83 FR 34625 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Schedule of Fees To Add Establish Fees and Rebates for NQX Options and Make Several Clarifying Changes

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 140 (July 20, 2018)

Page Range		34625-34630
FR Document		2018-15503
Federal Register, Volume 83 Issue 140 (Friday, July 20, 2018)
[Federal Register Volume 83, Number 140 (Friday, July 20, 2018)]
[Notices]
[Pages 34625-34630]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-15503]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83639; File No. SR-ISE-2018-61]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Schedule of Fees To Add Establish Fees and Rebates for NQX 
Options and Make Several Clarifying Changes

July 16, 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 July 2, 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 the Exchange's Schedule of Fees.
    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

[[Page 34626]]

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 recently received approval to list index options on 
the Nasdaq 100 Reduced Value Index (``NQX'') on a pilot basis.\3\ The 
Exchange began to list NQX on June 26, 2018, and filed on the same day 
a proposed rule change that waived fees and rebates for executions in 
NQX options from June 26-29, 2018.\4\ The Exchange now proposes to 
amend its Schedule of Fees to adopt pricing for NQX.
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    \3\ See Securities Exchange Act Release No. 82911 (March 20, 
2018), 83 FR 12966 (March 26, 2018) (SR-ISE-2017-106). The NQX 
options contract is the same in all respects as the current Nasdaq-
100 Index options contract (``NDX'') listed on the Exchange, except 
that NQX is P.M. settled and based on \1/5\ of the value of the 
Nasdaq 100 Index. The Exchange notes that similar features are 
available with other index options contracts listed on the Exchange, 
including P.M. settled options on the full value of the Nasdaq 100 
Index (``NDXP'').
    \4\ See SR-ISE-2018-58 (not yet published).
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    By way of background, certain proprietary products such as NDX and 
NDXP are commonly included in or excluded from a variety of fee and 
rebate programs. The Exchange notes that the reason these products are 
often included in or excluded from certain programs is because the 
Exchange has expended considerable resources developing and maintaining 
its proprietary products. Similar to NDX and NDXP, NQX is a proprietary 
product. As such, the Exchange proposes to establish transaction fees 
for NQX options that are similarly structured to the transaction fees 
for NDX and NDXP options with some differences as noted below. The 
Exchange also proposes to similarly include or exclude NQX options from 
several programs from which NDX and NDXP options are currently included 
or excluded. Lastly, the Exchange proposes a number of clarifying 
changes to the Schedule of Fees. Each change is discussed below.
Transaction Fees for NQX Options
    The Exchange proposes to establish transaction fees and rebates for 
adding or removing liquidity from ISE (i.e., maker/taker fees and 
rebates) in NQX options. The proposed maker/taker fees and rebates for 
NQX will apply to executions in both the regular and complex order 
book, according to the following schedule:

------------------------------------------------------------------------
       Market participant          Maker fee/rebate    Taker fee/rebate
------------------------------------------------------------------------
Market Maker....................             ($0.25)               $0.00
Market Maker (for orders sent by              (0.25)                0.00
 Electronic Access Members).....
Non-Nasdaq ISE Market Maker                     0.25                0.25
 (FarMM)........................
Firm Proprietary/Broker-Dealer..                0.25                0.25
Professional Customer...........                0.25                0.25
Priority Customer...............                0.00                0.00
------------------------------------------------------------------------

    The proposed pricing for NQX is similarly structured to how the 
Exchange currently prices its other proprietary products, NDX and NDXP, 
in that Non-Priority Customers,\5\ except for Market Makers (i.e., 
Primary Market Makers and Competitive Market Makers) in this case, will 
be charged uniform transaction fees and Priority Customers \6\ will not 
be charged any fees.\7\ Furthermore, the proposed pricing for NQX will 
similarly apply to all executions in NQX, including Non-Priority 
Customer Crossing Orders \8\ in NQX. Unlike NDX and NDXP, which are 
currently charged the applicable complex order fees for Non-Select 
Symbols (i.e., options overlying all symbols that are not in the Penny 
Program) in Section II, the proposed pricing for NQX applies to both 
regular and complex executions in NQX orders. The Exchange believes 
that this will promote trading activity in the new product since 
complex executions in Non-Priority Customer NQX orders will mainly be 
charged at a lower rate.\9\
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    \5\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq 
ISE Market Makers, Firm Proprietary/Broker-Dealers, and Professional 
Customers.
    \6\ 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).
    \7\ See Securities Exchange Act Releases No. 80637 (May 10, 
2017), 82 FR 22576 (May 16, 2017) (SR-ISE-2017-35) (among other 
changes, establishing flat transaction fees for executions of 
regular NDX orders) and No. 83144 (May 1, 2018), 83 FR 20107 (May 7, 
2018) (SR-ISE-2018-38) (among other changes, establishing flat 
transaction fees for executions of regular NDXP orders).
    \8\ A ``Crossing Order'' is an order executed in the Exchange's 
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement 
Mechanism (PIM) or submitted as a Qualified Contingent Cross order. 
For purposes of the fee schedule, orders executed in the Block Order 
Mechanism are also considered Crossing Orders.
    \9\ For instance, a Non-Priority Customer complex order in a 
Non-Select Symbol (when trading against a Priority Customer) would 
normally be charged maker/taker fees ranging from $0.86 to $0.88 per 
contract. See Maker and Taker fee schedule in Section II. NQX is a 
Non-Select Symbol.
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    The proposed pricing for Market Maker orders, including those 
orders sent by Electronic Access Members (``EAMs''), is intended to 
encourage Market Maker activity in NQX, and the Exchange believes that 
the $0.25 per contract maker rebate and taker fee waiver for Market 
Maker orders will provide such incentive. In addition, the proposed 
$0.25 per contract maker rebate is intended to offset the proposed NQX 
license surcharge, as further discussed below, and will further 
incentivize Market Makers to provide liquidity in the new product 
during the initial months of trading.
    In connection the foregoing changes, the Exchange proposes to 
remove language related to the NQX fee holiday from June 26-30, 2018 
from its Schedule of Fees. The Exchange also proposes to relocate the 
pricing for NDX and NDXP presently set forth in the separate table 
entitled ``Index Options'' within Section I, and the Non-Priority 
Customer license surcharge for index options presently within Section 
IV.C, to group them with the proposed fees and rebates for NQX. The 
Exchange proposes to set forth the foregoing index options fees in 
Section III, which currently contains pricing for FX options, and 
retitle that section as ``Index Options Fees and Rebates.'' FX options 
ceased trading on the Exchange upon the January 2018 expiry, after 
which the Exchange determined not to list additional expiry contracts 
for FX options. No market participant has traded FX options on the 
Exchange as of the January 2018 expiry. As such, the Exchange proposes 
to remove all references to specific pricing for FX options from its 
Schedule of Fees.

