Federal Register / Vol. 89, No. 215 / Wednesday, November 6, 2024 / Notices 88089 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 79619 

(December 20, 2016), 81 FR 95250 (December 27, 

2016) (SR–NASDAQ–2016–178). 

4See Securities Exchange Act Release No. 83193 

(May 9, 2018), 83 FR 22539 (May 15, 2018) (SR– 

NASDAQ–2018–036). 

5See https://data.bls.gov/timeseries/ 

PCU5182105182105. 

6See https://www.bls.gov/ppi/overview.htm. 

7See Id. 

8See https://data.bls.gov/timeseries/ 

PCU5182105182105. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101497; File No. SR– 

NASDAQ–2024–063] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend 

Options 7, Section 3 

October 31, 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 October 

18, 2024, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III 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 

Nasdaq Options Market LLC (‘‘NOM’’) 

Rules at Options 7, Section 3. 

While these amendments are effective 

upon filing, the Exchange has 

designated the proposed amendments to 

be operative on January 1, 2025. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/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 SQF 

Port Fees and SQF Purge Port Fees. 

Specifically, the Exchange proposes to 

raise its SQF Port Fees and SQF Purge 

Port Fees in Options 7, Section 9, B by 

10%. 

Today, NOM assesses SQF Ports and 

SQF Purge Ports a per port, per month 

fee based on a tiered fee schedule. 

Specifically, NOM assesses an SQF Port 

and an SQF Purge Port Fee of $1,500 per 

port, per month for the first 5 ports (1– 

5), a $1,000 per port, per month fee for 

the next 15 ports (6–20), and a $500 per 

port, per month fee for all ports over 20 

ports (21 and above). With this 

proposal, NOM would assess Market 

Makers the following SQF Port and an 

SQF Purge Port Fees: $1,650 per port, 

per month for the first 5 ports (1–5), a 

$1,100 per port, per month fee for the 

next 15 ports (6–20), and a $550 per 

port, per month fee for all ports over 20 

ports (21 and above). The fees represent 

a 10% increase from the current tiered 

fees. 

The proposed SQF Port Fee and SQF 

Purge Port Fee increases would enable 

the Exchange to maintain and improve 

its market technology and services to 

remain competitive with its peers. Over 

the years, customer demand for risk 

protections and capacity has increased. 

The Exchange continues to invest in 

maintaining, improving, and enhancing 

its port protocols—for the benefit and 

often at the behest of its customers. 

Such enhancements include refreshing 

hardware, upgrading risk protections 

and information security, and offering 

customers additional capacity. The 

Exchange has not increased NOM’s SQF 

Port Fee since 2016,3 and has not 

increased its SQF Purge Port Fee since 

2018 4 where inflation has been between 

roughly 14%–16%, as measured using 

the metric described below. 

Nevertheless, the Exchange proposes to 

increase its SQF Port Fee by 10%, only 

with respect to inflation that has 

occurred since 2016 and its SQF Purge 

Port Fee by 10%, only with respect to 

inflation that has occurred since 2018. 

As discussed below, the Exchange 

proposes to adjust its fees by an 

industry- and product-specific 

inflationary measure. It is reasonable 

and consistent with the Act for the 

Exchange to recoup its investments, at 

least in part, by adjusting its fees. 

Continuing to operate at fees frozen at 

2016 and 2018 levels, respectively, 

impacts the Exchange’s ability to 

enhance its offerings and the interests of 

market participants and investors. 

