83 FR 52593 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Certain Maker/Taker Fees in Section I of the Exchanges Schedule of Fees

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 201 (October 17, 2018)

[Federal Register Volume 83, Number 201 (Wednesday, October 17, 2018)]
[Notices]
[Pages 52593-52595]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-22538]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84402; File No. SR-ISE-2018-83]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Certain 
Maker/Taker Fees in Section I of the Exchanges Schedule of Fees

October 11, 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 October 1, 2018, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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 certain maker/taker fees in Section 
I of the Exchange's Schedule of Fees, as described further below.
    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 Exchange's

[[Page 52594]]

Schedule of Fees to modify the Section I taker fee for Priority 
Customers \3\ to $0.41, and the Section I maker fee for non-Priority 
Customers \4\ to $0.11.
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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).
    \4\ Non-Priority Customers are Market Makers, Non-Nasdaq ISE 
Market Makers, Firm Proprietary/Broker-Dealers, and Professional 
Customers.
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    As provided in Section I of the Schedule of Fees, the Exchange 
currently charges Priority Customers a taker fee for regular orders in 
Select Symbols \5\ that is $0.44 per contract, except in SPY, QQQ, IWM 
and VXX, where this fee is $0.40 per contract. The Exchange now 
proposes to charge Priority Customers a uniform taker fee of $0.41 per 
contract in all Select Symbols, and make a related change to delete the 
reference to the reduced taker fee for SPY, QQQ, IWM and VXX. As a 
result, while the reduced taker fee currently assessed for SPY, QQQ, 
IWM and VXX will be increased by $0.01 per contract, the fee will be 
decreased by $0.03 for all other Select Symbols.
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    \5\ ``Select Symbols'' are options overlying all symbols listed 
on the Nasdaq ISE that are in the Penny Pilot Program.
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    As provided in Section I of the Schedule of Fees, the Exchange 
currently charges non-Priority Customers a maker fee in Select Symbols 
that is $0.10 per contract.\6\ The Exchange now seeks to increase this 
fee to $0.11 per contract.
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    \6\ As it relates solely to Market Makers, however: (i) Market 
Makers that qualify for Market Maker Plus will not pay this fee if 
they meet the applicable tier thresholds set forth in the table 
within Section I of the Schedule of Fees and will instead receive a 
rebate based on the applicable tier for which they qualify; (ii) no 
fee will be charged or rebate provided when trading against non-
Priority Customer complex orders that leg into the regular order 
book; and (iii) a $0.15 per contract fee applies instead of the 
applicable fee or rebate when trading against Priority Customer 
complex orders that leg into the regular order book. A $0.15 per 
contract fee likewise applies to Non-Nasdaq ISE Market Makers 
instead of the applicable fee or rebate when trading against 
Priority Customer complex orders that leg into the regular order 
book. These fees and rebates are not changing under this proposal.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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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 it is reasonable to charge Priority 
Customers a uniform taker fee of $0.41 per contract in all Select 
Symbols and no longer differentiate between the different products, as 
described above. While the reduced taker fee currently assessed for 
SPY, QQQ, IWM and VXX will be increased by $0.01 per contract, this fee 
will be decreased by $0.03 for all other Select Symbols. As such, the 
Exchange believes the modest increase in the taker fee for SPY, QQQ, 
IWM and VXX will be offset by the larger decrease for all other Select 
Symbols, and will also simplify Priority Customer taker pricing by 
assessing a uniform fee for Priority Customer all Select Symbols 
instead of differentiating by product. Furthermore, the proposed taker 
fee of $0.41 per contract continues to be competitive with another 
options exchange,\9\ and also remains lower than the fees charged to 
other market participants that remove Select Symbol liquidity on the 
Exchange.\10\
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    \9\ For instance, Cboe C2 Options Exchange (``C2'') charges its 
public customers a $0.43 per contract fee for removing liquidity in 
penny classes. See C2 Fees Schedule, Transaction Fees.
    \10\ Specifically, this fee is currently $0.45 per contract for 
Market Maker orders and $0.46 per contract for Non-Nasdaq ISE Market 
Maker orders, Firm Proprietary/Broker-Dealer orders, and 
Professional Customer orders. See Schedule of Fees, Section I.
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    In addition, the Exchange believes that this proposal is equitable 
and not unfairly discriminatory because the Exchange will apply the 
same taker fee to all similarly situated members in a uniform manner. 
The Exchange does not believe that it is unfairly discriminatory to 
offer a lower taker fee to Priority Customers. Priority Customer 
interest brings valuable liquidity to the market, which liquidity 
benefits other market participants. Priority Customer liquidity 
benefits all market participants by providing 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 Exchange believes that its proposal to increase the maker fee 
for all non-Priority Customer transactions in Select Symbols from $0.10 
to $0.11 per contract is reasonable because it is a modest increase, 
and is in part to offset the proposed reduction in taker fees as 
described above. Furthermore, Market Makers that qualify for Market 
Maker Plus will not pay the maker fee if they meet the applicable tier 
thresholds set forth in the table within Section I of the Schedule of 
Fees and will instead receive a rebate based on the applicable tier for 
which they qualify.\11\ The Exchange also notes that its maker pricing 
as proposed for non-Priority Customers herein remains competitive 
compared to another options exchange.\12\ The Exchange further believes 
that its proposed maker pricing is equitable and not unfairly 
discriminatory because the Exchange will apply the same maker fee to 
all similarly situated members.
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    \11\ See Schedule of Fees, Section I, note 5.
    \12\ For instance, Nasdaq PHLX (``Phlx'') charges non-Customers 
the following Penny Pilot options transaction charges: $0.22 per 
contract for Specialists and Market Makers (plus a $0.25 per 
contract marketing fee in Penny Pilot options that is applied to 
those who elect to participate in the Marketing program for a total 
of $0.47 per contract); and $0.48 per contract for Broker-Dealers, 
Firms, and Professionals. See Phlx Pricing Schedule, Section II.
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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's proposal to 
modify the Priority Customer taker fee and non-Priority Customer maker 
fee in Section I, each as described above, does not impose an undue 
burden on competition because the Exchange believes that its maker/
taker pricing remains competitive compared to other options 
exchanges.\13\ Furthermore, the Exchange would uniformly assess the 
proposed maker/taker fees to all similarly situated market 
participants, as discussed above. 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.
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    \13\ See notes 9 and 12 above.

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[[Page 52595]]

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\ 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).
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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-2018-83 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-2018-83. 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-2018-83 and should be submitted on 
or before November 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22538 Filed 10-16-18; 8:45 am]
 BILLING CODE 8011-01-P