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]
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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).
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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
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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
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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
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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.
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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.
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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.
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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).
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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.
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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.
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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.
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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.
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34629
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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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).
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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-
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]]>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\
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\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\
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\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.
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\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.
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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\
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\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).
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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.
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4) and (5).
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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.
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\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.
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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.
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\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