The fee increases the Exchange 

proposes are based on an industryspecific Producer Price Index (‘‘PPI’’), 

which is a tailored measure of 

inflation.5 As a general matter, the 

Producer Price Index is a family of 

indexes that measures the average 

change over time in selling prices 

received by domestic producers of 

goods and services. PPI measures price 

change from the perspective of the 

seller. This contrasts with other metrics, 

such as the Consumer Price Index 

(‘‘CPI’’), that measure price change from 

the purchaser’s perspective.6 About 

10,000 PPIs for individual products and 

groups of products are tracked and 

released each month.7 PPIs are available 

for the output of nearly all industries in 

the goods-producing sectors of the U.S. 

economy—mining, manufacturing, 

agriculture, fishing, and forestry—as 

well as natural gas, electricity, and 

construction, among others. The PPI 

program covers approximately 69 

percent of the service sector’s output, as 

measured by revenue reported in the 

2017 Economic Census. 

For purposes of this proposal, the 

relevant industry-specific PPI is the 

Hosting, Activer Server Pages, and 

Other IT Infrastructure Provisioning 

Services (‘‘Data PPI’’) within the Data 

Processing and Related Services 

Industry, which is an industry netoutput PPI that measures the average 

change in selling prices received by 

companies that provide data processing 

services. 

The Data Processing and Related 

Services industry was introduced to the 

PPI in January 2002 by the Bureau of 

Labor Statistics (‘‘BLS’’) as part of an 

ongoing effort to expand Producer Price 

Index coverage of the services sector of 

the U.S. economy and is identified as 

NAICS–518210 in the North American 

Industry Classification System.8

According to the BLS ‘‘[t]he primary 

output of NAICS 518210 is the 

provision of electronic data processing 

services. In the broadest sense, 

computer services companies help their 


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88090 Federal Register / Vol. 89, No. 215 / Wednesday, November 6, 2024 / Notices 

9See https://www.bls.gov/ppi/factsheets/ 

producer-price-index-for-the-data-processing-andrelated-servicesindustry-naics-518210.htm. 

10See https://www.usinflationcalculator.com/. 

11See supra discussion of SQF Port and SQF 

Purge Port enhancements. Additionally, other 

exchanges have filed for increases in certain fees, 

based in part on comparisons to inflation. See, e.g., 

Securities Exchange Act Release Nos. 34–100004 

(April 22, 2024), 89 FR 32465 (April 26, 2024) (SR– 

CboeBYX–2024–012); and 34–100398 (June 21, 

2024), 89 FR 53676 (June 27, 2024) (SR–BOX–2024– 

16)l; Securities Exchange Act Release No. 34– 

100994 (September 10, 2024), 89 FR 75612 

(September 16, 2024) (SR–NYSEARCA–2024–79). 

12 15 U.S.C. 78f(b). 

13 15 U.S.C. 78f(b)(4) and (5). 

14See https://www.officialdata.org/us/inflation/ 

2015?amount=1. 

15See https://www.officialdata.org/us/inflation/ 

2015?amount=1. 

customers efficiently use technology. 

The processing services market consists 

of vendors who use their own computer 

systems—often utilizing proprietary 

software—to process customers’ 

transactions and data. Companies that 

offer processing services collect, 

organize, and store a customer’s 

transactions and other data for recordkeeping purposes. Price movements for 

the NAICS 518210 index are based on 

changes in the revenue received by 

companies that provide data processing 

services. Each month, companies 

provide net transaction prices for a 

specified service. The transaction is an 

actual contract selected by probability, 

where the price-determining 

characteristics are held constant while 

the service is repriced. The prices used 

in index calculation are the actual 

prices billed for the selected service 

contract.’’ 9

The Exchange believes the Data PPI is 

the most appropriate subset of the Data 

Processing and Related services 

industry to be considered in the context 

of the proposed rule change to modify 

the SQF Port Fee and the SQF Purge 

Port Fee because the Exchange uses its 

‘‘proprietary software,’’ i.e., its own 

proprietary matching engine software, 

respectively, to receive options quotes 

on the Exchange’s proprietary trading 

platform. 

