Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Market Maker Plus Program in the Schedule of Fees, 13173-13176 [2018-06099]
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Federal Register / Vol. 83, No. 59 / Tuesday, March 27, 2018 / Notices
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File No.
SR–OCC–2017–020. 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 (https://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
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All submissions should refer to File
No. SR–OCC–2017–020 and should be
submitted on or before April 17, 2018.
If comments are received, any rebuttal
comments should be submitted on or
before May 1, 2018.
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• Use the Commission’s internet
comment form (https://www.sec.gov/
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• Send an email to rule-comments@
sec.gov. Please include File No. SR–
OCC–2017–020 on the subject line.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–06105 Filed 3–26–18; 8:45 am]
BILLING CODE 8011–01–P
37 17
CFR 200.30–3(a)(12).
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[SEC File No. 270–135, OMB Control No.
3235–0176]
Submission for OMB Review;
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Extension:
Rules 8b–1 to 8b–33
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for extension of the
previously approved collection of
information discussed below.
Rules 8b–1 to 8b–33 (17 CFR 270.8b–
1 to 8b–33) under the Investment
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et seq.) (‘‘Investment Company Act’’) set
forth the procedures for preparing and
filing a registration statement under the
Investment Company Act. These
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The Commission believes that it is
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impact of the procedural instructions
under Section 8(b) of the Investment
Company Act, which impose burdens
only in the context of the preparation of
the various registration statement forms.
Accordingly, the Commission is not
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for rules 8b–1 through 8b–33, but
instead will include the burden for
these rules in its estimates of burden for
each of the registration forms under the
Investment Company Act. The
Commission is, however, submitting an
1 Although the rules under Section 8(b) of the
Investment Company Act are generally procedural
in nature, two of the rules require respondents to
disclose some limited information. Rule 8b–3 (17
CFR 270.8b–3) provides that whenever a
registration form requires the title of securities to
be stated, the registrant must indicate the type and
general character of the securities to be issued. Rule
8b–22 (17 CFR 270.8b–22) provides that if the
existence of control is open to reasonable doubt, the
registrant may disclaim the existence of control, but
it must state the material facts pertinent to the
possible existence of control. The information
required by both of these rules is necessary to
insure that investors have clear and complete
information upon which to base an investment
decision.
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hourly burden estimate of one hour for
administrative purposes.
The collection of information under
rules 8b–1 to 8b–33 is mandatory. The
information provided under rules 8b–1
to 8b–33 is not kept confidential. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
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The public may view the background
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collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE, Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: March 22, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–06120 Filed 3–26–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82920; File No. SR–ISE–
2018–20]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Market
Maker Plus Program in the Schedule of
Fees
March 22, 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 March 13,
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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 83, No. 59 / Tuesday, March 27, 2018 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Market Maker Plus program in the
Schedule of Fees.
The text of the proposed rule change
is available on the Exchange’s website at
https://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
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1. Purpose
The Exchange operates a Market
Maker Plus program for regular orders
in Select Symbols 3 whereby Market
Makers 4 that contribute to market
quality by maintaining tight markets are
eligible for enhanced rebates. The
purpose of the proposed rule change is
to amend: (1) The expirations that are
used to evaluate a Market Maker’s
performance and hence eligibility for
rebates, and (2) the process for
excluding certain days from the Market
Maker Plus calculation. The Exchange
believes that these proposed changes
will encourage Market Makers to make
quality markets in Select Symbols and
thereby further the goals of the Market
Maker Plus program.
Market Maker orders in Select
Symbols are charged a maker fee of
$0.10 per contract; 5 provided that
Market Makers that qualify for Market
Maker Plus will not pay this fee if they
meet the applicable tier thresholds set
forth in the table below, and will
3 ‘‘Select Symbols’’ are options overlying all
symbols listed on the Nasdaq ISE that are in the
Penny Pilot Program.
4 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See ISE Rule 100(a)(28).
