Document ID: SEC-2019-0079-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq GEMX, LLC
Posted Date: 2019-02-07T05:00Z

[Federal Register Volume 84, Number 26 (Thursday, February 7, 2019)]
[Notices]
[Pages 2639-2643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01381]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85024; File No. SR-GEMX-2018-45]

Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the 
Exchange's Provisions for Excluding a Day From Its Volume Calculations

February 1, 2019.
    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 December 21, 2018, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's provisions for 
excluding a day from its volume calculations for purposes of 
determining pricing tiers.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.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 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 
provisions for excluding a day from its volume calculations for 
purposes of determining pricing tiers. The Exchange is standardizing 
its practice for removing a day from volume calculations in its Pricing 
Schedule with its affiliated options market, Nasdaq PHLX LLC 
(``Phlx'').\3\ Each change is discussed below.
---------------------------------------------------------------------------

    \3\ See Phlx Pricing Schedule, Options 7, Section 1(b). The 
Exchange's other affiliated options markets, Nasdaq ISE, Nasdaq MRX, 
Nasdaq BX, and The Nasdaq Options Market will also file similar rule 
change proposals to conform to Phlx's rule.
---------------------------------------------------------------------------

Background

    To avoid penalizing members when aberrant low volume days result 
from systems or other issues at the Exchange, or where the Exchange 
closes early for holiday observance, the Exchange currently has 
language in its Pricing Schedule allowing it to exclude certain days 
from its average daily volume (``ADV'') calculations. Currently, 
language in the Exchange's Pricing Schedule provides that, for purposes 
of determining ADV for certain incentive programs,\4\ any day that the 
market is not open for the entire trading day or the Exchange instructs 
members in writing to route their orders to other markets may be 
excluded from such calculation; provided that the Exchange will only 
remove the day for members that would have a lower ADV with the day 
included. The proviso language (hereinafter, the ``better of rule'') 
ensures that members would only have the day removed when doing so is 
beneficial for the member. As such, the Exchange only applies the 
better of rule to ADV calculations, and not for other volume-based 
pricing where members would not benefit from having the day excluded 
(e.g., straight volume accumulations).
---------------------------------------------------------------------------

    \4\ The current language in the Pricing Schedule applies to the 
calculations of Total Affiliated Member ADV and Priority Customer 
Maker ADV used to determine tiered maker rebates and taker fees for 
members. See Options 7, Section 3, Table 1 (Qualifying Tier 
Thresholds).
---------------------------------------------------------------------------

Proposal
    In Options 7, Section 1, the Exchange proposes to adopt subsection 
(a) with the title ``Removal of Days for Purposes of Pricing Tiers,'' 
and renumber the existing first paragraph (related to fee disputes) as 
subsection (b). The Exchange also proposes to adopt new language in 
subsection (a) that is substantially similar to language currently in 
place on Phlx.\5\ Specifically, as proposed:
---------------------------------------------------------------------------

    \5\ See note 3 above.
---------------------------------------------------------------------------

    (1)(A) Any day that the Exchange announces in advance that it will 
not be open for trading will be excluded from the options tier 
calculations set forth in its Pricing Schedule; and (B) any day with a 
scheduled early market close (``Scheduled Early Close'') may be 
excluded from the options tier calculations only pursuant to paragraph 
(3) below.
    (2) The Exchange may exclude the following days (``Unanticipated 
Events'') from the options tier calculations only pursuant to paragraph 
(3) below, specifically any day that:
    (A) The market is not open for the entire trading day, (B) the 
Exchange instructs members in writing to route their orders to other 
markets, (C) the Exchange is inaccessible to members during the 30-
minute period before the opening of trade due to an Exchange system 
disruption, or (D) the Exchange's system experiences a disruption that 
lasts for more than 60 minutes during regular trading hours.
    (3) If a day is to be excluded as a result of paragraph (1)(B) or 
(2) above, the Exchange will exclude the day from any member's monthly 
options tier calculations as follows:
    (A) The Exchange may exclude from the ADV calculation any Scheduled 
Early Close or Unanticipated Event; or
    (B) the Exchange may exclude from any other applicable options tier 
calculation provided for in its Pricing Schedule (together with (3)(A), 
``Tier Calculations'') any Scheduled Early Close or Unanticipated 
Event.

