Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Market Maker Plus Program, 10133-10136 [2019-05091]
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Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices
Pursuant to the Privacy Act of
1974, as amended by the Computer
Matching and Privacy Protection Act of
1988 and the Computer Matching and
Privacy Protections Amendment of 1990
(Privacy Act), and Office of Management
and Budget (OMB) guidance on the
conduct of matching programs, notice is
hereby given of the re-establishment of
a matching program between the Office
of Personnel Management (OPM) and
the Social Security Administration
(SSA) (Computer Matching Agreement
1018).
SUMMARY:
Please submit comments on or
before April 18, 2019. The matching
program will begin on April 18, 2019
unless comments have been received
from interested members of the public
that require modification and
republication of the notice. The
matching program will continue for 18
months from the beginning date and
may be extended an additional 12
months if the respective agency Data
Integrity Boards determine that the
conditions specified in 5 U.S.C.
552a(o)(2)(D) have been met.
ADDRESSES: You may submit comments
via mail to: Deon Mason, Chief,
Business Services, Retirement
Management and Services, Retirement
Services, Office of Personnel
Management, Room 3316–G, 1900 E
Street NW, Washington, DC 20415, or
via email at Deon.Mason@opm.gov. You
may also submit comments, identified
by docket number and title, at the
Federal Rulemaking Portal: https://
www.regulations.gov by following the
instructions for submitting comments.
All submissions received must
include the agency name and docket
number for this document. The general
policy for comments and other
submissions from members of the public
is to make these submissions available
for public viewing at https://
www.regulations.gov as they are
received without change, including any
personal identifiers or contact
information.
DATES:
FOR FURTHER INFORMATION CONTACT:
Bernard A. Wells III, Retirement
Services, Office of Personnel
Management, at (202) 606–2730.
SUPPLEMENTARY INFORMATION: In
accordance with the Privacy Act of
1974, as amended by the Computer
Matching and Privacy Protection Act of
1988 and the Computer Matching and
Privacy Protections Amendment of 1990
(Privacy Act), and Office of Management
and Budget (OMB) guidance on the
conduct of matching programs,
including OMB Final Guidance
Interpreting the Provisions of Public
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Law 100–53 (published in the Federal
Register on June 19, 1989 (54 FR 25818)
and OMB Circular A–108, notice is
hereby given of the re-establishment of
a matching program between the Office
of Personnel Management (OPM) and
the Social Security Administration
(SSA). This matching program,
Computer Matching Agreement 1018, is
being re-established to redetermine and
recompute the benefits of certain
annuitants and survivors whose
computations are based, in part, on
military service performed after
December 1956 under the Civil Service
Retirement System (CSRS), and of
certain annuitants and survivors whose
annuity computation under the Federal
Employees Retirement System (FERS)
have a CSRS component.
Participating Agencies: OPM and
SSA.
Authority for Conducting the
Matching Program: OPM’s authority to
participate in this matching program
derives from 5 U.S.C. 8332(j) and
8422(e)4 SSA is authorized to
participate in this matching program
pursuant to 42 U.S.C. 1306.
Purpose(s): The purpose of this
matching program is to set forth the
terms, conditions and safeguards under
which the Social Security
Administration (SSA) will disclose tax
return and Social Security benefit
information to the Office of Personnel
Management. OPM will use the
disclosed information to redetermine
and recompute the benefits of certain
annuitants and survivors whose
computations are based, in part, on
military service performed after
December 1956 under the Civil Service
Retirement System and of certain
annuitants and survivors whose annuity
computation under the Federal
Employees Retirement System (FERS)
have a CSRS component.
Categories of Individuals: The
individuals about whom OPM
maintains information that are involved
in this matching program include
retired Federal employees and survivors
whose annuity computations are based,
in part, on military service performed
after December 31, 1956 and who also
receive benefits from SSA.
