Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 34101 

38 15 U.S.C. 78(b)(3)(A). 

39 17 CFR 240.19b–4(f)(6). 

40 15 U.S.C. 78s(b)(3)(A). 

41 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

42 17 CFR 240.19b–4(f)(6). 

43 17 CFR 240.19b–4(f)(6). 

44For purposes only of waiving the 30-day 

operative delay, the Commission also has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

45 15 U.S.C. 78s(b)(3)(A)(iii). 

46 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

47 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A) of the Act 38 and Rule 19b– 

4(f)(6) 39 thereunder. Because the 

foregoing proposed rule change does 

not: (i) Significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 40 and Rule 19b– 

4(f)(6) 41 thereunder. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 42 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),43 the 

Commission may designate a shorter 

time if such action is consistent with 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposed 

rule change may become operative upon 

filing. The Exchange’s proposal does not 

raise any new or novel issues. 

Therefore, the Commission believes that 

waving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest. 

Accordingly, the Commission 

designates the proposed rule change to 

be operative on upon filing.44

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 will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved. 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 45 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.46

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

ISE–2021–14 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–ISE–2021–14. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–ISE–2021–14 and should be 

submitted on or before July 19, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.47

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13654 Filed 6–25–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92231; File No. SR–Phlx– 

2021–37] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the 

Exchange’s Pricing Schedule at Equity 

7, Section 3 

June 22, 2021 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on June 11, 

2021, Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 


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34102 Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 

3The Exchange notes that the threshold for prices 

at or below $5.00 tracks the SEC’s definition of a 

‘‘penny stock.’’ See 17 CFR 240.3a5–1–1. 

4Although there may be value in offering credits 

to members that provide liquidity in securities 

executed at other prices, or that satisfy other 

criteria, the Exchange has limited resources 

available to it to offer its members marketimproving incentives, and it allocates those limited 

resources to those segments of the market where it 

perceives the need to be greatest and/or where it 

determines that the incentive is likely to achieve its 

intended objective. 

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

6 15 U.S.C. 78f(b)(4) and (5). 

7NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 

2010) (quoting Securities Exchange Act Release No. 

59039 (December 2, 2008), 73 FR 74770, 74782–83 

(December 9, 2008) (SR–NYSEArca–2006–21)). 

8Securities Exchange Act Release No. 51808 

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

(‘‘Regulation NMS Adopting Release’’). 

9The Exchange perceives no regulatory, 

structural, or cost impediments to market 

participants shifting order flow away from it. In 

particular, the Exchange notes that such shifts in 

liquidity and market share occur within the context 

of market participants’ existing duties of Best 

Execution and obligations under the Order 

Protection Rule under Regulation NMS. 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Exchange’s pricing schedule at Equity 7, 

Section 3, as described further below. 

The text of the proposed rule change is 

available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/phlx/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

pricing schedule, at Equity 7, Section 3, 

to adopt a new $0.0033 per share 

executed credit for member 

organizations that provide displayed 

liquidity to the Exchange and receive an 

execution priced at or between $1.00 

and $5.00. The Exchange proposes to 

add this new credit and target it at 

securities executed at prices between 

$1.00 and $5.00 because the Exchange 

observes that, at present, liquidity in 

securities in this lower price segment is 

less robust on the Exchange than it is in 

other price segments.3 The Exchange 

hopes that the proposed credit will 

encourage member organizations to 

increase the extent to which they quote 

or place orders on the Exchange for 

securities priced at or between $1.00 

and $5.00. If the proposal is effective in 

achieving this purpose, then the quality 

of the Exchange’s market will improve, 

to the benefit of all participants.4

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,5 in general, and furthers the 

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

of the Act,6 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility, and is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Proposal Is Reasonable and Is an 

Equitable Allocation of Credits 

The Exchange’s proposed change to 

its schedule of credits is reasonable in 

several respects. As a threshold matter, 

the Exchange is subject to significant 

competitive forces in the market for 

equity securities transaction services 

that constrain its pricing determinations 

in that market. The fact that this market 

is competitive has long been recognized 

by the courts. In NetCoalition v. 

