Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Schedule of Fees To Add Establish Fees and Rebates for NQX Options and Make Several Clarifying Changes, 34625-34630 [2018-15503]

Download as PDF Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / 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 Because the proposed rule change does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 18 and Rule 19b– 4(f)(6) thereunder.19 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 20 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 21 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that it may allow all Members to submit Improvement Orders directly into PIM to provide an even greater number of GEMX Members an opportunity to more directly participate in PIM and provide price improvement. The Exchange states that it will issue an Options Trader Alert to notify Members of the date within which this functionality will be implemented. The Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.22 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the 18 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 20 17 CFR 240.19b–4(f)(6). 21 17 CFR 240.19b–4(f)(6)(iii). 22 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). daltland on DSKBBV9HB2PROD with NOTICES 19 17 VerDate Sep<11>2014 18:06 Jul 19, 2018 Jkt 244001 public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 34625 should be submitted on or before August 10, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Eduardo A. Aleman, Assistant Secretary. 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: [FR Doc. 2018–15501 Filed 7–19–18; 8:45 am] 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– GEMX–2018–25 on the subject line. Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Schedule of Fees To Add Establish Fees and Rebates for NQX Options and Make Several Clarifying Changes Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–GEMX–2018–25. 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 such 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–GEMX–2018–25, and PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83639; File No. SR–ISE– 2018–61] July 16, 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 July 2, 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 Exchange’s Schedule of Fees. The text of the proposed rule change is available on the Exchange’s website at https://ise.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\20JYN1.SGM 20JYN1 34626 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange recently received approval to list index options on the Nasdaq 100 Reduced Value Index (‘‘NQX’’) on a pilot basis.3 The Exchange began to list NQX on June 26, 2018, and filed on the same day a proposed rule change that waived fees and rebates for executions in NQX options from June 26–29, 2018.4 The Exchange now proposes to amend its Schedule of Fees to adopt pricing for NQX. By way of background, certain proprietary products such as NDX and NDXP are commonly included in or excluded from a variety of fee and rebate programs. The Exchange notes that the reason these products are often included in or excluded from certain programs is because the Exchange has expended considerable resources developing and maintaining its proprietary products. Similar to NDX and NDXP, NQX is a proprietary product. As such, the Exchange proposes to establish transaction fees for NQX options that are similarly structured to the transaction fees for NDX and NDXP options with some differences as noted below. The Exchange also proposes to similarly include or exclude NQX options from several programs from which NDX and NDXP options are currently included or excluded. Lastly, the Exchange proposes a number of clarifying changes to the Schedule of Fees. Each change is discussed below. Transaction Fees for NQX Options The Exchange proposes to establish transaction fees and rebates for adding or removing liquidity from ISE (i.e., maker/taker fees and rebates) in NQX options. The proposed maker/taker fees and rebates for NQX will apply to executions in both the regular and complex order book, according to the following schedule: Market participant Maker fee/rebate Market Maker ........................................................................................................................................... Market Maker (for orders sent by Electronic Access Members) ............................................................. Non-Nasdaq ISE Market Maker (FarMM) ............................................................................................... Firm Proprietary/Broker-Dealer ................................................................................................................ Professional Customer ............................................................................................................................ Priority Customer ..................................................................................................................................... ($0.25) (0.25) 0.25 0.25 0.25 0.00 Taker fee/rebate $0.00 0.00 0.25 0.25 0.25 0.00 daltland on DSKBBV9HB2PROD with NOTICES The proposed pricing for NQX is similarly structured to how the Exchange currently prices its other proprietary products, NDX and NDXP, in that Non-Priority Customers,5 except for Market Makers (i.e., Primary Market Makers and Competitive Market Makers) in this case, will be charged uniform transaction fees and Priority Customers 6 will not be charged any fees.7 Furthermore, the proposed pricing for NQX will similarly apply to all executions in NQX, including NonPriority Customer Crossing Orders 8 in NQX. Unlike NDX and NDXP, which are currently charged the applicable complex order fees for Non-Select Symbols (i.e., options overlying all symbols that are not in the Penny Program) in Section II, the proposed pricing for NQX applies to both regular and complex executions in NQX orders. The Exchange believes that this will promote trading activity in the new product since complex executions in Non-Priority Customer NQX orders will mainly be charged at a lower rate.9 The proposed pricing for Market Maker orders, including those orders sent by Electronic Access Members (‘‘EAMs’’), is intended to encourage Market Maker activity in NQX, and the Exchange believes that the $0.25 per contract maker rebate and taker fee waiver for Market Maker orders will provide such incentive. In addition, the proposed $0.25 per contract maker rebate is intended to offset the proposed NQX license surcharge, as further discussed below, and will further incentivize Market Makers to provide liquidity in the new product during the initial months of trading. In connection the foregoing changes, the Exchange proposes to remove language related to the NQX fee holiday from June 26–30, 2018 from its Schedule of Fees. The Exchange also proposes to relocate the pricing for NDX and NDXP presently set forth in the separate table entitled ‘‘Index Options’’ within Section I, and the Non-Priority Customer license surcharge for index options presently within Section IV.C, to group them with the proposed fees and rebates for NQX. The Exchange proposes to set forth the foregoing index options fees in Section III, which currently contains pricing for FX options, and retitle that section as ‘‘Index Options Fees and Rebates.’’ FX options ceased trading on the Exchange upon the January 2018 expiry, after which the Exchange determined not to list additional expiry contracts for FX options. No market participant has traded FX options on the Exchange as of the January 2018 expiry. As such, the Exchange proposes to remove all references to specific pricing for FX options from its Schedule of Fees. 3 See Securities Exchange Act Release No. 82911 (March 20, 2018), 83 FR 12966 (March 26, 2018) (SR–ISE–2017–106). The NQX options contract is the same in all respects as the current Nasdaq-100 Index options contract (‘‘NDX’’) listed on the Exchange, except that NQX is P.M. settled and based on 1⁄5 of the value of the Nasdaq 100 Index. The Exchange notes that similar features are available with other index options contracts listed on the Exchange, including P.M. settled options on the full value of the Nasdaq 100 Index (‘‘NDXP’’). 