Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish a Priority Customer Complex Order Surcharge and Provide an Additional Rebate per Originating Contract Side to Qualifying Members, 16300-16303 [2019-07822]
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Federal Register / Vol. 84, No. 75 / Thursday, April 18, 2019 / Notices
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.6 On January 15,
2019, the Commission issued an order
instituting proceedings under Section
19(b)(2)(B) of the Act 7 to determine
whether to approve or disapprove the
proposed rule change (‘‘OIP’’).8 The
Commission received one comment on
the proposal in response to the OIP.9
Section 19(b)(2) of the Act 10 provides
that, after initiating disapproval
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of filing of the proposed rule
change. The Commission may extend
the period for issuing an order
approving or disapproving the proposed
rule change, however, by not more than
60 days if the Commission determines
that a longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
change was published for notice and
comment in the Federal Register on
October 18, 2018. The 180th day after
publication of the Notice is April 16,
2019, and June 15, 2019 is an additional
60 days from that date.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change and the
comment letters. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Act,11 designates June 15,
2019, as the date by which the
Commission shall either approve or
disapprove the proposed rule change
(File No. SR–NYSE–2018–46).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–07824 Filed 4–17–19; 8:45 am]
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BILLING CODE 8011–01–P
6 See Securities Exchange Act Release No. 84680
(November 29, 2018), 83 FR 62942 (December 8,
2018). The Commission designated January 16,
2019, as the date by which it should approve,
disapprove, or institute proceedings to determine
whether to disapprove the proposed rule change.
7 15 U.S.C. 78s(b)(2)(B).
8 See Securities Exchange Act Release No. 84984
(January 15, 2019), 84 FR 0855 (January 31, 2019).
9 See Letter to Secretary, Commission, from
Jeffrey P. Mahoney, General Counsel, Council of
Institutional Investors, dated February 11, 2019
(‘‘CII Letter II’’).
10 15 U.S.C. 78s(b)(2).
11 Id.
12 17 CFR 200.30–3(a)(57).
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17:37 Apr 17, 2019
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85647; File No. SR–ISE–
2019–09]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Establish a Priority
Customer Complex Order Surcharge
and Provide an Additional Rebate per
Originating Contract Side to Qualifying
Members
April 15, 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 April 1,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Pricing Schedule in Options 7.
The text of the proposed rule change
is available on the Exchange’s website at
https://ise.cchwallstreet.com/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00062
Fmt 4703
Sfmt 4703
Pricing Schedule in Options 7 to: (1)
Establish a $0.05 per contract surcharge
for Priority Customer 3 complex orders
in SPY that leg into the regular order
book; and (2) amend its QCC and
Solicitation Rebate program to provide
an additional rebate of $0.01 per
originating contract side to qualifying
members.
Priority Customer Complex Order
Surcharge
The Exchange currently has a pricing
structure in place that provides rebates
to Priority Customer 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 4 in Select Symbols 5 and
Non-Select Symbols 6 (other than NDX,
NQX or MNX). All complex order
volume executed on the Exchange,
including volume executed by Affiliated
Members,7 is included in the volume
calculation, except for volume executed
as Crossing Orders 8 and Responses to
Crossing Orders.9 Affiliated Entities 10
3 A ‘‘Priority Customer’’ is a person or entity that
is not a broker/dealer in securities, and does not
place more than 390 orders in listed options per day
on average during a calendar month for its own
beneficial account(s), as defined in Nasdaq ISE Rule
100(a)(37A).
4 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.
5 ‘‘Select Symbols’’ are options overlying all
symbols listed on the Nasdaq ISE that are in the
Penny Pilot Program. SPY is a Select Symbol.
6 ‘‘Non-Select Symbols’’ are options overlying all
symbols excluding Select Symbols.
7 An ‘‘Affiliated Member’’ is a Member that shares
at least 75% common ownership with a particular
Member as reflected on the Member’s Form BD,
Schedule A.
8 A ‘‘Crossing Order’’ is an order executed in the
Exchange’s Facilitation Mechanism, Solicited Order
Mechanism, Price Improvement Mechanism (PIM)
or submitted as a Qualified Contingent Cross order.
For purposes of this Pricing Schedule, orders
executed in the Block Order Mechanism are also
considered Crossing Orders.
9 ‘‘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.
