Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Calculation of the Member Order Routing Program, 60455-60458 [2017-27340]

Download as PDF Federal Register / Vol. 82, No. 243 / Wednesday, December 20, 2017 / Notices with the protection of investors and the public interest. Therefore, the Commission designates the proposed rule change to be operative upon filing.11 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 necessary or appropriate in the public interest, for the protection of investors, or 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. Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE–2017–104 and should be submitted on or before January 10, 2018. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Eduardo A. Aleman, Assistant Secretary. sradovich on DSK3GMQ082PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2017–104 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2017–104. 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 11 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 21:36 Dec 19, 2017 Jkt 244001 [FR Doc. 2017–27338 Filed 12–19–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82323; File No. SR– NYSEArca–2017–99] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Designation of a Longer Period for Commission Action on Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of the Hartford Schroders Tax-Aware Bond ETF Under NYSE Arca Rule 8.600–E 60455 has received no comment letters on the proposed rule change. Section 19(b)(2) of the Act 5 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is December 15, 2017. The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,6 designates January 29, 2018, as the date by which the Commission shall either approve or disapprove or institute proceedings to determine whether to disapprove the proposed rule change (File Number SR– NYSEArca–2017–99). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–27344 Filed 12–19–17; 8:45 am] BILLING CODE 8011–01–P December 14, 2017. On October 11, 2017, NYSE Arca, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares of the Hartford Schroders Tax-Aware Bond ETF under NYSE Arca Rule 8.600–E. The proposed rule change was published for comment in the Federal Register on October 31, 2017.3 On November 21, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.4 The Commission 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 81944 (October 25, 2017), 82 FR 50461. 4 Amendment No. 1, which amended and replaced the proposed rule change in its entirety, is available on the Commission’s website at: https:// www.sec.gov/comments/sr-nysearca-2017-99/ nysearca201799-2711017-161518.pdf. 1 15 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82320; File No. SR–ISE– 2017–103] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Calculation of the Member Order Routing Program December 14, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 29, 2017, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities 5 15 U.S.C. 78s(b)(2). 6 Id. 7 17 CFR 200.30–3(a)(31). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\20DEN1.SGM 20DEN1 60456 Federal Register / Vol. 82, No. 243 / Wednesday, December 20, 2017 / Notices 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Schedule of Fees to amend the calculation of the Member Order Routing Program. While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on December 1, 2017. The text of the proposed rule change is available on the Exchange’s website at http://ise.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange operates the Member Order Routing Program (‘‘MORP’’),3 which is a program that provides enhanced rebates to order routing firms that select the Exchange as the default routing destination for unsolicited Regular orders in select symbols Market participant Market Maker ........................................... Non-Nasdaq ISE Market Maker (FarMM) Firm Proprietary/Broker-Dealer ................ Professional Customer ............................. Priority Customer ..................................... N/A ($0.35) (0.35) (0.35) (0.35) Complex orders in select symbols Regular orders in non-select symbols N/A ($0.35) (0.35) (0.35) (0.35) N/A ($0.15) (0.15) (0.15) (0.15) Crossing Orders.4 This proposal seeks to exclude options overlying NDX 5 from the calculation of MORP for purposes of rebates. Eligible MORP Electronic Access Members (EAMS) that execute a monthly average daily volume (ADV) in unsolicited Crossing Orders of 30,000 originating contract sides or more on their MORP designated sessions are eligible for increased Facilitation and Solicitation break-up rebates in addition to enhanced rebates for Unsolicited Crossing Orders. Break-up rebates, which are shown in the table below, apply instead of rebates described in Sections I, II, and III of the Schedule of Fees, and will be provided for contracts that are submitted to the Facilitation and Solicited Order Mechanisms that do not trade with their contra order except when those contracts trade against preexisting orders and quotes on the Exchange’s order books. The applicable fee for Crossing Orders is applied to any contracts for which a rebate is provided. Facilitation and Solicitation Break-Up Rebates are as follows: Complex orders in non-select symbols N/A ($0.80) (0.80) (0.80) (0.80) Regular orders in FX options N/A ($0.15) (0.15) (0.15) (0.15) Complex orders in FX options N/A ($0.15) (0.15) (0.15) (0.15) sradovich on DSK3GMQ082PROD with NOTICES Currently, an EAM that is MORP eligible receives a rebate for all unsolicited Crossing Orders of $0.05 per originating contract side, provided that the member executes a minimum ADV in unsolicited Crossing Orders of 30,000 to 99,999 originating contract sides though their MORP designated sessions. If the member executed greater than 100,000 originating contract sides, the rebate for all unsolicited Crossing Orders is $0.07 per