For purposes of this proposed rule 

change, with respect to the SQF Port 

Fee, the Exchange examined the Data 

PPI value for the period from December 

2016 to August 2024. The Data PPI had 

a starting value of 100.8 in December 

2016 and an ending value of 116.445 in 

August 2024, a 15.52% increase. For 

purposes of this proposed rule change, 

with respect to the SQF Purge Port Fee, 

the Exchange examined the Data PPI 

value for the period from May 2018 to 

August 2024. The Data PPI had a 

starting value of 102.1 in May 2018 and 

an ending value of 116.445 in August 

2024, a 14.04% increase. This data 

indicates that companies who are also 

in the data storage and processing 

business have generally increased prices 

for a specified service covered under 

NAICS 518210 by an average of 15.52% 

and 14.04%, respectively, during this 

period. Based on that percentage 

change, the Exchange proposes to make 

a one-time fee increase of only 10%, 

which reflects an increase covering 

roughly the entire period since the last 

price adjustment to the SQF Port Fee 

and the SQF Purge Port Fee was made. 

The Exchange further believes the 

Data PPI is an appropriate measure for 

purposes of the proposed rule change on 

the basis that it is a stable metric with 

limited volatility, unlike other 

consumer-side inflation metrics. In fact, 

the Data PPI has not experienced a 

greater than 2.16% increase for any one 

calendar year period since Data PPI was 

introduced into the PPI in January 2002. 

The average calendar year change from 

January 2002 to December 2023 was 

.62%, with a cumulative increase of 

15.67% over this 21-year period. The 

Exchange believes the Data PPI is 

considerably less volatile than other 

inflation metrics such as CPI, which has 

had individual calendar-year increases 

of more than 6.5%, and a cumulative 

increase of over 73% over the same 

period.10

The Exchange believes the Data PPI, 

and significant investments into, and 

enhanced performance of, the Exchange 

support the reasonableness of the 

proposed fee increases.11

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,12 in general, and furthers the 

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

of the Act,13 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. 

This belief is based on two factors. 

First, the current fees do not properly 

reflect the quality of the SQF Ports and 

SQF Purge Ports, as the SQF Port Fee 

and SQF Purge Port Fee has been static 

in nominal terms, and therefore falling 

in real terms due to inflation. Second, 

the Exchange believes that investments 

made in enhancing the risk protections 

and capacity of SQF Ports and SQF 

Purge Ports has increased the 

performance of these ports. 

The Proposed Rule Change Is 

Reasonable 

As noted above, the Exchange has not 

increased any of the fees included in the 

proposal since 2016 and 2018, 

respectively. However, in the years 

following the last fee increases, the 

Exchange has made significant 

investments in upgrades to its SQF Ports 

and SQF Purge Ports, enhancing the 

quality of its services, as measured by, 

among other things, increased capacity. 

In other words, Exchange customers 

have greatly benefitted, while the 

Exchange’s ability to recoup its 

investments has been hampered. 

Between 2016 and 2024, the inflation 

rate is 3.47% per year, on average, 

producing a cumulative inflation rate of 

31.37%.14 Also, between 2018 and 

2024, the inflation rate is 3.86% per 

year, on average, producing a 

cumulative inflation rate of 25.50%.15

Using the more targeted inflation 

number of Data PPI, the cumulative 

inflation rate was 15.52% between 2016 

and 2024, and 14.04% between 2018 

and 2024. The Exchange believes the 

Data PPI is a reasonable metric to base 

this fee increase on because it is targeted 

to producer-side increases in the data 

processing industry, which based on the 

definition adopted by BLS would 

include the Exchange’s port protocols. 

Notwithstanding inflation, as noted 

above, the Exchange has not increased 

its fees at all for over eight and six years, 

respectively, for the subject services. 

The proposed SQF Port Fee and SQF 

Purge Port Fee represent a modest 

increase from the current SQF Port Fee 

and SQF Purge Port Fee. The Exchange 

believes the proposed SQF Port Fee and 

SQF Purge Port Fee increases are 

reasonable in light of the Exchange’s 

continued expenditure in maintaining a 

robust technology ecosystem. 