5 This fee also applies to Market Maker orders
sent to the Exchange by Electronic Access Members.
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instead receive the rebates described in
the table based on the applicable tier for
which they qualify.6 The Exchange is
not proposing to amend the Market
Maker Plus rebates, which will remain
unchanged, but proposes to make
changes to the process for evaluating
Market Makers for achieving Market
Maker Plus status.
SELECT SYMBOLS OTHER THAN SPY
AND QQQ
Maker
rebate
($)
Market Maker Plus tier
(specified percentage)
Tier 1 (80% to less than 85%) ..................
Tier 2 (85% to less than 95%) ..................
Tier 3 (95% or greater) .............................
(0.15)
(0.18)
(0.22)
SPY AND QQQ
Regular
maker
rebate
($)
Market Maker Plus tier
(specified percentage)
Tier
Tier
Tier
Tier
1
2
3
4
(70%
(80%
(85%
(90%
to less than 80%)
to less than 85%)
to less than 90%)
or greater) ...........
Linked
maker
rebate 7
($)
(0.00)
(0.18)
(0.22)
(0.26)
N/A
(0.16)
(0.20)
(0.24)
A Market Maker Plus is defined in the
Schedule of Fees as a Market Maker
who is on the National Best Bid or
National Best Offer (‘‘NBBO’’) a
specified percentage of the time for
series trading between $0.03 and $3.00
(for options whose underlying stock’s
previous trading day’s last sale price
was less than or equal to $100) and
between $0.10 and $3.00 (for options
whose underlying stock’s previous
trading day’s last sale price was greater
than $100) in premium in each of the
front two expiration months.8
6 A $0.10 per contract fee applies instead of the
applicable Market Maker Plus rebate when trading
against Priority Customer complex orders that leg
into the regular order book. There will be no fee
charged or rebate provided when trading against
non-Priority Customer complex orders that leg into
the regular order book.
7 Market Makers that qualify for Market Maker
Plus Tiers 2–4 for executions in SPY or QQQ may
be eligible for a linked maker rebate in addition to
the regular maker rebate for the applicable tier.
Linked maker rebate applies to executions in SPY
or QQQ if the Market Maker does not achieve the
applicable tier in that symbol but achieves the tier
(i.e., any of Market Maker Plus Tiers 2–4) for any
badge/suffix combination in the other symbol, in
which case the higher tier achieved applies to both
symbols. The regular maker rebate will be provided
in the symbol that qualifies the Market Maker for
the higher tier based on percentage of time at the
NBBO.
8 Market Makers may enter quotes in a symbol
using one or more unique, exchange assigned
identifiers—i.e., badge/suffix combinations. Market
Maker Plus status is calculated independently
based on quotes entered in a symbol for each of the
Market Maker’s badge/suffix combinations, and the
highest tier achieved for any badge/suffix
combination quoting that symbol applies to
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Performance in each of the front two
expiration months is measured daily,
and would include all available
expirations from the that trading day up
to and including the first monthly
expiration (i.e., the 1st front expiration
month), and all expirations after the first
monthly expiration up to and including
the second monthly expiration (i.e., the
2nd front expiration month). At the end
of the month, the Exchange calculates a
monthly average based on daily
performance in each of these two
buckets, and Market Makers that meet
the specified percentage of time at the
NBBO in both buckets will qualify for
the associated Market Maker Plus
rebate.
In practice, using the front two
expiration months to measure
performance means that a Market
Maker’s performance is evaluated based
on a shrinking number of contracts as
the trading day approaches the monthly
expiration date. For example, on
February 1, 2018, a Market Maker’s
performance in symbol AAPL would
have been measured in a number of
weekly and monthly expirations leading
up to and including the February
monthly expiration (i.e., for the 1st front
expiration month), and similarly in a
number of weekly and monthly
expirations beginning after the February
monthly expiration up to and including
the March monthly expiration (i.e., for
the 2nd front expiration month). On
February 15, 2018, however, the 1st
front expiration month would include
only one expiration—i.e., the February
16, 2018 monthly contract that expires
the next day. The Exchange believes
that this frustrates the goals of the
Market Maker Plus program as Market
Makers need to maintain quotes at the
NBBO in a more limited number of
expirations as the next monthly
expiration approaches, and will not get
credit for maintaining tight quotes in
other expirations that are not included.
