82_FR_61847 82 FR 61599 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees To Clarify the Market Maker Plus Program

82 FR 61599 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees To Clarify the Market Maker Plus Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 248 (December 28, 2017)

Page Range61599-61601
FR Document2017-28081

Federal Register, Volume 82 Issue 248 (Thursday, December 28, 2017)
[Federal Register Volume 82, Number 248 (Thursday, December 28, 2017)]
[Notices]
[Pages 61599-61601]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-28081]



[[Page 61599]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82396; File No. SR-ISE-2017-108]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Schedule of Fees To Clarify the Market Maker Plus Program

December 22, 2017.
    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 December 12, 2017, Nasdaq ISE, LLC (``ISE'' 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 amend the Schedule of Fees to clarify the 
Market Maker Plus program.
    The text of the proposed rule change is available on the Exchange's 
website at http://ise.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 Exchange operates a Market Maker Plus program for regular 
orders in Select Symbols\3\ whereby Market Makers that contribute to 
market quality by maintaining tight markets are eligible for enhanced 
rebates. The purpose of the proposed rule change is to amend the 
Schedule of Fees to clarify how the Exchange provides Market Maker Plus 
rebates under the Schedule of Fees.
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    \3\ ``Select Symbols'' are options overlying all symbols listed 
on the Nasdaq ISE that are in the Penny Pilot Program.
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    A Market Maker Plus is a Market Maker who is on the National Best 
Bid or National Best Offer (``NBBO'') a specified percentage of the 
time for series trading between $0.03 and $3.00 (for options whose 
underlying stock's previous trading day's last sale price was less than 
or equal to $100) and between $0.10 and $3.00 (for options whose 
underlying stock's previous trading day's last sale price was greater 
than $100) in premium in each of the front two expiration months.\4\ 
Currently, the specified percentage for time at the NBBO for Select 
Symbols other than SPY and QQQ is 80% to less than 85% for Tier 1, 85% 
to less than 95% for Tier 2, and 95% or greater for Tier 3. For SPY and 
QQQ only, the specified percentage for time at the NBBO is 70% to less 
than 80% for Tier 1, 80% to less than 85% for Tier 2, 85% to less than 
90% for Tier 3, and 90% or greater for Tier 4.
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    \4\ A Market Maker's single best and single worst quoting days 
each month based on the front two expiration months, on a per symbol 
basis, will be excluded in calculating whether a Market Maker 
qualifies for this rebate, if doing so will qualify a Market Maker 
for the rebate. Other than days where the Exchange closes early for 
holiday observance, any day that the market is not open for the 
entire trading day or the Exchange instructs members in writing to 
route their orders to other markets may be excluded from the Market 
Maker Plus tier calculation; provided that the Exchange will only 
remove the day for members that would have a lower time at the NBBO 
for the specified series with the day included.
---------------------------------------------------------------------------

    Due to how quoting infrastructure is designed on INET, when 
determining if the Market Maker meets the above specified percentages, 
Market Maker Plus status is calculated independently based on quotes 
entered in a symbol for each of the Market Maker's badge/suffix 
combinations.\5\ If any badge/suffix combination meets the specified 
percentage for a tier, the rebates for that tier are applied to 
executions for all badge/suffix combinations used by the member to 
trade the product--i.e., a member's highest tier achieved for any 
badge/suffix combination quoting that symbol applies to executions 
across all badge/suffix combinations that the member uses to trade in 
that symbol. The same logic applies for linked rebates in SPY/QQQ, 
meaning that if a member achieves a higher tier of Market Maker Plus 
for any badge/suffix combination in one product (e.g., SPY) but not for 
badge/suffix combinations in the other linked product (e.g., QQQ), the 
member would receive the linked rebate in the other product for all 
badge/suffix combinations.
---------------------------------------------------------------------------

    \5\ Market Makers may enter quotes in a symbol using one or more 
unique, exchange assigned identifiers--i.e., badge/suffix 
combinations.
---------------------------------------------------------------------------

