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, 28681-28684 [2018-13161]
Download as PDF
<![CDATA[
Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices
execution services are completely
voluntary and subject to extensive
competition both from other exchanges
and from off-exchange venues.
The proposed changes to the credits
are reflective of a robust and
competitive securities market, where
trading venues must provide incentives
to participants in the form of credits to
attract order flow and adjust those
incentives to make them more
competitive or to allow the Exchange to
provide other market-improving
incentives elsewhere.
Moreover, trading venues are free to
adjust their fees and credits in response
to any changes that the Exchange makes
to its fees and credits. If any of the
changes proposed herein are
unattractive to market participants, it is
likely that the Exchange will lose
market share as a result. Accordingly,
the Exchange does not believe that the
proposed changes will impair the ability
of members or competing order
execution venues to maintain their
competitive standing in the financial
markets.
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.18
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.
sradovich on DSK3GMQ082PROD with NOTICES
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–
NASDAQ–2018–042 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–NASDAQ–2018–042. 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–NASDAQ–2018–042, and
should be submitted on or before July
11, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–13163 Filed 6–19–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83431; File No. SR–ISE–
2018–51]
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
June 14, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 1,
2018, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I 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
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. Specifically, the Exchange
1 15
18 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
17:58 Jun 19, 2018
19 17
Jkt 244001
PO 00000
CFR 200.30–3(a)(12).
Frm 00075
Fmt 4703
Sfmt 4703
28681
2 17
E:\FR\FM\20JNN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
20JNN1
28682
Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices
proposes to: (1) Reduce the volume
requirements for Priority Customer 3
Complex Tier 9, and (2) eliminate the
discount for Market Maker 4 Complex
Orders that trade against Priority
Customer Complex Orders preferenced
to them in the complex order book.
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 that
trade with non-Priority Customer orders
in the complex order book or trade with
quotes and orders on the regular order
book are provided rebates in Select
Symbols 5 and Non-Select Symbols 6
(other than NDX and MNX) based on
nine volume tiers, as shown in the table
below. The Priority Customer Complex
Tiers are based on Total Affiliated
Member 7 Complex Order Volume
(Excluding Crossing Orders 8 and
Responses to Crossing Orders 9)
Calculated as a Percentage of Customer
Priority customer complex tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
6
7
8
9
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
Total Consolidated Volume 10
(hereinafter, ‘‘Complex Order Volume
Percentage’’). All Complex Order
volume executed on the Exchange,
including volume executed by Affiliated
Members, is included in the volume
calculation, except for volume executed
as Crossing Orders and Responses to
Crossing Orders. Rebates are provided
per contract per leg, and once the
threshold has been reached the rebate
for the highest tier is applied
retroactively to all eligible Priority
Customer Complex volume.11
Rebate for
select symbols
Complex order volume percentage
0.000–0.200 ...............................................................................................
Above 0.200–0.400 ...................................................................................
Above 0.400–0.600 ...................................................................................
Above 0.600–0.800 ...................................................................................
Above 0.800–1.000 ...................................................................................
Above 1.000–1.600 ...................................................................................
Above 1.600–2.000 ...................................................................................
Above 2.000–3.500 ...................................................................................
Above 3.500 ..............................................................................................
($0.25)
(0.30)
(0.35)
(0.40)
(0.45)
(0.46)
(0.48)
(0.50)
(0.50)
Rebate for
non-select
symbols
($0.40)
(0.55)
(0.70)
(0.75)
(0.80)
(0.80)
(0.80)
(0.85)
(0.85)
sradovich on DSK3GMQ082PROD with NOTICES
Currently, a Member must execute a
Complex Order Volume Percentage of
above 3.5% to qualify for Priority
Customer Complex Tier 9. The
Exchange now proposes to reduce the
Complex Order Volume Percentage
requirement to above 3.25%, thereby
making Priority Customer Complex
Order Tier 9 easier for Members to
achieve. As proposed, Members with a
Complex Order Volume Percentage
above 2% and up to 3.25% will qualify
for Priority Customer Complex Tier 8,
while Members with a Complex Order
Volume Percentage above 3.25% will
qualify for Priority Customer Complex
Tier 9. Although Priority Customer
Complex Order Tier 8 and 9 are
currently eligible for the same $0.50 per
contract rebate in Select Symbols and
$0.85 per contract rebate in Non-Select
Symbols, the lower proposed volume
requirements for Priority Customer
Complex Tier 9 will benefit Market
Makers that currently receive
discounted Complex Order fees in
Select Symbols if they achieve this
Priority Customer Complex Tier.