[[Page 34627]]

    The Exchange proposes in the new Section III to restructure the 
index options fees described above into three separate subsections. 
First, the Exchange proposes to add a new subsection A, and list the 
transaction fees for NDX and NDXP in this subsection. As noted above, 
the fees are not being amended; rather, the existing fees in Section I 
are being relocated into Section III.A. The rule text in corresponding 
note 7 in Section I will be deleted since the substance is being 
relocated to Section III.A. Section III.A will be titled, ``NDX Index 
Options Fees for Regular Orders'' to clarify that these fees apply to 
executions in regular NDX and NDXP orders only, and the Exchange will 
separately note in Section III.A that for all executions in complex NDX 
and NDXP orders, the applicable complex order fees for Non-Select 
Symbols in Section II will apply.\10\
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    \10\ For purposes of the Schedule of Fees, ``NDX'' is defined 
therein as A.M. or P.M. settled options on the full value of the 
Nasdaq 100 Index, and therefore includes both NDX and NDXP options.
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    Second, the Exchange proposes to add a new subsection B, and list 
the proposed maker/taker fees and rebates for NQX, as discussed above, 
in this subsection. Section III.B will be titled, ``NQX Index Options 
Fees and Rebates for Regular and Complex Orders'' to clarify that these 
fees and rebates apply to executions in both regular and complex NQX 
orders.
    Third, the Exchange proposes to add a new subsection C, and list 
the various Non-Priority Customer license surcharge fee amounts for the 
specified index options. Other than to include the proposed NQX license 
surcharge as further discussed below, the current fees are not being 
amended; rather, the existing fees in Section IV.C are being relocated 
into Section III.C. Section III.C will be titled, ``Non-Priority 
Customer License Surcharge for Index Options.''
    The Exchange considers it appropriate to group the index options 
fees as described above so that ISE's pricing for index options may be 
easily located within its fee schedule. For the sake of clarity, the 
Exchange also proposes to note within Section I that for all executions 
in regular NDX, NDXP and NQX orders, the applicable index options fees 
in Section III will apply. The Exchange similarly proposes to note 
within Section II that for all executions in complex NQX orders, the 
NQX index options fees in Section III will apply. The Exchange believes 
that the proposed cross references will clarify how its pricing for 
NDX, NDXP and NQX will apply.
Priority Customer Complex Rebates
    Today, the tiered Priority Customer Complex Rebates in Section II 
of the Schedule of Fees are not paid for NDX or NDXP. Under the 
Exchange's proposal, the Priority Customer Complex Rebates will 
likewise not be paid for NQX.
Non-Priority Customer License Surcharge
    Today as set forth in Section IV.C, the Exchange assesses a license 
surcharge of $0.25 per contract for all Non-Priority Customer orders in 
NDX and NDXP, which applies to all executions in those symbols, 
including executions of NDX and NDXP orders that are routed to away 
markets in connection with the Options Order Protection and Locked/
Crossed Market Plan (the ``Plan'').\11\ The Exchange now proposes to 
apply the $0.25 per contract Non-Priority Customer license surcharge to 
NQX in order to recoup the costs associated with listing this 
proprietary product. Unlike NDX and NDXP, the Exchange is not proposing 
to apply this surcharge to NQX orders that are routed away at this time 
because NQX is currently listed exclusively on ISE. If NQX begins 
listing on any of the other Nasdaq, Inc.-owned exchanges, the Exchange 
will file any necessary rule change proposals with the Commission to 
apply the $0.25 per contract surcharge in addition to the $0.95 per 
contract route-out fee for those NQX orders that are routed away.\12\
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    \11\ The Exchange applies a route-out fee to executions of 
orders in all symbols that are routed to away markets in connection 
with the Plan. Specifically, Non-Priority Customer orders in Non-
Select Symbols pay a route-out fee of $0.95 per contract. NDX and 
NDXP are Non-Select Symbols. See Schedule of Fees, Section IV.F.
    \12\ NQX is a Non-Select Symbol.
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Marketing Fee
    By way of background, the Exchange administers a marketing fee 
program that helps Market Makers establish marketing fee arrangements 
with EAMs in exchange for those EAMs routing some or all of their order 
flow to the Market Maker. This program is funded through a fee of $0.70 
per contract, which is paid by Market Makers for each regular Priority 
Customer contract executed in Non-Select Symbols.\13\ This fee is 
currently waived for NDX and NDXP orders. The Exchange proposes to 
similarly waive the marketing fee for NQX orders.
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    \13\ See Schedule of Fees, Section IV.E.
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Crossing Fee Cap
    As set forth in Section IV.H of the Schedule of Fees, the Exchange 
currently caps Crossing Order fees at $90,000 per month per member on 
all Firm Proprietary \14\ and Non-Nasdaq ISE Market Maker \15\ 
transactions that are part of the originating or contra side of a 
Crossing Order. Surcharge fees charged by the Exchange for licensed 
products (e.g., the $0.25 per contract license surcharge for NDX and 
NDXP) and the fees for index options as set forth in Section I (e.g., 
the $0.75 per contract fees for NDX and NDXP) are currently excluded 
from the calculation of this monthly fee cap. The Exchange now proposes 
to similarly exclude the license surcharge and fees for NQX from the 
calculation of the monthly Crossing Fee Cap. The Exchange also proposes 
to amend language in Section IV.H that currently states, ``Surcharge 
fees charged by the Exchange for licensed products and the fees for 
index options as set forth in Section I . . .'' by replacing the 
reference to Section I with Section III to reflect the proposed 
relocation of various index options fees, as further described above.
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    \14\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \15\ 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.
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Clean-Up Changes
    Lastly, the Exchange proposes a number of clarifying changes to its 
Schedule of Fees. In Section I, the Exchange proposes to amend note 6, 
which currently reads: ``Market Maker fees are subject to tier 
discounts, as provided in Section IV.C.'' The Exchange seeks to update 
the reference to Section IV.C, which presently sets forth the Non-
Priority Customer license surcharge for index options, to Section IV.D, 
which sets forth the Market Maker discount tiers.\16\ In Section II, 
the Exchange proposes to delete the stray references to note 5, which 
is currently reserved, from the maker and taker fee schedule.\17\
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    \16\ The Exchange recently filed a rule change that renumbered 
the subsection containing the market maker tier discounts from 
Section IV.C to Section IV.D, but did not update the specific 
references within the fee schedule. See Securities Exchange Act 
Release No. 83002 (April 5, 2018), 83 FR 15655 (April 11, 2018) (SR-
ISE-2018-27).
    \17\ The Exchange recently filed a proposed rule change to 
delete the rule text within note 5, but did not delete the 
references to the note from maker and taker fee schedule in Section 
II. See Securities Exchange Act Release No. 83431 (June 14, 2018), 
83 FR 28681 (June 20, 2018) (SR-ISE-2018-51).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 34628]]

