Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend MRX's Pricing Schedule at Options 7 To Assess Membership, Port and Market Data Fees

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on May 2, 2022, Nasdaq MRX, LLC (“MRX” 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend MRX's Pricing Schedule at Options 7 to assess membership, port and market data fees.

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

MRX proposes to amend its Pricing Schedule at Options 7 to assess membership, port and market data fees, which are not assessed today, and which have not been assessed since MRX's inception in 2016. The proposed changes are designed to update fees for MRX's data and services to reflect their current value—rather than their value when it was a new exchange six years ago—based on MRX's ability to deliver value to its customers through technology, liquidity and functionality. Newly-opened exchanges often charge no fees for certain services such as membership, ports and market data in order to attract order flow to an exchange, and later amend their fees to reflect the true value of those services. Allowing newly-opened exchanges time to build and sustain market share before charging non-transactional fees encourages market entry and promotes competition. The proposed changes fall into three categories, discussed in detail below: Membership fees (Options 7, Section 5; Other Options Fees and Rebates); port fees (Options 7, Section 6; Ports and Other Services); and market data fees (Options 7, Section 7 Market Data).

This Proposal reflects MRX's assessment that it has gained sufficient market share to compete effectively against the other 15 options exchanges without waiving fees for membership, ports or market data. These types of fees are assessed by options exchanges that compete with MRX in the sale of exchange services—indeed, MRX is the only options exchange (out of the 16 current options exchanges) not assessing membership, port and market data fees today. New exchanges commonly waive connectivity, data and membership fees to attract market participants, facilitating their entry into the market and, once there is sufficient depth and breadth of liquidity, “graduate” to compete against established exchanges and charge fees that reflect the value of their services. If MRX is incorrect in this assessment, that error will be reflected in MRX's ability to compete with other options exchanges.

Options 7, Section 5

As noted above, MRX Members are not assessed fees for membership today. Under the proposed fee change, MRX Members will be required to pay a monthly Access Fee, which entitles MRX Members to trade on the Exchange based on their membership type. Specifically, MRX proposes to assess Electronic Access Members an Access Fee of $200 per month, per membership. The Exchange proposes to assess Market Makers Access Fees depending on whether they are a Primary Market Maker (“PMM”) or a Competitive Market Maker (“CMM”). A PMM would be assessed an Access Fee of $200 per month, per membership. A CMM would be assessed an Access Fee of $100 per month, per membership. The proposed fees are identical to access fees on Nasdaq GEMX, LLC (“GEMX”).

In order to receive market making appointments to quote in any options class, CMMs will also be assessed a CMM Trading Right Fee identical to GEMX. CMM trading rights entitle a CMM to enter quotes in options symbols that comprise a certain percentage of industry volume. On a quarterly basis, the Exchange assigns points to each options class equal to its percentage of overall industry volume (not including exclusively traded index options), rounded down to the nearest one hundredth of a percentage with a maximum of 15 points. A new listing is assigned a point value of zero for the remainder of the quarter in which it was listed. CMMs may seek appointments to options classes that total 20 points for the first CMM Right it holds, and 10 points for the second and each subsequent CMM Right it holds. In order to encourage CMMs to quote on the Exchange, MRX launched CMM trading rights without any fees, allowing CMMs to freely quote in all options classes.

The Exchange is now proposing to adopt a monthly CMM Trading Rights Fee. Under the proposed fee structure, CMMs will be assessed a Trading Rights Fee of $850 per month for the first trading right, which will entitle the CMM to quote in 20 percent of industry volume. Each additional CMM Right will cost $500 per month, and will entitle the CMM to quote an additional 10 percent of volume. Similar to GEMX's trading rights fee,¹³ a new CMM would pay $850 for the first trading right and all CMMs would thereafter pay $500 for each additional trading right. The Exchange is proposing this pricing model because each subsequent CMM Right costs less than the first trading right. All CMMs have the opportunity to purchase additional CMM Rights beyond the initial trading right in order to quote in additional options series. The Exchange notes that it is not proposing trading right fees for

PMMs, as the Exchange wishes to encourage Members to act as PMMs, which will benefit the market through, for example, more robust quoting requirements. PMMs have additional obligations on MRX as compared to CMMs. The Exchange is proposing only to charge the $200 access fee to EAMs, and no trading rights fee, as the technical, regulatory, and administrative services associated with an EAM's use of the Exchange are not as comprehensive as those associated with Market Makers' use.

