Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 102223 

52 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3On October 31, 2024, SR–GEMX–2024–37 was 

filed to amend ORF. On November 27, 2024, SR– 

GEMX–2024–37 was withdrawn and this rule 

change was filed. The current proposal amends the 

ORF Rate for Local Customer ‘‘C’’ Origin Code 

transactions executed on GEMX, Local Firm ‘‘F’’ 

Origin Code transactions executed on GEMX, and 

Away ORF Rate Firm ‘‘F’’ Origin Code multi-list 

transactions executed on non-GEMX exchanges. 

4Today, ORF is collected from Customers, 

Professionals and broker-dealers that are not 

affiliated with a clearing member that clear in the 

‘‘C’’ range at OCC. See supra notes 13 and 14 for 

descriptions of Priority Customers and Professional 

Customers. 

5The term ‘‘Member’’ means an organization that 

has been approved to exercise trading rights 

associated with Exchange Rights. See General 1, 

Section 1(a)(14). 

6Market participants must record the appropriate 

account origin code on all orders at the time of 

entry of the order. The Exchange represents that it 

has surveillances in place to verify that members 

mark orders with the correct account origin code. 

7The Exchange uses reports from OCC when 

assessing and collecting the ORF. 

8CMTA or Clearing Member Trade Assignment is 

a form of ‘‘give-up’’ whereby the position will be 

assigned to a specific clearing firm at OCC. 

9By way of example, if Broker A, an GEMX 

Member, routes a Customer order to CBOE and the 

transaction executes on CBOE and clears in Broker 

A’s OCC Clearing account, ORF will be collected by 

GEMX from Broker A’s clearing account at OCC via 

direct debit. While this transaction was executed on 

a market other than GEMX, it was cleared by an 

Continued 

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–ISE–2024–56. 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–ISE–2024–56 and should be 

submitted on or before January 7, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.52

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–29624 Filed 12–16–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101875; File No. SR– 

GEMX–2024–42] 

Self-Regulatory Organizations; Nasdaq 

GEMX, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Adopt a New 

Approach to the Options Regulatory 

Fee (ORF) in 2025 

December 11, 2024. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

27, 2024, Nasdaq GEMX, LLC (‘‘GEMX’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘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 

GEMX’s Pricing Schedule at Options 7, 

Section 5 regarding the Options 

Regulatory Fee.3

While the changes proposed herein 

are effective upon filing, the Exchange 

has designated the 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/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 

GEMX proposes to amend its current 

ORF in several respects. GEMX 

proposes to amend its methodology of 

collection to: (1) specify that it is 

including options transactions in GEMX 

proprietary products; and (2) assess ORF 

in all clearing ranges except market 

makers who clear as ‘‘M’’ at The 

Options Clearing Corporation (‘‘OCC’’). 

Additionally, GEMX will assess a 

different rate for trades executed on 

GEMX (‘‘Local ORF Rate’’) and trades 

executed on non-GEMX exchanges 

(‘‘Away ORF Rate’’). 

Background on Current ORF 

Today, GEMX assesses its ORF for 

each Customer 4 option transaction that 

is either: (1) executed by a Member 5 on 

GEMX; or (2) cleared by an GEMX 

Member at OCC in the Customer range,6

even if the transaction was executed by 

a non-Member of GEMX, regardless of 

the exchange on which the transaction 

occurs.7 If the OCC clearing member is 

an GEMX Member, ORF is assessed and 

collected on all ultimately cleared 

Customer contracts (after adjustment for 

CMTA 8); and (2) if the OCC clearing 

member is not an GEMX Member, ORF 

is collected only on the cleared 

Customer contracts executed at GEMX, 

taking into account any CMTA 

instructions which may result in 

collecting the ORF from a non-Member.9


ddrumheller on DSK120RN23PROD with NOTICES1
102224 Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 

GEMX Member in the member’s OCC clearing 

account in the Customer range, therefore there is a 

regulatory nexus between GEMX and the 

transaction. If Broker A was not an GEMX Member, 

then no ORF should be assessed and collected 

because there is no nexus; the transaction did not 

execute on GEMX nor was it cleared by an GEMX 

Member. 

10The regulatory costs for options comprise a 

subset of the Exchange’s regulatory budget that is 

specifically related to options regulatory expenses 

and encompasses the cost to regulate all Members’ 

options activity (‘‘Options Regulatory Cost’’). 

11 Direct and indirect expenses are based on the 

Exchange’s 2024 Regulatory Budget. 

12Proprietary products are products with 

intellectual property rights that are not multi-listed. 

GEMX lists proprietary products. 

13Capacity ‘‘M’’ covers Market Makers registered 

on GEMX and market makers registered at nonGEMX exchanges. 

14A ‘‘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 this Pricing Schedule the term 

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

7, Section 1(c). 

15A ‘‘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). The ‘‘C’’ 

range at OCC includes both Priority Customer and 

Professional Customer transactions. 

16A ‘‘Firm Proprietary’’ order is an order 

submitted by a Member for its own proprietary 

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

17A ‘‘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). A Broker-Dealer clears in the ‘‘F’’ range at 

OCC. 

The current GEMX ORF is $0.0012 per 

contract side. 

Today, in the case where a Member 

both executes a transaction and clears 

the transaction, the ORF will be 

assessed to and collected from that 

Member. Today, in the case where a 

Member executes a transaction and a 

different Member clears the transaction, 

the ORF will be assessed to and 

collected from the Member who clears 

the transaction and not the Member who 

executes the transaction. Today, in the 

case where a non-Member executes a 

transaction at an away market and a 

Member clears the transaction, the ORF 

will be assessed to and collected from 

the Member who clears the transaction. 

Today, in the case where a Member 

executes a transaction on GEMX and a 

non-Member clears the transaction, the 

ORF will be assessed to the Member that 

executed the transaction on GEMX and 

collected from the non-Member who 

cleared the transaction. Today, in the 

case where a Member executes a 

transaction at an away market and a 

non-Member ultimately clears the 

transaction, the ORF will not be 

assessed to the Member who executed 

the transaction or collected from the 

non-Member who cleared the 

transaction because the Exchange does 

not have access to the data to make 

absolutely certain that ORF should 

apply. Further, the data does not allow 

the Exchange to identify the Member 

executing the trade at an away market. 

