Document ID: SEC-2020-0113-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq MRX, LLC
Posted Date: 2020-01-29T05:00Z

[Federal Register Volume 85, Number 19 (Wednesday, January 29, 2020)]
[Notices]
[Pages 5263-5267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01520]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88022; File No. SR-MRX-2020-02]

Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend MRX 
Pricing Schedule

January 23, 2020.
    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 January 13, 2020, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the 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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend MRX's Pricing Schedule. 
Specifically, the Exchange proposes to amend Options 7, Section 3, 
titled ``Regular Order Fees and Rebates.''
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqmrx.cchwallstreet.com/, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the

[[Page 5264]]

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
    MRX proposes to amend its Pricing Schedule at Options 7, Section 3, 
titled ``Regular Order Fees and Rebates.'' There are two changes that 
are proposed to Options 7, Section 3: (1) An amendment to the Tier 2 
Market Maker Penny and Non-Penny Symbol Regular Order Fees in Table 1; 
and (2) an amendment to the Qualifying Tier Thresholds in Table 3. Each 
proposed amendment will be discussed below.
    The Exchange originally filed the proposed pricing changes on 
January 2, 2020 (SR-MRX-2020-01). On January 13, 2020, the Exchange 
withdrew that filing and submitted this filing.
Market Maker Fees
    Today, the Exchange assesses the following Penny Symbol Regular 
Order Fees and Rebates within Table 1 of Options 7, Section 3:

                                                  Penny Symbols
----------------------------------------------------------------------------------------------------------------
                                                     Maker fee       Maker fee       Taker fee       Taker fee
               Market participant                     tier 1          tier 2          tier 1          tier 2
----------------------------------------------------------------------------------------------------------------
Market Maker \(1)\..............................           $0.20           $0.00     \(2)\ $0.50     \(2)\ $0.50
Non-Nasdaq MRX Market Maker (FarMM).............            0.47            0.47            0.50            0.50
Firm Proprietary/Broker-Dealer..................            0.47            0.47            0.50            0.50
Professional Customer...........................            0.47            0.47            0.50            0.50
Priority Customer...............................            0.00            0.00            0.00            0.00
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    Today, the Exchange assesses the following Non-Penny Symbol Regular 
Order Fees and Rebates within Table 1 of Options 7, Section 3:

                                                Non-Penny Symbols
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                                                     Maker fee       Maker fee       Taker fee       Taker fee
               Market Participant                     tier 1          tier 2          tier 1          tier 2
----------------------------------------------------------------------------------------------------------------
Market Maker \(1)\..............................           $0.20           $0.00     \(2)\ $0.90     \(2)\ $0.90
Non-Nasdaq MRX Market Maker (FarMM).............            0.90            0.90            0.90            0.90
Firm Proprietary/Broker-Dealer..................            0.90            0.90            0.90            0.90
Professional Customer...........................            0.90            0.90            0.90            0.90
Priority Customer...............................            0.00            0.00            0.00            0.00
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    Today, the Tier 2 Market Maker \3\ Fee for both Penny and Non-Penny 
Symbols is currently $0.00 per contract. The Exchange proposes to 
increase this fee from $0.00 to $0.10 per contract. The Exchange is not 
proposing to amend other fees within Table 1 other than the Market 
Maker fees. Non-Nasdaq Marker Makers (FarMM), Firm Proprietary/Broker-
Dealer and Professional Customers are assessed a fee of $0.47 per 
contract for Penny Symbols and $0.90 per contract for Non-Penny 
Symbols. Priority Customers do not pay any fees for transacting Penny 
or Non-Penny Symbols on MRX. Also, the Exchange is continuing to offer 
Market Makers the opportunity to reduce its Maker Fee if it qualifies 
for Tier 2. The Market Maker Fee for Tier 1 remains at $0.20 for both 
Penny and Non-Penny Pilot Symbols and is not being amended. The 
Exchange believes its fees remain competitive and will continue to 
attract order flow.
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    \3\ This fee also applies to Market Maker orders sent to the 
Exchange by Electronic Access Members. See Options 7, Section 3 at 
note 1 of the Pricing Schedule.
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    Tier 2
    Today the Exchange has two tiers as part of its Qualifying Tier 
Thresholds in Table 3 of Options 7, Section 3 as follows:

