Document ID: SEC-2023-0697-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq MRX, LLC
Posted Date: 2023-06-30T04:00Z

[Federal Register Volume 88, Number 125 (Friday, June 30, 2023)]
[Notices]
[Pages 42409-42414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13895]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97800; File No. SR-MRX-2023-11]

Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Pricing Schedule at Options 7, Section 3

June 26, 2023.
    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 12, 2023, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 42410]]

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 
Options 7, Section 3 (Regular Order Fees and Rebates).
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Pricing Schedule at Options 7, Section 3 (Regular Order Fees and 
Rebates). The Exchange initially filed the proposed pricing changes on 
June 1, 2023 (SR-MRX-2023-09). On June 12, 2023, the Exchange withdrew 
that filing and submitted this filing.
Background
    Today, as set forth in Table 1 of Options 7, Section 3, the 
Exchange assesses the following maker/taker fees for regular orders in 
Penny and Non-Penny Symbols:

----------------------------------------------------------------------------------------------------------------
                                                               Maker fee    Maker fee    Taker fee    Taker fee
                     Market participant                          Tier 1       Tier 2       Tier 1       Tier 2
----------------------------------------------------------------------------------------------------------------
                                                  Penny Symbols
----------------------------------------------------------------------------------------------------------------
Market Maker \3\............................................        $0.20        $0.10        $0.50        $0.50
Non-Nasdaq MRX Market Maker (FarMM) \4\.....................         0.47         0.47         0.50         0.50
Firm Proprietary \5\/Broker-Dealer \6\......................         0.47         0.47         0.50         0.50
Professional Customer \7\...................................         0.47         0.47         0.50         0.50
Priority Customer \8\.......................................         0.00         0.00         0.00         0.00
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                                                Non-Penny Symbols
----------------------------------------------------------------------------------------------------------------
Market Maker................................................         0.35         0.20         1.10         1.10
Non-Nasdaq MRX Market Maker (FarMM).........................         0.90         0.90         1.10         1.10
Firm Proprietary/Broker-Dealer..............................         0.90         0.90         1.10         1.10
Professional Customer.......................................         0.90         0.90         1.10         1.10
Priority Customer...........................................         0.00         0.00         0.00         0.00
----------------------------------------------------------------------------------------------------------------

    Market participants are charged the above Tier 1 and Tier 2 maker/
taker fees (or are eligible for free executions) if they meet the 
applicable tier thresholds based on Total Affiliated Member or 
Affiliated Entity ADV \9\ in Table 3 of Options 7, Section 3. Market 
Makers may also alternatively qualify for these fees if they meet the 
applicable tier thresholds based on Total Market Maker ADV \10\ in 
Table 3. Specifically:
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    \3\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Options 1, 
Section 1(a)(21).
    \4\ A ``Non-Nasdaq MRX Market Maker'' is a market maker as 
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, 
as amended, registered in the same options class on another options 
exchange.
    \5\ A ``Firm Proprietary'' order is an order submitted by a 
Member for its own proprietary account.
    \6\ A ``Broker-Dealer'' order is an order submitted by a Member 
for a broker-dealer account that is not its own proprietary account.
    \7\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \8\ A ``Priority Customer'' is a person or entity that is not a 
broker/dealer in securities, and does not place more than 390 orders 
in listed options per day on average during a calendar month for its 
own beneficial account(s), as defined in Nasdaq MRX Options 1, 
Section 1(a)(36).
    \9\ Total Affiliated Member or Affiliated Entity ADV means all 
ADV executed on the Exchange in all symbols and order types, 
including volume executed by Affiliated Members or Affiliated 
Entities. All eligible volume from Affiliated Members or an 
Affiliated Entity will be aggregated in determining applicable 
tiers.
    \10\ Total Market Maker ADV means all Market Maker ADV executed 
on the Exchange in all symbols and order types, including volume 
executed by Affiliated Members or Affiliated Entities. All eligible 
volume from Affiliated Members or an Affiliated Entity will be 
aggregated in determining applicable tiers.
    \11\ ``Customer Total Consolidated Volume'' means the total 
volume cleared at The Options Clearing Corporation in the Customer 
range in equity and ETF options in that month.

