80788 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The term ‘‘Market Makers’’ refers to 

‘‘Competitive Market Makers’’ and ‘‘Primary Market 

Makers’’ collectively. See Options 1, Section 

1(a)(21). 

4A ‘‘Non-Nasdaq GEMX Market Maker’’ is a 

market maker as defined in Section 3(a)(38) of the 

Securities Exchange Act of 1934, as amended, 

registered in the same options class on another 

options exchange. See Options 7, Section 1(c). 

5A ‘‘Firm Proprietary’’ order is an order 

submitted by a member for its own proprietary 

account. See Options 7, Section 1(c). 

6A ‘‘Broker-Dealer’’ order is an order submitted 

by a member for a broker-dealer account that is not 

its own proprietary account. See Options 7, Section 

1(c). 

7A ‘‘Professional Customer’’ is a person or entity 

that is not a broker/dealer and is not a Priority 

Customer. See Options 7, Section 1(c). 

8A ‘‘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 GEMX 

Options 1, Section 1(a)(36). Unless otherwise noted, 

when used in the Pricing Schedule the term 

‘‘Priority Customer’’ includes ‘‘Retail’’. See Options 

7, Section 1(c). 

9See 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. 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(4) and (5). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25542 Filed 11–17–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98924; File No. SR–GEMX– 

2023–14] 

Self-Regulatory Organizations; Nasdaq 

GEMX, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend GEMX Options 

7, Section 4 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 GEMX, LLC (‘‘GEMX’’ 

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 4, 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/gemx/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend the Exchange’s 

Pricing Schedule at Options 7, Section 

4, 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 Market 

Makers,3 Non-Nasdaq GEMX Market 

Makers (FarMM),4 Firm Proprietary 5/ 

Broker-Dealers 6 and Professional 

Customers 7 a $0.55 per contract Penny 

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

another options exchange. Additionally, 

today, the Exchange assess Priority 

Customers 8 a $0.50 per contract Penny 

Symbol Routing Fee and a $0.90 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 NonPenny 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. The proposed 

structure for Routing Fees is similar to 

another options market.9 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,10 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act,11 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 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 80789 

12NetCoalition 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)). 

13Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(‘‘Regulation NMS Adopting Release’’). 

14See 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. 

15 15 U.S.C. 78s(b)(3)(A)(ii). 

16 17 CFR 240.19b–4(f)(2). 

percentages for granted’ because ‘no 

exchange possesses a monopoly, 

regulatory or otherwise, in the execution 

of order flow from broker dealers’ 

. . . .’’ 12

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.’’ 13

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 seventeen 

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. 

The Exchange’s proposal to amend its 

Routing Fees such that all Members 

would pay a $0.60 per contract Penny 

Symbol Routing Fee and a $1.20 NonPenny Symbol Routing Fee to route to 

another options exchange, regardless of 

capacity, is reasonable because 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. 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. 

The proposed structure for Routing Fees 

is similar to another options market.14

The Exchange’s proposal to amend its 

Routing Fees such that all Members 

would pay a $0.60 per contract Penny 

Symbol Routing Fee and a $1.20 NonPenny Symbol Routing Fee, regardless 

of capacity, to route to another options 

exchange is equitable and not unfairly 

discriminatory because these uniform 

Routing Fees will apply equally to all 

options Members. 

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’s proposal to amend its 

Routing Fees such that all Members 

would pay a $0.60 per contract Penny 

Symbol Routing Fee and a $1.20 NonPenny Symbol Routing Fee, regardless 

of capacity, to route to another options 

exchange does not impose an undue 

burden on competition because these 

uniform Routing Fees will apply equally 

to all options Members. 

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. 

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 15 and Rule 

19b–4(f)(2) 16 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. 

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 rule-comments@

sec.gov. Please include file number SR– 

GEMX–2023–14 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–GEMX–2023–14. 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 


ddrumheller on DSK120RN23PROD with NOTICES1
80790 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Notice of Filing infra note 4, at 88 FR 59976. 

4Securities Exchange Act Release No. 98213 

(Aug. 24, 2023), 88 FR 59968 (Aug. 30, 2023) (File 

No. SR–NSCC–2023–007) (‘‘Notice of Filing’’). 

5 15 U.S.C. 78s(b)(2). 

6Securities Exchange Act Release No. 98508 (Sep. 

25, 2023), 88 FR 67407 (Sep. 29, 2023) (File No. SR– 

NSCC–2023–007). 

7Partial Amendment No. 1 delays 

implementation of the proposed change. As 

amended, NSCC would implement the proposed 

rule change within 90 days of receiving all 

necessary regulatory approvals and would 

announce the specific date of implementation on its 

public website at least 14 days prior to 

implementation. The delay is proposed in light of 

the technical system changes that are required to 

implement the liquidity stress testing 

enhancements and to be able to provide sufficient 

notice to Clearing Members following receipt of 

approval. 

8 15 U.S.C. 78s(b)(2)(B). 

9The term ‘‘physically-settled’’ refers to cleared 

contracts that settle into their underlying interest 

(i.e., options or futures contracts that are not cashsettled). When a contract settles into its underlying 

interest, shares of stock are sent (i.e., delivered) to 

contract holders who have the right to receive the 

shares from contract holders who are obligated to 

deliver the shares at the time of exercise/assignment 

in the case of an option and maturity in the case 

of a future. 

