Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees Related to Complex Orders, 24543-24547 [2018-11456]
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Federal Register / Vol. 83, No. 103 / Tuesday, May 29, 2018 / Notices
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–
CboeBZX–2018–034 on the subject line.
Paper Comments
daltland on DSKBBV9HB2PROD with NOTICES
• 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–CboeBZX–2018–034. 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–CboeBZX–2018–034, and
should be submitted on or before June
19, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Jill M. Peterson,
Assistant Secretary.
16:39 May 25, 2018
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Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
1. Purpose
[FR Doc. 2018–11356 Filed 5–25–18; 8:45 am]
[Release No. 34–83306; File No. SR–ISE–
2018–46]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Schedule
of Fees Related to Complex Orders
May 23, 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 May 10,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Schedule of Fees related to Complex
Orders traded on the Exchange.
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
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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The purpose of the proposed rule
change is to amend the Schedule of Fees
related to Complex Orders traded on the
Exchange, including: (1) Priority
Customer 3 Complex Order rebates, (2)
Market Maker 4 fees, (3) the non-Priority
Customer Complex Order taker
surcharge, and (4) formatting and other
non-substantive changes to the tables.
Each of the proposed changes is
described in more detail below.
I. Priority Customer Complex Order
Rebates
Currently, the Exchange has a fee
structure in place for Complex Orders
that provides rebates to Priority
Customer Complex Orders in order to
encourage Members to bring that order
flow to the Exchange. Specifically,
Priority Customer Complex Orders are
provided rebates in Select Symbols 5
and Non-Select Symbols 6 (other than
NDX and MNX) based on Priority
Customer average daily volume
(‘‘ADV’’) in eight tiers as shown in the
table below:7
3 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in Nasdaq ISE Rule
100(a)(37A).
4 ‘‘Market Maker’’ refers to ‘‘Competitive Market
Makers’’ and ‘‘Primary Market Makers’’ collectively.
See ISE Rule 100(a)(28).
5 ‘‘Select Symbols’’ are options overlying all
symbols listed on the Nasdaq ISE that are in the
Penny Pilot Program.
6 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols.
7 The Priority Customer Complex Order rebates
are provided per contract per leg if the order trades
with non-Priority Customer orders in the Complex
Order Book or trades with quotes and orders on the
regular order book.
The rebate for the highest tier volume achieved
is applied retroactively to all eligible Priority
Customer Complex volume once the threshold has
been reached.
Members will not receive rebates for net zero
complex orders. For purposes of determining which
complex orders qualify as ‘‘net zero’’ the Exchange
will count all complex orders that leg in to the
regular order book and are executed at a net price
per contract that is within a range of $0.01 credit
and $0.01 debit.
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Rebate for
select
symbols
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Priority
Priority
Priority
Priority
Priority
Priority
Priority
Priority
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Complex
Complex
Complex
Complex
Complex
Complex
Complex
Complex
ADV
ADV
ADV
ADV
ADV
ADV
ADV
ADV
0–14,999 .............................................................................................................
15,000–44,999 ....................................................................................................
45,000–59,999 ....................................................................................................
60,000–74,999 ....................................................................................................
75,000–99,999 ....................................................................................................
100,000–124,999 ................................................................................................
125,000–224,999 ................................................................................................
225,000+ .............................................................................................................
The Exchange now proposes to
modify this rebate structure such that
Priority Customer Complex Order
rebates will be paid a rebate based on
a percentage of industry volume rather
than straight volume thresholds. In
addition, the Exchange proposes to
move away from a tier calculation based
solely on Priority Customer Complex
ADV to one that includes Complex
Orders entered for other market
participant types, and orders entered by
affiliates of the Member. Specifically,
the Exchange proposes to adopt Priority
Customer Complex Tiers that are based
on Total Affiliated Member Complex
Order Volume (Excluding Crossing
Orders and Responses to Crossing
Orders) Calculated as a Percentage of
Customer Total Consolidated Volume.
All Complex Order volume executed on
the Exchange, including volume
executed by Affiliated Members, will be
included in the volume calculation,
except for volume executed as Crossing
Orders and Responses to Crossing
Orders. An ‘‘Affiliated Member’’ is a
Member that shares at least 75%
common ownership with a particular
Member as reflected on the Member’s
Form BD, Schedule A. Furthermore,
‘‘Customer Total Consolidated Volume’’
means the total national volume cleared
at The Options Clearing Corporation in
the Customer range in equity and ETF
options in that month.
As proposed, there will be nine
Priority Customer Complex Order Tiers
based on the percentage of industry
volume calculation: 0.000%–0.200%
(Tier 1); above 0.200%–0.400% (Tier 2);
above 0.400%–0.600% (Tier 3), above
0.600%–0.800% (Tier 4), above
0.800%–1.000% (Tier 5), above
1.000%–1.600% (Tier 6), above
1.600%–2.000% (Tier 7), above
2.000%–3.500% (Tier 8), above 3.500%
(Tier 9). Furthermore, the associated
rebates will be modified such that in
Select Symbols the proposed rebate will
be $0.25 per contract for Tier 1, $0.30
per contract for Tier 2, $0.35 per
contract for Tier 3, $0.40 per contract for
Tier 4, $0.45 per contract for Tier 5,
$0.46 per contract for Tier 6, $0.48 per
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contract for Tier 7, and $0.50 per
contract for Tiers 8 and 9. Furthermore,
in Non-Select Symbols the proposed
rebate will be $0.40 per contract for Tier
1, $0.55 per contract for Tier 2, $0.70
per contract for Tier 3, $0.75 per
contract for Tier 4, $0.80 per contract for
Tiers 5–7, and $0.85 per contract for
Tiers 8 and 9.
II. Market Maker Fees
Market Maker Complex Orders in
Select Symbols are charged a maker fee
of $0.47 per contract when trading
against Priority Customer Complex
Orders, and a $0.50 per contract taker
fee regardless of the counterparty.