    For example, assume Market Maker ABC is configured to trade SPY in 
the following badge/suffix combinations: 123A, 123B, and 321A, and is 
on the NBBO 97% of the time in 123A, 86% of the time in 123B, and 92% 
of the time in 321A. Based on these facts, Market Maker ABC would 
qualify for Tier 3 rebates in SPY for 123A based on a time at the NBBO 
of 95% or greater. In addition Market Maker ABC would qualify for the 
same Tier 3 rebates in SPY for 123B and 321A as the highest tier 
achieved is applied to all badge/suffix combinations. If Market Maker 
ABC also quotes QQQ in 321A, and is on the NBBO 80% of the time for 
that badge/suffix, it would similarly receive the Tier 3 Linked Rebate 
for QQQ in 321A based on quoting activity for SPY in 123A.
    Based on the above, the Exchange proposes to amend footnote 5 under 
Section I. Regular Order Fees and Rebates to provide that: ``Market 
Makers may enter quotes in a symbol using one or more unique, exchange 
assigned identifiers--i.e., badge/suffix combinations. Market Maker 
Plus status is calculated independently based on quotes entered in a 
symbol for each of the Market Maker's badge/suffix combinations, and 
the highest tier achieved for any badge/suffix combination quoting that 
symbol applies to executions across all badge/suffix combinations that 
the member uses to trade in that symbol.'' In addition, the Exchange 
proposes to amend the second sentence of footnote 9 under Section I. 
Regular Order Fees and Rebates to provide that: ``Linked maker rebate 
applies to executions in SPY or QQQ if the Market Maker does not 
achieve the applicable tier in that symbol but achieves the tier (i.e., 
any of Market Maker Plus Tiers 2-4) for any badge/suffix combination in 
the other symbol, in which case the higher tier achieved applies to 
both symbols.''
    Furthermore, the Schedule of Fees provides that if a Market Maker 
achieves Market Maker Plus status, a $0.10 per contract fee applies 
when trading against Priority Customer complex orders that leg into the 
regular order book, and there will be no fee charged or rebate provided 
when trading against non-Priority Customer complex orders that leg into 
the regular order book. The

[[Page 61600]]

$0.10 per contract fee described above has always been applied instead 
of the tiered rebate that normally applies to Market Maker Plus 
executions.\6\ To increase transparency to members, the Exchange 
proposes to explicitly state in the Schedule of Fees that no Market 
Maker Plus rebate is provided when a fee is charged. As proposed, the 
first line of footnote 10 under Section I. Regular Order Fees and 
Rebates will be amended to provide that: ``A $0.10 per contract fee 
applies instead of the applicable Market Maker Plus rebate when trading 
against Priority Customer complex orders that leg into the regular 
order book.'' Although this change is consistent with current practice, 
the Exchange believes that it will eliminate any potential confusion 
around whether a rebate is provided in addition to the fee charged when 
trading against Priority Customer complex orders that leg into the 
regular order book.
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    \6\ See Securities Exchange Act Release No. 72817 (August 12, 
2014), 79 FR 48801 (August 18, 2014) (SR-ISE-2014-39).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed rule change is reasonable 
and equitable as it identifies how Market Maker Plus rebates are 
provided on INET, which performs the Market Maker Plus calculation at 
the badge/suffix level and applies Market Maker Plus rebates to 
executions across all badge/suffix combinations that the member uses to 
trade in that symbol, or to trade in a linked symbol in the case of 
linked maker rebates for SPY/QQQ. The Exchange believes that it is 
appropriate to amend the Schedule of Fees so that members are 
appropriately apprised of how the Market Maker Plus program is 
implemented on INET. By including this detail in the Schedule of Fees, 
the proposed rule change will increase transparency around the 
Exchange's billing to the benefit of its members, and in particular, 
Market Makers that participate in the Market Maker Plus Program.
    The INET implementation being codified in this proposed rule change 
is different in one respect from the prior implementation on the legacy 
T7 trading system. Specifically, although the T7 billing system 
similarly applied the rebates to all of a Market Maker's executions in 
a symbol where the member met the Market Maker Plus requirements, the 
calculation for time at the NBBO was based on all quotes submitted by 
the member. On the legacy system, Market Makers were assigned Business 
Unit designations for their quoting, with the majority of Market Makers 
being configured with only one Business Unit for all of the firm's 
quoting activity across the suite of products listed by the 
Exchange.\9\ On INET, by contrast, Market Makers are assigned one or 
more accounts and can associate different badge/suffix combinations 
with each of those accounts--for example, to manage quotes in a 
particular product. As currently implemented on INET, Market Makers 
that quote a product across multiple badge/suffix combinations have to 
qualify for a tier for one or more badge/suffix combinations in order 
to qualify for that tier of Market Maker Plus. Because of the different 
system architecture, which allows flexibility in setting up badge/
suffix combinations associated with a Market Maker account(s), the INET 
billing system does not aggregate quoting activity across these 
separate badge/suffix combinations to determine eligibility. However, 
once a member qualifies for one badge/suffix combination, rebates are 
paid across all of the Market Maker's badge/suffix combinations that 
trade the product, thereby ensuring that Market Makers receive this 
benefit across the entire firm when enhancing market quality.
---------------------------------------------------------------------------