The Exchange therefore proposes to
change its Market Maker Plus
methodology to ensure that a full
month’s worth of expirations are always
included in each bucket for the Market
Maker Plus calculation. Specifically, the
Exchange proposes to amend the Market
Maker Plus language to provide that:
‘‘Market Makers are evaluated each
trading day for the percentage of time
spent on the National Best Bid or
National Best Offer (‘‘NBBO’’) for
qualifying series that expire in two
successive thirty calendar day periods
beginning on that trading day.’’ Thus
under the proposed methodology, on
executions across all badge/suffix combinations that
the member uses to trade in that symbol.
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February 15, 2018, the periods
referenced above would include all
expirations: (1) From February 15, 2018
to March 17, 2018, and (2) from March
18, 2018 to April 17, 2018. Furthermore,
the Exchange proposes to amend the
definition of Market Maker Plus by
clarifying that Market Maker Plus status
requires the Market Maker to meet the
specified percentage of time at the
NBBO as a monthly average based on
daily performance in each of the two
successive periods described above.9
Qualifying series will also be defined
separately as series trading between
$0.03 and $3.00 (for options whose
underlying stock’s previous trading
day’s last sale price was less than or
equal to $100) and between $0.10 and
$3.00 (for options whose underlying
stock’s previous trading day’s last sale
price was greater than $100) in
premium—i.e., current language
without the reference to the front two
expiration months, which the Exchange
proposes to eliminate in connection
with the changes to the expiration
periods used by the Exchange in the
Market Maker Plus calculation.10
Finally, the Exchange proposes to add
language that emphasizes that if a
Market Maker would qualify for a
different Market Maker Plus tier in each
of the two successive periods described
above, then the lower of the two Market
Maker Plus tier rebates shall apply to all
contracts. The proposed changes would
add transparency around the process for
evaluating Market Maker Pus status—
i.e., by including more operational
language that describes how
performance is measured—and change
the process to ensure that an
appropriate number of expirations are
included in the calculation.
In addition, the Schedule of Fees
provides that a Market Maker’s single
best and single worst quoting days each
month,11 on a per symbol basis, will be
excluded in calculating whether a
Market Maker qualifies for the Market
Maker Plus rebate, if doing so will
qualify a Market Maker for the rebate.12
9 The current language contains a reference to the
‘‘National Best Bid or National Best Offer,’’ which
the Exchange proposes to change to ‘‘NBBO,’’ based
on defining NBBO as National Best Bid or National
Best Offer in the immediately preceding sentence.
10 The Exchange proposes to remove all
references to the front two expiration months in the
Market Maker Plus description (e.g., in the section
on excluding certain days from the Market Maker
Plus calculation). Where applicable the Exchange
will refer instead to the proposed thirty calendar
day periods.
11 The current language in the Schedule of Fees
contains a reference to the expirations used in the
calculation, which are being changed in this
proposed rule change. See id.
