Document ID: SEC-2023-1486-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq GEMX, LLC
Posted Date: 2023-12-20T05:00Z

[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88195-88197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27915]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99172; File No. SR-GEMX-2023-20]

Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the Fees 
for Options on the Nasdaq 100 Index in the Exchange's Pricing Schedule 
at Options 7

December 14, 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 December 8, 2023, Nasdaq GEMX, LLC (``GEMX'' 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.
---------------------------------------------------------------------------

    \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 transaction fees for Nasdaq 100 
Index options in the Exchange's Pricing Schedule at Options 7, Section 
3. While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on December 1, 2023.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/gemx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

[[Page 88196]]

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 transaction 
fees for NDX \3\ in Options 7, Section 3. The Exchange initially filed 
the proposed pricing changes on November 30, 2023 (SR-GEMX-2023-18). On 
December 8, 2023, the Exchange withdrew that filing and submitted this 
filing.
---------------------------------------------------------------------------

    \3\ NDX represents A.M. settled options on the full value of the 
Nasdaq 100 Index traded under the symbol NDX.
---------------------------------------------------------------------------

    Today, the Exchange assesses a transaction fee of $0.75 per 
contract for all Non-Priority Customer \4\ orders in NDX. Priority 
Customers \5\ currently receive free executions in NDX. The Exchange 
now proposes to begin assessing Priority Customer NDX orders a $0.25 
per contract transaction fee. The Exchange notes that the proposed fee 
amount is in line with customer transaction fees assessed on other 
index products.\6\
---------------------------------------------------------------------------

    \4\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq 
GEMX Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and 
Professional Customers. As discussed later in this filing, the 
Exchange will codify this definition in Options 7, Section 1.
    \5\ 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 GEMX Options 1, 
Section 1(a)(36).
    \6\ For example, Cboe Options (``Cboe'') currently assesses a 
$0.25 per contract customer transaction fee for MXEA and MXEF 
options, $0.35 per contract for OEX and XEO options, and $0.36 per 
contract (if premium <$1.00) or $0.45 per contract (if premium >= 
$1.00) for SPX and SPESG options. See Cboe Fees Schedule.
---------------------------------------------------------------------------

    The Exchange also proposes a change in Options 7, Section 1(c) to 
add ``Non-Priority Customers'' as a defined term. The Exchange notes 
that this term is already used in its Pricing Schedule,\7\ and aligns 
with how it is currently used in the Pricing Schedule as well as with 
the definition in the pricing schedule of its affiliate, Nasdaq ISE, 
LLC (``ISE'').\8\ The Exchange will also capitalize the current 
reference to ``non-Priority Customer'' in Options 7, Section 3, 
footnote 11 to align with the proposed change to add Non-Priority 
Customer as a defined term. The Exchange also proposes to alphabetize 
the definitions in Options 7, Section 1(c) for better readability.
---------------------------------------------------------------------------

    \7\ See e.g., Options 7, Section 3, footnotes 4 and 11.
    \8\ See ISE Options 7, Section 1(c).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to begin assessing Priority 
Customer orders in NDX a $0.25 per contract fee because the proposed 
pricing reflects the proprietary nature of this product. Similar to 
other proprietary products, the Exchange seeks to recoup the 
operational costs of listing such products.\11\ Also, pricing by symbol 
is a common practice on many U.S. options exchanges as a means to 
incentivize order flow to be sent to an exchange for execution in 
particular products. Other options exchanges price by symbol.\12\ 
Further, the Exchange notes that market participants are offered 
different ways to gain exposure to the Nasdaq 100 Index, whether 
through the Exchange's proprietary products like NDX options, or 
separately through multi-listed options overlying Invesco QQQ Trust 
(``QQQ'').\13\ Offering such products provides market participants with 
a variety of choices in selecting the product they desire to utilize in 
order to gain exposure to the Nasdaq 100 Index. When exchanges are able 
to recoup costs associated with offering proprietary products, it 
incentivizes growth and competition for the innovation of additional 
products.
---------------------------------------------------------------------------

    \11\ By way of example, in analyzing an obvious error, the 
Exchange would have additional data points available in establishing 
a theoretical price for a multiply listed option as compared to a 
proprietary product, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \12\ See supra note 6.
    \13\ QQQ is an exchange-traded fund based on the same Nasdaq 100 
Index as NDX.
---------------------------------------------------------------------------

    While the transaction fee for Priority Customer NDX orders is 
increasing under this proposal, the Exchange believes that the proposal 
is reasonable and would continue to incentivize market participants to 
transaction in Priority Customer NDX orders because Priority Customers 
would continue to be assessed a lower fee for NDX than Non-Priority 
Customers (i.e., $0.25 versus $0.75 per contract). As a result, the 
Exchange believes that the proposed pricing is structured in a way that 
continues to encourage market participants, especially Priority 
Customers, to transact in NDX on GEMX. As noted above, the proposed fee 
amount is in line with customer transaction fees assessed on other 
index products at another options exchange.\14\
---------------------------------------------------------------------------

    \14\ See supra note 6.
---------------------------------------------------------------------------

    The Exchange's proposal to assess a $0.25 per contract transaction 
fee to Priority Customer NDX orders is equitable and not unfairly 
discriminatory it will apply uniformly to all similarly situated market 
participants. The Exchange believes it is equitable and not unfairly 
discriminatory to continue charging Priority Customers a lower 
transaction fee because Priority Customer orders bring valuable 
liquidity to the market by providing more trading opportunities, which, 
in turn, 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 to the benefit 
of all market participants.
    Lastly, the Exchange believes that the proposed changes in Options 
7, Section 1(c) to add ``Non-Priority Customers'' as a defined term, to 
capitalize the reference to ``non-Priority Customer'' in footnote 11 of 
Options 7, Section 3, and to alphabetize the definitions are 
reasonable, equitable and not unfairly discriminatory. As noted above, 
the term ``Non-Priority Customers'' is already used in the Exchange's 
Pricing Schedule and codifying this definition in the manner it is used 
today will bring greater clarity to the Exchange's rules to the benefit 
of all market participants. The Exchange likewise believes that 
alphabetizing the definitions in Options 7, Section 1(c) for better 
readability will add more clarity to 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 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. As noted above, market participants are offered

[[Page 88197]]

an opportunity to transact in NDX or separately execute options 
overlying QQQ. Offering these products provides market participants 
with a variety of choices in selecting the product they desire to use 
to gain exposure to the Nasdaq 100 Index. Furthermore, the proposed fee 
amount is in line with customer transaction fees assessed on other 
index products at another options exchange.\15\
---------------------------------------------------------------------------

    \15\ See supra note 6.
---------------------------------------------------------------------------

    Further, the Exchange does not believe that its proposal to begin 
assessing a $0.25 per contract transaction fee for Priority Customer 
NDX orders will impose an undue burden on intra-market competition 
because Priority Customers will continue to be assessed lower fees than 
Non-Priority Customers for NDX orders. As discussed above, Priority 
Customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants.
    Finally, the Exchange believes that the proposed changes in Options 
7 to add Non-Priority Customers as a defined term, to capitalize the 
reference to ``non-Priority Customer,'' and to alphabetize the Pricing 
Schedule definitions do not impose an undue burden on competition 
because these are non-competitive changes that are intended to bring 
clarity to the Exchange's Pricing Schedule.

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 \16\ and Rule 19b-4(f)(2) \17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-GEMX-2023-20 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-2023-20. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-GEMX-2023-20 and should be 
submitted on or before January 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27915 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P