Currently, each of these fees is reduced
to $0.44 per contract for Market Makers
with total affiliated Priority Customer
Complex ADV of 150,000 or more
contracts.8 The Exchange proposes to
base this fee discount on the proposed
Priority Customer Complex Tiers, and
introduce a second tier of reduced fee
for Market Makers that achieve a higher
Priority Customer Complex Tier.
Specifically, the Exchange proposes to
keep the current $0.44 per contract fee
for Market Makers Market Makers that
achieve Priority Customer Complex Tier
9, and charge a fee of $0.47 per contract
for Market Makers that achieve Priority
Customer Complex Tier 8.
In addition, Market Makers that
qualify for the Market Maker Plus
program are currently charged a fee
$0.10 per contract instead of the
applicable Market Maker Plus rebate
when trading against Priority Customer
Complex Orders that leg into the regular
order book. Regardless of the
counterparty, a $0.10 per contract maker
fee also applies to Market Makers that
do not qualify for Market Maker Plus
and Non-Nasdaq ISE Market Makers.
With the proposed Priority Customer
Complex Order Tiers described above,
which in some cases may result in
higher rebates being provided to Priority
8 All eligible volume from affiliated Members is
aggregated in determining total affiliated Priority
Customer Complex ADV, provided there is at least
75% common ownership between the Members as
reflected on each Member’s Form BD, Schedule A.
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Rebate for
non-select
symbols
($0.26)
(0.30)
(0.36)
(0.41)
(0.42)
(0.45)
(0.46)
(0.50)
($0.40)
(0.60)
(0.70)
(0.75)
(0.75)
(0.80)
(0.81)
(0.85)
Customer Complex Orders, including
Complex Orders that leg into the regular
order book, the Exchange proposes to
increase the fee for trading against
Priority Customer Complex Orders that
leg into the regular order book.
Specifically, the Exchange proposes to
increase this fee to $0.15 per contract
and apply it to all Market Maker Orders
and Non-Nasdaq ISE Market Maker
Orders. Furthermore, there is currently
no fee charged or rebate provided to
Market Maker Orders submitted by
Market Makers that qualify for Market
Maker Plus when trading against nonPriority Customer Complex Orders that
leg into the regular order book. As
proposed, this treatment will be
afforded to all Market Maker Orders
when trading against non-Priority
Customer Complex Orders that leg into
the regular order book. The fees for NonNasdaq ISE Market Makers for trading
against non-Priority Customer Complex
Orders that leg into the regular order
book will remain unchanged.
III. Non-Priority Customer Complex
Order Taker Surcharge
Currently, the Exchange assesses a
$0.03 per contract surcharge to nonPriority Customer Complex Orders in
Non-Select Symbols that take liquidity
from the Complex Order Book,
excluding Complex Orders executed in
the Facilitation Mechanism, Solicited
Order Mechanism, Price Improvement
Mechanism (‘‘PIM’’) and ‘‘exposure’’
auctions pursuant to Rule 722(b)(3)(iii).
The Exchange proposes to increase this
taker surcharge to $0.05 per contract.
IV. Formatting and Other NonSubstantive Changes to the Tables
With the changes described above,
which add additional content to the
Schedule of Fees, the Exchange
proposes to make certain nonsubstantive formatting changes that are
designed to make the flow of the
Schedule of Fees easier for Members to
understand. None of these changes
affect the fees charged or rebates
provided to members. With the
proposed changes, the Exchange will
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have three tables located under Section
II of the Schedule of Fees (Complex
Order Fees and Rebates): (1) ‘‘Priority
Customer Rebates,’’ (2) ‘‘Maker and
Taker Fees,’’ and (3) ‘‘Crossing Order
Fees and Rebates.’’
The first table, i.e., Priority Customer
Rebates, will contain the Priority
Customer Complex Tiers described
above rather than all rebates as is
currently the case. As such, the
Exchange proposes to move the column
on Facilitation and Solicitation Breakup Rebate for Select Symbols to the
third table on Crossing Order Fees and
Rebates. These rebates will continue to
be applied in exactly the same manner
as today. Furthermore, the Exchange
proposes to delete references in this
table to other market participant types,
which are not eligible for rebates in
Complex Orders other than the
Facilitation and Solicitation Break-up
Rebate in Select Symbols described
above. The second table, i.e., Maker and
Taker Fees, will include both the maker
fees described there today as well as the
taker fees that are currently included in
the following table. As such, the
Exchange proposes to move the columns
that describe the taker fee for Select
Symbols and the taker fee for NonSelect Symbols to this table. No changes
to these taker fees are proposed. Finally,
the third table, i.e., Crossing Order Fees
and Rebates, will include only fees and
rebates that relate to the Exchange’s
various crossing mechanisms. The fees
and rebates moved to and from this
table are described above.
Finally, the footnote referenced in the
column on Facilitation and Solicitation
Break-up Rebates for Select Symbols
contains an outdated reference to the
PIM. Specifically, the footnote provides
that rebates are provided per contract
per leg for contracts that are submitted
to PIM, Facilitation and Solicitation
Mechanisms . . .’’ As indicated in the
header to the column, these break-up
rebates apply to the Facilitation and
Solicitation Mechanisms only. The
language related to the PIM was
included in the Schedule of Fees when
the Exchange offered a break-up rebate
for the PIM. When the Exchange
eliminated PIM break-up rebates, the
Exchange deleted the column that
included those rebates but did not
remove the related reference in this
footnote.9 The Exchange therefore
proposes to update this footnote now by
deleting the PIM reference, which is no
longer applicable.
9 See Securities Exchange Act Release No. 80684
(May 16, 2017), 82 FR 23435 (May 22, 2017) (SR–
ISE–2017–39).
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,11 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.