Specifically, Market Maker Complex
Orders in Select Symbols are charged a
fee of $0.44 per contract for either taking
liquidity, or providing liquidity to a
Priority Customer Complex Order,
provided that the firm achieves Priority
Customer Complex Tier 9. This fee is
discounted from the regular taker fee of
$0.50 per contract (reduced to $0.47 per
contract for Priority Customer Complex
Tier 8) and the maker fee of $0.47 per
contract for trading against a Priority
Customer. Thus, reducing the volume
requirements for achieving Priority
Customer Complex Tier 9 will make it
easier for Market Makers to achieve the
discounted $0.44 per contract rate.
Customer orders preferenced to them in
the complex order book in equity
options that are able to be listed and
traded on more than one options
exchange. This discount does not apply
to FX Options Symbols or to option
classes designated by the Exchange to
receive a guaranteed allocation pursuant
to Nasdaq ISE Rule 722(b)(3)(i)(B). The
Exchange now proposes to eliminate
this discount. With the recent
introduction of new pricing incentives
for Complex Orders, which include the
discounted Market Maker fees described
in the section above, the Exchange does
not believe that an additional incentive
for preferenced orders is necessary to
attract Complex Order flow.
II. Preferenced Market Maker Complex
Order Discount
Currently, Market Makers making or
taking liquidity in Select Symbols or
Non-Select Symbols receive a discount
of $0.02 when trading against Priority
2. Statutory Basis
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 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.
8 A ‘‘Crossing Order’’ is an order executed in the
Exchange’s Facilitation Mechanism, Solicited Order
Mechanism, Price Improvement Mechanism (PIM)
or submitted as a Qualified Contingent Cross order.
For purposes of the Fee Schedule, orders executed
in the Block Order Mechanism are also considered
Crossing Orders.
9 A ‘‘Response to a Crossing Order’’ is any contraside interest submitted after the commencement of
an auction in the Exchange’s Facilitation
VerDate Sep<11>2014
17:58 Jun 19, 2018
Jkt 244001
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,12 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
Mechanism, Solicited Order Mechanism, Block
Order Mechanism or PIM.
10 ‘‘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.
11 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.
12 15 U.S.C. 78f(b).
E:\FR\FM\20JNN1.SGM
20JNN1
Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices
of the Act,13 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.
sradovich on DSK3GMQ082PROD with NOTICES
I. Priority Customer Complex Order
Rebates
The Exchange believes it is reasonable
and equitable to reduce the volume
requirements for Priority Customer
Complex Order Tier 9 as this change
will make it easier for Members to
achieve this tier. The proposed change
is designed to incentivize Members to
trade Complex Orders on the Exchange.
While the proposed change will not
have any impact on Priority Customer
Complex Order rebates since the rebates
are currently the same for Priority
Customer Complex Tier 8 and 9, the
Exchange also offers discounted
Complex Order fees in Select Symbols
for Market Makers that achieve higher
Priority Customer Complex Tiers. With
the proposed change, Market Makers
may find it easier to achieve the higher
tier of discounted fee, and thereby lower
their execution costs when trading on
the Exchange. Furthermore, the
Exchange believes that the proposed
change to the Priority Customer
Complex Order Tiers is equitable and
not unfairly discriminatory as this
change is designed to increase trading
by Market Makers, which may benefit
other market participants that will have
an increased opportunity to trade in
Complex Orders. Market Makers are
subject to additional requirements and
obligations (such as quoting
requirements) that other market
participants are not. The Exchange
believes that the mix of incentives that
it provides will encourage an active
market in Complex Orders from Market
Makers and other market participants.
II. Preferenced Market Maker Complex
Order Discount
The Exchange believes that it is
reasonable and equitable to eliminate
the preferenced Market Maker Complex
Order discount as the Exchange has
recently introduced new incentives for
Market Makers that trade Complex
Orders. Specifically, Market Makers are
now eligible for tiered Complex Order
taker fees based on achieving Priority
Customer Complex Tier 8 or 9. With the
changes to the Priority Customer
Complex Tier 9 volume requirements
discussed above, the highest tier of
discount will be even easier for Market
Makers to achieve. The Exchange
therefore believes that an additional
discount based on receiving preferenced
Priority Customer Complex Orders is no
longer necessary. Furthermore, the
Exchange believes that eliminating this
fee discount is equitable and not
unfairly discriminatory as this discount
will no longer be available for any
Market Makers. Market Makers may
instead qualify for the other Complex
Order discounts based on meeting the
applicable volume requirements.
to determine whether the proposed rule
should be approved or disapproved.