4 See SR–ISE–2018–58 (not yet published). 5 ‘‘Non-Priority Customers’’ include Market Makers, Non-Nasdaq ISE Market Makers, Firm Proprietary/Broker-Dealers, and Professional Customers. 6 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). 7 See Securities Exchange Act Releases No. 80637 (May 10, 2017), 82 FR 22576 (May 16, 2017) (SR– ISE–2017–35) (among other changes, establishing flat transaction fees for executions of regular NDX orders) and No. 83144 (May 1, 2018), 83 FR 20107 (May 7, 2018) (SR–ISE–2018–38) (among other changes, establishing flat transaction fees for executions of regular NDXP orders). 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 For instance, a Non-Priority Customer complex order in a Non-Select Symbol (when trading against a Priority Customer) would normally be charged maker/taker fees ranging from $0.86 to $0.88 per contract. See Maker and Taker fee schedule in Section II. NQX is a Non-Select Symbol. VerDate Sep<11>2014 18:06 Jul 19, 2018 Jkt 244001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\20JYN1.SGM 20JYN1 daltland on DSKBBV9HB2PROD with NOTICES Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices The Exchange proposes in the new Section III to restructure the index options fees described above into three separate subsections. First, the Exchange proposes to add a new subsection A, and list the transaction fees for NDX and NDXP in this subsection. As noted above, the fees are not being amended; rather, the existing fees in Section I are being relocated into Section III.A. The rule text in corresponding note 7 in Section I will be deleted since the substance is being relocated to Section III.A. Section III.A will be titled, ‘‘NDX Index Options Fees for Regular Orders’’ to clarify that these fees apply to executions in regular NDX and NDXP orders only, and the Exchange will separately note in Section III.A that for all executions in complex NDX and NDXP orders, the applicable complex order fees for Non-Select Symbols in Section II will apply.10 Second, the Exchange proposes to add a new subsection B, and list the proposed maker/taker fees and rebates for NQX, as discussed above, in this subsection. Section III.B will be titled, ‘‘NQX Index Options Fees and Rebates for Regular and Complex Orders’’ to clarify that these fees and rebates apply to executions in both regular and complex NQX orders. Third, the Exchange proposes to add a new subsection C, and list the various Non-Priority Customer license surcharge fee amounts for the specified index options. Other than to include the proposed NQX license surcharge as further discussed below, the current fees are not being amended; rather, the existing fees in Section IV.C are being relocated into Section III.C. Section III.C will be titled, ‘‘Non-Priority Customer License Surcharge for Index Options.’’ The Exchange considers it appropriate to group the index options fees as described above so that ISE’s pricing for index options may be easily located within its fee schedule. For the sake of clarity, the Exchange also proposes to note within Section I that for all executions in regular NDX, NDXP and NQX orders, the applicable index options fees in Section III will apply. The Exchange similarly proposes to note within Section II that for all executions in complex NQX orders, the NQX index options fees in Section III will apply. The Exchange believes that the proposed cross references will clarify how its pricing for NDX, NDXP and NQX will apply. 10 For purposes of the Schedule of Fees, ‘‘NDX’’ is defined therein as A.M. or P.M. settled options on the full value of the Nasdaq 100 Index, and therefore includes both NDX and NDXP options. VerDate Sep<11>2014 18:06 Jul 19, 2018 Jkt 244001 Priority Customer Complex Rebates Today, the tiered Priority Customer Complex Rebates in Section II of the Schedule of Fees are not paid for NDX or NDXP. Under the Exchange’s proposal, the Priority Customer Complex Rebates will likewise not be paid for NQX. Non-Priority Customer License Surcharge Today as set forth in Section IV.C, the Exchange assesses a license surcharge of $0.25 per contract for all Non-Priority Customer orders in NDX and NDXP, which applies to all executions in those symbols, including executions of NDX and NDXP orders that are routed to away markets in connection with the Options Order Protection and Locked/ Crossed Market Plan (the ‘‘Plan’’).11 The Exchange now proposes to apply the $0.25 per contract Non-Priority Customer license surcharge to NQX in order to recoup the costs associated with listing this proprietary product. Unlike NDX and NDXP, the Exchange is not proposing to apply this surcharge to NQX orders that are routed away at this time because NQX is currently listed exclusively on ISE. If NQX begins listing on any of the other Nasdaq, Inc.-owned exchanges, the Exchange will file any necessary rule change proposals with the Commission to apply the $0.25 per contract surcharge in addition to the $0.95 per contract route-out fee for those NQX orders that are routed away.12 Marketing Fee By way of background, the Exchange administers a marketing fee program that helps Market Makers establish marketing fee arrangements with EAMs in exchange for those EAMs routing some or all of their order flow to the Market Maker. This program is funded through a fee of $0.70 per contract, which is paid by Market Makers for each regular Priority Customer contract executed in Non-Select Symbols.13 This fee is currently waived for NDX and NDXP orders. The Exchange proposes to similarly waive the marketing fee for NQX orders. Crossing Fee Cap As set forth in Section IV.H of the Schedule of Fees, the Exchange currently caps Crossing Order fees at 11 The Exchange applies a route-out fee to executions of orders in all symbols that are routed to away markets in connection with the Plan. Specifically, Non-Priority Customer orders in NonSelect Symbols pay a route-out fee of $0.95 per contract. NDX and NDXP are Non-Select Symbols. See Schedule of Fees, Section IV.F. 12 NQX is a Non-Select Symbol. 13 See Schedule of Fees, Section IV.E. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 34627 $90,000 per month per member on all Firm Proprietary 14 and Non-Nasdaq ISE Market Maker 15 transactions that are part of the originating or contra side of a Crossing Order. Surcharge fees charged by the Exchange for licensed products (e.g., the $0.25 per contract license surcharge for NDX and NDXP) and the fees for index options as set forth in Section I (e.g., the $0.75 per contract fees for NDX and NDXP) are currently excluded from the calculation of this monthly fee cap. The Exchange now proposes to similarly exclude the license surcharge and fees for NQX from the calculation of the monthly Crossing Fee Cap. The Exchange also proposes to amend language in Section IV.H that currently states, ‘‘Surcharge fees charged by the Exchange for licensed products and the fees for index options as set forth in Section I . . .’’ by replacing the reference to Section I with Section III to reflect the proposed relocation of various index options fees, as further described above. Clean-Up Changes Lastly, the Exchange proposes a number of clarifying changes to its Schedule of Fees. In Section I, the Exchange proposes to amend note 6, which currently reads: ‘‘Market Maker fees are subject to tier discounts, as provided in Section IV.C.’’ The Exchange seeks to update the reference to Section IV.C, which presently sets forth the Non-Priority Customer license surcharge for index options, to Section IV.D, which sets forth the Market Maker discount tiers.16 In Section II, the Exchange proposes to delete the stray references to note 5, which is currently reserved, from the maker and taker fee schedule.17 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) 14 A ‘‘Firm Proprietary’’ order is an order submitted by a member for its own proprietary account. 