[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Notices]
[Pages 65273-65279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23483]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96144; File No. SR-MRX-2022-22]


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, Section 7

October 24, 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 October 14, 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, 
Section 7.
    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.

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

1. Purpose
    On May 2, 2022, MRX initially filed this proposal to amend its 
Pricing Schedule at Options 7, Section 7, to assess market data fees, 
which had not been assessed since MRX's inception in 2016.\3\ The 
proposed changes are designed to update data fees to reflect their 
current value--rather than their value when it was a new exchange six 
years ago--based on increased market share. Newly-opened exchanges 
often charge no fees for market data to attract order flow to an 
exchange, and later amend their fees to reflect the true value of those 
services.\4\ Allowing newly-

[[Page 65274]]

opened exchanges time to build and sustain market share before charging 
for their market data encourages market entry and promotes competition.
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    \3\ The Exchange initially filed the proposed pricing changes on 
May 2, 2022 (SR-MRX-2022-04), instituting fees for membership, ports 
and market data. See Securities Exchange Act Release No. 94901 (May 
12, 2022), 87 FR 30305 (May 18, 2022) (SR-MRX-2022-04). On June 29, 
2022, the Exchange withdrew that filing, and submitted separate 
filings for membership (SR-MRX-2022-07), market data (SR-MRX-2022-
08) and ports (SR-MRX-2022-09). On August 25, 2022, the Exchange 
withdrew the market data filing (SR-MRX-2022-08) and replaced it 
with SR-MRX-2022-14. See Securities Exchange Act Release No. 95708 
(September 8, 2022), 87 FR 56457 (September 14, 2022) (SR-MRX-2022-
14). On October 14, 2022, the Exchange withdrew SR-MRX-2022-14 and 
replaced it with the instant filing in order to reflect changes to 
the information contained within each of the five MRX market data 
feeds proposed in SR-MRX-2022-18. See Securities Exchange Act 
Release No. 95982 (October 4, 2022), 87 FR 61391 (October 11, 2022) 
(SR-MRX-2022-18).
    \4\ 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).
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    This Proposal reflects MRX's assessment that it has gained 
sufficient market share to compete effectively against other 15 options 
exchanges without waiving market data fees. Such fees are assessed by 
options exchanges that compete with MRX--indeed, MRX is the only 
options exchange (out of the 16 current options exchanges) not to 
assess them today.
    As explained in further detail below, MRX in 2022 is in the same 
position as NYSE National in 2020, when it sought approval for the 
``NYSE National Integrated Feed.'' \5\ The Commission approved the NYSE 
National Integrated Feed based on a finding that it ``was subject to 
significant substitution-based competitive forces'' based on ``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.'' \6\
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    \5\ 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.
    \6\ See id.
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    The three factors cited in the Commission's approval order for NYSE 
National are present in MRX today. First, 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. 
Second, only a small number of firms purchase market data from MRX 
relative to its affiliated options exchanges. Third, a sizeable portion 
of subscribers--approximately 15 percent--have terminated their 
subscriptions following the implementation of the proposed fees, 
demonstrating that customers can and do exercise choice in deciding 
whether to purchase the Exchange's market data feeds.
    Disapproval of the Proposal--given that the three factors cited in 
the Commission's approval order for NYSE National two years ago are 
present in MRX today--would result in differential treatment of 
similarly-situated exchanges. Under such circumstances, disapproval of 
the Proposal should be rejected as arbitrary and capricious.
    Disapproval would also place a substantial burden on competition. 
MRX would be uniquely disadvantaged as the only options exchange unable 
to charge for its market data. If the Commission were to disapprove 
this Proposal, that action, and not market forces, would determine 
whether MRX is successful in its competition with other options 
exchanges.
    New exchanges commonly waive data 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. If MRX is incorrect in its assessment, that error will 
be reflected in MRX's ability to compete with other options 
exchanges.\7\
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    \7\ Nasdaq announced that, beginning in 2022, it will migrate 
its North American markets to Amazon Web Services in a phased 
approach, starting with MRX. The MRX migration will take place in 
November 2022. The proposed fee changes are entirely unrelated to 
this effort.
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    The Exchange proposes to amend fees for the following market data 
feeds within Options 7, Section 7: (1) Nasdaq MRX Depth of Market Data 
Feed (``Depth of Market Feed''); \8\ (2) Nasdaq MRX Order Feed (``Order 
Feed''); \9\ (3) Nasdaq MRX Top of Market Feed (``Top Feed''); \10\ (4) 
Nasdaq MRX Trades Feed (``Trades Feed''); \11\ and (5) Nasdaq MRX 
Spread Feed (``Spread Feed'').\12\ Prior to the initial filing of these 
proposed price changes on May 2, 2022, no fees had been assessed for 
these feeds.
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    \8\ Nasdaq MRX Depth of Market Data Feed is a data feed that 
provides full order and quote depth information for individual 
orders and quotes on the Exchange book and last sale information for 
trades executed on the Exchange. 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 the Exchange 
and identifies if the series is available for closing transactions 
only. The feed also provides order imbalances on opening/reopening 
(size of matched contracts and size of the imbalance). See Options 
3, Section 23(a)(1).
    \9\ Nasdaq MRX Order Feed provides information on new orders 
resting on the book (e.g., price, quantity, market participant 
capacity and Attributable Order tags when provided by a Member). The 
data provided for each option series includes the symbols (series 
and underlying security), displayed order types, order attributes 
(e.g., OCC account number, give-up information, CMTA information), 
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 (size of matched contracts and size of the 
imbalance), auction and exposure notifications. See Options 3, 
Section 23(a)(2).
    \10\ Nasdaq MRX Top of Market 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 and 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).
    \11\ Nasdaq MRX Trades Feed displays last trade information. 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).
    \12\ Nasdaq MRX 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) full Complex Order depth 
information, including prices, side, size, capacity, Attributable 
Complex Order tags when provided by a Member, and order attributes 
(e.g., OCC account number, give-up information, CMTA information), 
for individual Complex Orders on the Exchange book; (3) last trades 
information; and (4) calculating and disseminating MRX's complex 
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 
Complex Order interest in the System. The feed also provides Complex 
Order auction notifications. See Options 3, Section 23(a)(5).
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    In addition to the proposed fees for each data feed, the Exchange 
proposes an Internal Distributor Fee \13\ of $1,500 per month for the 
Depth of Market Feed, Order Feed, and Top Feed, an Internal Distributor 
Fee of $750 per month for the Trades Feed, and 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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    \13\ 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 also proposes to assess an External Distributor Fee of 
$2,000 per month for the Depth of Market Feed, Order Feed, and Top 
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 will also assess Professional \14\ and Non-Professional \15\ 
subscriber fees.

