102994 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices 

25 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–NASDAQ–2024–058 

was filed to amend ORF. On November 27, 2024, 

SR–NASDAQ–2024–058 was withdrawn and this 

rule change was filed. The current proposal amends 

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

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

Origin Code transactions executed on NOM, and 

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

transactions executed on non-NOM 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 18 and 19 for 

descriptions of Customers and Professionals. 

5The term ‘‘Options Participant’’ or ‘‘Participant’’ 

mean a firm, or organization that is registered with 

the Exchange pursuant to Options 2A of these Rules 

for purposes of participating in options trading on 

NOM as a ‘‘Nasdaq Options Order Entry Firm’’ or 

‘‘Nasdaq Options Market Maker’’. See Options 1, 

Section 1(a)(39). 

6Participants 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 Participants 

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. 

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– 

MIAX–2024–45 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–MIAX–2024–45. 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–MIAX–2024–45 and should be 

submitted on or before January 8, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–29923 Filed 12–17–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101892; File No. SR– 

NASDAQ–2024–078] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Lower the 

Options Regulatory Fee (ORF) and 

Adopt a New Approach to ORF in 2025 

December 12, 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, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ 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 The 

Nasdaq Options Market LLC (‘‘NOM’’) 

Pricing Schedule at Options 7, Section 

5, Options Regulatory Fee.3

While the changes proposed herein 

are effective upon filing, the Exchange 

has designated certain amendments to 

be operative on November 1, 2024, and 

other amendments to be operative on 

January 1, 2025, as noted in the Exhibit 

5 and herein. 

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 

NOM proposes to amend its current 

ORF in several respects. In summary, 

first, NOM proposes to reduce its ORF 

from $0.0016 to $0.0014 per contract 

side from November 1, 2024, through 

December 31, 2024. Second, as of 

January 1, 2025, NOM proposes to 

amend its methodology of collection to: 

(1) exclude options transactions in 

proprietary products; and (2) assess ORF 

in all clearing ranges except market 

makers who clear as ‘‘M’’ at The 

Options Clearing Corporation (‘‘OCC’’). 

Additionally, NOM will assess a 

different rate for trades executed on 

NOM (‘‘Local ORF Rate’’) and trades 

executed on non-NOM exchanges 

(‘‘Away ORF Rate’’). Each change will 

be described below in greater detail. 

Background on Current ORF 

Today, NOM assesses its ORF for each 

Customer 4 option transaction that is 

either: (1) executed by a Participant 5 on 

NOM; or (2) cleared by a NOM 

Participant at OCC in the Customer 

range,6 even if the transaction was 

executed by a non-member of NOM, 

regardless of the exchange on which the 

transaction occurs.7 If the OCC clearing 

member is a NOM Participant, 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 a NOM 

Participant, ORF is collected only on the 

cleared Customer contracts executed at 


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9By way of example, if Broker A, a NOM 

Participant, 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 NOM from Broker A’s clearing account 

at OCC via direct debit. While this transaction was 

executed on a market other than NOM, it was 

cleared by a NOM Participant in the member’s OCC 

clearing account in the Customer range, therefore 

there is a regulatory nexus between NOM and the 

transaction. If Broker A was not a NOM Participant, 

then no ORF should be assessed and collected 

because there is no nexus; the transaction did not 

execute on NOM nor was it cleared by a NOM 

Participant. 

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 

Participants’ options activity (‘‘Options Regulatory 

Cost’’). 

11 Direct and indirect expenses are based on the 

Exchange’s 2024 Regulatory Budget. 

12See https://www.nasdaqtrader.com/MicroNews.

aspx?id=OTA2024-53. The Exchange plans on 

issuing a second Options Trader Alert announcing 

changes for January 1, 2025. 

13The Exchange notes that its regulatory 

responsibilities with respect to Participant 

compliance with options sales practice rules have 

largely been allocated to FINRA under a 17d–2 

agreement. The ORF is not designed to cover the 

cost of that options sales practice regulation. 