Category of Records: The categories of
records involved in the data match from
OPM include information about those
individuals who have applied for or are
eligible for both OPM and SSA benefits
as described above. OPM will provide
name, SSN, date of birth, alleged dates
of military service, alleged service
branch, and in survivor cases, date of
death of the individuals for whom OPM
requests information. These elements
will be matched against SSA records.
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10133
SSA will provide tax information
(amount of earnings and military wages
for the relevant time period and Social
Security benefit information, the SSN,
Social Security monthly benefit amount
and the amount of the SSA benefit
attributable to post-1956 military
service.
System(s) of Records: OPM’s system
of records involved in this matching
program is designated OPM/Central-1,
Civil Service Retirement and Insurance
Records 73 FR 15013 (March 20, 2008),
as amended 80 FR 74815 (November 30,
2015).
SSA’s systems of records involved in
this matching program is the Master
Beneficiary Record (MBR), 60–0090, 71
FR 1826 (Jan. 11, 2006), as amended at
72 FR 69723 (Dec. 10, 2007), 78 FR
40542 (July 5, 2013) and 83 FR 31250–
31251 (July 3, 2018). Additionally SSA
will disclose data from the MEF file
(60–0059, Earnings Recording and SelfEmployment Income system) last fully
published on January 11, 2006, at 71 FR
1819 and amended on July 5, 2013 at 78
FR 40542 and from the ‘‘1086’’
microfilm file, published on January 11,
2006 at 71 FR 1796.
Alexys Stanley,
Regulatory Affairs Analyst.
[FR Doc. 2019–05099 Filed 3–18–19; 8:45 am]
BILLING CODE 6325–38–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85307; File No. SR–ISE–
2019–03]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Market
Maker Plus Program
March 13, 2019.
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 February
27, 2019, 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
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Market Maker Plus program under
Options 7, Section 3.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on March 1, 2019.
The text of the proposed rule change
is available on the Exchange’s website at
https://ise.cchwallstreet.com/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to provide a supplemental
rebate in addition to the linked maker
rebate for SPY, QQQ, and IWM, as
described in detail below.
Background
Market Maker Plus
As set forth in Section 3 of the Pricing
Schedule, the Exchange operates a
Market Maker Plus program for regular
orders in Select Symbols 3 where Market
Makers 4 that contribute to market
quality by maintaining tight markets are
eligible for enhanced rebates. Market
Makers are evaluated each trading day
for the percentage of time spent on the
National Best Bid or National Best Offer
(‘‘NBBO’’) for qualifying series that
expire in two successive thirty calendar
day periods beginning on that trading
day. A Market Maker Plus is a Market
Maker who is on the NBBO a specified
percentage of the time on average for the
month based on daily performance in
the qualifying series for each of the two
successive periods described above.
Qualifying series are series trading
between $0.03 and $3.00 (for options
whose underlying stock’s previous
trading day’s last sale price was less
than or equal to $100) and between
$0.10 and $3.00 (for options whose
underlying stock’s previous trading
day’s last sale price was greater than
$100) in premium. If a Market Maker
would qualify for a different Market
Maker Plus tier in each of the two
successive periods described above,
then the lower of the two Market Maker
Plus tier rebates shall apply to all
contracts.5 These general qualification
requirements will remain unchanged
with the amendments to the applicable
Market Maker Plus rebates described in
this proposed rule change.
Market Maker orders in Select
Symbols are charged a maker fee of
$0.11 per contract; 6 provided that
Market Makers that qualify for Market
Maker Plus will not pay this fee if they
meet the applicable tier thresholds set
forth in the table below, and will
instead receive the below maker rebates
based on the applicable tier for which
they qualify.7
SELECT SYMBOLS OTHER THAN SPY, QQQ, AND IWM
Market Maker Plus tier
(specified percentage)
Maker rebate
Tier 1 (80% to less than 85%) ................................................................................................................................
Tier 2 (85% to less than 95%) ................................................................................................................................
Tier 3 (95% or greater) ............................................................................................................................................