ORF Revenue and Monitoring of ORF 

Today, the Exchange monitors the 

amount of revenue collected from the 

ORF (‘‘ORF Regulatory Revenue’’) to 

ensure that it, in combination with other 

regulatory fees and fines, does not 

exceed Options Regulatory Costs.10 In 

determining whether an expense is 

considered an Options Regulatory Cost, 

the Exchange reviews all costs and 

makes determinations if there is a nexus 

between the expense and a regulatory 

function. The Exchange notes that fines 

collected by the Exchange in connection 

with a disciplinary matter offset Options 

Regulatory Cost. 

ORF Regulatory Revenue, when 

combined with all of the Exchange’s 

other regulatory fees and fines, is 

designed to recover a material portion of 

the Options Regulatory Costs to the 

Exchange of the supervision and 

regulation of member Customer options 

business including performing routine 

surveillances, investigations, 

examinations, financial monitoring, and 

policy, rulemaking, interpretive, and 

enforcement activities. Options 

Regulatory Costs include direct 

regulatory expenses and certain indirect 

expenses in support of the regulatory 

function. The direct expenses include 

in-house and third-party service 

provider costs to support the day-to-day 

regulatory work such as surveillances, 

investigations and examinations. The 

indirect expenses are only those 

expenses that are in support of the 

regulatory functions, such areas include 

Office of the General Counsel, 

technology, finance, and internal audit. 

Indirect expenses will not exceed 35% 

of the total Options Regulatory Costs. 

Thus, direct expenses would be 65% of 

total Options Regulatory Costs for 

2024.11

The ORF is designed to recover a 

material portion of the Options 

Regulatory Costs to the Exchange of the 

supervision and regulation of its 

Members, including performing routine 

surveillances, investigations, 

examinations, financial monitoring, and 

policy, rulemaking, interpretive, and 

enforcement activities. 

Proposal for January 1, 2025 

GEMX has been reviewing it 

methodologies for the assessment and 

collection of ORF. As a result of this 

review, GEMX proposes to revamp the 

current process of assessing and 

collecting ORF in various ways. Below 

GEMX will explain the modelling it 

performed and the outcomes of the 

modelling which have led the Exchange 

to propose the below changes. 

Effective January 1, 2025, GEMX 

proposes to assess ORF to each GEMX 

Member for multi-listed options 

transactions, including options 

transactions in GEMX proprietary 

products,12 cleared by OCC in all 

clearing ranges except market makers 

who clear as ‘‘M’’ at OCC (‘‘Market 

Makers’’) 13 where: (1) the execution 

occurs on GEMX or (2) the execution 

occurs on another exchange and is 

cleared by an GEMX Member. With this 

change, GEMX proposes to amend its 

current ORF to assess ORF on Priority 

Customer,14 Professional Customer,15

and Firm Proprietary 16 and BrokerDealer 17 transactions. All market 

participants, except Market Makers, 

would be subject to ORF. 

The ORF would be collected by OCC 

on behalf of GEMX from (1) GEMX 

clearing members for all Priority 

Customer, Professional Customer, Firm 

Proprietary and Broker-Dealer 

transactions they clear or (2) nonmembers for all Priority Customer, 

Professional Customer, Firm Proprietary 

and Broker-Dealer transactions they 

clear that were executed on GEMX. This 

model collects ORF where there is a 

nexus with GEMX and does not collect 

ORF from a non-Member where the 

transaction takes place away from the 

Exchange. 

Further, effective January 1, 2025, the 

Exchange proposes to establish a 

different ORF for trades executed on 

GEMX (‘‘Local ORF Rate’’) and trades 

executed on non-GEMX exchanges 

(‘‘Away ORF Rate’’) by market 

participants. For Priority Customer, 

Professional Customer, and brokerdealer (not affiliated with a clearing 

member) transactions that clear in the 

‘‘C’’ range at OCC transactions 

(collectively ‘‘Customers’’) the Exchange 

proposes to assess a Local ORF Rate of 

$0.0170 per contract and an Away ORF 

Rate of $0.00 per contract. For Firm 

Proprietary and Broker-Dealer 

transactions that clear in the ‘‘F’’ range 

at OCC (collectively ‘‘Firm Proprietary 

and Broker-Dealer Transactions’’) the 

Exchange proposes to assess a Local 

ORF Rate of $0.00020 per contract and 

an Away ORF Rate of $0.00020 per 

contract. The combined amount of Local 

ORF and Away ORF collected may not 

exceed 88% of Options Regulatory Cost. 

GEMX will ensure that ORF Regulatory 

Revenue does not exceed Options 

Regulatory Cost. As is the case today, 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 102225 

18This new model seeks to provide a new 

approach to attributing Options Regulatory Cost to 

Options Regulatory Expense. In creating this model, 

the exchange did not rely on data from a single SRO 

as it had in the past. 19The Exchange utilized data from all Nasdaq 

affiliated options exchanges to create this model 

from 2023 Q3 through 2024 Q2 (‘‘Time Period’’). 

20The Exchange utilized data from 2023 Q1 to 

2024 Q3 to calculate the slope and intercept. 21R-Squared is a statistical measure that indicates 

how much of the variation of a dependent variable 

is explained by an independent variable in a 

regression model. The formula for calculating Rsquared is: R2 = 1¥Unexplained Variation/Total 

Variation. 

22The Exchange notes that various exchanges 

negotiate their respective contracts independently 

with FINRA creating some variability. Additionally, 

an exchange with a floor component would create 

some variability. 

the Exchange will notify Members via 

an Options Trader Alert of these 

changes at least 30 calendar days prior 

to January 1, 2025. 