provided, in each case, that the Exchange will only remove the day for 
members that would have a lower Tier Calculation with the day included.
    The proposed language: (i) Applies the rule for excluding days to 
all volume based calculations rather than specified incentive 
programs,\6\ (ii) expands upon the existing scenarios where the 
Exchange may remove a day to adopt two additional situations related to 
Exchange systems disruptions, (iii)

[[Page 2640]]

categorizes the potential excluded days into days that are known in 
advance (i.e., days in proposed paragraph (1), including Scheduled 
Early Closes) and days that are not (i.e., Unanticipated Events in 
proposed paragraph (2)), (iv) clarifies how the potential excluded days 
proposed above would be removed from the ADV and other applicable 
volume based tier calculations in the Pricing Schedule, and (v) 
generally adds more detail to clarify the application of the better of 
rule. As it relates to Unanticipated Events, the Exchange will inform 
all members if any such day will be excluded from its Tier Calculations 
through a system status message disseminated to all members. The 
Exchange notes that it is not proposing to amend the thresholds a 
member must achieve to become eligible for, or the dollar amount 
associated with, the tiered rebates or fees.
---------------------------------------------------------------------------

    \6\ See note 4 above. Since the proposed language will now apply 
to all current and future programs administered by the Exchange that 
are based on ADV and other applicable volume calculations, the 
current rule in Options 7, Section 3 will be replaced by the 
proposed language in Section 1(a) with the modifications described 
above, including language providing that the rule will apply to all 
Tier Calculations in its Pricing Schedule.
---------------------------------------------------------------------------

Rule Application
    Currently, the Exchange's rule for removing a day from its ADV 
calculations applies to specific ADV calculations of Total Affiliated 
Member ADV \7\ and Priority Customer Maker ADV.\8\ As applied, the 
Exchange can remove a day from tier calculations for the maker rebates 
\9\ and taker fees \10\ assessed to members.\11\ The Exchange now 
believes it is appropriate to expand this provision to cover all volume 
based calculations including ADV rather than limit it to specific 
enumerated programs. Applying this rule to all volume based 
calculations will benefit members by permitting the Exchange to exclude 
atypical low volume days from its volume calculations regardless of the 
specific pricing program impacted. As is the case today, the Exchange 
would only remove the day for members that would have a lower volume 
calculation with the day included. This change will standardize the 
Exchange's practice with Phlx, which currently applies its rule to 
cover all ADV and other volume calculations set forth in its pricing 
schedule rather than specified programs.\12\
---------------------------------------------------------------------------

    \7\ The Total Affiliated Member ADV category includes all volume 
in all symbols and order types, including both maker and taker 
volume and volume executed in the PIM, Facilitation, Solicitation, 
and QCC mechanisms. For purposes of determining a member's 
eligibility for the volume-based tiers in the Total Affiliated 
Member ADV category, the Exchange uses either numeric thresholds 
that measure a member's absolute volume or, as an alternative, a 
percentage-based calculation that considers a member's volume 
relative to total customer industry volume (i.e., the ``Customer 
Total Consolidated Volume''). For purposes of measuring Total 
Affiliated 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.
    \8\ The Priority Customer Maker ADV category includes all 
Priority Customer volume that adds liquidity in all symbols.
    \9\ The Exchange provides tiered maker rebates to Market Maker 
and Priority Customer orders in Penny Symbols and SPY, as well as in 
Non-Penny Symbols (excluding index options), all of which are based 
on Total Affiliated Member ADV and Priority Customer Maker ADV. See 
Option 7, Section 3.
    \10\ Members are charged tiered taker fees in Penny Symbols and 
SPY, as well as in Non-Penny Symbols (excluding index options), all 
of which are based on Total Affiliated Member ADV and Priority 
Customer Maker ADV. See Option 7, Section 3.
    \11\ All eligible volume from affiliated Members will be 
aggregated in determining applicable tiers, provided there is at 
least 75% common ownership between the Members as reflected on each 
Member's Form BD, Schedule A. The highest tier threshold attained 
applies retroactively in a given month to all eligible traded 
contracts and applies to all eligible market participants.
    \12\ See note 3 above.
---------------------------------------------------------------------------

