Document ID: SEC-2019-0170-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq MRX, LLC
Posted Date: 2019-02-21T05:00Z

[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5508-5511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02904]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85143; File No. SR-MRX-2019-02]

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

February 14, 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 January 31, 2019, Nasdaq MRX, LLC (``MRX'' 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.
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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 the Pricing Schedule at Options 7, 
Section 3, entitled ``Regular Order Fees and Rebates.''
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on February 1, 2019.
    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 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 Pricing 
Schedule at Options 7, Section 3, entitled ``Regular Order Fees and 
Rebates'' at Table 2 to (1) amend PIM Fees for Crossing Orders \3\ for 
both Penny and Non-Penny Symbols; (2) increase Non-Penny Fees for 
Reponses to Crossing Orders; (3) adopt a letter ``(c)'' within Options 
7, Section 1 for ease of reference to defined terms. The Exchange will 
describe each amendment below.
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    \3\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (``PIM'') or submitted as a Qualified Contingent Cross 
order. For purposes of this Pricing Schedule, orders executed in the 
Block Order Mechanism are also considered Crossing Orders.

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[[Page 5509]]

Fees for Crossing Orders
    Today, MRX assesses a Fee for Crossing Orders in Penny and Non-
Penny Symbols of $0.20 per contract for Market Maker,\4\ Non-Nasdaq MRX 
Market Maker,\5\ Firm Proprietary,\6\ Broker-Dealer,\7\ and 
Professional Customer \8\ orders, and $0.00 per contract for Priority 
Customer Orders.\9\ These fees apply to both originating and contra-
side orders for all Crossing Orders.
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    \4\ A ``Market Maker'' is a market maker as defined in Nasdaq 
MRX Rule 100(a)(30). Market Maker fees discussed in this section 
also apply to Market Maker orders sent to the Exchange by Electronic 
Access Members.
    \5\ A ``Non-Nasdaq MRX Market Maker'' is a market maker as 
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, 
as amended, registered in the same options class on another options 
exchange.
    \6\ A ``Firm Proprietary'' order is an order submitted by a 
Member for its own proprietary account.
    \7\ A ``Broker-Dealer'' order is an order submitted by a Member 
for a broker-dealer account that is not its own proprietary account.
    \8\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \9\ 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 Rule 
100(a)(37A).
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    MRX proposes to continue assessing the Fees for Crossing Orders in 
Table 2 for Penny and Non-Penny Symbols with respect to originating PIM 
Orders. MRX proposes to assess a Fee for Crossing Orders in all symbols 
for PIM orders of $0.05 per contract provided a market participant is 
on the contra-side of a PIM auction. This fee would apply to all market 
participants. This fee represents a reduced fee for Market Maker, Non-
Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer, and 
Professional Customer orders (from $0.20 to $0.05 per contract) and an 
increased fee for Priority Customers (from $0.00 to $0.05 per 
contract).\10\
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    \10\ MRX is not amending fees with respect the Facilitation 
Mechanism, Solicited Order Mechanism, or an order submitted as a 
Qualified Contingent Cross order or an order executed in the Block 
Order Mechanism.
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    Further, MRX proposes to pay a rebate to an originating Priority 
Customer PIM Order that executes with a response (an order or quote), 
other than the PIM contra-side order, of $0.40 per contract in Penny 
Symbols and $1.00 per contract in Non-Penny Symbols. The Exchange 
believes that this proposal will encourage greater participation in PIM 
auctions.
    The Exchange proposes to amend note 1 within the Pricing Schedule 
at Options 7, Section 3 to add ``-side'' after the term ``contra'' in 
the existing sentence. The Exchange also proposes to add the following 
text to that sentence, ``. . . except for PIM Orders. With respect to 
PIM Orders, the Fees for Crossing Orders apply to PIM originating 
orders, however all market participants on the contra-side of a PIM 
auction will be assessed a Fee for Crossing Orders of $0.05 per 
contract. An originating Priority Customer PIM Order that executes with 
any response (order or quote), other than the PIM contra-side order, 
will receive a rebate of $0.40 per contract in Penny Symbols and $1.00 
per contract in Non-Penny Symbols.''
Fees for Responses to Crossing Orders
    Today, MRX assesses a Fee for Responses to Crossing Orders of $0.50 
per contract in Penny Symbols to all market participants and $0.95 per 
contract in Non-Penny Symbols to all market participants.
    MRX proposes to increase the Fees for Responses to Crossing Orders 
in Non-Penny Symbols from $0.95 to $1.10 per contract for all market 
participants. No changes are proposed to Penny Symbols for Fees for 
Reponses to Crossing Orders. The Exchange proposes to utilize the 
increased rate to offer rebates to Priority Customers who submit PIM 
Orders as described above.\11\
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    \11\ MRX proposes herein to pay a rebate to an originating 
Priority Customer PIM Order that executes with any response, other 
than the PIM contra-side order, of $0.40 per contract in Penny 
Symbols and $1.00 per contract in Non-Penny Symbols.
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Options 7, Section 1
    The Exchange proposes to amend Options 7, Section 1 to add a letter 
``(c)'' before certain defined terms for ease of reference.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\13\ 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. The 
Exchange believes that the proposed changes will attract PIM order flow 
to MRX, which will create trading opportunities on MRX to the benefit 
of all Members.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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Fees for Crossing Orders
    The Exchange believes that its proposal to assess contra-side PIM 
Orders a reduced Fee for Crossing Orders in both Penny and Non-Penny 
Symbols of $0.05 per contract instead of $0.20 per contract to Market 
Maker, Non-Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer, 
and Professional Customer orders is reasonable because the Exchange 
proposes to encourage theses market participants to submit a greater 
amount of order flow to the MRX PIM auction. The Exchange believes that 
it is reasonable to assess Priority Customers an increased $0.05 per 
contract Fee for Crossing Orders \14\ for contra-side PIM Orders in 
Penny and Non-Penny Symbols because the Exchange is also offering 
Priority Customers an opportunity to receive a rebate of $0.40 per 
contract in Penny Symbols and $1.00 per contract in Non-Penny Symbols 
for any originating Priority Customer PIM Order that executes with any 
response, other than the PIM contra-side order. As is the case today, 
Priority Customers will not pay a Fee for Crossing Orders in Penny and 
Non-Penny Symbols with respect originating PIM Orders and non-PIM 
Crossing Order transactions.
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    \14\ Today, Priority Customers pay no Fee for Crossing Orders 
(originating or contra-side orders) with respect to PIM transactions 
in either Penny or Non-Penny Symbols.
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    The Exchange believes that its proposal to assess contra-side PIM 
Orders a lower Fee for Crossing Orders in both Penny and Non-Penny 
Symbols of $0.05 per contract instead of $0.20 per contract to Market 
Maker, Non-Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer, 
and Professional Customer orders is equitable and not unfairly 
discriminatory because the Exchange will uniformly charge all market 
participants, except Priority Customers, a lower contra-side Fee for 
Crossing PIM Orders in Penny and Non-Penny Symbols. While a Priority 
Customer's contra-side Fee for Crossing PIM Orders will increase from 
$0.00 to $0.05 per contract in both Penny and Non-Penny Symbols, the 
Priority Customer has an opportunity to receive a rebate of $0.40 per 
contract in Penny Symbols and $1.00 per contract in Non-Penny Symbols 
for any originating Priority Customer PIM Order that executes with any 
response, other than the PIM contra-side order. As is the case today, 
Priority Customers will not pay an originating Fee for PIM Orders. 
Further, the Exchange notes that Priority Customer interest brings 
valuable liquidity to the