of the Act,\18\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\19\ 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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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) and (5).
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Transaction Fees for NQX Options
    The Exchange believes that it is reasonable to assess the proposed 
maker/taker fees and rebates as discussed above for NQX because NQX 
will be an exclusively listed product on ISE only. Similar to NDX and 
NDXP, the Exchange seeks to recoup the operational costs for listing 
proprietary products.\20\ Also, pricing by symbol is a common practice 
on many U.S. options exchanges as a means to incentivize order flow to 
be sent to an exchange for execution in particular products. Other 
options exchanges price by symbol.\21\ Further, the Exchange notes that 
with its products, market participants are offered an opportunity to 
either transact NQX or separately execute PowerShares QQQ Trust 
(``QQQ'') options.\22\ Offering products such as QQQ provides market 
participants with a variety of choices in selecting the product they 
desire to utilize to transact the Nasdaq 100 Index.\23\ When exchanges 
are able to recoup costs associated with offering proprietary products, 
it incentivizes growth and competition for the innovation of additional 
products. The Exchange also believes that it is reasonable to assess 
the proposed fees and rebates for both regular and complex executions 
in NQX options, unlike NDX and NDXP which are assessed the normal 
complex rates in Section II, because the Exchange believes that this 
will promote trading activity in NQX as further discussed above.
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    \20\ For example, in analyzing an obvious error, the Exchange 
would have additional data points available in establishing a 
theoretical price for a multiply listed option as compared to a 
proprietary product, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \21\ See pricing for Russell 2000 Index (``RUT'') on Chicago 
Board Options Exchange, Incorporated's (``CBOE'') Fees Schedule and 
on CBOE C2 Exchange, Inc.'s (``C2'') Fees Schedule.
    \22\ QQQ is an exchange-traded fund based on the Nasdaq 100 
Index.
    \23\ QQQ options overlie the same index as NDX, namely the 
Nasdaq 100 Index. This relationship between QQQ options and NDX 
options is similar to the relationship between RUT and the iShares 
Russell 2000 Index (``IWM''), which is the ETF on RUT.
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    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to provide a maker rebate of $0.25 per contract 
and assess no taker fee to Maker Makers as compared to other market 
participants because Market Makers, unlike other market participants, 
take on a number of obligations, including quoting obligations, that 
other market participants do not have. Further, the proposed pricing 
for Market Maker orders in NQX are intended to incentivize Market 
Makers to quote and trade more on the Exchange, thereby providing more 
trading opportunities for all market participants. As noted above, the 
$0.25 per contract maker rebate is intended to offset the $0.25 per 
contract NQX license surcharge, and the Exchange believes this will 
further incentivize Market Makers to provide liquidity in the new 
product during the initial months of trading. Additionally, the 
proposed NQX pricing for Market Makers will be applied equally to all 
Market Maker orders (including those orders sent by an EAM), as further 
discussed above.
    The Exchange also believes that it is reasonable, equitable and not 
unfairly discriminatory to assess no transaction fees to Priority 
Customer orders in NQX because Priority Customer order flow enhances 
liquidity on the Exchange for the benefit of all market participants. 
Priority Customer liquidity provides more trading opportunities, which 
attracts Market Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. The proposed pricing for Priority Customer orders in NQX 
is intended to attract more Priority Customer trading volume to the 
Exchange. In addition, the proposed NQX pricing for Priority Customers 
will apply equally to all Priority Customer orders, as further 
discussed above.
    The Exchange further believes that the proposed fee of $0.25 per 
contract for Non-Nasdaq ISE Market Maker, Firm Proprietary/Broker-
Dealer,\24\ and Professional Customer \25\ orders in NQX is reasonable, 
equitable and not unfairly discriminatory because they are well within 
the range of amounts assessed for the Exchange's other proprietary 
products, including the $0.75 per contract fee charged to those market 
participant orders in NDX and NDXP.\26\ The lower fee amount of $0.25 
per contract for NQX options as compared to $0.75 per contract for NDX 
and NDXP options is reasonable because NQX options is based on \1/5\ of 
the value of the Nasdaq 100 Index whereas both NDX and NDXP are based 
on the full value of the Nasdaq 100, and the Exchange therefore seeks 
to assess corresponding reduced fees for this product. In addition, the 
proposed pricing for Non-Nasdaq ISE Market Maker, Firm Proprietary/
Broker-Dealer, and Professional Customer orders in NQX will be applied 
equally to those market participants, as further discussed above.
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    \24\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \25\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \26\ See Index Options pricing table in the Schedule of Fees, 
Section I.
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    The Exchange believes that the proposed changes to eliminate 
language related to the NQX fee holiday, relocate and group the various 
index options fees within the Schedule of Fees, and make all of the 
clarifying changes related to the relocation, each as discussed above, 
are reasonable, equitable and not unfairly discriminatory. The proposed 
changes are all intended to bring greater clarity to the Schedule of 
Fees and will ensure that ISE's pricing for index options may be easily 
located within its fee schedule. Finally, the Exchange believes that 
its proposal to remove obsolete references to specific pricing for FX 
options from its Schedule of Fees is reasonable, equitable and not 
unfairly discriminatory because FX options ceased trading on the 
Exchange upon the January 2018 expiry, as discussed above, and the 
specific pricing for FX options is therefore no longer applicable. No 
market participant can trade any FX options on ISE since the Exchange 
has determined not to list additional expiry contracts.
Priority Customer Complex Rebates
    The Exchange believes that its proposal to eliminate the Priority 
Customer Complex Rebates for NQX is reasonable because even after the 
elimination of the rebate, Priority Customer complex orders in NQX will 
not be assessed any complex order transaction fees. As noted above, the 
Priority Customer Complex Rebates are likewise currently eliminated for 
NDX and NDXP. By contrast, public customer executions on C2 in RUT are 
subject to a $0.15 per contract transaction fee.\27\
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    \27\ See C2's Fees Schedule, Section 1.C.
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    The Exchange's proposal to eliminate the Priority Customer Complex 
Rebates for NQX is equitable and not unfairly