Options 7, Section 6

The Exchange proposes to amend fees for the following ports within Options 7, Section 6: (1) FIX, (2) SQF; (3) SQF Purge; (4) OTTO; (5) CTI; and (6) FIX DROP. Currently, no fees are being assessed for these ports. The Exchange proposes to assess a FIX Port Fee and OTTO Port Fee of $650 per port, per month, per account number. The Exchange proposes to assess an SQF Port Fee and SQF Purge Port Fee of $1,250 per port, per month. The Exchange proposes to assess a CTI Port Fee and a FIX Drop Port Fee of $650 per port, per month.

The OTTO Port, CTI Port, FIX Port, FIX Drop Port and all Disaster Recovery Ports are available to all EAMs, and will be subject to a monthly cap of $7,500.

The SQF Port and the SQF Purge Port will be subject to a monthly cap of $17,500. The SQF Port and SQF Purge Port are available to Market Makers.

The Exchange is not amending the TradeInfo MRX Interface or the Nasdaq MRX Depth of Market, Nasdaq MRX Order Feed, Nasdaq MRX Top Quote Feed, Nasdaq MRX Trades Feed or Nasdaq MRX Spread Feed Ports, all of these aforementioned ports will continue to be assessed no fees. Additionally, as is the case today, the Disaster Recovery Ports for TradeInfo and the Nasdaq MRX Depth of Market, Nasdaq MRX Order Feed, Nasdaq MRX Top Quote Feed, Nasdaq MRX Trades Feed or Nasdaq MRX Spread Feed Ports will not be assessed a fee.

Finally, the Exchange proposes to amend the Disaster Recovery Port Fee from $0 to $50 per port, per month, per account for FIX, SQF, SQF Purge and OTTO Ports and from $0 to $50 per port, per month for CTI, and FIX DROP Ports. Disaster Recovery ports provide connectivity to the Exchange's disaster recovery data center, to be utilized in the event the Exchange should failover during a trading day. The Exchange proposes to assess the aforementioned Disaster Recovery Port Fees to encourage Members to be efficient when purchasing Disaster Recovery ports. Similar to all other ports, Disaster Recovery Ports need to be maintained by the Exchange. The proposed port fees are similar to fees assessed by GEMX.

In order to submit orders into MRX, only one order protocol is required, either FIX or OTTO. A quoting protocol, such as SQF, is only required to the extent an MRX Member has been appointed as a Market Maker in an options series pursuant to Options 2, Section 1. Similarly, only one quoting protocol, or SQF Port, is necessary to quote on MRX. Depending on a Member's business model, one protocol may be better suited for a Member as compared to another protocol when determining which order entry protocol to select. Members may elect to utilize both order entry protocols, depending on how they organize their business. Only one protocol is necessary to submit orders into MRX; however, Members may choose to purchase a greater number of order entry ports, depending on that Member's business model.

The Exchange notes that FIX, and OTTO Ports, as well TradeInfo, are available to all Members and may be utilized to cancel orders. Further, FIX DROP, the Clearing Trade Interface, and TradeInfo are available to all Members and may be utilized to obtain order information. These different protocols are not all necessary to conduct business on MRX; a Member may choose among protocols based on their business workflow.

Options 7, Section 7

The Exchange proposes to amend fees for the following market data feeds within Options 7, Section 7: (1) Nasdaq MRX Depth of Market Data; (2) Nasdaq MRX Order Feed; (3) Nasdaq MRX Top Quote Feed; (4) Nasdaq MRX Trades Feed; and (5) Nasdaq MRX Spread Feed. Currently, no fees are being assessed for these feeds.

The Exchange also proposes to assess an Internal Distributor Fee of $1,500 per month for the Nasdaq MRX Depth of Market Feed, Order Feed, and Top Quote Feed. The Exchange proposes to assess an Internal Distributor Fee of $750 per month for the Trades Feed. Finally, the Exchange proposes to assess an Internal Distributor Fee of $1,000 per month for the Spread Feed. If a Member subscribes to both the Trades Feed and the Spread Feed, both Internal Distributor Fees would be assessed.

The Exchange proposes to assess an External Distributor Fee of $2,000 per month for the Nasdaq MRX Depth of Market Feed, Order Feed, and Top Quote Feed, an External Distributor Fee of $1,000 per month for the Trades Feed, and an External Distributor Fee of $1,500 per month for the Spread Feed.

MRX does not currently assess subscriber fees, but proposes to begin assessing Professional and Non-Professional subscriber fees. The Exchange proposes to assess a Professional Subscriber of $25 per month, and a Non-Professional Subscriber of $1 per month. These subscriber fees (both Professional and Non-Professional) cover the usage of all five MRX data products identified above and would not be assessed separately for each data product.