($0.15)
($0.18)
($0.22)
SPY, QQQ, and IWM
Market Maker Plus tier
(specified percentage)
Tier
Tier
Tier
Tier
1
2
3
4
(70%
(80%
(85%
(90%
Regular
Maker
rebate
to less than 80%) ................................................................................................................................
to less than 85%) ................................................................................................................................
to less than 90%) ................................................................................................................................
or greater) ............................................................................................................................................
($0.00)
($0.18)
($0.22)
($0.26)
Linked
Maker
rebate
N/A
($0.15)
($0.19)
($0.23)
To encourage Market Makers to
maintain quality markets in SPY, QQQ,
and IWM in particular, members that
maintain tight markets in those symbols
are eligible for higher regular maker
rebates and may also be eligible for
linked maker rebates, as shown in the
table above. Specifically, the following
symbols are linked for purposes of the
linked maker rebate: (1) SPY and QQQ,
and (2) SPY and IWM. Market Makers
that qualify for Market Maker Plus Tiers
2–4 above for executions in SPY, QQQ,
and IWM may be eligible for a linked
maker rebate in a linked symbol in
addition to the regular maker rebate for
the applicable tier. The linked maker
rebate applies to executions in SPY,
3 ‘‘Select Symbols’’ are options overlying all
symbols listed on the Nasdaq ISE that are in the
Penny Pilot Program.
4 The term ‘‘Market Makers’’ refers to
‘‘Competitive Market Makers’’ and ‘‘Primary Market
Makers’’ collectively. See ISE Rule 100(a)(32).
5 Market Makers may enter quotes in a symbol
using one or more unique, exchange assigned
identifiers—i.e., badge/suffix combinations. Market
Maker Plus status is calculated independently
based on quotes entered in a symbol for each of the
Market Maker’s badge/suffix combinations, and the
highest tier achieved for any badge/suffix
combination quoting that symbol applies to
executions across all badge/suffix combinations that
the member uses to trade in that symbol. A Market
Maker’s worst quoting day each month for each of
the two successive periods described above, on a
per symbol basis, will be excluded in calculating
whether a Market Maker qualifies for this rebate.
6 This fee also applies to Market Maker orders
sent to the Exchange by Electronic Access Members.
7 A $0.15 per contract fee applies instead of the
applicable fee or rebate when trading against
Priority Customer complex orders that leg into the
regular order book. There will be no fee charged or
rebate provided when trading against non-Priority
Customer complex orders that leg into the regular
order book.
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Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices
QQQ, and IWM if the Market Maker
does not achieve the applicable tier in
that symbol but achieves the tier (i.e.,
any of the Market Maker Plus Tiers 2–
4) for any badge/suffix combination in
the other linked symbol, in which case
the higher tier achieved applies to both
symbols. If a Market Maker would
qualify for a linked maker rebate in SPY
based on the tier achieved in QQQ and
the tier achieved in IWM, then the
higher of the two linked maker rebates
will be applied to SPY. The regular
maker rebate will be provided in the
symbol that qualifies the Market Maker
for the higher tier based on percentage
of time at the NBBO.8
Priority Customer Complex Order
Rebates
The Exchange currently has a pricing
structure in place that provides rebates
to Priority Customer 9 complex orders in
order to encourage members to bring
that order flow to the Exchange. The
Exchange provides these rebates to
members that achieve Priority Customer
Complex Tiers 10 in Select Symbols and
Non-Select Symbols 11 (other than NDX,
Priority Customer complex tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
6
7
8
9
NQX or MNX).12 All complex order
volume executed on the Exchange,
including volume executed by Affiliated
Members,13 is included in the volume
calculation, except for volume executed
as Crossing Orders 14 and Responses to
Crossing Orders.15 Affiliated Entities 16
may also aggregate their complex order
volume for purposes of qualifying
Appointed OFPs for these Priority
Customer rebates.17 As set forth in
Section 4 of the Pricing Schedule, there
are currently nine Priority Customer
Complex Tiers as follows:
Rebate for
select
symbols
Complex order volume percentage
............................................................................