------------------------------------------------------------------------
                      Total Affiliated
      Tiers         Member or Affiliated     OR      Total Market Maker
                         Entity ADV                         ADV
------------------------------------------------------------------------
Tier 1...........  executes 0.00% to less          executes up to 0.10%
                    than 0.75% of                   of Customer Total
                    Customer Total                  Consolidated Volume
                    Consolidated Volume             which adds liquidity
                    \11\.                           in Regular Orders.
Tier 2...........  executes 0.75% or more          executes more than
                    of Customer Total               0.10% of Customer
                    Consolidated Volume.            Total Consolidated
                                                    Volume which adds
                                                    liquidity in Regular
                                                    Orders.
------------------------------------------------------------------------

    In addition, the Exchange currently offers Market Makers a number 
of ways to reduce their maker/taker fees described above. First, Market 
Makers may qualify for reduced taker fees in Penny Symbols when trading 
against Priority Customer orders in Penny Symbols entered by an 
Affiliated

[[Page 42411]]

Member \12\ or Affiliated Entity.\13\ In lieu of the $0.50 per contract 
Tier 1/Tier 2 Market Maker Taker Fee, a Taker Fee of $0.20 per contract 
applies instead when trading with Priority Customer orders in Penny 
Symbols entered by an Affiliated Member or Affiliated Entity. A Taker 
Fee of $0.10 per contract applies instead when trading with Priority 
Customer orders in Penny Symbols entered by an Affiliated Member or 
Affiliated Entity if the Member has a Total Affiliated Member or 
Affiliated Entity Priority Customer ADV \14\ of 0.20% to less than 
0.75% Customer Total Consolidated Volume. A Taker Fee of $0.00 per 
contract applies instead when trading with Priority Customer orders in 
Penny Symbols entered by an Affiliated Member or Affiliated Entity if 
the Member has a Total Affiliated Member or Affiliated Entity Priority 
Customer ADV of 0.75% Customer Total Consolidated Volume or more.\15\
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    \12\ An ``Affiliated Member'' is a Member that shares at least 
75% common ownership with a particular Member as reflected on the 
Member's Form BD, Schedule A.
    \13\ An ``Affiliated Entity'' is a relationship between an 
Appointed Market Maker and an Appointed OFP for purposes of 
qualifying for certain pricing specified in the Pricing Schedule. 
Market Makers and OFPs are required to send an email to the Exchange 
to appoint their counterpart, at least 3 business days prior to the 
last day of the month to qualify for the next month. The Exchange 
will acknowledge receipt of the emails and specify the date the 
Affiliated Entity is eligible for applicable pricing, as specified 
in the Pricing Schedule. Each Affiliated Entity relationship will 
commence on the 1st of a month and may not be terminated prior to 
the end of any month. An Affiliated Entity relationship will 
automatically renew each month until or unless either party 
terminates earlier in writing by sending an email to the Exchange at 
least 3 business days prior to the last day of the month to 
terminate for the next month. Affiliated Members may not qualify as 
a counterparty comprising an Affiliated Entity. Each Member may 