The Exchange utilized historical and 

current data from its affiliated options 

exchanges to create a new regression 

model that would tie expenses 

attributable to regulation to a respective 

source.18 To that end, the Exchange 

plotted Customer volumes from each 

exchange 19 against Options Regulatory 

Cost from each exchange for the Time 

Period. Specifically, the Exchange 

utilized standard charting functionality 

to create a linear regression. The 

charting functionality yields a ‘‘slope’’ 

of the line, representing the marginal 

cost of regulation, as well as an 

‘‘intercept,’’ representing the fixed cost 

of regulation.20 The Exchange 

considered using non-linear models, but 

concluded that the best R∧2 (‘‘RSquared’’) 21 results came from a 

standard y = Mx +B format for 

regulatory expense. The R-Squared for 

the below charting method ranged from 

85% to 95% historically. As noted, the 

plots below represent the Time Period. 

The X-axis reflects Customer volumes 

by exchange, by quarter and the Y-axis 

reflects regulatory expense by exchange. 

The results of this modelling 

indicated a high correlation and 

intercept for the baseline cost of 

regulating the options market as a 

whole. Specifically, the regression 

model indicated that (1) the marginal 

cost of regulation is easily measurable, 

and significantly attributable to 

Customer activity; and (2) the fixed cost 

of setting up a regulatory regime should 

arguably be dispersed across the 

industry so that all options exchanges 

have substantially similar revenue 

streams to satisfy the ‘‘intercept’’ 

element of cost. When seeking to offset 

the ‘‘set-up’’ cost of regulation, the 

Exchange attempted several levels of 

attribution. The most successful 

attribution was related to industry wide 

Firm Proprietary and Broker-Dealer 

Transaction volume. Of note, through 

analysis of the results of this regression 

model, there was no positive correlation 

that could be established between 

Customer away volume and regulatory 

expense. This led the Exchange to 

utilize a model with a two-factor 

regression on a quarterly basis for the 

last four quarters of volumes relative to 

the pool of expense data for the six 

Nasdaq affiliated options exchanges. 

Once again, standard spreadsheet 

functionality (including the Data 

Analysis Packet) was used to determine 

the mathematics for this model. The 

results of this two-factor model, which 

resulted in the attribution of Customer 

Local ORF and Firm Proprietary and 

Broker-Dealer Transaction Local and 

Away ORF, typically increased the RSquared (goodness of fit) to >97% across 

multiple historical periods.22

Utilizing the new regression model, 

and assumptions in the proposal, the 

model demonstrates that Customer 

volumes are directly attributable to 

marginal cost, and also shows that Firm 

Proprietary and Broker-Dealer 

Transaction volumes industry-wide are 

a valid method (given the goodness of 

fit) to offset the fixed cost of regulation. 

Applying the regression coefficient 

values historically, the Exchange 

established a ‘‘normalization’’ by per 

options exchange. This ‘‘normalization’’ 

encompassed idiosyncratic exchange 

expense-volume relationships which 

served to tighten the attributions further 

while not deviating by more than 30% 

from the mean for any single options 

exchange in the model. The primary 

driver of this need for ‘‘normalization’’ 

are negotiated regulatory contracts that 

were negotiated at different points in 

time, yielding some differences in per 

contract regulatory costs by exchange. 

Normalization is therefore the average of 

a given exchange’s historical (prior 4 

quarters) ratio of regulatory expense to 

revenue when using the regressed 

values (for Customer Local ORF and 

Firm Proprietary and Broker-Dealer 

Transaction Local and Away ORF) that 

yields an effective rate by exchange. The 

‘‘normalization’’ was then multiplied to 

a ‘‘targeted collection rate’’ of 

approximately 88% to arrive at ORF 

rates for Customer, Firm Proprietary and 

Broker-Dealer Transactions. Of note, 

when comparing the ORF rates 

generated from this method, 


ddrumheller on DSK120RN23PROD with NOTICES1EN17DE24.080</GPH>

6,000,000.00 

5,000,000.00 

ci. 4,000,000.00 

X 

: 3,000,000.00 

Q) 

o:: 2,000,000.00 

1,000,000.00 

0.00 

Customer Volume vs Reg. Exp. 

0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 

Cust Volume 
102226 Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 

23The direct expenses include in-house and 

third-party service provider costs to support the 

day-to-day regulatory work such as surveillances, 

investigations and examinations. 

24The indirect expenses include support from 

such areas as Office of the General Counsel, 

technology, finance and internal audit. 

25The Exchange proposes to reconsider the 

sunset date in 2025 and determine whether to 

proceed with the proposed ORF structure at that 

time. 

26 15 U.S.C. 78f(b). 

27 15 U.S.C. 78f(b)(4). 

28 15 U.S.C. 78f(b)(5). 

29See GEMX Options 3, Section 8 and Options 2, 

Section 5. 

30 Id. 

31See GEMX Options 2, Section 4(b)(1) and (3). 

32See GEMX Options 7, Section 6B. 

historically, there appears to be a very 

tight relationship between the estimated 

modeled collection and actual expense 

and the regulatory expenses for that 

same period. In summary, the model 

does not appear to increase marginal 

returns. 

One other important aspect of this 

modeling is the input of Options 

Regulatory Costs. The Exchange notes 

that in defining Options Regulatory 

Costs it accounts for the nexus between 

the expense and options regulation. By 

way of example, the Exchange excludes 

certain indirect expenses such as 

payroll expenses, accounts receivable, 

accounts payable, marketing, executive 

level expenses and corporate systems. 

The Exchange would continue to 

monitor the amount of Options 

Regulatory Revenue collected from the 

ORF to ensure that it, in combination 

with other regulatory fees and fines, 

does not exceed Options Regulatory 

Costs. In determining whether an 

expense is considered an Options 

Regulatory Cost, the Exchange would 

continue to review all costs and makes 

determinations if there is a nexus 

between the expense and a regulatory 

function. The Exchange notes that fines 

collected by the Exchange in connection 

with a disciplinary matter will continue 

to offset Options Regulatory Cost. 

Members will continue to be provided 

with 30 calendar day notice of any 

change to ORF. 