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 its Complex
Order 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.
• 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–2018–51 on the subject line.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,14 and Rule
19b–4(f)(2) 15 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
14 15
13 15
U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
17:58 Jun 19, 2018
15 17
Jkt 244001
28683
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00077
Fmt 4703
Sfmt 4703
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
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–2018–51. 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–2018–51 and should be
submitted on or before July 11, 2018.
E:\FR\FM\20JNN1.SGM
20JNN1
28684
Federal Register / Vol. 83, No. 119 / Wednesday, June 20, 2018 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–13161 Filed 6–19–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83441; File No. SR–
CboeBYX–2018–006]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Related to
Physical Port Fees for BYX
June 14, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 1,
2018, Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Exchange has
designated the proposed rule change as
one establishing or changing a member
due, fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
of the Act 3 and Rule 19b–4(f)(2)
thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. 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
sradovich on DSK3GMQ082PROD with NOTICES
The Exchange filed a proposal to
amend its fees and rebates applicable to
Members 5 and non-Members of the
Exchange pursuant to BYX Rule 15.1(a)
and (c) to modify its fees for physical
ports.
The text of the proposed rule change
is available at the Exchange’s website at
www.markets.cboe.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer that has been admitted
to membership in the Exchange.’’ See Exchange
Rule 1.5(n).
1 15
VerDate Sep<11>2014
17:58 Jun 19, 2018
Jkt 244001
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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to implement
proposed changes to its fee schedule
relating to physical connectivity fees,
effective June 1, 2018. By way of
background, a physical port is utilized
by a Member or non-Member to connect
to the Exchange at the data centers
where the Exchange’s servers are
located. The Exchange currently
maintains a presence in two third-party
data centers: (i) The primary data center
where the Exchange’s business is
primarily conducted on a daily basis,
and (ii) a secondary data center, which
is predominantly maintained for
business continuity purposes. The
Exchange currently assesses the
following physical connectivity fees for
Members and non-Members on a
monthly basis: $2,000 per physical port
for a 1 gigabyte circuit and $7,000 per
physical port for a 10 gigabyte circuit.
The Exchange proposes to increase the
fees per physical ports from (i) $2,000
to $2,500 per month, per port for a 1
gigabyte circuit and (ii) $7,000 to $7,500
per month, per port for a 10 gigabyte
circuit. The Exchange notes the
proposed fees enable it to continue to
maintain and improve its market
technology and services and also notes
that the proposed fee changes are in line
with the amounts assessed by other
exchanges for similar connections.6
The Exchange also proposes to adopt
separate physical port fees for
connection to its secondary data center,
which is predominantly maintained for
business continuity purposes (‘‘Disaster
Recovery Systems’’). Particularly, the
Disaster Recovery Systems can be
6 See e.g., NYSE Arca Equities Fees and Charges,
NYSE Arca Marketplace: Other Fees and Charges,
Connectivity Fees. See also, Nasdaq Phlx LLC
Pricing Schedule, Section XI, Direct Connectivity to
Phlx.
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
accessed via physical ports in Chicago.
Members and Non-Members may
maintain physical ports in order to be
able to connect to the Disaster Recovery
Systems in case of a disaster. Currently,
physical ports that are used to connect
to the Disaster Recovery Systems are
assessed the same fees as physical ports
used to connect to the Exchange’s
trading system. The Exchange proposes
to establish separate pricing for physical
ports that are used to connect to the
Disaster Recovery Systems (‘‘Disaster
Recovery Physical Ports’’). Specifically,
the Exchange proposes to assess a
monthly fee of $2,000 per 1 gigabyte
Disaster Recovery Physical Port and a
monthly fee of $6,000 per 10 gigabyte
Disaster Recovery Physical Port. This
amount will continue to enable the
Exchange to maintain the Disaster
Recovery Physical Ports in case they
become necessary. The Exchange notes
that the Disaster Recovery Physical
Ports may also be used to access the
Disaster Recovery Systems for the
following affiliate exchanges Cboe BZX
Exchange, Inc., Cboe EDGX Exchange,
Inc., Cboe EDGA Exchange, Inc., Cboe
C2 Exchange, Inc., Cboe Exchange, Inc.
and Cboe Futures Exchange, LLC as
well. The Exchange proposes to provide
that market participants will only be
assessed a single fee for any Disaster
Recovery Physical Port that also
accesses the Disaster Recover Systems
for these exchanges.7
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,8
in general, and furthers the objectives of
Section 6(b)(4),9 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
other persons using its facilities. The
Exchange also notes that it operates in
a highly-competitive market in which
market participants can readily direct
order flow to competing venues if they
deem fee levels at a particular venue to
be excessive. The proposed rule change
reflects a competitive pricing structure
designed to incent market participants
to direct their order flow to the
Exchange.
