[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Notices]
[Pages 30370-30373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10031]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97440; File No. SR-MRX-2023-08]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Pricing Schedule at Options 7, Section 3

May 5, 2023.
    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 April 24, 2023, 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 and II 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 Pricing Schedule at 
Options 7, Section 3 (Regular Order Fees and Rebates).
    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.

[[Page 30371]]

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Pricing Schedule at Options 7, Section 3 (Regular Order Fees and 
Rebates).
    Today, as set forth in Table 1 of Options 7, Section 3, the 
Exchange assesses the following fees for regular orders in Penny 
Symbols:

                                                  Penny Symbols
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                                                  Maker fee Tier  Maker fee Tier  Taker fee Tier  Taker fee Tier
               Market participant                        1               2               1               2
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Market Maker....................................           $0.20           $0.10           $0.50           $0.50
Non-Nasdaq MRX Market Maker (FarMM).............            0.47            0.47            0.50            0.50
Firm Proprietary/Broker-Dealer..................            0.47            0.47            0.50            0.50
Professional Customer...........................            0.47            0.47            0.50            0.50
Priority Customer...............................            0.00            0.00            0.00            0.00
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    In addition, the Exchange currently offers a growth incentive that 
allows Market Makers \3\ to reduce their maker fees described above.\4\ 
Specifically, Market Makers may qualify for a reduction in the Tier 1 
and Tier 2 Maker Fees described above if the Market Maker has increased 
its volume which adds liquidity in Penny Symbols as a percentage of 
Customer Total Consolidated Volume \5\ by at least 100% over the 
Member's December 2022 Market Maker volume which adds liquidity in 
Penny Symbols as a percentage of Customer Total Consolidated Volume. 
Market Makers that qualify would have their Tier 1 Maker Fee reduced to 
$0.08 and their Tier 2 Maker Fee reduced to $0.04. From January 3, 2023 
until June 30, 2023, Market Makers with no volume in the Penny Symbol 
add liquidity segment for the month of December 2022 may qualify for 
the reduced Tier 1 and Tier 2 Maker Fees by having any new volume 
considered as added volume. As stated in the adopting filing, the 
Exchange offers this temporary incentive from January 3, 2023 until 
June 30, 2023 in order to encourage new Market Makers to join MRX, and 
is using this time period to evaluate the appropriate parameters going 
forward for market participants with no December 2022 volume in the 
targeted segment.\6\
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    \3\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Options 1, 
Section 1(a)(21).
    \4\ See Options 7, Section 3, note 6.
    \5\ ``Customer Total Consolidated Volume'' means the total 
volume cleared at The Options Clearing Corporation in the Customer 
range in equity and ETF options in that month. See Options 7, 
Section 1(c).
    \6\ See Securities Exchange Act Release No. 97148 (March 15, 
2023), 88 FR 17068 (March 21, 2023) (SR-MRX-2023-07).
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    The Exchange now proposes to amend this Market Maker growth 
incentive by expanding the sunset date from the current new Market 
Maker portion of the incentive to the entire incentive. As amended, 
note 6 will provide:

    Market Makers may qualify for a reduction in the Tier 1 and Tier 
2 Maker Fees described above if the Market Maker has increased its 
volume which adds liquidity in Penny Symbols as a percentage of 
Customer Total Consolidated Volume by at least 100% over the 
Member's December 2022 Market Maker volume which adds liquidity in 
Penny Symbols as a percentage of Customer Total Consolidated Volume. 
Market Makers that qualify will have their Tier 1 Maker Fee reduced 
to $0.08 and their Tier 2 Maker Fee reduced to $0.04. Market Makers 
with no volume in the Penny Symbol add liquidity segment for the 
month of December 2022 may qualify for the reduced Tier 1 and Tier 2 
Maker Fees by having any new volume considered as added volume. This 
note 6 incentive will be available to Market Makers until June 30, 
2023.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\7\ in general, and furthers the objectives of sections 
6(b)(4) and 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its schedule of credits are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[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'. . . .'' \9\
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    \9\ NetCoalition v. SEC, 615 F.3d 525, 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 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

[[Page 30372]]

``has been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \10\
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    \10\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options 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. As such, 
the proposal represents a reasonable attempt by the Exchange to 
increase its liquidity and market share relative to its competitors.
    The Exchange believes that it is reasonable to have the growth 
incentive in note 6 expire on June 30, 2023. Currently, only the new 
Market Maker portion of this incentive expires on June 30, 2023.\11\ 
The proposal is reasonable because it will continue to provide extra 
incentives to Market Makers to engage in substantial amounts of 
liquidity adding activity in Penny Symbols on the Exchange, as well as 
to grow substantially the extent to which they do so relative to a 
recent benchmark month. The Exchange believes that sunsetting the note 
6 incentive within six months of the base month (December 2022) will 
ensure that the benchmark against which Market Maker growth is measured 
is timely and meets the intended purpose of encouraging increased order 
flow.
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    \11\ Specifically, the rule provides that from January 3, 2023 
until June 30, 2023, Market Makers with no volume in the Penny 
Symbol add liquidity segment for the month of December 2022 may 
qualify for the reduced Tier 1 and Tier 2 Maker Fees by having any 
new volume considered as added volume.
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    The Exchange believes that its proposal to have the note 6 growth 
incentive expire on June 30, 2023 is equitable and not unfairly 
discriminatory because the proposed expiration date will be applied 
uniformly to all Market Makers. The Exchange continues to believe that 
it is equitable and not unfairly discriminatory to provide the note 6 
growth incentive to only Market Makers because Market Makers have 
different requirements and additional obligations to the Exchange that 
other market participants do not (such as quoting requirements). As 
such, this growth incentive is designed to increase Market Maker 
participation and reward Market Makers for the unique role they play in 
ensuring a robust market. As discussed above, the note 6 incentive is 
designed to encourage Market Makers to substantially add Penny Symbol 
liquidity to the Exchange, to the benefit of all market participants.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    In terms of intra-market competition, the Exchange does not believe 
that its proposal will place any category of market participant at a 
competitive disadvantage. The proposed change to sunset the note 6 
incentive on June 30, 2023 does not impose an undue burden on intra-
market competition because all Market Makers will have the opportunity 
to qualify for this growth incentive for the six months it is offered. 
The Exchange also believes that the Market Maker growth incentive will 
continue to encourage the provision of liquidity from both existing and 
new Market Makers that enhances the quality of the Exchange's market 
and increases the number of trading opportunities on the Exchange for 
all market participants who will be able to compete for such 
opportunities.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
options exchanges. Because competitors are free to modify their own 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which fee changes in this market may impose any burden on competition 
is extremely limited.
    In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that the Exchange will lose market share as 
a result. Accordingly, the Exchange does not believe that the proposed 
changes will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets.

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,\12\ and Rule 19b-4(f)(2) \13\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is: (i) necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MRX-2023-08 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-MRX-2023-08. 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 (https://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

[[Page 30373]]

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. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-MRX-2023-08 and should 
be submitted on or before June 1, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-10031 Filed 5-10-23; 8:45 am]
BILLING CODE 8011-01-P


