
[Federal Register Volume 88, Number 159 (Friday, August 18, 2023)]
[Notices]
[Pages 56672-56675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17759]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98129; File No. SR-MRX-2023-15]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend MRX 
Options 7, Section 3

August 14, 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 August 9, 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).\3\
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    \3\ The Exchange withdrew SR-MRX-2023-13 on August 9, 2023 and 
replaced it with the instant filing.
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    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 56673]]

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 Maker Fees/Rebate for regular orders in 
Penny Symbols:

                                                  Penny Symbols
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                                                  Maker fee tier  Maker fee tier    Maker fee/      Maker Fee/
               Market participant                        1               2         rebate tier 3   rebate tier 4
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Market Maker....................................           $0.10           $0.00         ($0.05)         ($0.10)
Non-Nasdaq MRX Market Maker (FarMM).............            0.47            0.47            0.47            0.47
Firm Proprietary/Broker-Dealer..................            0.47            0.47            0.47            0.47
Professional Customer...........................            0.47            0.47            0.47            0.47
Priority Customer...............................            0.00            0.00            0.00            0.00
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    Today, the Exchange assesses the following Penny Symbol Maker Fees/
Rebates to Market Makers: \4\ a Tier 1 fee of $0.10 per contract, a 
Tier 2 fee of $0.00 per contract, a Tier 3 rebate of $0.05 per contract 
and a Tier 4 rebate of $0.10 per contract. At this time, the Exchange 
proposes to amend the Market Maker Tier 1 through Tier 4 Penny Symbol 
Maker Fees/Rebates by adding a new note 6 in Options 7, Section 3 that 
would provide that Market Maker Penny Symbol Tier 1 through Tier 4 
Maker Fees/Rebates will be $0.00 per contract for options on SPDR S&P 
500 ETF Trust (``SPY''), the INVESCO QQQ Trust\SM\, Series 1 (``QQQ''), 
and iShares Russell 2000 ETF (``IWM'').
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    \4\ A ``Market Maker'' is a market maker as defined in Nasdaq 
MRX Rule Options 1, Section 1(a)(21). See Options 1, Section 1(c).
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    Today, as set forth in Table 1 of Options 7, Section 3, the 
Exchange assesses the following Taker Fees for regular orders in Penny 
Symbols:

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                                                  Taker fee tier  Taker fee tier  Taker fee tier  Taker fee tier
               Market participant                        1               2               3               4
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Market Maker....................................           $0.50           $0.50           $0.50           $0.50
Non-Nasdaq MRX Market Maker (FarMM).............            0.50            0.50            0.50            0.50
Firm Proprietary/Broker-Dealer..................            0.50            0.50            0.50            0.50
Professional Customer...........................            0.50            0.50            0.50            0.50
Priority Customer...............................            0.15            0.15            0.15            0.10
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    Today, the Exchange assesses the following Penny Symbol Taker Fees 
to Priority Customers: a Tier 1 fee of $0.15 per contract, a Tier 2 fee 
of $0.15 per contract, a Tier 3 fee of $0.15 per contract and a Tier 4 
fee of $0.10 per contract. At this time, the Exchange proposes to amend 
the Priority Customer \5\ Tier 1 through Tier 4 Penny Symbol Taker Fees 
by adding a new note 6 in Options 7, Section 3 that would provide that 
the Priority Customer Penny Symbol Tier 1 through Tier 4 Taker Fees 
will be $0.00 for options on SPY, QQQ and IWM.
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    \5\ A ``Priority Customer'' is a person or entity that is not a 
broker/dealer in securities, and does not place more than 390 orders 
in listed options per day on average during a calendar month for its 
own beneficial account(s), as defined in Nasdaq MRX Options 1, 
Section 1(a)(36). Unless otherwise noted, when used in this Pricing 
Schedule the term ``Priority Customer'' includes ``Retail''. A 
``Retail'' order is a Priority Customer order that originates from a 
natural person, provided that no change is made to the terms of the 
order with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. See Options 1, Section 1(c).
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    The Exchange believes that the proposed pricing will attract 
Priority Customer orders in SPY, QQQ and IWM to MRX in Penny Symbols. 
Additionally, the Exchange believes this pricing will encourage Market 
Makers to add liquidity on the MRX order book in SPY, QQQ and IWM as 
the Tier 1 Market Maker Penny Symbol Maker Fee of $0.10 per contract is 
being reduced to $0.00 per contract. While Market Makers that add 
liquidity in SPY, QQQ and IWM will no longer receive the Market Maker 
Tier 3 or Tier 4 Maker Rebates in Penny Symbols, the proposed pricing 
should overall continue to attract order flow to MRX in these symbols.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its Penny Symbol Maker Fees/
Rebates and Taker Fees are reasonable in several respects. As a 
threshold matter, the

[[Page 56674]]

