[Federal Register Volume 89, Number 186 (Wednesday, September 25, 2024)]
[Notices]
[Pages 78408-78414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21869]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101097; File No. SR-GEMX-2024-35]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Codify the 
Definition of GEMX Open/Close End of Day and Intraday Trade Profile

September 19, 2024.
    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 September 6, 2024, 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.
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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 codify the definition of GEMX Open/Close 
End of Day and Intraday Trade Profile in the GEMX rulebook. This filing 
also incorporates previously proposed fee changes that: (i) adjusted 
fees for GEMX Open/Close End of Day and Intraday Trade Profile; (ii) 
reduced fees for 36 months of historical data for current customers; 
and (iii) allowed unlimited external distribution of GEMX Open/Close 
End of Day and Intraday Trade Profile for a fixed monthly fee.
    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

[[Page 78409]]

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 codify the definition 
of GEMX Open/Close Trade Profile in the GEMX rulebook. This filing also 
incorporates previously proposed fee changes that: (i) adjusted fees 
for GEMX Open/Close End of Day and Intraday Trade Profile; (ii) reduced 
fees for 36 months of historical data for current customers; and (iii) 
allowed unlimited external distribution of GEMX Open/Close End of Day 
and Intraday Trade Profile for a fixed monthly fee.\3\
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    \3\ The previously introduced fee proposal was initially filed 
on July 1, 2024, as SR-GEMX-2024-19. On July 15, 2024, that filing 
was withdrawn and refiled as SR-GEMX-2024-24. On July 29, 2024, that 
filing was withdrawn and refiled as SR-GEMX-2024-26 On August 12, 
2024, that proposal was withdrawn and replaced with SR-GEMX-2024-28 
to incorporate those fees into a filing that codifies the definition 
of GEMX Open/Close Trade Profile. On August 23, 2024, SR-GEMX-2024-
28 was withdrawn and replaced with SR-GEMX-2024-31 to provide 
additional information. On September 6, 2024, SR-GEMX-2024-31 was 
withdrawn and replaced with the instant filing to provide further 
information.
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GEMX Open/Close Trade Profile
    The GEMX Open/Close Trade Profile provides over 80 fields of 
trading and volume data for GEMX-listed options that can be used to 
create and test trading models and analytical strategies.\4\ This 
product is designed to provide data to subscribers regarding investor 
sentiment and trading activity.
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    \4\ See Securities Exchange Act Release No. 81632 (September 15, 
2017), 82 FR 44235 (September 21, 2017) (SR-GEMX-2017-42) (setting 
current fees for GEMX Open/Close Trade Profile).
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    The GEMX Open/Close Trade Profile provides aggregate quantity and 
volume information for trades on the Exchange for all series \5\ during 
a trading session. Information is provided in the following categories: 
(i) total exchange volume for Intra-Day information and total exchange 
and industry volume for End of Day information for each reported 
series; (ii) open interest for the series; (iii) aggregate quantity of 
trades and aggregate trade volume effected to open a position, 
characterized by origin type (Priority Customer,\6\ Broker-Dealer,\7\ 
Firm Proprietary,\8\ and Professional Customer \9\), and for Priority 
Customers and Professional Customers, further subdivided by trade size 
buckets; and (iv) aggregate quantity of trades and aggregate trade 
volume effected to close a position, characterized by origin type 
(Priority Customer, Broker-Dealer, Firm Proprietary, and Professional 
Customer), and for Priority Customers and Professional Customers, 
further subdivided by trade size buckets.
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    \5\ Every options series trades as a distinct symbol; the terms 
``series'' and ``symbol'' are therefore synonyms.
    \6\ 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 GEMX Options 1, 
Section 1(a)(36). See Options 7, Section 1(c).
    \7\ A ``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).
    \8\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account. See Options 7 Section 1(c).
    \9\ A ``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).
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    GEMX Open/Close Trade Profile End of Day also provides opening buy, 
closing buy, opening sell and closing sell information, which includes 