originating contract side.6 No rebate is paid for volume below 30,000 originating contract sides. With respect to the Facilitation and Solicitation Break-Up Rebate, any EAM that qualifies for the MORP rebate by executing an ADV of 30,000 originating contract sides or more on their MORP designated sessions is also eligible for increased Facilitation and Solicitation break-up rebates 7 for their Non-ISE Market Maker,8 Firm Proprietary,9 Broker-Dealer,10 Professional Customer,11 and Priority Customer orders.12 Currently, MORP eligible members that execute a qualifying ADV in unsolicited Crossing Orders of at least 30,000 originating contract sides, receive a Facilitation and Solicitation break-up rebate that is $0.35 per contract for regular and complex orders 3 See Securities Exchange Act Release No. 74706 (April 10, 2016), 80 FR 20522 (April 16, 2016) (SR– ISE–2015–11). A Member may designate one or more sessions to be eligible for MORP. A session is connection to the exchange over which a member submits orders. See Section V.C. of the Schedule of Fees. If a session is designated as eligible for MORP all requirements for the program must be met for that session. 4 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 (‘‘QCC’’) order. For purposes of the fee schedule, orders executed in the Block Order Mechanism are also considered Crossing Orders. 5 NDX represents options on the Nasdaq 100 Index traded under the symbol NDX (‘‘NDX’’). 6 The rebate for the highest tier achieved is applied retroactively to all eligible contracts traded in a given month. For purposes of determining whether the member meets the above ADV thresholds, any day that the Exchange is not open for the entire trading day or the Exchange instructs members in writing to route their orders to other markets may be excluded from such calculation; provided that the Exchange will only remove the day for members that would have a lower ADV with the day included. 7 Break-up rebates are provided for contracts that are submitted to the Facilitation and Solicited Order Mechanisms that do not trade with their contra order except when those contracts trade against pre-existing orders and quotes on the Exchange’s orderbooks. The applicable fee for Crossing Orders is applied to any contracts for which a rebate is provided. 8 A ‘‘Non-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. 9 A ‘‘Firm Proprietary’’ order is an order submitted by a member for its own proprietary account. 10 A ‘‘Broker-Dealer’’ order is an order submitted by a member for a broker-dealer account that is not its own proprietary account. 11 A ‘‘Professional Customer’’ is a person or entity that is not a broker/dealer and is not a Priority Customer. VerDate Sep<11>2014 21:36 Dec 19, 2017 Jkt 244001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 E:\FR\FM\20DEN1.SGM 20DEN1 Federal Register / Vol. 82, No. 243 / Wednesday, December 20, 2017 / Notices in Select Symbols,13 $0.15 per contract for regular orders in Non-Select Symbols,14 $0.80 per contract for complex orders in Non-Select Symbols, and $0.15 per contract for regular and complex orders in foreign exchange option classes (‘‘FX Options’’). Proposal This proposal would exclude options overlying NDX from the monthly ADV when calculating the originating contract side for unsolicited Crossing Orders executed by an eligible EAM on their MORP designated sessions. NDX would not be subject to unsolicited Crossing Orders rebates and Facilitation and Solicitation break-up rebates. NDX will continue to be subject to Section I Index Options pricing for simple orders and Non-Select pricing for complex orders. sradovich on DSK3GMQ082PROD with NOTICES 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,15 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,16 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. The Exchange’s proposal to exclude options overlying NDX from the monthly ADV when calculating unsolicited Crossing Orders rebates and also from Facilitation and Solicitation break-up rebates is reasonable because the MORP will continue to be attractive to members that participate in the program.17 Under MORP, which is a voluntary rebate program, the Exchange currently provides enhanced rebates to EAMs that connect directly to the Exchange and provide their clients with order routing functionality that includes all U.S. options exchanges, including ISE. Even with the exclusion of NDX from the MORP monthly ADV and rebates, the Exchange still believes that Members will continue to be incentivized to participate in the program. The Exchange today prices 12 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 ISE Rule 100(a)(37A). 13 ‘‘Select Symbols’’ are options overlying all symbols listed on the ISE that are in the Penny Pilot Program. 14 ‘‘Non-Select Symbols’’ are options overlying all symbols excluding Select Symbols. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(4) and (5). VerDate Sep<11>2014 21:36 Dec 19, 2017 Jkt 244001 Index Options separately from other multiply-listed options.18 This practice of pricing certain products separately is not novel.19 The Exchange’s proposal to exclude options overlying NDX from the monthly ADV when calculating unsolicited Crossing Orders rebates and also from Facilitation and Solicitation break-up rebates is equitable and not unfairly discriminatory because no Member would be eligible to include NDX in monthly ADV and receive MORP rebates. The Exchange would uniformly calculate tiers and pay rebates associated with MORP. Any EAM that participates in the program will be provided the rebates on an equal and non-discriminatory basis based on the order flow executed on the Exchange. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,20 the Exchange does not believe that the proposed rule change will impose any burden on intermarket or intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Order routing firms that participate in MORP and select the Exchange as the default routing destination for unsolicited Crossing Orders will continue to receive enhanced rebates. The exclusion from NDX from the monthly ADV when calculating unsolicited Crossing Orders rebates and also from Facilitation and Solicitation break-up rebates will apply uniformly to all ISE Members. Other exchanges price certain symbols differently.21 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. 17 See note 3 above. Section I of the ISE Schedule of Fees. 19 See Nasdaq Phlx’s Pricing Schedule at Section I which offers separate pricing for options overlying SPY. 20 15 U.S.C. 78f(b)(8). 18 See PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 60457 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.22 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. 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 rule-comments@ sec.gov. Please include File Number SR– ISE–2017–103 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2017–103. 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, 21 See E:\FR\FM\20DEN1.SGM note 19 above. 20DEN1 60458 Federal Register / Vol. 82, No. 243 / Wednesday, December 20, 2017 / Notices Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE–2017–103 and should be submitted on or before January 10, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–27340 Filed 12–19–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82322; File No. SR–Phlx– 2017–101] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Specialist Obligations December 14, 2017. sradovich on DSK3GMQ082PROD with NOTICES 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 November 29, 2017, Nasdaq PHLX LLC (‘‘Phlx’’ 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 1017, entitled ‘‘Openings in Options,’’ to specify the obligations of a Specialist when entering Valid Width Quotes 3 during the Opening Process. The text of the proposed rule change is available on the Exchange’s website at 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 A Valid Width Quote is a two-sided electronic quotation submitted by a Phlx Electronic Market http://nasdaqphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend Rule 1017, Openings in Options, to amend the obligations of a Specialist when entering Valid Width Quotes during the Opening Process. In addition, the Exchange proposes to make clear the obligations of a Specialist and a Phlx Electronic Market Maker once an options series has opened. Currently, Rule 1017(d)(i) provides, the Opening Process for an option series will be conducted pursuant to paragraphs (f)–(k) of Phlx Rule 1017 below on or after 9:30 a.m. if: The ABBO, if any, is not crossed; and the system has received, within two minutes (or such shorter time as determined by the Exchange and disseminated to membership on the Exchange’s website) of the opening trade or quote on the market for the underlying security in the case of equity options or, in the case of index options, within two minutes of the receipt of the opening price in the underlying index (or such shorter time as determined by the Exchange and disseminated to membership on the Exchange’s website), or within two minutes of market opening for the underlying currency in the case of U.S. dollar-settled FCO (or such shorter time as determined by the Exchange and disseminated to membership on the Exchange’s website) any of the following: (A) The Specialist’s Valid Width Quote; (B) the Valid Width Quotes of at least two Phlx Electronic Market Makers other than the 1 15 VerDate Sep<11>2014 21:36 Dec 19, 2017 Jkt 244001 Maker that consists of a bid/ask differential that is compliant with Rule 1014(c)(i)(A)(1)(a). See Rule 1017(a)(ix). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 Specialist; or (C) if neither the Specialist’s Valid Width Quote nor the Valid Width Quotes of two Phlx Electronic Market Makers have been submitted within such timeframe, one Phlx Electronic Market Maker has submitted a Valid Width Quote. Thereafter, Rule 1017(d)(iii) specifies that the Specialist assigned in a particular equity or index option must enter a Valid Width Quote, in 90% of their assigned series, not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index. The Specialist assigned in a particular U.S. dollar-settled FCO must enter a Valid Width Quote, in 90% of their assigned series, not later than 30 seconds after the announced market opening. The Specialist must promptly enter a Valid Width Quote in the remainder of their assigned series, which did not open within one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to a U.S. dollarsettled FCO, following the announced market opening. The Exchange proposes to make clear that a Specialist has the obligations specified in Phlx Rule 1017(d)(iii) to promptly enter a Valid Width Quote in the remainder of their assigned series in cases where the Specialist’s assigned series was not already opened by a Phlx Electronic Market Maker as permitted by Rule 1017(d)(i) as noted herein. The Specialist would continue to have the ultimate obligation to open each assigned series, however this rule change would not require the Specialist to enter a Valid Width Quote for the 10% of their assigned series, not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index during the Opening Process if a Phlx Electronic Market Maker entered an order pursuant to Rule 1017(d)(i)(B) and (C) within the timeframe specified for the Specialist to enter a Valid Width Quote as noted in Rule 1017(d)(iii). Also, the Specialist assigned in a particular U.S. dollarsettled FCO must enter a Valid Width Quote for 10% of their assigned series, not later than 3 [sic] seconds after the announced market opening during the Opening Process if a Phlx Electronic Market Makers entered [sic] an order pursuant to Rule 1017(d)(i)(B) and (C) E:\FR\FM\20DEN1.SGM 20DEN1