15 A ‘‘Non-Nasdaq ISE Market Maker’’ is a market maker as defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended, registered in the same options class on another options exchange. 16 The Exchange recently filed a rule change that renumbered the subsection containing the market maker tier discounts from Section IV.C to Section IV.D, but did not update the specific references within the fee schedule. See Securities Exchange Act Release No. 83002 (April 5, 2018), 83 FR 15655 (April 11, 2018) (SR–ISE–2018–27). 17 The Exchange recently filed a proposed rule change to delete the rule text within note 5, but did not delete the references to the note from maker and taker fee schedule in Section II. See Securities Exchange Act Release No. 83431 (June 14, 2018), 83 FR 28681 (June 20, 2018) (SR–ISE–2018–51). E:\FR\FM\20JYN1.SGM 20JYN1 34628 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices of the Act,18 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,19 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. Transaction Fees for NQX Options The Exchange believes that it is reasonable to assess the proposed maker/taker fees and rebates as discussed above for NQX because NQX will be an exclusively listed product on ISE only. Similar to NDX and NDXP, the Exchange seeks to recoup the operational costs for listing proprietary products.20 Also, pricing by symbol is a common practice on many U.S. options exchanges as a means to incentivize order flow to be sent to an exchange for execution in particular products. Other options exchanges price by symbol.21 Further, the Exchange notes that with its products, market participants are offered an opportunity to either transact NQX or separately execute PowerShares QQQ Trust (‘‘QQQ’’) options.22 Offering products such as QQQ provides market participants with a variety of choices in selecting the product they desire to utilize to transact the Nasdaq 100 Index.23 When exchanges are able to recoup costs associated with offering proprietary products, it incentivizes growth and competition for the innovation of additional products. The Exchange also believes that it is reasonable to assess the proposed fees and rebates for both regular and complex executions in NQX options, unlike NDX and NDXP which are assessed the normal complex rates in Section II, because the Exchange believes that this will promote trading 18 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 20 For example, in analyzing an obvious error, the Exchange would have additional data points available in establishing a theoretical price for a multiply listed option as compared to a proprietary product, which requires additional analysis and administrative time to comply with Exchange rules to resolve an obvious error. 21 See pricing for Russell 2000 Index (‘‘RUT’’) on Chicago Board Options Exchange, Incorporated’s (‘‘CBOE’’) Fees Schedule and on CBOE C2 Exchange, Inc.’s (‘‘C2’’) Fees Schedule. 22 QQQ is an exchange-traded fund based on the Nasdaq 100 Index. 23 QQQ options overlie the same index as NDX, namely the Nasdaq 100 Index. This relationship between QQQ options and NDX options is similar to the relationship between RUT and the iShares Russell 2000 Index (‘‘IWM’’), which is the ETF on RUT. daltland on DSKBBV9HB2PROD with NOTICES 19 15 VerDate Sep<11>2014 18:06 Jul 19, 2018 Jkt 244001 activity in NQX as further discussed above. The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to provide a maker rebate of $0.25 per contract and assess no taker fee to Maker Makers as compared to other market participants because Market Makers, unlike other market participants, take on a number of obligations, including quoting obligations, that other market participants do not have. Further, the proposed pricing for Market Maker orders in NQX are intended to incentivize Market Makers to quote and trade more on the Exchange, thereby providing more trading opportunities for all market participants. As noted above, the $0.25 per contract maker rebate is intended to offset the $0.25 per contract NQX license surcharge, and the Exchange believes this will further incentivize Market Makers to provide liquidity in the new product during the initial months of trading. Additionally, the proposed NQX pricing for Market Makers will be applied equally to all Market Maker orders (including those orders sent by an EAM), as further discussed above. The Exchange also believes that it is reasonable, equitable and not unfairly discriminatory to assess no transaction fees to Priority Customer orders in NQX because Priority Customer order flow enhances liquidity on the Exchange for the benefit of all market participants. Priority Customer liquidity provides more trading opportunities, which attracts Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. The proposed pricing for Priority Customer orders in NQX is intended to attract more Priority Customer trading volume to the Exchange. In addition, the proposed NQX pricing for Priority Customers will apply equally to all Priority Customer orders, as further discussed above. The Exchange further believes that the proposed fee of $0.25 per contract for Non-Nasdaq ISE Market Maker, Firm Proprietary/Broker-Dealer,24 and Professional Customer 25 orders in NQX is reasonable, equitable and not unfairly discriminatory because they are well within the range of amounts assessed for the Exchange’s other proprietary products, including the $0.75 per 24 A ‘‘Broker-Dealer’’ order is an order submitted by a member for a broker-dealer account that is not its own proprietary account. 25 A ‘‘Professional Customer’’ is a person or entity that is not a broker/dealer and is not a Priority Customer. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 contract fee charged to those market participant orders in NDX and NDXP.26 The lower fee amount of $0.25 per contract for NQX options as compared to $0.75 per contract for NDX and NDXP options is reasonable because NQX options is based on 1⁄5 of the value of the Nasdaq 100 Index whereas both NDX and NDXP are based on the full value of the Nasdaq 100, and the Exchange therefore seeks to assess corresponding reduced fees for this product. In addition, the proposed pricing for Non-Nasdaq ISE Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer orders in NQX will be applied equally to those market participants, as further discussed above. The Exchange believes that the proposed changes to eliminate language related to the NQX fee holiday, relocate and group the various index options fees within the Schedule of Fees, and make all of the clarifying changes related to the relocation, each as discussed above, are reasonable, equitable and not unfairly discriminatory. The proposed changes are all intended to bring greater clarity to the Schedule of Fees and will ensure that ISE’s pricing for index options may be easily located within its fee schedule. Finally, the Exchange believes that its proposal to remove obsolete references to specific pricing for FX options from its Schedule of Fees is reasonable, equitable and not unfairly discriminatory because FX options ceased trading on the Exchange upon the January 2018 expiry, as discussed above, and the specific pricing for FX options is therefore no longer applicable. No market participant can trade any FX options on ISE since the Exchange has determined not to list additional expiry contracts. Priority Customer Complex Rebates The Exchange believes that its proposal to eliminate the Priority Customer Complex Rebates for NQX is reasonable because even after the elimination of the rebate, Priority Customer complex orders in NQX will not be assessed any complex order transaction fees. As noted above, the Priority Customer Complex Rebates are likewise currently eliminated for NDX and NDXP. By contrast, public customer executions on C2 in RUT are subject to a $0.15 per contract transaction fee.27 The Exchange’s proposal to eliminate the Priority Customer Complex Rebates for NQX is equitable and not unfairly 26 See Index Options pricing table in the Schedule of Fees, Section I. 27 See C2’s Fees