MRX also proposes a Non-Display Enterprise License of $7,500 per month. This license would lower costs for internal professional subscribers and lower administrative costs overall by permitting the distribution of all MRX proprietary direct data feed products to an unlimited number of internal non-display Subscribers without incurring additional fees for each internal Subscriber, or requiring the customer to count internal subscribers.

The Non-Display Enterprise License is in addition to any other associated distributor fees for MRX proprietary direct data feed products.

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act, in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act, 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 proposed changes to the pricing schedule are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for order flow, which constrains its pricing determinations. The fact that the market for order flow is competitive has long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated, “[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'. . . .”

The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention to determine 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.”

Congress directed the Commission to “rely on `competition, whenever possible, in meeting its regulatory responsibilities for overseeing the SROs and the national market system.' ” As a result, the Commission has historically relied on competitive forces to determine whether a fee proposal is equitable, fair, reasonable, and not unreasonably or unfairly discriminatory. “If competitive forces are operative, the self-interest of the exchanges themselves will work powerfully to constrain unreasonable or unfair behavior.” Accordingly, “the existence of significant competition provides a substantial basis for finding that the terms of an exchange's fee proposal are equitable, fair, reasonable, and not unreasonably or unfairly discriminatory.” In its 2019 guidance on fee proposals, Commission staff indicated that they would look at factors beyond the competitive environment, such as cost, only if a “proposal lacks persuasive evidence that the proposed fee is constrained by significant competitive forces.”

History of MRX Operations

Over the years, MRX has amended its transactional pricing to remain competitive and attract order flow to the Exchange.

In June 2019, MRX commenced offering complex orders. With the addition of complex order functionality, MRX offered Members certain order types, an opening process, auction capabilities and other trading functionality that was nearly identical to functionality available on ISE. By way of comparison, ISE, unlike MRX, assessed membership fees in 2019 while offering the same suite of functionality as MRX, with a limited exception. Additionally, by way of

comparison, ISE assessed fees for ports in 2019 while offering the same suite of functionality as MRX, with a limited exception. Finally, in 2019, unlike MRX, ISE assessed fees for its market data, while offering the same functionality suite as MRX, with a limited exception.

Membership, Ports and Market Data Are Subject to Significant Substitution-Based Competitive Forces

An Exchange can show that a product is “subject to significant substitution-based competitive forces” by introducing evidence that customers can substitute the product for products offered by other exchanges.

NYSE National was able to prove exactly this when it sought approval for the “NYSE National Integrated Feed” in 2020. NYSE National at the time of its filing was in a similar position to MRX today—the exchange had an approximately 1.9% market share of executed volume of equity trades. The Commission approved the proposal to establish fees for NYSE National based on a finding that the exchange “was subject to significant substitution-based competitive forces.” Citing NetCoalition I, the Commission stated that “whether a market is competitive notwithstanding potential alternatives depends on factors such as the number of buyers who consider other products interchangeable and at what prices.” Noting that “many market participants . . . do not subscribe to . . . the NYSE National Integrated Feed, even when the feed is offered without charge,” the Commission concluded that “NYSE National's consistently low percentage of market share, the relatively small number of subscribers to the NYSE National Integrated Feed, and the sizeable portion of subscribers that terminated their subscriptions following the proposal of the fees,” demonstrated that the exchange “was subject to significant substitution-based competitive forces” in setting fees such that the proposed rule change was consistent with the Act.

MRX today is essentially in the same position as NYSE National in 2020. MRX has a consistently low percentage of market share, starting at approximately 0.2 percent when it opened as an Exchange and ending in approximately 1.8 percent today. It has a small number of firms that are Members, subscribe to ports, or purchase market data relative to its affiliated options exchanges. Two firms that currently subscribe to MRX market data have terminated all of their subscriptions, and one additional firm that is currently a Member and purchases port services has told the Exchange that it will initiate a review of all of the services it purchases from MRX based on the all-in cost of trading on MRX. Based on prior experience, MRX may see additional cancellations of membership, ports and market data after May 2, 2022.

Chart 1 below shows the January 2022 market share for multiply-listed options by exchange. Of the 16 operating options exchanges, none currently has more than a 13.1% market share, and MRX has the smallest market share at 1.8%. Customers widely distribute their transactions across exchanges according to their business needs and the ability of each exchange to meet those needs through technology, liquidity and functionality. Average market share for the 16 options exchanges is 6.26 percent, with the median at 5.8, and a range between 1.8 and 13.1 percent.

Market share is the percentage of volume on a particular exchange relative to the total volume across all exchanges, and indicates the amount of order flow directed to that exchange. High levels of market share enhance the value of trading, membership, ports and market data.