12 Other than days where the Exchange closes
early for holiday observance, any day that the
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While this provision is intended to aid
Market Makers in achieving Market
Maker Plus status, and therefore only
applies if better for the Market Maker
(i.e., if excluding these days will qualify
the Market Maker for the rebate), it may
provide a disincentive for Market
Makers to increase their performance at
the end of the month to meet a higher
tier as the Market Maker’s best quoting
day may be removed in addition to the
worst. For example, a Market Maker that
is on the border between Tier 1 and Tier
2 on the last trading day of the month
based on time at the NBBO could
attempt to reach the higher tier by
quoting more aggressively on that day
but would not be incentivized to do if
the day would simply be removed as the
best quoting day for the month. The
Exchange therefore proposes to remove
only the Market Maker’s worst quoting
day. Since this means that removing the
day will always be beneficial to the
Market Maker, the Exchange also
proposes to remove the language related
to excluding the day only if doing so
will qualify a Market Maker for the
rebate.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,13 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,14 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 believes that the
proposed changes to the periods used
for the Market Maker Plus calculation
are reasonable and equitable as this
change is designed to encourage Market
Makers to make quality markets in
Select Symbols and thereby further the
goal of the Market Maker Plus program.
Currently, the Market Maker Plus
program requires that Market Makers
show their commitment to market
quality by quoting at the NBBO a
specified percentage of time in certain
series in the front two expiration
months—i.e., all available expirations
from the trading day up to and
market is not open for the entire trading day or the
Exchange instructs members in writing to route
their orders to other markets may also be excluded
from the Market Maker Plus tier calculation;
provided that the Exchange will only remove the
day for members that would have a lower time at
the NBBO for the specified series with the day
included.
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(4) and (5).
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including the first monthly expiration,
and all expirations after the first
monthly expiration up to and including
the second monthly expiration. Because
the Exchange measures performance
using the front two expiration months,
Market Makers have to quote a more
limited subset of expirations as the
trading day approaches a monthly
expiration. The Exchange believes that
it is preferable to evaluate performance
based on two successive thirty calendar
day periods so that as the monthly
expiration approaches, Market Makers
will nevertheless be able to qualify for
Market Maker Plus by maintaining
quotes at the NBBO in a number of
available expirations. The Exchange
believes that this balances the benefit
provided by Market Maker Plus rebates
with an appropriately demonstrated
commitment to market quality.
Furthermore, the proposed language
also describes the operation of the
Market Maker Plus calculation, which is
evaluated each trading day and then
computed as a monthly average based
on daily performance. And finally, the
proposed language makes other
clarifying changes to the language, such
as separately defining qualifying series
based on language already included in
the Market Maker Plus section of the
Schedule of Fees, and reinforcing that
the Market Maker Plus program requires
a Market Maker to achieve the
applicable tier in both of the two
successive periods, meaning that if a
Market Maker is in a different tier for
each of the proposed expiration buckets,
then the lower tier of rebate would
apply to all contracts. The Exchange
believes that adding this detail to the
Schedule of Fees in connection with the
change of the expirations used for the
calculation will further increase
transparency around the operation of
this program. The Exchange also
believes that the proposed changes are
equitable and not unfairly
discriminatory as all Market Makers can
qualify for Market Maker Plus by
meeting program requirements that are
designed to incentivize Market Markets
to maintain quality markets.
Furthermore, the Exchange believes that
the benefits to market quality that may
result from Market Makers being
required to maintain quotes at the
NBBO in a number of expirations will
flow to all market participants that trade
on the Exchange.
In addition, the Exchange believes
that the proposed change to the days
excluded from the Market Maker Plus
calculation is reasonable and equitable
as not removing the best day will make
it easier for Market Makers to achieve
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Federal Register / Vol. 83, No. 59 / Tuesday, March 27, 2018 / Notices
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higher tiers of Market Maker Plus. More
specifically, this change is designed to
permit Market Makers to aim for a
higher tier at the end of month without
potentially removing one of those
trading days from the calculation if it is
the Market Maker’s best quoting day for
the month. The Exchange believes that
this will allow Market Makers to quote
more aggressively at the end of the
month in order to qualify for a higher
tier of Market Maker Plus, and thereby
contribute to market quality in Select
Symbols. Furthermore, with the change
described above, the Exchange believes
that it is reasonable and equitable now
to remove the language about removing
the day only when doing so will qualify
the Market Maker for the rebate. This
language is no longer needed since
removing the worst day will always be
better for the Market Maker. Finally, the
Exchange believes that these changes
are equitable and not unfairly
discriminatory as all Market Makers will
be subject to the same qualification
criteria for Market Maker Plus. The
proposed fee changes described in this
proposed rule change are applicable
solely to Market Makers as the Market
Maker Plus program, which is designed
to encourage Market Makers to maintain
quality markets, applies only to these
members. The Exchange continues to
believe that it is not unfairly
discriminatory to offer rebates under
this program only to Market Makers
since Market Makers, and, in particular,
those Market Makers that achieve
Market Maker Plus status, are subject to
additional requirements and obligations
(such as quoting requirements) that
other market participants are not.