............................................................................
............................................................................
............................................................................
............................................................................
............................................................................
............................................................................
............................................................................
............................................................................
0.000–0.200 ..................................................................
Above 0.200–0.400 ......................................................
Above 0.400–0.600 ......................................................
Above 0.600–0.750 ......................................................
Above 0.750–1.000 ......................................................
Above 1.000–1.500 ......................................................
Above 1.500–2.000 ......................................................
Above 2.000–3.250 ......................................................
Above 3.250 .................................................................
($0.25)
(0.30)
(0.35)
(0.40)
(0.45)
(0.46)
(0.48)
(0.50)
(0.50)
Rebate for
non-select
symbols
($0.40)
(0.55)
(0.70)
(0.75)
(0.80)
(0.80)
(0.80)
(0.85)
(0.85)
Proposal
At this time, the Exchange proposes
that to the extent Market Makers qualify
for the foregoing Priority Customer
complex order rebate in Tiers 7–9, they
may also become eligible to earn a
supplemental rebate in addition to the
linked maker rebate tiers 2–4 in SPY,
QQQ, and IWM provided to Market
Makers that qualify for Market Maker
Plus, as described above. Specifically, if
Market Makers separately achieve
Priority Customer complex tiers 7–9,
they will earn an additional $0.01 per
contract rebate on executions in SPY,
QQQ, or IWM that qualify for the linked
maker rebate program, in addition to the
linked rebates tiers 2–4. As proposed,
Market Makers that qualify for Priority
The Exchange believes that its
proposal is consistent with Section 6(b)
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.
The Exchange believes that the
proposed changes to provide a
supplementary $0.01 per contract rebate
in addition to the linked maker rebate
tiers 2–4, provided the Market Maker
achieves Priority Customer complex
tiers 7–9 is reasonable because this
incentive is intended to encourage
Market Makers that maintain quality
markets and qualify for Market Maker
Plus to continue send more complex
order flow to the Exchange to achieve
Priority Customer complex tiers 7–9 in
order to earn the additional $0.01
rebate. All market participants benefit
from increased order interaction when
more order flow is available on ISE. The
8 Thus, for example, if a Market Maker achieves
Tier 1 in SPY, Tier 2 in QQQ, and Tier 3 in IWM,
the Market Maker would receive the $0.18 per
contract Tier 2 regular maker rebate in QQQ, the
$0.22 per contract Tier 3 regular maker rebate in
IWM, and the $0.19 per contract Tier 3 linked
maker rebate in SPY—i.e., based on the Market
Maker achieving Tier 3 in IWM.
9 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).
10 The Priority Customer Complex Tiers are based
on total Affiliated Member or Affiliated Entity
complex order volume (excluding Crossing Orders
and Responses to Crossing Orders), and are
calculated as a percentage of Customer Total
Consolidated Volume (hereinafter, ‘‘Complex Order
Volume Percentage’’). ‘‘Customer Total
Consolidated Volume’’ means the total national
volume cleared at The Options Clearing
Corporation in the Customer range in equity and
ETF options in that month.
11 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols.
12 Rebates are provided per contract per leg if the
order trades with non-Priority Customer orders in
the complex order book or trades with quotes and
orders on the regular order book.
13 An ‘‘Affiliated Member’’ is a Member that
shares at least 75% common ownership with a
particular Member as reflected on the Member’s
Form BD, Schedule A.
14 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 this Pricing Schedule, orders
executed in the Block Order Mechanism are also
considered Crossing Orders.
15 ‘‘Responses to Crossing Orders’’ are any contraside interest submitted after the commencement of
an auction in the Exchange’s Facilitation
Mechanism, Solicited Order Mechanism, Block
Order Mechanism or PIM.