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'. . . .'' \8\
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    \8\ 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 ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \9\
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    \9\ 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 decrease its Market 
Maker Penny Symbol Tier 1 Maker Fee from $0.10 to $0.00 per contract on 
options in SPY, QQQ and IWM and not pay any Market Maker Penny Symbol 
Tier 3 or 4 Maker Rebates (currently $0.05 and $0.10 per contract, 
respectively) on options in SPY, QQQ and IWM in order to attract 
Priority Customer orders in SPY, QQQ and IWM to MRX and incentivize 
Market Makers to add liquidity in SPY, QQQ and IWM on MRX. With this 
proposal, the Exchange seeks to assess Market Makers no Penny Symbol 
Maker Fees and pay no Maker Rebates in Penny Symbols to Market Makers 
on options in SPY, QQQ and IWM. While Market Makers who are eligible to 
receive a Penny Symbol Tier 3 or 4 Maker Rebate would no longer receive 
this rebate in SPY, QQQ, and IWM, they would be able to provide 
liquidity on the order book in these symbols at no cost. Additionally, 
Priority Customers would be able to remove Penny Symbol liquidity from 
the order book at no cost. With this proposal, the Priority Customer 
Penny Symbol Taker Fee in Tiers 1-3 would be reduced from $0.15 to 
$0.00 per contract and the Priority Customer Penny Symbol Taker Fee in 
Tier 4 would be reduced from $0.10 to $0.00 per contract on options in 
SPY, QQQ and IWM.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to decrease its Market Maker Penny Symbol Tier 1 Maker 
Fee from $0.10 to $0.00 per contract and not pay any Market Maker Penny 
Symbol Tier 3 or 4 Maker Rebates, (currently $0.05 and $0.10 per 
contract, respectively) on options in SPY, QQQ and IWM because Market 
Makers have different requirements and additional obligations to the 
Exchange that other market participants do not (such as quoting 
requirements).\10\ As such, the proposed fees are designed to increase 
Market Maker participation in SPY, QQQ and IWM, for the benefit of all 
market participants, by removing fees for Market Makers to add Penny 
Symbol liquidity in SPY, QQQ and IWM. The Exchange believes that it is 
equitable and not unfairly discriminatory to assess Priority Customers 
no Penny Symbol Taker Fees in SPY, QQQ and IWM because Priority 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts market makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants, to the benefit of all market 
participants.
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    \10\ See MRX Options 2, Section 5.
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    The Exchange believes assessing different fees for options in SPY, 
QQQ and IWM, as compared to other symbols, is reasonable because 
trading in SPY, QQQ and IWM is different from trading in other symbols 
in that they are more liquid, have higher volume and competition for 
executions is more intense. Additionally, the Exchange believes 
assessing different fees for options in SPY, QQQ and IWM, as compared 
to other symbols, is equitable and not unfairly discriminatory because 
the Exchange would uniformly not assess a Market Maker the Penny Symbol 
Maker Fees or pay a Market Maker the Penny Symbol Maker Rebates in SPY, 
QQQ and IWM. Similarly, the Exchange would uniformly not assess 
Priority Customers the Penny Symbol Taker Fees in SPY, QQQ and IWM.

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 proposals will place any category of market participant at a 
competitive disadvantage. The Exchange believes that the proposed 
Market Maker Penny Symbol Maker Fees/Rebates and Priority Customer 
Penny Symbol Taker Fees will encourage additional liquidity and trading 
of SPY, QQQ and IWM on MRX. Despite not paying Market Makers any Maker 
Rebates in SPY, QQQ and IWM in Penny Symbols, the proposed pricing 
should overall continue to attract order flow to MRX in these symbols.
    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.
    The Exchange believes that this proposal does not impose an undue 
burden on competition. The proposed pricing will attract Priority 
Customer orders in SPY, QQQ and IWM to MRX in Penny Symbols because no 
Priority Customer Penny Symbol Taker Fee will be assessed in these 
symbols.

[[Page 56675]]

Additionally, the Exchange believes this pricing will encourage Market 
Makers to add liquidity on the MRX order book in SPY, QQQ and IWM as 
the Tier 1 Market Maker Penny Symbol Maker Fee of $0.10 per contract is 
being reduced to $0.00 per contract. While Market Makers that add 
liquidity in SPY, QQQ and IWM will no longer receive the Market Maker 
Tier 3 or Tier 4 Maker Rebates in Penny Symbols, the proposed pricing 
should overall continue to attract order flow to MRX in these symbols. 
Market Makers have different requirements and additional obligations to 
the Exchange that other market participants do not (such as quoting 
requirements).\11\ Increasing Market Maker participation in SPY, QQQ 
and IWM, by removing the Tier 1 Maker Fee for Market Makers to add 
Penny Symbol liquidity in SPY, QQQ and IWM, will benefit all market 
participants. Assessing Priority Customers no Penny Symbol Taker Fees 
in SPY, QQQ and IWM will benefit all market participants as Priority 
Customer liquidity provides more trading opportunities, which attracts 
market makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants, 
for the benefit of all market participants. The Exchange believes 
assessing different fees for options in SPY, QQQ and IWM, as compared 
to other symbols, does not impose an undue burden on competition 
because the Exchange would uniformly not assess a Market Maker a Penny 
Symbol Maker Fee or pay a Market Maker a Penny Symbol Maker Rebate in 
SPY, QQQ and IWM. Similarly, the Exchange would uniformly not assess 
Priority Customers a Penny Symbol Taker Fee in SPY, QQQ and IWM.
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    \11\ See MRX Options 2, Section 5.
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    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-2023-15 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-2023-15. 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 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 
a.m. and 3 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-2023-15 and should be 
submitted on or before September 8, 2023.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17759 Filed 8-17-23; 8:45 am]
BILLING CODE 8011-01-P


