Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 80783 

23 17 CFR 240.17Ad–22(e)(17)(i). 

24 15 U.S.C. 78q–1(b)(3)(F). 

25 17 CFR 240.17Ad–22(e)(1), 17 CFR 240.17Ad– 

22(e)(7), and 17 CFR 240.17Ad–22(e)(20). 

26 17 CFR 240.19b–4(g). 

27Section 19(b)(2) of the Exchange Act grants to 

the Commission flexibility to determine what type 

of proceeding—either oral or notice and 

opportunity for written comments—is appropriate 

for consideration of a particular proposal by a selfregulatory organization. See Securities Act 

Amendments of 1975, Senate Comm. on Banking, 

Housing & Urban Affairs, S. Rep. No. 75, 94th 

Cong., 1st Sess. 30 (1975). 

28See OCC Notice of Filing, supra note 4. 

29 17 CFR 200.30–3(a)(31). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98231 

(August 28, 2023), 88 FR 60516 (‘‘Notice’’). 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 98497 

(September 25, 2023), 88 FR 67397 (September 29, 

2023) (designating November 30, 2023, as the date 

by which the Commission will either approve or 

disapprove, or institute proceedings to determine 

whether to disapprove, the proposed rule change). 

The Commission has received no comments on the 

proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

that a covered clearing agency establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to effectively 

measure, monitor, and manage the 

liquidity risk that arises in or is borne 

by the covered clearing agency, 

including measuring, monitoring, and 

managing its settlement and funding 

flows on an ongoing and timely basis, 

and its use of intraday liquidity; and 

• Rule 17Ad–22(e)(20) under the 

Exchange Act,23 which requires that a 

covered clearing agency establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to identify, 

monitor, and manage risks related to 

any link the covered clearing agency 

establishes with one or more other 

clearing agencies, financial market 

utilities, or trading markets. 

IV. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

Proposed Rule Change. In particular, the 

Commission invites the written views of 

interested persons concerning whether 

the Proposed Rule Change is consistent 

with Section 17A(b)(3)(F) 24 and Rules 

17Ad–22(e)(1), (e)(7), and (e)(20) 25 of 

the Exchange Act, or any other 

provision of the Exchange Act, or the 

rules and regulations thereunder. 

Although there do not appear to be any 

issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4(g) 

under the Exchange Act,26 any request 

for an opportunity to make an oral 

presentation.27

The Commission asks that 

commenters address the sufficiency of 

OCC’s statements in support of the 

Proposed Rule Change, which are set 

forth in the Notice of Filing 28 in 

addition to any other comments they 

may wish to submit about the Proposed 

Rule Change. 

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 rule-comments@

sec.gov. Please include file number SR– 

OCC–2023–007 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–OCC–2023–007. 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 such filing 

also will be available for inspection and 

copying at the principal office of OCC 

and on OCC’s website at https://

www.theocc.com/CompanyInformation/Documents-and-Archives/ 

By-Laws-and-Rules. 

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–OCC–2023–007 and should 

be submitted on or before December 11, 

2023. Rebuttal comments should be 

submitted by December 26, 2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25545 Filed 11–17–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98933; File No. SRCboeBZX–2023–062] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change To Amend the Initial 

Period After Commencement of 

Trading of a Series of ETF Shares on 

the Exchange as It Relates to the 

Holders of Record and/or Beneficial 

Holders, as Provided in Exchange Rule 

14.11(l) 

November 14, 2023. 

On August 14, 2023, Cboe BZX 

Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’ or 

‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend the initial period after 

commencement of trading of a series of 

ETF Shares on the Exchange as it 

specifically relates to holders of record 

and/or beneficial holders under BZX 

Rule 14.11(l). The proposed rule change 

was published for comment in the 

Federal Register on September 1, 2023.3

On September 25, 2023, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.5 This order 

institutes proceedings under Section 

19(b)(2)(B) of the Act 6 to determine 


ddrumheller on DSK120RN23PROD with NOTICES1
80784 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 

7The term ‘‘ETF Shares’’ means shares of stock 

issued by an Exchange-Traded Fund. See BZX Rule 

14.11(l)(3)(A). The term ‘‘Exchange-Traded Fund’’ 

has the same meaning as the term ‘‘exchange-traded 

fund’’ as defined in Rule 6c–11 under the 

Investment Company Act of 1940 (‘‘1940 Act’’). See 

BZX Rule 14.11(l)(3)(B). 

8See BZX Rule 14.11(l)(4)(B)(i)(c). 

9Earlier, on April 29, 2020, the Exchange filed a 

proposed rule change to extend the NonCompliance Period of the Beneficial Holders Rule 

applicable to Index Fund Shares, Managed Fund 

Shares, and ETF Shares from 12 to 36 months. The 

Commission disapproved that proposed rule 

change. See Securities Exchange Act Release No. 

