83 FR 19128 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Regular Order Fees and Rebates

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 84 (May 1, 2018)

[Federal Register Volume 83, Number 84 (Tuesday, May 1, 2018)]
[Notices]
[Pages 19128-19130]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-09114]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83104; File No. SR-ISE-2018-37]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to Regular 
Order Fees and Rebates

April 25, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 11, 2018, 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 ISE's Schedule of Fees at Section I, 
entitled ``Regular Order Fees and Rebates.''
    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 purpose of the proposed rule change is to amend the ISE 
Schedule of Fees at Section I, entitled ``Regular Order Fees and 
Rebates.'' This proposed rule change is intended to make changes to: 
(i) Increase Taker Fees for Market Makers,\3\ Non-Nasdaq ISE Market 
Makers \4\ (FarMM) and Professional Customers; \5\ (ii) increase Fees 
for Responses to ISE's Price Improvement Mechanism \6\ (``PIM'') Orders 
for Market Makers, Non-Nasdaq ISE Market Makers (FarMM), Firm 
Proprietary \7\/Broker Dealers,\8\ Professional Customers, and Priority 
Customers; \9\ and (iii) increase the amount assessed to a Member, 
other than for a Priority Customer, that executes an average daily 
volume (``ADV'') of 12,500 or more contracts in the PIM.
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    \3\ ``Market makers'' refers to ``Competitive Market Makers'' 
and ``Primary Market Makers'' collectively. See ISE Rule 100(a)(28).
    \4\ A ``Non-Nasdaq ISE Market Maker'' is a market maker as 
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, 
as amended, registered in the same options class on another options 
exchange. See Preface to ISE Schedule of Fees.
    \5\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer. See Preface to 
ISE Schedule of Fees.
    \6\ The Price Improvement Mechanism is a process by which an 
Electronic Access Member can provide price improvement opportunities 
for a transaction wherein the Electronic Access Member seeks to 
facilitate an order it represents as agent, and/or a transaction 
wherein the Electronic Access Member solicited interest to execute 
against an order it represents as agent (a ``Crossing 
Transaction''). See ISE Rule 723.
    \7\ A ``Firm Proprietary'' order is an order submitted by a 
Member for its own proprietary account. See Preface to ISE Schedule 
of Fees.
    \8\ ``Broker-Dealer'' order is an order submitted by a Member 
for a broker-dealer account that is not its own proprietary account. 
See Preface to ISE Schedule of Fees.
    \9\ A ``Priority Customer'' is a person or entity that is not a 
broker/dealer in securities, and does not place more than 390 orders 
in listed options per day on average during a calendar month for its 
own beneficial account(s), as defined in Nasdaq ISE Rule 
100(a)(37A). Unless otherwise noted, when used in the Schedule of 
Fees the term ``Priority Customer'' includes ``Retail'' as defined 
in the Schedule of Fees. See Preface to ISE Schedule of Fees.
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Taker Fees
    The Exchange proposes to increase Regular Order Taker Fees for 
Market Makers, Non-Nasdaq ISE Market Makers (FarMM) and Professional 
Customers. Today, a Market Maker is assessed a $0.44 per contract Taker 
Fee for Regular Orders. The Exchange proposes to increase the Market 
Maker Taker Fee to $0.45 per contract. Today, Non-Nasdaq ISE Market 
Makers (FarMM) and Professional Customer are assessed a $0.45 per 
contract Taker Fees for Regular Orders. The Exchange proposes to 
increase the Non-Nasdaq ISE Market Makers (FarMM) and Professional 
Customer Taker Fees to $0.46 per contract. The Exchange will continue 
to assess a Firm Proprietary/Broker Dealer a Taker Fee of $0.46 per 
contract and assess a Priority Customer a $0.44 per contract Taker Fee.
Fees for Reponses to PIM Orders
    The Exchange proposes to increase Fees for Reponses to PIM Orders 
for all market participants. Today, a Market Maker, Non-Nasdaq ISE 
Market Maker (FarMM), Firm Proprietary/Broker Dealer, Professional 
Customer, and Priority Customer are assessed a Regular Order Fee for 
Responses to PIM Orders of $0.20 per contact. The Exchange proposes to 
assess all market participants a Regular Order Fee for Responses to PIM 
Orders of $0.25 per contact.

[[Page 19129]]