Securities and Exchange Commission, 

the D.C. Circuit stated as follows: ‘‘[n]o 

one disputes that competition for order 

flow is ‘fierce.’ . . . As the SEC 

explained, ‘[i]n the U.S. national market 

system, buyers and sellers of securities, 

and the broker-dealers that act as their 

order-routing agents, have a wide range 

of choices of where to route orders for 

execution’; [and] ‘no exchange can 

afford to take its market share 

percentages for granted’ because ‘no 

exchange possesses a monopoly, 

regulatory or otherwise, in the execution 

of order flow from broker dealers’ 

. . . .’’ 7

The Commission and the courts have 

repeatedly expressed their preference 

for competition over regulatory 

intervention in determining prices, 

products, and services in the securities 

markets. In Regulation NMS, while 

adopting a series of steps to improve the 

current market model, the Commission 

highlighted the importance of market 

forces in determining prices and SRO 

revenues and, also, recognized that 

current regulation of the market system 

‘‘has been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 8

Numerous indicia demonstrate the 

competitive nature of this market. For 

example, clear substitutes to the 

Exchange exist in the market for equity 

security transaction services. The 

Exchange is only one of several equity 

venues to which market participants 

may direct their order flow. 

Within this environment, market 

participants can freely and often do shift 

their order flow among the Exchange 

and competing venues in response to 

changes in their respective pricing 

schedules.9 Within the foregoing 

context, the proposal represents a 

reasonable attempt by the Exchange to 

increase its market share relative to its 

competitors. 

The Exchange believes that it is 

reasonable and equitable to adopt a new 

$0.0033 per share executed credit for 

member organizations that provide 

displayed liquidity in securities that 

execute at prices at or between $1.00 

and $5.00 per share. As discussed 

above, the Exchange observes a 

particular need to increase displayed 

liquidity in securities at these prices 

because liquidity on the Exchange in 

such lower priced securities is less 

robust than it is in other market 

segments. It is reasonable and equitable 

to address this need by allocating its 

limited resources to offer member 

organizations a credit to incent them to 

provide the liquidity needed. If the 

proposal is effective in achieving this 

purpose, then the quality of the 

Exchange’s market will improve, to the 

benefit of all participants. 

The Proposal Is Not Unfairly 

Discriminatory 

The Exchange believes that the 

proposal is not unfairly discriminatory. 

The Exchange intends for its proposal to 

increase displayed liquidity in 

securities executed at or between $1.00 

and $5.00 per share, where the 

Exchange observes that liquidity in such 

lower securities is less robust than it is 

in other market segments. Additional 

liquidity is needed for the Exchange to 

maintain and improve its market 

quality. Although member organizations 

that are able to provide liquidity in such 

securities are likely to benefit directly 


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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 34103 

10 15 U.S.C. 78s(b)(3)(A)(ii). 

from this proposal, any improvement in 

market quality that it facilitates will 

ultimately benefit all market 

participants. 

Although there may be value in 

offering credits to members that provide 

liquidity in securities executed at other 

prices, or that satisfy other criteria, the 

Exchange has limited resources 

available to it to offer its members 

market-improving incentives, and it 

allocates those limited resources to 

those segments of the market where it 

perceives the need to be greatest and/or 

where it determines that the incentive is 

likely to achieve its intended objective. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Intramarket Competition 

The Exchange does not believe that its 

proposal will place any category of 

Exchange participants at a competitive 

disadvantage. As noted above, all 

member organizations of the Exchange 

will benefit from an increase in the 

addition of liquidity in securities priced 

at or between $1.00 and $5.00. 

Moreover, member organizations are 

free to trade on other venues to the 

extent they believe that the credit 

provided is not attractive. As one can 

observe by looking at any market share 

chart, price competition between 

exchanges is fierce, with liquidity and 

market share moving freely between 

exchanges in reaction to fee and credit 

changes. 