90819 (December 29, 2020), 86 FR 332 (January 5, 

2021). 

10The Exchange notes that ETF Shares is a type 

of ETP. 

11See Notice, 88 FR at 60517. 

12See id. 

13See id. 14See id. 15See id. 16See id. 17See id. at 60518. 18See id. 19See id. 20 Id. 21 Id. 

22See id. 

23 Id. 

24 Id. 

25 15 U.S.C. 78s(b)(2)(B). 

26 Id. 

whether to approve or disapprove the 

proposed rule change. 

I. Description of the Proposal 

A continued listing requirement for 

ETF Shares 7 currently provides that, 

following the initial 12-month period 

after commencement of trading on the 

Exchange, the Exchange will consider 

the suspension of trading in, and will 

commence delisting proceedings under 

BZX Rule 14.12 for, a series of ETF 

Shares for which there are fewer than 50 

beneficial holders for 30 or more 

consecutive trading days (‘‘Beneficial 

Holders Rule’’).8 The Exchange is 

proposing to change the date after 

which a series of ETF Shares must have 

at least 50 beneficial holders or be 

subject to delisting proceedings under 

BZX Rule 14.12 (‘‘Non-Compliance 

Period’’). Specifically, the Exchange 

seeks to extend the Non-Compliance 

Period from 12 months after 

commencement of trading on the 

Exchange to 36 months after 

commencement of trading on the 

Exchange.9

The Exchange asserts that it would be 

appropriate to increase the NonCompliance Period from 12 months to 

36 months because: (1) it would bring 

the rule more in line with the life cycle 

of an exchange-traded product 

(‘‘ETP’’); 10 (2) the economic and 

competitive structures in place in the 

ETP ecosystem naturally incentivize 

issuers to de-list products rather than 

continuing to list products that do not 

garner investor interest; and (3) 

extending the period from 12 to 36 

months will not meaningfully impact 

the manipulation concerns that the 

continued listing standard is intended 

to address.11

According to the Exchange, the ETP 

space is more competitive that it has 

ever been, with more than 2,000 ETPs 

listed on exchanges.12 As a result, 

distribution platforms have become 

more restrictive about the ETPs they 

will allow on their systems, often 

requiring a minimum existing track 

record (e.g., at least twelve months) and 

a minimum level of assets under 

management (e.g., at least $100 

million).13 Many larger entities also 

require a one-year track record before 

they will invest in an ETP.14 In the 

Exchange’s view, this has slowed the 

growth cycle of the average ETP and has 

resulted in a significant number of 

deficiencies with respect to satisfying 

the Beneficial Holders Rule over the last 

several years.15 Specifically, the 

Exchange notes that it has issued 

deficiency notifications to 39 ETPs for 

non-compliance with the Beneficial 

Holders Rule since 2015, 30 of which 

ultimately were able to achieve 

compliance after the deficiency notice 

was issued.16

In addition, the Exchange believes 

that the economic and competitive 

structures in place in the ETP ecosystem 

naturally incentivize issuers to de-list 

products with insufficient investor 

interest, and that the Beneficial Holders 

Rule has resulted in the forced 

termination of ETPs that issuers 

believed were still economically 

viable.17 The Exchange states that there 

are significant costs associated with the 

launch and continued operation of an 

ETP, and notes that the Exchange has 

had 148 products voluntarily delist 

since 2018.18 The Exchange also 

questions whether the number of 

beneficial holders is a meaningful 

measure of market interest in an ETP, 

and believes that an ETP issuer is 

incentivized to have as many beneficial 

holders as possible.19

Finally, the Exchange states that the 

proposal ‘‘does not create any 

significant change in the risk of 

manipulation for ETF Shares listed on 

the exchange.’’ 20 The Exchange points 

out that the Beneficial Holders Rule 

does not apply during the first 12 

months that an issue of ETF Shares is 

listed on the Exchange. Therefore, 

according to BZX, ‘‘[a]ny risk that is 

present during months 12 through 36 of 

initial listing would also be present 

during the first 12 months as provided 

under current rules.’’ 21 The Exchange 

also states that it has in place a robust 

surveillance program for ETPs that it 

believes is sufficient to deter and detect 

manipulation and other violative 

activity, and that the Exchange (or the 

Financial Industry Regulatory Authority 

on its behalf) communicates as needed 

with other members and other entities 

of the Intermarket Surveillance Group.22

The Exchange believes that ‘‘these 

robust surveillance procedures 

successfully mitigated manipulation 

concerns during an ETPs first 12 months 

of listing on the Exchange, during which 

there is currently no Beneficial Holder 

requirement,’’ and that ‘‘these 

surveillance procedures will act to 

mitigate any manipulation concerns that 

arise from extending the compliance 

period for the Beneficial Holders Rules 

from 12 months to 36 months.’’ 23

Lastly, the Exchange asserts that other 

continued listing standards (the 

disclosure obligations applicable under 

Rule 6c–11 of the 1940 Act for series of 

ETF Shares) ‘‘are generally sufficient to 

mitigate manipulation concerns 

associated with ETF Shares.’’ 24

II. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

CboeBZX–2023–062 and Grounds for 

Disapproval Under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Act 25 to determine 

whether the proposed rule change 

should be approved or disapproved. 

