83 FR 28699 - Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Increase Certain Route-Out Fees Set Forth in Section II.A of the Schedule of Fees

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 119 (June 20, 2018)

[Federal Register Volume 83, Number 119 (Wednesday, June 20, 2018)]
[Notices]
[Pages 28699-28701]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-13170]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83445; File No. SR-GEMX-2018-20]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Increase Certain 
Route-Out Fees Set Forth in Section II.A of the Schedule of Fees

June 14, 2018.
    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 June 1, 2018, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to increase certain route-out fees set forth 
in Section II.A of the Schedule of Fees.
    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 increase certain 
route-out fees set forth in Section II.A of the Schedule of Fees. 
Today, the Exchange charges Non-Priority Customers (i.e., Market 
Maker,\3\ Non-Nasdaq GEMX Market Maker,\4\ Firm Proprietary \5\/Broker-
Dealer,\6\ and Professional Customer \7\) route-out fees of $0.95 per 
contract for orders in Non-Penny Symbols that are routed to away 
exchanges in connection with the Options Order Protection and Locked/
Crossed Market Plan (the ``Plan''). The Exchange now proposes to 
increase this fee to $1.09 per contract for all Non-Priority Customer 
orders in Non-Penny Symbols that are routed to away

[[Page 28700]]

exchanges in connection with the Plan. The Exchange believes that the 
proposed increase will help offset the costs associated with routing 
orders through the Plan, such as paying the transaction fees for such 
executions at other exchanges.
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    \3\ The term ``Market Makers'' refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. See Rule 
100(a)(30).
    \4\ A ``Non-Nasdaq GEMX 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.
    \5\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \6\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \7\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that proposed increase in the Non-Priority 
Customer route-out fees from $0.95 to $1.09 per contract for orders in 
Non-Penny Symbols is reasonable because it is designed to help recoup 
costs associated with routing orders to away exchanges in connection 
with the Plan, such as paying the transaction fees for such executions 
at other exchanges. Furthermore, the Exchange notes that the proposed 
fees remain competitive with the fees of other options exchanges which, 
in addition to a fixed routing fee, assess the actual transaction 
fees.\10\
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    \10\ For example, CBOE C2 Exchange, Inc. (``C2'') charges $1.63 
per routed contract for non-public customer, non-C2 market-maker 
orders in non-penny classes. See C2 Fees Schedule, Section 1.A 
(Transaction Fees) and Section 2 (Linkage Routing).
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    The Exchange believes that proposed increase in the Non-Priority 
Customer route-out fees is an equitable allocation and is not unfairly 
discriminatory because the Exchange will apply the same fee to all 
similarly situated members. The Exchange believes it is equitable and 
not unfairly discriminatory to increase the route-out fees for all 
market participants other than Priority Customers \11\ because the 
Exchange seeks to encourage Priority Customer order flow and the 
liquidity that such order flow brings to the marketplace, which in turn 
benefits all market participants.
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    \11\ 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 Rule 
100(a)(37A).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In particular, the proposed 
increase to the route-out fees will apply equally to all Non-Priority 
Customer orders that are routed to away exchanges in connection with 
the Plan, and will help offset costs associated with routing orders via 
the Plan. Furthermore as noted above, the Exchange believes that its 
proposed fees remain competitive with another options exchange.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive, or rebate 
opportunities available at other venues to be more favorable. In such 
an environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and with alternative trading systems 
that have been exempted from compliance with the statutory standards 
applicable to exchanges. Because competitors are free to modify their 
own fees in response, and because market participants may readily 
adjust their order routing practices, the Exchange believes that the 
degree to which fee changes in this market may impose any burden on 
competition is extremely limited. In sum, 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 proposed changes will impair the ability of 
members or competing order execution venues to maintain their 
competitive standing in the financial markets.

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,\12\ and Rule 19b-4(f)(2) \13\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is: (i) Necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-GEMX-2018-20 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-2018-20. 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 (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-2018-20 and

[[Page 28701]]

should be submitted on or before July 11, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13170 Filed 6-19-18; 8:45 am]
BILLING CODE 8011-01-P