[[Page 34629]]

discriminatory because the Exchange will eliminate the rebate for all 
similarly situated members.
Non-Priority Customer License Surcharge
    The Exchange believes that its proposal to charge a $0.25 per 
contract Non-Priority Customer license surcharge for NQX is reasonable 
because the fee amount is the same as the amount for NDX and NDXP, and 
lower when compared to the $0.45 per contract surcharge C2 applies to 
non-public customer transactions in RUT.\28\ The proposed license 
surcharge for NQX will also help recoup costs associated with listing 
proprietary products. The Exchange also believes that its proposal to 
not apply the Non-Priority Customer license surcharge to NQX orders 
that are routed to away markets in connection with the Plan is 
reasonable because NQX is currently an exclusively listed product, as 
discussed above.
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    \28\ See C2's Fees Schedule, Section 1.D.
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    Further, the Exchange believes that its proposal to assess a Non-
Priority Customer license surcharge of $0.25 per contract to NQX 
options is equitable and not unfairly discriminatory because the 
Exchange will apply the same surcharge for all similarly situated 
members in a similar manner. The Exchange also believes that it is 
equitable and not unfairly discriminatory to not assess the surcharge 
to Priority Customer orders in NQX because Priority Customer orders 
bring valuable liquidity to the market, which in turn benefits other 
market participants.
Marketing Fee
    The Exchange believes that its proposal to exclude NQX from the 
$0.70 per contract marketing fee is reasonable because the purpose of 
the marketing fee is to attract order flow to the Exchange. Because NQX 
will be an exclusively listed product, a marketing fee whose purpose is 
to attract order flow to the Exchange is no longer necessary for NQX.
    The Exchange's proposal to exclude NQX from the marketing fee is 
equitable and not unfairly discriminatory because the Exchange will 
apply this exclusion to all similarly situated members.
Crossing Fee Cap
    The Exchange believes that its proposal to exclude the Non-Priority 
Customer license surcharge and transaction fees for NQX from the 
calculation of the monthly Crossing Fee Cap is reasonable because NQX 
will be an exclusively listed product. Similar to NDX and NDXP, which 
are also excluded from the Crossing Fee Cap, the Exchange seeks to 
recoup the operational costs for listing proprietary products. The 
Exchange further believes that the proposed exclusion of NQX from the 
Crossing Fee Cap is equitable and not unfairly discriminatory because 
the Exchange will apply the exclusion all similarly situated members. 
The Exchange also believes that it is reasonable, equitable and not 
unfairly discriminatory to amend Section IV.H to include the reference 
to the various index options fees in Section III, as discussed above, 
because it will conform Section IV.H to the changes proposed herein and 
clarify how this provision will be applied.
Clean-Up Changes
    The Exchange believes that the clean-up changes to Sections I and 
II as described above are reasonable, equitable and not unfairly 
discriminatory because they are merely intended to bring greater 
clarity to the Schedule of Fees, to the benefit of all market 
participants.

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 does not believe 
its proposal to assess different maker/taker fees and rebates to 
different market participants for NQX options will impose an undue 
burden on competition because different market participants have 
different obligations and circumstances, as further discussed above. 
For example, Market Makers have quoting obligations that other market 
participants do not have. In addition, the Exchange notes that with its 
products, market participants are offered an opportunity to either 
transact NDXP or separately execute QQQ options. Offering products such 
as QQQ provides market participants with a variety of choices in 
selecting the product they desire to utilize to transact the Nasdaq 100 
Index.\29\ Furthermore, the proposed pricing changes will apply 
uniformly to all similarly situated market participants, as discussed 
above. For the foregoing reasons, the Exchange does not believe that 
the proposed changes to adopt pricing for NQX options as described 
above will impose an undue burden on competition.
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    \29\ See note 23 above.
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    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.

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,\30\ and Rule 19b-4(f)(2) \31\ 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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    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \31\ 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-2018-61 on the subject line.

[[Page 34630]]

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-2018-61. 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-2018-61 and should be submitted on 
or before August 10, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-15503 Filed 7-19-18; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices 34625

