Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Review of Professional Orders

[Federal Register Volume 91, Number 73 (Thursday, April 16, 2026)]
[Notices]
[Pages 20528-20530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-07350]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-105219; File No. SR-GEMX-2026-14]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Review of 
Professional Orders

April 13, 2026.
    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 March 31, 2026, 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, 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 quarterly review of Professional 
Orders.\3\
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    \3\ The term ``Professional Order'' means an order that is for 
the account of a person or entity that is not a Priority Customer. 
See Options 1, Section 1(a)(38). The manner in which a Professional 
Order is calculated is specified in Options 1, Section 1(a)(28)(a).
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    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/gemx/rulefilings, 
and at the principal office of the Exchange.

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 proposes to amend the quarterly review of Professional 
Orders. Today, orders for any Priority Customer \4\ that average more 
than 390 orders per day during any month of a calendar quarter must be 
represented as Professional orders for the next calendar quarter.\5\ In 
order to properly represent orders entered on the Exchange, Members \6\ 
are required currently to review their Priority Customers' activity 
and, on at least a quarterly basis, designate orders as Priority 
Customer orders or Professional orders.\7\ Specifically, Members are 
required to conduct a quarterly review and make any appropriate changes 
to the way in which they are representing orders within five days after 
the end of each calendar quarter.\8\ While Members are required to 
designate accounts on a quarterly basis, if during a quarter the 
Exchange identifies a customer for which orders are being represented 
as Priority Customer Orders but that has averaged more than 390 orders 
per day during a month, the Exchange must notify the Member and the 
Member is required to change the manner in which it is representing the 
customer's orders within five days.\9\
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    \4\ The term ``Priority Customer'' means a person or entity that 
(i) is not a broker or dealer in securities, and (ii) does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Options 1, 
Section 1(a)(36).
    \5\ The requirement to review Priority Customers' activity on at 
least a quarterly basis to determine whether orders that are not for 
the account of a broker-dealer should be represented as Priority 
Customer Orders or Professional Orders is not in the current rule 
text, however it was described in the adopting proposal. See 
Securities Exchange Act Release No. 78790 (September 8, 2016), 81 FR 
63245 (September 14, 2016) (SR-ISEGemini-2016-08) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend 
Exchange Rule 100(a)(37C) (Definitions) To Add Specificity to the 
Definition of a Professional) (``SR-ISEGemini-2016-08''). The 
instant proposal seeks to codify the timing for review of Priority 
Customers' activity.
    \6\ The term ``Member'' means an organization that has been 
approved to exercise trading rights associated with Exchange Rights. 
See General 1, Section 1(a)(14).
    \7\ See 81 FR 63245 at 63245.
    \8\ See id.
    \9\ See id.
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Proposal
    At this time, the Exchange proposes to shorten the quarterly review 
and designation to a monthly review. The Exchange proposes to state at 
Options 1, Section 1(a)(38)(b) that orders for any customer that had an 
average of more than 390 orders per day during any calendar month must 
be represented as Professional orders for the next calendar month.
    As noted, currently, each Member is required to monitor Priority 
Customer orders to determine if the Priority Customer has averaged more 
than 390 orders per day during a month. Determining whether a Priority 
Customer has executed more than 390 orders per day during a month 
requires computing a daily average. As such, Members should be 
performing the workflow necessary to designate orders on a daily basis. 
Therefore, the proposal does not amend the current workflow, rather, 
the proposal amends the timeframe to change the manner in which the 
customer's order is being represented from five days after the end of 
each calendar quarter to five days after the end of each calendar 
month.
    The Exchange does not believe that this amendment is a significant 
departure from the current rule, nor does it impose any burden on any 
Member because each broker-dealer is required currently to perform the 
necessary calculation daily to arrive at the requisite average.
    Further, in addition to the calculation, broker-dealers are subject 
to know-your-customer and suitability requirements under FINRA Rules 
2090 (Know Your Customer) and 2111 (Suitability) and would need to 
consider whether a customer meets the Professional designation for 
purposes of determining best execution and making appropriate 
recommendations. The Exchange notes that the trading behavior of a 
Priority Customer can be distinguished from that of a Professional 
which is the purpose of the separate designations. Finally, some 
Members currently designate a Priority Customer that has averaged more 
than 390 orders per day during a month as a Professional on a more 
expedited basis, not waiting until five days after the quarter.

[[Page 20529]]

