Document ID: SEC-2020-1872-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq MRX, LLC
Posted Date: 2020-11-20T05:00Z

[Federal Register Volume 85, Number 225 (Friday, November 20, 2020)]
[Notices]
[Pages 74473-74477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25617]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90434; File No. SR-MRX-2020-19]

Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To the Exchange's 
Pricing Schedule at Options 7 To Amend Taker Fees for Regular Orders

November 16, 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 November 2, 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.
---------------------------------------------------------------------------

    \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 Pricing Schedule at 
Options 7, as described further below.
    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 Exchange recently filed to permit certain affiliated market 
participants (i.e., Affiliated Entities) \3\ to aggregate volume and 
qualify for certain pricing incentives.\4\ The purpose of the proposed 
rule change is to amend the Exchange's Pricing Schedule to enhance 
participation in the Exchange's Affiliated Entities program in order to 
encourage additional order flow to the Exchange. Each change is 
described below.
---------------------------------------------------------------------------

    \3\ 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 
terminate after a one (1) year period, 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 Entity relationships must 
be renewed annually by each party sending an email to the Exchange. 
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. See Options 7, 
Section 1(c).
    \4\ See SR-MRX-2020-17 (not yet published).
---------------------------------------------------------------------------

Regular Taker Fees
    Today, as set forth in Options 7, Section 3, Table 1, the Exchange 
applies a two-tier taker fee structure based on Total Affiliated Member 
\5\ or Affiliated Entity ADV.\6\ In Penny Symbols, the Exchange 
currently charges all non-Priority Customer \7\ orders a taker fee of 
$0.50 per contract, regardless of the tier achieved. In Non-Penny 
Symbols, the Exchange currently charges all non-Priority Customers a 
taker fee of $0.90 per contract, regardless of tier achieved. Priority 
Customer \8\ orders do not get charged taker fees for executions in 
either Penny or Non-Penny Symbols today.
---------------------------------------------------------------------------

    \5\ 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. See Options 7, Section 1(c).
    \6\ 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. See Options 7, Section 3, Table 3.
    \7\ Non-Priority Customer include Market Makers, Non-Nasdaq MRX 
Market Makers (FarMMs), Firm Proprietary/Broker-Dealers, and 
Professional Customers.
    \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).
---------------------------------------------------------------------------

    In addition, as set forth in note 2 within Options 7, Section 3, 
Table 1, Market Maker \9\ orders that take liquidity are also currently 
eligible for ADV-based fee discounts in both Penny and Non-Penny 
Symbols when trading against Priority Customer orders entered by an 
Affiliated Member or Affiliated Entity.

[[Page 74474]]

Today, the discounted fee is $0.05 per contract if the Member has a 
Total Affiliated Member or Affiliated Entity Priority Customer ADV \10\ 
of 5,000 contracts or more, or $0.00 per contract if the Member has a 
Total Affiliated Member or Affiliated Entity Priority Customer ADV of 
50,000 contracts or more. These fee discounts apply instead of the 
Market Maker taker fees of $0.50 per contract in Penny Symbols and 
$0.90 per contract in Non-Penny Symbols.
---------------------------------------------------------------------------

    \9\ The term Market Makers refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively.
    \10\ 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. See Options 7, Section 3, Table 3.
---------------------------------------------------------------------------