C. Self-Regulatory Organization’s public interest, for the protection of should be submitted on or before
Statement on Comments on the investors, or otherwise in furtherance of August 10, 2018.
Proposed Rule Change Received From the purposes of the Act. If the For the Commission, by the Division of
Members, Participants, or Others Commission takes such action, the Trading and Markets, pursuant to delegated
No written comments were either Commission shall institute proceedings authority.23
solicited or received. to determine whether the proposed rule Eduardo A. Aleman,
should be approved or disapproved. Assistant Secretary.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for IV. Solicitation of Comments [FR Doc. 2018–15501 Filed 7–19–18; 8:45 am]
BILLING CODE 8011–01–P
Commission Action Interested persons are invited to
Because the proposed rule change submit written data, views, and
does not (i) significantly affect the arguments concerning the foregoing,
SECURITIES AND EXCHANGE
protection of investors or the public including whether the proposed rule
COMMISSION
interest; (ii) impose any significant change is consistent with the Act.
burden on competition; and (iii) become Comments may be submitted by any of [Release No. 34–83639; File No. SR–ISE–
the following methods: 2018–61]
operative for 30 days from the date on
which it was filed, or such shorter time Electronic Comments Self-Regulatory Organizations; Nasdaq
as the Commission may designate, it has
• Use the Commission’s internet ISE, LLC; Notice of Filing and
become effective pursuant to Section Immediate Effectiveness of Proposed
comment form (http://www.sec.gov/
19(b)(3)(A) of the Act 18 and Rule 19b– rules/sro.shtml); or Rule Change To Amend the
4(f)(6) thereunder.19 • Send an email to rule-comments@ Exchange’s Schedule of Fees To Add
A proposed rule change filed sec.gov. Please include File Number SR– Establish Fees and Rebates for NQX
pursuant to Rule 19b–4(f)(6) under the GEMX–2018–25 on the subject line. Options and Make Several Clarifying
Act 20 normally does not become Changes
operative for 30 days after the date of its Paper Comments
filing. However, Rule 19b–4(f)(6)(iii) 21 • Send paper comments in triplicate July 16, 2018.
permits the Commission to designate a to Brent J. Fields, Secretary, Securities Pursuant to Section 19(b)(1) of the
shorter time if such action is consistent and Exchange Commission, 100 F Street Securities Exchange Act of 1934
with the protection of investors and the NE, Washington, DC 20549–1090. (‘‘Act’’),1 and Rule 19b–4 thereunder,2
public interest. The Exchange has asked All submissions should refer to File notice is hereby given that on July 2,
the Commission to waive the 30-day Number SR–GEMX–2018–25. This file 2018, Nasdaq ISE, LLC (‘‘ISE’’ or
operative delay so that it may allow all number should be included on the ‘‘Exchange’’) filed with the Securities
Members to submit Improvement Orders subject line if email is used. To help the and Exchange Commission
directly into PIM to provide an even Commission process and review your (‘‘Commission’’) the proposed rule
greater number of GEMX Members an comments more efficiently, please use change as described in Items I and II
opportunity to more directly participate only one method. The Commission will below, which Items have been prepared
in PIM and provide price improvement. post all comments on the Commission’s by the Exchange. The Commission is
The Exchange states that it will issue an internet website (http://www.sec.gov/ publishing this notice to solicit
Options Trader Alert to notify Members rules/sro.shtml). Copies of the comments on the proposed rule change
of the date within which this submission, all subsequent from interested persons.
functionality will be implemented. The amendments, all written statements I. Self-Regulatory Organization’s
Commission believes the waiver of the with respect to the proposed rule Statement of the Terms of Substance of
operative delay is consistent with the change that are filed with the the Proposed Rule Change
protection of investors and the public Commission, and all written
interest. Accordingly, the Commission The Exchange proposes to amend the
communications relating to the
hereby waives the operative delay and Exchange’s Schedule of Fees.
proposed rule change between the The text of the proposed rule change
designates the proposed rule change Commission and any person, other than
operative upon filing.22 is available on the Exchange’s website at
those that may be withheld from the http://ise.cchwallstreet.com/, at the
At any time within 60 days of the public in accordance with the
filing of the proposed rule change, the principal office of the Exchange, and at
provisions of 5 U.S.C. 552, will be the Commission’s Public Reference
Commission summarily may available for website viewing and
temporarily suspend such rule change if Room.
printing in the Commission’s Public
it appears to the Commission that such Reference Room, 100 F Street NE, II. Self-Regulatory Organization’s
action is necessary or appropriate in the Washington, DC 20549 on official Statement of the Purpose of, and
business days between the hours of Statutory Basis for, the Proposed Rule
18 15 U.S.C. 78s(b)(3)(A).
19 17
10:00 a.m. and 3:00 p.m. Copies of such Change
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the filing also will be available for In its filing with the Commission, the
Commission with written notice of its intent to file inspection and copying at the principal Exchange included statements
the proposed rule change, along with a brief office of the Exchange. All comments concerning the purpose of and basis for
description and the text of the proposed rule received will be posted without change.
change, at least five business days prior to the date the proposed rule change and discussed
of filing of the proposed rule change, or such Persons submitting comments are any comments it received on the
daltland on DSKBBV9HB2PROD with NOTICES

shorter time as designated by the Commission. cautioned that we do not redact or edit proposed rule change. The text of these
20 17 CFR 240.19b–4(f)(6). personal identifying information from statements may be examined at the
21 17 CFR 240.19b–4(f)(6)(iii).
comment submissions. You should places specified in Item IV below. The
22 For purposes only of waiving the 30-day
submit only information that you wish
operative delay, the Commission has also
considered the proposed rule’s impact on
to make available publicly. All 23 17 CFR 200.30–3(a)(12).
efficiency, competition, and capital formation. See submissions should refer to File 1 15 U.S.C. 78s(b)(1).
15 U.S.C. 78c(f). Number SR–GEMX–2018–25, and 2 17 CFR 240.19b–4.

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Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices 34627