14The Exchange will provide Participants with 

such notice at least 30 calendar days prior to the 

effective date of the change. 

15The Exchange notes that in connection with 

this proposal, it provided the Commission 

confidential details regarding the Exchange’s 

projected regulatory revenue, including projected 

revenue from ORF, along with a projected 

regulatory expense. 

16The Exchange proposes to delete language in 

the Pricing Schedule at Options 7, Section 5 that 

will be obsolete as of November 1, 2024. 

NOM, taking into account any CMTA 

instructions which may result in 

collecting the ORF from a non-member.9

Today, in the case where a Participant 

both executes a transaction and clears 

the transaction, the ORF will be 

assessed to and collected from that 

Participant. Today, in the case where a 

Participant executes a transaction and a 

different Participant clears the 

transaction, the ORF will be assessed to 

and collected from the Participant who 

clears the transaction and not the 

Participant who executes the 

transaction. Today, in the case where a 

non-member executes a transaction at 

an away market and a Participant clears 

the transaction, the ORF will be 

assessed to and collected from the 

Participant who clears the transaction. 

Today, in the case where a Participant 

executes a transaction on NOM and a 

non-member clears the transaction, the 

ORF will be assessed to the Participant 

that executed the transaction on NOM 

and collected from the non-member 

who cleared the transaction. Today, in 

the case where a Participant executes a 

transaction at an away market and a 

non-member ultimately clears the 

transaction, the ORF will not be 

assessed to the Participant 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 Participant 

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 

Participants, including performing 

routine surveillances, investigations, 

examinations, financial monitoring, and 

policy, rulemaking, interpretive, and 

enforcement activities. 

Proposal for November 1, 2024, Through 

December 31, 2024 

Based on NOM’s most recent review 

of its ORF Regulatory Revenues as 

compared to its ORF Regulatory Costs in 

light of recent fines, NOM proposes to 

reduce the amount of ORF that will be 

collected by the Exchange from $0.0016 

to $0.0014 per contract side from 

November 1, 2024, through December 

31, 2024. The Exchange issued an 

Options Trader Alert on September 16, 

2024, that specified the proposed rate 

change for November 1, 2024.12

NOM notes that there can be no 

assurance that the Options Regulatory 

Costs for the remainder of 2024 will not 

differ materially from these expectations 

and prior practice, nor can the Exchange 

predict with certainty whether options 

volume will remain at the current level 

going forward. The Exchange notes 

however, that when combined with 

regulatory fees and fines, the Options 

Regulatory Revenue that may be 

generated utilizing an ORF rate of 

$0.0016 per contract side may result in 

Options Regulatory Revenue which 

exceeds the Exchange’s estimated 

Options Regulatory Costs for 2024 as a 

result of fines. The Exchange therefore 

proposes to reduce its ORF to $0.0014 

per contract side to ensure that Options 

Regulatory Revenue does not exceed the 

Exchange’s estimated Options 

Regulatory Costs in 2024. Particularly, 

the Exchange believes that reducing the 

ORF when combined with all of the 

Exchange’s other regulatory fees and 

fines, would allow the Exchange to 

continue covering a material portion of 

its Options Regulatory Costs, while 

lessening the potential for generating 

excess revenue that may otherwise 

occur using the rate of $0.0016 per 

contract side.13

The Exchange will continue to 

monitor the amount of Options 

Regulatory Revenue collected from the 

ORF to ensure that Options Regulatory 

Revenue, in combination with its other 

regulatory fees and fines, does not 

exceed Options Regulatory Costs. If the 

Exchange determines Options 

Regulatory Revenue exceed Options 

Regulatory Costs, the Exchange will 

adjust the ORF by submitting a fee 

change filing to the Commission and 

notifying 14 its Participants via an 

Options Trader Alert.15

Proposal for January 1, 2025 

NOM has been reviewing it 

methodologies for the assessment and 

collection of ORF. As a result of this 

review, NOM proposes to revamp the 

current process of assessing and 

collecting ORF in various ways.16 Below 

NOM will explain the modelling it 

performed and the outcomes of the 


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17Proprietary products are products with 

intellectual property rights that are not multi-listed. 