As is the case today, ORF Regulatory 

Revenue, when combined with all of the 

Exchange’s other regulatory fees and 

fines, is designed to recover a material 

portion of the Options Regulatory Costs 

to the Exchange for the supervision and 

regulation of Members’ transactions, 

including performing routine 

surveillances, investigations, 

examinations, financial monitoring, and 

policy, rulemaking, interpretive, and 

enforcement activities. As discussed 

above, Options Regulatory Costs include 

direct regulatory expenses 23 and certain 

indirect expenses in support of the 

regulatory function.24

Finally, the Exchange notes that this 

proposal will sunset on July 1, 2025, at 

which point the Exchange would revert 

back to the ORF methodology and rate 

($0.0012 per contract side) that was in 

effect prior to this rule change.25

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.26 Specifically, 

the Exchange believes the proposed rule 

change is consistent with Section 6(b)(4) 

of the Act,27 which provides that 

Exchange rules may provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members, and other persons using its 

facilities. Additionally, the Exchange 

believes the proposed rule change is 

consistent with the Section 6(b)(5) 28

requirement that the rules of an 

exchange not be designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

Proposal for January 1, 2025 

The Exchange believes the proposed 

ORF to be assessed on January 1, 2025, 

is reasonable, equitable and not unfairly 

discriminatory for various reasons. First, 

as of January 1, 2025, the Exchange 

would expand the collection of ORF to 

all clearing ranges, except Market 

Makers, provided the transaction was 

executed by an GEMX Member or 

cleared by an GEMX Member. With this 

amendment, GEMX would begin to 

assess Firm Proprietary and BrokerDealer Transactions an ORF, provided 

the transactions were executed by an 

GEMX Member or cleared by an GEMX 

Member, including options transactions 

in proprietary products. Second, as of 

January 1, 2025, the Exchange would 

assess different rates to Customer 

transactions for the Local ORF Rate and 

Away ORF Rate as compared to Firm 

Proprietary and Broker-Dealer 

Transactions. Third, as of January 1, 

2025, the combined amount of Local 

ORF and Away ORF collected would 

not exceed 88% of Options Regulatory 

Cost as all Members, except Market 

Makers, would be assessed ORF. 

The Exchange believes that assessing 

all Members, except Market Makers, an 

ORF is reasonable, equitable and not 

unfairly discriminatory. While the 

Exchange acknowledges that there is a 

cost to regulate Market Makers, unlike 

other market participants, Market 

Makers have various regulatory 

requirements with respect to quoting as 

provided for in Options 2, Section 4. 

Specifically, Market Makers have 

certain quoting requirements with 

respect to their assigned options series 

as provided in Options 2, Section 5. 

Primary Market Makers are obligated to 

quote in the Opening Process and intraday.29 Additionally, Market Makers may 

enter quotes in the Opening Process to 

open an option series and they are 

required to quote intra-day.30 Further, 

unlike other market participants, 

Primary Market Makers and Market 

Makers have obligations to compete 

with other Market Makers to improve 

the market in all series of options 

classes to which the Market Maker is 

appointed and to update market 

quotations in response to changed 

market conditions in all series of 

options classes to which the Market 

Maker is appointed.31 Also, Primary 

Market Makers and Market Makers incur 

other costs imposed by the Exchange 

related to their quoting obligations in 

addition to other fees paid by other 

market participants. Market Makers are 

subject to a number of fees, unlike other 

market participants. Market Makers pay 

CMM Trading Right Fees 32 in addition 

to other fees paid by other market 

participants. These liquidity providers 

are critical market participants in that 

they are the only market participants 

that are required to provide liquidity to 

GEMX and are necessary for opening the 

market. Excluding Market Maker 

transactions from ORF allows these 

market participants to manage their 

costs and consequently their business 

model more effectively thus enabling 

them to better allocate resources to other 

technologies that are necessary to 

manage risk and capacity to ensure that 

these market participants continue to 

compete effectively on GEMX in 

providing tight displayed quotes which 

in turn benefits markets generally and 

market participants specifically. Finally, 

the Exchange notes that Market Makers 

may transact orders in addition to 

submitting quotes on the Exchange. This 

proposal would except orders submitted 

by Market Makers, in addition to quotes, 

for purposes of ORF. Market Makers 

utilize orders in their assigned options 

series to sweep the order book. The 

Exchange believes the quantity of orders 

utilized by Market Makers in their 

assigned series is de minimis. In their 

unassigned options series, Market 

Makers utilize orders to hedge their risk 

or respond to auction. The Exchange 

notes that the number of orders 

submitted by Market Makers in their 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 102227 

33See GEMX Options 2, Section 6(b)(1) and (2). 

The total number of contracts executed during a 

quarter by a Competitive Market Maker in options 

classes to which it is not appointed may not exceed 

twenty-five percent (25%) of the total number of 

contracts traded by such Competitive Market Maker 

in classes to which it is appointed and with respect 

to which it was quoting pursuant to Options 2, 

Section 5(e)(1). The total number of contracts 

executed during a quarter by a Primary Market 

Maker in options classes to which it is not 

appointed may not exceed twenty-five percent 

(25%) of the total number of contracts traded per 

each Primary Market Maker Membership. 

34The Exchange notes that the regulatory costs 

relating to monitoring Members with respect to 

Customer trading activity are generally higher than 

the regulatory costs associated with Members that 

do not engage in customer trading activity, which 

tends to be more automated and less laborintensive. By contrast, regulating Members that 

engage in Customer trading activity is generally 

more labor intensive and requires a greater 

expenditure of human and technical resoures as the 

Exchange needs to review not only the trading 

activity on behalf of Customers, but also the 

Member’s relationshi with its Customers via more 

labor-intensive exam-based programs. As a result, 

the costs associated with administering the 

Customer component of the Exchange’s overall 

regulatory program are materially higher than the 

costs associated with administering the nonCustomer component of the regulatory program. 

35See GEMX Options 10 Rules. GEMX Options 10 

Rules are incorporated by reference to ISE Options 

10 Rules. 36The Know Your Customer or ‘‘KYC’’ provision 

is the obligation of the broker-dealer. 

unassigned options series are far below 

the cap 33 and therefore de minimis. 