Intermarket Competition 

The Exchange believes that its 

proposed new credit will not impose a 

burden on competition because the 

Exchange’s execution services are 

completely voluntary and subject to 

extensive competition both from the 

other live exchanges and from offexchange venues, which include 

alternative trading systems that trade 

national market system stock. The 

Exchange notes that it operates in a 

highly competitive market in which 

market participants can readily favor 

competing venues if they deem fee 

levels at a particular venue to be 

excessive, or rebate opportunities 

available at other venues to be more 

favorable. In such an environment, the 

Exchange must continually adjust its 

fees to remain competitive with other 

exchanges and with alternative trading 

systems that have been exempted from 

compliance with the statutory standards 

applicable to exchanges. Because 

competitors are free to modify their own 

fees in response, and because market 

participants may readily adjust their 

order routing practices, the Exchange 

believes that the degree to which fee 

changes in this market may impose any 

burden on competition is extremely 

limited. 

The proposed credit for adding 

liquidity is reflective of this competition 

because, as a threshold issue, the 

Exchange is a relatively small market so 

its ability to burden intermarket 

competition is limited. In this regard, 

even the largest U.S. equities exchange 

by volume only has 17–18% market 

share, which in most markets could 

hardly be categorized as having enough 

market power to burden competition. 

Moreover, as noted above, price 

competition between exchanges is 

fierce, with liquidity and market share 

moving freely between exchanges in 

reaction to fee and credit changes. This 

is in addition to free flow of order flow 

to and among off-exchange venues 

which comprises more than 40% of 

industry volume in recent months. 

In sum, the Exchange intends for the 

proposed credit to incent member 

organizations to add displayed liquidity 

to the Exchange in securities within a 

certain price range, and to thereby 

contribute to market quality, which is 

reflective of fierce competition for order 

flow noted above; however, if the 

proposed credit is unattractive to market 

participants, it is likely that the 

Exchange will either fail to increase its 

market share or even lose market share 

as a result. Accordingly, the Exchange 

does not believe that the proposed new 

credit will impair the ability of member 

organizations or competing order 

execution venues to maintain their 

competitive standing in the financial 

markets. 

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.10

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2021–37 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–Phlx–2021–37. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 


khammond on DSKJM1Z7X2PROD with NOTICES
34104 Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices 

11 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. 70050 

(July 26, 2013), 78 FR 46622 (August 1, 2013) 

(Application of Topaz Exchange, LLC for 

Registration as a National Securities Exchange; 

Findings, Opinion, and Order of the Commission). 

4Prior Interpretation and Policy .02 to Rule 8.7 

provided, ‘‘Market-Makers are expected ordinarily 

to refrain from purchasing a call option or a put 

option at a price more than $0.25 below parity, 

although a larger amount may be appropriate 

considering the particular market conditions. In the 

case of calls, parity is measured by the bid in the 

underlying security, and in the case of puts, parity 

is measured by the offer in the underlying security. 

The $0.25 amount above may be increased, or the 

provisions of this Interpretation may be waived, by 

the Exchange on a series-by-series basis.’’ 

5Cboe’s rule change merely noted, with respect 

to the removal of Cboe’s parity rule, that the filing 

makes non-substantive changes to the rule 

governing a Market-Maker’s general obligations 

(current Rule 8.7, in part), most of which remove 

redundant provisions that are already covered 

under the umbrella of a Market-Maker’s obligation 

to engage in dealing to maintain fair and orderly 

markets. No specific argument is provided with 

respect to removing this provision. See Securities 

Exchange Act 87024 (September 19, 2019), 84 FR 

50545 (September 25, 2019) (SR–CBOE–2019–059) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change to Amend Certain Rules 

Relating To Market-Makers Upon Migration to the 

Trading System Used by Cboe Affiliated 

Exchanges). 

6See Nasdaq Phlx LLC, The Nasdaq Options 

Market LLC and Nasdaq BX, Inc. at Options 2, 

Section 4 (Obligations of Market Makers). 

7See Options 3, Section 10 (Priority of Quotes 

and Orders). Primary Market Makers are offered an 

enhanced allocation provided the Primary Market 

Maker is quoting at same price as a non-Priority 

Customer Order or Market Maker quote. 