NOM has no proprietary products. 

18Capacity ‘‘M’’ covers Market Makers registered 

on NOM and market makers registered at non-NOM 

exchanges. 

19The term ‘‘Customer’’ or (‘‘C’’) applies to any 

transaction that is identified by a Participant for 

clearing in the Customer range at The Options 

Clearing Corporation (‘‘OCC’’) which is not for the 

account of broker or dealer or for the account of a 

‘‘Professional’’ (as that term is defined in Options 

1, Section 1(a)(47)). See Options 7, Section 1(a). 

20The term ‘‘Professional’’ or (‘‘P’’) means any 

person or entity that (i) is not a broker or dealer in 

securities, and (ii) places more than 390 orders in 

listed options per day on average during a calendar 

month for its own beneficial account(s) pursuant to 

Options 1, Section 1(a)(47). All Professional orders 

shall be appropriately marked by Participants. See 

Options 7, Section 1(a). 21The term ‘‘Firm’’ or (‘‘F’’) applies to any 

transaction that is identified by a Participant for 

clearing in the Firm range at OCC. See Options 7, 

Section 1(A). 

22The term ‘‘Broker-Dealer’’ or (‘‘B’’) applies to 

any transaction which is not subject to any of the 

other transaction fees applicable within a particular 

category. See Options 7, Section 1(a). A BrokerDealer clears in the ‘‘F’’ range at OCC. 

23The Exchange is continuing to permit NOM 

Participants who do not transact an equities 

business on Nasdaq in a calendar year to receive a 

refund of the fees specified in Equity 7, Section 

30(b) upon written notification to the Exchange 

along with documentation evidencing that no 

equities business was conducted on Nasdaq for that 

calendar year. The Exchange is replicating related 

rule text in Options 7, Section 5 to retain the 

continuity of this refund process. 

24This 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. 

25The Exchange utilized data from all Nasdaq 

affiliated options exchanges to create this model 

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

26The Exchange utilized data from 2023 Q1 to 

2024 Q3 to calculate the slope and intercept. 

27R-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. 

modelling which have led the Exchange 

to propose the below changes. 

Effective January 1, 2025, NOM 

proposes to assess ORF to each NOM 

Participant for multi-listed options 

transactions, excluding options 

transactions in proprietary products,17

cleared by OCC in all clearing ranges 

except market makers who clear as ‘‘M’’ 

at OCC (‘‘Market Makers’’) 18 where: (1) 

the execution occurs on NOM or (2) the 

execution occurs on another exchange 

and is cleared by a NOM Participant. 

With this change, NOM proposes to 

amend its current ORF to assess ORF on 

Customer,19 Professional,20 Firm 21 and 

Broker-Dealer 22 transactions. All market 

participants, except Market Makers, 

would be subject to ORF. 

The ORF would be collected by OCC 

on behalf of NOM from (1) NOM 

clearing members for all Customer, 

Professional, Firm and Broker-Dealer 

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

Firm and Broker-Dealer transactions 

they clear that were executed on NOM. 

This model collects ORF where there is 

a nexus with NOM 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 

NOM (‘‘Local ORF Rate’’) and trades 

executed on non-NOM exchanges 

(‘‘Away ORF Rate’’) by market 

participants.23 For Customer, 

Professional, and broker-dealer (not 

affiliated with a clearing member) 

transactions that clear in the ‘‘C’’ range 

at OCC (collectively ‘‘Customers’’) the 

Exchange proposes to assess a Local 

ORF Rate of $0.0203 per contract and an 

Away ORF Rate of $0.00 per contract. 