[[Page 65275]]

The Professional Subscriber will be $25 per month, and the Non-
Professional Subscriber will be $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 product.\16\
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    \14\ A Professional Subscriber is any Subscriber that is not a 
Non-Professional Subscriber.
    \15\ 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.
    \16\ For example, if a firm has one Professional (Non-
Professional) Subscriber accessing Top Quote Feed, 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 for $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.\17\ The Non-Display Enterprise License 
is in addition to any other associated distributor fees for MRX 
proprietary direct data feed products.
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    \17\ 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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2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\18\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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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    \18\ See 15 U.S.C. 78f(b).
    \19\ See 15 U.S.C. 78f(b)(4) and (5).
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    The proposed changes to the pricing schedule are reasonable in 
several respects. As a threshold matter, the Exchange is subject to 
significant competitive forces in the market for order flow, which 
constrains its pricing determinations. The fact that the market for 
order flow is competitive has long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \20\
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    \20\ 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.'' \21\
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    \21\ 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.' '' \22\ 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.'' \23\ 
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.'' \24\ 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.'' \25\
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    \22\ 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.'').
    \23\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \24\ Id.
    \25\ 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 
attract order flow to the Exchange.\26\ In June 2019,

[[Page 65276]]

MRX commenced offering complex orders.\27\ 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.\28\ The 
added functionality attracted order flow, which has enhanced the value 
of its market data and is the basis for these proposed fee changes.
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    \26\ 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.
    \27\ 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).
    \28\ 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.
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Market Data Products 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 that product with products offered by other 
exchanges.
    NYSE National was able to prove exactly this when it sought 
approval for the ``NYSE National Integrated Feed'' \29\ 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.\30\ 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,\31\ 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.'' \32\ 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.\33\
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    \29\ 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.
    \30\ See id.
    \31\ See NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. 2010) 
(``NetCoalition I'').
    \32\ See NYSE National Approval Order (citing NetCoalition I).
    \33\ See id.
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    MRX today is in essentially the same position as NYSE National in 
2020, and all three of the factors cited in the Commission's approval 
order for NYSE National are present in MRX today. First, 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. Second, only a small number of firms purchase market 
data from MRX relative to its affiliated options exchanges. Third, a 
sizeable portion of subscribers--approximately 15 percent--have 
terminated their subscriptions following the implementation of the 
proposed fees, demonstrating that customers can and do exercise choice 
in deciding whether to purchase the Exchange's market data feeds.
    As of May 2, 2022, the date that MRX initially proposed these 
market data fees, MRX reported that two customers had terminated their 
market data subscriptions.\34\ As of now, a total of five firms have 
cancelled, amounting to approximately 15 percent of the 34 customers 
that had been taking MRX feeds in the first quarter of 2022.\35\
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    \34\ See Securities Exchange Act Release No. 94901 (May 12, 
2022), 87 FR 30305 (May 18, 2022) (SR-MRX-2022-04).
    \35\ These terminations were limited to market data; none of 
these customers were members of MRX and therefore purchased neither 
memberships nor ports from the Exchange.
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    Commission Staff have requested additional information pertaining 
to: (i) the types of feeds available to these customers prior to 
termination, (ii) the characteristics of the customers that terminated 
their feeds, and (iii) whether such customers traded on the Exchange.
    With respect to the types of data feeds accessed, two of the five 
customers had access to all five feeds: the Depth of Market Data, the 
Order Feed, the Top Feed, the Trades Feed, and the Spread Feed. The 
three remaining customers had access to only two feeds: the Order Feed 
and the Top Feed. All five customers cancelled all feeds that they had 
access to.
    With respect to the types of customers cancelling feeds, three of 
the five were either data vendors or technology suppliers. Data vendors 
purchase exchange data and redistribute it to downstream customers, 
while technology suppliers incorporate exchange data into software 
solutions, which are sold to downstream customers. The remaining two 
firms engage in options trading, either on their own behalf or that of 
a customer.
    With respect to trading, the three data vendors/technology 
suppliers do not trade on their own behalf or on the behalf of any 
downstream customs, although their customers may do so. The Exchange 
understands that these three firms cancelled due to insufficient demand 
from their downstream customers for MRX data. The two remaining firms, 
which do engage in options trading, have not traded on MRX, but are 
active traders on other Nasdaq options exchanges.\36\
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    \36\ NYSE National did not provide similarly detailed 
information regarding the characteristics of cancelling customers. 
Nevertheless, the Exchange believes that the characteristics of such 
customers are similar for both NYSE National and MRX, and the same 
competitive forces apply to all exchanges.
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    Detailed information supporting the first step in the analysis of 
substitution-based competitive forces--low market share--is set forth 
in Chart 1, which 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.