    \9\ A number of users could be permissioned for each Business 
Unit.
---------------------------------------------------------------------------

    The vast majority of Market Makers that choose to enter quotes for 
a product using a single badge/suffix combination on INET are 
unaffected by this change, which only impacts firms that decide to 
quote a product across multiple badge/suffix combinations. In 
conducting an analysis of Market Makers potentially impacted by this 
change because the member quotes a single symbol using more than one 
badge/suffix combination on INET, the Exchange found only one member 
that did so and only during one month in a total of three symbols. The 
Exchange therefore believes that members are unlikely to be negatively 
impacted in their ability to earn rebates for their market quality 
contribution under the INET implementation. Furthermore, for Market 
Makers that do choose to enter quotes for a single product using 
multiple badge/suffix combinations, the Exchange believes that this 
implementation is appropriate as these members may be conducting 
separate business across these badge/suffix combinations and should 
therefore have their contribution to market quality measured at that 
level. Nevertheless, as mentioned above, the program benefits continue 
to accrue to all badge/suffix combinations once one badge/suffix 
combination qualifies for that tier of Market Maker Plus. Paying 
rebates across the entire firm based on the highest tier of Market 
Maker Plus achieved in a symbol adds an extra incentive for members to 
qualify for Market Maker Plus in one or more badge/suffix combinations 
by maintaining quality markets based on time at the NBBO.
    The Exchange also believes that the proposed changes are not 
unfairly discriminatory as all Market Makers are free to configure 
their quoting activity across one or more badge/suffix combinations 
based on their business or other needs, and will be treated uniformly 
based on their quoting activity (i.e., time at the NBBO) and 
configuration (i.e., badge/suffix setup) in the manner described in 
this proposed rule change. As described above, this change is unlikely 
to have any significant effect on any Market Maker's ability to earn 
rebates under the Market Maker Plus program because it is rare for 
Market Makers to quote a single product across multiple badge/suffix 
combinations, and any impact can be mitigated by the Market Maker 
determining to quote a product using only one badge/suffix combination. 
Moreover, to the extent that any Market Maker chooses to use multiple 
badge/suffix combinations to quote a particular symbol, the Exchange 
believes that such member may be conducting separate business across 
these badge/suffix combinations and it is therefore not unfairly 
discriminatory to have the firm's contribution to market quality 
measured at that level. Furthermore, the proposed rule change will 
increase transparency around how Market Maker Plus rebates are applied, 
which is beneficial for all members.
    Finally, the Exchange believes that the proposed clarification to 
the fee charged for trading against Priority Customer complex orders 
that leg into the regular order book is reasonable, equitable, and not 
unfairly discriminatory as it avoids potential member confusion about 
whether a rebate is provided when the fee is charged. Although prior 
filings were

[[Page 61601]]

more clear that a rebate is not provided when a fee is charged, the 
Exchange wishes to be explicit about this in the text of the Schedule 
of Fees. The Exchange believes that the proposed change will increase 
transparency around the Exchange's billing to the benefit of its 
members.

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 proposed rule change 
describes the INET implementation of the Market Maker Plus program. 
While certain elements of the program are changed from the prior T7 
practice, for the reasons described in this proposed rule change the 
Exchange does not believe that any members will be significantly 
impacted by the changes. The Exchange therefore believes that the 
Market Maker Plus program will continue to encourage competition by 
incentivizing Market Makers to provide liquidity and maintain tight 
markets in Select Symbols. Furthermore, the proposed rule change 
explains that rebates are not provided when a fee is charged for 
trading against Priority Customer complex orders that leg into the 
regular order book. This language merely describes the Exchange's 
billing, which remains unchanged, and will increase transparency to 
members without any impact on competition. The Exchange 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. 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.