For Firm and Broker-Dealer transactions 

that clear in the ‘‘F’’ range at OCC 

(collectively ‘‘Firm and Broker-Dealer 

Transactions’’) the Exchange proposes 

to assess a Local ORF Rate of $0.00024 

per contract and an Away ORF Rate of 

$0.00024 per contract. The combined 

amount of Local ORF and Away ORF 

collected may not exceed 88% of 

Options Regulatory Cost. NOM will 

ensure that ORF Regulatory Revenue 

does not exceed Options Regulatory 

Cost. As is the case today, the Exchange 

will notify Participants 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.24 To that end, the Exchange 

plotted Customer volumes from each 

exchange 25 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.26 The Exchange 

considered using non-linear models, but 

concluded that the best R∧2 (‘‘RSquared’’) 27 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. 


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28The 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. 

29The 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. 

30The indirect expenses include support from 

such areas as Office of the General Counsel, 

technology, finance and internal audit. 

31The Exchange proposes to reconsider the 

sunset date in 2025 and determine whether to 

proceed with the proposed ORF structure at that 

time. 

32 15 U.S.C. 78f(b). 

33 15 U.S.C. 78f(b)(4). 

34 15 U.S.C. 78f(b)(5). 

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 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 and 

Broker-Dealer Transaction Local and 

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

multiple historical periods.28

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 

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 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 and BrokerDealer Transactions. Of note, when 

comparing the ORF rates generated from 

this method, 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. 

Participants 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 Participants’ 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 29 and certain 

indirect expenses in support of the 

regulatory function.30

Finally, the Exchange notes that this 

proposal will be sunset on July 1, 2025, 

at which point the Exchange would 

revert back to the ORF methodology and 

rate ($0.0016 per contract side) that was 

in effect prior to this rule change.31

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.32 Specifically, 

the Exchange believes the proposed rule 

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

of the Act,33 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) 34

requirement that the rules of an 

exchange not be designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

Proposal for November 1, 2024, Through 

December 31, 2024 

The Exchange believes the proposed 

reduction of ORF is reasonable because 

it would help ensure that ORF 

Regulatory Revenue does not exceed a 

material portion of the Exchange’s ORF 

Regulatory Costs. As noted above, the 

ORF is designed to recover a material 

portion, but not all, of the Exchange’s 

ORF Regulatory Costs. Further, the 

Exchange believes the proposed fee 

change is reasonable because Customer 

transactions will be subject to a lower 

ORF than the rate that would otherwise 

be in effect on November 1, 2024. 

The Exchange had designed the ORF 

to generate ORF Regulatory Revenue 

that would be less than the amount of 

the Exchange’s ORF Regulatory Costs to 

ensure that it, in combination with its 

other regulatory fees and fines, does not 

exceed ORF Regulatory Costs, which is 


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35 If the OCC clearing member is a NOM 

Participant, ORF will be assessed and collected on 

all cleared Customer contracts (after adjustment for 

CMTA); and (2) if the OCC clearing member is not 

a NOM Participant, ORF will be collected only on 

the cleared Customer contracts executed at NOM, 

taking into account any CMTA instructions which 

may result in collecting the ORF from a nonmember. 

36 ISG is an industry organization formed in 1983 

to coordinate intermarket surveillance among the 

SROs by cooperatively sharing regulatory 

information pursuant to a written agreement 

between the parties. The goal of the ISG’s 

information sharing is to coordinate regulatory 

efforts to address potential intermarket trading 

abuses and manipulations. 

37See Options 2, Section 5(d). 

38See NOM Options 2, Section 4(a)(3) and (5). 

39See NOM Options 2, Section 6(b). The total 

number of contracts executed by a Market Maker in 

options in which it is not registered as a Market 

Maker shall not exceed 25 percent of the total 

number of all contracts executed by the Market 

Maker in any calendar quarter. 

consistent with the view of the 

Commission that regulatory fees be used 

for regulatory purposes and not to 

support the Exchange’s business 

operations. As discussed above, 

however, after review of its ORF 

Regulatory Costs and ORF Regulatory 

Revenue which includes revenues from 

ORF and other regulatory fees and fines, 

the Exchange determined that absent a 

reduction in ORF, it may collect ORF 

Regulatory Revenue which would 

exceed its ORF Regulatory Costs. 