Schedule, Section 1.C. E:\FR\FM\20JYN1.SGM 20JYN1 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices discriminatory because the Exchange will eliminate the rebate for all similarly situated members. Non-Priority Customer License Surcharge The Exchange believes that its proposal to charge a $0.25 per contract Non-Priority Customer license surcharge for NQX is reasonable because the fee amount is the same as the amount for NDX and NDXP, and lower when compared to the $0.45 per contract surcharge C2 applies to non-public customer transactions in RUT.28 The proposed license surcharge for NQX will also help recoup costs associated with listing proprietary products. The Exchange also believes that its proposal to not apply the Non-Priority Customer license surcharge to NQX orders that are routed to away markets in connection with the Plan is reasonable because NQX is currently an exclusively listed product, as discussed above. Further, the Exchange believes that its proposal to assess a Non-Priority Customer license surcharge of $0.25 per contract to NQX options is equitable and not unfairly discriminatory because the Exchange will apply the same surcharge for all similarly situated members in a similar manner. The Exchange also believes that it is equitable and not unfairly discriminatory to not assess the surcharge to Priority Customer orders in NQX because Priority Customer orders bring valuable liquidity to the market, which in turn benefits other market participants. daltland on DSKBBV9HB2PROD with NOTICES Marketing Fee The Exchange believes that its proposal to exclude NQX from the $0.70 per contract marketing fee is reasonable because the purpose of the marketing fee is to attract order flow to the Exchange. Because NQX will be an exclusively listed product, a marketing fee whose purpose is to attract order flow to the Exchange is no longer necessary for NQX. The Exchange’s proposal to exclude NQX from the marketing fee is equitable and not unfairly discriminatory because the Exchange will apply this exclusion to all similarly situated members. Crossing Fee Cap The Exchange believes that its proposal to exclude the Non-Priority Customer license surcharge and transaction fees for NQX from the calculation of the monthly Crossing Fee Cap is reasonable because NQX will be an exclusively listed product. Similar to NDX and NDXP, which are also excluded from the Crossing Fee Cap, the Exchange seeks to recoup the operational costs for listing proprietary products. The Exchange further believes that the proposed exclusion of NQX from the Crossing Fee Cap is equitable and not unfairly discriminatory because the Exchange will apply the exclusion all similarly situated members. The Exchange also believes that it is reasonable, equitable and not unfairly discriminatory to amend Section IV.H to include the reference to the various index options fees in Section III, as discussed above, because it will conform Section IV.H to the changes proposed herein and clarify how this provision will be applied. Clean-Up Changes The Exchange believes that the cleanup changes to Sections I and II as described above are reasonable, equitable and not unfairly discriminatory because they are merely intended to bring greater clarity to the Schedule of Fees, to the benefit of all market participants. 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 does not believe its proposal to assess different maker/taker fees and rebates to different market participants for NQX options will impose an undue burden on competition because different market participants have different obligations and circumstances, as further discussed above. For example, Market Makers have quoting obligations that other market participants do not have. In addition, the Exchange notes that with its products, market participants are offered an opportunity to either transact NDXP or separately execute QQQ options. Offering products such as QQQ provides market participants with a variety of choices in selecting the product they desire to utilize to transact the Nasdaq 100 Index.29 Furthermore, the proposed pricing changes will apply uniformly to all similarly situated market participants, as discussed above. For the foregoing reasons, the Exchange does not believe that the proposed changes to adopt pricing for NQX options as described above will impose an undue burden on competition. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. 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,30 and Rule 19b–4(f)(2) 31 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2018–61 on the subject line. 30 15 28 See C2’s Fees Schedule, Section 1.D. VerDate Sep<11>2014 18:06 Jul 19, 2018 Jkt 244001 29 See PO 00000 note 23 above. Frm 00094 Fmt 4703 31 17 Sfmt 4703 34629 E:\FR\FM\20JYN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 20JYN1 34630 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Notices 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–2018–61. 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–2018–61 and should be submitted on or before August 10, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–15503 Filed 7–19–18; 8:45 am] daltland on DSKBBV9HB2PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83643; File No. SRCboeEDGA–2018–012] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use on Cboe EDGA Exchange, Inc. July 16, 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 July 2, 2018, Cboe EDGA Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGA’’) 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 The Exchange filed a proposal to amend the fee schedule applicable to Members 5 and non-Members of the Exchange pursuant to EDGA Rules 15.1(a) and (c). 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. 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 1 15 U.S.C. 78s(b)(1). 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). 2 17 32 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:06 Jul 19, 2018 Jkt 244001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule to (i) amend its pricing model, (ii) eliminate Add Volume Tier 1 and (iii) amend certain routing fees, effective July 2, 2018. Currently, the Exchange utilizes a low pricing model under which it charges a low fee or provides the execution free of charge. The Exchange proposes to amend its fee schedule to replace its current low pricing model to an inverted pricing model under which the Exchange will charge a fee to add liquidity and provide a rebate to remove liquidity. Displayed Order Fee Change In securities priced at or above $1.00, the Exchange currently charges a fee of $0.00030 per share for Displayed orders that add or remove liquidity. The Exchange proposes to assess a standard rate of $0.00080 per share for Displayed orders that add liquidity for securities at or above $1.00 that are appended with fee codes B, V, Y, 3 or 4. The Exchange also proposes to provide a rebate of $0.00040 per share for orders that remove liquidity for securities at or above $1.00 that are appended with fee codes N, W, 6, or BB. All Displayed orders in securities priced below $1.00 would continue to be free. Non-Displayed Order Fee Change In securities priced at or above $1.00, the Exchange currently charges a fee of $0.00050 per share for Non-Displayed orders that remove liquidity other than orders that yield fee code DT and DR (i.e., orders that yield fee codes HR, MT, PT). The Exchange notes that it does not assess a fee or provide a rebate for NonDisplayed orders that remove liquidity using Midpoint Discretionary Orders within discretionary range and yield fee code DT. The Exchange does assess a fee of $0.00030 for Non-Displayed orders that remove liquidity using MidPoint Discretionary Orders that are not within discretionary range and yield fee code DR. The Exchange does not currently assess a fee or provide a rebate for NonDisplayed orders that add liquidity other than orders that yield fee code DA (i.e., orders that yield fee codes DM, HA, MM, RP, PA). The Exchange does assess a fee of $0.00030 per share for Non- E:\FR\FM\20JYN1.SGM 20JYN1