qualify for only one (1) Affiliated Entity relationship at any given 
time.
    \14\ Total Affiliated Member or Affiliated Entity Priority 
Customer ADV means all Priority Customer ADV executed on the 
Exchange in all symbols and order types, including volume executed 
by Affiliated Members or Affiliated Entities. All eligible volume 
from Affiliated Members or an Affiliated Entity will be aggregated 
in determining applicable tiers.
    \15\ See Options 7, Section 3, Table 1, note 2 (``note 2 
incentive'').
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    Second, Market Makers may currently qualify for reduced taker fees 
in Non-Penny Symbols when trading against Priority Customer orders in 
Non-Penny Symbols entered by an Affiliated Member or Affiliated Entity. 
In lieu of the $1.10 per contract Tier 1/Tier 2 Market Maker Taker Fee, 
a Taker Fee of $0.90 per contract applies instead when trading with 
Priority Customer orders in Non-Penny Symbols entered by an Affiliated 
Member or Affiliated Entity. A Taker Fee of $0.50 per contract applies 
instead when trading with Priority Customer orders in Non-Penny Symbols 
entered by an Affiliated Member or Affiliated Entity if the Member has 
a Total Affiliated Member or Affiliated Entity Priority Customer ADV of 
0.20% to less than 0.75% Customer Total Consolidated Volume. A Taker 
Fee of $0.20 per contract applies instead when trading with Priority 
Customer orders in Non-Penny Symbols entered by an Affiliated Member or 
Affiliated Entity if the Member has a Total Affiliated Member or 
Affiliated Entity Priority Customer ADV of 0.75% Customer Total 
Consolidated Volume or more.\16\
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    \16\ See Options 7, Section 3, Table 1, note 3 (``note 3 
incentive'').
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    Third, Market Makers may qualify for a reduction in the Tier 1 and 
Tier 2 Maker Fees described above if the Market Maker has increased its 
volume which adds liquidity in Penny Symbols as a percentage of 
Customer Total Consolidated Volume by at least 100% over the Member's 
December 2022 Market Maker volume which adds liquidity in Penny Symbols 
as a percentage of Customer Total Consolidated Volume. Market Makers 
that qualify will have their Tier 1 Maker Fee reduced to $0.08 and 
their Tier 2 Maker Fee reduced to $0.04. Market Makers with no volume 
in the Penny Symbol add liquidity segment for the month of December 
2022 may qualify for the reduced Tier 1 and Tier 2 Maker Fees by having 
any new volume considered as added volume.\17\
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    \17\ See Options 7, Section 3, Table 1, note 6 (``note 6 
incentive''). The note 6 incentive will be available to Market 
Makers until June 30, 2023.
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Proposal 1: Amend Qualifying Tier Thresholds and Related Maker/Taker 
Pricing
    The Exchange now proposes to amend the Table 3 qualifying tier 
thresholds in the following manner. First, the Exchange proposes to 
introduce new Tiers 3 and 4 and related maker/taker fees. Specifically, 
the Exchange proposes that Tiers 3 and 4 will have the following volume 
requirements:
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    \18\ 1.50% of Customer Total Consolidated Volume is 
approximately 517,800 contracts per day.
    \19\ 0.25% of Customer Total Consolidated Volume is 
approximately 86,300 contracts per day. 0.45% of Customer Total 
Consolidated Volume is approximately 155,300 contracts per day.
    \20\ 2.25% of Customer Total Consolidated Volume is 
approximately 776,700 contracts per day.