10 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
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may also aggregate their complex order
volume for purposes of qualifying
Appointed OFPs for these Priority
Customer rebates.11 Rebates are
provided per contract per leg if the
Priority Customer complex order trades
with non-Priority Customer orders in
the complex order book or trades with
quotes and orders on the regular order
book.12
Priority customer complex tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
4
5
6
7
8
9
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
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% ...........................................................................................
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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.
11 The Appointed OFP would receive the rebate
associated with the qualifying volume tier based on
aggregated volume.
12 The rebate for the highest tier volume achieved
is applied retroactively to all eligible Priority
Customer complex volume once the threshold has
been reached. Members will not receive rebates for
net zero complex orders. For purposes of
determining which complex orders qualify as ‘‘net
zero’’ the Exchange will count all complex orders
that leg into the regular order book and are executed
at a net price per contract that is within a range of
$0.01 credit and $0.01 debit.
13 As discussed above, the Exchange currently
provides the Tiers 1–9 Priority Customer complex
17:37 Apr 17, 2019
Rebate for
select symbols
Complex order volume percentage
Going forward, the Exchange proposes
to impose a $0.05 per contract surcharge
on Priority Customer complex orders in
SPY that leg into the regular order book,
which will be applied in addition to the
applicable rebate.13 For example, if a
member qualifies for Priority Customer
Complex Tier 1, the member’s Priority
Customer complex orders in SPY that
leg into the regular order book for nonnet zero activity will earn $0.20 per
contract (i.e., $0.25 per contract rebate
for Select Symbols minus the $0.05 per
contract surcharge). If, however, the
member’s SPY Priority Customer
complex orders execute against nonPriority Customer orders in the complex
order book instead of legging into the
regular order book, those orders will
earn the $0.25 per contract rebate and
not be assessed the $0.05 surcharge.
The Exchange is proposing this
surcharge to reduce the costs of such
transactions. Not only does the
Exchange provide the tiered rebates
discussed above to Priority Customer
complex orders, but the Exchange also
does not charge any maker or taker fees
for such orders.14
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As set forth in Section 4 of the Pricing
Schedule, there are currently nine
Priority Customer Complex Tiers as
follows:
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QCC and Solicitation Rebate
Originating contract sides
Currently, members using the
Qualified Contingent Cross (‘‘QCC’’) 15
and/or other solicited crossing orders,
including solicited orders executed in
the Solicitation,16 Facilitation 17 or Price
Improvement Mechanisms (‘‘PIM’’),18
receive rebates for each originating
contract side in all symbols traded on
the Exchange. Once a member reaches a
certain volume threshold in QCC orders
and/or solicited crossing orders during
a month, the Exchange provides rebates
to that member for all of its QCC and
solicited crossing order traded contracts
for that month.19 The applicable rebates
are applied on QCC and solicited
crossing order traded contracts once the
volume threshold is met. Members
receive the rebate for all QCC and/or
other solicited crossing orders except for
QCC and solicited orders between two
Priority Customers, which do not
receive any rebate. Today, the volume
thresholds and corresponding rebates
are as follows:
Originating contract sides
0 to 99,999 ...........................
100,000 to 199,999 ..............
200,000 to 499,999 ..............
Rebate
$0.00
(0.05)
(0.07)
order rebates to non-net zero Priority Customer
complex orders that leg into the regular order book.
See supra note 12, with accompanying text.
14 See Options 7, Section 4.
15 A QCC Order is comprised of an originating
order to buy or sell at least 1000 contracts that is
identified as being part of a qualified contingent
trade, as that term is defined in Supplementary
Material .01 to Rule 715, coupled with a contra-side
order or orders totaling an equal number of
contracts. See Rule 715(j).
16 The Solicited Order Mechanism is a process by
which an Electronic Access Member (‘‘EAM’’) can
attempt to execute orders of 500 or more contracts
it represents as agent against contra orders that it
solicited. Each order entered into the Solicited
Order Mechanism shall be designated as all-ornone. See Rule 716(e).
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
($0.25)
(0.30)
(0.35)
(0.40)
(0.45)
(0.46)
(0.48)
(0.50)
(0.50)
500,000 to 749,999 ..............
750,000 to 999,999 ..............
1,000,000+ ............................