                   Table 3--Qualifying Tier Thresholds
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                                               Total affiliated and/or
                   Tier                       appointed member ADV \4\
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Tier 1....................................  0-49,999.
Tier 2....................................  50,000 or more.
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    All market participants can qualify for Tiers 1 and 2, provided 
they meet the requisite volume thresholds specified in Table 3 above. 
The maker and taker fees for all market participants represented in 
Table 1, displayed above, are dependent on qualifying for a particular 
tier (either Tier 1 or Tier 2). With respect to these tiers, the 
highest tier threshold attained applies retroactively in a given month 
to all eligible traded contracts and applies to all eligible market 
participants.\5\
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    \4\ Total Affiliated and/or Appointed Member ADV means all 
average daily volume (``ADV'') executed on the Exchange in all 
symbols and order types, including volume executed by Affiliated 
Members and/or Appointed Members.
    \5\ The Exchange proposes to amend the word ``Tier'' in Table 3 
of Options 7, Section 3 to ``Tiers.''
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    The Exchange proposes to amend the current Qualifying Tier 
Thresholds by replacing the ADV thresholds with total industry 
percentage thresholds. Specifically, a member would be eligible for 
Tier 1 if it executes 0.00%-0.7499% of Customer Total Consolidated 
Volume, and Tier 2 if it executes 0.75% or more of Customer Total 
Consolidated Volume. The Exchange also proposes to note that for 
purposes of measuring Total Affiliated and/or Appointed Member ADV, 
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. The Exchange

[[Page 5265]]