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
proposed fee changes are procompetitive as they are designed to
encourage Market Makers to make
quality markets in Select Symbols. The
Exchange believes that the Market
Maker Plus program will continue to
encourage competition by incentivizing
Market Makers to provide liquidity and
maintain tight markets in Select
Symbols. The Exchange 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
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fees to remain competitive. 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,15 and Rule
19b–4(f)(2) 16 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.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2018–20 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–2018–20. 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
15 15
16 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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only one method. The Commission will
post all comments on the Commission’s
internet website (https://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–2018–20 and should be
submitted on or before April 17, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–06099 Filed 3–26–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82927; File No. SR–OCC–
2017–021]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove the
Proposed Rule Concerning Updates to
and Formalization of OCC’s Recovery
and Orderly Wind-Down Plan
March 22, 2018.
I. Introduction
On December 8, 2017, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2017–
021 (‘‘Proposed Rule Change’’),
pursuant to Section 19(b) of the
Securities Exchange Act of 1934
17 17
E:\FR\FM\27MRN1.SGM
CFR 200.30–3(a)(12).
27MRN1
]]>Agencies
[Federal Register Volume 83, Number 59 (Tuesday, March 27, 2018)]
[Notices]
[Pages 13173-13176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06099]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82920; File No. SR-ISE-2018-20]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the Market
Maker Plus Program in the Schedule of Fees
March 22, 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 March 13, 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 13174]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Market Maker Plus program in the
Schedule of Fees.
The text of the proposed rule change is available on the Exchange's
website at https://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 a Market Maker Plus program for regular
orders in Select Symbols \3\ whereby Market Makers \4\ that contribute
to market quality by maintaining tight markets are eligible for
enhanced rebates. The purpose of the proposed rule change is to amend:
(1) The expirations that are used to evaluate a Market Maker's
performance and hence eligibility for rebates, and (2) the process for
excluding certain days from the Market Maker Plus calculation. The
Exchange believes that these proposed changes will encourage Market
Makers to make quality markets in Select Symbols and thereby further
the goals of the Market Maker Plus program.
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\3\ ``Select Symbols'' are options overlying all symbols listed
on the Nasdaq ISE that are in the Penny Pilot Program.
\4\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(28).
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Market Maker orders in Select Symbols are charged a maker fee of
$0.10 per contract; \5\ provided that 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 below, and will instead receive
the rebates described in the table based on the applicable tier for
which they qualify.\6\ The Exchange is not proposing to amend the
Market Maker Plus rebates, which will remain unchanged, but proposes to
make changes to the process for evaluating Market Makers for achieving
Market Maker Plus status.
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\5\ This fee also applies to Market Maker orders sent to the
Exchange by Electronic Access Members.
\6\ A $0.10 per contract fee applies instead of the applicable
Market Maker Plus rebate when trading against Priority Customer
complex orders that leg into the regular order book. There will be
no fee charged or rebate provided when trading against non-Priority
Customer complex orders that leg into the regular order book.
