Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee, 40103-40105 [2018-17257]

Download as PDF Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices contrary, the Exchange believes that the proposed changes should increase both intermarket and intramarket competition. Specifically, the Exchange believes that the changes will promote competition by increasing the connectivity fees to become more within the range of comparable fees assessed by other competing exchanges.14 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. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges. The Exchange believes that the proposed changes reflect this competitive environment. To the extent that this purpose is achieved, all the Exchange’s market participants should benefit from the improved market liquidity. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,15 and Rule 19b–4(f)(2) 16 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the 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. sradovich on DSK3GMQ082PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– PEARL–2018–16 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–PEARL–2018–16. 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–PEARL–2018–16 and should be submitted on or before September 4, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–17251 Filed 8–10–18; 8:45 am] supra note 4. U.S.C. 78s(b)(3)(A)(ii). 16 17 CFR 240.19b–4(f)(2). 20:42 Aug 10, 2018 [Release No. 34–83793; File No. SR–ISE– 2018–70] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Options Regulatory Fee August 7, 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 27, 2018, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III 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 revise ISE’s Schedule of Fees to amend its Options Regulatory Fee or ‘‘ORF’’. While the changes proposed herein are effective upon filing, the Exchange has designated the amendments become operative on August 1, 2018. The text of the proposed rule change is available on the Exchange’s website at https://ise.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 1 15 15 15 VerDate Sep<11>2014 SECURITIES AND EXCHANGE COMMISSION BILLING CODE 8011–01–P 14 See 17 17 Jkt 244001 PO 00000 CFR 200.30–3(a)(12). Frm 00123 Fmt 4703 Sfmt 4703 40103 2 17 E:\FR\FM\13AUN1.SGM U.S.C. 78s(b)(1). CFR 240.19B–4. 13AUN1 40104 Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Currently, ISE assesses an ORF of $0.0016 per contract side. The Exchange proposes to increase this ORF to $0.0020 per contract side. In 2017, ISE reduced its ORF from $0.0039 per contract side to $0.0016 per contract side to account for synergies which resulted from Nasdaq’s acquisition 3 of the Exchange. At this time, the Exchange proposes an increase to its ORF that reflects its current expense profile. The Exchange’s proposed change to the ORF should balance the Exchange’s regulatory revenue against the anticipated costs. sradovich on DSK3GMQ082PROD with NOTICES Collection of ORF Currently, ISE assesses its ORF for each customer option transaction that is either: (1) Executed by a Member on ISE; or (2) cleared by an ISE Member at The Options Clearing Corporation (‘‘OCC’’) in the customer range,4 even if the transaction was executed by a nonmember of ISE, regardless of the exchange on which the transaction occurs.5 If the OCC clearing member is an ISE Member, ORF is assessed and collected on all cleared customer contracts (after adjustment for CMTA 6); and (2) if the OCC clearing member is not an ISE Member, ORF is collected only on the cleared customer contracts executed at ISE, taking into account any CMTA instructions which may result in collecting the ORF from a non-member. By way of example, if Broker A, an ISE Member, routes a customer order to CBOE and the transaction executes on CBOE and clears in Broker A’s OCC Clearing account, ORF will be collected by ISE from Broker A’s clearing account 3 On June 30, 2016, Nasdaq completed its acquisition of the International Securities Exchange. With the acquisition, ISE regulatory program has been examined and conformed to certain best practices which exist today on NASDAQ PHLX LLC, The NASDAQ Options Market LLC and NASDAQ BX, Inc. (collectively ‘‘Nasdaq Markets’’) and Nasdaq GEMX, LLC. These synergies in combination with conforming the expense and revenue review of ISE to that of the Nasdaq Markets resulted in decreased regulatory expenses for ISE. See Securities Exchange Act Release No. 81345 (August 8, 2017), 82 FR 155 (August 14, 2017) (SR– ISE–2017–71). 4 Members must record the appropriate account origin code on all orders at the time of entry in order. The Exchange represents that it has surveillances in place to verify that members mark orders with the correct account origin code. 5 The Exchange uses reports from OCC when assessing and collecting the ORF. 6 CMTA or Clearing Member Trade Assignment is a form of ‘‘give-up’’ whereby the position will be assigned to a specific clearing firm at OCC. VerDate Sep<11>2014 20:42 Aug 10, 2018 Jkt 244001 at OCC via direct debit. While this transaction was executed on a market other than ISE, it was cleared by an ISE Member in the member’s OCC clearing account in the customer range, therefore there is a regulatory nexus between ISE and the transaction. If Broker A was not an ISE Member, then no ORF should be assessed and collected because there is no nexus; the transaction did not execute on ISE nor was it cleared by an ISE Member. In the case where a Member both executes a transaction and clears the transaction, the ORF is assessed to and collected from that Member. In the case where a Member executes a transaction and a different member clears the transaction, the ORF is assessed to and collected from the Member who clears the transaction and not the Member who executes the transaction. In the case where a non-member executes a transaction at an away market and a Member clears the transaction, the ORF is assessed to and collected from the Member who clears the transaction. In the case where a Member executes a transaction on ISE and a non-member clears the transaction, the ORF is assessed to the Member that executed the transaction on ISE and collected from the non-member who cleared the transaction. In the case where a Member executes a transaction at an away market and a non-member clears the transaction, the ORF is not assessed to the Member who executed the transaction or collected from the nonmember who cleared the transaction because the Exchange does not have access to the data to make absolutely certain that ORF should apply. Further, the data does not allow the Exchange to identify the Member executing the trade at an away market. ORF Revenue and Monitoring of ORF The Exchange monitors the amount of revenue collected from the ORF to ensure that it, in combination with other