I. Priority Customer Complex Order
Rebates
The Exchange believes that the
proposed changes to the Priority
Customer Complex Order Tiers are
reasonable and equitable as these
changes are designed to incentivize
Members to trade Complex Orders, and,
in particular Priority Customer Complex
Orders, on the Exchange. The Exchange
is proposing to base Priority Customer
Complex Order Tiers on a percentage of
industry volume in recognition of the
fact that the volume executed by a
Member may rise or fall with industry
volume. A percentage of industry
volume calculation allows the
Exchange’s tiers to be calibrated to
current market volumes rather than
requiring the same amount of volume
regardless of market conditions. While
the amount of volume required by the
proposed tiers may change in any given
month due to increases or decreases in
industry volume, the Exchange believes
that the proposed tier requirements are
set at a level that roughly corresponds
to the current ADV requirements for
Priority Customer Complex Tiers. The
Exchange is also proposing to include
additional types of Complex Order
volume in the tier calculation. Although
the current tier structure counts solely
Priority Customer Complex ADV, the
proposed structure would allow
Members to qualify for higher tier based
on all Complex Order volume except for
Crossing Orders and Responses to
Crossing Orders. The Exchange believes
that increasing the volume counted for
purposes of calculating tiers will
encourage Members to bring different
types of Complex Order volume to the
Exchange (i.e., to qualify for a higher
tier), while continuing to incentivize
Members to bring Priority Customer
Complex Orders specifically to earn the
associated rebates. Crossing Orders and
Responses to Crossing Orders will be
excluded from the proposed tier
calculation as this type of order flow is
10 15
U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(4) and (5).
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subject to separate pricing, with various
incentives for Members that trade in the
Exchange’s crossing mechanisms.
In addition, the Exchange believes
that the proposed changes are equitable
and not unfairly discriminatory as these
changes are designed to bring more
order flow, and in particular, Priority
Customer Complex Orders, to the
Exchange. The Exchange does not
believe that it is unfairly discriminatory
provide rebates only to Priority
Customer Complex Orders as this is the
order flow that the Exchange is seeking
to incentivize. A Priority Customer is by
definition not a broker or 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). This
limitation does not apply to participants
whose behavior is substantially similar
to that of market professionals,
including Professional Customers, who
will generally submit a higher number
of orders than Priority Customers. The
Exchange currently has Priority
Customer Complex Order Tiers in place
to incentivize that order flow, and is
simply modifying those tiers in a way
that the Exchange believes will increase
participation in Complex Orders. The
Exchange believes that the proposed
changes to the Priority Customer
Complex Tiers will benefit all market
participants that trade on the Exchange
by increasing their opportunities to
trade.
Furthermore, the Exchange believes
that its proposed definitions of
‘‘Affiliated Member’’ and ‘‘Customer
Total Consolidated Volume’’ are
reasonable, equitable, and not unfairly
discriminatory as these definitions
clarify terms that the Exchange is using
to describe its Priority Customer
Complex Tiers. The proposed
definitions are consistent with
definitions adopted for these concepts
on the Exchange’s affiliated exchanges,
Nasdaq MRX, LLC (‘‘MRX’’) and Nasdaq
GEMX, LLC (‘‘GEMX’’) respectively.12
Furthermore, with respect to the
definition of ‘‘Affiliated Member’’ in
particular the Exchange is adopting a
definition that is consistent with the
Exchange’s current practice of
aggregating volume from Members that
share at least 75% common ownership.
II. Market Maker Fees
The Exchange believes the proposed
changes to the Market Maker Complex
Order fees in Select Symbols are
reasonable and equitable as the
12 See MRX Schedule of Fees, Preface; GEMX
Schedule of Fees, I. Regular Order Fees and
Rebates, Qualifying Tier Thresholds.
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proposed fees replace a fee that was
previously tied to the Priority Customer
Complex ADV with a new fees based on
the proposed Priority Customer
Complex Tiers. Furthermore, the
Exchange believes that it is reasonable
and equitable to provide a differentiated
fee based on whether the Market Maker
achieves Priority Customer Complex
Tier 8 or 9. With the proposed changes,
Market Makers that achieve Priority
Customer Complex Tier 9 will pay the
same fee as would be applicable today
based on achieving the required total
affiliated Priority Customer ADV, while
Market Makers that achieve Priority
Customer Complex Tier 8 will pay a
slightly higher fee that is nonetheless
discounted compared to the fees
applicable to Market Makers that do not
achieve these tiers. The Exchange
believes that this two tiered structure
will encourage firms to reach for the
highest tier of the under Priority
Customer Complex Order rebate
program, while nonetheless
incentivizing firms that do not have
sufficient volume to reach that tier to
work towards the second highest tier
introduced under that program.
Furthermore, the Exchange believes
that the proposed changes to Market
Maker Complex Order fees are equitable
and not unfairly discriminatory the
changes apply equally to all Market
Maker Complex Orders based on
achieving the required Priority
Customer Complex Tier. As is the case
today, the Exchange will continue to
charge lower fees to Market Makers that
execute, through their affiliates, a
significant volume of Priority Customer
Complex Orders, as this will incentivize
members to bring order flow to the
Exchange, creating additional liquidity
in Complex Orders to the benefit of all
Members. The Exchange does not
believe that it is unfairly discriminatory
only to provide these lower fees to
Market Maker Orders as Market Makers
are subject to additional requirements
and obligations (such as quoting
requirements) that other market
participants are not.