    The Exchange believes that a calendar month is a sufficient time 
period to determine whether the activity of a customer meets the 
criteria for a Professional order. The Exchange believes that the 
shortened time period will ensure that the spirit of the designation of 
Professional order is met in that Members will make any appropriate 
changes to the way in which they are representing orders in a 30-day 
timeframe as opposed to a 90-day timeframe, thereby ensuring the 
designation is applied in a more expeditious manner.
    The Exchange continues to believe that identifying Professional 
orders based upon the average number of orders entered in qualified 
accounts is an appropriate and objective approach to reasonably 
distinguish such persons and entities from retail investors or market 
participants.
Technical Amendment
    The Exchange proposes to reserve Options 3B, Options 3C and Options 
4D. Other Nasdaq affiliated exchanges have proposed rules in those 
corresponding sections. The reserved sections are intended to harmonize 
the structure of the Exchange's rules to those of other Nasdaq 
affiliated exchanges. The Exchange proposes that this amendment be 
operative 30 days from the date of filing.
Implementation
    The Exchange proposes implementing this rule change on July 1, 
2026, except for the technical amendments which should become operative 
30 days after the date of the filing. The Exchange will issue an 
Options Trader Alert to provide notice to Members of the proposed 
change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange's proposal to shorten the quarterly look-back to a 
monthly look-back is consistent with the Act because it will ensure 
that the spirit of the designation of Professional order continues to 
be met, only on a more expedited basis--removing a potential delay of 
two months before affecting a change in the designation. The Exchange 
believes that this amendment will remove impediments to and perfect the 
mechanism of a free and open market and a national market system by 
promoting the consistent application of its rules and shortening the 
timeframe to change the designation for all Members while continuing to 
provide a sufficient time period to determine whether the activity of a 
customer meets the criteria for a Professional order. Further, the 
Exchange believes that the shortened time period will continue to 
promote consistency in the treatment of orders as Professional orders 
while also preventing members with high volume from receiving benefits 
reserved for Priority Customer orders.
    As noted, currently, each Member is required to monitor Priority 
Customer orders to determine if the Priority Customer has averaged more 
than 390 orders per day during a month. Determining whether a Priority 
Customer has executed more than 390 orders per day during a month 
requires computing a daily average. As such, Members should be 
performing the workflow necessary to designate orders on a daily basis. 
Therefore, the proposal does not amend the current workflow, rather, 
the proposal amends the timeframe to change the manner in which the 
customer's order is being represented from five days after the end of 
each calendar quarter to five days after the end of each calendar 
month.
    The Exchange does not believe that this amendment is a significant 
departure from the current rule, nor does it impose any burden on any 
Member because each broker-dealer is required currently to perform the 
necessary calculation daily to arrive at the requisite average. 
Further, in addition to the calculation, broker-dealers are subject to 
know-your-customer and suitability requirements under FINRA Rules 2090 
(Know Your Customer) and 2111 (Suitability) and would need to consider 
whether a customer meets the Professional designation for purposes of 
determining best execution and making appropriate recommendations. 
Finally, some Members currently designate a Priority Customer that has 
averaged more than 390 orders per day during a month as a Professional 
on a more expedited basis, not waiting until five days after the 
quarter.
    The Exchange notes that the trading behavior of a Priority Customer 
can be distinguished from that of a Professional which is the purpose 
of the separate designations. The Exchange continues to believe that 
identifying Professional orders based upon the average number of orders 
entered in qualified accounts is an appropriately objective approach to 
reasonably distinguish such persons and entities from retail investors 
or market participants. Priority is one of the marketplace advantages 
provided to Priority Customer orders on the Exchange. Priority Customer 
orders are given execution priority over non-Customer orders and 
quotations of market makers at the same price. Another marketplace 
advantage afforded to Priority Customer orders on the Exchange is that 
members are generally not assessed transaction fees or are assessed 
lower fees for the execution of Priority Customer orders. The purpose 
of these marketplace advantages is to attract retail order flow to the 
Exchange by leveling the playing field for retail investors over market 
Professionals. This proposal will continue to provide Priority Customer 
accounts with marketplace advantages and distinguish those accounts 
non-Professional retail investors from the Professionals accounts. The 
Exchange notes that some non-broker-dealer individuals and entities 
have access to information and technology that enables them to 
Professionally trade listed options in the same manner as a broker or 
dealer in securities.
Technical Amendment
    Reserving Options 3B, Options 3C and Options 4D are non-substantive 
amendments.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    Specifically, the Exchange does not believe that the proposed rule 
change will impose any burden on intra-market competition because, 
today, each Member is required to monitor Priority Customer orders to 
determine if the Priority Customer has averaged more than 390 orders 
per day during a month. Determining whether a Priority Customer has 
executed more than 390 orders per day during a month requires computing 
a daily average. As such, Members should be performing the workflow 
necessary to designate orders on a daily basis. Therefore, the proposal 
does not amend the current workflow, rather, the proposal amends the 
timeframe to change the manner in which the customer's order is being 
represented from five days after the end

[[Page 20530]]

of each calendar quarter to five days after the end of each calendar 
month.
    The Exchange does not believe that this amendment is a significant 
departure from the current rule, nor does it impose any burden on any 
Member because each broker-dealer is required currently to perform the 
necessary calculation daily to arrive at the requisite average. 
Further, in addition to the calculation, broker-dealers are subject to 
know-your-customer and suitability requirements under FINRA Rules 2090 
(Know Your Customer) and 2111 (Suitability) and would need to consider 
whether a customer meets the Professional designation for purposes of 
determining best execution and making appropriate recommendations. 
Finally, some Members currently designate a Priority Customer that has 
averaged more than 390 orders per day during a month as a Professional 
on a more expedited basis, not waiting until five days after the 
quarter.
    The Exchange notes that the trading behavior of a Priority Customer 
can be distinguished from that of a Professional which is the purpose 
of the separate designations.
    Further, the designation of Professional orders would not result in 
any different treatment of such orders for purposes of compliance with 
the Exchange's Rules. Priority Customers have been granted certain 
priority over other non-broker-dealer individuals and entities that 
have access to information and technology that enables them to 
Professionally trade listed options in the same manner as a broker or 
dealer in securities. Further, the Priority Customer designation allows 
the Exchange to attract order flow or create more competitive markets.
    Also, the Exchange does not believe that the proposed rule change 
will impose any burden on inter-market competition because other 
exchanges are expected to adopt similar rules.

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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.

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 rule-comments@sec.gov. Please include 
file number SR-GEMX-2026-14 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-2026-14. 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 filing 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-2026-14 and should be submitted on 
or before May 7, 2026.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-07350 Filed 4-15-26; 8:45 am]
BILLING CODE 8011-01-P