regulatory fees and fines, does not exceed regulatory costs. In determining whether an expense is considered a regulatory cost, the Exchange reviews all costs and makes determinations if there is a nexus between the expense and a regulatory function. The Exchange notes that fines collected by the Exchange in connection with a disciplinary matter offset ORF. The ORF is designed to recover a material portion of the costs to the Exchange of the supervision and regulation of its members, including performing routine surveillances, investigations, examinations, financial monitoring, and policy, rulemaking, interpretive, and enforcement activities. PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 The Exchange believes that revenue generated from the ORF, when combined with all of the Exchange’s other regulatory fees, will cover a material portion, but not all, of the Exchange’s regulatory costs. The Exchange will continue to monitor the amount of revenue collected from the ORF to ensure that it, in combination with its other regulatory fees and fines, does not exceed regulatory costs. If the Exchange determines regulatory revenues exceed regulatory costs, the Exchange will adjust the ORF by submitting a fee change filing to the Commission. Proposal The Exchange is proposing to increase the ORF from $0.0016 to $0.0020 as of August 1, 2018 to reflect its current expense expenses while also ensuring that the ORF will not exceed costs. The Exchange regularly reviews its ORF to ensure that the ORF, in combination with its other regulatory fees and fines, does not exceed regulatory costs. The Exchange believes this adjustment will permit the Exchange to cover a material portion of its regulatory costs, while not exceeding regulatory costs. The Exchange notified Members via an Options Trader Alert of the proposed change to the ORF thirty (30) calendar days prior to the proposed operative date, August 1, 2018.7 The Exchange believes that the prior notification market participants will ensure market participants are prepared to configure their systems to properly account for the ORF. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 8 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act 9 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 its facility and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that increasing the ORF from $0.0016 to $0.0020 as of August 1, 2018 is reasonable because the Exchange’s collection of ORF needs to be balanced against the amount of regulatory costs incurred by the Exchange. The Exchange believes that the proposed adjustments noted herein will serve to balance the Exchange’s regulatory revenue against the 7 See Options Trader Alert #2018–27. U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(4) and (5). 8 15 E:\FR\FM\13AUN1.SGM 13AUN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Notices anticipated regulatory costs. While these adjustments result in an increase, the increase is modest. The Exchange believes that amending the ORF from $0.0016 to $0.0020 as of August 1, 2018 is equitable and not unfairly discriminatory because assessing the ORF to each Member for options transactions cleared by OCC in the customer range where the execution occurs on another exchange and is cleared by an ISE Member is an equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. The ORF is collected by OCC on behalf of ISE from Exchange clearing members for all customer transactions they clear or from nonmembers for all customer transactions they clear that were executed on ISE. The Exchange believes the ORF ensures fairness by assessing fees to Members based on the amount of customer options business they conduct. Regulating customer trading activity is much more labor intensive and requires greater expenditure of human and technical resources than regulating noncustomer trading activity, which tends to be more automated and less laborintensive. As a result, the costs associated with administering the customer component of the Exchange’s overall regulatory program are materially higher than the costs associated with administering the noncustomer component (e.g., Member proprietary transactions) of its regulatory program. The ORF is designed to recover a material portion of the costs of supervising and regulating Members’ customer options business including performing routine surveillances, investigations, examinations, financial monitoring, and policy, rulemaking, interpretive, and enforcement activities. The Exchange will monitor the amount of revenue collected from the ORF to ensure that it, in combination with its other regulatory fees and fines, does not exceed the Exchange’s total regulatory costs. The Exchange has designed the ORF to generate revenues that, when combined with all of the Exchange’s other regulatory fees, will be less than or equal to the Exchange’s regulatory costs, which is consistent with the Commission’s view that regulatory fees be used for regulatory purposes and not to support the Exchange’s business side. 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 VerDate Sep<11>2014 20:42 Aug 10, 2018 Jkt 244001 of the purposes of the Act. This proposal does not create an unnecessary or inappropriate intra-market burden on competition because the ORF applies to all customer activity, thereby raising regulatory revenue to offset regulatory expenses. It also supplements the regulatory revenue derived from noncustomer activity. This proposal does not create an unnecessary or inappropriate inter-market burden on competition because it is a regulatory fee that supports regulation in furtherance of the purposes of the Act. The Exchange is obligated to ensure that the amount of regulatory revenue collected from the ORF, in combination with its other regulatory fees and fines, does not exceed regulatory costs. 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.10 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: Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File No. SR–ISE–2018–70. 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 No. SR–ISE–2018–70, and should be submitted on or before September 4, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–17257 Filed 8–10–18; 8:45 am] BILLING CODE 8011–01–P 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 No. SR–ISE– 2018–70 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange 10 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00125 Fmt 4703 Sfmt 9990 40105 11 17 E:\FR\FM\13AUN1.SGM CFR 200.30–3(a)(12). 13AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 156 (Monday, August 13, 2018)]
[Notices]
[Pages 40103-40105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17257]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83793; File No. SR-ISE-2018-70]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the 
Options Regulatory Fee