Agencies

[Federal Register Volume 82, Number 243 (Wednesday, December 20, 2017)]
[Notices]
[Pages 60455-60458]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27340]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82320; File No. SR-ISE-2017-103]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Calculation of the Member Order Routing Program

December 14, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 29, 2017, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities

[[Page 60456]]

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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Schedule of Fees to amend the 
calculation of the Member Order Routing Program.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on December 1, 2017.
    The text of the proposed rule change is available on the Exchange's 
website at http://ise.cchwallstreet.com/, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange operates the Member Order Routing Program 
(``MORP''),\3\ which is a program that provides enhanced rebates to 
order routing firms that select the Exchange as the default routing 
destination for unsolicited Crossing Orders.\4\ This proposal seeks to 
exclude options overlying NDX \5\ from the calculation of MORP for 
purposes of rebates.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 74706 (April 10, 
2016), 80 FR 20522 (April 16, 2016) (SR-ISE-2015-11). A Member may 
designate one or more sessions to be eligible for MORP. A session is 
connection to the exchange over which a member submits orders. See 
Section V.C. of the Schedule of Fees. If a session is designated as 
eligible for MORP all requirements for the program must be met for 
that session.
    \4\ 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 
(``QCC'') order. For purposes of the fee schedule, orders executed 
in the Block Order Mechanism are also considered Crossing Orders.
    \5\ NDX represents options on the Nasdaq 100 Index traded under 
the symbol NDX (``NDX'').
---------------------------------------------------------------------------

    Eligible MORP Electronic Access Members (EAMS) that execute a 
monthly average daily volume (ADV) in unsolicited Crossing Orders of 
30,000 originating contract sides or more on their MORP designated 
sessions are eligible for increased Facilitation and Solicitation 
break-up rebates in addition to enhanced rebates for Unsolicited 
Crossing Orders. Break-up rebates, which are shown in the table below, 
apply instead of rebates described in Sections I, II, and III of the 
Schedule of Fees, and will be provided for contracts that are submitted 
to the Facilitation and Solicited Order Mechanisms that do not trade 
with their contra order except when those contracts trade against pre-
existing orders and quotes on the Exchange's order books. The 
applicable fee for Crossing Orders is applied to any contracts for 
which a rebate is provided.
    Facilitation and Solicitation Break-Up Rebates are as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Regular orders      Complex     Regular orders      Complex                         Complex
                   Market participant                        in select       orders in     in non-select  orders in  non- Regular orders   orders in FX
                                                              symbols     select symbols      symbols     select symbols   in FX options      options
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Maker............................................             N/A             N/A             N/A             N/A             N/A             N/A
Non-Nasdaq ISE Market Maker (FarMM).....................         ($0.35)         ($0.35)         ($0.15)         ($0.80)         ($0.15)         ($0.15)
Firm Proprietary/Broker-Dealer..........................          (0.35)          (0.35)          (0.15)          (0.80)          (0.15)          (0.15)
Professional Customer...................................          (0.35)          (0.35)          (0.15)          (0.80)          (0.15)          (0.15)
Priority Customer.......................................          (0.35)          (0.35)          (0.15)          (0.80)          (0.15)          (0.15)
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    Currently, an EAM that is MORP eligible receives a rebate for all 
unsolicited Crossing Orders of $0.05 per originating contract side, 
provided that the member executes a minimum ADV in unsolicited Crossing 
Orders of 30,000 to 99,999 originating contract sides though their MORP 
designated sessions. If the member executed greater than 100,000 
originating contract sides, the rebate for all unsolicited Crossing 
Orders is $0.07 per originating contract side.\6\ No rebate is paid for 
volume below 30,000 originating contract sides.
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    \6\ The rebate for the highest tier achieved is applied 
retroactively to all eligible contracts traded in a given month. For 
purposes of determining whether the member meets the above ADV 
thresholds, any day that the Exchange is not open for the entire 
trading day or the Exchange instructs members in writing to route 
their orders to other markets may be excluded from such calculation; 
provided that the Exchange will only remove the day for members that 
would have a lower ADV with the day included.
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    With respect to the Facilitation and Solicitation Break-Up Rebate, 
any EAM that qualifies for the MORP rebate by executing an ADV of 
30,000 originating contract sides or more on their MORP designated 
sessions is also eligible for increased Facilitation and Solicitation 
break-up rebates \7\ for their Non-ISE Market Maker,\8\ Firm 
Proprietary,\9\ Broker-Dealer,\10\ Professional Customer,\11\ and 
Priority Customer orders.\12\ Currently, MORP eligible members that 
execute a qualifying ADV in unsolicited Crossing Orders of at least 
30,000 originating contract sides, receive a Facilitation and 
Solicitation break-up rebate that is $0.35 per contract for regular and 
complex orders