Institution of such proceedings is 

appropriate at this time in view of the 

legal and policy issues raised by the 

proposed rule change. Institution of 

proceedings does not indicate that the 

Commission has reached any 

conclusions with respect to any of the 

issues involved. 

Pursuant to Section 19(b)(2)(B) of the 

Act,26 the Commission is providing 

notice of the grounds for disapproval 

under consideration. The Commission is 

instituting proceedings to allow for 

additional analysis of and input 

concerning the proposed rule change’s 

consistency with the Act and, in 

particular, Section 6(b)(5) of the Act, 

which requires, among other things, that 

the rules of a national securities 

exchange be ‘‘designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest; and are not designed to 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 80785 

27 15 U.S.C. 78f(b)(5). 

28See, e.g., Securities Exchange Act Release No. 

57785 (May 6, 2008), 73 FR 27597 (May 13, 2008) 

(SR–NYSE–2008–17) (stating that the distribution 

standards, which includes exchange holder 

requirements ‘‘. . . should help to ensure that the 

[Special Purpose Acquisition Company’s] securities 

have sufficient public float, investor base, and 

liquidity to promote fair and orderly markets’’); 

Securities Exchange Act Release No. 86117 (June 

14, 2019), 84 FR 28879 (June 20, 2018) (SR–NYSE– 

2018–46) (disapproving a proposal to reduce the 

minimum number of public holders continued 

listing requirement applicable to Special Purpose 

Acquisition Companies from 300 to 100). 

29See Notice, 88 FR at 60518. 

30Specifically, BZX does not discuss why it 

believes that existing surveillance procedures 

‘‘successfully mitigated manipulation concerns’’ 

during the first 12 months after listing. 

31Rule 700(b)(3), Commission Rules of Practice, 

17 CFR 201.700(b)(3). 

32See id. 

33Section 19(b)(2) of the Act, as amended by the 

Securities Act Amendments of 1975, Public Law 

94–29 (June 4, 1975), grants the Commission 

flexibility to determine what type of proceeding— 

either oral or notice and opportunity for written 

comments—is appropriate for consideration of a 

particular proposal by a self-regulatory 

organization. See Securities Act Amendments of 

1975, Senate Comm. on Banking, Housing & Urban 

Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 

(1975). 

permit unfair discrimination between 

customers, issuers, brokers, or 

dealers.’’ 27

The Commission has consistently 

recognized the importance of the 

minimum number of holders and other 

similar requirements in exchange listing 

standards. Among other things, such 

listing standards help ensure that 

exchange listed securities have 

sufficient public float, investor base, 

and trading interest to provide the depth 

and liquidity necessary to promote fair 

and orderly markets.28

As discussed above, the Exchange is 

proposing to increase the NonCompliance Period from 12 months to 

36 months, thereby extending by two 

years the length of time during which a 

series of ETF Shares listed on the 

Exchange would have no requirement to 

have a minimum number of beneficial 

holders. In support of its proposal, the 

Exchange emphasizes that some ETPs 

have had difficulty complying with the 

Beneficial Holders Rule. The Exchange 

indicates that non-compliance with the 

Beneficial Holders Rule is increasing 

because the ETP market has become so 

competitive, and there are so many of 

them, that it can be difficult to acquire 

the requisite number of beneficial 

holders within the existing NonCompliance Period. The Exchange also 

believes that the existing Beneficial 

Holders Rule forces the delisting of 

ETPs that may still be economically 

viable. 

While the Exchange takes the position 

that the highly competitive ETP market 

has made compliance with the 

Beneficial Holders Rule difficult, and 

led to the delisting of ETPs that may be 

economically viable, the Exchange does 

not explain why these compliance 

difficulties justify extending the NonCompliance Period for this core 

quantitative listing standard for an 

additional two years. The Exchange 

does not explain why the manipulation 

and other regulatory risks would not be 

greater with a very small number of 

beneficial holders, and tripling the 

period during which the same 

regulatory risks posed by a NonCompliance Period would be present is 

consistent with the Exchange Act. The 

Exchange states that no new 

manipulation concerns would arise with 

a longer Non-Compliance Period than a 

shorter one, and that existing 

surveillances and other listing standards 

sufficient to mitigate manipulation 

concerns for 12 months are sufficient for 

36 months,29 but does not explain in 

any detail the basis for this view,30 or 

the impact of its proposal on the 

maintenance of fair and orderly markets 

or other applicable Exchange Act 

standards. 