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,\10\ and Rule 19b-4(f)(2) \11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ISE-2017-108 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-ISE-2017-108. 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-ISE-2017-108 and should be submitted on 
or before January 18, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-28081 Filed 12-27-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                             Federal Register / Vol. 82, No. 248 / Thursday, December 28, 2017 / Notices                                             61599

                                                SECURITIES AND EXCHANGE                                    in Select Symbols3 whereby Market                       rebates in SPY/QQQ, meaning that if a
                                                COMMISSION                                                 Makers that contribute to market quality                member achieves a higher tier of Market
                                                                                                           by maintaining tight markets are eligible               Maker Plus for any badge/suffix
                                                [Release No. 34–82396; File No. SR–ISE–                    for enhanced rebates. The purpose of                    combination in one product (e.g., SPY)
                                                2017–108]                                                  the proposed rule change is to amend                    but not for badge/suffix combinations in
                                                Self-Regulatory Organizations; Nasdaq                      the Schedule of Fees to clarify how the                 the other linked product (e.g., QQQ), the
                                                                                                           Exchange provides Market Maker Plus                     member would receive the linked rebate
                                                ISE, LLC; Notice of Filing and
                                                                                                           rebates under the Schedule of Fees.                     in the other product for all badge/suffix
                                                Immediate Effectiveness of Proposed
                                                                                                              A Market Maker Plus is a Market                      combinations.
                                                Rule Change To Amend the Schedule                          Maker who is on the National Best Bid                      For example, assume Market Maker
                                                of Fees To Clarify the Market Maker                        or National Best Offer (‘‘NBBO’’) a                     ABC is configured to trade SPY in the
                                                Plus Program                                               specified percentage of the time for                    following badge/suffix combinations:
                                                December 22, 2017.                                         series trading between $0.03 and $3.00                  123A, 123B, and 321A, and is on the
                                                   Pursuant to Section 19(b)(1) of the                     (for options whose underlying stock’s                   NBBO 97% of the time in 123A, 86% of
                                                Securities Exchange Act of 1934                            previous trading day’s last sale price                  the time in 123B, and 92% of the time
                                                (‘‘Act’’),1 and Rule 19b–4 thereunder,2                    was less than or equal to $100) and                     in 321A. Based on these facts, Market
                                                notice is hereby given that on December                    between $0.10 and $3.00 (for options                    Maker ABC would qualify for Tier 3
                                                12, 2017, Nasdaq ISE, LLC (‘‘ISE’’ or                      whose underlying stock’s previous                       rebates in SPY for 123A based on a time
                                                ‘‘Exchange’’) filed with the Securities                    trading day’s last sale price was greater               at the NBBO of 95% or greater. In
                                                and Exchange Commission                                    than $100) in premium in each of the                    addition Market Maker ABC would
                                                (‘‘Commission’’) the proposed rule                         front two expiration months.4 Currently,                qualify for the same Tier 3 rebates in
                                                change as described in Items I and II                      the specified percentage for time at the                SPY for 123B and 321A as the highest
                                                below, which Items have been prepared                      NBBO for Select Symbols other than                      tier achieved is applied to all badge/
                                                by the Exchange. The Commission is                         SPY and QQQ is 80% to less than 85%                     suffix combinations. If Market Maker
                                                publishing this notice to solicit                          for Tier 1, 85% to less than 95% for Tier               ABC also quotes QQQ in 321A, and is
                                                comments on the proposed rule change                       2, and 95% or greater for Tier 3. For                   on the NBBO 80% of the time for that
                                                from interested persons.                                   SPY and QQQ only, the specified                         badge/suffix, it would similarly receive
                                                                                                           percentage for time at the NBBO is 70%                  the Tier 3 Linked Rebate for QQQ in
                                                I. Self-Regulatory Organization’s                          to less than 80% for Tier 1, 80% to less                321A based on quoting activity for SPY
                                                Statement of the Terms of Substance of                     than 85% for Tier 2, 85% to less than                   in 123A.
                                                the Proposed Rule Change                                   90% for Tier 3, and 90% or greater for                     Based on the above, the Exchange
                                                   The Exchange proposes to amend the                      Tier 4.                                                 proposes to amend footnote 5 under
                                                                                                              Due to how quoting infrastructure is                 Section I. Regular Order Fees and
                                                Schedule of Fees to clarify the Market
                                                                                                           designed on INET, when determining if                   Rebates to provide that: ‘‘Market Makers