notes that these new volume tiers are more stringent.\6\ The Exchange 
is proposing to effectively raise the volume requirements to align with 
increasing member activity on MRX over time. While the proposed tiers 
are more stringent, the proposed pricing is intended to continue to 
reward members that bring order flow to the Exchange and thereby 
increase liquidity and trading opportunities for all members. The Total 
Affiliated Member ADV category includes all volume executed on the 
Exchange in all symbols and order types, as is the case today.
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    \6\ For example, 0.75% of Customer Total Consolidated Volume is 
approximately 115,000 contracts per day.
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    While the maker/taker fees will remain the same for Non-Nasdaq MRX 
Market Maker orders, Firm Proprietary/Broker-Dealer orders, and 
Professional Customer orders regardless of the tier achieved,\7\ the 
proposed volume requirements will impact Market Makers that are 
eligible to qualify for the lower Tier 2 maker fee.\8\ Nonetheless, the 
Exchange believes that the proposed fee structure will remain 
attractive to Market Makers as they will continue to be charged 
substantially lower maker fees based on their contributions to the 
market.
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    \7\ In particular, these market participants will continue to be 
uniformly charged the same $0.47 per contract (Penny Symbols) and 
$0.90 per contract (Non-Penny Symbols) maker fees for Tier 1 and 
Tier 2. Priority Customer orders currently do not get charged any 
maker/taker fees, which will not change under this proposal.
    \8\ Currently, Market Makers are charged maker fees of $0.20 per 
contract for Tier 1 and $0.00 per contract for Tier 2. As proposed 
above, the Tier 2 maker fee for Market Makers will be increased from 
$0.00 to $0.10 per contract.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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Market Maker Fees
    The Exchange's proposal to increase the Tier 2 Market Maker Fee for 
both Penny and Non-Penny Symbols from $0.00 to $0.10 per contract is 
reasonable. While the Exchange is proposing to increase these fees for 
Market Makers in Tier 2, it continues to remain competitive and will 
continue to attract order flow. MRX is continuing to offer Market 
Makers the opportunity to reduce the Penny and Non-Penny Symbol Market 
Maker Fee if it qualifies for Tier 2 ($0.20 per contract as compared to 
the proposed $0.10 per contract).\11\ This discount will reward Market 
Makers that bring more order flow to the Exchange. Incentivizing Market 
Makers to provide greater liquidity benefits all market participants 
through the quality of order interaction.
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    \11\ The Market Maker Fee for Tier 1 remains at $0.20 for both 
Penny and Non-Penny Pilot Symbols.
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    The Exchange's proposal to increase the Tier 2 Market Maker Fee for 
both Penny and Non-Penny Symbols from $0.00 to $0.10 per contract is 
equitable and not unfairly discriminatory. Market Makers would continue 
to pay a lower fee as compared to fees for orders from other non-
Priority Customers. Non-Nasdaq Marker Makers (FarMM), Firm Proprietary/
Broker-Dealer and Professional Customers are assessed a fee of $0.47 
per contract for Penny Symbols and $0.90 per contract for Non-Penny 
Symbols. Market Makers add value to MRX through quoting obligations 
\12\ and their commitment of capital, unlike other market participants, 
and are therefore entitled to the lower fee. Priority Customers do not 
pay any fees for transacting Penny or Non-Penny Symbols on MRX. 
Priority Customer liquidity benefits all market participants by 
providing more trading opportunities, which attracts Market Makers. An 
increase in the activity of these market participants in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants.
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    \12\ See Options 3, Section 5.
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Tier 2
    The Exchange's proposal to amend the current Qualifying Tier 
Thresholds by amending Tier 1 from Total Affiliated and/or Appointed 
Member ADV of 0-49,999 contracts to 0.00%-0.7499% of Customer Total 
Consolidated Volume \13\ and amending Tier 2 from Total Affiliated and/
or Appointed Member ADV of 50,000 or more to 0.75% or more of Customer 
Total Consolidated Volume is reasonable. The Exchange is proposing to 
base Tiers 1 and 2 on a percentage of industry volume in recognition of 
the fact that the volume executed by a member may rise or fall with 
industry volume. A percentage of industry volume calculation allows the 
Exchange's tiers to be calibrated to current market volumes rather than 
requiring the same amount of volume regardless of market conditions. 
While the amount of volume required by the proposed tiers may change in 
any given month due to increases or decreases in industry volume, the 
Exchange believes that the proposed tier requirements are set at 
appropriate levels. While the proposed percentage of industry volume 
tier requirements are more stringent than the current ADV 
requirements,\14\ the Exchange is proposing to effectively raise the 
volume thresholds for the Qualifying Tier Thresholds to align with 
MRX's growth as a venue (and corresponding increased member activity) 
over time. While the proposed tiers are more stringent, the maker/taker 
tiered fee structure is intended to continue to reward members, and in 
particular, Market Makers who will continue to get charged lower maker 
fees, to bring more order flow to the Exchange and thereby increase 
liquidity and trading opportunities for all members.
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    \13\ For purposes of measuring Total Affiliated and/or Appointed 
Member ADV, 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. The Exchange notes 
that these new volume tiers are more stringent.
    \14\ See supra note 6.
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    The Exchange's proposal to amend the current Qualifying Tier 
Thresholds is equitable and not unfairly discriminatory. The proposed 
tiers will be applied uniformly to all market participants. 
Furthermore, the Exchange believes that the qualifying tier thresholds 
are equitable and not unfairly discriminatory as all market 
participants may qualify for a higher tier by executing the required 
volume of contracts, either through the Member, its affiliates, or an 
Appointed Member, as is the case today. As noted above, the proposed 
volume requirements will primarily impact Market Makers that are 
eligible to qualify for the lower Tier 2 maker fee \15\ while all other 
market participants (other than Priority Customers that get the benefit 
of free executions) will continue to be charged the same fees 
regardless of the tier achieved.\16\ The Exchange, however, anticipates 
minimal member impact with the proposed changes to Tier 1 and Tier 2 as 
no members, including Market Makers, meet the current Tier 2 ADV 
requirements and thus would not fall