underlying close, option close, and moneyness.
    End of Day information is available the next business day. Intra-
Day information is updated at 10-minute intervals over the course of 
the trading day. Historical information is available upon request.
    The GEMX Open/Close Trade Profile provides proprietary Exchange 
trade data and does not include any intraday trade data from any other 
exchange.\10\ The information provided, both in End of Day and Intraday 
formats, is not a real-time data feed.
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    \10\ The End of Day report includes a field that presents Total 
Industry Volume for the Series.
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    GEMX Open/Close Trade Profile is a completely voluntary product in 
that the Exchange is not required by any rule or regulation to make 
this data available and potential subscribers may purchase it only if 
they voluntarily choose to do so.
    This information is available to all market participants, including 
both members and non-members, for all series and symbols in End of Day, 
Intra-Day, and historical files (upon request).
    Trade Profile data includes ``Origin Code'' (the type of trader 
participating in the transaction); opening and closing buys and sells; 
\11\ trading volume and number of trades categorized by day and series; 
\12\ the degree to which a series is ``in'' or ``out'' of the 
``money''; \13\ the number of days to expiration; an indication of the 
degree to which there is ``Open Interest'' \14\ for each series; and a 
comparison of the volume of trading at GEMX relative to the industry as 
a whole.
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    \11\ An opening buy is a transaction that creates or increases a 
long position and an opening sell is a transaction that creates or 
increases a short position. A closing buy is a transaction made to 
close out an existing position. A closing sell is a transaction to 
reduce or eliminate a long position.
    \12\ Trading volume is the number of contracts traded; the 
number of trades is the number of transactions.
    \13\ The degree to which a series is ``in'' or ``out'' of the 
``money'' is identified according to the following five levels of 
``moneyness'': (i) ``Deep in the Money'' means that the strike price 
of this option is more than 12% lower than the price of the 
underlying security if it is a call or more than 12% higher if it is 
a put; (ii) ``In the Money'' means that the strike price of this 
option is within the range of 5%-12% lower than the price of the 
underlying security if it is a call or within the range of 5%-12% 
higher if it is a put; (iii) ``At the Money'' means that the strike 
price of this option is within the range of 5% higher or lower than 
the price of the underlying security; (iv) ``Out of the Money'' 
means that the strike price of this option is within the range of 
5%-12% higher than the price of the underlying security if it is a 
call or 5%-12% lower if it is a put; and (v) ``Deep out of the 
Money'' means that the strike price of this option is more than 12% 
higher than the price of the underlying security if it is a call or 
more than 12% lower if it is a put.
    \14\ ``Open Interest'' is the total number of outstanding 
contracts for each series across all options exchanges for the trade 
date of the file.
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    The End of Day file is updated overnight and available for download 
the following morning.
    The Intraday file is captured in ``snapshots'' taken every 10 
minutes throughout the trading day, available to subscribers within 2 
minutes of the conclusion of each period. Subscribers receive the first 
calculation at 9:42 a.m. ET, representing data captured from 9:30 a.m. 
to 9:39 a.m., and the second calculation at 9:52 a.m., representing 
data from both the most recent snapshot and previous snapshots, 
continuing over the course of the trading day.
    The End of Day subscription is available for $500 per month. The 
Intraday subscription is available for $1,000 per month. These fees 
were set in 2017.\15\
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    \15\ See Securities Exchange Act Release No. 81632 (September 
15, 2017), 82 FR 44235 (September 21, 2017) (SR-GEMX-2017-42) 
(setting current fees for GEMX Open/Close Trade Profile).
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    The GEMX Open/Close Trade Profile is also available as an 
historical database available upon request.\16\ This data is intended 
to enhance a purchaser's ability to analyze option trade and volume 
data, evaluate historical trends in the trading activity of a 
particular option series, and create and test trading models and 
analytical