Rebate for
non-select
symbols
($0.40)
(0.55)
(0.70)
(0.75)
(0.80)
(0.80)
(0.80)
(0.85)
(0.85)
Rebate
(0.09)
(0.10)
(0.11)
At this time, the Exchange proposes to
provide an additional incentive for
members that achieve high volumes of
QCC and other solicited crossing
activity well above the current highest
volume threshold of more than
1,000,000 originating contract sides and
also provide significant complex order
volume in a given month. Specifically,
members will receive an additional
rebate of $0.01 per originating contract
side on QCC and/or other solicited
crossing orders that qualify for the QCC
and Solicitation Rebate program if they
achieve in a given month: (i) Combined
QCC and other solicited crossing order
volume of more than 1,750,000
originating contract sides and (ii)
Priority Customer Complex Tiers 6–9, as
described above. This additional rebate
opportunity will be cumulative of the
$0.11 base rebate since qualifying
members will have exceeded requisite
volume threshold to receive the
additional $0.01 incentive for a total of
$0.12 per originating contract side on
17 The Facilitation Mechanism is a process by
which an EAM can execute a transaction wherein
the EAM seeks to facilitate a block-size order it
represents as agent, and/or a transaction wherein
the EAM solicited interest to execute against a
block-size order it represents as agent. See Rule
716(d).
18 PIM is a process by which an EAM can provide
price improvement opportunities for a transaction
wherein the EAM seeks to facilitate an order it
represents as agent, and/or a transaction wherein
the EAM solicited interest to execute against an
order it represents as agent. See Rule 723.
19 All eligible volume from affiliated members
will be aggregated in determining QCC and
Solicitation volume totals, provided there is at least
75% common ownership between the members as
reflected on each member’s Form BD, Schedule A.
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QCC and solicited crossing order traded
contracts.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,20 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,21 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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Priority Customer Complex Order
Surcharge
The Exchange believes that it is
reasonable to establish a $0.05 per
contract surcharge for Priority Customer
complex orders in SPY that leg into the
regular order book. As noted above, the
Exchange is proposing this surcharge on
Priority Customer complex orders in
SPY, which is one of the most heavily
traded symbols on ISE, to recoup the
costs of such transactions. Not only does
the Exchange provide the tiered rebates
discussed above to Priority Customer
complex orders, but the Exchange also
does not charge any maker or taker fees
for such orders. Despite the proposed
change, the Exchange believes that the
complex order pricing structure will
continue to encourage members to bring
Priority Customer complex order flow to
ISE as the surcharge is minimal and
only applies in limited circumstances
(i.e., when SPY Priority Customer
complex orders leg into the regular
order book). Finally, the Exchange notes
that members will still net a rebate for
each Priority Customer Complex Tier
even after the surcharge is applied.
The Exchange believes that the
proposed surcharge is equitable and not
unfairly discriminatory because the
Exchange will uniformly apply this fee
to all similarly situated market
participants. Even with this surcharge,
SPY complex order pricing for Priority
Customers will continue to be lower
than for all other market participants.
The Exchange does not believe that this
pricing structure is unfairly
discriminatory because Priority
Customer orders bring valuable liquidity
to the market, which in turn benefits
other market participants by increasing
their opportunities to trade.
QCC and Solicitation Rebate
The Exchange believes that its
proposal to provide a supplementary
20 15
21 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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17:37 Apr 17, 2019
$0.01 rebate cumulative of the base
$0.11 rebate to members that achieve in
a given month both combined QCC and
other solicited crossing order volume of
more than 1,750,000 originating contract
sides and Priority Customer Complex
Tiers 6–9 is reasonable because this
incentive is intended to encourage
members that achieve high volumes of
QCC and other solicited crossing
activity to continue to send more
complex order flow to the Exchange to
achieve Priority Customer Complex
Tiers 6–9 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 also believes that the
proposed changes will continue to
encourage members to submit greater
numbers of QCC and other solicited
crossing orders to ISE to receive the
additional rebate. Furthermore, the
Exchange notes that it currently has
other incentive programs to promote
and encourage growth in specific
business areas to garnish greater order
flow. For example, the Exchange offers
additional rebates to members that
achieve high volumes of unsolicited
PIM and Facilitation activity as well as
complex activity.22
The Exchange also believes that the
proposed changes are equitable and not
unfairly discriminatory because any
member may qualify for the proposed
supplemental rebate by submitting QCC
and other solicited crossing orders as
well as complex orders. Finally, the
Exchange will apply the proposed
incentive uniformly to all members’
orders that meet the requisite volume
thresholds.