Under the Commission’s Rules of 

Practice, the ‘‘burden to demonstrate 

that a proposed rule change is 

consistent with the Exchange Act and 

the rules and regulations issued 

thereunder. . .is on the self-regulatory 

organization [‘SRO’] that proposed the 

rule change.’’ 31 The description of a 

proposed rule change, its purpose and 

operation, its effect, and a legal analysis 

of its consistency with applicable 

requirements must all be sufficiently 

detailed and specific to support an 

affirmative Commission finding, and 

any failure of an SRO to provide this 

information may result in the 

Commission not having a sufficient 

basis to make an affirmative finding that 

a proposed rule change is consistent 

with the Exchange Act and the 

applicable rules and regulations.32

For these reasons, the Commission 

believes it is appropriate to institute 

proceedings pursuant to Section 

19(b)(2)(B) of the Act to determine 

whether the proposal should be 

approved or disapproved. 

III. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

proposal. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposal is consistent with Section 

6(b)(5) or any other provision of the Act, 

and the rules and regulations 

thereunder. Although there do not 

appear to be any issues relevant to 

approval or disapproval that would be 

facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b–4, any request for an 

opportunity to make an oral 

presentation.33

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposed rule change should be 

approved or disapproved by December 

11, 2023. Any person who wishes to file 

a rebuttal to any other person’s 

submission must file that rebuttal by 

December 26, 2023. 

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 rule-comments@

sec.gov. Please include file number SR– 

CboeBZX–2023–062 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–CboeBZX–2023–062. 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 


ddrumheller on DSK120RN23PROD with NOTICES1
80786 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 

34 17 CFR 200.30–3(a)(57). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b-4. 

3See Supplementary Material .04 to MRX 

Options 3, Section 7. 

4See MEMX’s Options Fee Schedule at https://

info.memxtrading.com/us-options-tradingresources/us-options-fee-schedule/. MEMX assesses 

a $0.60 per contract Penny Symbol routing fee and 

a $1.20 Non-Penny Symbol routing fee. 

5 15 U.S.C. 78f(b). 

6 15 U.S.C. 78f(b)(4) and (5). 

7NetCoalition 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)). 

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–CboeBZX–2023–062 and should be 

submitted on or before December 11, 

2023. Rebuttal comments should be 

submitted by December 26, 2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.34

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25546 Filed 11–17–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98925; File No. SR–MRX– 

2023–20] 

Self-Regulatory Organizations; Nasdaq 

MRX, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change to Amend MRX Options 7, 

Section 5 To Amend Route-Out Fees 

November 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 November 

1, 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. 

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 5, Other Options 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. 

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 

5, Other Options Fees and Rebates. 

Specifically, the Exchange proposes to 

amend Part A, Route-Out Fees. The 

Routing Fees apply to executions of 

orders that are routed to one or more 

exchanges in connection with the 

Options Order Protection and Locked/ 

Crossed Market Plan. 

Today, the Exchange assesses all 

Members a $0.55 per contract Penny 

Symbol Routing Fee and a $1.09 NonPenny Symbol Routing Fee to route to 

another options exchange. The 

Exchange proposes to instead assess a 

$0.60 per contract Penny Symbol 

Routing Fee and a $1.20 Non-Penny 

Symbol Routing Fee to route to another 

options exchange regardless of the 

capacity of the order. The purpose of the 

proposed Routing Fees is to recoup 

costs incurred by the Exchange when 

routing orders to other options 

exchanges on behalf of options 

Members. In determining its proposed 

Routing Fees, the Exchange took into 

account transaction fees assessed by 

other options exchanges, the Exchange’s 

projected clearing costs, and the 

projected administrative, regulatory, 

and technical costs associated with 

routing orders to other options 

exchanges. The Exchange will continue 

to use its affiliated broker-dealer, 

Nasdaq Execution Services, to route 

orders to other options exchanges. 

Routing services offered by the 

Exchange are completely optional and 

market participants can readily select 

between various providers of routing 

services, including other exchanges and 

broker-dealers. Also, the Exchange notes 

that market participants may elect to 

mark their orders as ‘‘Do Not Route’’ to 

avoid any Routing Fees.3 The proposed 

structure for Routing Fees is similar to 

another options market.4 The Exchange 

believes that the proposed Routing Fees 

would enable the Exchange to recover 

the costs it incurs to route orders to 

away markets after taking into account 

the other costs associated with routing 

orders to other options exchanges. 

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. 

The Exchange’s proposed changes to 

its Routing Fees 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’. . . .’’ 7

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 


ddrumheller on DSK120RN23PROD with NOTICES1