Agencies

[Federal Register Volume 83, Number 140 (Friday, July 20, 2018)]
[Notices]
[Pages 34625-34630]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15503]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83639; File No. SR-ISE-2018-61]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Schedule of Fees To Add Establish Fees and Rebates for NQX 
Options and Make Several Clarifying Changes

July 16, 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 July 2, 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 Exchange's Schedule of Fees.
    The text of the proposed rule change is available on the Exchange's 
website at https://ise.cchwallstreet.com/, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The

[[Page 34626]]

Exchange has prepared summaries, set forth in sections A, B, and C 
below, of the most significant aspects of such statements.

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

1. Purpose
    The Exchange recently received approval to list index options on 
the Nasdaq 100 Reduced Value Index (``NQX'') on a pilot basis.\3\ The 
Exchange began to list NQX on June 26, 2018, and filed on the same day 
a proposed rule change that waived fees and rebates for executions in 
NQX options from June 26-29, 2018.\4\ The Exchange now proposes to 
amend its Schedule of Fees to adopt pricing for NQX.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 82911 (March 20, 
2018), 83 FR 12966 (March 26, 2018) (SR-ISE-2017-106). The NQX 
options contract is the same in all respects as the current Nasdaq-
100 Index options contract (``NDX'') listed on the Exchange, except 
that NQX is P.M. settled and based on \1/5\ of the value of the 
Nasdaq 100 Index. The Exchange notes that similar features are 
available with other index options contracts listed on the Exchange, 
including P.M. settled options on the full value of the Nasdaq 100 
Index (``NDXP'').
    \4\ See SR-ISE-2018-58 (not yet published).
---------------------------------------------------------------------------

    By way of background, certain proprietary products such as NDX and 
NDXP are commonly included in or excluded from a variety of fee and 
rebate programs. The Exchange notes that the reason these products are 
often included in or excluded from certain programs is because the 
Exchange has expended considerable resources developing and maintaining 
its proprietary products. Similar to NDX and NDXP, NQX is a proprietary 
product. As such, the Exchange proposes to establish transaction fees 
for NQX options that are similarly structured to the transaction fees 
for NDX and NDXP options with some differences as noted below. The 
Exchange also proposes to similarly include or exclude NQX options from 
several programs from which NDX and NDXP options are currently included 
or excluded. Lastly, the Exchange proposes a number of clarifying 
changes to the Schedule of Fees. Each change is discussed below.
Transaction Fees for NQX Options
    The Exchange proposes to establish transaction fees and rebates for 
adding or removing liquidity from ISE (i.e., maker/taker fees and 
rebates) in NQX options. The proposed maker/taker fees and rebates for 
NQX will apply to executions in both the regular and complex order 
book, according to the following schedule:

------------------------------------------------------------------------
       Market participant          Maker fee/rebate    Taker fee/rebate
------------------------------------------------------------------------
Market Maker....................             ($0.25)               $0.00
Market Maker (for orders sent by              (0.25)                0.00
 Electronic Access Members).....
Non-Nasdaq ISE Market Maker                     0.25                0.25
 (FarMM)........................
Firm Proprietary/Broker-Dealer..                0.25                0.25
Professional Customer...........                0.25                0.25
Priority Customer...............                0.00                0.00
------------------------------------------------------------------------

    The proposed pricing for NQX is similarly structured to how the 
Exchange currently prices its other proprietary products, NDX and NDXP, 
in that Non-Priority Customers,\5\ except for Market Makers (i.e., 
Primary Market Makers and Competitive Market Makers) in this case, will 
be charged uniform transaction fees and Priority Customers \6\ will not 
be charged any fees.\7\ Furthermore, the proposed pricing for NQX will 
similarly apply to all executions in NQX, including Non-Priority 
Customer Crossing Orders \8\ in NQX. Unlike NDX and NDXP, which are 
currently charged the applicable complex order fees for Non-Select 
Symbols (i.e., options overlying all symbols that are not in the Penny 
Program) in Section II, the proposed pricing for NQX applies to both 
regular and complex executions in NQX orders. The Exchange believes 
that this will promote trading activity in the new product since 
complex executions in Non-Priority Customer NQX orders will mainly be 
charged at a lower rate.\9\
---------------------------------------------------------------------------

    \5\ ``Non-Priority Customers'' include Market Makers, Non-Nasdaq 
ISE Market Makers, Firm Proprietary/Broker-Dealers, and Professional 
Customers.
    \6\ 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).
    \7\ See Securities Exchange Act Releases No. 80637 (May 10, 
2017), 82 FR 22576 (May 16, 2017) (SR-ISE-2017-35) (among other 
changes, establishing flat transaction fees for executions of 
regular NDX orders) and No. 83144 (May 1, 2018), 83 FR 20107 (May 7, 
2018) (SR-ISE-2018-38) (among other changes, establishing flat 
transaction fees for executions of regular NDXP orders).
    \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\ For instance, a Non-Priority Customer complex order in a 
Non-Select Symbol (when trading against a Priority Customer) would 
normally be charged maker/taker fees ranging from $0.86 to $0.88 per 
contract. See Maker and Taker fee schedule in Section II. NQX is a 
Non-Select Symbol.
---------------------------------------------------------------------------

    The proposed pricing for Market Maker orders, including those 
orders sent by Electronic Access Members (``EAMs''), is intended to 
encourage Market Maker activity in NQX, and the Exchange believes that 
the $0.25 per contract maker rebate and taker fee waiver for Market 
Maker orders will provide such incentive. In addition, the proposed 
$0.25 per contract maker rebate is intended to offset the proposed NQX 
license surcharge, as further discussed below, and will further 
incentivize Market Makers to provide liquidity in the new product 
during the initial months of trading.
    In connection the foregoing changes, the Exchange proposes to 
remove language related to the NQX fee holiday from June 26-30, 2018 
from its Schedule of Fees. The Exchange also proposes to relocate the 
pricing for NDX and NDXP presently set forth in the separate table 
entitled ``Index Options'' within Section I, and the Non-Priority 
Customer license surcharge for index options presently within Section 
IV.C, to group them with the proposed fees and rebates for NQX. The 
Exchange proposes to set forth the foregoing index options fees in 
Section III, which currently contains pricing for FX options, and 
retitle that section as ``Index Options Fees and Rebates.'' FX options 
ceased trading on the Exchange upon the January 2018 expiry, after 
which the Exchange determined not to list additional expiry contracts 
for FX options. No market participant has traded FX options on the 
Exchange as of the January 2018 expiry. As such, the Exchange proposes 
to remove all references to specific pricing for FX options from its 
Schedule of Fees.