Chart 2 below compares the number of firms purchasing FIX and SQF ports, memberships, and market data from MRX to the number of firms purchasing such services from the four MRX-affiliated options exchanges, GEMX, ISE, The Nasdaq Stock Market LLC (“NOM”) and Nasdaq PHLX, LLC (“Phlx”).

Chart 2 shows that fewer firms purchased MRX ports in March 2022 than the ports of its options exchange affiliates. As described in detail below, only one order protocol is required to submit orders to MRX, either FIX or OTTO. Quoting protocols are only required to the extent an MRX Member has been appointed as a Market Maker in an options series pursuant to Options 2, Section 1, and only one quoting protocol (SQF) is necessary to quote on MRX. Members may choose a greater number of order entry ports, however, depending on that Member's particular business model. With respect to the submission of orders, Members may also choose not to purchase any port at all from the Exchange, and instead rely on the port of a third party to submit an order. The Exchange assigns the Member a badge and/or mnemonic to submit quotes and/or orders to the Exchange on a particular port. Use of this badge or mnemonic by a Member would allow a Member to use a third-party port to trade on the Exchange.

The experience of MRX's affiliates shows that the number of ports that members choose to purchase varies widely. For example, a review of the Phlx exchange in April 2022 shows that, among its members that purchase ports, approximately 26 percent purchased 1 SQF or FIX port, another 26 percent purchased between 2 and 5 ports, 21 percent purchased between 6 and 10 ports, and 28 percent purchased more than 11 ports. This means that any member has the option of reducing its purchase of port services without purchasing a substitute product by, for example, reconfiguring its systems to change the number of ports from 16 to 14.

By way of comparison, the number of ports that MRX Members purchased in April 2022 also varies widely. For example, approximately 23 percent purchased 1 SQF, FIX or OTTO port, another 43 percent purchased between 2 and 5 ports, 13 percent purchased between 6 and 10 ports, and 20 percent purchased more than 11 ports. MRX Members, similar to Phlx members, have the option of reducing their port purchases without purchasing a substitute product.

Chart 2 also shows that MRX has the smallest number of Members relative to its GEMX, ISE, NOM and Phlx affiliates, with approximately 40 members. This demonstrates that customers can and will choose where to become members, need not become members of all exchanges, and do not need to become Members of MRX and instead may utilize a third party.

With respect to market data, Chart 2 shows that approximately 34 firms subscribe to at least one market data product from MRX in the first quarter of 2022. This is the second lowest number of firms purchasing market data from the Nasdaq-affiliated options exchanges.

As explained above, Nasdaq proposes to introduce fees for five market data feeds: (i) Nasdaq MRX Depth of Market Data (aggregate quotes and orders at the top five price levels on MRX, and a consolidated view of tradable prices beyond the BBO); (ii) the Nasdaq MRX Order Feed (new orders resting on the book); (iii) Nasdaq MRX Top Quote Feed (best bid and offer position, with aggregated size based on displayable order and quote interest in the System; (iv) Nasdaq MRX Trades Feed (last trade information along with opening price, daily trading volume, high and low prices for the day); and (5) the Nasdaq MRX Spread Feed (orders for all Complex Orders, data aggregated at the top five price levels (BBO) on both the bid and offer side of the market and last trades information).

The MRX Top Quote Feed and the MRX Trades Feed provide “top-of-book” information. Such information is typically of interest to a broader audience than Members trading on exchanges, including retail investors, media, portfolio managers, competing exchanges and others. For this broader audience, top-of-book data from one exchange is, in general, readily substitutable with the top-of-book information from another exchange, and therefore the Exchange may lose customers if fees for top-of-book data are set too high.

The other three market data feeds, the Depth of Market Data feed, the Order Feed, and the Spread Feed are generally of more interest to Members trading on the Exchange relative to other market participants but, as noted above, MRX has the smallest market share at 1.8%, and any Member can choose to trade on another exchange if fees for these other three feeds exceed their value.

All of these statistics must be viewed in the context of a field with relatively low barriers to entry. MRX, like many new entrants to the field, offered membership, ports and market data for free to establish itself and gain market share. As new entrants enter the field, MRX can also expect competition from these new entrants. Those new entrants, like MRX, are likely to set membership, port, market data, or other fees to zero, increasing marketplace competition.

In summary, MRX membership, port and market data fees are subject to significant substitution-based competitive forces due to its consistently low percentage of market share, the relatively small number of purchasers for each product, and the purchasers that either cancelled or are reviewing their subscriptions. Implementation of the proposed fees is therefore consistent with the Act.