Select Symbols Other Than SPY and QQQ
------------------------------------------------------------------------
Maker
Market Maker Plus tier (specified percentage) rebate
($)
------------------------------------------------------------------------
Tier 1 (80% to less than 85%)................................. (0.15)
Tier 2 (85% to less than 95%)................................. (0.18)
Tier 3 (95% or greater)....................................... (0.22)
------------------------------------------------------------------------
SPY and QQQ
------------------------------------------------------------------------
Regular Linked
maker maker
Market Maker Plus tier (specified percentage) rebate rebate
($) \7\ ($)
------------------------------------------------------------------------
Tier 1 (70% to less than 80%)....................... (0.00) N/A
Tier 2 (80% to less than 85%)....................... (0.18) (0.16)
Tier 3 (85% to less than 90%)....................... (0.22) (0.20)
Tier 4 (90% or greater)............................. (0.26) (0.24)
------------------------------------------------------------------------
A Market Maker Plus is defined in the Schedule of Fees as a Market
Maker who is on the National Best Bid or National Best Offer (``NBBO'')
a specified percentage of the time for series trading between $0.03 and
$3.00 (for options whose underlying stock's previous trading day's last
sale price was less than or equal to $100) and between $0.10 and $3.00
(for options whose underlying stock's previous trading day's last sale
price was greater than $100) in premium in each of the front two
expiration months.\8\ Performance in each of the front two expiration
months is measured daily, and would include all available expirations
from the that trading day up to and including the first monthly
expiration (i.e., the 1st front expiration month), and all expirations
after the first monthly expiration up to and including the second
monthly expiration (i.e., the 2nd front expiration month). At the end
of the month, the Exchange calculates a monthly average based on daily
performance in each of these two buckets, and Market Makers that meet
the specified percentage of time at the NBBO in both buckets will
qualify for the associated Market Maker Plus rebate.
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\7\ Market Makers that qualify for Market Maker Plus Tiers 2-4
for executions in SPY or QQQ may be eligible for a linked maker
rebate in addition to the regular maker rebate for the applicable
tier. Linked maker rebate applies to executions in SPY or QQQ if the
Market Maker does not achieve the applicable tier in that symbol but
achieves the tier (i.e., any of Market Maker Plus Tiers 2-4) for any
badge/suffix combination in the other symbol, in which case the
higher tier achieved applies to both symbols. The regular maker
rebate will be provided in the symbol that qualifies the Market
Maker for the higher tier based on percentage of time at the NBBO.
\8\ Market Makers may enter quotes in a symbol using one or more
unique, exchange assigned identifiers--i.e., badge/suffix
combinations. Market Maker Plus status is calculated independently
based on quotes entered in a symbol for each of the Market Maker's
badge/suffix combinations, and the highest tier achieved for any
badge/suffix combination quoting that symbol applies to executions
across all badge/suffix combinations that the member uses to trade
in that symbol.
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In practice, using the front two expiration months to measure
performance means that a Market Maker's performance is evaluated based
on a shrinking number of contracts as the trading day approaches the
monthly expiration date. For example, on February 1, 2018, a Market
Maker's performance in symbol AAPL would have been measured in a number
of weekly and monthly expirations leading up to and including the
February monthly expiration (i.e., for the 1st front expiration month),
and similarly in a number of weekly and monthly expirations beginning
after the February monthly expiration up to and including the March
monthly expiration (i.e., for the 2nd front expiration month). On
February 15, 2018, however, the 1st front expiration month would
include only one expiration--i.e., the February 16, 2018 monthly
contract that expires the next day. The Exchange believes that this
frustrates the goals of the Market Maker Plus program as Market Makers
need to maintain quotes at the NBBO in a more limited number of
expirations as the next monthly expiration approaches, and will not get
credit for maintaining tight quotes in other expirations that are not
included.
The Exchange therefore proposes to change its Market Maker Plus
methodology to ensure that a full month's worth of expirations are
always included in each bucket for the Market Maker Plus calculation.
Specifically, the Exchange proposes to amend the Market Maker Plus
language to provide that: ``Market Makers are evaluated each trading
day for the percentage of time spent on the National Best Bid or
National Best Offer (``NBBO'') for qualifying series that expire in two
successive thirty calendar day periods beginning on that trading day.''