The Exchange proposes in the new Priority Customer Complex Rebates $90,000 per month per member on all
Section III to restructure the index Today, the tiered Priority Customer Firm Proprietary 14 and Non-Nasdaq ISE
options fees described above into three Complex Rebates in Section II of the Market Maker 15 transactions that are
separate subsections. First, the Schedule of Fees are not paid for NDX part of the originating or contra side of
Exchange proposes to add a new or NDXP. Under the Exchange’s a Crossing Order. Surcharge fees
subsection A, and list the transaction proposal, the Priority Customer charged by the Exchange for licensed
fees for NDX and NDXP in this Complex Rebates will likewise not be products (e.g., the $0.25 per contract
subsection. As noted above, the fees are paid for NQX. license surcharge for NDX and NDXP)
not being amended; rather, the existing and the fees for index options as set
fees in Section I are being relocated into Non-Priority Customer License forth in Section I (e.g., the $0.75 per
Section III.A. The rule text in Surcharge contract fees for NDX and NDXP) are
corresponding note 7 in Section I will Today as set forth in Section IV.C, the currently excluded from the calculation
be deleted since the substance is being Exchange assesses a license surcharge of of this monthly fee cap. The Exchange
relocated to Section III.A. Section III.A $0.25 per contract for all Non-Priority now proposes to similarly exclude the
will be titled, ‘‘NDX Index Options Fees Customer orders in NDX and NDXP, license surcharge and fees for NQX from
for Regular Orders’’ to clarify that these which applies to all executions in those the calculation of the monthly Crossing
fees apply to executions in regular NDX symbols, including executions of NDX Fee Cap. The Exchange also proposes to
and NDXP orders only, and the and NDXP orders that are routed to amend language in Section IV.H that
Exchange will separately note in Section away markets in connection with the currently states, ‘‘Surcharge fees
III.A that for all executions in complex Options Order Protection and Locked/ charged by the Exchange for licensed
NDX and NDXP orders, the applicable Crossed Market Plan (the ‘‘Plan’’).11 The products and the fees for index options
complex order fees for Non-Select Exchange now proposes to apply the as set forth in Section I . . .’’ by
Symbols in Section II will apply.10 $0.25 per contract Non-Priority replacing the reference to Section I with
Second, the Exchange proposes to add Customer license surcharge to NQX in Section III to reflect the proposed
a new subsection B, and list the order to recoup the costs associated relocation of various index options fees,
proposed maker/taker fees and rebates with listing this proprietary product. as further described above.
for NQX, as discussed above, in this Unlike NDX and NDXP, the Exchange is
not proposing to apply this surcharge to Clean-Up Changes
subsection. Section III.B will be titled,
‘‘NQX Index Options Fees and Rebates NQX orders that are routed away at this Lastly, the Exchange proposes a
for Regular and Complex Orders’’ to time because NQX is currently listed number of clarifying changes to its
clarify that these fees and rebates apply exclusively on ISE. If NQX begins listing Schedule of Fees. In Section I, the
to executions in both regular and on any of the other Nasdaq, Inc.-owned Exchange proposes to amend note 6,
complex NQX orders. exchanges, the Exchange will file any which currently reads: ‘‘Market Maker
Third, the Exchange proposes to add necessary rule change proposals with fees are subject to tier discounts, as
a new subsection C, and list the various the Commission to apply the $0.25 per provided in Section IV.C.’’ The
Non-Priority Customer license surcharge contract surcharge in addition to the Exchange seeks to update the reference
fee amounts for the specified index $0.95 per contract route-out fee for those to Section IV.C, which presently sets
options. Other than to include the NQX orders that are routed away.12 forth the Non-Priority Customer license
proposed NQX license surcharge as Marketing Fee surcharge for index options, to Section
further discussed below, the current fees By way of background, the Exchange IV.D, which sets forth the Market Maker
are not being amended; rather, the administers a marketing fee program discount tiers.16 In Section II, the
existing fees in Section IV.C are being that helps Market Makers establish Exchange proposes to delete the stray
relocated into Section III.C. Section III.C marketing fee arrangements with EAMs references to note 5, which is currently
will be titled, ‘‘Non-Priority Customer in exchange for those EAMs routing reserved, from the maker and taker fee
License Surcharge for Index Options.’’ some or all of their order flow to the schedule.17
The Exchange considers it appropriate Market Maker. This program is funded 2. Statutory Basis
to group the index options fees as through a fee of $0.70 per contract,
described above so that ISE’s pricing for which is paid by Market Makers for The Exchange believes that its
index options may be easily located each regular Priority Customer contract proposal is consistent with Section 6(b)
within its fee schedule. For the sake of executed in Non-Select Symbols.13 This
clarity, the Exchange also proposes to fee is currently waived for NDX and 14 A ‘‘Firm Proprietary’’ order is an order

note within Section I that for all NDXP orders. The Exchange proposes to submitted by a member for its own proprietary
executions in regular NDX, NDXP and account.
similarly waive the marketing fee for 15 A ‘‘Non-Nasdaq ISE Market Maker’’ is a market
NQX orders, the applicable index NQX orders. maker as defined in Section 3(a)(38) of the
options fees in Section III will apply. Securities Exchange Act of 1934, as amended,
The Exchange similarly proposes to note Crossing Fee Cap registered in the same options class on another
within Section II that for all executions As set forth in Section IV.H of the options exchange.
16 The Exchange recently filed a rule change that
in complex NQX orders, the NQX index Schedule of Fees, the Exchange
renumbered the subsection containing the market
options fees in Section III will apply. currently caps Crossing Order fees at maker tier discounts from Section IV.C to Section
The Exchange believes that the IV.D, but did not update the specific references
daltland on DSKBBV9HB2PROD with NOTICES

proposed cross references will clarify 11 The Exchange applies a route-out fee to
within the fee schedule. See Securities Exchange
how its pricing for NDX, NDXP and executions of orders in all symbols that are routed Act Release No. 83002 (April 5, 2018), 83 FR 15655
to away markets in connection with the Plan. (April 11, 2018) (SR–ISE–2018–27).
NQX will apply. Specifically, Non-Priority Customer orders in Non- 17 The Exchange recently filed a proposed rule
Select Symbols pay a route-out fee of $0.95 per change to delete the rule text within note 5, but did
10 For purposes of the Schedule of Fees, ‘‘NDX’’ contract. NDX and NDXP are Non-Select Symbols. not delete the references to the note from maker and
is defined therein as A.M. or P.M. settled options See Schedule of Fees, Section IV.F. taker fee schedule in Section II. See Securities
12 NQX is a Non-Select Symbol.
on the full value of the Nasdaq 100 Index, and Exchange Act Release No. 83431 (June 14, 2018), 83
therefore includes both NDX and NDXP options. 13 See Schedule of Fees, Section IV.E. FR 28681 (June 20, 2018) (SR–ISE–2018–51).