Exchange Systems Disruptions
    The Exchange proposes to adopt two additional scenarios as 
``Unanticipated Events'' that the Exchange may determine to exclude 
from its Tier Calculations. First, the Exchange proposes to exclude 
days where the Exchange is inaccessible to members during the 30-minute 
period before the opening of trade (i.e., between 9:00 a.m. to 9:30 
a.m. Eastern Time) due to an Exchange system disruption, even if the 
Exchange does not instruct members to route away to other markets. As 
discussed above, the Exchange's current ability to remove days is 
limited to days where the market is not open for the entire trading 
day, and where the Exchange instructs members to route away to other 
markets. This allows the Exchange to exclude days, for example, where 
the Exchange honors a market-wide trading halt declared by another 
market, closes early for holiday observance, or instructs members to 
route away to other markets because of a systems issue in the morning, 
which ultimately does not carry over into the trading day. The Exchange 
notes, however, that it may not always instruct members to route away. 
For instance, the Exchange may be inaccessible to members in the 
morning due to a systems disruption but the Exchange resolves the issue 
shortly before 9:30 a.m. and as a result, the Exchange does not 
instruct members to route away. In such cases, the Exchange is not 
permitted to exclude the day from its ADV calculations. The Exchange 
generally experiences a high volume of member participation within the 
30-minute window leading up to the opening of trade from members who 
submit eligible interest be included in the Exchange's opening process. 
As a result, days where members are precluded from submitting eligible 
interest during this 30-minute time period due to an Exchange systems 
disruption, even if the issue is ultimately resolved by the Exchange 
before the market opens (and members therefore are not instructed to 
route away), are likely to have lower trading volume. Including such 
days in calculations of ADV will therefore make it more difficult for 
members to achieve particular pricing tiers for that month. 
Accordingly, excluding such days will diminish the likelihood of a cost 
increase occurring because a member is not able to reach a pricing tier 
on that date that it would reach on other trading days during the 
month. Phlx currently has identical language allowing it to remove such 
days from its volume based tiers.\13\
---------------------------------------------------------------------------

    \13\ See id. at paragraph 2(C).
---------------------------------------------------------------------------

    Second, the Exchange proposes to exclude days where there is an 
Exchange system disruption that lasts for more than 60 minutes during 
regular trading hours (i.e., 9:30 a.m. to 4:00 p.m. Eastern Time), even 
if such disruption would not be categorized as a complete outage of the 
Exchange's system. Such a disruption may occur where a certain options 
series traded on the Exchange is unavailable for trading due to an 
Exchange systems issue, or where the Exchange may be able to perform 
certain functions with respect to accepting and processing orders, but 
may have a failure to another significant process, such as routing to 
other market centers, that would lead members who rely on such 
processes to avoid using the Exchange until the Exchange's entire 
system was operational. The Exchange believes that certain system 
disruptions that are not complete system outages could preclude some 
members from submitting orders to the Exchange. The Exchange notes that 
this proposal is consistent with the rules of Phlx and other options 
exchanges.\14\
---------------------------------------------------------------------------

    \14\ See id. at paragraph 2(D). See also BATS [sic] BZX Options 
Exchange Fee Schedule (defining an ``Exchange System Disruption'' as 
any day that the exchange's system experiences a disruption that 
lasts for more than 60 minutes during regular trading hours); and 
NYSE Arca Options Fee Schedule (defining an ``Exchange System 
Disruption'' as a disruption affects an Exchange system that lasts 
for more than 60 minutes during regular trading hours).
---------------------------------------------------------------------------

    The Exchange believes that the two scenarios proposed above are 
reasonable and equitable because the intent of the current rule has 
always been to avoid penalizing members that might otherwise qualify 
for certain tiered pricing but that because of aberrant low volume days 
resulting, for instance, from Exchange systems disruptions, did not 
participate on the Exchange to the