The Exchange also believes that that
it is reasonable and equitable to increase
the maker fee charged to Market Makers
and Non-Nasdaq ISE Market Makers that
provide liquidity to Priority Customer
Complex Orders that leg into the regular
order book. Today, Market Makers that
do not qualify for Market Maker Plus
and Non-Nasdaq ISE Market Makers pay
a small fee for providing liquidity in
Select Symbols. In addition, Market
Makers that qualify for Market Maker
Plus and would typically be eligible for
a maker rebate are instead charged a
maker fee when trading against Priority
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Customer Complex Orders that leg into
the regular order book. At the same
time, the Exchange pays high rebates to
Priority Customer Complex Orders,
including when those Complex Orders
leg into the regular order book. In some
cases these rebates may be increased
with the proposed changes described
above to the Priority Customer Complex
Order Tiers. The Exchange believes that
it is reasonable and equitable to increase
the fees charged for all Market Maker
and Non-Nasdaq ISE Market Maker
Orders that provide liquidity to Priority
Customer Complex Orders that leg into
the regular market as this will help
offset potentially significant rebates
paid on the other side of these trades.
In this regard, the proposed fee increase
would decrease but not completely
eliminate the negative economics
associated with these trades as the
Exchange pays out significantly more in
rebate opportunity for Priority Customer
Complex Orders than it receives from
other side of the trade when those
orders leg into the regular order book.
Furthermore, the Exchange believes that
it is reasonable and equitable to reduce
fees for all Market Maker Orders trading
against non-Priority Customer Complex
Orders that leg into the regular order
book. Currently, this benefit is provided
only to Market Makers that achieve
Market Maker Plus status. The Exchange
believes, however, that it is appropriate
to extend this benefit to all Market
Maker Orders as an additional incentive
for Market Makers that have an
obligation to maintain quotes and
provide liquidity in the regular market
rather than only those Market Makers
that meet the heightened requirements
of Market Maker Plus. Non-Nasdaq ISE
Market Makers who have no obligations
to provide liquidity will not be eligible
for this incentive.
Furthermore, the Exchange believes
that the proposed changes to these fees
for Market Maker and Non-Nasdaq ISE
Market Maker Orders are equitable and
not unfairly discriminatory as they are
designed to reduce the negative
economics associated with Priority
Customer Complex Orders that leg into
the regular order book. The proposed
fees will apply equally to all Market
Makers and Non-Nasdaq ISE Market
Makers. The Exchange pays significant
rebates to that Priority Customer
Complex Orders, including when those
orders leg into the regular order book
where they may trade with Market
Makers and Non-Nasdaq ISE Market
Makers providing liquidity in the
regular market. The Exchange does not
believe it is unfairly discriminatory to
charge increased maker fees only to
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Market Maker and Non-Nasdaq ISE
Market Maker Orders as these market
participants are typically the ones
providing liquidity and trading with
Priority Customer Complex Orders that
leg into the regular order book.
III. Non-Priority Customer Complex
Order Taker Surcharge
The Exchange believes that the
proposed increase the taker surcharge
for non-Priority Customer Complex
Orders in Non-Select Symbols that take
liquidity from the complex order book
is reasonable and equitable. The
proposed fees are modestly increased
and the Exchange believes that such fees
will remain attractive to market
participants, who will continue to be
charged lower fees for adding liquidity
to the complex order book than for
removing liquidity, and who may be
granted additional opportunities to
trade by virtue of the incentives being
granted to attract Priority Customer
Complex Orders to the Exchange.
Furthermore, the Exchange believes that
the proposed change is equitable and
not unfairly discriminatory as it applies
to all non-Priority Customer Complex
Orders that take liquidity in Non-Select
Symbols.
IV. Formatting and Other NonSubstantive Changes to the Tables
The Exchange believes that the
proposed formatting changes to the
tables are reasonable, equitable, and not
unfairly discriminatory. As explained in
the purpose section of this filing, these
changes are entirely cosmetic and
merely move around columns in various
tables so that these are grouped in a
manner that the Exchange believes will
be easier for Members to follow. The
Exchange hopes that these changes will
increase the readability of the Schedule
of Fees by grouping fees and rebates for
Complex Orders under three headings—
i.e., Priority Customer Rebates, Maker
and Taker Fees, and Crossing Order
Fees and Rebates. None of the proposed
formatting changes impact the fees
charged or rebates provided to
Members. Furthermore, the Exchange
believes that it is reasonable, equitable,
and not unfairly discriminatory to
remove the outdated reference to the
PIM in the Facilitation and Solicitation
break-up rebate footnote. As explained
in the purpose section of this proposed
rule change, the Exchange does not have
break-up rebates for the PIM. Although
the column correctly refers to
Facilitation and Solicitation break-up
rebates, the PIM reference was
inadvertently left in the footnote at the
time the Exchange filed to remove those
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rebates. The proposed change corrects
this reference.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
changes will enhance both intermarket
and intramarket competition by
amending various fees and rebates
related to the trading of Complex Orders
on the Exchange. The Exchange believes
that the proposed fees and rebates
remain competitive with those on other
options markets, and will continue to
attract order flow to the Exchange,
thereby encouraging additional volume
and liquidity to the benefit of all market
participants. 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.
daltland on DSKBBV9HB2PROD with NOTICES
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,13 and Rule
19b–4(f)(2) 14 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:
SMALL BUSINESS ADMINISTRATION
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–2018–46 on the subject line.
ACTION:
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–2018–46. 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–2018–46 and should be
submitted on or before June 19, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–11456 Filed 5–25–18; 8:45 am]
BILLING CODE 8011–01–P
U.S.C. 78s(b)(3)(A)(ii).
14 17 CFR 240.19b–4(f)(2).
13 15
VerDate Sep<11>2014
16:39 May 25, 2018
15 17
Jkt 244001
24547
PO 00000
CFR 200.30–3(a)(12).
Frm 00091
Fmt 4703
Sfmt 4703
Reporting and Recordkeeping
Requirements Under OMB Review
Small Business Administration.
30-day notice.
AGENCY:
The Small Business
Administration (SBA) is publishing this
notice to comply with requirements of
the Paperwork Reduction Act (PRA),
which requires agencies to submit
proposed reporting and recordkeeping
requirements to OMB for review and
approval, and to publish a notice in the
Federal Register notifying the public of
that submission.