    The Exchange now proposes a number of changes to the current taker 
fee structure described above. The Exchange first proposes to increase 
the Non-Penny taker fees for all non-Priority Customer orders from 
$0.90 to $1.10 per contract, regardless of tier. Priority Customer 
orders will continue to be charged no fee under this proposal.
    The Exchange also proposes to amend the note 2 incentive that 
currently offers discounted taker fees to qualifying Market Maker 
orders in all symbols by separating the incentive structure between 
Penny and Non-Penny Symbols. For Penny Symbols, the Exchange proposes 
to replace the current language in note 2 with the following:
    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.
    For Non-Penny Symbols, the Exchange proposes to introduce separate 
discounted Market Maker taker fees in new note 3, which would replace 
the note 2 incentive currently offered for such orders. The new 
incentive will be structured similarly to the amended note 2 incentive, 
except with respect to the amount of the discounted taker fees. 
Otherwise, the proposed tier structure and related qualifications will 
be identical to the ones proposed above for the amended note 2 
incentive. As proposed, new note 3 will be added to Options 7, Section 
3, Table 1 as follows:
    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.
    Taken together, the proposed note 2 and note 3 incentives differ 
from the current note 2 incentive in a few key ways. First, the current 
incentive structure will be expanded from two to three tiers with the 
introduction of a top tier that will contain a more stringent volume 
requirement than the lower tiers in order for the Member to qualify for 
free executions. The Exchange will also reduce the amount of the 
discount for some tiers,\11\ while raising the volume requirement in 
the new top tier to qualify for free executions. Second, the base tier 
qualifications will be modified to remove the volume requirement 
stipulating that the Member have a Total Affiliated Member or 
Affiliated Entity Priority Customer ADV of 5,000 contracts or more. As 
amended, the base tiers would offer the $0.20 (Penny Symbols) and $0.90 
(Non-Penny Symbols) discounted Market Maker taker fees when trading 
with Priority Customer orders that are entered by an Affiliated Member 
or Affiliated Entity, without requiring them to meet a requisite volume 
threshold. As noted above, this would further the Exchange's goal to 
encourage Members to become Affiliated Entities, provided they are not 
already Affiliated Members, thereby enhancing participation in the 
Exchange's newly established Affiliated Entity program to bring 
increased order flow.
---------------------------------------------------------------------------

    \11\ As proposed, the discounted Market Maker taker fees are 
$0.20 and $0.10 in the lower tiers for Penny Symbols, and $0.90 and 
$0.50 in the lower tiers for Non-Penny Symbols. Today, the 
discounted Market Maker taker fee is $0.05 in the lower tier across 
all symbols.
---------------------------------------------------------------------------

    Third, the cumulative volume thresholds in current note 2 would be 
replaced by total industry percentage thresholds, specifically 
thresholds that are based on a percentage of Customer Total 
Consolidated Volume.\12\ The Exchange notes that the proposed 
percentage threshold of 0.20% Customer Total Consolidated Volume is 
comparable in terms of requisite volume to the existing ADV threshold 
of 50,000 contracts. The proposed percentage threshold for the new top 
tier requires additional volume to meet the proposed criteria of 0.75% 
Customer Total Consolidated Volume.\13\ The Exchange is proposing to 
replace the current cumulative volume thresholds with total industry 
volume percentages to align with increasing Member activity on MRX over 
time. The Exchange notes that total industry percentage thresholds are 
established concepts within its Pricing Schedule today.\14\
---------------------------------------------------------------------------

    \12\ 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. See Options 7, Section 3, 
Table 3.
    \13\ Today, 0.75% of Customer Total Consolidated Volume on the 
Exchange is approximately 165,000 contracts per day.
    \14\ Specifically, the qualifying tier thresholds for the 
Exchange's maker/taker pricing are currently based on Customer Total 
Consolidated Volume percentages. See Options 7, Section 3, Table 3.
---------------------------------------------------------------------------

    Lastly, the Exchange proposes to relocate the defined term 
``Customer Total Consolidated Volume'' from Options 7, Section 3, Table 
3 to Options 7, Section 1(c). Because this term is used throughout the 
Pricing Schedule, the Exchange believes that its relocation to the 
general definition section in Section 1(c) is appropriate.
Flash Order Definition
    The Exchange proposes a non-substantive, clarifying change to the 
definition of a Flash Order in its Pricing Schedule. A Flash Order is 
currently defined as an order that is exposed at the National Best Bid 
or Offer by the Exchange to all Members for execution, as provided 
under Supplementary Material .02 to Options 5, Section 2.\15\ Today, 
the initiation of a Flash Order is considered as ``taker'' (i.e., 
removing liquidity from the book), while responses to a Flash Order is 
considered as ``maker'' (i.e., adding liquidity to the book). 
Accordingly, the current definition also indicates that for all Flash 
Orders, the Exchange will charge the applicable taker fee and for 
responses that trade against a Flash