8See Options 2, Section 4. GEMX Market Makers 

must for example: (1) Compete with other Market 

Makers to improve the market in all series of 

options classes to which the Market Maker is 

appointed; (2) make markets that, absent changed 

market conditions, will be honored for the number 

of contracts entered into the Exchange’s System in 

all series of options classes to which the Market 

Maker is appointed; (3) update market quotations in 

response to changed market conditions in all series 

of options classes to which the Market Maker is 

appointed; and (4) price options contracts fairly by, 

among other things, bidding and offering so as to 

create differences of no more than $5 between the 

bid and offer following the opening rotation in an 

equity or index options contract. See Options 2, 

Section 4(b). 

9See Options 2, Section 5 (Electronic Market 

Maker Obligations and Quoting Requirements). 

Further, Options 3, Section 8(c)(3) requires Primary 

Market Makers to submit a Valid Width Quote 

during the Opening Process. 

10See Options 3, Section 20 (Nullification and 

Adjustment of Options Transactions including 

Obvious Errors). 

11See Options 3, Section 4(b)(6). 

Number SR–Phlx–2021–37 and should 

be submitted on or before July 19, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13658 Filed 6–25–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92227; File No. SR–GEMX– 

2021–05] 

Self-Regulatory Organizations; Nasdaq 

GEMX, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change to Options 2, Section 4 

(Obligations of Market Makers) 

June 22, 2021. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on June 9, 

2021, Nasdaq GEMX, LLC (‘‘GEMX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Options 2, Section 4, Obligations of 

Market Makers. The Exchange also 

proposes to add a new Options 4C. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/gemx/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Options 2, Section 4, Obligations of 

Market Makers. The Exchange also 

proposes to add a new Options 4C. 

Options 2, Section 4(a) 

The Exchange proposes to remove the 

following rule text from Options 2, 

Section 4(a), which has been in place 

since GEMX’s inception: 3

. . . Ordinarily, Market Makers are expected 

to: 

(1) Refrain from purchasing a call option or 

a put option at a price more than $0.25 below 

parity, although a larger amount may be 

appropriate considering the particular market 

conditions. In the case of calls, parity is 

measured by the bid in the underlying 

security, and in the case of puts, parity is 

measured by the offer in the underlying 

security. 

(2) The $0.25 amount above may be 

increased, or the provisions of this Rule may 

be waived, by the Exchange on a series-byseries basis. This proposed rule text also 

previously existed on Cboe Exchange, Inc. 

within prior Rule 8.7 4 and was removed 

from Cboe’s Rulebook in 2019.5 The 

Exchange likewise desires to remove this 

restriction on Market Makers which does not 

exist on Cboe or other Nasdaq affiliated 

markets.6 The proposed rule text is currently 

waived on GEMX pursuant to Options 2, 

Section 4(a)(2). The Exchange proposes to 

remove this rule text from Options 2, Section 

4 as the Exchange does not desire to enforce 

this provision in the future. The Exchange 

believes that this market maker provision is 

no longer necessary. Today, GEMX 

incentivizes Market Makers through 

allocation 7 to quote tightly in their assigned 

options series. Primary Market Makers and 

Competitive Market Makers also have other 

obligations with respect to market making 8

in addition to other quoting obligations 9 that 

they must abide by when quoting on GEMX. 

Also, since the adoption of the rule, the 

Exchange has adopted the obvious error 

rule 10 which permits the Exchange to review 

a transaction as potentially erroneous based 

on a theoretical price. Also, GEMX orders are 

subject to trade-through compliance, thereby 

limiting the prices at which orders may 

execute.11 Market Makers are relied upon to 

provide liquidity on GEMX, which benefits 

other Members who have the opportunity to 

interact with the order flow. The Exchange 

believes that the obligation to refrain from 

purchasing a call option or a put option at 

a price more than $0.25 below parity places 

yet another obligation on GEMX Market 

Makers that is not required on Cboe or other 

Nasdaq markets. The Exchange believes that 

this additional obligation is not necessary to 

maintain fair and orderly markets and notes 

the Exchange has waived this obligation. 

Bid/Ask Differentials 

The Exchange proposes to amend 

Options 2, Section 4(b)(4) and Options 

4A, Section 12(b)(i) to centralize the 

bid/ask differentials. Specifically, the 

Exchange proposes to state within new 

Options 2, Section 4(b)(4)(iii) that, 


khammond on DSKJM1Z7X2PROD with NOTICES