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. As it relates
to the proposed surcharge for Priority
Customer complex orders in SPY, the
Exchange believes that its proposal will
continue to encourage members to send
more complex order flow to ISE given
that the surcharge will apply in limited
circumstances, and that Priority
Customers will still earn a rebate in
each Priority Customer Complex Tier
even after the surcharge is applied. The
Exchange further believes that the
additional QCC and Solicitation Rebate
proposed above will encourage
members to submit more QCC and other
solicited crossing orders as well as
22 See Options 7, Section 6.B (PIM and
Facilitation Rebate).
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Frm 00064
Fmt 4703
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complex orders. Accordingly, the
Exchange believes that the fees and
rebates proposed above will continue to
attract order flow to the Exchange,
thereby encouraging additional volume
and liquidity. 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,23 and Rule
19b–4(f)(2) 24 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
23 15
24 17
E:\FR\FM\18APN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
18APN1
Federal Register / Vol. 84, No. 75 / Thursday, April 18, 2019 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2019–09 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–2019–09. 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–2019–09 and should be
submitted on or before May 9, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–07822 Filed 4–17–19; 8:45 am]
BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
25 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:37 Apr 17, 2019
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100 F Street NE, Washington, DC
20549–2736.
Extension: Rule 20a–1, SEC File No. 270–
132, OMB Control No. 3235–0158.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 20a–1 (17 CFR 270.20a–1) was
adopted under Section 20(a) of the
Investment Company Act of 1940
(‘‘1940 Act’’) (15 U.S.C. 80a–20(a)) and
concerns the solicitation of proxies,
consents, and authorizations with
respect to securities issued by registered
investment companies (‘‘Funds’’). More
specifically, rule 20a–1 under the 1940
Act (15 U.S.C. 80a–1 et seq.) requires
that the solicitation of a proxy, consent,
or authorization with respect to a
security issued by a Fund be in
compliance with Regulation 14A (17
CFR 240.14a–1 et seq.), Schedule 14A
(17 CFR 240.14a–101), and all other
rules and regulations adopted pursuant
to section 14(a) of the Securities
Exchange Act of 1934 (‘‘1934 Act’’) (15
U.S.C. 78n(a)). It also requires, in certain
circumstances, a Fund’s investment
adviser or a prospective adviser, and
certain affiliates of the adviser or
prospective adviser, to transmit to the
person making the solicitation the
information necessary to enable that
person to comply with the rules and
regulations applicable to the
solicitation. In addition, rule 20a–1
instructs Funds that have made a public
offering of securities and that hold
security holder votes for which proxies,
consents, or authorizations are not being
solicited, to refer to section 14(c) of the
1934 Act (15 U.S.C. 78n(c)) and the
information statement requirements set
forth in the rules thereunder.
The types of proposals voted upon by
Fund shareholders include not only the
typical matters considered in proxy
solicitations made by operating
companies, such as the election of
directors, but also include issues that
are unique to Funds, such as the
approval of an investment advisory
contract and the approval of changes in
fundamental investment policies of the
Fund. Through rule 20a–1, any person
making a solicitation with respect to a
security issued by a Fund must, similar
to operating company solicitations,
comply with the rules and regulations
adopted pursuant to Section 14(a) of the
PO 00000
Frm 00065
Fmt 4703
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16303
1934 Act. Some of those Section 14(a)
rules and regulations, however, include
provisions specifically related to Funds,
including certain particularized
disclosure requirements set forth in Item
22 of Schedule 14A under the 1934 Act.
Rule 20a–1 is intended to ensure that
investors in Fund securities are
provided with appropriate information
upon which to base informed decisions
regarding the actions for which Funds
solicit proxies. Without rule 20a–1,
Fund issuers would not be required to
comply with the rules and regulations
adopted under Section 14(a) of the 1934
Act, which are applicable to non-Fund
issuers, including the provisions
relating to the form of proxy and
disclosure in proxy statements.