[[Page 78410]]

strategies. The historical database provides the same fields of 
information available for the Intraday and End of Day products, 
respectively.
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    \16\ See Securities Exchange Act Release No. 80722 (May 18, 
2017), 82 FR 23891 (May 24, 2017) (SR-GEMX-2017-13) (establishing 
fees for historical information on GEMX Open/Close Trade Profile).
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    End of Day data is available for $400 per request per month. 
Intraday information is available in 10-minute increments for $750 per 
request per month. Historical data is available starting in August 
2013.
    Trade Profile is designed to enhance the ability of customers to 
understand market sentiment on the Exchange and to create and test 
trading models and analytical strategies useful in both options and 
equities markets. It is not necessary to execute a trade, but it 
supplies the customer with information about underlying market trends 
designed to improve the quality of that customer's investment 
decisions. Customers can, and often do, elect to forego this 
information.
    Products similar to Trade Profile have been available on multiple 
exchanges for many years and are well-established in the market. Such 
products are available from the Nasdaq Phlx LLC (``Phlx''),\17\ Nasdaq 
Options Market (``NOM''),\18\ Nasdaq ISE LLC (``ISE''),\19\ Cboe 
Options Exchange (``Cboe''),\20\ NYSE American Options (``NYSE 
American''),\21\ NYSE Arca Options (``NYSE Arca''),\22\ BOX Options 
Market LLC (``BOX''),\23\ MIAX Pearl Options Exchange (``Pearl''),\24\ 
and others. In general, the relative value of these products depends on 
the volume of transactions included; the greater the volume of 
transactions, the greater the value of the data. The current purchasers 
of Trade Profile are investment banks, market makers, asset managers 
and other buy-side investors.
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    \17\ See Securities Exchange Act Release No. 62887 (September 
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121) 
(introducing PHOTO on September 1, 2010).
    \18\ See Nasdaq Stock Market Rules, Options 7, Section 4 (Nasdaq 
Options Market Data Distributor Fees).
    \19\ See Nasdaq ISE Rules, Options 7, Section 10(A) and (B) 
(Nasdaq ISE Open/Close Trade Profile End of Day; Nasdaq ISE Open/
Close Trade Profile Intraday).
    \20\ See, e.g., Securities Exchange Act Release No. 94913 (May 
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing 
End of Day and Intra-Day Open-Close Data as a summary of trading 
activity on the exchange at the option level by origin, side of the 
market, price, and transaction type).
    \21\ See, e.g., Securities Exchange Act Release No. 93803 
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \22\ See, e.g., Securities Exchange Act Release No. 93132 
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \23\ See, e.g., Securities Exchange Act Release No. 97174 (March 
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing 
the BOX exchange Open-Close Data report as providing volume by 
origin, buying/selling, and opening/closing criteria).
    \24\ See, e.g., Securities Exchange Act Release No. 91964 (May 
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24) 
(introducing the Open-Close Report).
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Proposed Changes
Definition of GEMX Open/Close Trade Profile
    The Exchange proposes to codify the definition of GEMX Open/Close 
Trade Profile. Nothing in this codification is intended to change the 
product in any way, but rather is intended to describe the product 
exactly as it exists. Specifically, the Exchange proposes the following 
definition:

    GEMX Open/Close Trade Profile provides aggregate quantity and 
volume information for trades on the Exchange for all series during 
a trading session. Information is provided in the following 
categories: (i) total exchange volume for Intra-Day information and 
total exchange and industry volume for End of Day information for 
each reported series; (ii) open interest for the series; (iii) 
aggregate quantity of trades and aggregate trade volume effected to 
open a position, characterized by origin type (Priority Customer, 
Broker-Dealer, Firm Proprietary, and Professional Customer), and for 
Priority Customers and Professional Customers, further subdivided by 
trade size buckets; and (iv) aggregate quantity of trades and 
aggregate trade volume effected to close a position, characterized 
by origin type (Priority Customer, Broker-Dealer, Firm Proprietary, 
and Professional Customer), and for Priority Customers and 
Professional Customers, further subdivided by trade size buckets.
    GEMX Open/Close Trade Profile End of Day will also provide 
opening buy, closing buy, opening sell and closing sell information, 
which shall include option first trade price, underlying close, 
option close, and moneyness.
    End of Day information will be available the next business day. 
Intra-Day information is updated at 10-minute intervals over the 
course of the trading day. Historical information will be available 
upon request.