[[Page 5266]]

out of the higher tier as a result of this change. While the proposal 
effectively increases the volume requirements for Tier 1 and Tier 2, 
Market Makers will continue to be charged substantially lower maker 
fees than other non-Priority Customers for both tiers based on their 
contribution to the market. The Exchange does not believe that 
continuing to provide lower maker fees for Market Makers is unfairly 
discriminatory as Market Makers are subject to additional requirements 
and obligations (such as quoting requirements) that other market 
participants are not.
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    \15\ Currently, Market Makers are charged maker fees of $0.20 
per contract for Tier 1 and $0.00 per contract for Tier 2. As 
proposed above, the Tier 2 maker fee for Market Makers will be 
increased from $0.00 to $0.10 per contract.
    \16\ In particular, other non-Priority Customers will continue 
to be uniformly charged the same $0.47 per contract (Penny Symbols) 
and $0.90 per contract (Non-Penny Symbols) maker fees for Tier 1 and 
Tier 2.
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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.
Inter-Market Competition
    The proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants with 
another choice of where to transact options. 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 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.
Intra-Market Competition
    The proposed fee do not impose an undue burden on intra-market 
competition.
Market Maker Fees
    The Exchange's proposal to increase the Tier 2 Market Maker Fee for 
both Penny and Non-Penny Symbols from $0.00 to $0.10 per contract does 
not impose an undue burden on intra-market competition. Market Makers 
would continue to pay a lower fee as compared to fees for orders from 
other non-Priority Customers. Non-Nasdaq Marker Makers (FarMM), Firm 
Proprietary/Broker-Dealer and Professional Customers are assessed a fee 
of $0.47 per contract for Penny Symbols and $0.90 per contract for Non-
Penny Symbols. Makers add value to MRX through quoting obligations \17\ 
and their commitment of capital, unlike other market participants, and 
are therefore entitled to the lower fee. Priority Customers do not pay 
any fees for transacting Penny or Non-Penny Symbols on MRX. Priority 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts Market Makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants.
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    \17\ See Options 3, Section 5.
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Tier 2
    The Exchange's proposal to amend the current Qualifying Tier 
Thresholds does not impose an undue burden on intra-market competition. 
The tiers will be applied uniformly to all market participants. 
Furthermore, all market participants can qualify for a higher tier by 
executing the required volume of contracts, either through the member, 
its affiliates, or an appointed member, as is the case today. As noted 
above, the proposed volume requirements will primarily impact Market 
Makers that are eligible to qualify for the lower Tier 2 maker fee 
while all other market participants (other than Priority Customers that 
get the benefit of free executions) will continue to be charged the 
same maker/taker fees regardless of the tier achieved. The Exchange, 
however, anticipates minimal member impact with the proposed changes to 
Tier 1 and Tier 2 as no members, including Market Makers, meet the 
current Tier 2 ADV requirements and thus would not fall out of the 
higher tier as a result of this change. Furthermore, while the proposal 
effectively increases the volume requirements for Tier 1 and Tier 2, 
Market Makers will continue to be charged substantially lower maker 
fees than other non-Priority Customers for both tiers. For the 
foregoing reasons, the Exchange does not believe that its proposal will 
have an undue burden on intramarket competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\18\ and Rule 19b-4(f)(2) \19\ 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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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 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 rule-comments@sec.gov. Please include 
File Number SR-MRX-2020-02 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-2020-02. 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

[[Page 5267]]

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-MRX-2020-02 and should be 
submitted on or before February 19, 2020.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-01520 Filed 1-28-20; 8:45 am]
BILLING CODE 8011-01-P