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34628 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices

of the Act,18 in general, and furthers the activity in NQX as further discussed contract fee charged to those market
objectives of Sections 6(b)(4) and 6(b)(5) above. participant orders in NDX and NDXP.26
of the Act,19 in particular, in that it The Exchange believes that it is The lower fee amount of $0.25 per
provides for the equitable allocation of reasonable, equitable and not unfairly contract for NQX options as compared
reasonable dues, fees, and other charges discriminatory to provide a maker to $0.75 per contract for NDX and NDXP
among members and issuers and other rebate of $0.25 per contract and assess options is reasonable because NQX
persons using any facility, and is not no taker fee to Maker Makers as options is based on 1⁄5 of the value of
designed to permit unfair compared to other market participants the Nasdaq 100 Index whereas both
discrimination between customers, because Market Makers, unlike other NDX and NDXP are based on the full
issuers, brokers, or dealers. market participants, take on a number of value of the Nasdaq 100, and the
obligations, including quoting Exchange therefore seeks to assess
Transaction Fees for NQX Options obligations, that other market corresponding reduced fees for this
participants do not have. Further, the product. In addition, the proposed
The Exchange believes that it is proposed pricing for Market Maker pricing for Non-Nasdaq ISE Market
reasonable to assess the proposed orders in NQX are intended to Maker, Firm Proprietary/Broker-Dealer,
maker/taker fees and rebates as incentivize Market Makers to quote and and Professional Customer orders in
discussed above for NQX because NQX trade more on the Exchange, thereby NQX will be applied equally to those
will be an exclusively listed product on providing more trading opportunities market participants, as further discussed
ISE only. Similar to NDX and NDXP, the for all market participants. As noted above.
Exchange seeks to recoup the above, the $0.25 per contract maker The Exchange believes that the
operational costs for listing proprietary rebate is intended to offset the $0.25 per proposed changes to eliminate language
products.20 Also, pricing by symbol is a contract NQX license surcharge, and the related to the NQX fee holiday, relocate
common practice on many U.S. options Exchange believes this will further and group the various index options
exchanges as a means to incentivize incentivize Market Makers to provide fees within the Schedule of Fees, and
order flow to be sent to an exchange for liquidity in the new product during the make all of the clarifying changes
execution in particular products. Other initial months of trading. Additionally, related to the relocation, each as
options exchanges price by symbol.21 the proposed NQX pricing for Market discussed above, are reasonable,
Further, the Exchange notes that with its Makers will be applied equally to all equitable and not unfairly
products, market participants are Market Maker orders (including those discriminatory. The proposed changes
offered an opportunity to either transact orders sent by an EAM), as further are all intended to bring greater clarity
discussed above. to the Schedule of Fees and will ensure
NQX or separately execute PowerShares
The Exchange also believes that it is that ISE’s pricing for index options may
QQQ Trust (‘‘QQQ’’) options.22 Offering reasonable, equitable and not unfairly
products such as QQQ provides market be easily located within its fee schedule.
discriminatory to assess no transaction Finally, the Exchange believes that its
participants with a variety of choices in fees to Priority Customer orders in NQX
selecting the product they desire to proposal to remove obsolete references
because Priority Customer order flow to specific pricing for FX options from
utilize to transact the Nasdaq 100 enhances liquidity on the Exchange for
Index.23 When exchanges are able to its Schedule of Fees is reasonable,
the benefit of all market participants. equitable and not unfairly
recoup costs associated with offering Priority Customer liquidity provides discriminatory because FX options
proprietary products, it incentivizes more trading opportunities, which ceased trading on the Exchange upon
growth and competition for the attracts Market Makers. An increase in the January 2018 expiry, as discussed
innovation of additional products. The the activity of these market participants above, and the specific pricing for FX
Exchange also believes that it is in turn facilitates tighter spreads, which options is therefore no longer
reasonable to assess the proposed fees may cause an additional corresponding applicable. No market participant can
and rebates for both regular and increase in order flow from other market trade any FX options on ISE since the
complex executions in NQX options, participants. The proposed pricing for Exchange has determined not to list
unlike NDX and NDXP which are Priority Customer orders in NQX is additional expiry contracts.
assessed the normal complex rates in intended to attract more Priority
Section II, because the Exchange Customer trading volume to the Priority Customer Complex Rebates
believes that this will promote trading Exchange. In addition, the proposed The Exchange believes that its
NQX pricing for Priority Customers will proposal to eliminate the Priority
18 15 U.S.C. 78f(b). apply equally to all Priority Customer Customer Complex Rebates for NQX is
19 15 U.S.C. 78f(b)(4) and (5). orders, as further discussed above. reasonable because even after the
20 For example, in analyzing an obvious error, the The Exchange further believes that the elimination of the rebate, Priority
Exchange would have additional data points proposed fee of $0.25 per contract for Customer complex orders in NQX will
available in establishing a theoretical price for a Non-Nasdaq ISE Market Maker, Firm not be assessed any complex order
multiply listed option as compared to a proprietary Proprietary/Broker-Dealer,24 and
product, which requires additional analysis and transaction fees. As noted above, the
administrative time to comply with Exchange rules Professional Customer 25 orders in NQX Priority Customer Complex Rebates are
to resolve an obvious error. is reasonable, equitable and not unfairly likewise currently eliminated for NDX
21 See pricing for Russell 2000 Index (‘‘RUT’’) on discriminatory because they are well and NDXP. By contrast, public customer
Chicago Board Options Exchange, Incorporated’s within the range of amounts assessed for
(‘‘CBOE’’) Fees Schedule and on CBOE C2 executions on C2 in RUT are subject to
the Exchange’s other proprietary a $0.15 per contract transaction fee.27
daltland on DSKBBV9HB2PROD with NOTICES

Exchange, Inc.’s (‘‘C2’’) Fees Schedule.
22 QQQ is an exchange-traded fund based on the products, including the $0.75 per The Exchange’s proposal to eliminate
Nasdaq 100 Index. the Priority Customer Complex Rebates
23 QQQ options overlie the same index as NDX, 24 A ‘‘Broker-Dealer’’ order is an order submitted

namely the Nasdaq 100 Index. This relationship by a member for a broker-dealer account that is not
for NQX is equitable and not unfairly
between QQQ options and NDX options is similar its own proprietary account.
26 See Index Options pricing table in the Schedule
to the relationship between RUT and the iShares 25 A ‘‘Professional Customer’’ is a person or entity

Russell 2000 Index (‘‘IWM’’), which is the ETF on that is not a broker/dealer and is not a Priority of Fees, Section I.
RUT. Customer. 27 See C2’s Fees Schedule, Section 1.C.