The staff currently estimates that
approximately 1,333 proxy statements
are filed by Funds annually. Based on
staff estimates and information from the
industry, the staff estimates that the
average annual burden associated with
the preparation and submission of proxy
statements is 85 hours per response, for
a total annual burden of 113,305 hours
(1,333 responses × 85 hours per
response = 113,305). In addition, the
staff estimates the costs for purchased
services, such as outside legal counsel,
proxy statement mailing, and proxy
tabulation services, to be approximately
$30,000 per proxy solicitation.
Rule 20a–1 does not involve any
recordkeeping requirements. Providing
the information required by the rule is
mandatory and information provided
under the rule will not be kept
confidential.
An agency may not conduct or
sponsor, and a person is not required to
respond to a collection of information
unless it displays a currently valid
control number.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Candace
E:\FR\FM\18APN1.SGM
18APN1
]]>Agencies
[Federal Register Volume 84, Number 75 (Thursday, April 18, 2019)]
[Notices]
[Pages 16300-16303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07822]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85647; File No. SR-ISE-2019-09]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Establish a
Priority Customer Complex Order Surcharge and Provide an Additional
Rebate per Originating Contract Side to Qualifying Members
April 15, 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 April 1, 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Pricing Schedule in Options 7.
The text of the proposed rule change is available on the Exchange's
website at https://ise.cchwallstreet.com/, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule in Options 7 to: (1) Establish a $0.05 per contract
surcharge for Priority Customer \3\ complex orders in SPY that leg into
the regular order book; and (2) amend its QCC and Solicitation Rebate
program to provide an additional rebate of $0.01 per originating
contract side to qualifying members.
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\3\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq ISE Rule
100(a)(37A).
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Priority Customer Complex Order Surcharge
The Exchange currently has a pricing structure in place that
provides rebates to Priority Customer 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 \4\ in Select Symbols \5\ and Non-Select Symbols
\6\ (other than NDX, NQX or MNX). All complex order volume executed on
the Exchange, including volume executed by Affiliated Members,\7\ is
included in the volume calculation, except for volume executed as
Crossing Orders \8\ and Responses to Crossing Orders.\9\ Affiliated
Entities \10\
[[Page 16301]]
may also aggregate their complex order volume for purposes of
qualifying Appointed OFPs for these Priority Customer rebates.\11\
Rebates are provided per contract per leg if the Priority Customer
complex order trades with non-Priority Customer orders in the complex
order book or trades with quotes and orders on the regular order
book.\12\
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\4\ 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.
\5\ ``Select Symbols'' are options overlying all symbols listed
on the Nasdaq ISE that are in the Penny Pilot Program. SPY is a
Select Symbol.
\6\ ``Non-Select Symbols'' are options overlying all symbols
excluding Select Symbols.
\7\ An ``Affiliated Member'' is a Member that shares at least
75% common ownership with a particular Member as reflected on the
Member's Form BD, Schedule A.
\8\ A ``Crossing Order'' is an order executed in the Exchange's
Facilitation Mechanism, Solicited Order Mechanism, Price Improvement
Mechanism (PIM) or submitted as a Qualified Contingent Cross order.
For purposes of this Pricing Schedule, orders executed in the Block
Order Mechanism are also considered Crossing Orders.
\9\ ``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.
\10\ 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.
\11\ The Appointed OFP would receive the rebate associated with
the qualifying volume tier based on aggregated volume.
\12\ The rebate for the highest tier volume achieved is applied
retroactively to all eligible Priority Customer complex volume once
the threshold has been reached. Members will not receive rebates for
net zero complex orders. For purposes of determining which complex
orders qualify as ``net zero'' the Exchange will count all complex
orders that leg into the regular order book and are executed at a
net price per contract that is within a range of $0.01 credit and
$0.01 debit.