DATES: Submit comments on or before
June 28, 2018.
ADDRESSES: Comments should refer to
the information collection by name and/
or OMB Control Number and should be
sent to: Agency Clearance Officer, Curtis
Rich, Small Business Administration,
409 3rd Street SW, 5th Floor,
Washington, DC 20416; and SBA Desk
Officer, Office of Information and
Regulatory Affairs, Office of
Management and Budget, New
Executive Office Building, Washington,
DC 20503.
FOR FURTHER INFORMATION CONTACT:
Curtis Rich, Agency Clearance Officer,
(202) 205–7030, curtis.rich@sba.gov.
Copies: A copy of the Form OMB 83–
1, supporting statement, and other
documents submitted to OMB for
review may be obtained from the
Agency Clearance Officer.
SUPPLEMENTARY INFORMATION: Small
Business Administration (SBA) Surety
Bond Guarantee Program was created to
encourage surety companies to provide
bonding for small contractors. The
information collected on this form from
small businesses and surety companies
will be used to evaluate the eligibility of
applicants for contracts up to $250,000.
SUMMARY:
Solicitation of Public Comments
Comments may be submitted on (a)
whether the collection of information is
necessary for the agency to properly
perform its functions; (b) whether the
burden estimates are accurate; (c)
whether there are ways to minimize the
burden, including through the use of
automated techniques or other forms of
information technology; and (d) whether
there are ways to enhance the quality,
utility, and clarity of the information.
Summary of Information Collections
Title: Quick Bond Guarantee
Application and Agreement.
Description of Respondents: Small
Businesses and Surety Companies.
Form Number: SBA Form 990A.
E:\FR\FM\29MYN1.SGM
29MYN1
]]>Agencies
[Federal Register Volume 83, Number 103 (Tuesday, May 29, 2018)]
[Notices]
[Pages 24543-24547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-11456]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83306; File No. SR-ISE-2018-46]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Schedule of Fees Related to Complex Orders
May 23, 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 May 10, 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 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 the Schedule of Fees related to
Complex Orders traded on the Exchange.
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 purpose of the proposed rule change is to amend the Schedule of
Fees related to Complex Orders traded on the Exchange, including: (1)
Priority Customer \3\ Complex Order rebates, (2) Market Maker \4\ fees,
(3) the non-Priority Customer Complex Order taker surcharge, and (4)
formatting and other non-substantive changes to the tables. Each of the
proposed changes is described in more detail below.
---------------------------------------------------------------------------
\3\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq ISE Rule
100(a)(37A).
\4\ ``Market Maker'' refers to ``Competitive Market Makers'' and
``Primary Market Makers'' collectively. See ISE Rule 100(a)(28).
---------------------------------------------------------------------------
I. Priority Customer Complex Order Rebates
Currently, the Exchange has a fee structure in place for Complex
Orders that provides rebates to Priority Customer Complex Orders in
order to encourage Members to bring that order flow to the Exchange.
Specifically, Priority Customer Complex Orders are provided rebates in
Select Symbols \5\ and Non-Select Symbols \6\ (other than NDX and MNX)
based on Priority Customer average daily volume (``ADV'') in eight
tiers as shown in the table below:\7\
---------------------------------------------------------------------------
\5\ ``Select Symbols'' are options overlying all symbols listed
on the Nasdaq ISE that are in the Penny Pilot Program.
\6\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols.
\7\ The Priority Customer Complex Order rebates are provided per
contract per leg if the order trades with non-Priority Customer
orders in the Complex Order Book or trades with quotes and orders on
the regular order book.
The rebate for the highest tier volume achieved is applied
retroactively to all eligible Priority Customer Complex volume once
the threshold has been reached.
Members will not receive rebates for net zero complex orders.
For purposes of determining which complex orders qualify as ``net
zero'' the Exchange will count all complex orders that leg in to the
regular order book and are executed at a net price per contract that
is within a range of $0.01 credit and $0.01 debit.
[[Page 24544]]
------------------------------------------------------------------------
Rebate for Rebate for non-
select symbols select symbols
------------------------------------------------------------------------
Priority Customer Complex ADV 0-14,999.. ($0.26) ($0.40)
Priority Customer Complex ADV 15,000- (0.30) (0.60)
44,999.................................
Priority Customer Complex ADV 45,000- (0.36) (0.70)
59,999.................................
Priority Customer Complex ADV 60,000- (0.41) (0.75)
74,999.................................
Priority Customer Complex ADV 75,000- (0.42) (0.75)
99,999.................................
Priority Customer Complex ADV 100,000- (0.45) (0.80)
124,999................................
Priority Customer Complex ADV 125,000- (0.46) (0.81)
224,999................................
Priority Customer Complex ADV 225,000+.. (0.50) (0.85)
------------------------------------------------------------------------
The Exchange now proposes to modify this rebate structure such that
Priority Customer Complex Order rebates will be paid a rebate based on
a percentage of industry volume rather than straight volume thresholds.
In addition, the Exchange proposes to move away from a tier calculation
based solely on Priority Customer Complex ADV to one that includes
Complex Orders entered for other market participant types, and orders
entered by affiliates of the Member. Specifically, the Exchange
proposes to adopt Priority Customer Complex Tiers that are based on
Total Affiliated Member Complex Order Volume (Excluding Crossing Orders
and Responses to Crossing Orders) Calculated as a Percentage of
Customer Total Consolidated Volume. All Complex Order volume executed
on the Exchange, including volume executed by Affiliated Members, will
be included in the volume calculation, except for volume executed as
Crossing Orders and Responses to Crossing Orders. An ``Affiliated
Member'' is a Member that shares at least 75% common ownership with a
particular Member as reflected on the Member's Form BD, Schedule A.