Thus under the proposed methodology, on
[[Page 13175]]
February 15, 2018, the periods referenced above would include all
expirations: (1) From February 15, 2018 to March 17, 2018, and (2) from
March 18, 2018 to April 17, 2018. Furthermore, the Exchange proposes to
amend the definition of Market Maker Plus by clarifying that Market
Maker Plus status requires the Market Maker to meet the specified
percentage of time at the NBBO as a monthly average based on daily
performance in each of the two successive periods described above.\9\
Qualifying series will also be defined separately as series trading
between $0.03 and $3.00 (for options whose underlying stock's previous
trading day's last sale price was less than or equal to $100) and
between $0.10 and $3.00 (for options whose underlying stock's previous
trading day's last sale price was greater than $100) in premium--i.e.,
current language without the reference to the front two expiration
months, which the Exchange proposes to eliminate in connection with the
changes to the expiration periods used by the Exchange in the Market
Maker Plus calculation.\10\ Finally, the Exchange proposes to add
language that emphasizes that if a Market Maker would qualify for a
different Market Maker Plus tier in each of the two successive periods
described above, then the lower of the two Market Maker Plus tier
rebates shall apply to all contracts. The proposed changes would add
transparency around the process for evaluating Market Maker Pus
status--i.e., by including more operational language that describes how
performance is measured--and change the process to ensure that an
appropriate number of expirations are included in the calculation.
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\9\ The current language contains a reference to the ``National
Best Bid or National Best Offer,'' which the Exchange proposes to
change to ``NBBO,'' based on defining NBBO as National Best Bid or
National Best Offer in the immediately preceding sentence.
\10\ The Exchange proposes to remove all references to the front
two expiration months in the Market Maker Plus description (e.g., in
the section on excluding certain days from the Market Maker Plus
calculation). Where applicable the Exchange will refer instead to
the proposed thirty calendar day periods.
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In addition, the Schedule of Fees provides that a Market Maker's
single best and single worst quoting days each month,\11\ on a per
symbol basis, will be excluded in calculating whether a Market Maker
qualifies for the Market Maker Plus rebate, if doing so will qualify a
Market Maker for the rebate.\12\ While this provision is intended to
aid Market Makers in achieving Market Maker Plus status, and therefore
only applies if better for the Market Maker (i.e., if excluding these
days will qualify the Market Maker for the rebate), it may provide a
disincentive for Market Makers to increase their performance at the end
of the month to meet a higher tier as the Market Maker's best quoting
day may be removed in addition to the worst. For example, a Market
Maker that is on the border between Tier 1 and Tier 2 on the last
trading day of the month based on time at the NBBO could attempt to
reach the higher tier by quoting more aggressively on that day but
would not be incentivized to do if the day would simply be removed as
the best quoting day for the month. The Exchange therefore proposes to
remove only the Market Maker's worst quoting day. Since this means that
removing the day will always be beneficial to the Market Maker, the
Exchange also proposes to remove the language related to excluding the
day only if doing so will qualify a Market Maker for the rebate.
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\11\ The current language in the Schedule of Fees contains a
reference to the expirations used in the calculation, which are
being changed in this proposed rule change. See id.
\12\ Other than days where the Exchange closes early for holiday
observance, any day that the market is not open for the entire
trading day or the Exchange instructs members in writing to route
their orders to other markets may also be excluded from the Market
Maker Plus tier calculation; provided that the Exchange will only
remove the day for members that would have a lower time at the NBBO
for the specified series with the day included.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\14\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed changes to the periods used
for the Market Maker Plus calculation are reasonable and equitable as
this change is designed to encourage Market Makers to make quality
markets in Select Symbols and thereby further the goal of the Market
Maker Plus program. Currently, the Market Maker Plus program requires
that Market Makers show their commitment to market quality by quoting
at the NBBO a specified percentage of time in certain series in the
front two expiration months--i.e., all available expirations from the
trading day up to and including the first monthly expiration, and all
expirations after the first monthly expiration up to and including the
second monthly expiration. Because the Exchange measures performance
using the front two expiration months, Market Makers have to quote a
more limited subset of expirations as the trading day approaches a
monthly expiration. The Exchange believes that it is preferable to
evaluate performance based on two successive thirty calendar day
periods so that as the monthly expiration approaches, Market Makers
will nevertheless be able to qualify for Market Maker Plus by
maintaining quotes at the NBBO in a number of available expirations.