16 An ‘‘Affiliated Entity’’ is a relationship between
an Appointed Market Maker and an Appointed OFP
for purposes of qualifying for certain pricing
specified in the Pricing Schedule. An ‘‘Appointed
Market Maker’’ is a Market Maker who has been
appointed by an Order Flow Provider (‘‘OFP’’) for
purposes of qualifying as an Affiliated Entity. An
‘‘Appointed OFP’’ is an OFP (i.e., a member, other
than a Market Maker, that submits orders, as agent
or principal, to the Exchange) who has been
appointed by a Market Maker for purposes of
qualifying as an Affiliated Entity. Each member may
qualify for only one Affiliated Entity relationship at
any given time. Affiliated Members are not eligible
to enter an Affiliated Entity relationship.
17 The Appointed OFP would receive the rebate
associated with the qualifying volume tier based on
aggregated volume.
18 15 U.S.C. 78f(b).
19 15 U.S.C. 78f(b)(4) and (5).
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Customer complex tiers 7–9 will receive
a linked maker rebate of $0.16 per
contract in tier 2, $0.20 per contract in
tier 3, and $0.24 per contract in tier 4,
provided that they also meet the
qualifications of the applicable linked
maker rebate tier.
2. Statutory Basis
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Federal Register / Vol. 84, No. 53 / Tuesday, March 19, 2019 / Notices
Exchange also believes that the
proposed changes will continue to
encourage better market quality in SPY,
QQQ, and IWM as Market Makers
would be able to earn the supplemental
rebate in addition to the linked maker
rebates that they may qualify for today.
The Exchange believes that the
proposed changes to provide the
supplemental $0.01 rebate to qualifying
Market Makers are not unfairly
discriminatory as the changes apply to
all Market Makers orders based on
achieving the required Priority
Customer complex tier, and qualifying
for the linked maker rebate program by
way of achieving the required Market
Maker Plus tier in SPY, QQQ, or IWM.
Furthermore, the Exchange continues to
believe that it is not unfairly
discriminatory to offer these rebates
only to Market Makers because Market
Makers, and in particular, those Market
Makers that achieve Market Maker Plus
status, are subject to additional
requirements and obligations (such as
quoting requirements) that other market
participants are not.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
changes will encourage Market Makers
that maintain quality markets and
qualify for Market Maker Plus to
continue send more complex order flow
to the Exchange to achieve Priority
Customer complex tiers 7–9 in order to
earn the additional $0.01 rebate. All
market participants benefit from
increased order interaction when more
order flow is available on ISE.
The Exchange operates in a highly
competitive market in which market
participants can readily direct their
order flow to 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. For the
reasons described above, the Exchange
believes that the proposed fee changes
reflect this competitive environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
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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,20 and Rule
19b–4(f)(2) 21 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–2019–03 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE–2019–03. 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–2019–03 and should be
submitted on or before April 9, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–05091 Filed 3–18–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85308; File No. SR–ISE–
2019–05]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change to No Longer Offer
Complex Order Quoting Functionality
or Legging Functionality for StockOption Orders and To Make Other
Changes to Chapter 7
March 13, 2019.
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 March 1,
2019, Nasdaq ISE, LLC (‘‘ISE’’ or the
‘‘Exchange’’) 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
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 no longer
offer Complex Order quoting
functionality or legging functionality for
Stock-Option Orders on ISE. The
Exchange also proposes other
amendments, including modifying its
22 17
20 15
U.S.C. 78s(b)(3)(A)(ii).
21 17 CFR 240.19b–4(f)(2).
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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 Volume 84, Number 53 (Tuesday, March 19, 2019)]
[Notices]
[Pages 10133-10136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05091]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85307; File No. SR-ISE-2019-03]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the Market
Maker Plus Program
March 13, 2019.
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 February 27, 2019, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 10134]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Market Maker Plus program under
Options 7, Section 3.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on March 1, 2019.
The text of the proposed rule change is available on the Exchange's
website at https://ise.cchwallstreet.com/, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to provide a
supplemental rebate in addition to the linked maker rebate for SPY,
QQQ, and IWM, as described in detail below.