August 7, 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 27, 2018, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with 
the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise ISE's Schedule of Fees to amend its 
Options Regulatory Fee or ``ORF''.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated the amendments become operative on August 1, 
2018.
    The text of the proposed rule change is available on the Exchange's 
website at https://ise.cchwallstreet.com/, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 40104]]

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

1. Purpose
    Currently, ISE assesses an ORF of $0.0016 per contract side. The 
Exchange proposes to increase this ORF to $0.0020 per contract side. In 
2017, ISE reduced its ORF from $0.0039 per contract side to $0.0016 per 
contract side to account for synergies which resulted from Nasdaq's 
acquisition \3\ of the Exchange. At this time, the Exchange proposes an 
increase to its ORF that reflects its current expense profile. The 
Exchange's proposed change to the ORF should balance the Exchange's 
regulatory revenue against the anticipated costs.
---------------------------------------------------------------------------

    \3\ On June 30, 2016, Nasdaq completed its acquisition of the 
International Securities Exchange. With the acquisition, ISE 
regulatory program has been examined and conformed to certain best 
practices which exist today on NASDAQ PHLX LLC, The NASDAQ Options 
Market LLC and NASDAQ BX, Inc. (collectively ``Nasdaq Markets'') and 
Nasdaq GEMX, LLC. These synergies in combination with conforming the 
expense and revenue review of ISE to that of the Nasdaq Markets 
resulted in decreased regulatory expenses for ISE. See Securities 
Exchange Act Release No. 81345 (August 8, 2017), 82 FR 155 (August 
14, 2017) (SR-ISE-2017-71).
---------------------------------------------------------------------------