[[Page 60457]]

in Select Symbols,\13\ $0.15 per contract for regular orders in Non-
Select Symbols,\14\ $0.80 per contract for complex orders in Non-Select 
Symbols, and $0.15 per contract for regular and complex orders in 
foreign exchange option classes (``FX Options'').
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    \7\ Break-up rebates are provided for contracts that are 
submitted to the Facilitation and Solicited Order Mechanisms that do 
not trade with their contra order except when those contracts trade 
against pre-existing orders and quotes on the Exchange's orderbooks. 
The applicable fee for Crossing Orders is applied to any contracts 
for which a rebate is provided.
    \8\ A ``Non-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.
    \9\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \10\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \11\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \12\ 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 ISE Rule 100(a)(37A).
    \13\ ``Select Symbols'' are options overlying all symbols listed 
on the ISE that are in the Penny Pilot Program.
    \14\ ``Non-Select Symbols'' are options overlying all symbols 
excluding Select Symbols.
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Proposal
    This proposal would exclude options overlying NDX from the monthly 
ADV when calculating the originating contract side for unsolicited 
Crossing Orders executed by an eligible EAM on their MORP designated 
sessions. NDX would not be subject to unsolicited Crossing Orders 
rebates and Facilitation and Solicitation break-up rebates. NDX will 
continue to be subject to Section I Index Options pricing for simple 
orders and Non-Select pricing for complex orders.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\15\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to exclude options overlying NDX from the 
monthly ADV when calculating unsolicited Crossing Orders rebates and 
also from Facilitation and Solicitation break-up rebates is reasonable 
because the MORP will continue to be attractive to members that 
participate in the program.\17\ Under MORP, which is a voluntary rebate 
program, the Exchange currently provides enhanced rebates to EAMs that 
connect directly to the Exchange and provide their clients with order 
routing functionality that includes all U.S. options exchanges, 
including ISE. Even with the exclusion of NDX from the MORP monthly ADV 
and rebates, the Exchange still believes that Members will continue to 
be incentivized to participate in the program. The Exchange today 
prices Index Options separately from other multiply-listed options.\18\ 
This practice of pricing certain products separately is not novel.\19\
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    \17\ See note 3 above.
    \18\ See Section I of the ISE Schedule of Fees.
    \19\ See Nasdaq Phlx's Pricing Schedule at Section I which 
offers separate pricing for options overlying SPY.
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    The Exchange's proposal to exclude options overlying NDX from the 
monthly ADV when calculating unsolicited Crossing Orders rebates and 
also from Facilitation and Solicitation break-up rebates is equitable 
and not unfairly discriminatory because no Member would be eligible to 
include NDX in monthly ADV and receive MORP rebates. The Exchange would 
uniformly calculate tiers and pay rebates associated with MORP.
    Any EAM that participates in the program will be provided the 
rebates on an equal and non-discriminatory basis based on the order 
flow executed on the Exchange.

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

    In accordance with Section 6(b)(8) of the Act,\20\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Order routing 
firms that participate in MORP and select the Exchange as the default 
routing destination for unsolicited Crossing Orders will continue to 
receive enhanced rebates. The exclusion from NDX from the monthly ADV 
when calculating unsolicited Crossing Orders rebates and also from 
Facilitation and Solicitation break-up rebates will apply uniformly to 
all ISE Members. Other exchanges price certain symbols differently.\21\
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    \20\ 15 U.S.C. 78f(b)(8).
    \21\ See note 19 above.
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    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.\22\ 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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    \22\ 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-2017-103 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2017-103. 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,

[[Page 60458]]

Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ISE-2017-103 and should be 
submitted on or before January 10, 2018.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-27340 Filed 12-19-17; 8:45 am]
 BILLING CODE 8011-01-P