10See Notice of Filing, 88 FR at 59969. 

11See id. 

12See id. 

13The Required Fund Deposit is calculated 

pursuant to Rule 4 (Clearing Fund) and Procedure 

XV (Clearing Fund Formula and Other Matters) of 

the NSCC Rules. See Notice of Filing, 88 FR at 

59971, n.26. 

14Under the NSCC Rules, NSCC collects 

additional cash deposits from those Members who 

would generate the largest settlement debits in 

stressed market conditions, referred to as 

‘‘Supplemental Liquidity Deposits’’ or ‘‘SLD.’’ See 

Rule 4A of the NSCC Rules. See also Notice of 

Filing, 88 FR at 59971, n.27. 

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–GEMX–2023–14 and should be 

submitted on or before December 11, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25541 Filed 11–17–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98930; File No. SR–NSCC– 

2023–007] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of Partial 

Amendment No. 1 and Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change, as Modified by Partial 

Amendment No. 1, Concerning 

Modifications to the Amended and 

Restated Stock Options and Futures 

Settlement Agreement Between The 

Options Clearing Corporation and the 

National Securities Clearing 

Corporation 

November 14, 2023. 

I. Introduction 

On August 10, 2023, the National 

Securities Clearing Corporation 

(‘‘NSCC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change SR–NSCC– 

2023–007 (‘‘Proposed Rule Change’’) 

pursuant to section 19(b) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 2

thereunder to modify the Amended and 

Restated Stock Options and Futures 

Settlement Agreement dated August 5, 

2017, between OCC and National 

Securities Clearing Corporation, NSCC’s 

related rules.3 The Proposed Rule 

Change was published for public 

comment in the Federal Register on 

August 30, 2023.4 The Commission has 

received no comments regarding the 

Proposed Rule Change. 

On September 25, 2023, pursuant to 

section 19(b)(2) of the Exchange Act,5

the Commission designated a longer 

period within which to approve, 

disapprove, or institute proceedings to 

determine whether to approve or 

disapprove the Proposed Rule Change.6

On November 8, 2023, NSCC filed a 

Partial Amendment No. 1 to the 

Proposed Rule Change.7 The 

Commission is publishing this notice to 

solicit comments on Partial Amendment 

No. 1 from interested persons and is 

instituting proceedings, pursuant to 

section 19(b)(2)(B) of the Exchange Act,8

to determine whether to approve or 

disapprove the proposed rule change, as 

modified by the Partial Amendment No. 

1 (hereinafter defined as ‘‘Proposed Rule 

Change’’). 

II. Summary of the Proposed Rule 

Change 

NSCC is a clearing agency that 

provides clearing, settlement, risk 

management, and central counterparty 

services for trades involving equity 

securities. OCC is the sole clearing 

agency for standardized equity options 

listed on national securities exchanges 

registered with the Commission, 

including options that contemplate the 

physical delivery of equities cleared by 

NSCC in exchange for cash (‘‘physically 

settled’’ options).9 OCC also clears 

certain futures contracts that, at 

maturity, require the delivery of equity 

securities cleared by NSCC in exchange 

for cash. As a result, the exercise and 

assignment of certain options or 

maturation of certain futures cleared by 

OCC effectively results in stock 

settlement obligations to be cleared by 

NSCC (‘‘E&A Activity’’). NSCC and OCC 

maintain a legal agreement, generally 

referred to by the parties as the 

‘‘Accord’’ agreement, that governs the 

processing of such E&A Activity for 

firms that are members of both OCC and 

NSCC (‘‘Common Members’’). 

Under certain circumstances, the 

Accord currently allows NSCC not to 

guaranty the settlement of securities 

arising out of E&A Activity for a 

defaulted Common Member. To the 

extent NSCC chooses not to guaranty 

such transactions, OCC would have to 

engage in an alternate method of 

settlement outside of NSCC to manage 

the default of the Common Member, 

which presents two issues. First, based 

on historical data, the cash required for 

such alternative settlement could be as 

much as $300 billion.10 Second, 

settlement outside of NSCC introduces 

significant operational complexities.11

NSCC proposes to revise the Accord 

to address the liquidity and operational 

issues that arise under the current 

Accord. Specifically, the proposed 

changes to the Accord would require 

NSCC to guaranty the positions of a 

defaulting Common Member if OCC 

makes a payment to cover the 

incremental risk posed by such 

positions (the ‘‘Guaranty Substitution 

Payment’’ or ‘‘GSP’’). Based on 

historical data, the GSP could be as 

much as $6 billion (in contrast with the 

potential $300 billion required for 

alternative settlement).12

The total amount owed by the 

Common Member would be a 

combination of the member’s unpaid 

deposit to the NSCC Clearing Fund 

(‘‘Required Fund Deposit’’) 13 and 

Supplemental Liquidity Deposit.14 The 

SLD portion of the GSP would be the 

unpaid SLD associated with any E&A 

Activity. The Required Fund Deposit 

portion of the GSP, however, would be 

estimated by reference to the day-overday change in gross market value of the 

Common Member’s positions at NSCC 


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