Collection of ORF
    Currently, ISE assesses its ORF for each customer option 
transaction that is either: (1) Executed by a Member on ISE; or (2) 
cleared by an ISE Member at The Options Clearing Corporation (``OCC'') 
in the customer range,\4\ even if the transaction was executed by a 
non-member of ISE, regardless of the exchange on which the transaction 
occurs.\5\ If the OCC clearing member is an ISE Member, ORF is assessed 
and collected on all cleared customer contracts (after adjustment for 
CMTA \6\); and (2) if the OCC clearing member is not an ISE Member, ORF 
is collected only on the cleared customer contracts executed at ISE, 
taking into account any CMTA instructions which may result in 
collecting the ORF from a non-member.
---------------------------------------------------------------------------

    \4\ Members must record the appropriate account origin code on 
all orders at the time of entry in order. The Exchange represents 
that it has surveillances in place to verify that members mark 
orders with the correct account origin code.
    \5\ The Exchange uses reports from OCC when assessing and 
collecting the ORF.
    \6\ CMTA or Clearing Member Trade Assignment is a form of 
``give-up'' whereby the position will be assigned to a specific 
clearing firm at OCC.
---------------------------------------------------------------------------

    By way of example, if Broker A, an ISE Member, routes a customer 
order to CBOE and the transaction executes on CBOE and clears in Broker 
A's OCC Clearing account, ORF will be collected by ISE from Broker A's 
clearing account at OCC via direct debit. While this transaction was 
executed on a market other than ISE, it was cleared by an ISE Member in 
the member's OCC clearing account in the customer range, therefore 
there is a regulatory nexus between ISE and the transaction. If Broker 
A was not an ISE Member, then no ORF should be assessed and collected 
because there is no nexus; the transaction did not execute on ISE nor 
was it cleared by an ISE Member.
    In the case where a Member both executes a transaction and clears 
the transaction, the ORF is assessed to and collected from that Member. 
In the case where a Member executes a transaction and a different 
member clears the transaction, the ORF is assessed to and collected 
from the Member who clears the transaction and not the Member who 
executes the transaction. In the case where a non-member executes a 
transaction at an away market and a Member clears the transaction, the 
ORF is assessed to and collected from the Member who clears the 
transaction. In the case where a Member executes a transaction on ISE 
and a non-member clears the transaction, the ORF is assessed to the 
Member that executed the transaction on ISE and collected from the non-
member who cleared the transaction. In the case where a Member executes 
a transaction at an away market and a non-member clears the 
transaction, the ORF is not assessed to the Member who executed the 
transaction or collected from the non-member who cleared the 
transaction because the Exchange does not have access to the data to 
make absolutely certain that ORF should apply. Further, the data does 
not allow the Exchange to identify the Member executing the trade at an 
away market.
ORF Revenue and Monitoring of ORF
    The Exchange monitors the amount of revenue collected from the ORF 
to ensure that it, in combination with other regulatory fees and fines, 
does not exceed regulatory costs. In determining whether an expense is 
considered a regulatory cost, the Exchange reviews all costs and makes 
determinations if there is a nexus between the expense and a regulatory 
function. The Exchange notes that fines collected by the Exchange in 
connection with a disciplinary matter offset ORF.
    The ORF is designed to recover a material portion of the costs to 
the Exchange of the supervision and regulation of its members, 
including performing routine surveillances, investigations, 
examinations, financial monitoring, and policy, rulemaking, 
interpretive, and enforcement activities.
    The Exchange believes that revenue generated from the ORF, when 
combined with all of the Exchange's other regulatory fees, will cover a 
material portion, but not all, of the Exchange's regulatory costs. The 
Exchange will continue to monitor the amount of revenue collected from 
the ORF to ensure that it, in combination with its other regulatory 
fees and fines, does not exceed regulatory costs. If the Exchange 
determines regulatory revenues exceed regulatory costs, the Exchange 
will adjust the ORF by submitting a fee change filing to the 
Commission.
Proposal
    The Exchange is proposing to increase the ORF from $0.0016 to 
$0.0020 as of August 1, 2018 to reflect its current expense expenses 
while also ensuring that the ORF will not exceed costs. The Exchange 
regularly reviews its ORF to ensure that the ORF, in combination with 
its other regulatory fees and fines, does not exceed regulatory costs. 
The Exchange believes this adjustment will permit the Exchange to cover 
a material portion of its regulatory costs, while not exceeding 
regulatory costs.
    The Exchange notified Members via an Options Trader Alert of the 
proposed change to the ORF thirty (30) calendar days prior to the 
proposed operative date, August 1, 2018.\7\ The Exchange believes that 
the prior notification market participants will ensure market 
participants are prepared to configure their systems to properly 
account for the ORF.
---------------------------------------------------------------------------