The Exchange believes that this balances the benefit provided by Market
Maker Plus rebates with an appropriately demonstrated commitment to
market quality. Furthermore, the proposed language also describes the
operation of the Market Maker Plus calculation, which is evaluated each
trading day and then computed as a monthly average based on daily
performance. And finally, the proposed language makes other clarifying
changes to the language, such as separately defining qualifying series
based on language already included in the Market Maker Plus section of
the Schedule of Fees, and reinforcing that the Market Maker Plus
program requires a Market Maker to achieve the applicable tier in both
of the two successive periods, meaning that if a Market Maker is in a
different tier for each of the proposed expiration buckets, then the
lower tier of rebate would apply to all contracts. The Exchange
believes that adding this detail to the Schedule of Fees in connection
with the change of the expirations used for the calculation will
further increase transparency around the operation of this program. The
Exchange also believes that the proposed changes are equitable and not
unfairly discriminatory as all Market Makers can qualify for Market
Maker Plus by meeting program requirements that are designed to
incentivize Market Markets to maintain quality markets. Furthermore,
the Exchange believes that the benefits to market quality that may
result from Market Makers being required to maintain quotes at the NBBO
in a number of expirations will flow to all market participants that
trade on the Exchange.
In addition, the Exchange believes that the proposed change to the
days excluded from the Market Maker Plus calculation is reasonable and
equitable as not removing the best day will make it easier for Market
Makers to achieve
[[Page 13176]]
higher tiers of Market Maker Plus. More specifically, this change is
designed to permit Market Makers to aim for a higher tier at the end of
month without potentially removing one of those trading days from the
calculation if it is the Market Maker's best quoting day for the month.
The Exchange believes that this will allow Market Makers to quote more
aggressively at the end of the month in order to qualify for a higher
tier of Market Maker Plus, and thereby contribute to market quality in
Select Symbols. Furthermore, with the change described above, the
Exchange believes that it is reasonable and equitable now to remove the
language about removing the day only when doing so will qualify the
Market Maker for the rebate. This language is no longer needed since
removing the worst day will always be better for the Market Maker.
Finally, the Exchange believes that these changes are equitable and not
unfairly discriminatory as all Market Makers will be subject to the
same qualification criteria for Market Maker Plus. The proposed fee
changes described in this proposed rule change are applicable solely to
Market Makers as the Market Maker Plus program, which is designed to
encourage Market Makers to maintain quality markets, applies only to
these members. The Exchange continues to believe that it is not
unfairly discriminatory to offer rebates under this program only to
Market Makers since Market Makers, and, in particular, those Market
Makers that achieve Market Maker Plus status, are subject to additional
requirements and obligations (such as quoting requirements) that other
market participants are not.
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 proposed fee changes are
pro-competitive as they are designed to encourage Market Makers to make
quality markets in Select Symbols. The Exchange believes that the
Market Maker Plus program will continue to encourage competition by
incentivizing Market Makers to provide liquidity and maintain tight
markets in Select Symbols. The Exchange 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. 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,\15\ and Rule 19b-4(f)(2) \16\ 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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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ISE-2018-20 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-2018-20. 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 (https://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-2018-20 and should be submitted on
or before April 17, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-06099 Filed 3-26-18; 8:45 am]
BILLING CODE 8011-01-P