                                                Maker Plus program.
                                                                                                           the Market Maker meets the above                        may enter quotes in a symbol using one
                                                   The text of the proposed rule change
                                                                                                           specified percentages, Market Maker                     or more unique, exchange assigned
                                                is available on the Exchange’s website at
                                                                                                           Plus status is calculated independently                 identifiers—i.e., badge/suffix
                                                http://ise.cchwallstreet.com/, at the
                                                                                                           based on quotes entered in a symbol for                 combinations. Market Maker Plus status
                                                principal office of the Exchange, and at
                                                                                                           each of the Market Maker’s badge/suffix                 is calculated independently based on
                                                the Commission’s Public Reference
                                                                                                           combinations.5 If any badge/suffix                      quotes entered in a symbol for each of
                                                Room.
                                                                                                           combination meets the specified                         the Market Maker’s badge/suffix
                                                II. Self-Regulatory Organization’s                         percentage for a tier, the rebates for that             combinations, and the highest tier
                                                Statement of the Purpose of, and                           tier are applied to executions for all                  achieved for any badge/suffix
                                                Statutory Basis for, the Proposed Rule                     badge/suffix combinations used by the                   combination quoting that symbol
                                                Change                                                     member to trade the product—i.e., a                     applies to executions across all badge/
                                                                                                           member’s highest tier achieved for any                  suffix combinations that the member
                                                  In its filing with the Commission, the
                                                                                                           badge/suffix combination quoting that                   uses to trade in that symbol.’’ In
                                                Exchange included statements
                                                                                                           symbol applies to executions across all                 addition, the Exchange proposes to
                                                concerning the purpose of and basis for
                                                                                                           badge/suffix combinations that the                      amend the second sentence of footnote
                                                the proposed rule change and discussed
                                                                                                           member uses to trade in that symbol.                    9 under Section I. Regular Order Fees
                                                any comments it received on the
                                                                                                           The same logic applies for linked                       and Rebates to provide that: ‘‘Linked
                                                proposed rule change. The text of these
                                                                                                                                                                   maker rebate applies to executions in
                                                statements may be examined at the                             3 ‘‘Select Symbols’’ are options overlying all       SPY or QQQ if the Market Maker does
                                                places specified in Item IV below. The                     symbols listed on the Nasdaq ISE that are in the        not achieve the applicable tier in that
                                                Exchange has prepared summaries, set                       Penny Pilot Program.
                                                                                                                                                                   symbol but achieves the tier (i.e., any of
                                                                                                              4 A Market Maker’s single best and single worst
                                                forth in sections A, B, and C below, of                                                                            Market Maker Plus Tiers 2–4) for any
                                                                                                           quoting days each month based on the front two
                                                the most significant aspects of such                       expiration months, on a per symbol basis, will be       badge/suffix combination in the other
                                                statements.                                                excluded in calculating whether a Market Maker          symbol, in which case the higher tier
                                                                                                           qualifies for this rebate, if doing so will qualify a
                                                A. Self-Regulatory Organization’s                          Market Maker for the rebate. Other than days where
                                                                                                                                                                   achieved applies to both symbols.’’
                                                Statement of the Purpose of, and                           the Exchange closes early for holiday observance,          Furthermore, the Schedule of Fees
                                                Statutory Basis for, the Proposed Rule                     any day that the market is not open for the entire      provides that if a Market Maker achieves
                                                                                                           trading day or the Exchange instructs members in        Market Maker Plus status, a $0.10 per
sradovich on DSK3GMQ082PROD with NOTICES