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As set forth in Section 4 of the Pricing Schedule, there are
currently nine Priority Customer Complex Tiers as follows:
----------------------------------------------------------------------------------------------------------------
Rebate for Rebate for non-
Priority customer complex tier Complex order volume percentage select symbols select symbols
----------------------------------------------------------------------------------------------------------------
Tier 1..................................... 0.000%-0.200%...................... ($0.25) ($0.40)
Tier 2..................................... Above 0.200%-0.400%................ (0.30) (0.55)
Tier 3..................................... Above 0.400%-0.600%................ (0.35) (0.70)
Tier 4..................................... Above 0.600%-0.750%................ (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)
----------------------------------------------------------------------------------------------------------------
Going forward, the Exchange proposes to impose a $0.05 per contract
surcharge on Priority Customer complex orders in SPY that leg into the
regular order book, which will be applied in addition to the applicable
rebate.\13\ For example, if a member qualifies for Priority Customer
Complex Tier 1, the member's Priority Customer complex orders in SPY
that leg into the regular order book for non-net zero activity will
earn $0.20 per contract (i.e., $0.25 per contract rebate for Select
Symbols minus the $0.05 per contract surcharge). If, however, the
member's SPY Priority Customer complex orders execute against non-
Priority Customer orders in the complex order book instead of legging
into the regular order book, those orders will earn the $0.25 per
contract rebate and not be assessed the $0.05 surcharge.
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\13\ As discussed above, the Exchange currently provides the
Tiers 1-9 Priority Customer complex order rebates to non-net zero
Priority Customer complex orders that leg into the regular order
book. See supra note 12, with accompanying text.
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The Exchange is proposing this surcharge to reduce the costs of
such transactions. Not only does the Exchange provide the tiered
rebates discussed above to Priority Customer complex orders, but the
Exchange also does not charge any maker or taker fees for such
orders.\14\
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\14\ See Options 7, Section 4.
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QCC and Solicitation Rebate
Currently, members using the Qualified Contingent Cross (``QCC'')
\15\ and/or other solicited crossing orders, including solicited orders
executed in the Solicitation,\16\ Facilitation \17\ or Price
Improvement Mechanisms (``PIM''),\18\ receive rebates for each
originating contract side in all symbols traded on the Exchange. Once a
member reaches a certain volume threshold in QCC orders and/or
solicited crossing orders during a month, the Exchange provides rebates
to that member for all of its QCC and solicited crossing order traded
contracts for that month.\19\ The applicable rebates are applied on QCC
and solicited crossing order traded contracts once the volume threshold
is met. Members receive the rebate for all QCC and/or other solicited
crossing orders except for QCC and solicited orders between two
Priority Customers, which do not receive any rebate. Today, the volume
thresholds and corresponding rebates are as follows:
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\15\ A QCC Order is comprised of an originating order to buy or
sell at least 1000 contracts that is identified as being part of a
qualified contingent trade, as that term is defined in Supplementary
Material .01 to Rule 715, coupled with a contra-side order or orders
totaling an equal number of contracts. See Rule 715(j).
\16\ The Solicited Order Mechanism is a process by which an
Electronic Access Member (``EAM'') can attempt to execute orders of
500 or more contracts it represents as agent against contra orders
that it solicited. Each order entered into the Solicited Order
Mechanism shall be designated as all-or-none. See Rule 716(e).
\17\ The Facilitation Mechanism is a process by which an EAM can
execute a transaction wherein the EAM seeks to facilitate a block-
size order it represents as agent, and/or a transaction wherein the
EAM solicited interest to execute against a block-size order it
represents as agent. See Rule 716(d).
\18\ PIM is a process by which an EAM can provide price
improvement opportunities for a transaction wherein the EAM seeks to
facilitate an order it represents as agent, and/or a transaction
wherein the EAM solicited interest to execute against an order it
represents as agent. See Rule 723.
\19\ All eligible volume from affiliated members will be
aggregated in determining QCC and Solicitation volume totals,
provided there is at least 75% common ownership between the members
as reflected on each member's Form BD, Schedule A.
------------------------------------------------------------------------
Originating contract sides Rebate
------------------------------------------------------------------------
0 to 99,999............................................. $0.00
100,000 to 199,999...................................... (0.05)
200,000 to 499,999...................................... (0.07)
500,000 to 749,999...................................... (0.09)
750,000 to 999,999...................................... (0.10)
1,000,000+.............................................. (0.11)
------------------------------------------------------------------------
At this time, the Exchange proposes to provide an additional
incentive for members that achieve high volumes of QCC and other
solicited crossing activity well above the current highest volume
threshold of more than 1,000,000 originating contract sides and also
provide significant complex order volume in a given month.