Background
Market Maker Plus
As set forth in Section 3 of the Pricing Schedule, the Exchange
operates a Market Maker Plus program for regular orders in Select
Symbols \3\ where Market Makers \4\ that contribute to market quality
by maintaining tight markets are eligible for enhanced rebates. Market
Makers are evaluated each trading day for the percentage of time spent
on the National Best Bid or National Best Offer (``NBBO'') for
qualifying series that expire in two successive thirty calendar day
periods beginning on that trading day. A Market Maker Plus is a Market
Maker who is on the NBBO a specified percentage of the time on average
for the month based on daily performance in the qualifying series for
each of the two successive periods described above. Qualifying series
are series trading between $0.03 and $3.00 (for options whose
underlying stock's previous trading day's last sale price was less than
or equal to $100) and between $0.10 and $3.00 (for options whose
underlying stock's previous trading day's last sale price was greater
than $100) in premium. If a Market Maker would qualify for a different
Market Maker Plus tier in each of the two successive periods described
above, then the lower of the two Market Maker Plus tier rebates shall
apply to all contracts.\5\ These general qualification requirements
will remain unchanged with the amendments to the applicable Market
Maker Plus rebates described in this proposed rule change.
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\3\ ``Select Symbols'' are options overlying all symbols listed
on the Nasdaq ISE that are in the Penny Pilot Program.
\4\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See ISE Rule
100(a)(32).
\5\ Market Makers may enter quotes in a symbol using one or more
unique, exchange assigned identifiers--i.e., badge/suffix
combinations. Market Maker Plus status is calculated independently
based on quotes entered in a symbol for each of the Market Maker's
badge/suffix combinations, and the highest tier achieved for any
badge/suffix combination quoting that symbol applies to executions
across all badge/suffix combinations that the member uses to trade
in that symbol. A Market Maker's worst quoting day each month for
each of the two successive periods described above, on a per symbol
basis, will be excluded in calculating whether a Market Maker
qualifies for this rebate.
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Market Maker orders in Select Symbols are charged a maker fee of
$0.11 per contract; \6\ provided that Market Makers that qualify for
Market Maker Plus will not pay this fee if they meet the applicable
tier thresholds set forth in the table below, and will instead receive
the below maker rebates based on the applicable tier for which they
qualify.\7\
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\6\ This fee also applies to Market Maker orders sent to the
Exchange by Electronic Access Members.
\7\ A $0.15 per contract fee applies instead of the applicable
fee or rebate when trading against Priority Customer complex orders
that leg into the regular order book. There will be no fee charged
or rebate provided when trading against non-Priority Customer
complex orders that leg into the regular order book.
Select Symbols Other Than SPY, QQQ, and IWM
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Market Maker Plus tier
(specified percentage) Maker rebate
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Tier 1 (80% to less than 85%)........... ($0.15)
Tier 2 (85% to less than 95%)........... ($0.18)
Tier 3 (95% or greater)................. ($0.22)
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SPY, QQQ, and IWM
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Market Maker Plus tier Regular Linked
(specified percentage) Maker Maker
rebate rebate
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Tier 1 (70% to less than 80%)........... ($0.00) N/A
Tier 2 (80% to less than 85%)........... ($0.18) ($0.15)
Tier 3 (85% to less than 90%)........... ($0.22) ($0.19)
Tier 4 (90% or greater)................. ($0.26) ($0.23)
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To encourage Market Makers to maintain quality markets in SPY, QQQ,
and IWM in particular, members that maintain tight markets in those
symbols are eligible for higher regular maker rebates and may also be
eligible for linked maker rebates, as shown in the table above.