Fees for PIM Orders
    The Exchange proposes to increase the amount assessed to a Member, 
other than for a Priority Customer, that executes an ADV of 12,500 or 
more contracts in the PIM. Today, other than a Priority Customer order, 
the Exchange assesses non-Priority Customer market participants a fee 
of $0.05 per contract for orders executed by Members that execute an 
ADV of 7,500 or more contracts in the PIM in a given month. Today, 
Members that execute an ADV of 12,500 or more contracts in the PIM will 
not be assessed a fee. The Exchange proposes to amend the amount 
assessed to a Member that executed an ADV of 12,500 or more contracts 
in the PIM a fee of $0.02 per contract. This $0.02 per contract fee 
represents an increase as the Member that executed an ADV of 12,500 or 
more contracts in the PIM is not charged a fee today.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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Taker Fees
    The Exchange's proposal to increase Regular Order Taker Fees for 
Market Makers from $0.44 to $0.45 per contract and increase Taker Fees 
for Non-Nasdaq ISE Market Makers (FarMM) and Professional Customers 
from $0.45 to $0.46 per contract is reasonable because despite the 
increase to these Regular Order Taker Fees the fees remain competitive.
    The Exchange's proposal to increase Regular Order Taker Fees for 
Market Makers from $0.44 to $0.45 per contract and increase Taker Fees 
for Non-Nasdaq ISE Market Makers (FarMM) and Professional Customers 
from $0.45 to $0.46 per contract is equitable and not unfairly 
discriminatory because all market participants will be assessed a 
similar Taker Fee, except that Market Makers and Priority Customers 
will continue to be assessed a lower fee. The Exchange believes that 
assessing a lower Taker Fee for Priority Customers is reasonable 
because Priority Customer order flow enhances liquidity on the Exchange 
for the benefit of all market participants and benefits all market 
participants by providing more trading opportunities, which attracts 
Market Makers. Further, assessing a lower Taker Fee for Market Makers 
is reasonable because Market Makers add value through quoting 
obligations \12\ and the commitment of capital. Encouraging Market 
Makers to add greater liquidity benefits all market participants in the 
quality of order interaction.
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    \12\ See ISE Rule 804.
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Fees for Reponses to PIM Orders
    The Exchange's proposal to increase Regular Order Fees for Reponses 
to PIM Orders for all market participants from $0.20 to $0.25 per 
contract is reasonable because despite the increase to these Regular 
Order Taker Fees the fees remain competitive and all market 
participants, other than Priority Customers, have an opportunity to 
decrease there PIM Fees by executing a greater amount of order flow.
    The Exchange's proposal to increase Regular Fees for Reponses to 
PIM Orders for all market participants from $0.20 to $0.25 per contract 
is equitable and not unfairly discriminatory because the Exchange is 
assessing all market participants the same Fee for Reponses to PIM 
Orders.
Fees for PIM Orders
    The Exchange's proposal to increase the amount assessed to a 
Member, other than for a Priority Customer, that executes an ADV of 
12,500 or more contracts in the PIM from $0.00 to $0.02 per contract is 
reasonable because despite the increase to PIM Order fees, the Exchange 
continues to offer market participants, other than Priority Customers, 
the ability to reduce fees by executing a certain amount of eligible 
contracts, in this case ADV of 12,500 or more contracts.
    The Exchange's proposal to increase the amount assessed to a 
Member, other than for a Priority Customer, that executes an ADV of 
12,500 or more contracts in the PIM from $0.00 to $0.02 per contract is 
equitable and not unfairly discriminatory because today all market 
participants, except Priority Customers, are assessed a $0.10 per 
contract fee for executing PIM orders. Priority Customers are not 
assessed a Fee for PIM Orders. Non-Priority Customer market 
participants have the opportunity today to decrease their PIM Orders 
Fee from $0.10 to $0.05 per contract provided a Member executes an ADV 
of 7,500 or more contracts in the PIM in a given month. With this 
proposal, all non-Priority Customer market participants have the 
opportunity today to decrease their PIM Orders Fee from $0.10 to $0.02 
per contract provided Members execute an ADV of 12,500 or more 
contracts in the PIM in a given month.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited. While 
this proposal increases various fees, the Exchange believes that its 
pricing remains competitive. Below the Exchange addresses, for each 
proposed, change the reasons why it believes this proposal does not 
impose a burden on intra-market competition.
Taker Fees
    The Exchange's proposal to increase Regular Order Taker Fees for 
Market Makers from $0.44 to $0.45 per contract and increase Taker Fees 
for Non-Nasdaq ISE Market Makers (FarMM) and Professional Customers 
from $0.45 to $0.46 per contract does not impose an undue burden on 
competition because all market participants will be assessed a similar 
Taker Fee, except that Market Makers and Priority Customers will 
continue to be assessed a lower fee. The Exchange believes that 
assessing a lower Taker Fee for Priority Customers is reasonable 
because Priority Customer order flow enhances liquidity on the Exchange 
for the benefit of all market participants and benefits all market 
participants by providing more trading opportunities, which attracts 
market makers. Further, assessing a lower Taker Fee for Market Makers 
is reasonable because Market Makers add value

[[Page 19130]]

through quoting obligations \13\ and the commitment of capital. 
Encouraging Market Makers to add greater liquidity benefits all market 
participants in the quality of order interaction.
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    \13\ See ISE Rule 804.
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Fees for Reponses to PIM Orders
    The Exchange's proposal to increase Regular Order Fees for Reponses 
to PIM Orders for all market participants from $0.20 to $0.25 per 
contract does not impose an undue burden on competition because the 
Exchange is assessing all market participants the same Fee for Reponses 
to PIM Orders.
Fees for PIM Orders
    The Exchange's proposal to increase the amount assessed to a 
Member, other than for a Priority Customer, that executes an ADV of 
12,500 or more contracts in the PIM from $0.00 to $0.02 per contract 
does not impose an undue burden on competition because today all market 
participants, except Priority Customers, are assessed a $0.10 per 
contract fee for executing PIM orders. Priority Customers are not 
assessed a Fee for PIM Orders. Non-Priority Customer market 
participants have the opportunity today to decrease their PIM Order Fee 
from $0.10 to $0.05 per contract provided a Member executes an ADV of 
7,500 or more contracts in the PIM in a given month. With this 
proposal, all non-Priority Customer market participants have the 
opportunity today to decrease their PIM Order Fee from $0.10 to $0.02 
per contract provided Members execute an ADV of 12,500 or more 
contracts in the PIM in a given month.

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,\14\ and Rule 19b-4(f)(2) \15\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is: (i) Necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ISE-2018-37 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-2018-37. 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-2018-37 and should be submitted on 
or before May 22, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-09114 Filed 4-30-18; 8:45 am]
BILLING CODE 8011-01-P