    \7\ See Options Trader Alert #2018-27.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act \9\ 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 its facility and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that increasing the ORF from $0.0016 to 
$0.0020 as of August 1, 2018 is reasonable because the Exchange's 
collection of ORF needs to be balanced against the amount of regulatory 
costs incurred by the Exchange. The Exchange believes that the proposed 
adjustments noted herein will serve to balance the Exchange's 
regulatory revenue against the

[[Page 40105]]

anticipated regulatory costs. While these adjustments result in an 
increase, the increase is modest.
    The Exchange believes that amending the ORF from $0.0016 to $0.0020 
as of August 1, 2018 is equitable and not unfairly discriminatory 
because assessing the ORF to each Member for options transactions 
cleared by OCC in the customer range where the execution occurs on 
another exchange and is cleared by an ISE Member is an equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities. The ORF is 
collected by OCC on behalf of ISE from Exchange clearing members for 
all customer transactions they clear or from non-members for all 
customer transactions they clear that were executed on ISE. The 
Exchange believes the ORF ensures fairness by assessing fees to Members 
based on the amount of customer options business they conduct. 
Regulating customer trading activity is much more labor intensive and 
requires greater expenditure of human and technical resources than 
regulating non-customer trading activity, which tends to be more 
automated and less labor-intensive. As a result, the costs associated 
with administering the customer component of the Exchange's overall 
regulatory program are materially higher than the costs associated with 
administering the non-customer component (e.g., Member proprietary 
transactions) of its regulatory program.
    The ORF is designed to recover a material portion of the costs of 
supervising and regulating Members' customer options business including 
performing routine surveillances, investigations, examinations, 
financial monitoring, and policy, rulemaking, interpretive, and 
enforcement activities. The Exchange will monitor the amount of revenue 
collected from the ORF to ensure that it, in combination with its other 
regulatory fees and fines, does not exceed the Exchange's total 
regulatory costs. The Exchange has designed the ORF to generate 
revenues that, when combined with all of the Exchange's other 
regulatory fees, will be less than or equal to the Exchange's 
regulatory costs, which is consistent with the Commission's view that 
regulatory fees be used for regulatory purposes and not to support the 
Exchange's business side.

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. This proposal does not create 
an unnecessary or inappropriate intra-market burden on competition 
because the ORF applies to all customer activity, thereby raising 
regulatory revenue to offset regulatory expenses. It also supplements 
the regulatory revenue derived from non-customer activity. This 
proposal does not create an unnecessary or inappropriate inter-market 
burden on competition because it is a regulatory fee that supports 
regulation in furtherance of the purposes of the Act. The Exchange is 
obligated to ensure that the amount of regulatory revenue collected 
from the ORF, in combination with its other regulatory fees and fines, 
does not exceed regulatory costs.

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.\10\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 No. SR-ISE-2018-70 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File No. SR-ISE-2018-70. 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 No. SR-ISE-2018-70, and should be submitted on or 
before September 4, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17257 Filed 8-10-18; 8:45 am]
 BILLING CODE 8011-01-P

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