                                                Change                                                     writing to route their orders to other markets may
                                                                                                           be excluded from the Market Maker Plus tier
                                                                                                                                                                   contract fee applies when trading
                                                1. Purpose                                                                                                         against Priority Customer complex
                                                                                                           calculation; provided that the Exchange will only
                                                 The Exchange operates a Market                            remove the day for members that would have a            orders that leg into the regular order
                                                                                                           lower time at the NBBO for the specified series with    book, and there will be no fee charged
                                                Maker Plus program for regular orders                      the day included.
                                                                                                              5 Market Makers may enter quotes in a symbol
                                                                                                                                                                   or rebate provided when trading against
                                                  1 15   U.S.C. 78s(b)(1).                                 using one or more unique, exchange assigned             non-Priority Customer complex orders
                                                  2 17   CFR 240.19b–4.                                    identifiers—i.e., badge/suffix combinations.            that leg into the regular order book. The


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                                                61600                     Federal Register / Vol. 82, No. 248 / Thursday, December 28, 2017 / Notices

                                                $0.10 per contract fee described above                     The INET implementation being                      Furthermore, for Market Makers that do
                                                has always been applied instead of the                  codified in this proposed rule change is              choose to enter quotes for a single
                                                tiered rebate that normally applies to                  different in one respect from the prior               product using multiple badge/suffix
                                                Market Maker Plus executions.6 To                       implementation on the legacy T7                       combinations, the Exchange believes
                                                increase transparency to members, the                   trading system. Specifically, although                that this implementation is appropriate
                                                Exchange proposes to explicitly state in                the T7 billing system similarly applied               as these members may be conducting
                                                the Schedule of Fees that no Market                     the rebates to all of a Market Maker’s                separate business across these badge/
                                                Maker Plus rebate is provided when a                    executions in a symbol where the                      suffix combinations and should
                                                fee is charged. As proposed, the first                  member met the Market Maker Plus                      therefore have their contribution to
                                                line of footnote 10 under Section I.                    requirements, the calculation for time at             market quality measured at that level.
                                                Regular Order Fees and Rebates will be                  the NBBO was based on all quotes                      Nevertheless, as mentioned above, the
                                                amended to provide that: ‘‘A $0.10 per                  submitted by the member. On the legacy                program benefits continue to accrue to
                                                contract fee applies instead of the                     system, Market Makers were assigned                   all badge/suffix combinations once one
                                                applicable Market Maker Plus rebate                     Business Unit designations for their                  badge/suffix combination qualifies for
                                                when trading against Priority Customer                  quoting, with the majority of Market                  that tier of Market Maker Plus. Paying
                                                complex orders that leg into the regular                Makers being configured with only one                 rebates across the entire firm based on
                                                order book.’’ Although this change is                   Business Unit for all of the firm’s                   the highest tier of Market Maker Plus
                                                consistent with current practice, the                   quoting activity across the suite of                  achieved in a symbol adds an extra
                                                Exchange believes that it will eliminate                products listed by the Exchange.9 On                  incentive for members to qualify for
                                                any potential confusion around whether                  INET, by contrast, Market Makers are                  Market Maker Plus in one or more
                                                a rebate is provided in addition to the                 assigned one or more accounts and can                 badge/suffix combinations by
                                                fee charged when trading against                        associate different badge/suffix                      maintaining quality markets based on
                                                Priority Customer complex orders that                   combinations with each of those                       time at the NBBO.
                                                leg into the regular order book.                        accounts—for example, to manage                          The Exchange also believes that the
                                                                                                        quotes in a particular product. As                    proposed changes are not unfairly
                                                2. Statutory Basis                                      currently implemented on INET, Market                 discriminatory as all Market Makers are
                                                                                                        Makers that quote a product across                    free to configure their quoting activity
                                                   The Exchange believes that its                       multiple badge/suffix combinations                    across one or more badge/suffix
                                                proposal is consistent with Section 6(b)                have to qualify for a tier for one or more            combinations based on their business or