[[Page 74475]]

Order, the Exchange will provide the applicable maker rebate. The 
Exchange is not proposing to change its current billing practices with 
respect to Flash Orders; however, because the Exchange does not 
currently offer maker rebates and instead charges maker fees, the 
Exchange proposes to clarify that for responses that trade against a 
Flash Order, it will charge the applicable maker fee. As such, the 
Exchange is aligning the rule text to current billing practices.
---------------------------------------------------------------------------

    \15\ See Options 7, Section 1(c).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\16\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange's proposed changes to its Pricing Schedule 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'. . . .'' \18\
---------------------------------------------------------------------------

    \18\ 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)).
---------------------------------------------------------------------------

    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.'' \19\
---------------------------------------------------------------------------

    \19\ 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.
Regular Taker Fees
    The Exchange believes that the proposed changes to its regular 
taker fee structure are reasonable for several reasons. While the 
Exchange is proposing to increase the Non-Penny Symbol taker fees for 
all non-Priority Customer orders from $0.90 to $1.10 in Tier 1 and Tier 
2, the Exchange believes that its fees remain competitive and will 
continue to encourage market participants, and, in particular, Market 
Makers to execute more volume on MRX. Although the base taker fees for 
non-Priority Customers are increasing under this proposal, the Exchange 
believes that the fee increase is balanced by the potential for the new 
discounted taker fee structure proposed for Market Makers to encourage 
additional liquidity and opportunities for trading, to the benefit of 
all market participants. As discussed further below, the Exchange is 
proposing taker fee incentives that specifically target Market Maker 
activity on the Exchange. An increase in Market Maker activity may 
result in tighter spreads and more trading, improving the quality of 
the MRX market and increasing its attractiveness to existing and 
prospective participants. The Exchange notes that the proposed taker 
fees remain in line with similar fees charged by other options 
exchanges.\20\
---------------------------------------------------------------------------

    \20\ For instance, the Exchange's affiliate, Nasdaq Options 
Market (``NOM'') charges NOM Market Makers, Non-NOM Market Makers, 
Firms, and Broker-Dealers a $1.10 per contract Fee to Remove 
Liquidity in Non-Penny Symbols. See NOM Pricing Schedule at Options 
7, Section 2(1). In addition, MIAX PEARL charges all MIAX PEARL 
Market Makers, Non-Priority Customers, Firms, BDs, and Non-MIAX 
PEARL Market Makers a base taker fee of $1.10 per contract for Non-
Penny Classes. See MIAX PEARL Fee Schedule at Section (1)(a).
---------------------------------------------------------------------------

    The Exchange believes that the new discounted Market Maker taker 
fee structure that it is proposing in notes 2 and note 3 of Options 7, 
Section 3, Table 1 is reasonable. As noted above, the proposed changes 
would further the Exchange's goal of enhancing participation in the 
Exchange's newly established Affiliated Entity program, which is 
designed to further incentivize Members to aggregate volume and bring 
more order flow to MRX to qualify for fee incentives. For the reasons 
described in the following paragraphs, the Exchange believes that the 
proposed discounted taker fee incentives in proposed notes 2 and 3 will 
be beneficial for all market participants by encouraging an active and 
liquid market on MRX.
    As discussed above, the note 2 and note 3 incentives would continue 
to offer Market Makers the opportunity to receive discounted taker fees 
when trading with Priority Customer orders entered by an Affiliated 
Member or Affiliated Entity, with a few key differences. The Exchange 
believes that expanding the current two tier incentive structure to 
three tiers will continue to reward Market Makers for executing 
increasingly larger Priority Customer volume on MRX to obtain the 
proposed discounted fees. Permitting Members to aggregate volume for 
purposes of qualifying the Market Maker under an Affiliated Member 
relationship or an Appointed Market Maker \21\ under an Affiliated 
Entity relationship will also encourage the counterparty order flow 
providers that comprise the Affiliated Member or Affiliated Entity 
relationship to bring additional Priority Customer order flow to MRX. 
While the Exchange is reducing the amount of the discount for the lower 
tiers,\22\ the Exchange believes this is reasonable given that it will 
be significantly easier to qualify for the discounted taker fee in the 
base incentive tier under this proposal.\23\
---------------------------------------------------------------------------