[[Page 5510]]

market, which liquidity benefits other market participants. 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.
Fees for Responses to Crossing Orders
    The Exchange believes that its proposal to increase the Non-Penny 
Symbol Fees for Responses to Crossing Orders from $0.95 to $1.10 per 
contract for all market participants is reasonable because while these 
fees are increasing the Exchange believes that the fees remain 
competitive and will continue to attract order flow to the Exchange. 
Further, the Exchange proposes to utilize the increased rate to offer 
rebates to Priority Customers who submit PIM Orders as described 
herein.\15\ 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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    \15\ See note 9 above.
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    The Exchange believes that its proposal to increase the Non-Penny 
Symbol Fees for Responses to Crossing Orders from $0.95 to $1.10 per 
contract for all market participants is equitable and not unfairly 
discriminatory because all market participants will be uniformly 
assessed the increased fee in Non-Penny Symbols.
Options 7, Section 1
    The Exchange's proposal to amend Options 7, Section 1 to add a 
letter ``(c)'' before certain defined terms is reasonable, equitable 
and not unfairly discriminatory because this non-substantive amendment 
merely makes the section easier to reference.

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 Exchange's proposal does 
not impose a burden on inter-market competition because the proposed 
fee structure for Crossing Orders remains competitive with other 
options exchanges. MRX 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. 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.
Fees for Crossing Orders
    The Exchange believes that its proposal to assess contra-side PIM 
Orders a lower Fee for Crossing Orders in both Penny and Non-Penny 
Symbols of $0.05 per contract instead of $0.20 per contract to Market 
Maker, Non-Nasdaq MRX Market Maker, Firm Proprietary, Broker-Dealer, 
and Professional Customer orders does not impose a burden on intra-
market competition because the Exchange will uniformly pay all market 
participants, except Priority Customers, a lower contra-side Fee for 
Crossing PIM Orders in Penny and Non-Penny Symbols. While a Priority 
Customer's contra-side Fee for Crossing PIM Orders will increase from 
$0.00 to $0.05 per contract in Penny and Non-Penny Symbols, the 
Priority Customer has an opportunity to receive a rebate of $0.40 per 
contract in Penny Symbols and $1.00 per contract in Non-Penny Symbols 
for any originating Priority Customer PIM Order that executes with any 
response, other than the PIM contra-side order. As is the case today, 
Priority Customers will not pay an originating Fee for PIM Orders. 
Further, the Exchange notes that Priority Customer interest brings 
valuable liquidity to the market, which liquidity benefits other market 
participants. 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.
Fees for Responses to Crossing Orders
    The Exchange believes that its proposal to increase the Non-Penny 
Symbol Fees for Responses to Crossing Orders from $0.95 to $1.10 per 
contract for all market participants does not impose a burden on intra-
market competition because all market participants will be uniformly 
assessed the increased fee in Non-Penny Symbols.
Options 7, Section 1
    The Exchange's proposal to amend Options 7, Section 1 to add a 
letter ``(c)'' before certain defined terms does not impose an undue 
burden on intra-market competition because this non-substantive 
amendment merely makes the section easier to reference.

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\ 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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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2019-02 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-2019-02. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your

[[Page 5511]]

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-
2019-02 and should be submitted on or before March 14, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02904 Filed 2-20-19; 8:45 am]
BILLING CODE 8011-01-P