------------------------------------------------------------------------
                      Total Affiliated
      Tiers         Member or Affiliated     OR      Total Market Maker
                         Entity ADV                         ADV
------------------------------------------------------------------------
Tier 3...........  executes 1.50% to less          executes more than
                    than 2.25% of                   0.25% and up to
                    Customer Total                  0.45% of Customer
                    Consolidated Volume             Total Consolidated
                    \18\.                           Volume which adds
                                                    liquidity in Regular
                                                    Orders.\19\
Tier 4...........  executes 2.25% or more          executes more than
                    of Customer Total               0.45% of Customer
                    Consolidated Volume             Total Consolidated
                    \20\.                           Volume which adds
                                                    liquidity in Regular
                                                    Orders.
------------------------------------------------------------------------

    As proposed, Market Makers that qualify for Tiers 3 and 4 will 
receive Penny Symbol maker rebates of $0.05 per contract (Tier 3) and 
$0.10 per contract (Tier 4). Additionally, Market Makers that qualify 
for Tiers 3 and 4 will be assessed a Penny Symbol taker fee of $0.50 
per contract in both tiers, which is the same Penny Symbol taker fee 
they are charged today in Tiers 1 and 2. The note 2 incentive will also 
apply to the Market Maker Tiers 3 and 4 taker fees in Penny Symbols, 
like they do today for Tiers 1 and 2. Specifically, the Exchange will 
also offer Market Makers the reduced Penny Symbol taker fees set forth 
in the note 2 incentive (in lieu of the $0.50 per contract Tier 3//Tier 
4 taker fee) if they trade against Priority Customer orders in Penny 
Symbols entered by an Affiliated Member or Affiliated Entity.\21\
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    \21\ As discussed above, the note 2 incentive currently provides 
that a Taker Fee of $0.20 per contract applies instead when trading 
with Priority Customer orders in Penny Symbols entered by an 
Affiliated Member or Affiliated Entity. A Taker Fee of $0.10 per 
contract applies instead when trading with Priority Customer orders 
in Penny Symbols entered by an Affiliated Member or Affiliated 
Entity if the Member has a Total Affiliated Member or Affiliated 
Entity Priority Customer ADV of 0.20% to less than 0.75% Customer 
Total Consolidated Volume. A Taker Fee of $0.00 per contract applies 
instead when trading with Priority Customer orders in Penny Symbols 
entered by an Affiliated Member or Affiliated Entity if the Member 
has a Total Affiliated Member or Affiliated Entity Priority Customer 
ADV of 0.75% Customer Total Consolidated Volume or more.
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    In Non-Penny Symbols, Market Makers that qualify for Tiers 3 and 4 
will be charged maker fees of $0.15 per contract (Tier 3) and $0.10 per 
contract (Tier 4). Additionally, Market Makers that qualify for Tiers 3 
and 4 will be assessed a Non-Penny Symbol taker fee of $1.10 per 
contract in both tiers,

[[Page 42412]]

which is the same Non-Penny Symbol taker fee they are charged today in 
Tiers 1 and 2. The note 3 incentive will also apply to Market Maker 
Tiers 3 and 4 taker fees in Non-Penny Symbols, like they do today for 
Tiers 1 and 2. Specifically, the Exchange will also offer Market Makers 
the reduced Non-Penny Symbol taker fees set forth in the note 3 
incentive (in lieu of the $1.10 per contract Tier 3/Tier 4 taker fee) 
if they trade against Priority Customer orders in Non-Penny Symbols 
entered by an Affiliated Member or Affiliated Entity.\22\
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    \22\ As discussed above, the note 3 incentive currently provides 
that a Taker Fee of $0.90 per contract applies instead when trading 
with Priority Customer orders in Non-Penny Symbols entered by an 
Affiliated Member or Affiliated Entity. A Taker Fee of $0.50 per 
contract applies instead when trading with Priority Customer orders 
in Non-Penny Symbols entered by an Affiliated Member or Affiliated 
Entity if the Member has a Total Affiliated Member or Affiliated 
Entity Priority Customer ADV of 0.20% to less than 0.75% Customer 
Total Consolidated Volume. A Taker Fee of $0.20 per contract applies 
instead when trading with Priority Customer orders in Non-Penny 
Symbols entered by an Affiliated Member or Affiliated Entity if the 
Member has a Total Affiliated Member or Affiliated Entity Priority 
Customer ADV of 0.75% Customer Total Consolidated Volume or more.
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    For non-Priority Customers except Market Makers, the Exchange will 
continue to assess the same maker/taker fees in Tiers 3 and 4 for Penny 
and Non-Penny Symbols as the non-Priority Customer maker/taker fees in 
Tiers 1 and 2 today. Specifically, all non-Priority Customers other 
than Market Makers will be assessed the Penny Symbol maker fee of $0.47 
per contract and Penny Symbol taker fee of $0.50 per contract across 
Tiers 1-4. Additionally, all non-Priority Customers except Market 
Makers will be assessed the Non-Penny Symbol maker fee of $0.90 per 
contract and Penny Symbol taker fee of $1.10 per contract across Tiers 
1-4.
    As it relates to Priority Customers, the Exchange will continue to 
assess no maker fees in Tiers 3 and 4 in both Penny and Non-Penny 
Symbols, identical to the Priority Customer Tiers 1 and 2 maker fees 
today. For the taker fees in both Penny and Non-Penny Symbols, the 
Exchange will charge Priority Customers $0.15 per contract in Tier 3 
and $0.10 per contract in Tier 4.
    Second, the Exchange proposes to modify the existing qualifying 
tier thresholds and related maker/taker pricing for Tiers 1 and 2. As 
it relates to the qualifying tier thresholds, the Exchange proposes to 
amend the Tier 2 qualifications as follows:

------------------------------------------------------------------------
                      Total Affiliated
      Tiers         Member or Affiliated     OR      Total Market Maker
                         Entity ADV                         ADV
------------------------------------------------------------------------
Tier 2...........  executes 0.75% to less          executes more than
                    than 1.50% of                   0.10% and up to
                    Customer Total                  0.25% of Customer
                    Consolidated Volume             Total Consolidated
                    \23\.                           Volume which adds
                                                    liquidity in Regular
                                                    Orders.
------------------------------------------------------------------------

    As described above, the Tier 2 Total Affiliated Member or 
Affiliated Entity ADV threshold and the Tier 2 Total Market Maker ADV 
threshold will both be modified to accommodate the respective new 
thresholds.\24\ The Tier 1 qualifications will remain unchanged under 
this proposal.
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    \23\ 0.75% of Customer Total Consolidated Volume is 
approximately 258,900 contracts per day.
    \24\ As discussed above, the new Tier 3 Total Affiliated Member 
or Affiliated Entity ADV threshold will require Members to execute 
1.50% to less than 2.25% of Customer Total Consolidated Volume. The 
new Tier 3 Total Market Maker ADV threshold will require Market 
Makers to execute more than 0.25% and up to 0.45% of Customer Total 
Consolidated Volume which adds liquidity in Regular Orders.
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    For the related Tier 1 and Tier 2 maker/taker fees, the Exchange 
proposes to modify those fees for Market Makers and Priority Customers 
in a number of ways. For Market Makers, the Exchange proposes to 
decrease the Penny Symbol maker fees in Tier 1 and Tier 2 from $0.20 to 
$0.10 per contract (Tier 1) and from $0.10 to $0.00 per contract (Tier 
2). No other changes are being proposed to the remaining Tiers 1 and 2 
maker/taker fees for Market Makers.
    As it relates to Priority Customers, the Exchange proposes to begin 
charging those market participant orders taker fees in Tiers 1 and 2. 
Specifically, Priority Customers will be charged taker fees of $0.15 
per contract in both Tiers 1 and 2 for Penny Symbols. For Non-Penny 
Symbols, the Exchange proposes to charge Priority Customers taker fees 
of $0.35 per contract (Tier 1) and $0.25 per contract (Tier 2).
    While the maker/taker fees in Table 1 of Options 7, Section 3 for 
the majority of market participants (i.e., Non-Nasdaq MRX Market 
Makers, Firm Proprietary/Broker-Dealers, and Professional Customers) 
will not be impacted by the changes proposed above, the proposal will 
impact maker pricing for Market Makers and taker pricing for Priority 
Customers.\25\ In particular, qualifying Market Makers will see a 
decrease in their current Tier 1 and Tier 2 maker fees in Penny 
Symbols, and be eligible to receive the new Tier 3 and Tier 4 maker 
rebates in Penny Symbols. Additionally, qualifying Market Makers will 
be eligible for the new Tier 3 and Tier 4 maker fees in Non-Penny 
Symbols, which will be lower than the current Non-Penny Symbol Tier 1 
and Tier 2 maker fees.\26\ Furthermore, the Exchange will start 
charging Priority Customers taker fees in Tiers 1-4 across all symbols 
traded on the Exchange in the manner described above. Today, Priority 
Customers are not assessed any taker fees under the Table 1 pricing 
schedule.\27\
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    \25\ In particular, these market participants will continue to 
be uniformly charged the same maker fees of $0.47 per contract 
(Penny Symbols) and $0.90 per contract (Non-Penny Symbols), 
regardless of tier achieved. In addition, they will continue to be 
uniformly charged the same taker fees of $0.50 per contract (Penny 
Symbols) and $1.10 per contract (Non-Penny Symbols), regardless of 
tier achieved.
    \26\ However, as discussed above, Market Makers will continue to 
be uniformly charged the same taker fees $0.50 per contract (Penny 
Symbols) and $1.10 per contract (Non-Penny Symbols), regardless of 
tier achieved. They will also continue to be eligible for the note 2 
incentive (Penny Symbols) and note 3 incentive (Non-Penny Symbols), 
regardless of tier achieved.
    \27\ However, as discussed above, Priority Customers will 
continue to not be charged any maker fees pursuant to the Table 1 
pricing schedule under this proposal.
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Proposal 2: Eliminate Note 6 Incentive
    The Exchange proposes to eliminate the note 6 incentive described 
above. This temporary incentive was first introduced to encourage 
Market Makers to engage in substantial amounts of liquidity adding 
activity in Penny Symbols on the Exchange, as well as to grow 
substantially the extent to which they do so relative to a recent 
benchmark month.\28\ The Exchange does not believe that the note 6 
incentive has had the intended effect, and is therefore eliminating it 
before the expiration date of June 30, 2023 in order to redirect 
resources into other pricing programs intended to incentivize increased 
order flow.
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    \28\ See Securities Exchange Act Release No. 97148 (March 15, 
2023), 88 FR 17068 (March 21, 2023) (SR-MRX-2023-07).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 42413]]

