').
---------------------------------------------------------------------------

    All of this competition must be understood in the context of the 
fact that all broker-dealers involved in order routing must take 
consolidated data from OPRA, and proprietary data feeds cannot be used 
to meet that particular requirement. As such, all proprietary data 
feeds are optional.
* * * * *
    After 6 years, MRX proposes to commence assessing membership, port, 
and market data fees, just as all other options exchanges.\121\ The 
introduction of these fees will not impede a Member's access to MRX, 
but rather will allow MRX to continue to compete and grow its 
marketplace so that it may continue to offer a robust trading 
architecture, a quality opening process, an array of simple and complex 
order types and auctions, and competitive transaction pricing. If MRX 
is incorrect in its assessment of the value of its services, that 
assessment will be reflected in MRX's ability to compete with other 
options exchanges.
---------------------------------------------------------------------------

    \121\ Today, MRX is the only options exchange that does not 
assess membership, port, and market data fees.
---------------------------------------------------------------------------

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.
    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 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.
Options 7, Section 5--Membership
    The proposed membership fees are identical to membership fees 
assessed by GEMX.\122\ The proposed fees are designed to reflect the 
benefits of the technical, regulatory, and administrative services 
provided to a Member by the Exchange, and the fees remain competitive 
with similar fees offered on other options exchanges. The Exchange does 
not believe that assessing different fees for PMMs, CMMs, and EAMs 
creates an undue burden on competition.
---------------------------------------------------------------------------

    \122\ See GEMX Options 7, Section 6.A. (Access Fees) and Section 
6.B. (CMM Trading Rights Fees).
---------------------------------------------------------------------------

    With respect to the CMM Trading Rights Fee, the proposed fees 
compare favorably with those of other options exchanges.\123\ Like 
other options exchanges, the Exchange is proposing a tiered pricing 
model because it may encourage CMM firms to purchase additional trading 
rights and quote more issues because subsequent trading rights are 
priced lower than the initial trading right. The Exchange notes that it 
is not proposing trading right fees for PMMs as the Exchange wishes to 
encourage Members to act as PMMs, which will benefit the market 
through, for example, more robust quoting. Additionally, as noted 
herein, PMMs have higher quoting obligations as compared to CMMs.\124\
---------------------------------------------------------------------------

    \123\ See NYSE Arca Fees and Charges, General Options and 
Trading Permit (OTP) Fees (comparing CMM Trading Rights Fees to the 
Arca Market Maker fees).
    \124\ See MRX Options 2, Section 5. PMMs, associated with the 
same Member, are collectively required to provide two-sided 
quotations in 90% of the cumulative number of seconds, or such 
higher percentage as the Exchange may announce. CMMs are not 
required to enter quotations in the options classes to which it is 
appointed, however if a CMM initiates quoting in an options class, 
the CMM, associated with the same Member, is collectively required 
to provide two-sided quotations in 60% of the cumulative number of 
seconds, or such higher percentage as the Exchange may announce.
---------------------------------------------------------------------------

Options 7, Section 6--Ports
    The proposed port fees are similar to port fees assessed by GEMX 
\125\ for similar connectivity. As a consequence, competition will not 
be burdened by the proposed fees. In order to submit orders into MRX, 
only one order protocol is required, either FIX or OTTO. Likewise, only 
one quoting protocol, SQF, is necessary to quote on MRX. Finally, only 
one account number is necessary per Member. FIX, and OTTO Ports, as 
well TradeInfo, are available to all Members and may be utilized to 
cancel orders. Further, FIX, and OTTO Ports, as well TradeInfo, are 
available to all Members and may be utilized to cancel orders and FIX 
DROP, the Clearing Trade Interface, and TradeInfo are available to all 
Members and may be utilized to obtain order information. These 
different protocols are not all necessary to conduct business on MRX. 
Market participants may also connect to

[[Page 30317]]

third parties instead of directly to the Exchange.
---------------------------------------------------------------------------

    \125\ See GEMX Options 7, Section 6.C. (Ports and Other 
Services).
---------------------------------------------------------------------------

    With respect to the higher fees assessed for SQF Ports and SQF 
Purge Ports, the Exchange notes that only Market Makers may utilize 
these ports. Market Makers are required to provide continuous two-sided 
quotes on a daily basis,\126\ and are subject to various obligations 
associated with providing liquidity.\127\ As a result of these quoting 
obligations, the SQF Port and SQF Purge Port are designed to handle 
higher throughput to permit Market Makers to bundle orders to meet 
their obligations. The technology to permit Market Makers to submit a 
greater number of quotes, in addition to the various risk protections 
\128\ afforded to these market participants when quoting, accounts for 
the higher SQF Port and SQF Purge Port fees. Greater liquidity benefits 
all market participants by providing more trading opportunities and 
attracting greater participation by Market Makers. Also, an increase in 
the activity of Market Makers in turn facilitates tighter spreads.
---------------------------------------------------------------------------

    \126\ See MRX Options 2, Section 5.
    \127\ See MRX Options 2, Section 4.
    \128\ See MRX Options 3, Section 15(a)(3). Market Makers are 
offered risk protections to permit them to manage their risk more 
effectively.
---------------------------------------------------------------------------

Options 7, Section 7--Market Data
    The initiation of market data fees will not impose an undue burden 
on inter-market competition. Since February 2016, MRX has disseminated 
market data without charging a fee, allowing MRX time to build order 
flow. Now that order flow has increased from approximately 0.2 percent 
to 1.8 percent of the market, MRX proposes charging fees that reflect 
the value of that data.
    Permitting MRX to charge a fee for its data does not impose any 
burden on the ability of other options exchanges to compete. Each of 
the remaining 15 options exchanges currently sells its market data, and 
is capable of modifying its fees response to the proposed changes by 
MRX. Moreover, allowing MRX, or any new market entrant, to waive fees 
for a period of time to allow it to become established encourages 
market entry and thereby ultimately promotes competition.
    If the changes proposed herein are unattractive to market 
participants, it is likely that the Exchange will lose market 
share.\129\ 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.
---------------------------------------------------------------------------

    \129\ The Exchange notified market participants of the new fees 
on December 20, 2021. See Data News #2021-11 (December 20, 2021, 
available at http://www.nasdaqtrader.com/TraderNews.aspx?id=dn2021-11. As such, market participants have had ample notice of the 
proposed fee changes and will be able to adjust their purchases of 
exchange services accordingly.
---------------------------------------------------------------------------

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.\130\ 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.
---------------------------------------------------------------------------

    \130\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-MRX-2022-04 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-2022-04. 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-MRX-2022-04 and should be submitted on 
or before June 8, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\131\
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    \131\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10617 Filed 5-17-22; 8:45 am]
BILLING CODE 8011-01-P