                                                of the Act,7 in general, and furthers the               badge/suffix combinations in order to                 other needs, and will be treated
                                                objectives of Sections 6(b)(4) and 6(b)(5)              qualify for that tier of Market Maker                 uniformly based on their quoting
                                                of the Act,8 in particular, in that it                  Plus. Because of the different system                 activity (i.e., time at the NBBO) and
                                                provides for the equitable allocation of                architecture, which allows flexibility in             configuration (i.e., badge/suffix setup)
                                                reasonable dues, fees, and other charges                setting up badge/suffix combinations                  in the manner described in this
                                                among members and issuers and other                     associated with a Market Maker                        proposed rule change. As described
                                                persons using any facility, and is not                  account(s), the INET billing system does              above, this change is unlikely to have
                                                designed to permit unfair                               not aggregate quoting activity across                 any significant effect on any Market
                                                discrimination between customers,                       these separate badge/suffix                           Maker’s ability to earn rebates under the
                                                issuers, brokers, or dealers.                           combinations to determine eligibility.                Market Maker Plus program because it
                                                   The Exchange believes that the                       However, once a member qualifies for                  is rare for Market Makers to quote a
                                                proposed rule change is reasonable and                  one badge/suffix combination, rebates                 single product across multiple badge/
                                                equitable as it identifies how Market                   are paid across all of the Market Maker’s             suffix combinations, and any impact can
                                                Maker Plus rebates are provided on                      badge/suffix combinations that trade the              be mitigated by the Market Maker
                                                INET, which performs the Market Maker                   product, thereby ensuring that Market                 determining to quote a product using
                                                Plus calculation at the badge/suffix level              Makers receive this benefit across the                only one badge/suffix combination.
                                                and applies Market Maker Plus rebates                   entire firm when enhancing market                     Moreover, to the extent that any Market
                                                to executions across all badge/suffix                   quality.                                              Maker chooses to use multiple badge/
                                                combinations that the member uses to                       The vast majority of Market Makers                 suffix combinations to quote a particular
                                                trade in that symbol, or to trade in a                  that choose to enter quotes for a product             symbol, the Exchange believes that such
                                                linked symbol in the case of linked                     using a single badge/suffix combination               member may be conducting separate
                                                maker rebates for SPY/QQQ. The                          on INET are unaffected by this change,                business across these badge/suffix
                                                Exchange believes that it is appropriate                which only impacts firms that decide to               combinations and it is therefore not
                                                to amend the Schedule of Fees so that                   quote a product across multiple badge/                unfairly discriminatory to have the
                                                members are appropriately apprised of                   suffix combinations. In conducting an                 firm’s contribution to market quality
                                                how the Market Maker Plus program is                    analysis of Market Makers potentially                 measured at that level. Furthermore, the
                                                implemented on INET. By including                       impacted by this change because the                   proposed rule change will increase
                                                this detail in the Schedule of Fees, the                member quotes a single symbol using                   transparency around how Market Maker
                                                proposed rule change will increase                      more than one badge/suffix combination                Plus rebates are applied, which is
                                                transparency around the Exchange’s                      on INET, the Exchange found only one                  beneficial for all members.
                                                billing to the benefit of its members, and              member that did so and only during one                   Finally, the Exchange believes that
                                                in particular, Market Makers that                       month in a total of three symbols. The                the proposed clarification to the fee
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                                                participate in the Market Maker Plus                    Exchange therefore believes that                      charged for trading against Priority
                                                                                                        members are unlikely to be negatively                 Customer complex orders that leg into
                                                Program.
                                                                                                        impacted in their ability to earn rebates             the regular order book is reasonable,
                                                  6 See Securities Exchange Act Release No. 72817       for their market quality contribution                 equitable, and not unfairly
                                                (August 12, 2014), 79 FR 48801 (August 18, 2014)        under the INET implementation.                        discriminatory as it avoids potential
                                                (SR–ISE–2014–39).                                                                                             member confusion about whether a
                                                  7 15 U.S.C. 78f(b).                                     9 A number of users could be permissioned for       rebate is provided when the fee is
                                                  8 15 U.S.C. 78f(b)(4) and (5).                        each Business Unit.                                   charged. Although prior filings were