    The purpose of the proposed change is to add clarity and 
specificity to the GEMX rulebook.
Previously Introduced Fee Changes
Fee Changes for End of Day and Intraday Products
    The Exchange proposes to increase the fee for the End of Day 
product from $500 to $575, and the Intraday Product from $1,000 to 
$1,500.
    In addition, the Exchange proposes to insert a comma after the 
phrase ``or the Intraday Product for the current month'' into the 
definition of Current Distributor. The revised sentence will read as 
follows:

    A ``Current Distributor'' is any firm that purchases either the 
End of Day Product for the current month, or the Intraday Product 
for the current month, in the same month that the 36 months of 
historical End of Day or Intraday data is ordered.

    The change is designed to clarify that the phrase ``the same month 
that the 36 months of historical End of Day or Intraday data is 
ordered'' applies to both firms that purchase End of Day data in the 
current month and firms that purchase Intraday data for the current 
month. The clarification will not change how the fee is charged.
Discount for Historical Data
    The Exchange proposes to offer a discount for historical data for 
Current Intraday or End of Day Distributors.\25\ Historical data is 
currently available for $400 per request per month for End of Day 
information, and $750 per request per month for Intraday information. 
The Exchange proposes to offer the most recent 36 months of historical 
data for current end of day product distributors for $4,800, and the 
most recent 36 months of historical data for current Intraday product 
distributors for $9,000.
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    \25\ The Exchange proposes to define ``Current Distributor'' as 
any firm that purchases either the End of Day Product for the 
current month, or the Intraday Product for the current month in the 
same month that the 36 months of historical End of Day or Intraday 
data is ordered.
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    These changes would substantially reduce fees for historical data. 
Under the current fee schedule, 36 months of end of day data at $400 
per month would cost $14,400. The proposal would reduce this to $4,800. 
Thirty-six months of intraday data would cost $27,000 at the current 
rate of $750 per month. The proposal would reduce this to $9,000. 
Customers would be able to purchase historical information that exceeds 
36 months at the current rates.
    The historical data will continue to provide the same categories of 
information available for current subscribers under the new proposal.
    Eligibility for the discount will depend on the type of current 
subscription. A current purchaser of End of Day data would be eligible 
for the historical End of Day product at the reduced rate. A current 
purchaser of the Intraday product would similarly be able to purchase 
the historical Intraday product at the reduced rate. A purchaser of 
both the current End of Day and Intraday products would be entitled to

[[Page 78411]]