Fees for Membership, Ports and Market Data

Each of the proposed membership, port and data fees described below are in line with those of other markets. Setting a fee above competitors is likely to drive away customers, so the most efficient price-setting strategy is to set prices at the same level as other firms.

Options 7, Section 5—Membership

The Exchange's proposal to adopt membership fees is reasonable, equitable and not unfairly discriminatory. As a self-regulatory organization, MRX's membership department reviews applicants to ensure that each application complies with the rules specified within MRX General 3 as well as other requirements for membership. Applicants must meet the Exchange's qualification criteria prior to approval. The membership review includes, but is not limited to, the registration and qualification of associated persons, financial health, the validity of the required clearing relationship, and the history of disciplinary matters. Approved Members would be required to comply with MRX's By-Laws and Rules and would be subject to regulation by MRX. The proposed membership fees are identical to membership fees on GEMX, and are lower than similar fees assessed on other options markets.

The Exchange believes that there are many factors that may cause a market participant to decide to become a member of a particular exchange. Among various factors, the Exchange believes market participants consider: (i) An exchange's available liquidity in options series; (ii) trading functionality offered on a particular market; (iii) product offerings; (iv) customer service on an exchange; and (v) transactional pricing. The Exchange believes that the decision to become a member of an exchange, particularly as a registered market maker, is a complex one that is not solely based on non-transactional costs assessed by an exchange. Market participants weigh the tradeoff between where they choose to deploy liquidity versus where trading opportunities exist. Of course, the cost of membership, ports and market data may factor into a decision to become a member of a certain exchange, but the Exchange believes it is by no means the only factor when comparing exchanges.

Market Makers

Market makers play an important role on options exchanges as they provide liquidity. In options markets, registered market makers are assigned options series and are required to quote in those options series for a specified time period during the day. Typically, a lead or primary market maker will be required to quote for a longer period of time during the day as compared to other market makers registered on an exchange. Additionally, market makers are typically required to quote within a certain width on options markets. Greater liquidity on options markets benefits all market participants by providing more trading opportunities and attracting greater participation by market makers. An increase in the activity of market makers in turn facilitates tighter spreads. Market participants are attracted to options markets that have ample liquidity and tighter spreads in options series.

Trading Functionality

An exchange's trading functionality attracts market participants who may elect, for example, to submit an order into a price improving auction, enter a complex order, or utilize a particular order type. Different options exchanges offer different trading functionality to their members. For example, with respect to priority and allocation of an order book, some options exchanges have price/time allocation, some have a size pro-rata allocation, while other exchanges offer both allocation models. The allocation methodology on a particular options exchange's order book may attract certain market participants. Also, the manner in which some options markets structure their solicitation auction, or opening process, may be attractive to certain market participants. Finally, some exchanges have trading floors which may accommodate trading for certain market participants or trading firms.

Product Offerings

Introducing new and innovative products to the marketplace designed to meet customer demands may attract market participants to a particular options venue. New products in the options industry may allow market participants greater trading and hedging opportunities, as well as new avenues to manage risks. The listing of new options products enhances competition among market participants by providing investors with additional investment vehicles, as well as competitive alternatives, to existing investment products. An exchange's proprietary product offering may attract order flow to a particular exchange to trade a particular options product.

Transaction Pricing

The pricing available on a particular exchange may impact a market participant's decision to submit order flow to a particular options venue. The options industry is competitive. 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.

With respect to the CMM Trading Rights Fee, the proposed fees compare favorably with those of other options exchanges. For example, a market maker on MIAX assesses Market Makers a $3,000 one-time fee and then a tiered monthly fee from $7,000 for up to 10 classes to $22,000 for over 100 classes. By comparison, under the proposed fee structure, a CMM can be granted access on the Exchange for as little as $950 per month ( i.e., a $100 access fee and an $850 trading right), and could quote in all options classes on the Exchange by paying the access fee and obtaining nine CMM trading rights for a total of $4,950 per month. The Exchange notes that its tiered model for CMM trading rights is consistent with the pricing practices of other exchanges, such as NYSE Arca, which charges $6,000 per month for the first market maker trading permit, as mentioned above, down to $1,000 per month for the fifth and additional trading permits, with various tiers in-between. Like other options exchanges, the Exchange is proposing a tiered pricing model because it may encourage CMM firms to purchase additional trading rights and quote more issues because subsequent trading rights are priced lower than the initial trading right.