The Exchange believes that the
proposed changes are equitable and
non-discriminatory in that it applies
uniformly to all Members. Members and
7 For example, if a market participant uses a 1
gigabyte Disaster Recovery Physical Port to connect
to the Disaster Recovery Systems for both BYX and
EDGX, the market participant would only be
assessed one monthly fee of $2,000.
8 15 U.S.C. 78f.
9 15 U.S.C. 78f(b)(4).
E:\FR\FM\20JNN1.SGM
20JNN1
]]>Agencies
[Federal Register Volume 83, Number 119 (Wednesday, June 20, 2018)]
[Notices]
[Pages 28681-28684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13161]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83431; File No. SR-ISE-2018-51]
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
June 14, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 1, 2018, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I 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. Specifically,
the Exchange
[[Page 28682]]
proposes to: (1) Reduce the volume requirements for Priority Customer
\3\ Complex Tier 9, and (2) eliminate the discount for Market Maker \4\
Complex Orders that trade against Priority Customer Complex Orders
preferenced to them in the complex order book.
---------------------------------------------------------------------------
\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 that trade with non-
Priority Customer orders in the complex order book or trade with quotes
and orders on the regular order book are provided rebates in Select
Symbols \5\ and Non-Select Symbols \6\ (other than NDX and MNX) based
on nine volume tiers, as shown in the table below. The Priority
Customer Complex Tiers are based on Total Affiliated Member \7\ Complex
Order Volume (Excluding Crossing Orders \8\ and Responses to Crossing
Orders \9\) Calculated as a Percentage of Customer Total Consolidated
Volume \10\ (hereinafter, ``Complex Order Volume Percentage''). All
Complex Order volume executed on the Exchange, including volume
executed by Affiliated Members, is included in the volume calculation,
except for volume executed as Crossing Orders and Responses to Crossing
Orders. Rebates are provided per contract per leg, and once the
threshold has been reached the rebate for the highest tier is applied
retroactively to all eligible Priority Customer Complex volume.\11\
---------------------------------------------------------------------------
\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\ 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.
\8\ A ``Crossing Order'' is an order executed in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement
Mechanism (PIM) or submitted as a Qualified Contingent Cross order.
For purposes of the Fee Schedule, orders executed in the Block Order
Mechanism are also considered Crossing Orders.
\9\ A ``Response to a Crossing Order'' is any contra-side
interest submitted after the commencement of an auction in the
Exchange's Facilitation Mechanism, Solicited Order Mechanism, Block
Order Mechanism or PIM.
\10\ ``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.
\11\ 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.
\12\ 15 U.S.C. 78f(b).
----------------------------------------------------------------------------------------------------------------
Rebate for Rebate for non-
Priority customer complex tier Complex order volume percentage select symbols select symbols
----------------------------------------------------------------------------------------------------------------
Tier 1..................................... 0.000-0.200........................ ($0.25) ($0.40)
Tier 2..................................... Above 0.200-0.400.................. (0.30) (0.55)
Tier 3..................................... Above 0.400-0.600.................. (0.35) (0.70)
Tier 4..................................... Above 0.600-0.800.................. (0.40) (0.75)
Tier 5..................................... Above 0.800-1.000.................. (0.45) (0.80)
Tier 6..................................... Above 1.000-1.600.................. (0.46) (0.80)
Tier 7..................................... Above 1.600-2.000.................. (0.48) (0.80)
Tier 8..................................... Above 2.000-3.500.................. (0.50) (0.85)
Tier 9..................................... Above 3.500........................ (0.50) (0.85)
----------------------------------------------------------------------------------------------------------------
Currently, a Member must execute a Complex Order Volume Percentage
of above 3.5% to qualify for Priority Customer Complex Tier 9. The
Exchange now proposes to reduce the Complex Order Volume Percentage
requirement to above 3.25%, thereby making Priority Customer Complex
Order Tier 9 easier for Members to achieve. As proposed, Members with a
Complex Order Volume Percentage above 2% and up to 3.25% will qualify
for Priority Customer Complex Tier 8, while Members with a Complex
Order Volume Percentage above 3.25% will qualify for Priority Customer
Complex Tier 9. Although Priority Customer Complex Order Tier 8 and 9
are currently eligible for the same $0.50 per contract rebate in Select
Symbols and $0.85 per contract rebate in Non-Select Symbols, the lower
proposed volume requirements for Priority Customer Complex Tier 9 will
benefit Market Makers that currently receive discounted Complex Order
fees in Select Symbols if they achieve this Priority Customer Complex
Tier. Specifically, Market Maker Complex Orders in Select Symbols are
charged a fee of $0.44 per contract for either taking liquidity, or
providing liquidity to a Priority Customer Complex Order, provided that
the firm achieves Priority Customer Complex Tier 9. This fee is
discounted from the regular taker fee of $0.50 per contract (reduced to
$0.47 per contract for Priority Customer Complex Tier 8) and the maker
fee of $0.47 per contract for trading against a Priority Customer.