purchase both types of history at the reduced rate.
    The 36-month period will be based on the date of purchase of the 
current subscription by a Current Distributor. For example, a customer 
that buys the current End of Day product for the first time in July 
2024 would also be able to purchase historical End of Day data for the 
period July 2021 through July 2024 (inclusive) at the discounted rate. 
Similarly, a customer with an existing End of Day subscription that is 
current in July 2024 would be able to purchase the historical End of 
Day data from July 2021 through July 2024 at the discounted rate. The 
same reasoning would apply to Intraday customers.\26\
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    \26\ A customer may use the proposed historical data discount 
more than once. For example, a Current Distributor that purchases 36 
months of historical data at a discount, but later terminates that 
subscription, would be eligible to purchase another 36 months of 
historical data (based on the date of purchase) upon renewing that 
subscription. (Current Distributors that never terminate would have 
no need for a second purchase, as they would already possess the 
most recent months of historical data.).
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    The fees for historical data are linked to the current product 
because effective historical testing requires a comparison of similar 
products. Effective testing of the End of Day product, for example, 
requires End of Day historical data, and the same would hold true for 
Intraday data.
    Historical data is useful in analyzing option trade and volume 
data, evaluating historical trends in the trading activity of a 
particular option series, and creating and testing trading models and 
analytical strategies, and is often purchased concurrently with a new 
subscription to GEMX Open/Close Trade Profile. Many customers use 
historical data to test their strategies and models, and our 
discussions with current and former customers and experience indicate 
that 36 months of data is sufficient for most customer needs, and is an 
effective baseline for review.
External Distribution of Derived Data
    The Exchange proposes to offer a license for the unlimited external 
distribution of Derived Data from GEMX Trade Profile for $3,000 per 
month. Derived Data is ``any Information generated in whole or in part 
from Exchange Information such that the Information generated cannot be 
reverse engineered to recreate Exchange Information,\27\ or be used to 
create other data that is recognizable as a reasonable substitute for 
such Exchange Information.''
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    \27\ ``Exchange Information'' is any data or information that 
has been collected, validated, processed and/or recorded by the 
Exchange and made available for transmission relating to: (i) 
Eligible securities or other financial instruments, markets, 
products, vehicles, indicators, or devices; (ii) activities of the 
Exchange; or (iii) other information or data from the Exchange. 
Information includes, but is not limited to, any element of 
information used or processed in such a way that Exchange 
Information or a substitute for such Information can be identified, 
recalculated or re-engineered from the processed information.
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    Fees for external distribution of Derived Data from GEMX Trade 
Profile are in addition to fees for the End of Day product or the 
Intraday product, or both, as applicable.
    This is a new license; external distribution of Derived Data is not 
currently permitted. The proposal, based on a similar license offered 
by the Phlx exchange,\28\ will allow the external distribution of 
analytic products derived from GEMX Trade Profile to the general 
investing public. A similar product is also being proposed for the 
Nasdaq Options Market and the ISE Exchange.
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    \28\ See Securities Exchange Act Release No. 93293 (October 12, 
2021), 86 FR 57716 (October 18, 2021) (SR-Phlx-2021-58).
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    Experience with Phlx indicates that this license provides an 
effective mechanism for market data vendors to identify, develop, and 
sell derived market data products, such as sentiment indicators, 
harnessing the power of the competitive marketplace to promote 
innovation. The Exchange expects that this product will have the 
greatest utility for the general investing public.
2. Statutory Basis
    The Exchange believes that its proposal to codify the definition of 
GEMX Open/Close Trade Profile is consistent with Section 6(b) of the 
Act,\29\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\30\ in particular, in that it is designed 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.
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    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
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    Adding the definition of GEMX Open/Close Trade Profile will provide 
additional clarity and specificity to the GEMX rulebook. Nothing in 
this codification is intended to change the product or the way it 
functions, but rather is intended to describe the product exactly as it 
exists today. Providing additional clarity about an exchange product 
will help investors make better informed decisions about GEMX Open/
Close Trade Profile, and therefore will help protect investors and 
promote the public interest.
    Similarly, clarifying the definition of Current Distributor will 
also add specificity to the rulebook without changing the underlying 
fees. This additional clarity will help investors make better informed 
decisions about GEMX Open/Close Trade Profile, and thereby help protect 
investors and promote the public interest.
    The Exchange also believes that its proposal to change fees is 
consistent with Section 6(b) of the Act,\31\ in general, and furthers 
the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\32\ 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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    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(4) and (5).
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Equitable Allocation of Reasonable Dues, Fees and Other Charges
    The proposed changes are an equitable allocation of reasonable 
dues, fees and other charges because: (i) the trade outline products 
offered by multiple exchanges are substitutes, and customers are free 
to choose which product they purchase; and (ii) the proposed fees are 
comparable to the fees charged by other exchanges, and customers are 
free to purchase other products if the Exchange has mistaken the value 
of its product.
Substitution
    Products similar to Trade Profile have been available on multiple 
exchanges for many years and are well-established in the market. Such 
products are available from Phlx,\33\ ISE,\34\ GEMX,\35\ Cboe,\36\ NYSE 
American,\37\ NYSE

[[Page 78412]]