[[Page 2641]]

extent they might have otherwise participated.
    In addition, to avoid penalizing members that step up and trade on 
a day with artificially low volume, the Exchange currently only removes 
days for members that would have a lower ADV calculation with the day 
included (i.e., the better of rule). The Exchange believes that 
applying the better of rule to the proposed system disruption-related 
scenarios would be similarly helpful as it would ensure that members 
that continue to execute a large volume of contracts on such days are 
not inadvertently disadvantaged when the Exchange removes a systems 
disruption-related day from its calculations of ADV. This is consistent 
with the treatment of such days on Phlx.\15\
---------------------------------------------------------------------------

    \15\ See note 3 above at paragraph 3.
---------------------------------------------------------------------------

Categories of Excluded Days
    Similar to Phlx, the Exchange seeks to restructure the existing 
rule by separating out the different scenarios between days that are 
known in paragraph (1) and days that are not in paragraph (2), and 
define the latter as Unanticipated Events.
    For planned days, the Exchange proposes to further distinguish 
between days that the Exchange announces in advance that it will not be 
open for trading in paragraph (1)(A) (e.g., Thanksgiving), and 
Scheduled Early Closes in paragraph (1)(B) (e.g., the trading day after 
Thanksgiving). The Exchange notes that it currently considers Scheduled 
Early Closes as a subset of days that the market is not open for the 
entire trading day. The Exchange believes it would be more clear to 
distinguish Scheduled Early Closes in paragraph (1) as a day that is 
planned for in advance, and separately consider days that are not open 
for the entire trading day as Unanticipated Events in paragraph (2)(A). 
As proposed, (2)(A) would continue to cover unplanned days where the 
Exchange declares a trading halt in all securities or honors a market-
wide trading halt declared by another market. The other scenarios that 
will be categorized as Unanticipated Events in paragraph (2) are the 
two systems-related disruptions proposed above, and days that the 
Exchange instructs members in writing to route their orders to other 
markets, which is an existing scenario covered under the current rule 
as described above.
Exclusion of Days by Tier Calculation
    The Exchange proposes to further amend the existing rule to align 
with the Phlx rule by specifying how the days in paragraphs (1) and (2) 
will be excluded from its Tier Calculations. As it relates to days 
where the Exchange announces in advance that it will not be open for 
trading, the Exchange notes that it will exclude those days from all 
options tier calculations set forth in its Pricing Schedule.\16\ This 
is also the case today since no trading activity occurs on those days, 
and the Exchange is only clarifying its current practice within the 
proposed rule text in paragraph (1)(A).
---------------------------------------------------------------------------

    \16\ See id. at paragraph (1)(A) for similar language on Phlx.
---------------------------------------------------------------------------

    As discussed above, the Exchange currently removes Scheduled Early 
Closes as provided in paragraph (1)(B), and the Unanticipated Events in 
paragraphs (2)(A) and (2)(B), from its calculations of ADV only for 
members that would have a lower ADV with the day included. The Exchange 
is not changing how it currently excludes these days from the ADV 
calculations. And as further discussed above, the Exchange is proposing 
to adopt the same principle-based approach for excluding the two 
Unanticipated Events related to Exchange system disruptions as provided 
in paragraphs (2)(C) and (2)(D). Accordingly, the proposed language in 
paragraph (3)(A) will clarify for the ADV calculation that the Exchange 
may exclude any Scheduled Early Close or Unanticipated Event, subject 
to the better of rule.\17\
---------------------------------------------------------------------------

    \17\ See id. at paragraph (3)(A) for similar language on Phlx.
---------------------------------------------------------------------------

    Similar to Phlx, the proposal also adds a ``catch-all'' provision 
in paragraph (3)(B) that would apply to other applicable volume based 
tier calculations that are set forth in its Pricing Schedule, but are 
not specified within paragraph (3)(A) (i.e., not an ADV 
calculation).\18\ This catch-all provision will provide the Exchange 
with flexibility to apply the better of rule going forward to all 
pricing programs administered by the Exchange that are based on volume 
calculations. The Exchange believes that adopting a similar principle-
based approach for its options volume calculations would ensure that 
days are removed from such calculations only if doing so would be 
beneficial for the member. Accordingly, the proposed language will not 
apply to straight volume accumulations, as is the case today, and the 
Exchange will continue to not exclude days from such calculations as 
members do not benefit when volume executed on an excluded day is 
removed from straight volume accumulations.
---------------------------------------------------------------------------