The Exchange does not believe that it is unfairly discriminatory to assess different fees for PMMs, CMMs, and EAMs. For PMMs on MRX, the fees required to access the Exchange are substantially lower than those of competing exchanges. For example, a PMM could quote on the Exchange for only $200 ( i.e., the access fee), compared with the minimum $6,000 per month trading permit fee charged by NYSE Arca. The Exchange notes that it is not proposing trading right fees for PMMs, as the Exchange wishes to encourage Members to act as PMMs, which will benefit the market through, for example, more robust quoting requirements. Similarly, the Exchange is proposing only to charge the $200 access fee to EAMs as the technical, regulatory, and administrative services associated with an EAM's use of the Exchange are not as comprehensive as those associated with Market Makers. The CMM Trading Right Fee is identical to GEMX.

Membership fees are charged by nearly all exchanges, and all established exchanges with sufficient order flow. In 2022, MEMX LLC (“MEMX”) established a monthly membership fee of $200. MEMX reasoned in that rule change that there is value in becoming a Member of the Exchange. MEMX stated that it believed that its proposed membership fee “is not unfairly discriminatory because no broker-dealer is required to become a member of the Exchange.” Moreover, “neither the trade-through requirements under Regulation NMS nor broker-dealers' best execution obligations require a broker-dealer to become a member of every exchange.” In this respect, MEMX is correct; a monthly membership fee is reasonable, equitably allocated and not unfairly discriminatory. Market participants may choose to become a member of one or more options exchanges based on the market participant's business model. A very small number of market participants choose to become a member of all sixteen options exchanges. It is not a requirement for market participants to become members of all options exchanges, in fact, certain market participants conduct an options business as a member of only one options market. Most firms that actively trade on options markets are not currently members of MRX and do not purchase port services at MRX. Using options markets that Nasdaq operates as points of comparison, less than a third of the firms that are members of at least one of the options markets that Nasdaq operates are also members of MRX (approximately 29%). The Exchange notes that no firm that is a member of MRX only. Few, if any, firms have become members or purchased port services at MRX, notwithstanding the fact that both MRX membership and ports are currently free, because MRX currently has less liquidity than other options markets. As explained above, MRX has the smallest market share of the 16 options exchanges, representing only approximately 1.8% of the market, and, for certain market participants, the current levels of liquidity may be insufficient to justify the costs associated with becoming a member and connecting to the exchange, notwithstanding the fact that both are currently free.

The decision to become a member of an exchange, particularly for registered market makers, is complex, and not solely based on the non-transactional costs assessed by an exchange. As noted herein, specific factors include, but are not limited to: (i) An exchange's available liquidity in options series; (ii) trading functionality offered on a particular market; (iii) product offerings; (iv) customer service on an exchange; and (v) transactional pricing. Becoming a member of the exchange does not “lock” a potential member into a market or diminish the overall competition for exchange services. The decision to become a member of an exchange is made at the beginning of the relationship, and is no less subject to competition than trading fees or market data.

In lieu of becoming a member at each options exchange, a market participant may join one exchange and elect to have their orders routed in the event that a better price is available on an away market. Nothing in the Order Protection Rule requires a firm to become a Member at MRX. If MRX is not at the NBBO, MRX will route an order to any away market that is at the NBBO to prevent a trade-through and also ensure that the order was executed at a superior price.

In lieu of joining an exchange, a third-party may be utilized to execute an order on an exchange. For example, a third-party broker-dealer Member of MRX may be utilized by a retail investor to submit orders into an Exchange. An institutional investor may utilize a broker-dealer, a service bureau, or request sponsored access through a member of an exchange in order to submit a trade directly to an options exchange. A market participant may either pay the costs associated with becoming a member of an exchange or, in the alternative, a market participant may elect to pay commissions to a broker-dealer, pay fees to a service bureau to submit trades, or pay a member to sponsor the market participant in order to submit trades directly to an exchange. Market participants may elect any of the above models and weigh the varying costs when determining how to submit trades to an exchange. Depending on the number of orders to be submitted, technology, ability to control submission of orders, and projected revenues, a market participant may determine one model is more cost efficient as compared to the alternatives.

Options 7, Section 6—Ports

The Exchange's proposal to amend port fees is reasonable, equitable and not unfairly discriminatory. The proposed port fees are similar to the fees assessed by GEMX, and lower than the fees assessed by ISE. The proposed fees reflect the ongoing services provided to maintain and support the ports. In order to submit orders into MRX, only one order protocol is required, either FIX or OTTO. Quoting protocols are only required to the extent an MRX Member has been appointed as a Market Maker in an options series pursuant to Options 2, Section 1. Similarly, only one quoting protocol (SQF) is necessary to quote on MRX. Depending on a Member's business model, one protocol may be better suited for a particular Member relative to another. Members may elect to utilize both order entry protocols, depending on how they organize their business. Only one protocol is necessary to submit orders into MRX. However, Members may choose a greater number of order entry ports, depending on that Member's particular business model. Similarly, only one account number is necessary per Member, although Members may choose to have additional accounts number to organize their business. The Exchange notes that FIX, OTTO, FIX DROP, the Clearing Trade Interface, and TradeInfo are available to all Members and may be utilized to obtain order information.