Indeed, the Exchange notes that when 

taking into account the potential that 

recent options volume persists, it 

estimates the ORF may generate ORF 

Regulatory Revenue that would cover 

more than the approximated Exchange’s 

projected ORF Regulatory Costs due to 

fines. As such, the Exchange believes 

it’s reasonable and appropriate to 

reduce the ORF amount from $0.0016 to 

$0.0014 per contract side. 

The Exchange also believes the 

proposed fee change is equitable and 

not unfairly discriminatory in that it is 

charged to all Participants on all their 

transactions that clear in the Customer 

range at OCC.35 The Exchange believes 

the ORF ensures fairness by assessing 

higher fees to those Participants that 

require more Exchange regulatory 

services based on the amount of 

Customer options business they 

conduct. Regulating Customer trading 

activity is much more labor intensive 

and requires greater expenditure of 

human and technical resources than 

regulating non-Customer trading 

activity, which tends to be more 

automated and less labor-intensive. For 

example, there are 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 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 its regulatory 

program. Moreover, the Exchange notes 

that it has broad regulatory 

responsibilities with respect to activities 

of its Participants, a small portion of 

which takes place on away exchanges. 

Indeed, the Exchange cannot effectively 

review for such conduct without 

looking at and evaluating activity 

regardless of where it transpires. In 

addition to its own surveillance 

programs, the Exchange also works with 

other SROs and exchanges on 

intermarket surveillance related issues. 

Through its participation in the 

Intermarket Surveillance Group 

(‘‘ISG’’) 36 the Exchange shares 

information and coordinates inquiries 

and investigations with other exchanges 

designed to address potential 

intermarket manipulation and trading 

abuses. Accordingly, there is a strong 

nexus between the ORF and the 

Exchange’s regulatory activities with 

respect to Customer trading activity of 

its Participants. 

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 NOM Participant or 

cleared by an NOM Participant. With 

this amendment, NOM would begin to 

assess Firm and Broker-Dealer 

Transactions an ORF, provided the 

transactions were executed by a NOM 

Participant or cleared by a NOM 

Participant, except 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 Firms 

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 

Participants, except Market Makers, 

would be assessed ORF. 

The Exchange believes that assessing 

all Participants, 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. 

Market Makers are required to quote 

intra-day.37 Further, unlike other market 

participants, 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.38 Market Makers 

are critical market participants in that 

they are the only market participants 

that are required to provide liquidity to 

NOM 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 NOM 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 

unassigned options series are far below 

the cap 39 and therefore de minimis. 

The Exchange believes excluding 

options transactions in proprietary 

products is reasonable, equitable and 

not unfairly discriminatory because 

NOM does not list any proprietary 

products. The Exchange believes that 

only exchanges that list proprietary 

products should be able to collect a 

Local ORF for those products. NOM 

notes that there are a small number of 

proprietary products transacted as 

compared to multi-list options. NOM’s 

focus is on surveillance related to multiVerDate Sep<11>2014 18:09 Dec 17, 2024 Jkt 265001 PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 E:\FR\FM\18DEN1.SGM 18DEN1

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Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices 102999 

40The Exchange notes that the regulatory costs 

relating to monitoring Participants with respect to 

Customer trading activity are generally higher than 

the regulatory costs associated with Participants 

that do not engage in Customer trading activity, 

which tends to be more automated and less laborintensive. By contrast, regulating Participants 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 

Participant’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. 

41See NOM Options 10 Rules. 

42The Know Your Customer or ‘‘KYC’’ provision 

is the obligation of the broker-dealer. 

listed options. Should NOM list a 

proprietary product in the future, NOM 

would amend its ORF to collect a Local 

ORF on that 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 and BrokerDealer 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 NOM’s Options Regulatory 

Cost.40 Customer transactions in 

combination with Firm and BrokerDealer 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 and BrokerDealer Transactions.41 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 

Participants of the Exchange and is not 

readily available to NOM.42 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 NOM’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 and BrokerDealer 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. 


khammond on DSK9W7S144PROD with NOTICESEN18DE24.072</GPH>
103000 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices 

43NOM 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. 