Arca,\38\ BOX,\39\ MIAX Pearl,\40\ and others.
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    \33\ See Securities Exchange Act Release No. 62887 (September 
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121) 
(introducing PHOTO on September 1, 2010).
    \34\ See Nasdaq ISE Rules, Options 7, Section 10(A) and (B) 
(Nasdaq ISE Open/Close Trade Profile End of Day; Nasdaq ISE Open/
Close Trade Profile Intraday).
    \35\ See Nasdaq GEMX Rules, Options 7, Sections 7(D) (Nasdaq 
GEMX Open/Close End of Day Trade Profile) and 7(E) (Nasdaq GEMX 
Open/Close Intraday Trade Profile).
    \36\ See, e.g., Securities Exchange Act Release No. 94913 (May 
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing 
End of Day and Intra-Day Open-Close Data as a summary of trading 
activity on the exchange at the option level by origin, side of the 
market, price and transaction type).
    \37\ See, e.g., Securities Exchange Act Release No. 93803 
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \38\ See, e.g., Securities Exchange Act Release No. 93132 
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \39\ See, e.g., Securities Exchange Act Release No. 97174 (March 
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing 
the BOX exchange Open-Close Data report as providing volume by 
origin, buying/selling, and opening/closing criteria).
    \40\ See, e.g., Securities Exchange Act Release No. 91964 (May 
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24) 
(introducing the Open-Close Report).
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    Trade outline products offer the same categories of data through 
end of day or intraday reports. The information provided by one 
exchange is generally similar to that provided by other exchanges 
because order flow can move from one exchange to another, and market 
sentiment trends that appear on one exchange are likely to be similar 
to the sentiment trends on other exchanges. The key differentiator in 
the quality of the data depends on the volume of transactions on a 
given exchange; the greater the volume of transactions, the greater the 
value of the data. Customers can choose not to purchase the trade 
outline product of one exchange and substitute it for that of another 
exchange.
    Customers can also choose not to purchase a trade outline product 
at all. Trade outline products are designed to help investors 
understand underlying market trends to improve the quality of 
investment decisions, but are not necessary to execute a trade. 
Customers can, and do, choose to forego the information from Trade 
Profile or any of its competitor products when making a trade.
    Nasdaq and its affiliates have observed that customers purchase 
sufficient data to provide a view of the market, but not more, as the 
value of data from each additional exchange yields diminishing returns. 
As a result, all exchanges are limited in what they will be able to 
charge for Trade Profile.
    As the Commission and courts \41\ have recognized, ``[i]f 
competitive forces are operative, the self-interest of the exchanges 
themselves will work powerfully to constrain unreasonable or unfair 
behavior.'' \42\ Accordingly, ``the existence of significant 
competition provides a substantial basis for finding that the terms of 
an exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably or unfairly discriminatory.'' \43\ 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.'' \44\ Trade Profile is in direct competition with multiple 
exchanges that offer similar products in end of day and intraday 
formats.\45\
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    \41\ The decision of the United States Court of Appeals for the 
District of Columbia Circuit in NetCoalition v. SEC 615 F.3d 525 
(D.C. Cir. 2010). upheld the Commission's reliance upon competitive 
markets to set reasonable and equitably allocated fees for market 
data. ``In fact, the legislative history indicates that the Congress 
intended that the market system evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed and that the SEC wield its regulatory power in those 
situations where competition may not be sufficient, such as in the 
creation of a consolidated transactional reporting system.'' 
NetCoalition I at 535. (quoting H.R. Rep. No. 94-229, at 92 (1975), 
as reprinted in 1975 U.S.C.C.A.N. 321, 323) (internal quotation 
marks omitted). The court agreed with the Commission's conclusion 
that ``Congress intended that competitive forces should dictate the 
services and practices that constitute the U.S. national market 
system for trading equity securities.'' Id. (quoting Securities 
Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 
74771 (December 9, 2008) (SR-NYSEArca-2006-21)).
    \42\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \43\ See id.
    \44\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
    \45\ These substitute products include NOTO, ISE Trade Profile, 
GEMX Trade Profile data; open-close data from Cboe C1, C2, BZX, and 
EDGX; and Open Close Reports from MIAX Options, Pearl, and Emerald.
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    The license to allow the external distribution of Derived Data, 
like the purchase of the end of day and intraday licenses, is also 
subject to competition. Any exchange that wishes to allow distribution 
of a Derived Data product based on options trading information would be 
able to do so with an immediately effective fee filing similar to this 
proposal.
    Moreover, as explained above, the proposal is designed to promote 
the dissemination of a variety of analytical insights--generally used 
only by investment banks, market makers, asset managers and other buy-
side investors--to the general investing public by creating an 
incentive for market data vendors to identify, develop, and sell such 
indicators. As such, the proposal will spur competition among not only 
exchanges, but vendors as well.
    The discounted fees for historical data, like the purchase of the 
end of day, intraday and Derived Data licenses, is also subject to 
competition. Any exchange that wishes to provide discounts for 
historical data would be able to do so with an immediately effective 
fee filing in response.
Comparability of Proposed Fees
    The proposed fees are comparable to the fees charged by similarly 
situated exchanges.
    As explained above, the value of Trade Profile is determined in 
part by the number of underlying transactions reflected in the data. 
GEMX has a market share comparable to Cboe C2 and MIAX Emerald, at 
approximately 3% to 4% during the second quarter of 2024.\46\ For 
intraday products, MIAX Emerald charges $2,000 \47\ and Cboe C2 charges 
$1,000.\48\ The proposed fee of $1,500 is within that range. For End of 
Day products, MIAX Emerald charges $600,\49\ and Cboe C2 charges 
$500.\50\ The proposed fees of $575 are within the range of fees 
charged by these exchanges.
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    \46\ See NasdaqTrader.com, ``Options Market Statistics,'' 
available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
    \47\ See MIAX Emerald Options Exchange Fee Schedule as of April 
18, 2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_04182024.pdf.
    \48\ See Cboe DataShop, ``Cboe Open-Close Volume Summary,'' 
available at https://datashop.cboe.com/cboe-options-open-close-volume-summary.
    \49\ See MIAX Emerald Options Exchange Fee Schedule as of April 
18, 2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Emerald_Fee_Schedule_04182024.pdf.
    \50\ See Cboe DataShop, ``Cboe Open-Close Volume Summary,'' 
available at https://datashop.cboe.com/cboe-options-open-close-volume-summary.
---------------------------------------------------------------------------