Furthermore, the Exchange continues to 

invest in maintaining and enhancing its 

port products—for the benefit and often 

at the behest of its customers and global 

investors. Such enhancements include 

refreshing several aspects of the 

technology ecosystem including 

software, hardware, and network while 

introducing new and innovative 

products. The goal of the enhancements 

discussed above, among other things, is 

to provide more modern connectivity to 

the match engine. Accordingly, the 

Exchange continues to expend resources 

to innovate and modernize its 

technology so that it may benefit its 


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Federal Register / Vol. 89, No. 215 / Wednesday, November 6, 2024 / Notices 88091 

16Unlike other market participants, Market 

Makers are subject to market making and quoting 

obligations. See Options 2, Sections 4 and 5. 

17Unlike other market participants, Market 

Makers are subject to market making and quoting 

obligations. See Options 2, Sections 4 and 5. 18 15 U.S.C. 78s(b)(3)(A)(ii). 19 17 CFR 200.30–3(a)(12). 

Participants in offering SQF Ports and 

SQF Purge Ports. 

The Proposed Fees Are Equitably 

Allocated and Not Unfairly 

Discriminatory 

The Exchange also believes that the 

proposed fee increases are equitably 

allocated and not unfairly 

discriminatory because they would 

apply to all Market Makers uniformly. 

Market Makers are the only market 

participants that are assessed the SQF 

Port Fee and SQF Purge Port Fee 

because they are the only market 

participants that are permitted to quote 

on the Exchange.16 These liquidity 

providers are critical market 

participants in that they are the only 

market participants that provide 

liquidity to the Exchange on a 

continuous basis. SQF Ports and SQF 

Purge Ports are only utilized in a Market 

Maker’s assigned options series. The 

Exchange believes that the proposed fee 

increases are equitably allocated and not 

unfairly discriminatory because they 

would apply uniformly to all Market 

Makers that subscribe to SQF Ports and 

SQF Purge Ports to quote on the 

Exchange. The Exchange also believes 

that the proposal represents an equitable 

allocation of reasonable dues, fees and 

other charges because Exchange fees 

have fallen in real terms during the 

relevant period. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed fees will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Intramarket Competition 

The Exchange believes that the 

proposed fees do not impose an undue 

burden on intramarket competition 

because they would apply to all Market 

Makers uniformly. Market Makers are 

the only market participants that are 

assessed an SQF Port Fee and an SQF 

Purge Port Fee because they are the only 

market participants that are permitted to 

quote on the Exchange.17 These 

liquidity providers are critical market 

participants in that they are the only 

market participants that provide 

liquidity to the Exchange on a 

continuous basis. SQF Ports and SQF 

Purge Ports are only utilized in a Market 

Maker’s assigned options series. The 

Exchange believes that the proposed fee 

increases are equitably allocated and not 

unfairly discriminatory because they 

would apply uniformly to all Market 

Makers that subscribe to SQF Ports and 

SQF Purge Ports to quote on the 

Exchange. 

Intermarket Competition 

The Exchange believes that the 

proposed fees do not impose an undue 

burden on intermarket competition or 

on other SROs that is not necessary or 

appropriate. In determining the 

proposed fees, the Exchange utilized an 

objective and stable metric with limited 

volatility. Utilizing Data PPI over a 

specified period of time is a reasonable 

means of recouping the Exchange’s 

investment in SQF Ports and SQF Purge 

Ports. The Exchange believes utilizing 

Data PPI, a tailored measure of inflation, 

to increase the SQF Port Fee and SQF 

Purge Port Fee to recoup the Exchange’s 

investment in maintaining and 

enhancing SQF Ports and SQF Purge 

Ports does not impose a burden on 

competition. 

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.18

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– 

NASDAQ–2024–063 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–NASDAQ–2024–063. 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–NASDAQ–2024–063 and should be 

submitted on or before November 27, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–25734 Filed 11–5–24; 8:45 am] 

BILLING CODE 8011–01–P 


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