The Exchange believes including 

options transactions in GEMX 

proprietary products is reasonable, 

equitable and not unfairly 

discriminatory because GEMX lists 

various proprietary products for which 

the Exchange incurs Options Regulatory 

Costs. The Exchange believes that only 

exchanges that list proprietary products 

should be able to collect a Local ORF on 

their products. GEMX notes that there 

are a small number of GEMX proprietary 

products transacted as compared to 

multi-list options. Also, GEMX would 

only collect an ORF for proprietary 

products transacted on its market. As 

such, the Exchange believes that only a 

Local ORF should be applied to a GEMX 

proprietary product. 

The Exchange believes that assessing 

different rates to Customer transactions 

for the Local ORF Rate and Away ORF 

Rate as compared to Firm Proprietary 

and Broker-Dealer Transactions and 

collecting no more than 88% of Options 

Regulatory Cost is reasonable, equitable 

and not unfairly discriminatory. 

Customer transactions account for a 

material portion of GEMX’s Options 

Regulatory Cost.34 Customer 

transactions in combination with Firm 

Proprietary and Broker-Dealer 

Transactions account for a large portion 

of the Exchange’s surveillance expense. 

Therefore, the Exchange believes that 

88% of Options Regulatory Cost is 

appropriate and correlates to the degree 

of regulatory responsibility and Options 

Regulatory Cost borne by the Exchange. 

With respect to Customer transactions, 

options volume continues to surpass 

volume from other options participants. 

Additionally, there are rules in the 

Exchange’s Rulebook that deal 

exclusively with Customer transactions, 

such as rules involving doing business 

with a Customer, which would not 

apply to Firm Proprietary and BrokerDealer Transactions.35 For these 

reasons, regulating Customer trading 

activity is ‘‘much more labor-intensive’’ 

and therefore, more costly. The 

Exchange believes that a large portion of 

the Options Regulatory Cost relates to 

Customer allocation because obtaining 

Customer information may be more time 

intensive. For example, non-Customer 

market participants are subject to 

various regulatory and reporting 

requirements which provides the 

Exchange certain data with respect to 

these market participants. In contrast, 

Customer information is known by 

Members of the Exchange and is not 

readily available to GEMX.36 The 

Exchange may have to take additional 

steps to understand the facts 

surrounding particular trades involving 

a Customer which may require 

requesting such information from a 

broker-dealer. Further, Customers 

require more Exchange regulatory 

services based on the amount of options 

business they conduct. For example, 

there are Options Regulatory Costs 

associated with main office and branch 

office examinations (e.g., staff 

expenses), as well as investigations into 

Customer complaints and the 

terminations of registered persons. As a 

result, the Options Regulatory Costs 

associated with administering the 

Customer component of the Exchange’s 

overall regulatory program are 

materially higher than the Options 

Regulatory Costs associated with 

administering the non-Customer 

component when coupled with the 

amount of volume attributed to such 

Customer transactions. Utilizing the 

new regression model, and assumptions 

in the proposal, it appears that GEMX’s 

Customer regulation occurs to a large 

extent on Exchange. Utilizing the new 

regression model, and assumptions in 

the proposal, the Exchange does not 

believe that significant Options 

Regulatory Costs should be attributed to 

Customers for activity that may occur 

across options markets. To that end, 

with this proposal, the Exchange would 

assess Customers a Local ORF, but not 

an Away ORF rate. 

In contrast, the Options Regulatory 

Cost of regulating Firm Proprietary and 

Broker-Dealer Transactions is materially 

less than the Options Regulatory Costs 

of regulating Customer transactions, as 

explained above. The below chart 

derived from OCC data reflects the 

percentage of transactions by market 

participant. 


ddrumheller on DSK120RN23PROD with NOTICES1
102228 Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 

37 GEMX pays Financial Industry Regulatory 

Authority (‘‘FINRA’’) to perform certain crossmarket surveillances on its behalf. In order to 

peform cross-market surveillance, Consolidated 

Audit Trail (‘‘CAT’’) data is utilized to match 

options transactions to underlying equity 

transactions. This review is data intensive given the 

volumes of information that are being reviewed and 

analyzed. 

38 GEMX conducts surveillances and enforces 

GEMX Rules, however only a subset of those rules 

is subject to cross-market surveillance, such as 

margin and position limits. Of note, some GEMX 

trading rules are automatically enforced by GEMX’s 

System. 

39 GEMX would submit a rule change to the 

Commission to amend ORF rates. 

With this model, the addition of Firm 

Proprietary and Broker-Dealer 

Transactions to the collection of ORF 

does not entail significant volume when 

compared to Customer transactions. As 

these market participants are more 

sophisticated, the Exchange notes that 

there are not the same protections in 

place for Firm Proprietary and BrokerDealer Transactions as compared to 

Customer transactions. Therefore, with 

the proposed model, the regulation of 

Firm Proprietary and Broker-Dealer 

Transactions is less resource intensive 

than the regulation of Customer 

transactions. However, the Exchange 

notes that it appears from the new 

regression model and assumptions in 

the proposal, that unlike Customer 

transactions, the regulation of Firm 

Proprietary and Broker-Dealer 

Transactions occurs both on the 

Exchange and across options markets. 

To that end, the Exchange proposes to 

assess Firm Proprietary and BrokerDealer Transactions both a Local ORF 

and an Away ORF in contrast to 

Customer transactions that would only 

be assessed a Local ORF. The Exchange 

believes that not assessing Market 

Maker transactions an ORF permits 

these market participants to utilize their 

resources to quote tighter in the market. 

Tighter quotes benefits Customers as 

well as other market participants who 

interact with that liquidity. 