of the Act,\29\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\30\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its schedule of credits are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
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'. . . .'' \31\
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    \31\ NetCoalition 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)).
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    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.'' \32\
---------------------------------------------------------------------------

    \32\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges 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. As such, the 
proposal represents a reasonable attempt by the Exchange to increase 
its liquidity and market share relative to its competitors.
Proposal 1: Amend Qualifying Tier Thresholds and Related Maker/Taker 
Pricing
    The Exchange believes that its proposal to amend the qualifying 
tier thresholds and related maker/taker pricing are reasonable for 
several reasons. The Exchange believes that the modified volume 
threshold in Tier 2 and the new volume thresholds in Tiers 3 and 4 are 
reasonably designed to encourage Market Makers and Priority Customers 
to increase their liquidity adding activity to qualify for lower maker 
fees or maker rebates (for Market Makers only) and to increase their 
liquidity removing activity to qualify for the lower taker fees (for 
Priority Customers only).\33\ The Exchange believes that adding new 
Tiers 3 and 4 will encourage Market Makers and Priority Customers to 
strive to achieve the higher tiers by submitting the requisite amount 
of order flow. An overall increase in activity would deepen the 
Exchange's liquidity pool, support the quality of price discovery, and 
promote market quality to benefit of all market participants.
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    \33\ As discussed above, Non-Nasdaq MRX Market Makers, Firm 
Proprietary/Broker-Dealers, and Professional Customers will continue 
to be uniformly charged the same maker fees of $0.47 per contract 
(Penny Symbols) and $0.90 per contract (Non-Penny Symbols), 
regardless of tier achieved. In addition, they will continue to be 
uniformly charged the same taker fees of $0.50 per contract (Penny 
Symbols) and $1.10 per contract (Non-Penny Symbols), regardless of 
tier achieved.
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    The Exchange also believes that the proposed maker/taker pricing in 
Table 1 of Options 7, Section 3 is reasonable for the reasons that 
follow. First, the Exchange believes that it is reasonable to assess 
qualifying Market Makers lower maker fees or maker rebates, depending 
on the tier achieved, in the manner described above.\34\ The proposed 
structure will encourage Market Makers to increase their liquidity 
providing activity on the Exchange, which would support the quality of 
price discovery on the Exchange, provide additional liquidity for 
incoming orders, and create additional opportunities for market 
participants to trade. Second, the Exchange believes its proposal to 
begin charging Priority Customers taker fees in Tiers 1-4 across all 
symbols traded on the Exchange in the manner described above is 
reasonable because Priority Customers will continue to be assessed the 
lowest taker fees compared to any other market participant on the 
Exchange.\35\ Accordingly, the Exchange believes that the proposed 
taker fees will remain attractive and continue to incentivize more 
executions in Priority Customer orders on the Exchange.
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    \34\ In particular, qualifying Market Makers will see a decrease 
in their current Tier 1 and Tier 2 maker fees in Penny Symbols, and 
be eligible to receive the new Tier 3 and Tier 4 maker rebates in 
Penny Symbols. Additionally, qualifying Market Makers will be 
eligible for the new Tier 3 and Tier 4 maker fees in Non-Penny 
Symbols, which will be lower than the current Non-Penny Symbol Tier 
1 and Tier 2 maker fees.
    \35\ As proposed, Priority Customers will now be assessed Penny 
Symbol taker fees of $0.15 per contract (Tiers 1-3) and $0.10 per 
contract (Tier 4). For all non-Priority Customers, this Penny Symbol 
taker fee is $0.50 per contract (regardless of tier achieved). 
Additionally, Priority Customers will now be assessed Non-Penny 
Symbol taker fees of $0.35 per contract (Tier 1), $0.25 per contract 
(Tier 2), $0.15 per contract (Tier 3), and $0.10 per contract (Tier 
4). For all non-Priority Customers, this Non-Penny Symbol taker fee 
is $1.10 per contract.
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    The Exchange further believes that the proposed changes to the 
qualifying tier thresholds and related maker/taker pricing in the 
manner described above are equitable and not unfairly discriminatory as 
the proposed changes will apply uniformly to all similarly situated 
participants. The maker/taker fees in Table 1 of Options 7, Section 3 
for the majority of market participants (i.e., Non-Nasdaq MRX Market 
Makers, Firm Proprietary/Broker-Dealers, and Professional Customers) 
will not be impacted by the Exchange's proposal as they will continue 
to be charged the same pricing they are assessed today, regardless of 
tier achieved.\36\ The proposal, however, will impact maker pricing for 
Market Makers and taker pricing for Priority Customers, which will 
ultimately result in these market participants receiving more favorable 
pricing compared to other market participants under amended Table 1 of 
Options 7, Section 3. The Exchange believes the proposed structure 
continues to be equitable and not unfairly discriminatory as the 
Exchange has historically provided Market Makers and Priority Customers 
with more favorable pricing. Furthermore, Market Makers, unlike other 
market participants add value to the Exchange through quoting 
obligations and their commitment of capital. Additionally, Priority 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts market makers. An increase in the