    Nasdaq is not aware of another exchange that provides a similar 
discount for historical data other than its own affiliates. The Phlx 
exchange, which is affiliated with Nasdaq, offers the most recent 36 
months of historical End of Day data to Current Distributors for 
$6,000, and the most recent 36 months of Intraday data for $12,000. The 
proposed GEMX fees of $4,800 for 36 months of historical End of Day 
data and $9,000 for 36 months of Intraday data are reasonable in 
comparison to Phlx because GEMX has a much lower market share 
(approximately 9% for Phlx and about 3% for GEMX).
    If the Exchange is incorrect in its assessment, current and 
prospective customers will elect not to purchase Trade Profile.

[[Page 78413]]

    As noted above, clarifying the definition of Current Distributor 
will not change fees, and therefore will not impact the equitable 
allocation of reasonable dues, fees and other charges.
The Proposal Does Not Permit Unfair Discrimination
    Nothing in the proposal treats any category of market participant 
any differently from any other category of market participant. On the 
contrary, the proposal expands distribution of Trade Profile beyond 
investment banks, market makers, asset managers and other buy-side 
investors to market data vendors and the general investing public. 
Allowing the distribution of Derived Data to the general investing 
public will broaden the availability of such information while not 
treating any current recipient of the product differently in any way. 
The new fee structure, which modifies fees to reflect current market 
value and offers historical data at a discount, applies equally to all 
current and potential distributors. Trade Profile is available to all 
market participants, including members and non-members, and all market 
participants receive the same information in the Trade Profile data 
feed.
    With respect to the specific fee changes, it is reasonable and not 
unfair discrimination to charge an external distributor of Derived Data 
a $3,000 licensing fee. Vendors will ordinarily charge a fee to their 
downstream customers for this service, and, even if the vendor is not 
charging a specific fee for this particular service, derived data 
products from the Exchange will be part of a suite of offerings that 
generally promote sales. External distribution is fundamentally 
different than internal use, in that the former generates revenue from 
external sales while the latter does not. It is not unfair 
discrimination to charge a licensing fee for a product that generates 
downstream revenue.
    Nor is it unfair discrimination to allow the redistribution of 
Derived Data, but not the underlying information, to the general 
investing public. As explained above, neither exchanges nor vendors 
ordinarily allow redistribution of analytic products--such products are 
typically designed solely for the use of direct customers, not for 
redistribution to the customers of customers in the manner of a data 
feed. Allowing the redistribution of Derived Data provides an incentive 
for vendors to innovate with new compelling and varied analytic 
products for the general investing public that will provide access to 
market sentiment insights that are now generally used by sophisticated 
investors. This proposal is therefore not unfair discrimination, but 
rather allows for more equitable access to market sentiment information 
for the general investing public.
    It is also not unfair discrimination to provide a discount for 36 
months of historical data to Current Distributors, but not former 
distributors or firms that have never purchased the product. Any firm 
would be able to become a Current Distributor at any time by 
subscribing to Trade Profile, and would be able to cancel the 
subscription at any time after receiving the 36 months of historical 
data for the proposed discounted fee. More specifically, a firm that is 
not a Current Distributor may obtain access to the 36 months of 
historical data at a discount by becoming a Current Distributor for a 
limited time and then terminating the subscription.
    It is not unfair discrimination to limit the historical data 
discount to Current Distributors. Historical information is generally 
used by Current Distributors to test their strategies and trading 
models, and Current Distributors are therefore in the best position to 
benefit from the historical data. Outside of the 36 month period, all 
firms will have the opportunity to purchase historical data on an ad 
hoc basis.
    For all of these reasons, the proposal does not permit unfair 
discrimination.