The Exchange’s proposal to establish 

both a Local ORF Rate and an Away 

ORF Rate and allocate the portion of 

Options Regulatory Cost differently 

between the two separate rates, by 

market participant, ensures that the 

Local ORF Rate and Away ORF Rate 

reflect the amount of Options 

Regulatory Costs associated with 

different types of surveillances and are 

reasonable, equitable and not unfairly 

discriminatory. The Exchange is 

responsible for regulating activity on its 

market as well as activity that may 

occur across options markets. The 

Exchange believes that it is reasonable, 

equitable and not unfairly 

discriminatory to assess only Firm 

Proprietary and Broker-Dealer 

Transactions an Away ORF. With this 

model, while the regulation of Firm 

Proprietary and Broker-Dealer 

Transactions is less resource intensive 

than the regulation of Customer 

transactions, it occurs both on the 

Exchange and across options markets.37

The Exchange believes that assessing 

the Firm Proprietary and Broker-Dealer 

Transactions the same rate for Local 

ORF and Away ORF is appropriate 

given the lower volume that is 

attributed to these Members combined 

with the activity that is required to be 

regulated both on the Exchange and 

across options markets. The Exchange 

notes that there are Exchange rules that 

involve cross market surveillances that 

relate to activities conducted by Firm 

Proprietary and Broker-Dealer 

Members.38 While not large in number, 

when compared to the overall number 

of Exchange rules that are surveilled by 

GEMX for on-Exchange activity, the 

Away ORF that would be assessed to 

Firm Proprietary and Broker-Dealer 

regulation would account for those 

costs. Additionally, the Exchange 

believes that limiting the amount of 

ORF assessed for activity that occurs on 

non-GEMX exchanges avoids 

overlapping ORFs that would otherwise 

be assessed by GEMX and other options 

exchanges that also assess an ORF. Also, 

the Exchange’s proposal continues to 

ensure that Options Regulatory 

Revenue, in combination with other 

regulatory fees and fines, does not 

exceed Options Regulatory Costs. Fines 

collected by the Exchange in connection 

with a disciplinary matter will continue 

to offset Options Regulatory Cost. 

Capping the combined amount of 

Local ORF and Away ORF collected at 

88% of Options Regulatory Cost 

commencing January 1, 2025, is 

reasonable, equitable and not unfairly 

discriminatory as given these factors. 

The Exchange will review the ORF 

Regulatory Revenue at the end of 

January 2025 and would amend the ORF 

if it finds that its ORF Regulatory 

Revenue exceeds its projections.39

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 


ddrumheller on DSK120RN23PROD with NOTICES1EN17DE24.081</GPH>

Industry Capacity Market Share% january 2, 2019 to September 30, 2024 

55% 

50% 

45% 

40% 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

2019 2020 2021 2022 2023 

Type 

Cust 

• Firm2024 
Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 102229 

40See GEMX Options 3, Section 8 and Options 2, 

Section 5. 

41 Id. 

42See GEMX Options 2, Section 4(b)(1) and (3). 

43See GEMX Options 7, Section 6B. 

44See GEMX Options 2, Section 6(b)(1) and (2). 

The total number of contracts executed during a 

quarter by a Competitive Market Maker in options 

classes to which it is not appointed may not exceed 

twenty-five percent (25%) of the total number of 

contracts traded by such Competitive Market Maker 

in classes to which it is appointed and with respect 

to which it was quoting pursuant to Options 2, 

Section 5(e)(1). The total number of contracts 

executed during a quarter by a Primary Market 

Maker in options classes to which it is not 

appointed may not exceed twenty-five percent 

(25%) of the total number of contracts traded per 

each Primary Market Maker Membership. 

45The Exchange notes that the regulatory costs 

relating to monitoring Members with respect to 

customer trading activity are generally higher than 

the regulatory costs associated with Members that 

do not engage in customer trading activity, which 

tends to be more automated and less laborintensive. By contrast, regulating Members that 

engage in customer trading activity is generally 

more labor intensive and requires a greater 

expenditure of human and technical resources as 

the Exchange needs to review not only the trading 

activity on behalf of customers, but also the 

Member’s relationship with its customers via more 

labor-intensive exam-based programs. As a result, 

the costs associated with administering the 

customer component of the Exchange’s overall 

regulatory program are materially higher than the 

costs associated with administering the noncustomer component of the regulatory program. 

46See GEMX Options 10 Rules. GEMX Options 10 

Rules are incorporated by reference to ISE Options 

10 Rules. 

47The Know Your Customer or ‘‘KYC’’ provision 

is the obligation of the broker-dealer. 

any burden on intra-market competition 

not necessary or appropriate in 

furtherance of the purposes of the Act. 

The proposed changes to ORF do not 

impose an undue burden on intermarket competition because ORF is a 

regulatory fee that supports regulation 

in furtherance of the purposes of the 

Act. The Exchange notes, however, the 

proposed change is not designed to 

address any competitive issues. The 

Exchange is obligated to ensure that the 

amount of ORF Regulatory Revenue, in 

combination with its other regulatory 

fees and fines, does not exceed ORF 

Regulatory Cost. 

Proposal for January 1, 2025 

Excluding Market Makers does not 

impose an undue burden intra-market 

competition because, unlike other 

market participants, Market Makers 

have various regulatory requirements 

with respect to quoting as provided for 

in Options 2, Section 4. Specifically, 

Market Makers have certain quoting 

requirements with respect to their 

assigned options series as provided in 

Options 2, Section 5. Primary Market 

Makers are obligated to quote in the 

Opening Process and intra-day.40

Additionally, Market Makers may enter 

quotes in the Opening Process to open 

an option series and they are required 

to quote intra-day.41 Further, unlike 

other market participants, Primary 

Market Makers and Market Makers have 

obligations to compete with other 

Market Makers to improve the market in 

all series of options classes to which the 

Market Maker is appointed and to 

update market quotations in response to 

changed market conditions in all series 

of options classes to which the Market 

Maker is appointed.42 Also, Primary 

Market Makers and Market Makers incur 

other costs imposed by the Exchange 

related to their quoting obligations in 

addition to other fees paid by other 

market participants. Market Makers are 

subject to a number of fees, unlike other 

market participants. Market Makers pay 

CMM Trading Right Fees 43 in addition 

to other fees paid by other market 

participants. These liquidity providers 

are critical market participants in that 

they are the only market participants 

that are required to provide liquidity to 

GEMX and are necessary for opening the 

market. Excluding Market Maker 

transactions from ORF does not impose 

an intra-market burden on competition, 

rather it allows these market 

participants to manage their costs and 

consequently their business model more 

effectively thus enabling them to better 

allocate resources to other technologies 

that are necessary to manage risk and 

capacity to ensure that these market 

participants continue to compete 

effectively on GEMX in providing tight 

displayed quotes which in turn benefits 

markets generally and market 

participants specifically. Finally, the 

Exchange notes that Market Makers may 

transact orders on the Exchange, in 

addition to submitting quotes. The 

Exchange’s proposal to except orders 

submitted by Market Makers, in 

addition to quotes, for purposes of ORF 

does not impose an undue burden on 

intra-market competition because 

Market Makers utilize orders in their 

assigned options series to sweep the 

order book. Further, the Exchange 

believes the quantity of orders utilized 

by Market Makers in their assigned 

series is de minimis. In their unassigned 

options series, Market Makers utilize 

orders to hedge their risk or respond to 

auction. The Exchange notes that the 

number of orders submitted by Market 

Makers in their unassigned options 

series are far below the cap 44 and 

therefore de minimis. 

