[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Notices]
[Pages 57539-57541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20275]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95772; File No. SR-GEMX-2022-08]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Its Port-
Related Fees at Options 7, Section 6

September 14, 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 September 1, 2022, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's port-related fees at 
Options 7, Section 6, as described further below. The text of the 
proposed rule change is available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/gemx/rules, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend Options 7, 
Section 6 to (i) prorate port fees for the first month of service, (ii) 
clarify that port fees for cancelled services will continue to be 
charged for the remainder of month, (iii) clarify that Disaster 
Recovery Port Fees are not charged for market data ports listed in 
Options 7, Section 6C(iii), and (iv) clarify that Nasdaq Testing 
Facility (``NTF'') ports are provided at no cost.
    Currently, the Exchange does not prorate port connectivity fees. 
Thus, participants are assessed a full month's fee if they direct the 
Exchange to make the subscribed connectivity live on any day of the 
month, including the last day thereof. Participants are also assessed a 
full month's port fee if they cancel service during the month.
    The Exchange proposes to provide prorated port fees for the first 
month of service for new requests. By prorating the first month's fees, 
the Exchange would charge participants port fees only for the days in 
which the participants are connected to the Exchange during the first 
month of service. The Exchange proposes to continue the current 
practice of charging port fees for the remainder of the month upon 
cancellation. If a participant starts and cancels service in the same 
month, the participant would not be billed for those days prior to the 
service start date but would be billed for the remainder of the month, 
including after the service is cancelled.\3\
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    \3\ For example, if a participant orders a port on September 4, 
2022 and cancels the port on September 16, 2022, the participant 
would be charged the prorated port fee for September 5, 2022 through 
September 30, 2022.
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    The Exchange believes it is important for participants to have the 
option to

[[Page 57540]]

establish new connections to the Exchange at any time during the month 
without being hampered by a full month charge irrespective of when 
during the month service begins. Moreover, other exchanges also charge 
new ports on a prorated basis for the first month of service.\4\
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    \4\ See, e.g., Cboe BZX U.S. Equities Exchange Fee Schedule, 
available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/; New York Stock Exchange Price List 2022, 
available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
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    The Exchange also proposes to make clarifying changes to Options 7, 
Section 6C(iv). First, the Exchange proposes to clarify that Disaster 
Recovery Port Fees are not charged for the ports listed in Options 7, 
Section 6C(iii). The market data ports in Options 7, Section 6C(iii) 
are provided at no cost and the Exchange does not charge a Disaster 
Recovery Port Fee for these ports. Second, the Exchange proposes to 
clarify the Exchange's existing practice that NTF Ports are provided at 
no cost. The NTF provides subscribers with a virtual System test 
environment that closely approximates the production environment on 
which they may test their automated systems that integrate with the 
Exchange. For example, the NTF provides subscribers a virtual System 
environment for testing upcoming releases and product enhancements, as 
well as testing firm software prior to implementation. The Exchange 
proposes adding express language in the Rules to provide increased 
clarity to market participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\6\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its port fee schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options and 
equity securities transaction services that constrain its pricing 
determinations in that market. The Commission and the courts have 
repeatedly expressed their preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. In Regulation NMS, while adopting a series of steps 
to improve the current market model, the Commission highlighted the 
importance of market forces in determining prices and 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.'' \7\
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    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes that it is reasonable to prorate port fees 
for the first month of connectivity. As discussed above, the Exchange 
believes it is important for participants to have the flexibility to 
establish new connections to the Exchange at any time during the month 
without being hampered by a full month charge. For example, the 
Exchange believes it is reasonable to charge a user who begins a 
subscription on the last day of the month to be charged only for use of 
a port for that day. As noted above, other exchanges already charge 
their customers for new ports on a prorated basis for the first month 
of service.\8\ The proposed language describing the Exchange's practice 
to bill for the remainder of the month upon cancellation is intended 
only to clarify the existing practice and limit any confusion.
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    \8\ Supra note 4.
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    The Exchange believes that the proposal is also equitable and not 
unfairly discriminatory because the proposed change to prorate port 
fees for the first month of service and continue to charge for the 
remainder of the month upon cancellation will apply uniformly to all 
similarly situated participants. Removing the requirement to pay a full 
month's port fee if a user joins any day other than the first of the 
month is user-friendly and provides users incentive to subscribe at 
their convenience. The Exchange believes that prorating the fees for 
the first month of a user's subscription will ensure that the fees are 
more equitable to a user's utilization of the products. All users will 
benefit from the proration of the first month of their subscription.
    The Exchange also believes that it is just and equitable, and in 
the interests of market participants, for the Exchange to (i) clarify 
the Exchange's existing practice to provide NTF ports at no cost in 
Options 7, Section 6C(iv), codifying existing practice where it is not 
expressly stated in the Rule, and (ii) clarify the Exchange's existing 
practice not to charge a Disaster Recovery Port Fee for ports listed in 
Options 7, Section 6C(iii). The Exchange believes that market 
participants will benefit from increased clarity, which will help limit 
any potential confusion in the future.

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.
Intramarket Competition
    The Exchange does not believe that its proposal will place any 
category of Exchange participants at a competitive disadvantage. The 
proposed change to prorate port fees for the first month of service 
will apply uniformly to all similarly situated participants. All users 
will receive the benefit of a proration for the first month of port 
connectivity, which will enable users to save money that they otherwise 
would incur under the Exchange's current rules that do not provide for 
proration. The proposed language describing the Exchange's practice to 
bill for the remainder of the month upon cancellation, as well as the 
proposed changes to Options 7, Section 6C(iv) to clarify that the 
Exchange does not charge a Disaster Recovery Port Fee for ports listed 
in Options 7, Section 6C(iii) and to clarify that NTF ports are 
provided at no cost, merely codify and clarify existing practices of 
the Exchange.
Intermarket Competition
    The Exchange believes that the proposed change to its port fee 
schedule to provide proration for the first month of port connectivity 
will not impose a burden on competition because the Exchange's 
execution services are completely voluntary and subject to extensive 
competition both from the other live exchanges and from off-exchange 
venues, which include alternative trading systems that trade national 
market system stock. Moreover, as noted above, other exchanges 
currently charge new ports on a prorated basis for the first month of 
service.\9\ The proposed changes will help ensure that the Exchange's 
billing practices are commensurate with competitors.
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    \9\ Supra note 4.
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    The proposed change to the Exchange's port fee schedule is 
reflective of this competition because, as a threshold issue, the 
Exchange is a relatively small market so its ability to burden 
intermarket competition is

[[Page 57541]]

limited. In this regard, even the largest U.S. equities exchange by 
volume only has 17-18% market share, which in most markets could hardly 
be categorized as having enough market power to burden competition. 
Accordingly, the Exchange does not believe that the proposed change 
will impair the ability of members, participants, or competing order 
execution venues to maintain their competitive standing in the 
financial markets.
    The proposed changes to clarify that the Exchange does not charge a 
Disaster Recovery Port Fee for ports listed in Options 7, Section 
6C(iii) and to clarify that NTF ports are provided at no cost are 
designed to expressly state existing practices without changing their 
operation and, therefore, the Exchange believes that the proposed 
changes will not impose a burden on competition.

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) of the Act \10\ and paragraph (f) of Rule 19b-4 \11\ 
thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
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    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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-GEMX-2022-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-GEMX-2022-08. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-GEMX-2022-08 and should be submitted on 
or before October 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20275 Filed 9-19-22; 8:45 am]
BILLING CODE 8011-01-P