    \21\ An ``Appointed Market Maker'' is a Market Maker who has 
been appointed by an OFP for purposes of qualifying as an Affiliated 
Entity. See Options 7, Section 1(c).
    \22\ See supra note 11.
    \23\ As proposed, the Exchange will no longer require Market 
Makers to meet a requisite volume threshold in order to qualify for 
the discounted taker fees of $0.20 (Penny Symbols) and $0.90 (Non-
Penny Symbols) in the base incentive tier. See proposed notes 2 and 
3 in Options 7, Section 3, Table 1.
---------------------------------------------------------------------------

    The Exchange is also changing the volume qualifications for the 
discounted taker fee incentives by removing (for the base tiers only) 
or replacing the current cumulative volume thresholds with

[[Page 74476]]

total industry percentage thresholds for the Affiliated Member or 
Affiliated Entity. The Exchange believes that removing the volume 
requirements for the base tier so that Market Makers would be able to 
more easily obtain the benefit of the discounted taker fee if they 
trade with any Priority Customer orders entered by an Affiliated Member 
or Affiliated Entity would further incentivize Market Makers to 
aggregate and execute large volumes of Priority Customer orders on the 
Exchange to qualify for the discounted Market Maker taker fees.
    The Exchange also believes that replacing the current cumulative 
volume thresholds with total industry percentage thresholds is 
reasonable in order to align with increasing Member activity on MRX 
over time. The Exchange is proposing to base the discounted Market 
Maker taker fee volume requirements 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 qualifications within notes 2 and 3 to be 
calibrated to current market volumes rather than requiring a static 
amount of volume regardless of market conditions. While the amount of 
volume required by the proposed qualifications in notes 2 and 3 may 
change in any given month due to increases or decreases in industry 
volume, the Exchange believes that the proposed threshold requirements 
are set at appropriate levels. The proposed thresholds of 0.20% 
Customer Total Consolidated Volume, which is comparable to the existing 
ADV requirement of 50,000 contracts, and 0.75% Customer Total 
Consolidated Volume, which is new and requires additional volume,\24\ 
are both intended to continue to reward Market Makers for executing 
more volume on MRX. To the extent Market Maker activity is increased by 
this proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange, and thus would promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest. As noted 
above, total industry percentage thresholds are also established 
concepts within the Exchange's Pricing Schedule.\25\
---------------------------------------------------------------------------