Uniformly including options 

transactions in GEMX proprietary 

products in ORF for all GEMX Members 

does not impose an undue burden on 

intra-market competition. The Exchange 

believes that only exchanges that list 

proprietary products should be able to 

collect a Local ORF on their products. 

GEMX notes that there are a small 

number of GEMX proprietary products 

transacted as compared to multi-list 

options. Also, GEMX would only collect 

an ORF for proprietary products 

transacted on its market. 

The Exchange’s proposal to expand 

the clearing ranges to specifically 

include Firm Proprietary and BrokerDealer Transactions, in addition to 

Priority Customer and Professional 

Customer transactions, as of January 1, 

2025, does not impose an undue burden 

on intra-market competition as 

Customer transactions account for a 

material portion of GEMX’s Options 

Regulatory Cost.45 Customer 

transactions in combination with Firm 

Proprietary and Broker-Dealer 

Transactions account for a large portion 

of the Exchange’s surveillance expense. 

With respect to Customer transactions, 

options volume continues to surpass 

volume from other options participants. 

Additionally, there are rules in the 

Exchange’s Rulebook that deal 

exclusively with Customer transactions, 

such as rules involving doing business 

with a Customer, which would not 

apply to Firm Proprietary and BrokerDealer Transactions.46 For these 

reasons, regulating Customer trading 

activity is ‘‘much more labor-intensive’’ 

and therefore, more costly. Further, the 

Exchange believes that a large portion of 

the Options Regulatory Cost relates to 

Customer allocation because obtaining 

Customer information may be more time 

intensive. For example, non-Customer 

market participants are subject to 

various regulatory and reporting 

requirements which provides the 

Exchange certain data with respect to 

these market participants. In contrast, 

Customer information is known by 

Members of the Exchange and is not 

readily available to GEMX.47 The 

Exchange may have to take additional 

steps to understand the facts 

surrounding particular trades involving 

a Customer which may require 

requesting such information from a 

broker-dealer. Further, Customers 

require more Exchange regulatory 

services based on the amount of options 

business they conduct. For example, 

there are Options Regulatory Costs 

associated with main office and branch 

office examinations (e.g., staff 

expenses), as well as investigations into 

Customer complaints and the 

terminations of registered persons. As a 

result, the Options Regulatory Costs 

associated with administering the 


ddrumheller on DSK120RN23PROD with NOTICES1
102230 Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 

48 GEMX pays the Financial Industry Regulatory 

Authority (‘‘FINRA’’) to perform certain crossmarket surveillances on its behalf. In order to 

perform cross-market surveillances, Consolidated 

Audit Trail (‘‘CAT’’) data is utilized to match 

options transactions to underlying equity 

transactions. This review is data intensive given the 

volumes of information that are being reviewed and 

analyzed. 

49 GEMX conducts surveillances and enforces 

GEMX Rules, however only a subset of those rules 

is subject to cross-market surveillance, such as 

margin and position limits. Of note, some GEMX 

trading rules are automatically enforced by GEMX’s 

System. 

50 15 U.S.C. 78s(b)(3)(A)(ii). 

51 17 CFR 240.19b–4(f)(2). 

Customer component of the Exchange’s 

overall regulatory program are 

materially higher than the Options 

Regulatory Costs associated with 

administering the non-Customer 

component when coupled with the 

amount of volume attributed to such 

Customer transactions. Not attributing 

significant Options Regulatory Costs to 

Customers for activity that may occur 

across options markets does not impose 

an undue burden on intra-market 

competition because the data in the 

regression model demonstrates that 

GEMX’s Customer regulation occurs to a 

large extent on Exchange. 

The Exchange believes that assessing 

Firm Proprietary and Broker-Dealer 

Transactions a different ORF and 

assessing both a Local ORF and an 

Away ORF to these transactions does 

not impose an undue burden on intramarket competition because the 

regulation of Firm Proprietary and 

Broker-Dealer Transactions is less 

resource intensive than the regulation of 

Customer transactions. With this model, 

the addition of Firm Proprietary and 

Broker-Dealer Transactions to the 

collection of ORF does not entail 

significant volume when compared to 

Customer transactions. Unlike Customer 

transactions, the regulation of Firm 

Proprietary and Broker-Dealer 

Transactions occurs both on the 

Exchange and across options markets. 

To that end, the Exchange proposes to 

assess Firm Proprietary and BrokerDealer Transactions both a Local ORF 

and an Away ORF. 

The Exchange’s proposal to allocate 

the portion of costs differently between 

the Local ORF and Away ORF does not 

create an undue burden on intra-market 

competition. The Exchange believes that 

each rate reflects the amount of Options 

Regulatory Costs associated with 

different types of surveillances and does 

not create an undue burden on 

competition as GEMX Members, 

excluding except Market Makers, would 

be uniformly assessed either a Local 

ORF Rate or an Away ORF Rate 

depending on where the transaction 

occurred and whether the transaction 

was executed or cleared by an GEMX 

Member. Also, the Exchange would 

uniformly assess the Local ORF Rate 

and an Away ORF Rate by market 

participant. The Exchange is responsible 

for regulating activity on its market as 

well as activity that may occur across 

options markets. 