[[Page 42414]]

activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants, to the benefit of all market 
participants.
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    \36\ See supra note 25.
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Proposal 2: Eliminate Note 6 Incentive
    The Exchange believes that its proposal to eliminate the note 6 
incentive described above is reasonable because this temporary 
incentive has not had its intended effect of incentivizing Market 
Makers to increase their liquidity adding activity in Penny Symbols on 
the Exchange over the stipulated time period. As such, the Exchange is 
eliminating the note 6 incentive in order to redirect future resources 
into other pricing programs intended to incentivize increased order 
flow.
    The Exchange also believes that its proposal is equitable and not 
unfairly discriminatory as the note 6 incentive will be eliminated for 
all Market Makers. Further, the Exchange notes that the proposed 
changes will not adversely impact any market participant's ability to 
otherwise qualify for reduced fees or rebates offered under other 
programs in the Pricing Schedule.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of intra-market 
competition, the Exchange does not believe that its proposal will place 
any category of market participant at a competitive disadvantage. As 
discussed above, while parts of the Exchange's proposal provide more 
incentives for certain order flow and activity on the Exchange (i.e., 
Market Maker liquidity adding activity and Priority Customer liquidity 
removing activity), the proposed changes are ultimately aimed at 
attracting greater liquidity to the Exchange, which benefits all market 
participants in the quality of order interaction.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges and with alternative trading systems that have been exempted 
from compliance with the statutory standards applicable to exchanges. 
Because competitors are free to modify their own fees in response, and 
because market participants may readily adjust their order routing 
practices, the Exchange believes that the degree to which fee changes 
in this market may impose any burden on competition is extremely 
limited. In sum, if the changes proposed herein are unattractive to 
market participants, it is likely that the Exchange will lose market 
share as a result. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of members 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 \37\ and Rule 19b-4(f)(2) \38\ 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: (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.
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    \37\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \38\ 17 CFR 240.19b-4(f)(2).
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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 [email protected]. Please include 
file number SR-MRX-2023-11 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-MRX-2023-11. 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 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-MRX-2023-11 and should be submitted on 
or before July 21, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2023-13895 Filed 6-29-23; 8:45 am]
BILLING CODE 8011-01-P