[[Page 65277]]

[GRAPHIC] [TIFF OMITTED] TN28OC22.000

    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 market data.
    The second step in this analysis--demonstrating that only a small 
number of firms purchase market data relative to affiliated options 
exchanges--is shown in Chart 2, which compares the number of firms with 
access to market data from MRX to the number of firms purchasing market 
data from the four MRX-affiliated options exchanges, GEMX, ISE, The 
Nasdaq Stock Market LLC (``NOM'') and Nasdaq PHLX, LLC (``Phlx'').
[GRAPHIC] [TIFF OMITTED] TN28OC22.001

    Chart 2 shows that 34 firms subscribed 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.
    The third step in this analysis--showing that a sizable number of 
customers terminated subscriptions following the proposal of the fees--
is confirmed by the five customer cancellations. As explained above, 
all five customers terminated all feeds available to them. Although not 
all customers took all of the MRX feeds, each one of these feeds was 
cancelled by at least one customer, demonstrating that customers can 
and do exercise

[[Page 65278]]

choice with respect to each feed. These cancellations reduced the 
number of firms with access to at least one MRX market data feed from 
34 to 29, an approximately 15 percent reduction in usage, demonstrating 
that firms can and do exercise choice in determining whether to 
purchase market data from the Exchange.
    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,\37\ 
MIAX,\38\ and NYSE Arca Options.\39\ Because MRX does not list options 
on products that are exclusively available on MRX, consumers can 
substitute MRX data with data from any exchange that lists such 
multiply-listed options, or through OPRA. Moreover, 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.
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    \37\ See Cboe DataShop, available at https://datashop.cboe.com/.
    \38\ See MIAX Options Market Data & Offerings, available at 
https://www.miaxoptions.com/market-data-offerings.
    \39\ See NYSE Options Markets, available at https://www.nyse.com/options.
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    This analysis must be viewed in the context of a field with 
relatively low barriers to entry. MRX, like many new entrants to the 
field, offered 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 market data fees to zero, increasing marketplace competition.
    The Proposal is not unfairly discriminatory. The five market data 
feeds at issue here--the Depth of Market Feed, Order Feed, Top Feed, 
Trades Feed, and Spread Feed--are used 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, 
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.
    After 6 years, MRX proposes to assess market data fees, just as all 
other options exchanges do now.\40\ These fees will not impede 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.
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    \40\ Prior to submission of the proposed pricing changes on May 
2, 2022, MRX was the only options exchange not assessing market data 
fees.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. For all of the reasons set 
forth above, the Exchange is subject to ``significant substitution-
based competitive forces'': (i) it 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; (ii) only a 
small number of firms purchase market data from MRX relative to its 
affiliated options exchanges; and (iii) a sizeable portion of 
subscribers--approximately 15 percent--have terminated their 
subscriptions following the implementation of the proposed fees, 
demonstrating that customers can and do exercise choice in deciding 
whether to purchase market data.
    Nothing in the Proposal burdens inter-market competition (the 
competition among self-regulatory organizations) because approval of 
the Proposal 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 
in 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.
    Nothing in the Proposal burdens intra-market competition (the 
competition among consumers of exchange data) because each customer 
will be able to decide whether or not to purchase the Exchange's market 
data, as demonstrated by the fact that a significant number of the 
Exchange's customers have already elected to terminate their access to 
such feeds.
    The Exchange 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. 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. If the 
changes proposed herein are unattractive to market participants, it is 
likely that the Exchange will lose market share.\41\
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    \41\ 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.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act.\42\
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    \42\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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

[[Page 65279]]

     Send an email to [email protected]. Please include 
File Number SR-MRX-2022-22 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-2022-22. 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-2022-22 and should be submitted on 
or before November 18, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-23483 Filed 10-27-22; 8:45 am]
BILLING CODE 8011-01-P