[[Page 34627]]

    The Exchange proposes in the new Section III to restructure the 
index options fees described above into three separate subsections. 
First, the Exchange proposes to add a new subsection A, and list the 
transaction fees for NDX and NDXP in this subsection. As noted above, 
the fees are not being amended; rather, the existing fees in Section I 
are being relocated into Section III.A. The rule text in corresponding 
note 7 in Section I will be deleted since the substance is being 
relocated to Section III.A. Section III.A will be titled, ``NDX Index 
Options Fees for Regular Orders'' to clarify that these fees apply to 
executions in regular NDX and NDXP orders only, and the Exchange will 
separately note in Section III.A that for all executions in complex NDX 
and NDXP orders, the applicable complex order fees for Non-Select 
Symbols in Section II will apply.\10\
---------------------------------------------------------------------------

    \10\ For purposes of the Schedule of Fees, ``NDX'' is defined 
therein as A.M. or P.M. settled options on the full value of the 
Nasdaq 100 Index, and therefore includes both NDX and NDXP options.
---------------------------------------------------------------------------

    Second, the Exchange proposes to add a new subsection B, and list 
the proposed maker/taker fees and rebates for NQX, as discussed above, 
in this subsection. Section III.B will be titled, ``NQX Index Options 
Fees and Rebates for Regular and Complex Orders'' to clarify that these 
fees and rebates apply to executions in both regular and complex NQX 
orders.
    Third, the Exchange proposes to add a new subsection C, and list 
the various Non-Priority Customer license surcharge fee amounts for the 
specified index options. Other than to include the proposed NQX license 
surcharge as further discussed below, the current fees are not being 
amended; rather, the existing fees in Section IV.C are being relocated 
into Section III.C. Section III.C will be titled, ``Non-Priority 
Customer License Surcharge for Index Options.''
    The Exchange considers it appropriate to group the index options 
fees as described above so that ISE's pricing for index options may be 
easily located within its fee schedule. For the sake of clarity, the 
Exchange also proposes to note within Section I that for all executions 
in regular NDX, NDXP and NQX orders, the applicable index options fees 
in Section III will apply. The Exchange similarly proposes to note 
within Section II that for all executions in complex NQX orders, the 
NQX index options fees in Section III will apply. The Exchange believes 
that the proposed cross references will clarify how its pricing for 
NDX, NDXP and NQX will apply.
Priority Customer Complex Rebates
    Today, the tiered Priority Customer Complex Rebates in Section II 
of the Schedule of Fees are not paid for NDX or NDXP. Under the 
Exchange's proposal, the Priority Customer Complex Rebates will 
likewise not be paid for NQX.
Non-Priority Customer License Surcharge
    Today as set forth in Section IV.C, the Exchange assesses a license 
surcharge of $0.25 per contract for all Non-Priority Customer orders in 
NDX and NDXP, which applies to all executions in those symbols, 
including executions of NDX and NDXP orders that are routed to away 
markets in connection with the Options Order Protection and Locked/
Crossed Market Plan (the ``Plan'').\11\ The Exchange now proposes to 
apply the $0.25 per contract Non-Priority Customer license surcharge to 
NQX in order to recoup the costs associated with listing this 
proprietary product. Unlike NDX and NDXP, the Exchange is not proposing 
to apply this surcharge to NQX orders that are routed away at this time 
because NQX is currently listed exclusively on ISE. If NQX begins 
listing on any of the other Nasdaq, Inc.-owned exchanges, the Exchange 
will file any necessary rule change proposals with the Commission to 
apply the $0.25 per contract surcharge in addition to the $0.95 per 
contract route-out fee for those NQX orders that are routed away.\12\
---------------------------------------------------------------------------

    \11\ The Exchange applies a route-out fee to executions of 
orders in all symbols that are routed to away markets in connection 
with the Plan. Specifically, Non-Priority Customer orders in Non-
Select Symbols pay a route-out fee of $0.95 per contract. NDX and 
NDXP are Non-Select Symbols. See Schedule of Fees, Section IV.F.
    \12\ NQX is a Non-Select Symbol.
---------------------------------------------------------------------------

Marketing Fee
    By way of background, the Exchange administers a marketing fee 
program that helps Market Makers establish marketing fee arrangements 
with EAMs in exchange for those EAMs routing some or all of their order 
flow to the Market Maker. This program is funded through a fee of $0.70 
per contract, which is paid by Market Makers for each regular Priority 
Customer contract executed in Non-Select Symbols.\13\ This fee is 
currently waived for NDX and NDXP orders. The Exchange proposes to 
similarly waive the marketing fee for NQX orders.
---------------------------------------------------------------------------

    \13\ See Schedule of Fees, Section IV.E.
---------------------------------------------------------------------------

Crossing Fee Cap
    As set forth in Section IV.H of the Schedule of Fees, the Exchange 
currently caps Crossing Order fees at $90,000 per month per member on 
all Firm Proprietary \14\ and Non-Nasdaq ISE Market Maker \15\ 
transactions that are part of the originating or contra side of a 
Crossing Order. Surcharge fees charged by the Exchange for licensed 
products (e.g., the $0.25 per contract license surcharge for NDX and 
NDXP) and the fees for index options as set forth in Section I (e.g., 
the $0.75 per contract fees for NDX and NDXP) are currently excluded 
from the calculation of this monthly fee cap. The Exchange now proposes 
to similarly exclude the license surcharge and fees for NQX from the 
calculation of the monthly Crossing Fee Cap. The Exchange also proposes 
to amend language in Section IV.H that currently states, ``Surcharge 
fees charged by the Exchange for licensed products and the fees for 
index options as set forth in Section I . . .'' by replacing the 
reference to Section I with Section III to reflect the proposed 
relocation of various index options fees, as further described above.
---------------------------------------------------------------------------