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Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices 34629

discriminatory because the Exchange NDX and NDXP, which are also market participants can readily favor
will eliminate the rebate for all similarly excluded from the Crossing Fee Cap, the competing venues if they deem fee
situated members. Exchange seeks to recoup the levels at a particular venue to be
operational costs for listing proprietary excessive, or rebate opportunities
Non-Priority Customer License
products. The Exchange further believes available at other venues to be more
Surcharge
that the proposed exclusion of NQX favorable. In such an environment, the
The Exchange believes that its from the Crossing Fee Cap is equitable Exchange must continually adjust its
proposal to charge a $0.25 per contract and not unfairly discriminatory because fees to remain competitive with other
Non-Priority Customer license surcharge the Exchange will apply the exclusion exchanges and with alternative trading
for NQX is reasonable because the fee all similarly situated members. The systems that have been exempted from
amount is the same as the amount for Exchange also believes that it is compliance with the statutory standards
NDX and NDXP, and lower when reasonable, equitable and not unfairly applicable to exchanges. Because
compared to the $0.45 per contract discriminatory to amend Section IV.H to competitors are free to modify their own
surcharge C2 applies to non-public include the reference to the various fees in response, and because market
customer transactions in RUT.28 The index options fees in Section III, as participants may readily adjust their
proposed license surcharge for NQX discussed above, because it will order routing practices, the Exchange
will also help recoup costs associated conform Section IV.H to the changes believes that the degree to which fee
with listing proprietary products. The proposed herein and clarify how this changes in this market may impose any
Exchange also believes that its proposal provision will be applied. burden on competition is extremely
to not apply the Non-Priority Customer limited.
Clean-Up Changes
license surcharge to NQX orders that are
routed to away markets in connection The Exchange believes that the clean- C. Self-Regulatory Organization’s
with the Plan is reasonable because up changes to Sections I and II as Statement on Comments on the
NQX is currently an exclusively listed described above are reasonable, Proposed Rule Change Received From
product, as discussed above. equitable and not unfairly Members, Participants, or Others
Further, the Exchange believes that its discriminatory because they are merely No written comments were either
proposal to assess a Non-Priority intended to bring greater clarity to the
solicited or received.
Customer license surcharge of $0.25 per Schedule of Fees, to the benefit of all
contract to NQX options is equitable market participants. III. Date of Effectiveness of the
and not unfairly discriminatory because Proposed Rule Change and Timing for
B. Self-Regulatory Organization’s
the Exchange will apply the same Commission Action
Statement on Burden on Competition
surcharge for all similarly situated The foregoing rule change has become
members in a similar manner. The The Exchange does not believe that
the proposed rule change will impose effective pursuant to Section
Exchange also believes that it is 19(b)(3)(A)(ii) of the Act,30 and Rule
equitable and not unfairly any burden on competition not
necessary or appropriate in furtherance 19b–4(f)(2) 31 thereunder. At any time
discriminatory to not assess the within 60 days of the filing of the
surcharge to Priority Customer orders in of the purposes of the Act. The
Exchange does not believe its proposal proposed rule change, the Commission
NQX because Priority Customer orders summarily may temporarily suspend
bring valuable liquidity to the market, to assess different maker/taker fees and
rebates to different market participants such rule change if it appears to the
which in turn benefits other market Commission that such action is: (i)
participants. for NQX options will impose an undue
burden on competition because different Necessary or appropriate in the public
Marketing Fee market participants have different interest; (ii) for the protection of
obligations and circumstances, as investors; or (iii) otherwise in
The Exchange believes that its
further discussed above. For example, furtherance of the purposes of the Act.
proposal to exclude NQX from the $0.70
Market Makers have quoting obligations If the Commission takes such action, the
per contract marketing fee is reasonable
that other market participants do not Commission shall institute proceedings
because the purpose of the marketing
have. In addition, the Exchange notes to determine whether the proposed rule
fee is to attract order flow to the
that with its products, market should be approved or disapproved.
Exchange. Because NQX will be an
exclusively listed product, a marketing participants are offered an opportunity IV. Solicitation of Comments
fee whose purpose is to attract order to either transact NDXP or separately
execute QQQ options. Offering products Interested persons are invited to
flow to the Exchange is no longer
such as QQQ provides market submit written data, views, and
necessary for NQX.
The Exchange’s proposal to exclude participants with a variety of choices in arguments concerning the foregoing,
NQX from the marketing fee is equitable selecting the product they desire to including whether the proposed rule
and not unfairly discriminatory because utilize to transact the Nasdaq 100 change is consistent with the Act.
the Exchange will apply this exclusion Index.29 Furthermore, the proposed Comments may be submitted by any of
to all similarly situated members. pricing changes will apply uniformly to the following methods:
all similarly situated market Electronic Comments
Crossing Fee Cap participants, as discussed above. For the
The Exchange believes that its foregoing reasons, the Exchange does • Use the Commission’s internet
proposal to exclude the Non-Priority not believe that the proposed changes to comment form (http://www.sec.gov/
daltland on DSKBBV9HB2PROD with NOTICES

Customer license surcharge and adopt pricing for NQX options as rules/sro.shtml); or
transaction fees for NQX from the described above will impose an undue • Send an email to rule-comments@
calculation of the monthly Crossing Fee burden on competition. sec.gov. Please include File Number SR–
Cap is reasonable because NQX will be The Exchange notes that it operates in ISE–2018–61 on the subject line.
an exclusively listed product. Similar to a highly competitive market in which
30 15 U.S.C. 78s(b)(3)(A)(ii).
28 See C2’s Fees Schedule, Section 1.D. 29 See note 23 above. 31 17 CFR 240.19b–4(f)(2).

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Document Created: 2018-07-20 01:19:34
Document Modified: 2018-07-20 01:19:34
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		83 FR 34625