    \18\ See id. at paragraph (3)(C) for similar language on Phlx.
---------------------------------------------------------------------------

Clarifying Changes
    The Exchange proposes to add further details similar to Phlx's rule 
to bring greater transparency as to how the Exchange will apply the 
better of rule when removing days from its Tier Calculations. In 
particular, the Exchange proposes to make clear that it will only 
remove days pursuant to the better of rule by specifying in paragraphs 
(1)(B) and (2) that such days may be excluded from the Tier 
Calculations only pursuant to paragraph (3).\19\ Paragraph (3) will 
then provide that if a day is to be excluded as a result of paragraph 
(1)(B) or (2), the Exchange will be required to exclude the day from 
any member's monthly options volume tier calculations as detailed 
within paragraph (3).\20\ With the proposed changes, the Exchange seeks 
to clarify that it will exclude days from any member's Tier 
Calculations in a uniform manner to ensure that days are removed only 
in situations where the member benefits. The Exchange will look at each 
potential excluded day in a month and determine for every member their 
ADV or other applicable volume calculation based on their trading 
volume on that day. If any member would have a lower Tier Calculation 
with the particular day included, the Exchange will exclude that day 
for that member. This is how the Exchange applies the better of rule 
today for ADV calculations. As such, the proposed changes are intended 
to make clear that the Exchange will apply the better of rule in a 
uniform manner for all members, and that there is no arbitrary 
selection of ``winners'' or ``losers'' when the Exchange excludes days. 
In addition, the Exchange proposes to make two technical changes within 
the better of rule; first, to clarify that the rule applies in each 
case of the tier calculations specified in paragraph (3), and second, 
to use the defined term Tier Calculations instead of ADV to reflect the 
changes proposed herein.
---------------------------------------------------------------------------

    \19\ See id. at paragraphs (1)(B) and (2) for similar language 
on Phlx.
    \20\ See id. at paragraph (3) for similar language on Phlx.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\21\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\22\ 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

[[Page 2642]]

discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is reasonable 
and equitable as it provides a new framework for removing days from the 
Exchange's volume calculations that the Exchange believes is beneficial 
to members and consistent with similar provisions already in place on 
Phlx. The proposed rule change would permit the Exchange to remove a 
day from its pricing tiers in more circumstances, and ensures that the 
Exchange will only do so in circumstances where beneficial for the 
member because the member would have a lower volume calculation with 
the day included.
    By applying the rule to all volume based calculations rather than 
specified incentive programs based on Total Affiliated Member ADV and 
Priority Customer Maker ADV, the Exchange believes that members will be 
further protected if the Exchange experiences a systems or other issue 
that results in a day being excluded from the Exchange's volume 
calculations. Without this change, members would only have the day 
excluded for the specific ADV based pricing programs described above, 
and would not get the benefit for other un-enumerated programs.
    The Exchange believes it is reasonable and equitable to exclude a 
day from its volume based calculations when the Exchange's system 
experiences a disruption during the 30-minute period prior to the 
opening of trade that renders the Exchange inaccessible to members as 
this preserves the Exchange's intent behind adopting volume-based 
pricing. Without this change, members that are precluded from 
submitting eligible interest during the 30-minute window before the 
opening of trade may be negatively impacted, even if the Exchange 
resolves the issue before the market opens and as a result, does not 
instruct members to route away. The proposed change to exclude such 
days will diminish the likelihood of a cost increase occurring because 
a member is not able to reach a volume tier calculation on that date 
that it would reach on other trading days during the month.
    Similarly, excluding a day where the Exchange's system experiences 
a disruption that lasts for more than 60 minutes intra-day is 
reasonable and equitable because the proposal seeks to avoid penalizing 
members that might otherwise qualify for certain tiered pricing but 
that, because of an Exchange systems disruption, did not participate on 
the Exchange to the extent they might have otherwise participated. The 
Exchange believes that certain systems disruptions could preclude some 
members from sending order flow to the Exchange even if such issue is 
not actually a complete systems outage.
    In addition, the Exchange believes that it is reasonable and 
equitable to apply the better of rule to both systems disruption-
related scenarios. Without these changes, members that step up and 
trade significant volume on excluded trading days may be negatively 
impacted, resulting in an effective cost increase for those members. 
The proposal would align the Exchange's approach to how it applies this 
rule today for days where the market is not open for the entire trading 
day or where the Exchange instructs members to route away.
    Furthermore, the Exchange believes that categorizing the potential 
excluded days is reasonable and equitable because it will bring greater 
transparency to the application of its rule. Specifically, the Exchange 
is distinguishing between planned and unplanned days in paragraphs (1) 
and (2), defining the latter as Unanticipated Events, and stipulating 
how the Exchange will exclude such days pursuant to this rule. 
Categorizing days in this manner will clarify the application of its 
rule in light of the Exchange's proposal to expand the rule to adopt 
additional days that may be excluded from its tier calculations. 
Providing in paragraph (1)(A) that the Exchange will always exclude 
from its tier calculations days that it announces in advance it will 
not be open for trading will clarify current practice. Furthermore, the 
Exchange believes that the proposed changes to specify how days in 
paragraphs (1) and (2) may be excluded from its tier calculations will 
bring greater transparency by delineating the various circumstances in 
which the better of rule will apply. Providing in paragraph (3) that 
the Exchange may exclude any Scheduled Early Close or Unanticipated 
Event from the ADV and other Tier Calculations, subject to the better 
of rule, will make clear that the Exchange will take a consistent 
approach when excluding days for purposes of its volume based pricing 
tiers. In addition, having a catch-all in paragraph (3)(B) so that the 
better of rule applies to other options volume calculations than ADV to 
allow the Exchange to apply the rule going forward to all pricing 
programs based on volume calculations will further protect members. The 
Exchange notes that aberrant low volume days resulting from, for 
instance, an Unanticipated Event, impacts all volume-based 
calculations, and allowing the Exchange to exclude such days from any 
Tier Calculation if the member would have a lower Tier Calculation with 
the day included will further protect members from being inadvertently 
penalized.
    Furthermore, the proposed changes specifying that the days in 
paragraphs (1)(B) and (2) may be excluded only pursuant to paragraph 
(3), and requiring the Exchange to exclude such days pursuant to the 
specifications in paragraph (3) will likewise make clear that the 
Exchange will take a consistent approach with respect to excluding days 
from its volume calculations. As discussed above, these modifications 
will clarify that the Exchange will apply the better of rule in a 
uniform manner to all members, and that there is no arbitrary selection 
of ``winners'' or ``losers.'' The Exchange also believes that the two 
technical changes proposed in the better of rule to reflect the changes 
proposed herein will likewise bring greater clarity to its rule.
    Finally, the Exchange further believes that the proposed rule 
change is not unfairly discriminatory because it will apply equally to 
all members. While the Exchange currently has rules in place for 
removing a day from its pricing, the Exchange believes that the 
proposed changes will benefit all members by providing more 
circumstances to remove a day, and ensuring that such days are removed 
only in situations where the member benefits.

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. The proposed rule change is 
designed to protect members from the possibility of a cost increase by 
excluding days when overall member participation might be significantly 
lower than a typical trading day. The Exchange believes that the 
proposed modifications to its tier calculations are pro-competitive and 
will result in lower total costs to end users, a positive outcome of 
competitive markets. Furthermore, other options exchanges have adopted 
rules that are substantially similar to the Exchange's proposal.\23\
---------------------------------------------------------------------------

    \23\ See notes 3 and 14 above.
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive market in which 
market participants can readily direct their order flow to competing 
venues. In such an environment, the Exchange must continually review, 
and consider adjusting, its fees and rebates to remain competitive with 
other exchanges. For the reasons described above, the

[[Page 2643]]

Exchange believes that the proposed fee changes reflect this 
competitive environment.

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.\24\ 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.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-GEMX-2018-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-GEMX-2018-45. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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-GEMX-2018-45 and should be submitted on 
or before February 22, 2019.
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01381 Filed 2-6-19; 8:45 am]
 BILLING CODE 8011-01-P