Specifically, members will receive an additional rebate of $0.01 per
originating contract side on QCC and/or other solicited crossing orders
that qualify for the QCC and Solicitation Rebate program if they
achieve in a given month: (i) Combined QCC and other solicited crossing
order volume of more than 1,750,000 originating contract sides and (ii)
Priority Customer Complex Tiers 6-9, as described above. This
additional rebate opportunity will be cumulative of the $0.11 base
rebate since qualifying members will have exceeded requisite volume
threshold to receive the additional $0.01 incentive for a total of
$0.12 per originating contract side on
[[Page 16302]]
QCC and solicited crossing order traded contracts.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\20\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\21\ 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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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(4) and (5).
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Priority Customer Complex Order Surcharge
The Exchange believes that it is reasonable to establish a $0.05
per contract surcharge for Priority Customer complex orders in SPY that
leg into the regular order book. As noted above, the Exchange is
proposing this surcharge on Priority Customer complex orders in SPY,
which is one of the most heavily traded symbols on ISE, to recoup the
costs of such transactions. Not only does the Exchange provide the
tiered rebates discussed above to Priority Customer complex orders, but
the Exchange also does not charge any maker or taker fees for such
orders. Despite the proposed change, the Exchange believes that the
complex order pricing structure will continue to encourage members to
bring Priority Customer complex order flow to ISE as the surcharge is
minimal and only applies in limited circumstances (i.e., when SPY
Priority Customer complex orders leg into the regular order book).
Finally, the Exchange notes that members will still net a rebate for
each Priority Customer Complex Tier even after the surcharge is
applied.
The Exchange believes that the proposed surcharge is equitable and
not unfairly discriminatory because the Exchange will uniformly apply
this fee to all similarly situated market participants. Even with this
surcharge, SPY complex order pricing for Priority Customers will
continue to be lower than for all other market participants. The
Exchange does not believe that this pricing structure is unfairly
discriminatory because Priority Customer orders bring valuable
liquidity to the market, which in turn benefits other market
participants by increasing their opportunities to trade.
QCC and Solicitation Rebate
The Exchange believes that its proposal to provide a supplementary
$0.01 rebate cumulative of the base $0.11 rebate to members that
achieve in a given month both combined QCC and other solicited crossing
order volume of more than 1,750,000 originating contract sides and
Priority Customer Complex Tiers 6-9 is reasonable because this
incentive is intended to encourage members that achieve high volumes of
QCC and other solicited crossing activity to continue to send more
complex order flow to the Exchange to achieve Priority Customer Complex
Tiers 6-9 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 also believes that the proposed changes
will continue to encourage members to submit greater numbers of QCC and
other solicited crossing orders to ISE to receive the additional
rebate. Furthermore, the Exchange notes that it currently has other
incentive programs to promote and encourage growth in specific business
areas to garnish greater order flow. For example, the Exchange offers
additional rebates to members that achieve high volumes of unsolicited
PIM and Facilitation activity as well as complex activity.\22\
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\22\ See Options 7, Section 6.B (PIM and Facilitation Rebate).
---------------------------------------------------------------------------
The Exchange also believes that the proposed changes are equitable
and not unfairly discriminatory because any member may qualify for the
proposed supplemental rebate by submitting QCC and other solicited
crossing orders as well as complex orders. Finally, the Exchange will
apply the proposed incentive uniformly to all members' orders that meet
the requisite volume thresholds.
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. As it relates to the proposed
surcharge for Priority Customer complex orders in SPY, the Exchange
believes that its proposal will continue to encourage members to send
more complex order flow to ISE given that the surcharge will apply in
limited circumstances, and that Priority Customers will still earn a
rebate in each Priority Customer Complex Tier even after the surcharge
is applied. The Exchange further believes that the additional QCC and
Solicitation Rebate proposed above will encourage members to submit
more QCC and other solicited crossing orders as well as complex orders.
Accordingly, the Exchange believes that the fees and rebates proposed
above will continue to attract order flow to the Exchange, thereby
encouraging additional volume and liquidity. 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,\23\ and Rule 19b-4(f)(2) \24\ 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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\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
\24\ 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
[[Page 16303]]
Send an email to [email protected]. Please include
File Number SR-ISE-2019-09 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-2019-09. 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-2019-09 and should be submitted on
or before May 9, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07822 Filed 4-17-19; 8:45 am]
BILLING CODE 8011-01-P