    \14\ A ``Firm Proprietary'' order is an order submitted by a 
member for its own proprietary account.
    \15\ A ``Non-Nasdaq ISE Market Maker'' is a market maker as 
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, 
as amended, registered in the same options class on another options 
exchange.
---------------------------------------------------------------------------

Clean-Up Changes
    Lastly, the Exchange proposes a number of clarifying changes to its 
Schedule of Fees. In Section I, the Exchange proposes to amend note 6, 
which currently reads: ``Market Maker fees are subject to tier 
discounts, as provided in Section IV.C.'' The Exchange seeks to update 
the reference to Section IV.C, which presently sets forth the Non-
Priority Customer license surcharge for index options, to Section IV.D, 
which sets forth the Market Maker discount tiers.\16\ In Section II, 
the Exchange proposes to delete the stray references to note 5, which 
is currently reserved, from the maker and taker fee schedule.\17\
---------------------------------------------------------------------------

    \16\ The Exchange recently filed a rule change that renumbered 
the subsection containing the market maker tier discounts from 
Section IV.C to Section IV.D, but did not update the specific 
references within the fee schedule. See Securities Exchange Act 
Release No. 83002 (April 5, 2018), 83 FR 15655 (April 11, 2018) (SR-
ISE-2018-27).
    \17\ The Exchange recently filed a proposed rule change to 
delete the rule text within note 5, but did not delete the 
references to the note from maker and taker fee schedule in Section 
II. See Securities Exchange Act Release No. 83431 (June 14, 2018), 
83 FR 28681 (June 20, 2018) (SR-ISE-2018-51).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 34628]]

of the Act,\18\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

Transaction Fees for NQX Options
    The Exchange believes that it is reasonable to assess the proposed 
maker/taker fees and rebates as discussed above for NQX because NQX 
will be an exclusively listed product on ISE only. Similar to NDX and 
NDXP, the Exchange seeks to recoup the operational costs for listing 
proprietary products.\20\ Also, pricing by symbol is a common practice 
on many U.S. options exchanges as a means to incentivize order flow to 
be sent to an exchange for execution in particular products. Other 
options exchanges price by symbol.\21\ Further, the Exchange notes that 
with its products, market participants are offered an opportunity to 
either transact NQX or separately execute PowerShares QQQ Trust 
(``QQQ'') options.\22\ Offering products such as QQQ provides market 
participants with a variety of choices in selecting the product they 
desire to utilize to transact the Nasdaq 100 Index.\23\ When exchanges 
are able to recoup costs associated with offering proprietary products, 
it incentivizes growth and competition for the innovation of additional 
products. The Exchange also believes that it is reasonable to assess 
the proposed fees and rebates for both regular and complex executions 
in NQX options, unlike NDX and NDXP which are assessed the normal 
complex rates in Section II, because the Exchange believes that this 
will promote trading activity in NQX as further discussed above.
---------------------------------------------------------------------------

    \20\ For example, in analyzing an obvious error, the Exchange 
would have additional data points available in establishing a 
theoretical price for a multiply listed option as compared to a 
proprietary product, which requires additional analysis and 
administrative time to comply with Exchange rules to resolve an 
obvious error.
    \21\ See pricing for Russell 2000 Index (``RUT'') on Chicago 
Board Options Exchange, Incorporated's (``CBOE'') Fees Schedule and 
on CBOE C2 Exchange, Inc.'s (``C2'') Fees Schedule.
    \22\ QQQ is an exchange-traded fund based on the Nasdaq 100 
Index.
    \23\ QQQ options overlie the same index as NDX, namely the 
Nasdaq 100 Index. This relationship between QQQ options and NDX 
options is similar to the relationship between RUT and the iShares 
Russell 2000 Index (``IWM''), which is the ETF on RUT.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to provide a maker rebate of $0.25 per contract 
and assess no taker fee to Maker Makers as compared to other market 
participants because Market Makers, unlike other market participants, 
take on a number of obligations, including quoting obligations, that 
other market participants do not have. Further, the proposed pricing 
for Market Maker orders in NQX are intended to incentivize Market 
Makers to quote and trade more on the Exchange, thereby providing more 
trading opportunities for all market participants. As noted above, the 
$0.25 per contract maker rebate is intended to offset the $0.25 per 
contract NQX license surcharge, and the Exchange believes this will 
further incentivize Market Makers to provide liquidity in the new 
product during the initial months of trading. Additionally, the 
proposed NQX pricing for Market Makers will be applied equally to all 
Market Maker orders (including those orders sent by an EAM), as further 
discussed above.
    The Exchange also believes that it is reasonable, equitable and not 
unfairly discriminatory to assess no transaction fees to Priority 
Customer orders in NQX because Priority Customer order flow enhances 
liquidity on the Exchange for the benefit of all market participants. 
Priority Customer liquidity provides more trading opportunities, which 
attracts Market Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. The proposed pricing for Priority Customer orders in NQX 
is intended to attract more Priority Customer trading volume to the 
Exchange. In addition, the proposed NQX pricing for Priority Customers 
will apply equally to all Priority Customer orders, as further 
discussed above.
    The Exchange further believes that the proposed fee of $0.25 per 
contract for Non-Nasdaq ISE Market Maker, Firm Proprietary/Broker-
Dealer,\24\ and Professional Customer \25\ orders in NQX is reasonable, 
equitable and not unfairly discriminatory because they are well within 
the range of amounts assessed for the Exchange's other proprietary 
products, including the $0.75 per contract fee charged to those market 
participant orders in NDX and NDXP.\26\ The lower fee amount of $0.25 
per contract for NQX options as compared to $0.75 per contract for NDX 
and NDXP options is reasonable because NQX options is based on \1/5\ of 
the value of the Nasdaq 100 Index whereas both NDX and NDXP are based 
on the full value of the Nasdaq 100, and the Exchange therefore seeks 
to assess corresponding reduced fees for this product. In addition, the 
proposed pricing for Non-Nasdaq ISE Market Maker, Firm Proprietary/
Broker-Dealer, and Professional Customer orders in NQX will be applied 
equally to those market participants, as further discussed above.
---------------------------------------------------------------------------