    \24\ See supra note 13.
    \25\ See supra note 14.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to amend the regular taker 
fee structure in the manner described above is equitable and not 
unfairly discriminatory. As it relates to the increase in Non-Penny 
Symbol taker fees, the Exchange will apply this change to all non-
Priority Customers while Priority Customers will continue to not be 
charged taker fees under this proposal. The Exchange continues to 
believe that it is equitable and not unfairly discriminatory to provide 
free executions to Priority Customer orders as the Exchange is seeking 
to attract this order flow. The Exchange believes that attracting more 
volume from Priority Customers benefits all market participants by 
providing more trading opportunities on MRX.
    Furthermore, the Exchange's proposal to provide the discounted 
Market Maker taker fees in note 2 and note 3 is equitable and not 
unfairly discriminatory. As discussed above, the proposed threshold of 
0.20% Customer Total Consolidated Volume is comparable to the existing 
ADV requirement of 50,000 contracts, so the Exchange anticipates 
minimal impact to Market Makers as a result of replacing the current 
cumulative volume threshold with the new total industry percentage 
threshold. While the proposed threshold of 0.75% Customer Total 
Consolidated Volume is new and requires additional volume,\26\ the 
Exchange likewise anticipates minimal impact with this proposed change 
because no Market Makers meet the current ADV threshold for free 
executions, and thus would not fall out of the proposed highest tier as 
a result of this change. The Exchange also believes that it is 
equitable and not unfairly discriminatory to continue to offer the 
discounted taker fee incentives only to Market Makers. Market Makers 
have special obligations to the market (such as quoting obligations) 
that other market participants do not. As such, these incentives are 
designed to increase Market Maker participation and reward Market 
Makers for the unique role they play in ensuring a robust market. 
Furthermore, providing the discounted taker fees specifically to Market 
Makers that trade with Priority Customer orders entered by Affiliated 
Members or Affiliated Entities will encourage firms to bring more of 
this order flow to the Exchange. Priority Customer liquidity benefits 
all market participants by providing more trading opportunities and 
attracting other market participants, thus facilitating tighter spreads 
and increased order flow to the benefit of all market participants. In 
addition, all Members that are not Affiliated Members may enter into an 
Affiliated Entity relationship. Thus, rewarding Members that use these 
programs to aggregate volume to bring a more order flow is beneficial 
to all market participants, who are free to interact with such order 
flow.
---------------------------------------------------------------------------

    \26\ See supra note 13.
---------------------------------------------------------------------------

    Lastly, the Exchange believes that the proposed change to relocate 
the definition of Customer Total Consolidated Volume into Options 7, 
Section 1(c) is reasonable, equitable and not unfairly discriminatory. 
Because this term is used throughout the Pricing Schedule, the Exchange 
believes that its relocation to the general definition section in 
Section 1(c) is appropriate and brings greater transparency to the 
Pricing Schedule.
Flash Order Definition
    The Exchange believes that the proposed change to clarify in the 
definition of a Flash Order that it will charge the applicable maker 
fee for responses that trade against the Flash Order (instead of 
providing that it will provide the applicable maker rebate) is 
reasonable, equitable, and not unfairly discriminatory. As discussed 
above, the Exchange is not changing its current billing practices with 
respect to Flash Orders, and Members are being uniformly charged the 
applicable maker fee for their executed responses against Flash Orders 
today. Accordingly, the proposed change aligns the rule text to current 
practice.

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. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other options 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. 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

[[Page 74477]]

proposed changes will impair the ability of members or competing order 
execution venues to maintain their competitive standing in the 
financial markets.
    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. The proposed changes to the regular taker fee 
structure are ultimately designed to incentivize Members to bring 
additional order flow to the Exchange and create a more active and 
liquid market on MRX. The proposed discounted taker fees will continue 
to reward Market Makers for executing increasingly larger Priority 
Customer volume entered by Affiliated Members or Affiliated Entities on 
MRX to obtain the proposed incentives. As discussed above, permitting 
Members to aggregate volume for purposes of qualifying the Market Maker 
under an Affiliated Member relationship or an Appointed Market Maker 
under an Affiliated Entity relationship will also encourage the 
counterparty order flow providers that comprise the Affiliated Member 
or Affiliated Entity relationship to bring additional Priority Customer 
order flow to MRX. All Members will benefit from any increase in market 
activity that the proposal effectuates through increased trading 
opportunities and price discovery.

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,\27\ and Rule 19b-4(f)(2) \28\ 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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \28\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MRX-2020-19 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-2020-19. 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-MRX-2020-19 and should be submitted on 
or before December 11, 2020.
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25617 Filed 11-19-20; 8:45 am]
BILLING CODE 8011-01-P