Specifically, the following symbols are linked for purposes of the
linked maker rebate: (1) SPY and QQQ, and (2) SPY and IWM. Market
Makers that qualify for Market Maker Plus Tiers 2-4 above for
executions in SPY, QQQ, and IWM may be eligible for a linked maker
rebate in a linked symbol in addition to the regular maker rebate for
the applicable tier. The linked maker rebate applies to executions in
SPY,
[[Page 10135]]
QQQ, and IWM if the Market Maker does not achieve the applicable tier
in that symbol but achieves the tier (i.e., any of the Market Maker
Plus Tiers 2-4) for any badge/suffix combination in the other linked
symbol, in which case the higher tier achieved applies to both symbols.
If a Market Maker would qualify for a linked maker rebate in SPY based
on the tier achieved in QQQ and the tier achieved in IWM, then the
higher of the two linked maker rebates will be applied to SPY. The
regular maker rebate will be provided in the symbol that qualifies the
Market Maker for the higher tier based on percentage of time at the
NBBO.\8\
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\8\ Thus, for example, if a Market Maker achieves Tier 1 in SPY,
Tier 2 in QQQ, and Tier 3 in IWM, the Market Maker would receive the
$0.18 per contract Tier 2 regular maker rebate in QQQ, the $0.22 per
contract Tier 3 regular maker rebate in IWM, and the $0.19 per
contract Tier 3 linked maker rebate in SPY--i.e., based on the
Market Maker achieving Tier 3 in IWM.
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Priority Customer Complex Order Rebates
The Exchange currently has a pricing structure in place that
provides rebates to Priority Customer \9\ complex orders in order to
encourage members to bring that order flow to the Exchange. The
Exchange provides these rebates to members that achieve Priority
Customer Complex Tiers \10\ in Select Symbols and Non-Select Symbols
\11\ (other than NDX, NQX or MNX).\12\ All complex order volume
executed on the Exchange, including volume executed by Affiliated
Members,\13\ is included in the volume calculation, except for volume
executed as Crossing Orders \14\ and Responses to Crossing Orders.\15\
Affiliated Entities \16\ may also aggregate their complex order volume
for purposes of qualifying Appointed OFPs for these Priority Customer
rebates.\17\ As set forth in Section 4 of the Pricing Schedule, there
are currently nine Priority Customer Complex Tiers as follows:
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\9\ 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).
\10\ The Priority Customer Complex Tiers are based on total
Affiliated Member or Affiliated Entity complex order volume
(excluding Crossing Orders and Responses to Crossing Orders), and
are calculated as a percentage of Customer Total Consolidated Volume
(hereinafter, ``Complex Order Volume Percentage''). ``Customer Total
Consolidated Volume'' means the total national volume cleared at The
Options Clearing Corporation in the Customer range in equity and ETF
options in that month.
\11\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols.
\12\ Rebates are provided per contract per leg if the order
trades with non-Priority Customer orders in the complex order book
or trades with quotes and orders on the regular order book.
\13\ An ``Affiliated Member'' is a Member that shares at least
75% common ownership with a particular Member as reflected on the
Member's Form BD, Schedule A.
\14\ 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 this Pricing Schedule, orders executed in the Block
Order Mechanism are also considered Crossing Orders.
\15\ ``Responses to Crossing Orders'' are any contra-side
interest submitted after the commencement of an auction in the
Exchange's Facilitation Mechanism, Solicited Order Mechanism, Block
Order Mechanism or PIM.
\16\ An ``Affiliated Entity'' is a relationship between an
Appointed Market Maker and an Appointed OFP for purposes of
qualifying for certain pricing specified in the Pricing Schedule. An
``Appointed Market Maker'' is a Market Maker who has been appointed
by an Order Flow Provider (``OFP'') for purposes of qualifying as an
Affiliated Entity. An ``Appointed OFP'' is an OFP (i.e., a member,
other than a Market Maker, that submits orders, as agent or
principal, to the Exchange) who has been appointed by a Market Maker
for purposes of qualifying as an Affiliated Entity. Each member may
qualify for only one Affiliated Entity relationship at any given
time. Affiliated Members are not eligible to enter an Affiliated
Entity relationship.
\17\ The Appointed OFP would receive the rebate associated with
the qualifying volume tier based on aggregated volume.