44NOM conducts surveillances and enforces 

NOM Rules, however only a subset of those rules 

is subject to cross-market surveillance, such as 

margin and position limits. Of note, some NOM 

trading rules are automatically enforced by NOM’s 

System. 

45NOM would submit a rule change to the 

Commission to amend ORF rates. 

46See Options 2, Section 5(d). 

47See NOM Options 2, Section 4(a)(3) and (5). 

With this model, the addition of Firm 

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 and 

Broker-Dealer Transactions as compared 

to Customer transactions. Therefore, 

with the proposed model, the regulation 

of Firm 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 and Broker-Dealer 

Transactions occurs both on the 

Exchange and across options markets. 

To that end, the Exchange proposes to 

assess Firm and Broker-Dealer 

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 and 

Broker-Dealer Transactions an Away 

ORF. With this model, while the 

regulation of Firm and Broker-Dealer 

Transactions is less resource intensive 

than the regulation of Customer 

transactions, it occurs both on the 

Exchange and across options markets.43

The Exchange believes that assessing 

the Firm and Broker-Dealer 

Transactions the same rate for Local 

ORF and Away ORF is appropriate 

given the lower volume that is 

attributed to these Participants 

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 and 

Broker-Dealer Participants.44 While not 

large in number, when compared to the 

overall number of Exchange rules that 

are surveilled by NOM for on-Exchange 

activity, the Away ORF that would be 

assessed to Firm 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-NOM exchanges avoids overlapping 

ORFs that would otherwise be assessed 

by NOM 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.45

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 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 November 1, 2024, Through 

December 31, 2024 

The Exchange’s proposal to reduce its 

ORF from $0.0016 to $0.0014 per 

contract side from November 1, 2024, 

through December 31, 2024, does not 

create an unnecessary or inappropriate 

burden on intra-market competition 

because the ORF applies to all Customer 

activity, thereby raising regulatory 

revenue to offset regulatory expenses. It 

also supplements the regulatory revenue 

derived from non-customer activity. 

Proposal for January 1, 2025 

Excluding Market Makers does not 

impose an undue burden on intramarket 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. 

Market Makers are required to quote 

intra-day.46 Further, unlike other market 

participants, 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.47 Market Makers 

are critical market participants in that 

they are the only market participants 

that are required to provide liquidity to 

NOM 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 NOM 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 


khammond on DSK9W7S144PROD with NOTICES
Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices 103001 

48See NOM Options 2, Section 6(b). The total 

number of contracts executed by a Market Maker in 

options in which it is not registered as a Market 

Maker shall not exceed 25 percent of the total 

number of all contracts executed by the Market 

Maker in any calendar quarter. 

49The Exchange notes that the regulatory costs 

relating to monitoring Participants with respect to 

Customer trading activity are generally higher than 

the regulatory costs associated with Participants 

that do not engage in Customer trading activity, 

which tends to be more automated and less laborintensive. By contrast, regulating Participants 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 

Participant’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. 

50See NOM Options 10 Rules. 

51The Know Your Customer or ‘‘KYC’’ provision 

is the obligation of the broker-dealer. 

52NOM 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. 

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 48 and 

therefore de minimis. 

Uniformly excluding options 

transactions in proprietary products 

from ORF for all NOM Participants does 

not impose an undue burden on intramarket competition. The Exchange 

believes that only exchanges that list 

proprietary products should be able to 

collect a Local ORF for those products. 

There are a small number of proprietary 

products transacted as compared to 

multi-list options. Also, proprietary 

products are transacted on a limited 

number of options exchanges and would 

require a de minimis amount of cross 

market surveillance, for these reasons 

the Exchange believes that only a Local 

ORF should be applied to the extent that 

NOM were to list a proprietary product. 

NOM’s focus is on surveillance related 

to multi-listed options. Should NOM list 

a proprietary product in the future, 

NOM would amend its ORF to collect a 

Local ORF on that proprietary product. 