Members choose among the protocols based on their business workflow. The Exchange would uniformly assess the port fees to all Members and would uniformly apply monthly caps.

Ports are only available to MRX Members or service bureaus, and only an MRX Member may utilize a port.

Once an applicant is approved for membership on MRX and becomes a Member, the Exchange assigns the Member a badge and/or mnemonic to submit quotes and/or orders to the Exchange through the applicable port. An MRX Member may have one or more accounts numbers and may assign badges or mnemonics to those account numbers. Membership approval grants a Member a right to exercise trading privileges on MRX, which includes the submission of orders and/or quotes into the Exchange through a secure port by utilizing the badge and/or mnemonic assigned to a specific Member by the Exchange. The Exchange utilizes ports as a secure method for Members to submit orders into the Exchange's match engine and for the Exchange to send messages related to those orders to its Members.

MRX is obligated to regulate its Members and secure access to its environment. In order to properly regulate its Members and secure the trading environment, MRX takes measures to ensure access is monitored and maintained with various controls. Ports are a method utilized by the Exchange to grant Members secure access to communicate with the Exchange and exercise trading rights. When a market participant elects to be a Member of MRX, and is approved for membership by MRX, the Member is granted trading rights to enter orders into MRX through secure ports.

As noted herein, there is no legal or regulatory requirement that a market participant become a Member of MRX, or, if it is a Member, to purchase port services beyond the one quoting protocol or one order entry protocol necessary to quote or submit orders on MRX. As noted above, Members may freely choose to rely on one or many ports, depending on their business model. A Member can only submit interest (quotes or orders) through a secure port. Only one port is required to submit an order (FIX or OTTO) to MRX and only one port is required to submit a quote (SQF) to MRX. A market participant may decide, in the alternative, not to become a member of an exchange and instead utilize a third party.

The decision as to what types and number of ports to buy, like the decision to become a member of an exchange, is made at the beginning of that relationship, but that decision may be altered at any time as a market participant's business strategy evolves or the manner in which the market participant interacts with the exchange changes over time. As noted herein, only one protocol is required to submit orders. Depending on a Member's business model, one protocol may be better suited for a Member than another. Port selection is often made at the beginning of a trading relationship, like the decision whether to become a member, but a member is not “locked” into a particular number or type of ports over the course of the business relationship.

Options 7, Section 7—Market Data

The Exchange's proposal to adopt market data fees is reasonable, equitable and not unfairly discriminatory. The five market data feeds at issue here—the Depth of Market Feed, Order Feed, Top Quote Feed, Trades Feed, and Spreads Feed —are used throughout the market by a variety of market participants for a variety of purposes. Users include regulators, market makers, competing exchanges, media, retail, academics, portfolio managers. Market data feeds will be available to members of all of these groups on a non-discriminatory basis. With respect to the proposed Non-Display Enterprise License, the Exchange notes that enterprise licenses in general have been widely recognized as an effective and not unfairly discriminatory method of distributing market data. Enterprise licenses are widely employed by options exchanges, and the proposal here is typical of such licenses.

Market data, often mistakenly characterized as the “exhaust” of an exchange, is in fact the engine that drives liquidity: Firms are attracted by high levels of liquidity, diverse offerings and bids and offers close to the NBBO. Market data, unlike membership or ports, is not sold only to members, but rather is open to investors generally.

Nasdaq is subject to direct competition in the sale of market data. As explained above, Nasdaq proposes to introduce fees for both top-of-book and depth-of-book feeds. Top-of-book feeds are generally of interest to a broader audience that can readily substitute the top-of-book feed of one exchange with that of another. Depth-of-book feeds are, for the most part, of more interest to Members trading on the Exchange than other market participants but MRX has the smallest market share at 1.8%, and any Member can choose to trade on another exchange if fees for these other three feeds exceed their value.

Moreover, MRX lists no proprietary options products that are entirely unique to MRX. Firms can substitute MRX market data with feeds from exchanges that provide a high degree of functionality, including complex orders. Full market data options are available, for example, from Cboe, MIAX, and NYSE Arca Options.