Furthermore, ``Customer Total Consolidated Volume'' means the total
national volume cleared at The Options Clearing Corporation in the
Customer range in equity and ETF options in that month.
As proposed, there will be nine Priority Customer Complex Order
Tiers based on the percentage of industry volume calculation: 0.000%-
0.200% (Tier 1); above 0.200%-0.400% (Tier 2); above 0.400%-0.600%
(Tier 3), above 0.600%-0.800% (Tier 4), above 0.800%-1.000% (Tier 5),
above 1.000%-1.600% (Tier 6), above 1.600%-2.000% (Tier 7), above
2.000%-3.500% (Tier 8), above 3.500% (Tier 9). Furthermore, the
associated rebates will be modified such that in Select Symbols the
proposed rebate will be $0.25 per contract for Tier 1, $0.30 per
contract for Tier 2, $0.35 per contract for Tier 3, $0.40 per contract
for Tier 4, $0.45 per contract for Tier 5, $0.46 per contract for Tier
6, $0.48 per contract for Tier 7, and $0.50 per contract for Tiers 8
and 9. Furthermore, in Non-Select Symbols the proposed rebate will be
$0.40 per contract for Tier 1, $0.55 per contract for Tier 2, $0.70 per
contract for Tier 3, $0.75 per contract for Tier 4, $0.80 per contract
for Tiers 5-7, and $0.85 per contract for Tiers 8 and 9.
II. Market Maker Fees
Market Maker Complex Orders in Select Symbols are charged a maker
fee of $0.47 per contract when trading against Priority Customer
Complex Orders, and a $0.50 per contract taker fee regardless of the
counterparty. Currently, each of these fees is reduced to $0.44 per
contract for Market Makers with total affiliated Priority Customer
Complex ADV of 150,000 or more contracts.\8\ The Exchange proposes to
base this fee discount on the proposed Priority Customer Complex Tiers,
and introduce a second tier of reduced fee for Market Makers that
achieve a higher Priority Customer Complex Tier. Specifically, the
Exchange proposes to keep the current $0.44 per contract fee for Market
Makers Market Makers that achieve Priority Customer Complex Tier 9, and
charge a fee of $0.47 per contract for Market Makers that achieve
Priority Customer Complex Tier 8.
---------------------------------------------------------------------------
\8\ All eligible volume from affiliated Members is aggregated in
determining total affiliated Priority Customer Complex ADV, provided
there is at least 75% common ownership between the Members as
reflected on each Member's Form BD, Schedule A.
---------------------------------------------------------------------------
In addition, Market Makers that qualify for the Market Maker Plus
program are currently charged a fee $0.10 per contract instead of the
applicable Market Maker Plus rebate when trading against Priority
Customer Complex Orders that leg into the regular order book.
Regardless of the counterparty, a $0.10 per contract maker fee also
applies to Market Makers that do not qualify for Market Maker Plus and
Non-Nasdaq ISE Market Makers. With the proposed Priority Customer
Complex Order Tiers described above, which in some cases may result in
higher rebates being provided to Priority Customer Complex Orders,
including Complex Orders that leg into the regular order book, the
Exchange proposes to increase the fee for trading against Priority
Customer Complex Orders that leg into the regular order book.
Specifically, the Exchange proposes to increase this fee to $0.15 per
contract and apply it to all Market Maker Orders and Non-Nasdaq ISE
Market Maker Orders. Furthermore, there is currently no fee charged or
rebate provided to Market Maker Orders submitted by Market Makers that
qualify for Market Maker Plus when trading against non-Priority
Customer Complex Orders that leg into the regular order book. As
proposed, this treatment will be afforded to all Market Maker Orders
when trading against non-Priority Customer Complex Orders that leg into
the regular order book. The fees for Non-Nasdaq ISE Market Makers for
trading against non-Priority Customer Complex Orders that leg into the
regular order book will remain unchanged.
III. Non-Priority Customer Complex Order Taker Surcharge
Currently, the Exchange assesses a $0.03 per contract surcharge to
non-Priority Customer Complex Orders in Non-Select Symbols that take
liquidity from the Complex Order Book, excluding Complex Orders
executed in the Facilitation Mechanism, Solicited Order Mechanism,
Price Improvement Mechanism (``PIM'') and ``exposure'' auctions
pursuant to Rule 722(b)(3)(iii). The Exchange proposes to increase this
taker surcharge to $0.05 per contract.
IV. Formatting and Other Non-Substantive Changes to the Tables
With the changes described above, which add additional content to
the Schedule of Fees, the Exchange proposes to make certain non-
substantive formatting changes that are designed to make the flow of
the Schedule of Fees easier for Members to understand. None of these
changes affect the fees charged or rebates provided to members. With
the proposed changes, the Exchange will
[[Page 24545]]
have three tables located under Section II of the Schedule of Fees
(Complex Order Fees and Rebates): (1) ``Priority Customer Rebates,''
(2) ``Maker and Taker Fees,'' and (3) ``Crossing Order Fees and
Rebates.''
The first table, i.e., Priority Customer Rebates, will contain the
Priority Customer Complex Tiers described above rather than all rebates
as is currently the case. As such, the Exchange proposes to move the
column on Facilitation and Solicitation Break-up Rebate for Select
Symbols to the third table on Crossing Order Fees and Rebates. These
rebates will continue to be applied in exactly the same manner as
today. Furthermore, the Exchange proposes to delete references in this
table to other market participant types, which are not eligible for
rebates in Complex Orders other than the Facilitation and Solicitation
Break-up Rebate in Select Symbols described above. The second table,
i.e., Maker and Taker Fees, will include both the maker fees described
there today as well as the taker fees that are currently included in
the following table. As such, the Exchange proposes to move the columns
that describe the taker fee for Select Symbols and the taker fee for
Non-Select Symbols to this table. No changes to these taker fees are
proposed. Finally, the third table, i.e., Crossing Order Fees and
Rebates, will include only fees and rebates that relate to the
Exchange's various crossing mechanisms. The fees and rebates moved to
and from this table are described above.
