83 FR 42193 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees at Section II

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 161 (August 20, 2018)

[Federal Register Volume 83, Number 161 (Monday, August 20, 2018)]
[Notices]
[Pages 42193-42195]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-17828]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83841; File No. SR-ISE-2018-72]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Schedule of Fees at Section II

August 14, 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 30, 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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[[Page 42194]]

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 at Section II 
entitled ``Complex Orders Fees and Rebates.''
    While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments become operative on August 1, 
2018.
    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 Schedule of 
Fees at Section II entitled ``Complex Orders Fees and Rebates.'' 
Specifically, the Exchange is proposing to lower the qualifying Complex 
Order Volume in Tiers 4-7, as explained in more detail below, to 
attract a greater amount of Priority Customer \3\ Complex Order flow on 
ISE by paying the same rebates, but requiring less qualifying volume in 
those tiers.
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    \3\ 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 this Schedule of 
Fees the term ``Priority Customer'' includes ``Retail'' as defined 
below.
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    Currently, the Exchange has a pricing structure in place for 
Complex Orders that provides rebates to Priority Customer Complex 
Orders in order to encourage Members to bring that order flow to the 
Exchange. Specifically, Priority Customer Complex Orders are provided 
rebates in Select Symbols \4\ and Non-Select Symbols.\5\ Rebates are 
provided per contract per leg if the order trades with non-Priority 
Customer orders in the Complex Order Book or trades with quotes and 
orders on the regular order book. Customer Complex Order rebates are 
paid a rebate based on a percentage of industry volume. Priority 
Customer Complex Tiers are based on Total Affiliated Member Complex 
Order Volume (excluding Crossing Orders and Responses to Crossing 
Orders) and are calculated as a percentage of Customer Total 
Consolidated Volume. All Complex Order volume executed on the Exchange, 
including volume executed by Affiliated Members, is included in the 
volume calculation, except for volume executed as Crossing Orders and 
Responses to Crossing Orders.\6\ Currently, there are nine Priority 
Customer Complex Order Tiers based on the percentage of industry volume 
calculation:
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    \4\ ``Select Symbols'' are options overlying all symbols listed 
on the Nasdaq ISE that are in the Penny Pilot Program.
    \5\ ``Non-Select Symbols'' are options overlying all symbols 
excluding Select Symbols. For Non-Select Symbols, no rebates will be 
paid for orders in NDX, NQX and MNX
    \6\ An ``Affiliated Member'' is a Member that shares at least 
75% common ownership with a particular Member as reflected on the 
Member's Form BD, Schedule A. Furthermore, ``Customer Total 
Consolidated Volume'' means the total national volume cleared at The 
Options Clearing Corporation in the Customer range in equity and ETF 
options in that month.

 
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Tier 1.....................................  0.000%-0.200%......................         ($0.25)         ($0.40)
Tier 2.....................................  Above 0.200%-0.400%................          (0.30)          (0.55)
Tier 3.....................................  Above 0.400%-0.600%................          (0.35)          (0.70)
Tier 4.....................................  Above 0.600%-0.800%................          (0.40)          (0.75)
Tier 5.....................................  Above 0.800%-1.000%................          (0.45)          (0.80)
Tier 6.....................................  Above 1.000%-1.600%................          (0.46)          (0.80)
Tier 7.....................................  Above 1.600%-2.000%................          (0.48)          (0.80)
Tier 8.....................................  Above 2.000%-3.250%................          (0.50)          (0.85)
Tier 9.....................................  Above 3.250%.......................          (0.50)          (0.85)
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    At this time the Exchange proposes to amend the Total Affiliated 
Member Complex Order Volume, which excludes Crossing Orders and 
Responses to Crossing Orders, that are calculated as a percentage of 
Customer Total Consolidated Volume in Tiers 4-7. Today, Tier 4 requires 
Total Affiliated Member Complex Order Volume between 0.600% and 0.800%. 
The Exchange is amending Tier 4 to require Total Affiliated Member 
Complex Order Volume between 0.600% and 0.750%. Today, Tier 5 requires 
Total Affiliated Member Complex Order Volume between 0.800% and 1.000%. 
The Exchange is amending Tier 5 to require Total Affiliated Member 
Complex Order Volume between 0.750% and 1.000%. So, today a portion of 
Complex Order volume which qualified for Tier 4 volume would qualify as 
Tier 5 volume pursuant to this proposal. Today, Tier 6 requires Total 
Affiliated Member Complex Order Volume between 1.000%-1.600%. The 
Exchange is amending Tier 6 to require Total Affiliated Member Complex 
Order Volume between 1.000%-1.500%. So, today a portion of Complex 
Order volume which qualified as Tier 5 volume would qualify for Tier 6 
volume pursuant to this proposal. Today, Tier 7 requires Total 
Affiliated Member Complex Order Volume between 1.600%-2.000%. The 
Exchange is amending Tier 7 to require Total Affiliated Member Complex 
Order Volume between 1.500%-2.000%. So, today a portion of Complex 
Order volume which qualified as Tier 6 volume would qualify as Tier 7 
volume pursuant to this proposal. Members may earn greater rebates in 
Select and Non-Select Symbols simply by sending in certain of the same 
volume in Tiers 4-7 today, provided it would qualify for the higher 
tier pursuant to this proposal which lowers volume in Tier 4-7. No 
changes are proposed to Tier 1-3 or Tiers 8 and 9. No changes are 
proposed to any corresponding rebates in either Select or Non-Select 
Symbols.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 42195]]

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.
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    \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 changes to the Priority 
Customer Complex Order Tiers are reasonable as these changes are 
designed to incentivize Members to trade Complex Orders, and, in 
particular Priority Customer Complex Orders, on the Exchange. The 
Exchange's proposal, which lowers the qualifying Total Affiliated 
Member Complex Order Volume in Tiers 4-7, is intended to encourage 
Members to submit the same or a greater amount of Priority Customer 
Complex Order flow to obtain a higher rebate.
    In addition, the Exchange believes that the proposed changes are 
equitable and not unfairly discriminatory as these changes are designed 
to encourage Members to transact more Complex Order flow, and in 
particular, Priority Customer Complex Orders, on ISE. The Exchange does 
not believe that it is unfairly discriminatory to provide rebates only 
to Priority Customer Complex Orders as this type of order flow enhances 
liquidity on the Exchange for the benefit of all market participants by 
providing more trading opportunities, which attracts Market Makers. The 
Exchange believes that the proposed changes to the Priority Customer 
Complex Tiers will benefit all market participants that trade on ISE by 
increasing their opportunities to trade and earn rebates.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed changes will enhance both inter-market and intra-market 
competition by increasing opportunities for Members to obtain rebates 
by transacting Priority Customer Complex Orders. The Exchange believes 
that the proposed fees and rebates remain competitive with those on 
other options markets, and will continue to attract order flow to the 
Exchange, thereby encouraging additional volume and liquidity to the 
benefit of all market participants. Priority Customer Complex Order 
flow enhances liquidity on the Exchange for the benefit of all market 
participants by providing more trading opportunities, which attracts 
Market Makers.
    The Exchange operates in a highly competitive market in which 
market participants can readily direct their order flow to competing 
venues. In such an environment, the Exchange must continually review, 
and consider adjusting, its fees and rebates to remain competitive with 
other exchanges. For the reasons described above, the Exchange believes 
that the proposed fee changes reflect this competitive environment.

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 \9\ and Rule 19b-4(f)(2) \10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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-2018-72 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-2018-72. 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-2018-72 and should be submitted on 
or before September 10, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-17828 Filed 8-17-18; 8:45 am]
 BILLING CODE 8011-01-P