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Rebate for Rebate for non-
Priority Customer complex tier Complex order volume percentage select symbols select symbols
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Tier 1........................................ 0.000-0.200..................... ($0.25) ($0.40)
Tier 2........................................ Above 0.200-0.400............... (0.30) (0.55)
Tier 3........................................ Above 0.400-0.600............... (0.35) (0.70)
Tier 4........................................ Above 0.600-0.750............... (0.40) (0.75)
Tier 5........................................ Above 0.750-1.000............... (0.45) (0.80)
Tier 6........................................ Above 1.000-1.500............... (0.46) (0.80)
Tier 7........................................ Above 1.500-2.000............... (0.48) (0.80)
Tier 8........................................ Above 2.000-3.250............... (0.50) (0.85)
Tier 9........................................ Above 3.250..................... (0.50) (0.85)
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Proposal
At this time, the Exchange proposes that to the extent Market
Makers qualify for the foregoing Priority Customer complex order rebate
in Tiers 7-9, they may also become eligible to earn a supplemental
rebate in addition to the linked maker rebate tiers 2-4 in SPY, QQQ,
and IWM provided to Market Makers that qualify for Market Maker Plus,
as described above. Specifically, if Market Makers separately achieve
Priority Customer complex tiers 7-9, they will earn an additional $0.01
per contract rebate on executions in SPY, QQQ, or IWM that qualify for
the linked maker rebate program, in addition to the linked rebates
tiers 2-4. As proposed, Market Makers that qualify for Priority
Customer complex tiers 7-9 will receive a linked maker rebate of $0.16
per contract in tier 2, $0.20 per contract in tier 3, and $0.24 per
contract in tier 4, provided that they also meet the qualifications of
the applicable linked maker rebate tier.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) 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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The Exchange believes that the proposed changes to provide a
supplementary $0.01 per contract rebate in addition to the linked maker
rebate tiers 2-4, provided the Market Maker achieves Priority Customer
complex tiers 7-9 is reasonable because this incentive is intended to
encourage Market Makers that maintain quality markets and qualify for
Market Maker Plus to continue send more complex order flow to the
Exchange to achieve Priority Customer complex tiers 7-9 in order to
earn the additional $0.01 rebate. All market participants benefit from
increased order interaction when more order flow is available on ISE.
The
[[Page 10136]]
Exchange also believes that the proposed changes will continue to
encourage better market quality in SPY, QQQ, and IWM as Market Makers
would be able to earn the supplemental rebate in addition to the linked
maker rebates that they may qualify for today.
The Exchange believes that the proposed changes to provide the
supplemental $0.01 rebate to qualifying Market Makers are not unfairly
discriminatory as the changes apply to all Market Makers orders based
on achieving the required Priority Customer complex tier, and
qualifying for the linked maker rebate program by way of achieving the
required Market Maker Plus tier in SPY, QQQ, or IWM. Furthermore, the
Exchange continues to believe that it is not unfairly discriminatory to
offer these rebates only to Market Makers because Market Makers, and in
particular, those Market Makers that achieve Market Maker Plus status,
are subject to additional requirements and obligations (such as quoting
requirements) that other market participants are not.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed changes will encourage Market Makers that maintain quality
markets and qualify for Market Maker Plus to continue send more complex
order flow to the Exchange to achieve Priority Customer complex tiers
7-9 in order to earn the additional $0.01 rebate. All market
participants benefit from increased order interaction when more order
flow is available on ISE.
The Exchange operates in a highly competitive market in which
market participants can readily direct their order flow to 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. For the reasons described above, the Exchange
believes that the proposed fee changes reflect this competitive
environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\20\ and Rule 19b-4(f)(2) \21\ 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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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
\21\ 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 rule-comments@sec.gov. Please include
File Number SR-ISE-2019-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2019-03. 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-2019-03 and should be submitted on
or before April 9, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05091 Filed 3-18-19; 8:45 am]
BILLING CODE 8011-01-P