Finally, the footnote referenced in the column on Facilitation and
Solicitation Break-up Rebates for Select Symbols contains an outdated
reference to the PIM. Specifically, the footnote provides that rebates
are provided per contract per leg for contracts that are submitted to
PIM, Facilitation and Solicitation Mechanisms . . .'' As indicated in
the header to the column, these break-up rebates apply to the
Facilitation and Solicitation Mechanisms only. The language related to
the PIM was included in the Schedule of Fees when the Exchange offered
a break-up rebate for the PIM. When the Exchange eliminated PIM break-
up rebates, the Exchange deleted the column that included those rebates
but did not remove the related reference in this footnote.\9\ The
Exchange therefore proposes to update this footnote now by deleting the
PIM reference, which is no longer applicable.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 80684 (May 16,
2017), 82 FR 23435 (May 22, 2017) (SR-ISE-2017-39).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
I. Priority Customer Complex Order Rebates
The Exchange believes that the proposed changes to the Priority
Customer Complex Order Tiers are reasonable and equitable as these
changes are designed to incentivize Members to trade Complex Orders,
and, in particular Priority Customer Complex Orders, on the Exchange.
The Exchange is proposing to base Priority Customer Complex Order Tiers
on a percentage of industry volume in recognition of the fact that the
volume executed by a Member may rise or fall with industry volume. A
percentage of industry volume calculation allows the Exchange's tiers
to be calibrated to current market volumes rather than requiring the
same amount of volume regardless of market conditions. While the amount
of volume required by the proposed tiers may change in any given month
due to increases or decreases in industry volume, the Exchange believes
that the proposed tier requirements are set at a level that roughly
corresponds to the current ADV requirements for Priority Customer
Complex Tiers. The Exchange is also proposing to include additional
types of Complex Order volume in the tier calculation. Although the
current tier structure counts solely Priority Customer Complex ADV, the
proposed structure would allow Members to qualify for higher tier based
on all Complex Order volume except for Crossing Orders and Responses to
Crossing Orders. The Exchange believes that increasing the volume
counted for purposes of calculating tiers will encourage Members to
bring different types of Complex Order volume to the Exchange (i.e., to
qualify for a higher tier), while continuing to incentivize Members to
bring Priority Customer Complex Orders specifically to earn the
associated rebates. Crossing Orders and Responses to Crossing Orders
will be excluded from the proposed tier calculation as this type of
order flow is subject to separate pricing, with various incentives for
Members that trade in the Exchange's crossing mechanisms.
In addition, the Exchange believes that the proposed changes are
equitable and not unfairly discriminatory as these changes are designed
to bring more order flow, and in particular, Priority Customer Complex
Orders, to the Exchange. The Exchange does not believe that it is
unfairly discriminatory provide rebates only to Priority Customer
Complex Orders as this is the order flow that the Exchange is seeking
to incentivize. A Priority Customer is by definition not a broker or
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). This limitation does not apply to participants
whose behavior is substantially similar to that of market
professionals, including Professional Customers, who will generally
submit a higher number of orders than Priority Customers. The Exchange
currently has Priority Customer Complex Order Tiers in place to
incentivize that order flow, and is simply modifying those tiers in a
way that the Exchange believes will increase participation in Complex
Orders. The Exchange believes that the proposed changes to the Priority
Customer Complex Tiers will benefit all market participants that trade
on the Exchange by increasing their opportunities to trade.
Furthermore, the Exchange believes that its proposed definitions of
``Affiliated Member'' and ``Customer Total Consolidated Volume'' are
reasonable, equitable, and not unfairly discriminatory as these
definitions clarify terms that the Exchange is using to describe its
Priority Customer Complex Tiers. The proposed definitions are
consistent with definitions adopted for these concepts on the
Exchange's affiliated exchanges, Nasdaq MRX, LLC (``MRX'') and Nasdaq
GEMX, LLC (``GEMX'') respectively.\12\ Furthermore, with respect to the
definition of ``Affiliated Member'' in particular the Exchange is
adopting a definition that is consistent with the Exchange's current
practice of aggregating volume from Members that share at least 75%
common ownership.
---------------------------------------------------------------------------
\12\ See MRX Schedule of Fees, Preface; GEMX Schedule of Fees,
I. Regular Order Fees and Rebates, Qualifying Tier Thresholds.
---------------------------------------------------------------------------
II. Market Maker Fees
The Exchange believes the proposed changes to the Market Maker
Complex Order fees in Select Symbols are reasonable and equitable as
the
[[Page 24546]]
proposed fees replace a fee that was previously tied to the Priority
Customer Complex ADV with a new fees based on the proposed Priority
Customer Complex Tiers. Furthermore, the Exchange believes that it is
reasonable and equitable to provide a differentiated fee based on
whether the Market Maker achieves Priority Customer Complex Tier 8 or
9. With the proposed changes, Market Makers that achieve Priority
Customer Complex Tier 9 will pay the same fee as would be applicable
today based on achieving the required total affiliated Priority
Customer ADV, while Market Makers that achieve Priority Customer
Complex Tier 8 will pay a slightly higher fee that is nonetheless
discounted compared to the fees applicable to Market Makers that do not
achieve these tiers. The Exchange believes that this two tiered
structure will encourage firms to reach for the highest tier of the
under Priority Customer Complex Order rebate program, while nonetheless
incentivizing firms that do not have sufficient volume to reach that
tier to work towards the second highest tier introduced under that
program.
Furthermore, the Exchange believes that the proposed changes to
Market Maker Complex Order fees are equitable and not unfairly
discriminatory the changes apply equally to all Market Maker Complex
Orders based on achieving the required Priority Customer Complex Tier.