Top-of-book data—last trade and best bid and offer information—is sold broadly to a wide of market participants, including the media, the general investing public, retail broker-dealers, regulatory agencies, and many others in addition to broker-dealers routing order flow. Because MRX does not list options on products that are exclusively available on MRX, then these same types of general-interest consumers of data can substitute MRX data with data from any exchange that lists such multiply-listed options, or through OPRA, in the same sense that consumers of top-of-book data on equity exchanges compete with other sellers of top-of-book data. Top-of-book data is easily substitutable by many of its users, and therefore is subject to particularly fierce competition.

All of this competition must be understood in the context of the fact that all broker-dealers involved in order routing must take consolidated data from OPRA, and proprietary data feeds cannot be used to meet that particular requirement. As such, all proprietary data feeds are optional.

After 6 years, MRX proposes to commence assessing membership, port, and market data fees, just as all other options exchanges. The introduction of these fees will not impede a Member's access to MRX, but rather will allow MRX to continue to compete and grow its marketplace so that it may continue to offer a robust trading architecture, a quality opening process, an array of simple and complex order types and auctions, and competitive transaction pricing. If MRX is incorrect in its assessment of the value of its services, that assessment will be reflected in MRX's ability to compete with other options exchanges.

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 believes its proposal remains competitive with other options markets, and will offer market participants with another choice of venue to transact options. 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. 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.

Options 7, Section 5—Membership

The proposed membership fees are identical to membership fees assessed by GEMX. The proposed fees are designed to reflect the benefits of the technical, regulatory, and administrative services provided to a Member by the Exchange, and the fees remain competitive with similar fees offered on other options exchanges. The Exchange does not believe that assessing different fees for PMMs, CMMs, and EAMs creates an undue burden on competition.

With respect to the CMM Trading Rights Fee, the proposed fees compare favorably with those of other options exchanges. Like other options exchanges, the Exchange is proposing a tiered pricing model because it may encourage CMM firms to purchase additional trading rights and quote more issues because subsequent trading rights are priced lower than the initial trading right. The Exchange notes that it is not proposing trading right fees for PMMs as the Exchange wishes to encourage Members to act as PMMs, which will benefit the market through, for example, more robust quoting. Additionally, as noted herein, PMMs have higher quoting obligations as compared to CMMs.

Options 7, Section 6—Ports

The proposed port fees are similar to port fees assessed by GEMX for similar connectivity. As a consequence, competition will not be burdened by the proposed fees. In order to submit orders into MRX, only one order protocol is required, either FIX or OTTO. Likewise, only one quoting protocol, SQF, is necessary to quote on MRX. Finally, only one account number is necessary per Member. FIX, and OTTO Ports, as well TradeInfo, are available to all Members and may be utilized to cancel orders. Further, FIX, and OTTO Ports, as well TradeInfo, are available to all Members and may be utilized to cancel orders and FIX DROP, the Clearing Trade Interface, and TradeInfo are available to all Members and may be utilized to obtain order information. These different protocols are not all necessary to conduct business on MRX. Market participants may also connect to third parties instead of directly to the Exchange.

With respect to the higher fees assessed for SQF Ports and SQF Purge Ports, the Exchange notes that only Market Makers may utilize these ports. Market Makers are required to provide continuous two-sided quotes on a daily basis, and are subject to various obligations associated with providing liquidity. As a result of these quoting obligations, the SQF Port and SQF Purge Port are designed to handle higher throughput to permit Market Makers to bundle orders to meet their obligations. The technology to permit Market Makers to submit a greater number of quotes, in addition to the various risk protections afforded to these market participants when quoting, accounts for the higher SQF Port and SQF Purge Port fees. Greater liquidity benefits all market participants by providing more trading opportunities and attracting greater participation by Market Makers. Also, an increase in the activity of Market Makers in turn facilitates tighter spreads.

Options 7, Section 7—Market Data

The initiation of market data fees will not impose an undue burden on inter-market competition. Since February 2016, MRX has disseminated market data without charging a fee, allowing MRX time to build order flow. Now that order flow has increased from approximately 0.2 percent to 1.8 percent of the market, MRX proposes charging fees that reflect the value of that data.

Permitting MRX to charge a fee for its data does not impose any burden on the ability of other options exchanges to compete. Each of the remaining 15 options exchanges currently sells its market data, and is capable of modifying its fees response to the proposed changes by MRX. Moreover, allowing MRX, or any new market entrant, to waive fees for a period of time to allow it to become established encourages market entry and thereby ultimately promotes competition.

If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share. 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. 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.

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-2022-04 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-2022-04. 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-2022-04 and should be submitted on or before June 8, 2022.