The Exchange’s proposal to expand 

the clearing ranges to specifically 

include Firm and Broker-Dealer 

Transactions, in addition to Customer 

and Professional 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 NOM’s 

Options Regulatory Cost.49 Customer 

transactions in combination with Firm 

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 and BrokerDealer Transactions.50 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 

Participants of the Exchange and is not 

readily available to NOM.51 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. 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 

NOM’s Customer regulation occurs to a 

large extent on Exchange. 

The Exchange believes that assessing 

Firm 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 intra-market competition 

because the regulation of Firm and 

Broker-Dealer Transactions is less 

resource intensive than the regulation of 

Customer transactions. With this model, 

the addition of Firm 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 and Broker-Dealer 

Transactions occurs both on the 

Exchange and across options markets. 

To that end, the Exchange proposes to 

assess Firm and Broker-Dealer 

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 NOM Participants, 

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 NOM 

Participant. 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 and Broker-Dealer 

Transactions an Away ORF does not 

create an undue burden on intra-market 

competition because while the 

regulation of Firm and Broker-Dealer 

Transactions is less resource intensive 

than the regulation of Customer 

transactions, the regulation of Firm and 

Broker-Dealer Transactions occurs both 

on the Exchange and across options 

markets.52 The Exchange believes that 

assessing Firm and Broker-Dealer 

Transactions the same rate for Local 

ORF and Away ORF is appropriate 


khammond on DSK9W7S144PROD with NOTICES
103002 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices 

53NOM conducts surveillances and enforces 

NOM Rules, however only a subset of those rules 

is subject to cross-market surveillance, such as 

margin and position limits. Of note, some NOM 

trading rules are automatically enforced by NOM’s 

System. 

54 15 U.S.C. 78s(b)(3)(A)(ii). 

55 17 CFR 240.19b–4(f)(2). 

56 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 101413 

(October 23, 2024), 89 FR 86007. 

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

given the lower volume that is 

attributed to these Participants 

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 and 

Broker-Dealer Participants.53 While not 

large in number, when compared to the 

overall number of Exchange rules that 

are surveilled by NOM for on-Exchange 

activity, the Away ORF that would be 

assessed to Firm 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-NOM exchanges does not 

impose a burden on intra-market 

competition, rather it avoids 

overlapping ORFs that would otherwise 

be assessed by NOM 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 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 

Participants of the Exchange in light of 

the volume different Participants 

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 54 and Rule 

19b–4(f)(2) 55 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– 

NASDAQ–2024–078 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–2024–078. 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–2024–078 and should be 

submitted on or before January 8, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.56

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–29921 Filed 12–17–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101889; File No. SR–Phlx– 

2024–51] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Designation of a 

Longer Period for Commission Action 

on a Proposed Rule Change To Amend 

FLEX Floor Trading 

December 12, 2024. 

On October 8, 2024, Nasdaq PHLX 

LLC filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

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

Securities Exchange Act of 1934 

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

proposed rule change to: (i) amend 

Options 8, Section 34, FLEX Trading to 

clarify certain functionality; (ii) list 

p.m.-settled FLEX Index Options whose 

exercise settlement value is derived 

from closing prices on the last trading 

day prior to expiration that expire on or 

within two business days of a third 

Friday-of-the-month expiration day for a 

non-FLEX Option; and (iii) permit FLEX 

Options on certain Exchange-Traded 

Funds to be settled by delivery in cash 

if the underlying security meets 

prescribed criteria and set forth the 

applicable position and exercise limits 

for these options; and (iv) require that 

position and exercise limits for FLEX 

Options be aggregated with non-FLEX 

options in certain circumstances. The 

proposed rule change was published for 

comment in the Federal Register on 

October 29, 2024.3 The Commission has 

received no comment letters on the 

proposed rule change. 

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

that within 45 days of the publication of 

notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding, or as to which the 

self-regulatory organization consents, 

the Commission will either approve the 

proposed rule change, disapprove the 


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