As is the case today, the Exchange will continue to charge lower fees
to Market Makers that execute, through their affiliates, a significant
volume of Priority Customer Complex Orders, as this will incentivize
members to bring order flow to the Exchange, creating additional
liquidity in Complex Orders to the benefit of all Members. The Exchange
does not believe that it is unfairly discriminatory only to provide
these lower fees to Market Maker Orders as Market Makers are subject to
additional requirements and obligations (such as quoting requirements)
that other market participants are not.
The Exchange also believes that that it is reasonable and equitable
to increase the maker fee charged to Market Makers and Non-Nasdaq ISE
Market Makers that provide liquidity to Priority Customer Complex
Orders that leg into the regular order book. Today, Market Makers that
do not qualify for Market Maker Plus and Non-Nasdaq ISE Market Makers
pay a small fee for providing liquidity in Select Symbols. In addition,
Market Makers that qualify for Market Maker Plus and would typically be
eligible for a maker rebate are instead charged a maker fee when
trading against Priority Customer Complex Orders that leg into the
regular order book. At the same time, the Exchange pays high rebates to
Priority Customer Complex Orders, including when those Complex Orders
leg into the regular order book. In some cases these rebates may be
increased with the proposed changes described above to the Priority
Customer Complex Order Tiers. The Exchange believes that it is
reasonable and equitable to increase the fees charged for all Market
Maker and Non-Nasdaq ISE Market Maker Orders that provide liquidity to
Priority Customer Complex Orders that leg into the regular market as
this will help offset potentially significant rebates paid on the other
side of these trades. In this regard, the proposed fee increase would
decrease but not completely eliminate the negative economics associated
with these trades as the Exchange pays out significantly more in rebate
opportunity for Priority Customer Complex Orders than it receives from
other side of the trade when those orders leg into the regular order
book. Furthermore, the Exchange believes that it is reasonable and
equitable to reduce fees for all Market Maker Orders trading against
non-Priority Customer Complex Orders that leg into the regular order
book. Currently, this benefit is provided only to Market Makers that
achieve Market Maker Plus status. The Exchange believes, however, that
it is appropriate to extend this benefit to all Market Maker Orders as
an additional incentive for Market Makers that have an obligation to
maintain quotes and provide liquidity in the regular market rather than
only those Market Makers that meet the heightened requirements of
Market Maker Plus. Non-Nasdaq ISE Market Makers who have no obligations
to provide liquidity will not be eligible for this incentive.
Furthermore, the Exchange believes that the proposed changes to
these fees for Market Maker and Non-Nasdaq ISE Market Maker Orders are
equitable and not unfairly discriminatory as they are designed to
reduce the negative economics associated with Priority Customer Complex
Orders that leg into the regular order book. The proposed fees will
apply equally to all Market Makers and Non-Nasdaq ISE Market Makers.
The Exchange pays significant rebates to that Priority Customer Complex
Orders, including when those orders leg into the regular order book
where they may trade with Market Makers and Non-Nasdaq ISE Market
Makers providing liquidity in the regular market. The Exchange does not
believe it is unfairly discriminatory to charge increased maker fees
only to Market Maker and Non-Nasdaq ISE Market Maker Orders as these
market participants are typically the ones providing liquidity and
trading with Priority Customer Complex Orders that leg into the regular
order book.
III. Non-Priority Customer Complex Order Taker Surcharge
The Exchange believes that the proposed increase the taker
surcharge for non-Priority Customer Complex Orders in Non-Select
Symbols that take liquidity from the complex order book is reasonable
and equitable. The proposed fees are modestly increased and the
Exchange believes that such fees will remain attractive to market
participants, who will continue to be charged lower fees for adding
liquidity to the complex order book than for removing liquidity, and
who may be granted additional opportunities to trade by virtue of the
incentives being granted to attract Priority Customer Complex Orders to
the Exchange. Furthermore, the Exchange believes that the proposed
change is equitable and not unfairly discriminatory as it applies to
all non-Priority Customer Complex Orders that take liquidity in Non-
Select Symbols.
IV. Formatting and Other Non-Substantive Changes to the Tables
The Exchange believes that the proposed formatting changes to the
tables are reasonable, equitable, and not unfairly discriminatory. As
explained in the purpose section of this filing, these changes are
entirely cosmetic and merely move around columns in various tables so
that these are grouped in a manner that the Exchange believes will be
easier for Members to follow. The Exchange hopes that these changes
will increase the readability of the Schedule of Fees by grouping fees
and rebates for Complex Orders under three headings--i.e., Priority
Customer Rebates, Maker and Taker Fees, and Crossing Order Fees and
Rebates. None of the proposed formatting changes impact the fees
charged or rebates provided to Members. Furthermore, the Exchange
believes that it is reasonable, equitable, and not unfairly
discriminatory to remove the outdated reference to the PIM in the
Facilitation and Solicitation break-up rebate footnote. As explained in
the purpose section of this proposed rule change, the Exchange does not
have break-up rebates for the PIM. Although the column correctly refers
to Facilitation and Solicitation break-up rebates, the PIM reference
was inadvertently left in the footnote at the time the Exchange filed
to remove those
[[Page 24547]]
rebates. The proposed change corrects this reference.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed changes will enhance both intermarket and intramarket
competition by amending various fees and rebates related to the trading
of Complex Orders on the Exchange. The Exchange believes that the
proposed fees and rebates remain competitive with those on other
options markets, and will continue to attract order flow to the
Exchange, thereby encouraging additional volume and liquidity to the
benefit of all market participants. 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,\13\ and Rule 19b-4(f)(2) \14\ 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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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 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-2018-46 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-2018-46. 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-2018-46 and should be submitted on
or before June 19, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-11456 Filed 5-25-18; 8:45 am]
BILLING CODE 8011-01-P