The Exchange believes that assessing 

only Firm Proprietary and Broker-Dealer 

Transactions an Away ORF does not 

create an undue burden on intra-market 

competition because while the 

regulation of Firm Proprietary and 

Broker-Dealer Transactions is less 

resource intensive than the regulation of 

Customer transactions, the regulation of 

Firm Proprietary and Broker-Dealer 

Transactions occurs both on the 

Exchange and across options markets.48

The Exchange believes that assessing 

Firm Proprietary and Broker-Dealer 

Transactions the same rate for Local 

ORF and Away ORF is appropriate 

given the lower volume that is 

attributed to these Members combined 

with the activity that is required to be 

regulated both on the Exchange and 

across options markets. There are 

Exchange rules that involve cross 

market surveillances that relate to 

activities conducted by Firm Proprietary 

and Broker-Dealer Members.49 While 

not large in number, when compared to 

the overall number of Exchange rules 

that are surveilled by GEMX for onExchange activity, the Away ORF that 

would be assessed to Firm Proprietary 

and Broker-Dealer Transactions would 

account for those Options Regulatory 

Costs. Additionally, the Exchange 

believes that limiting the amount of 

ORF assessed for activity that occurs on 

non-GEMX exchanges does not impose 

a burden on intra-market competition, 

rather it avoids overlapping ORFs that 

would otherwise be assessed by GEMX 

and other options exchanges that also 

assess an ORF. With this model, 

Customer transactions would be 

assessed a higher Local ORF, while not 

being assessed an Away ORF as 

compared to Firm Proprietary and 

Broker-Dealer Transactions. The 

Exchange believes that this difference in 

allocation is appropriate and correlates 

to the degree of regulatory responsibility 

and Options Regulatory Costs borne by 

different Members of the Exchange in 

light of the volume different Members 

transact on the Exchange. 

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 50 and Rule 

19b–4(f)(2) 51 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 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 

change 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–2024–42 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–2024–42. 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 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 242 / Tuesday, December 17, 2024 / Notices 102231 

52 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The term ‘‘Participant’’ is defined in Article 1, 

Rule 1(s) to mean, among other things, any 

Participant Firm that holds a valid Trading Permit 

and that a Participant shall be considered a 

‘‘member’’ of the Exchange for purposes of the Act. 

If a Participant is not a natural person, the 

Participant may also be referred to as a Participant 

Firm. 

5See Securities Exchange Act Release No. 51808 

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

(File No. S7–10–04) (Final Rule) (‘‘Regulation 

NMS’’). 

6See Securities Exchange Act Release No. 61358, 

75 FR 3594, 3597 (January 21, 2010) (File No. S7– 

02–10) (Concept Release on Equity Market 

Structure). 

7See Cboe U.S Equities Market Volume 

Summary, available at https://markets.cboe.com/us/ 

equities/market_share. 

8See FINRA ATS Transparency Data, available at 

https://otctransparency.finra.org/otctransparency/ 

AtsIssueData. A list of alternative trading systems 

registered with the Commission is available at 

https://www.sec.gov/foia/docs/atslist.htm. 

9See Cboe Global Markets U.S. Equities Market 

Volume Summary, available at http://

markets.cboe.com/us/equities/market_share/. 

10See id. 

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–2024–42 and should be 

submitted on or before January 7, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.52

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–29623 Filed 12–16–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101879; File No. SR– 

NYSECHX–2024–35] 

Self-Regulatory Organizations; NYSE 

Chicago, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Fee 

Schedule of NYSE Chicago, Inc. 

December 11, 2024. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on December 

2, 2024, the NYSE Chicago, Inc. (‘‘NYSE 

Chicago’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. 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 

Fee Schedule of NYSE Chicago, Inc. (the 

‘‘Fee Schedule’’) by modifying certain 

fees and credits applicable to 

Participants for executions resulting 

from single-sided orders. The proposed 

rule change is available on the 

Exchange’s website at www.nyse.com, 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 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule by modifying certain fees 

and credits applicable to Participants 4

for executions resulting from singlesided orders, as described below. The 

Exchange proposes to implement the fee 

changes effective December 2, 2024. 

Background 

The Exchange operates in a highly 

competitive market. The Commission 

has repeatedly expressed its preference 

for competition over regulatory 

intervention in determining prices, 

products, and services in the securities 

markets. In Regulation NMS, 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.’’ 5

While Regulation NMS has enhanced 

competition, it has also fostered a 

‘‘fragmented’’ market structure where 

trading in a single stock can occur 

across multiple trading centers. When 

multiple trading centers compete for 

order flow in the same stock, the 

Commission has recognized that ‘‘such 

competition can lead to the 

fragmentation of order flow in that 

stock.’’ 6 Indeed, equity trading is 

currently dispersed across 16 

exchanges,7 numerous alternative 

trading systems,8 and broker-dealer 

internalizers and wholesalers, all 

competing for order flow. Based on 

publicly available information, no single 

exchange currently has more than 20% 

market share.9 Therefore, no exchange 

possesses significant pricing power in 

the execution of equity order flow. More 

specifically, the Exchange’s share of 

executed volume of equity trades in 

Tapes A, B and C securities is less than 

1%.10

The Exchange believes that the evershifting market share among the 

exchanges from month to month 

demonstrates that market participants 

can move order flow, or discontinue or 

reduce use of certain categories of 

products. While it is not possible to 

know a firm’s reason for shifting order 

flow, the Exchange believes that one 

such reason is because of fee changes at 

any of the registered exchanges or nonexchange venues to which the firm 

routes order flow. Accordingly, 

competitive forces compel the Exchange 

to use exchange transaction fees and 

credits because market participants can 

readily trade on competing venues if 

they deem pricing levels at those other 

venues to be more favorable. 

Proposed Rule Change 

Pursuant to Section E.1 of the Fee 

Schedule, the Exchange currently 

charges a fee for removing liquidity and 

for providing liquidity in single-sided 

orders in Tape A, B and C securities. For 

each of Tape A, B and C securities with 

a share price equal to or greater than 

$1.00, the Exchange charges a fee of 

$0.0010 per share for orders that both 

remove liquidity and provide liquidity. 

The Exchange proposes the following 

changes for single-sided orders in Tape 

A, B and C securities that remove 

liquidity and provide liquidity. For each 

single-sided order in Tape A, B and C 


ddrumheller on DSK120RN23PROD with NOTICES1