    \24\ A ``Broker-Dealer'' order is an order submitted by a member 
for a broker-dealer account that is not its own proprietary account.
    \25\ A ``Professional Customer'' is a person or entity that is 
not a broker/dealer and is not a Priority Customer.
    \26\ See Index Options pricing table in the Schedule of Fees, 
Section I.
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    The Exchange believes that the proposed changes to eliminate 
language related to the NQX fee holiday, relocate and group the various 
index options fees within the Schedule of Fees, and make all of the 
clarifying changes related to the relocation, each as discussed above, 
are reasonable, equitable and not unfairly discriminatory. The proposed 
changes are all intended to bring greater clarity to the Schedule of 
Fees and will ensure that ISE's pricing for index options may be easily 
located within its fee schedule. Finally, the Exchange believes that 
its proposal to remove obsolete references to specific pricing for FX 
options from its Schedule of Fees is reasonable, equitable and not 
unfairly discriminatory because FX options ceased trading on the 
Exchange upon the January 2018 expiry, as discussed above, and the 
specific pricing for FX options is therefore no longer applicable. No 
market participant can trade any FX options on ISE since the Exchange 
has determined not to list additional expiry contracts.
Priority Customer Complex Rebates
    The Exchange believes that its proposal to eliminate the Priority 
Customer Complex Rebates for NQX is reasonable because even after the 
elimination of the rebate, Priority Customer complex orders in NQX will 
not be assessed any complex order transaction fees. As noted above, the 
Priority Customer Complex Rebates are likewise currently eliminated for 
NDX and NDXP. By contrast, public customer executions on C2 in RUT are 
subject to a $0.15 per contract transaction fee.\27\
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    \27\ See C2's Fees Schedule, Section 1.C.
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    The Exchange's proposal to eliminate the Priority Customer Complex 
Rebates for NQX is equitable and not unfairly

[[Page 34629]]

discriminatory because the Exchange will eliminate the rebate for all 
similarly situated members.
Non-Priority Customer License Surcharge
    The Exchange believes that its proposal to charge a $0.25 per 
contract Non-Priority Customer license surcharge for NQX is reasonable 
because the fee amount is the same as the amount for NDX and NDXP, and 
lower when compared to the $0.45 per contract surcharge C2 applies to 
non-public customer transactions in RUT.\28\ The proposed license 
surcharge for NQX will also help recoup costs associated with listing 
proprietary products. The Exchange also believes that its proposal to 
not apply the Non-Priority Customer license surcharge to NQX orders 
that are routed to away markets in connection with the Plan is 
reasonable because NQX is currently an exclusively listed product, as 
discussed above.
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    \28\ See C2's Fees Schedule, Section 1.D.
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    Further, the Exchange believes that its proposal to assess a Non-
Priority Customer license surcharge of $0.25 per contract to NQX 
options is equitable and not unfairly discriminatory because the 
Exchange will apply the same surcharge for all similarly situated 
members in a similar manner. The Exchange also believes that it is 
equitable and not unfairly discriminatory to not assess the surcharge 
to Priority Customer orders in NQX because Priority Customer orders 
bring valuable liquidity to the market, which in turn benefits other 
market participants.
Marketing Fee
    The Exchange believes that its proposal to exclude NQX from the 
$0.70 per contract marketing fee is reasonable because the purpose of 
the marketing fee is to attract order flow to the Exchange. Because NQX 
will be an exclusively listed product, a marketing fee whose purpose is 
to attract order flow to the Exchange is no longer necessary for NQX.
    The Exchange's proposal to exclude NQX from the marketing fee is 
equitable and not unfairly discriminatory because the Exchange will 
apply this exclusion to all similarly situated members.
Crossing Fee Cap
    The Exchange believes that its proposal to exclude the Non-Priority 
Customer license surcharge and transaction fees for NQX from the 
calculation of the monthly Crossing Fee Cap is reasonable because NQX 
will be an exclusively listed product. Similar to NDX and NDXP, which 
are also excluded from the Crossing Fee Cap, the Exchange seeks to 
recoup the operational costs for listing proprietary products. The 
Exchange further believes that the proposed exclusion of NQX from the 
Crossing Fee Cap is equitable and not unfairly discriminatory because 
the Exchange will apply the exclusion all similarly situated members. 
The Exchange also believes that it is reasonable, equitable and not 
unfairly discriminatory to amend Section IV.H to include the reference 
to the various index options fees in Section III, as discussed above, 
because it will conform Section IV.H to the changes proposed herein and 
clarify how this provision will be applied.
Clean-Up Changes
    The Exchange believes that the clean-up changes to Sections I and 
II as described above are reasonable, equitable and not unfairly 
discriminatory because they are merely intended to bring greater 
clarity to the Schedule of Fees, to the benefit of all market 
participants.

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 does not believe 
its proposal to assess different maker/taker fees and rebates to 
different market participants for NQX options will impose an undue 
burden on competition because different market participants have 
different obligations and circumstances, as further discussed above. 
For example, Market Makers have quoting obligations that other market 
participants do not have. In addition, the Exchange notes that with its 
products, market participants are offered an opportunity to either 
transact NDXP or separately execute QQQ options. Offering products such 
as QQQ provides market participants with a variety of choices in 
selecting the product they desire to utilize to transact the Nasdaq 100 
Index.\29\ Furthermore, the proposed pricing changes will apply 
uniformly to all similarly situated market participants, as discussed 
above. For the foregoing reasons, the Exchange does not believe that 
the proposed changes to adopt pricing for NQX options as described 
above will impose an undue burden on competition.
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    \29\ See note 23 above.
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive, or rebate 
opportunities available at other venues to be more favorable. In such 
an environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and with alternative trading systems 
that have been exempted from compliance with the statutory standards 
applicable to exchanges. Because competitors are free to modify their 
own fees in response, and because market participants may readily 
adjust their order routing practices, the Exchange believes that the 
degree to which fee changes in this market may impose any burden on 
competition is extremely limited.

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,\30\ and Rule 19b-4(f)(2) \31\ 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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    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \31\ 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-2018-61 on the subject line.

[[Page 34630]]

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-2018-61. 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-2018-61 and should be submitted on 
or before August 10, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-15503 Filed 7-19-18; 8:45 am]
 BILLING CODE 8011-01-P
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