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 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 exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to 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.
    Adding the definition of GEMX Open/Close Trade Profile will promote 
competition by helping investors make better informed decisions about 
GEMX Open/Close Trade Profile.
Intermarket Competition
    Nothing in the proposal burdens inter-market competition (the 
competition among self-regulatory organizations).
    As discussed above, Trade Profile is subject to direct competition 
from other options exchanges that offer substitutes. Any of these 
exchanges can replicate this proposal in full or in part, and nothing 
in the proposal would interfere with the ability of any exchange to do 
so.
Intra-Market Competition
    Nothing in the proposal burdens intra-market competition (the 
competition among consumers of exchange data). Trade Profile is 
available to any customer under the same fee schedule as any other 
customer, and any market participant that wishes to purchase these 
products can do so on a non-discriminatory basis. Indeed, the proposal 
will foster competition by expanding dissemination of data to vendors 
and the general investing public, and by encouraging more market 
participants to use Trade Profile data to help inform their investments 
strategies and analytic models.
    Offering the 36 months of historical data to Current Distributors, 
but not former distributors or firms that have never purchased the 
product, will not burden competition because non-subscribers are free 
to purchase a current subscription. Moreover, a firm that is not a 
Current Distributor may become a Current Distributor and then cancel 
the product after receiving the historical discount. As such, firms 
that are not Current Distributors will have an opportunity to pay the 
same fees for the most recent 36 months of historical data as Current 
Distributors. Outside of the 36 month period, all firms will have the 
opportunity to purchase historical data on an ad hoc basis.
    Adding language to clarify the definition of Current Distributor 
will not change fees, and will promote competition by better informing 
investors.

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.

[[Page 78414]]

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \51\ and Rule 19b-
4(f)(6) \52\ thereunder.
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    \51\ 15 U.S.C. 78s(b)(3)(A).
    \52\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \53\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\54\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange states that 
adding the definition of GEMX Open/Close Trade Profile will provide 
additional clarity and specificity to the GEMX rulebook, and nothing in 
the clarification changes the product or the way it functions, but 
rather describes the product exactly as it exists today. The Exchange 
also states that the fees included in this filing have been in effect 
since July 1, 2024, and waiver of the operative delay will allow 
application of those fees to continue uninterrupted. For these reasons, 
the Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\55\
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    \53\ 17 CFR 240.19b-4(f)(6).
    \54\ 17 CFR 240.19b-4(f)(6)(iii).
    \55\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9defe8f1f8b0fef2f0f0f8f3e9eeddeef8feb3faf2eb"><span class="__cf_email__" data-cfemail="3b494e575e16585456565e554f487b485e58155c544d">[email protected]</span></a>. Please include 
file number SR-GEMX-2024-35 on the subject line.

Paper Comments

    <bullet> 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-2024-35. 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-GEMX-2024-35 and should be 
submitted on or before October 16, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\56\
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    \56\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21869 Filed 9-24-24; 8:45 am]
BILLING CODE 8011-01-P


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