Thus, reducing the volume requirements for achieving Priority Customer
Complex Tier 9 will make it easier for Market Makers to achieve the
discounted $0.44 per contract rate.
II. Preferenced Market Maker Complex Order Discount
Currently, Market Makers making or taking liquidity in Select
Symbols or Non-Select Symbols receive a discount of $0.02 when trading
against Priority Customer orders preferenced to them in the complex
order book in equity options that are able to be listed and traded on
more than one options exchange. This discount does not apply to FX
Options Symbols or to option classes designated by the Exchange to
receive a guaranteed allocation pursuant to Nasdaq ISE Rule
722(b)(3)(i)(B). The Exchange now proposes to eliminate this discount.
With the recent introduction of new pricing incentives for Complex
Orders, which include the discounted Market Maker fees described in the
section above, the Exchange does not believe that an additional
incentive for preferenced orders is necessary to attract Complex Order
flow.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5)
[[Page 28683]]
of the Act,\13\ 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.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
I. Priority Customer Complex Order Rebates
The Exchange believes it is reasonable and equitable to reduce the
volume requirements for Priority Customer Complex Order Tier 9 as this
change will make it easier for Members to achieve this tier. The
proposed change is designed to incentivize Members to trade Complex
Orders on the Exchange. While the proposed change will not have any
impact on Priority Customer Complex Order rebates since the rebates are
currently the same for Priority Customer Complex Tier 8 and 9, the
Exchange also offers discounted Complex Order fees in Select Symbols
for Market Makers that achieve higher Priority Customer Complex Tiers.
With the proposed change, Market Makers may find it easier to achieve
the higher tier of discounted fee, and thereby lower their execution
costs when trading on the Exchange. Furthermore, the Exchange believes
that the proposed change to the Priority Customer Complex Order Tiers
is equitable and not unfairly discriminatory as this change is designed
to increase trading by Market Makers, which may benefit other market
participants that will have an increased opportunity to trade in
Complex Orders. Market Makers are subject to additional requirements
and obligations (such as quoting requirements) that other market
participants are not. The Exchange believes that the mix of incentives
that it provides will encourage an active market in Complex Orders from
Market Makers and other market participants.
II. Preferenced Market Maker Complex Order Discount
The Exchange believes that it is reasonable and equitable to
eliminate the preferenced Market Maker Complex Order discount as the
Exchange has recently introduced new incentives for Market Makers that
trade Complex Orders. Specifically, Market Makers are now eligible for
tiered Complex Order taker fees based on achieving Priority Customer
Complex Tier 8 or 9. With the changes to the Priority Customer Complex
Tier 9 volume requirements discussed above, the highest tier of
discount will be even easier for Market Makers to achieve. The Exchange
therefore believes that an additional discount based on receiving
preferenced Priority Customer Complex Orders is no longer necessary.
Furthermore, the Exchange believes that eliminating this fee discount
is equitable and not unfairly discriminatory as this discount will no
longer be available for any Market Makers. Market Makers may instead
qualify for the other Complex Order discounts based on meeting the
applicable volume requirements.
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 its
Complex Order 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,\14\ and Rule 19b-4(f)(2) \15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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-2018-51 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-2018-51. 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-2018-51 and should be submitted on
or before July 11, 2018.
[[Page 28684]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13161 Filed 6-19-18; 8:45 am]
BILLING CODE 8011-01-P