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                                                                          Federal Register / Vol. 82, No. 248 / Thursday, December 28, 2017 / Notices                                                   61601

                                                more clear that a rebate is not provided                III. Date of Effectiveness of the                        Reference Room, 100 F Street NE,
                                                when a fee is charged, the Exchange                     Proposed Rule Change and Timing for                      Washington, DC 20549, on official
                                                wishes to be explicit about this in the                 Commission Action                                        business days between the hours of
                                                text of the Schedule of Fees. The                          The foregoing rule change has become                  10:00 a.m. and 3:00 p.m. Copies of the
                                                Exchange believes that the proposed                     effective pursuant to Section                            filing also will be available for
                                                change will increase transparency                       19(b)(3)(A)(ii) of the Act,10 and Rule                   inspection and copying at the principal
                                                around the Exchange’s billing to the                    19b–4(f)(2) 11 thereunder. At any time                   office of the Exchange. All comments
                                                benefit of its members.                                 within 60 days of the filing of the                      received will be posted without change.
                                                                                                        proposed rule change, the Commission                     Persons submitting comments are
                                                B. Self-Regulatory Organization’s                       summarily may temporarily suspend                        cautioned that we do not redact or edit
                                                Statement on Burden on Competition                      such rule change if it appears to the                    personal identifying information from
                                                                                                        Commission that such action is: (i)                      comment submissions. You should
                                                   The Exchange does not believe that                                                                            submit only information that you wish
                                                                                                        Necessary or appropriate in the public
                                                the proposed rule change will impose                                                                             to make available publicly. All
                                                                                                        interest; (ii) for the protection of
                                                any burden on competition not                                                                                    submissions should refer to File
                                                                                                        investors; or (iii) otherwise in
                                                necessary or appropriate in furtherance                 furtherance of the purposes of the Act.                  Number SR–ISE–2017–108 and should
                                                of the purposes of the Act. The                         If the Commission takes such action, the                 be submitted on or before January 18,
                                                proposed rule change describes the                      Commission shall institute proceedings                   2018.
                                                INET implementation of the Market                       to determine whether the proposed rule                     For the Commission, by the Division of
                                                Maker Plus program. While certain                       should be approved or disapproved.                       Trading and Markets, pursuant to delegated
                                                elements of the program are changed                                                                              authority.12
                                                from the prior T7 practice, for the                     IV. Solicitation of Comments                             Eduardo A. Aleman,
                                                reasons described in this proposed rule                   Interested persons are invited to                      Assistant Secretary.
                                                change the Exchange does not believe                    submit written data, views, and                          [FR Doc. 2017–28081 Filed 12–27–17; 8:45 am]
                                                that any members will be significantly                  arguments concerning the foregoing,                      BILLING CODE 8011–01–P
                                                impacted by the changes. The Exchange                   including whether the proposed rule
                                                therefore believes that the Market Maker                change is consistent with the Act.
                                                Plus program will continue to encourage                 Comments may be submitted by any of                      SECURITIES AND EXCHANGE
                                                competition by incentivizing Market                     the following methods:                                   COMMISSION
                                                Makers to provide liquidity and                         Electronic Comments                                      [Release No. 34–82372; File No. SR–
                                                maintain tight markets in Select                          • Use the Commission’s internet                        NYSEArca–2017–140]
                                                Symbols. Furthermore, the proposed                      comment form (http://www.sec.gov/
                                                rule change explains that rebates are not                                                                        Self-Regulatory Organizations; NYSE
                                                                                                        rules/sro.shtml); or
                                                provided when a fee is charged for                        • Send an email to rule-comments@                      Arca, Inc.; Notice of Filing of Proposed
                                                trading against Priority Customer                       sec.gov. Please include File Number SR–                  Rule Change To List and Trade Shares
                                                complex orders that leg into the regular                ISE–2017–108 on the subject line.                        of the Perth Mint Physical Gold ETF
                                                order book. This language merely                                                                                 Trust Under NYSE Arca Rule 8.201–E
                                                                                                        Paper Comments
                                                describes the Exchange’s billing, which                                                                          December 21, 2017.
                                                remains unchanged, and will increase                      • Send paper comments in triplicate                       Pursuant to Section 19(b)(1) 1 of the
                                                transparency to members without any                     to Secretary, Securities and Exchange                    Securities Exchange Act of 1934 (the
                                                impact on competition. The Exchange                     Commission, 100 F Street NE,                             ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
                                                operates in a highly competitive market                 Washington, DC 20549–1090.                               notice is hereby given that, on December
                                                in which market participants can                        All submissions should refer to File                     11, 2017, NYSE Arca, Inc. (the
                                                readily favor competing venues if they                  Number SR–ISE–2017–108. This file                        ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
                                                                                                        number should be included on the                         the Securities and Exchange
                                                deem fee levels at a particular venue to
                                                                                                        subject line if email is used. To help the               Commission (the ‘‘Commission’’) the
                                                be excessive, or rebate opportunities
                                                                                                        Commission process and review your                       proposed rule change as described in
                                                available at other venues to be more                    comments more efficiently, please use
                                                favorable. In such an environment, the                                                                           Items I and II below, which Items have
                                                                                                        only one method. The Commission will                     been prepared by the self-regulatory
                                                Exchange must continually adjust its                    post all comments on the Commission’s
                                                fees to remain competitive. Because                                                                              organization. The Commission is
                                                                                                        internet website (http://www.sec.gov/                    publishing this notice to solicit
                                                competitors are free to modify their own                rules/sro.shtml). Copies of the
                                                fees in response, and because market                                                                             comments on the proposed rule change
                                                                                                        submission, all subsequent                               from interested persons.
                                                participants may readily adjust their                   amendments, all written statements
                                                order routing practices, the Exchange                   with respect to the proposed rule                        I. Self-Regulatory Organization’s
                                                believes that the degree to which fee                   change that are filed with the                           Statement of the Terms of Substance of
                                                changes in this market may impose any                   Commission, and all written                              the Proposed Rule Change
                                                burden on competition is extremely                      communications relating to the                              The Exchange proposes to list and
                                                limited.                                                proposed rule change between the                         trade shares of the Perth Mint Physical
                                                                                                        Commission and any person, other than                    Gold ETF Trust under NYSE Arca Rule
                                                C. Self-Regulatory Organization’s
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                                                                                                        those that may be withheld from the                      8.201–E. The proposed change is
                                                Statement on Comments on the                            public in accordance with the                            available on the Exchange’s website at
                                                Proposed Rule Change Received From                      provisions of 5 U.S.C. 552, will be                      www.nyse.com, at the principal office of
                                                Members, Participants, or Others                        available for website viewing and
                                                                                                        printing in the Commission’s Public                        12 17 CFR 200.30–3(a)(12).
                                                  No written comments were either                                                                                  1 15 U.S.C.78s(b)(1).
                                                solicited or received.                                    10 15   U.S.C. 78s(b)(3)(A)(ii).                         2 15 U.S.C. 78a.
                                                                                                          11 17   CFR 240.19b–4(f)(2).                             3 17 CFR 240.19b–4.




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Document Created: 2017-12-28 00:43:12
Document Modified: 2017-12-28 00:43:12
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 61599 

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